12th Mar 2007 07:03
Management Consulting Group PLC12 March 2007 Financial results for the year ended 31 December 2006 Management Consulting Group PLC ("MCG" or "the Group"), the internationalmanagement consultancy group, today announces its results for the year ended 31December 2006. Key points • Revenue 13% up on last year to £146.9 million (2005: £129.6 million)• Underlying+ operating profit 28% up to £16.2 million (2005: £12.7 million)• Underlying EBITDA margin up 16% to 12.3% (2005: 10.6%)• Operating profit £13.4 million (2005: £13.6 million)• Underlying EPS up 22% to 6.1p (2005: 5.0p); Basic EPS 4.1p (2005: 5.3p)• Dividend increased by 25% to 1.0p per share (2005: 0.8p)• Ineum integration progressing well and out-performing expectations• Current trading and order intake in line with expectations +Throughout this statement the term underlying is used to describe profitsbefore non-recurring items and amortisation of acquired intangible assets Rolf Stomberg, Chairman: "In the light of the Group's performance and its prospects, I am delighted thatthe board is recommending that shareholders approve a 25% increase in thedividend to 1.0p per share." Kevin Parry, Chief Executive: "In 2006 we continued the execution of our strategy of delivering growth bycreating a significant multi-disciplinary consultancy group with particularspecialisms in different geographies. In the year we made good margin progressand added Ineum Consulting and Salzer Consulting to the Group's portfolio ofconsultancies. Both acquired consultancies are trading well and theirintegration into the Group is on schedule." For further information please contact: Management Consulting Group PLCKevin Parry Chief Executive 020 7710 5000 MaitlandSuzanne Bartch 020 7379 5151 (mobile) 07769 710 335Peter Ogden 020 7379 5151 (mobile) 07811 124 197 An analyst briefing will be held at the offices of Management Consulting GroupPLC on the 6th floor of Fleet Place House, 2 Fleet Place, Holborn Viaduct,London, EC4M 7RF on Monday 12 March 2007 at 9.30 am. Notes to Editors Management Consulting Group PLC (MMC.L) is an umbrella organisation for adiverse range of consulting and professional services offerings. It operates through four divisions: Ineum Consulting, Parson Consulting,Proudfoot Consulting and Salzer Consulting. Ineum Consulting provides consultingservices with industry expertise. Parson Consulting specialises in financialmanagement consulting. Proudfoot Consulting specialises in operationalimprovement consulting and Salzer Consulting specialises in starting, managingand restructuring business in Asian markets. The businesses operate worldwide.For further information, visit www.mcgplc.com. Forward-looking statements This preliminary announcement contains certain forward-looking statements withrespect to the financial condition, results of operations and businesses ofManagement Consulting Group PLC. These statements and forecasts involve risk anduncertainty because they relate to events and depend upon circumstances thatwill occur in the future. There are a number of factors that could cause actualresults of developments to differ materially from those expressed or implied bythese forward-looking statements and forecasts. The forward looking statementsare based on the directors' current views and information known to them at 9March 2007. The directors do not make any undertaking to update or revise anyforward looking statements, whether as a result of new information, futureevents, or otherwise. Nothing in this announcement should be construed as aprofit forecast. Overview The Group made significant progress in implementing its strategic plan todeliver growth through broadening its consulting offering in existing and newgeographies. The acquisition of Ineum provided a third, substantial consultancyto the Group's portfolio diversifying the service offerings and deepening theGroup's European footprint. The Group also invested in Salzer Consulting, aspecialist human resources consultancy operating in the fast expanding marketplace of Asia, with a particular focus on China. Operationally, all businesses are making progress towards realising theirpotential albeit that each is at different stages of individual development. The current year has started with good momentum and the order book has improvedsolidly from its satisfactory position at the year end. The performance of the four consultancies is set out below: Year ended Year ended 31 Dec 2006 31 Dec 2005 --------- --------- £'000 £'000 --------- ---------RevenueIneum Consulting 23,709 -Parson Consulting 34,301 43,216Proudfoot Consulting 88,658 86,385Salzer Consulting 222 - --------- ---------Total revenue 146,890 129,601 --------- --------- Operating profitIneum Consulting 2,780 -Parson Consulting (2,108) 2,245Proudfoot Consulting 15,575 10,417Salzer Consulting (91) - --------- ---------Underlying+ operating profit 16,156 12,662 Non-recurring items:Ineum integration (2,100) -Proudfoot surplus provision 335 897 --------- ---------Operating profit before amortisation 14,391 13,559Amortisation of acquired intangibles (943) - --------- ---------Profit from operations 13,448 13,559 +Throughout this statement the term underlying is used to describe profitsbefore non-recurring items and amortisation of acquired intangible assets Total revenue for the year was up 13% to £146.9 million. Ineum Consulting (whichwas a member of the Group for four months) accounted for 16% of revenue, ParsonConsulting accounted for 23% of revenue, Proudfoot Consulting accounted for 60%of revenue and Salzer Consulting (which was a member of the Group for threemonths) accounted for 1% of revenue. The acquisition of Ineum Consulting resulted in a material shift in thegeographic distribution of revenue. The Americas accounted for 44% (2005: 61%)and Europe accounted for 48% (2005: 31%) of Group revenue. The gross profit margin continues to be tightly managed and remains at 50% ofrevenue. Selling costs remain at 27% of revenue. Overall, underlying administrative expenses are unchanged from the previousyear, but this masks an increase of £2.5 million due to administrative expensesinherent in the acquired companies which were offset by cost savings over thecourse of the year in the remainder of the Group. Following the acquisition of Ineum Consulting, we embarked on a rapid plan tointegrate that consultancy into the Group. Non-recurring costs of £2.1 millionwere incurred in respect of rebranding, financial management alignment, officemoves, knowledge management, launch meetings, works council procedures andprofessional fees. Partially offsetting those costs, was a non-recurring creditof £0.3 million (2005: £0.9 million) associated with a surplus provision arisingfrom the disposal of Proudfoot's Japanese business in 2000. No further profitsor losses will arise from that transaction. Additionally, £0.9 million ofamortisation has been charged in the profit and loss account arising from theacquisition of Ineum's customer relationships and orders which are accounted foras intangible assets. The underlying profit from operations rose 28% to £16.2 million (2005: £12.7million). The underlying EBITDA margin was 12.3% compared with 10.6% last year. Our targetEBITDA margin remains at 15%. After charging the non-recurring costs of a net £1.8 million (2005: £0.9 millioncredit) and amortisation of intangible assets arising on the acquisition ofIneum of £0.9 million (2005: £-), the operating profit was little changed at£13.4 million (2005: £13.6 million). The Ineum acquisition was partly financed out of cash resources and new debtresulting in financing costs of £1.3 million (2005: £0.1 million) which was partly offset by investment income of £1.2 million (2005: £0.5 million) arisingprimarily in the first eight months of the year. Group pre-tax profits were£13.3 million (2005: £13.9 million). The effective tax charge on profit before tax, as adjusted for the creditassociated with the Japan indemnity provision and the amortisation chargerelated to the Ineum acquisition, is 33% (2005: 32%) and includes: 8% points(2005: 12% points) of non-cash tax items required to be included in the chargeby accounting standards; and 3% points (2005: 9% points credit) related to prioryears. The current year "cash tax" charge is therefore 22% (2005: 29%). Basic earnings per share were 4.1 pence (2005: 5.3 pence). After adjusting forpost tax, non-recurring items, the amortisation of intangibles and non "cashtax" items, the adjusted earnings per share were 6.1 pence (2005: 5.0 pence). Itis estimated that the Ineum acquisition increased underlying earnings per shareby over 15% in the period. Ineum Consulting Ineum Consulting has performed ahead of our expectations. Revenue increased by23% over the same period of last year. The integration plan that commenced onclosing is being executed in line with the planned timetable and the consultancyis adding a new dimension to the Group's services in the French speaking marketsof Europe. Its operating margin before the one-off costs was 11.7% compared with10.5% achieved in its last financial year ended 31 May 2006. The increasedmargin is primarily associated with the seasonality of the business. Parson Consulting As previously reported, Parson Consulting's revenue was held back by its USoperation which was slow to transition its offerings from Sarbanes-Oxley relatedengagements. In April 2006, we strengthened the management of Parson NorthAmerica, so separating that unit's management from that of the consultancy'smanagement as a whole. In addition, the management structure was simplified andrestructured and there was intense reinforcement of core sales disciplines. Goodprogress was made outside the US. The operating loss for the year was £2.1million of which £1.9 million was incurred in the first half. Proudfoot Consulting Proudfoot Consulting grew its revenues by 3% over last year. Excellent progresswas made by Proudfoot Consulting in improving its operating margin to 18% (2005:12%), primarily due to the elimination of European losses through bettermanagement of resources. The consultancy continued to invest in the developmentof its business in China and re-entered the Brazilian market after an absence ofsome seven years. Salzer Consulting Salzer Consulting's impact on the Group results was immaterial for the period ofownership. 2007 will be a year where we largely reinvest its profits back intothe business to ensure that it is able to take advantage of the marketopportunities in China. Balance sheet Net assets increased by £54.3 million to £112.2 million. The largest componentof the increase was the consideration for Ineum being partly settled in the formof new MCG shares. In accordance with International Financial Reporting Standards, intangibleassets arising on the purchases of businesses have been separately identifiedand quantified from goodwill and amount to £9.0 million before an associateddeferred tax liability of £3.0 million, as required by accounting standards. Theintangible assets are amortised through the income statement whereas thegoodwill is not. The aggregate goodwill and intangible assets beforeamortisation in respect of 2006 increased by £93.9 million primarily as a resultof the Ineum acquisition. Debtors have increased significantly from 18 days at the end of 2005 to 39 daysat the end of 2006. Ineum Consulting does not currently operate the same creditpolicies as the rest of the Group and as a result the Group has absorbed £10.8million of working capital since the date of acquisition. This is in addition to£4.1 million of net borrowings assumed at the time of the acquisition.Management is in the process of developing revised credit control procedures. The Group's overall net debt as at 31 December 2006 was £28.8 million comparedwith net funds of £21.6 million at 31 December 2005. £41.0 million of themovement is accounted for by the cash element of the Ineum purchaseconsideration and £4.1 million by the refinancing of Ineum's working capital atthe time of acquisition. The liability of the post retirement obligations has decreased from £11.9million at 31 December 2005 to £5.4 million at 31 December 2006. The decrease inthe liability arises from payments into the closed US defined benefit scheme of£2.0 million (2005: £2.5 million), an increase in the discount rate from 5.5% to5.8%, strong investment performance and the weakening of the US dollar by 14% in2006. Strategic progress Our strategic focus is unchanged. We are building a Group comprising a series ofconsultancies with particular specialisms in different geographies. Thediversification of the offerings in 2006 has added to the strength and decreasedthe risks of the Group from service line and geographic perspectives. Each ofthe four consulting businesses currently comprising the Group have excellentmedium term prospects. We now co-ordinate and develop major client relationships across theconsultancies to increase the services provided by the Group's consultancies. Going forward we will continue to expand the geographical overlap of thebusinesses to maximise the benefit that comes from our existing infrastructure.We will also expand our offerings by acquisitions commensurate with the marketopportunities and the absorption of prior acquisitions into the Group. Whilstsize itself is not a measure of success, diversification of risk that comes withsize and wider offerings is an important aspect of continued success. Management Consulting Group PLC is now one of the 30 largest consultancies inthe world operating through its four lines of business and in six continents. Dividend In the light of the increase in the size, the underlying profitability of thebusiness and the cash generation, the Board is recommending that the dividend inrespect of the year is increased by 25% to 1.0 pence per share. Subject toshareholders' approval, the dividend will be payable on 9 May 2007 toshareholders on the register on 13 April 2007. People We were pleased, earlier in the year, to welcome Ineum's and Salzer's employeesto the Group. The Board is delighted by the way that our people are workingtogether. Mark Currie, Finance Director, stood down from the Board on 13 October 2006. Hewill be replaced by Craig Smith who will join the Board on 26 April 2007. CraigSmith and Jacques Manardo (who joined the board as a non-executive director on 1September 2006), being eligible offer themselves for re-election at theforthcoming Annual General Meeting. Prospects The order book has grown solidly since the beginning of the year with tradingand work won in the first two months of 2007 being in line with directors'expectations. We expect Proudfoot Consulting to trade in line with the secondhalf of 2006 and for the other consultancies to show good growth in first halfrevenue. The directors are confident that the Group will show good progress in 2007. Dr Rolf Stomberg Kevin ParryChairman Chief Executive Management Consulting Group PLC 12 March 2007 Group income statement year ended 31 December 2006 2005 Note £'000 £'000 --- ---Continuing operations 3Revenue 146,890 129,601Cost of sales (73,415) (64,847) --------- ---------Gross profit 73,475 64,754Selling costs (40,169) (34,931)------------------------------------------------------------------------------ Administrative expenses - underlying (17,150) (17,161) --------- ---------Profit from operations beforenon-recurring expenses and amortisationof acquired intangibles 16,156 12,662 Administrative (expenses)/income - non-recurring (1,765) 897 --------- --------- Profit from operations beforeamortisation of acquired intangibles 14,391 13,559 Administrative expenses - amortisationof acquired intangibles (943) - ------------------------------------------------------------------------------Total administrative expenses (19,858) (16,264) --------- ---------Profit from operations 3 13,448 13,559Investment income 6 1,176 453Finance costs 6 (1,276) (92) --------- ---------Profit before tax 13,348 13,920Tax expense 7 (4,598) (4,128) --------- ---------Profit for the year 8,750 9,792 --------- ---------Earnings per share - penceFrom continuing operationsBasic 8 4.1 5.3Diluted 8 4.1 5.2Basic - excluding amortisation ofacquired intangible assets 8 4.6 5.3Basic - excluding amortisation,non-recurring and non-cash tax items 8 6.1 5.0 Group statement of recognised income and expense year ended 31 December 2006 2005 £'000 £'000 -------- --------Exchange differences on translation offoreign operations (4,904) 1,488Actuarial gains/(losses) on defined benefitpension fund and medical schemes 3,284 (1,646)Tax on items taken directly to equity 600 825 -------- --------Net (expense)/income recognised directly in equity (1,020) 667Profit for the year 8,750 9,792 -------- --------Total recognised income and expense for the 7,730 10,459year Group balance sheet as at 31 December 2006 2005 £'000 £'000Non-current assetsIntangible assets 162,546 68,696Property, plant and equipment 2,294 1,521Deferred income tax assets 3,597 1,358 -------- --------Total non-current assets 168,437 71,575 -------- -------- Current assetsTrade and other receivables 46,800 14,801Cash and cash equivalents 10,278 21,555 -------- --------Total current assets 57,078 36,356 -------- --------Total assets 225,515 107,931 -------- --------Current liabilitiesBorrowings (14,792) -Trade and other payables (54,103) (28,045)Current tax liabilities (5,728) (3,959) -------- --------Total current liabilities (74,623) (32,004) -------- --------Net current (liabilities)/assets (17,545) 4,352 -------- -------- Non-current liabilitiesBorrowings (24,255) -Retirement benefit obligation (5,411) (11,869)Non-current tax liabilities (7,711) (4,674)Long-term provisions (829) (871)Non-current accruals (497) (581) -------- --------Total non-current liabilities (38,703) (17,995) -------- --------Total liabilities (113,326) (49,999) -------- --------Net assets 112,189 57,932 -------- --------Equity Share capital 67,735 47,373Share premium account 38,163 38,146Merger reserve 32,513 5,683Shares to be issued 46 46Share compensation reserve 1,492 1,256Own shares held by employee share trust (1,270) (1,270)Translation reserve (5,161) (257)Other reserves 7,064 7,064Retained earnings (28,393) (40,109) -------- --------Total equity 112,189 57,932 Consolidated cash flow statement year ended 31 December 2006 2005 Note £'000 £'000 Net cash from operating activities 9 (1,954) 8,826 -------- --------- Investing activities Net interest received 1,013 323Acquisitions of subsidiaries, net of cash andoverdrafts acquired (44,932) -Purchases of property, plant and equipment (1,202) (669)Purchases of intangible assets (1,363) (454)Proceeds on disposal of property, plant and equipment - 13 -------- ---------Net cash used in investing activities (46,484) (787) -------- ---------Financing activitiesDividends paid 4 (1,486) (1,241)Purchases of own shares - (181)Proceeds from issue of shares 282 35Proceeds from borrowings 39,009Refinancing of acquired borrowings by term debt (15,211) -------- ---------Net cash used in financing activities 22,594 (1,387) -------- --------- Net (decrease)/increase in cash and cashequivalents (25,844) 6,652 Cash and cash equivalents at beginning of period 21,555 14,510 Effect of foreign exchange rate changes (225) 393 -------- ---------Cash and cash equivalents net of currentborrowings at end of period (4,514) 21,555 Notes 1. Basis of preparation The financial information included in this statement does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. Thefinancial information has been extracted without material adjustment from theconsolidated financial statements of Management Consulting Group PLC for theyear ended 31 December 2006, which have been audited. The auditors have made areport under Section 235 of the Companies Act 1985 in respect of the statutoryconsolidated accounts for the years ended 31 December 2006 and 31 December 2005.Their reports were unqualified within the meaning of Section 262(1) of theCompanies Act 1985 and did not contain a statement under Section 237(2) or (3)of that Act. While the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRS), this announcement does not itself contain sufficient information tocomply with IFRSs. Statutory accounts for the financial year ended 31 December 2005 have beendelivered to the Registrar of Companies pursuant to Section 242 of the Actwhereas those for 2006 will be delivered following the Annual General Meeting. The Group's Annual Report and Accounts will be sent to shareholders on 23 March2007 and will be available at the Company's registered office at Fleet PlaceHouse, 2 Fleet Place, London, EC4M 7RF, United Kingdom and on our website:www.mcgplc.com. The Annual General Meeting will be held at The Law Society's Halls, Old CouncilChamber, 113 Chancery Lane, London, WC2A 1PL on 26 April 2007 at 10 am. 2. Accounting policies The financial information has been prepared in accordance with IFRSs. Thesefinancial statements have been prepared in accordance with those IFRS standardsand IFRIC interpretations issued and effective or issued and early adopted as atthe time of preparing these statements (as at 31 December 2006). The policieshave been consistently applied to all the periods presented. Full details of the Group's accounting polices can be found in the 2005 AnnualReport in note 2 which is available on our website: www.mcgplc.com. 3. Segmental information The Group has one business reporting segment: management consultancy comprisingthe four consultancies: Ineum Consulting, Parson Consulting, ProudfootConsulting and Salzer Consulting. Primary reporting format - geographic segments The Group operates in three geographic areas: the Americas, Europe and the Restof the World. The Group reports segment information on the basis of geographic area asfollows: (a) Income statement year ended 31 December 2006 Americas Europe Rest of World Consolidated £'000 £'000 £'000 £'000 -------- -------- -------- --------RevenueExternal sales 63,981 70,251 12,658 146,890 -------- -------- -------- --------Profit/(loss) from operationsbeforerelease of indemnity provision,acquisition integration costs,depreciation and amortisation ofacquired intangibles 10,708 7,656 (361) 18,003Amortisation of acquiredintangibles - (943) - (943)Depreciation and otheramortisation (860) (926) (61) (1,847) -------- -------- -------- --------Profit/(loss) from operationsbeforenon-recurring items 9,848 5,787 (422) 15,213Acquisition integrationcosts - non- - (2,100) - (2,100)recurringRelease of indemnity provision -non-recurring - - 335 335 -------- -------- -------- --------Profit/(loss) fromoperations 9,848 3,687 (87) 13,448Finance costs (net) (100) -------- -------- -------- --------Profit before tax 13,348Income tax expense (4,598) -------- -------- -------- --------Profit for the year 8,750 (b) Net assets At 31 December 2006 Americas Europe Rest of World Consolidated £'000 £'000 £'000 £'000 -------- -------- -------- --------AssetsIntangibles, includinggoodwill 27,112 134,741 693 162,546Other segment assets 3,374 42,192 1,085 46,651 -------- -------- -------- -------- 30,486 176,933 1,778 209,197Unallocated corporateassets 16,318 -------- -------- -------- --------Consolidated total assets 225,515 -------- -------- -------- -------- LiabilitiesSegment liabilities (12,422) (46,101) (2,275) (60,798)Unallocated corporateliabilities (52,528) -------- -------- -------- --------Consolidated totalliabilities (113,326) -------- -------- -------- --------Net assets 112,189 (c) Capital additions, depreciation and amortisation Year ended 31 December 2006 Americas Europe Rest of Consolidated World £'000 £'000 £'000 £'000 -------- -------- ------- ---------Acquisitions - 10,536 - 10,536Capital additions by segment 393 709 64 1,166Unallocated corporate additions 1,399 -------- -------- ------- ---------Total capital additions 393 11,245 64 13,101 -------- -------- ------- ---------Depreciation and amortisation 860 1,869 61 2,790 (d) Income statement Year ended 31 December 2005 Americas Europe Rest of Consolidated World £'000 £'000 £'000 £'000 -------- ------- ------ ---------RevenueExternal sales 79,484 40,701 9,416 129,601 -------- ------- ------ ---------Profit/(loss)from operations beforerelease of indemnity provision,acquisition integration costs,depreciation and amortisation ofacquired intangibles 14,988 427 (1,688) 13,727Amortisation of acquired - - - -intangiblesDepreciation and otheramortisation (885) (121) (59) (1,065) -------- ------- ------ ---------Profit/(loss) from operationsbefore non-recurring items 14,103 306 (1,747) 12,662Acquisition integration costs -non-recurring - - - -Release of indemnity provision -non-recurring - - 897 897 -------- ------- ------ ---------Profit/(loss) from operations 14,103 306 (850) 13,559Finance income (net) 361 -------- ------- ------ ---------Profit before tax 13,920Income tax expense (4,128) -------- ------- ------ ---------Profit for the year 9,792 (e) Net assets At 31 December 2005 Americas Europe Rest of Consolidated World £'000 £'000 £'000 £'000 -------- ------- ------- ---------Balance sheetAssetsGoodwill 30,856 37,840 - 68,696Other segment assets 8,047 6,055 835 14,937 -------- ------- ------- --------- 38,903 43,895 835 83,633Unallocated corporate assets 24,298 -------- ------- ------- ---------Consolidated total assets 107,931 -------- ------- ------- ---------LiabilitiesSegment liabilities (14,576) (10,855) (2,587) (28,018)Unallocated corporate liabilities (21,981) -------- ------- ------- ---------Consolidated total liabilities (49,999) -------- ------- ------- ---------Net assets 57,932 (f) Capital additions, depreciation and amortisation At 31 December 2005 Americas Europe Rest of Consolidated World £'000 £'000 £'000 £'000 -------- ------- ------ ---------Capital additions 718 168 83 969Unallocated corporate additions 154 -------- ------- ------ ---------Total capital additions 1,123 -------- ------- ------ ---------Depreciation and amortisation 886 121 59 1,066 -------- ------- ------ --------- 4. Dividends 2006 2005 £'000 £'000 -------- --------Amounts recognised as distributions to equity holders in theyear:Final dividend for the year ended 31 December 2005 of 0.8p (2004: 0.67p) 1,486 1,241 Dividends are not payable on shares held in the employee share trust which haswaived its entitlement to dividends. The amount of the dividend waived in 2006(in respect of the year ended 31 December 2005) was £34,000 (2005: £26,000). The directors recommend the payment of a final dividend in respect of 2006 ofone pence per share to be paid on 9 May 2007 to ordinary shareholders on theregister on 13 April 2007. 5. Staff numbers and costs The average number of persons employed by the Group (including directors) duringthe year, analysed by category, was as follows: 2006 2005 -------- --------Sales and marketing 248 201Consultants 555 459Support staff 167 136 -------- -------- 970 796 As at 31 December 2006, the Group employed 1,448 (2005: 793) people. The aggregate payroll costs of these persons were as follows: 2006 2005 £'000 £'000 -------- --------Wages and salaries 67,571 62,936Social security costs 11,934 6,932Other pension costs 1,218 1,085 -------- -------- 80,723 70,953 Wages and salaries include £804,000 (2005: £640,000) relating to share optionsrecognised as an expense under IFRS 2. 6. Finance income/(costs) 2006 2005 £'000 £'000 -------- --------Interest receivable on bank deposits and similar income 1,013 453Interest payable on bank overdrafts and loans and similarcharges (1,276) (10)Net finance income/(charge) on retirement benefit plans 163 (82) -------- -------- (100) 361 -------- --------7. Tax 2006 2005 £'000 £'000 -------- --------Tax in respect of current year 326 500Foreign tax 5,540 4,899 -----------------------------------------------------------------------------Deferred tax - acquired intangible assets (316) -Deferred tax - tax losses and other temporary differences (2,250) (838) Deferred tax - US goodwill 813 795----------------------------------------------------------------------------- Total deferred tax (1,753) (43) Total current year tax 4,113 5,356Prior year taxation 485 (1,228) -------- -------- 4,598 4,128 The deferred tax charge includes tax deductions in the US for goodwill which isnot amortised in the income statement. A deferred tax liability is required tobe held for this item in accordance with accounting standards. UK corporationtax is calculated at 30% (2005: 30%) of the estimated assessable profit for theyear. Taxation for other jurisdictions is calculated at the rate prevailing inthe respective jurisdictions. 8. Earnings per share From continuing operations The calculation of the basic and diluted earnings per share is based on thefollowing data: 2006 2005Earnings £'000 £'000Earnings for the purposes of basic earnings per sharebeing net profit attributable to equity holders of theparent 8,750 9,792 Amortisation of acquired intangibles 943 - --------- ---------Earnings for the purpose of basic earnings per shareexcluding amortisation of acquired intangibles 9,693 9,792Non-recurring items 1,765 (897)Non-cash tax items and prior year tax 1,582 392 --------- ---------Earnings for the purpose of basic earnings per shareexcluding amortisation and non-recurring items 13,040 9,287 --------- --------- Number of shares Number Number (million) (million)Weighted average number of ordinary shares for thepurposes of basic earnings per share 212.5 185.2 Effect of dilutive potential ordinary shares:Share options 1.3 1.4Long-term incentive plan 0.2 0.2 --------- ---------Weighted average number of ordinary shares forthe purposes of diluted earnings per share 214.0 186.8 --------- --------- Pence PenceBasic earnings per share 4.1 5.3Diluted earnings per share 4.1 5.2Basic - excluding amortisation of acquired intangibles 4.6 5.3Basic - excluding amortisation of acquired intangibles,non-recurring, non-cash tax items and prior year tax 6.1 5.0 The average share price for the year ended 31 December 2006 was 54.3 pence(2005: 51.5 pence). There is no "cash tax" associated with the non-recurringitems and amortisation. 9. Notes to the cash flow statement 2006 2005 £'000 £'000 Profit from operations 13,448 13,559Adjustments for: Depreciation of property, plant and equipment 1,000 604Amortisation of intangible assets 1,790 462Loss on disposal of plant and equipment 79 14Management incentive plan - (56)Adjustment for pension funding (2,008) (2,528)Adjustment for share options charge 804 640Decrease in provisions (493) (903) --------- --------- Operating cash flows before movements in working capital 14,620 11,792 Increase in receivables (6,447) (4,153)(Decrease)/Increase in payables (5,858) 3,911 --------- --------- Cash generated by operations 2,315 11,550 Income taxes paid (4,269) (2,724) --------- ---------Net cash from operating activities (1,954) 8,826 Cash and cash equivalents (which are presented as a single class of assets onthe face of the balance sheet) comprise cash at bank and other short-term highlyliquid investments with a maturity of three months or less. 10. Group statement of changes in equity 2006 2005 £'000 £'000 -------- --------At 1 January 57,932 48,276Dividends paid (1,486) (1,241)Net profit for the year 8,750 9,792Own shares purchased for deferred share awards - (181)Issue of share capitalConsideration for acquisitions 46,927 -Exercise of share option schemes 282 35Share compensation expense 804 640Movement in reserve for management incentive plan - (56)Other recognised income and expense (1,020) 667 -------- --------At 31 December 112,189 57,932 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MMC.L