7th Aug 2006 07:01
Management Consulting Group PLC07 August 2006 FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 Management Consulting Group PLC ("MCG" or "the Group"), the internationalmanagement consultancy group, today announces its results for the six monthsended 30 June 2006. Key points • Revenue up 18% on last year to £67.3 million (2005: £57.2 million)• Profit from operations up 51% to £6.9 million (2005: £4.6 million)• Profit before tax up 54% at £7.3 million (2005: £4.7 million)• Earnings per share up 53% to 2.9 pence (2005: 1.9 pence)• Order book currently in line with last year• Proposed acquisition of Ineum Consulting Rolf Stomberg, Chairman: "The Group has delivered a good result. The acquisition of Ineum, announced lastmonth is a key development in our strategic plan to achieve growth by expandingour service offerings in existing and new geographies." Kevin Parry, Chief Executive: "The Group has made significant progress on the first half of last year. ParsonConsulting has shown good revenue growth outside of North America. Steps havebeen taken to address the shortcomings in its American business and progressshould be visible in the fourth quarter. Proudfoot Consulting has performed verywell and is now achieving its goal of a sustainable 15% operating margin." For further information, please contact: Management Consulting Group PLC Kevin Parry Chief Executive 020 7710 5000Mark Currie Finance Director 020 7710 5000 Maitland Suzanne Bartch 020 7379 5151Peter Ogden 020 7379 5151 An analyst briefing will be held today at the offices of Management ConsultingGroup PLC on the 6th floor of Fleet Place House, 2 Fleet Place, Holborn Viaduct,London, EC4M 7RF at 9.30 am. Notes to Editors Management Consulting Group PLC currently comprises two businesses: ProudfootConsulting and Parson Consulting. On 25 July 2006 it announced the acquisitionof Ineum Consulting ("Ineum") for €120 million (£82 million) plus the assumptionof up to €13.8 million (£9 million) of net debt. That transaction isanticipated to complete, subject to shareholder approval, on 1 September 2006. Proudfoot Consulting helps clients to achieve significantly increasedprofitability through the implementation of operational improvements leading toincreased sales, lower operating and overhead costs, greater output and lowercapital expenditure. Its clients include BP, National Australia Bank, NewmontMining, PSA Peugeot-Citroen and Societe Generale. Parson Consulting specialises in financial management consultancy. It is free ofauditing conflicts and provides Sarbanes-Oxley compliant services. It has fourservice lines: governance and risk management, operational financial management,strategic financial management and transaction support. Its clients includeAvis, Citigroup, Ford, General Mills, Kingfisher, Shell and Warner Bros. Ineum, which Management Consulting Group PLC has agreed to acquire subject toshareholder approval, provides a broad range of consulting services relevant tospecific industries including operational strategy, marketing and sales, supplychain management, IT and programme management. Its industry groups are focussedon the financial, public, manufacturing, consumer goods, energy and utilities,telecommunications and media, transportation and middle market sectors. Thefinancial management business of Ineum will be combined with that of ParsonConsulting's French business. Its clients include BNP Paribas, EDF, Schneider,Societe Generale, Veolia and Vivendi. Important note This trading update contains certain forward-looking statements with respect tothe financial condition, results, operations and businesses of ManagementConsulting 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 or developments to differ materially from those expressed or implied bythese forward-looking statements and forecasts. Nothing in this trading updateshould be construed as a profit forecast. Management Statement The Group's trading results are consistent with the trading update provided on12 May 2006: revenue for the period is considerably ahead of the same periodlast year. Proudfoot Consulting has made good progress in all geographic areas.Parson Consulting has made good progress outside North America but itsperformance in North America was weak principally as a result of the run-off ofSarbanes-Oxley related work. The results for the six months ended 30 June 2006 are summarised as follows: Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 Dec 2006 2005 2005 £'000 £'000 £'000RevenueProudfoot Consulting 51,656 35,989 86,385Parson Consulting 15,687 21,229 43,216 --------- --------- -------- 67,343 57,218 129,601 --------- --------- --------Profit/(loss) from operationsProudfoot Consulting - Before release of indemnity provision 8,431 2,636 10,417 - Release of indemnity provision 335 897 897 -------- -------- -------- 8,766 3,533 11,314Parson Consulting (1,857) 1,032 2,245 --------- --------- -------- 6,909 4,565 13,559 --------- --------- -------- Group results Revenue for the six months ended 30 June 2006 was up 18%. The first half revenue of Proudfoot Consulting was strong, built on the back ofa robust order book going into 2006. A larger number of client engagementscontributed to the result than in the second half of 2005 which had a smallernumber of larger engagements. All geographic units showed revenue growth. The performance of Parson Consulting was mixed. In North America, asSarbanes-Oxley related work has been completed, the transition to the provisionof our other services has been slow to establish. This was due to a softer thanexpected market which offset the impact of our increased sales initiatives. Incontrast outside North America, all units have shown good progress and the newservices in the areas of strategic finance and corporate transactions supporthave sold well. In the period, 53% of Group revenue was attributable to North America (sixmonths ended 30 June 2005: 61%). North American revenues increased by 4%compared with the corresponding period of 2005. Europe's share of revenue was36% (six months ended 30 June 2005: 34%) with reported revenues 25% up comparedwith the corresponding period of 2005. In the rest of the world, revenuesincreased by 138% with growth in all geographies. The Group's gross margin continued to be well managed and was 51% (six monthsended 30 June 2005: 49%). Selling costs were £2.6 million higher than in the corresponding period of 2005due to both increased revenue and investment in extra sales resources in Europeand Greater China. The total profit from operations was £6.9 million compared with £4.6 million inthe corresponding period of 2005. The tax charge on pre-tax profits is 28% compared with 27% for the first half of2005. This includes 6% points in respect of deferred tax that is required to becharged in respect of tax deductions for goodwill but will not become payableunless our consulting businesses are sold. The underlying tax rate of 22% isbelow the statutory rate of tax due to the utilisation of brought forward lossesthat have not previously been able to be recognised as deferred tax assets. Proudfoot Consulting Proudfoot Consulting's revenue was £51.7 million (2005: £36.0 million). Everygeographic region showed strong growth on the first six months of last year.This has been achieved by a solid overall performance rather than being due toany particularly large engagements. The profit from operations was £8.8 million (2005: £3.5 million). The increasein profitability is attributable to the operational gearing associated with theincreased revenue. The European region's progress has continued and itcontributed £1.8 million to profit from operations. There is a non-recurring credit of £0.3 million (2005: £0.9 million) associatedwith a surplus provision arising from the disposal of Proudfoot's Japanesebusiness in 2000. No further profits or losses will arise from that transaction. In the light of Proudfoot Consulting's strong trading, we have established astart-up business in Brazil with an initial revenue investment estimated toamount to £0.5 million in this calendar year concentrating on the management andsales functions. Parson Consulting Parson Consulting's revenue was £15.7 million (2005: £21.2 million). Revenue inNorth America declined by £6.9 million with engagements related toSarbanes-Oxley amounting to £2.5 million compared with £7.7 million in the sameperiod of last year. In the rest of the world revenue increased by 29% to £6.3million (2005: £4.9 million). The revenue decline in North America resulted in Parson as a whole reporting aloss from operations of £1.9 million (2005: profit from operations of £1.0million). We previously reported that Parson North America's trading has been slow. Thiscontinued in the second quarter of the year as the sale of follow onSarbanes-Oxley related and other engagements did not meet the expected targetlevels. This was due to a softer than expected market demand which offset theimpact of our increased sales initiatives. In April we strengthened themanagement of Parson North America, so separating that unit's management fromthat of the consultancy's management as a whole. In addition, the managementstructure has been simplified and restructured. Intense reinforcement of coresales disciplines is underway. In contrast outside North America, the non Sarbanes-Oxley service lines havesold well and in the United Kingdom in particular we have seen a good take-up inservices associated with corporate transactions. We have also seen good growthin Australia and France where our recent investments in new service lines arecoming to fruition. Earnings per share The basic earnings per share for the six months ended 30 June 2006 increased by53% to 2.9 pence compared with 1.9 pence in the corresponding period last year. Dividend In accordance with our established policy, we pay dividends once per year, afterthe declaration of the annual results. Accordingly, no interim dividend is beingdeclared. Balance sheet The decrease of £0.3 million in the goodwill balance is wholly attributable tothe weakening of the US dollar against Sterling. The Group's cash balance was £23.5 million compared with £10.9 million at 30June 2005. The increase in cash reflects the conversion to cash of the profitsof the Group in the last 12 months decreased by the funding of the closed USdefined benefit pension plan and the dividend. The deficit related to the closed defined benefit pension and medical plansdecreased substantially from £14.6 million at 30 June 2005 to £6.1 million as aresult of cash contributions, the investment performance, foreign exchange and a1% higher discount rate being applied to the long term liabilities followingincreases in market rates. Strategic direction On 25 July 2006 we announced the proposed acquisition of Ineum which is due tocomplete on 1 September 2006. This is a key development in the execution of the Group's strategic goal to deliver growth through broadening our consultancy offerings in existing and new geographies. The proposed acquisition increases the depth of Parson Consulting, our financial management practice, and also allows us to offer services to specific industries and the public sector in line with their particular needs. The acquisition has a number of important operational, geographic and financial benefits: it secures France's largest independent national management consultancy, secures a strong position for the Group in the world's fourth largest consulting market place and adds a well-managed and profitable business with growing revenues. As well as reducing the Group's exposure to US dollar earnings, the acquisition is also expected to be earnings and operating margin enhancing in 2007. Going forward our strategy remains unchanged. We will continue to explore waysto develop the service offerings of all parts of the business. ProudfootConsulting and Parson Consulting businesses have excellent medium termprospects. We continue to be interested in making acquisitions of businessesthat broaden the Group's consulting offerings and in widening the coverage ofParson Consulting and Ineum in geographies outside their existing operations.The timing of future acquisitions will depend upon the commercial fit,availability of suitable businesses and the terms on which they are available. Financial impact of Ineum acquisition The acquisition of Ineum will result in approximately £30 million of term debtwhich will improve the efficiency of the Group's capital structure, withoutconstraining the implementation of the Group's strategy. The acquisition will also result in the identification of intangible assets. Inaccordance with IFRS intangible assets other than goodwill are amortised in theincome statement over their estimated economic life. One-off integration costsamounting to £3.8 million are estimated to be incurred in the 2006 and 2007financial years. Excluding these items, we anticipate that the acquisition ofIneum will be earnings enhancing in the 2007 financial year. Outlook Whilst it remains too early to comment on the outcome for the year as a wholebecause work to be won in the remainder of the year is a key determinant of theresult, we remain confident that the business overall will continue to performwell. The Group order book is in line with the level at this time last year withProudfoot Consulting comprising a greater proportion and Parson Consulting alesser proportion of the order book than a year ago. Parson North America'searly indicators of pipeline opportunities are showing good improvements whichare anticipated to translate into fourth quarter progress. The pipeline forProudfoot Consulting and for Parson Consulting outside North America is robust. R W H StombergChairman K A H ParryChief Executive 7 August 2006 Independent review reportby Deloitte & Touche LLP to Management Consulting Group PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the consolidated incomestatement, the consolidated statement of recognised income and expense,statement of changes in equity, the consolidated balance sheet, the consolidatedcash flow statement and related notes 1 to 11. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performedWe conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Deloitte & Touche LLPChartered AccountantsLondon7 August 2006 A review does not provide assurance on the maintenance and integrity of thewebsite, including controls used to achieve this, and in particular on whetherany changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the directors but no controlprocedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination offinancial information differs from legislation in other jurisdictions. Consolidated income statementSix months ended 30 June 2006 Six Six months months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Note £'000 £'000 £'000Continuing operationsRevenue 3 67,343 57,218 129,601Cost of sales (32,697) (29,307) (64,847) --------- --------- ---------Gross profit 34,646 27,911 64,754Selling costs (19,370) (16,746) (34,931)Administrative expenses (8,367) (6,600) (16,264) --------- --------- ---------Profit from operations 6,909 4,565 13,559Investment income 531 224 453Finance costs (125) (51) (92) --------- --------- ---------Profit before tax 7,315 4,738 13,920Income tax expense 5 (2,014) (1,285) (4,128) --------- --------- ---------Profit for the period 5,301 3,453 9,792 --------- --------- --------- Earnings per shareFrom continuing operationsBasic 6 2.9 1.9 5.3Diluted 6 2.8 1.8 5.2 --------- --------- --------- Consolidated statement of recognised income and expenseSix months ended 30 June 2006 Six Six months months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Note £'000 £'000 £'000Exchange differences ontranslation of foreignoperations (3,261) (478) 1,488Actuarial gains/(losses) ondefined benefit pension andmedical schemes 9 3,734 (3,152) (1,646)Tax on items taken directlyto equity 449 300 825 -------- -------- ---------Net income/(expense)recognised directly in equity 922 (3,330) 667Profit for the period 5,301 3,453 9,792 -------- -------- ---------Total recognised incomeand expense for the period 6,223 123 10,459 -------- -------- --------- Statement of changes in equitySix months ended 30 June 2006 Six Six months months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 At 1 January 57,932 48,276 48,276Dividends paid (1,486) (1,241) (1,241)Profit for the period 5,301 3,453 9,792Own shares purchase fordeferred share awards - (181) (181)Issue of share capital Exercise of share options 120 35 35Share compensation expense 444 332 640Movement in reserve formanagement incentive plan - (56) (56)Other recognised income and expense 922 (3,330) 667 -------- -------- ---------At 30 June 63,233 47,288 57,932 -------- -------- --------- Consolidated balance sheetas at 30 June 2006 30 June 30 June 31 December 2006 2005 2005 Note £'000 £'000 £'000 Non-current assetsGoodwill 66,031 66,358 68,278Other intangible assets 1,388 522 418Property, plant and equipment 1,460 1,468 1,521 -------- -------- ---------Total non-current assets 68,879 68,348 70,217 -------- -------- --------- Current assetsTrade and other receivables 14,237 15,037 16,159Cash and cash equivalents 23,484 10,858 21,555 -------- -------- ---------Total current assets 37,721 25,895 37,714 -------- -------- ---------Total assets 106,600 94,243 107,931 -------- -------- --------- Current liabilitiesTrade and other payables (27,056) (22,503) (28,045)Current tax liabilities (3,915) (4,256) (3,959) -------- -------- ---------Total current liabilities (30,971) (26,759) (32,004) -------- -------- --------- Net currentassets/(liabilities) 6,750 (864) 5,710 -------- -------- --------- Non-current liabilitiesRetirement benefit obligation 9 (6,146) (14,574) (11,869)Non-current tax liabilities (5,294) (4,094) (4,674)Long-term provisions (476) (880) (871)Non-current accruals (480) (648) (581) -------- -------- ---------Total non-current liabilities (12,396) (20,196) (17,995) -------- -------- --------- Total liabilities (43,367) (46,955) (49,999) -------- -------- --------- Net assets 63,233 47,288 57,932 -------- -------- --------- EquityShare capital 7 47,488 47,373 47,373Share premium account 38,151 38,146 38,146Shares to be issued 46 46 46Share compensation reserve 1,133 948 1,256Own shares held byemployee share trust (1,270) (1,270) (1,270)Translation reserve (3,518) (2,223) (257)Other reserves 12,747 12,747 12,747Retained earnings (31,544) (48,479) (40,109) -------- -------- ---------Total equity 63,233 47,288 57,932 -------- -------- --------- Consolidated cash flow statement Six months ended 30 June 2006 Six Six months months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Note £'000 £'000 £'000Net cash from operating activities 8 5,690 (2,142) 8,826 -------- -------- ---------Investing activitiesInterest received 442 149 323Purchase of property, plantand equipment (403) (385) (669)Purchase of intangible assets (1,193) (334) (454)Proceeds on disposal ofproperty, plant and equipment - 16 13Purchase of own shares - (181) (181) -------- -------- ---------Net cash used in investing activities (1,154) (735) (968) -------- -------- ---------Financing activitiesDividends paid 4 (1,486) (1,241) (1,241)Proceeds from issue of shares 120 35 35 -------- -------- ---------Net cash used in financing activities (1,366) (1,206) (1,206) -------- -------- ---------Net increase/(decrease) incash and cash equivalents 3,170 (4,083) 6,652Cash and cash equivalentsat beginning of period 21,555 14,510 14,510Effect of foreign exchangerate changes (1,241) 431 393 -------- -------- ---------Cash and cash equivalents atend of period 23,484 10,858 21,555 -------- -------- --------- Notes 1. General information The information for the year ended 31 December 2005 does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. A copyof the statutory accounts for that year has been delivered to the Registrar ofCompanies. The auditors' report on those accounts was unqualified pursuant toSection 235 of the Companies Act 1985 and did not contain a statement underSection 237 (2) or (3) of that Act. 2. Summary of significant accounting policies (a) Basis of preparation The interim report has been prepared using accounting policies consistent withInternational Financial Reporting Standards (IFRS). The interim report was approved by the Board on 7 August 2006. (b) Accounting policies The accounting policies and methods of computation applied by the Group in theinterim report are consistent with those followed in the preparation of theGroup's annual financial statements for the year ended 31 December 2005. TheGroup's consolidated financial statements for the year ended 31 December 2005are available on our website: www.mcgplc.com. 3. Segmental information The Group operates in three geographical areas - North America, Europe and Restof the World. The following is an analysis of the revenue and results for theperiod, analysed by geographic segment, the Group's primary basis ofsegmentation: Six months ended 30 June 2006 North Rest of America Europe World Consolidated £'000 £'000 £'000 £'000RevenueExternal sales 35,935 24,552 6,856 67,343 -------- -------- -------- ----------Profit/(loss) fromoperations before release ofindemnity provision 4,508 2,411 (345) 6,574Release of indemnityprovision - - 335 335 -------- -------- -------- ----------Profit/(loss) fromoperations 4,508 2,411 (10) 6,909Finance income 406 -------- -------- -------- ----------Profit before tax 7,315Income tax expense (2,014) -------- -------- -------- ----------Profit for the period 5,301 -------- -------- -------- ---------- Six months ended 30 June 2005 North Rest of America Europe World Consolidated £'000 £'000 £'000 £'000RevenueExternal sales 34,666 19,673 2,879 57,218 -------- -------- -------- ----------Profit/(loss) from operations before release ofindemnity provision 4,406 748 (1,486) 3,668Release of indemnityprovision - - 897 897 -------- -------- -------- ----------Profit/(loss) fromoperations 4,406 748 (589) 4,565Finance income 173 -------- -------- -------- ----------Profit before tax 4,738Income tax expense (1,285) -------- -------- -------- ----------Profit for the period 3,453 -------- -------- -------- ---------- 4. Dividends 2006 2005 £'000 £'000Amounts recognised as distributions to equity holdersin the period: Final dividend in respect of the year ended 31December 2005 of 0.80p per share (2005: year ended31 December 2004 of 0.67p per share) 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). 5. Taxation The effective tax charge for the half year is 28% (30 June 2005: 27%), based onprofit before tax excluding the release of the Japan indemnity provision of £0.3million. The effective tax rate is lower than the average corporation tax rate(36%) applicable to the Group due to tax losses brought forward. 6. Earnings per share From continuing operations The calculation of the basic and diluted earnings per share is based on thefollowing data: Six Six months months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000EarningsEarnings for the purposes of basicearnings per share being net profitattributable to equity holders of theparent 5,301 3,453 9,792 --------- --------- -------- Number Number NumberNumber of shares (million) (million) (million)Weighted average number ofordinary shares for the purposes ofbasic earnings per share 185.5 185.1 185.2 Effect of dilutive potential ordinaryshares - Share options 1.5 3.5 1.4 - Long-term incentive plan 0.2 0.2 0.2 --------- --------- --------Weighted average number ofordinary shares for the purposes ofdiluted earnings per share 187.2 188.8 186.8 --------- --------- -------- Pence Pence PenceBasic earnings per share 2.9 1.9 5.3Diluted earnings per share 2.8 1.8 5.2 --------- --------- -------- The average share price for the six months ended 30 June 2006 was 57.3 pence (30June 2005: 50.2 pence and 31 December 2005: 51.5 pence). 7. Share capital During the interim period, the Company issued the following ordinary shares of25 pence each: Number of Nominal shares value £'000 At 1 January 2006 189,493,412 47,373Employee share options exercised 458,359 115 ------------- --------At 30 June 2006 189,951,771 47,488 ------------- -------- 8. Notes to the cash flow statement Six Six months months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Profit from operations 6,909 4,565 13,559Adjustments for: Depreciation of property, plant and equipment 386 288 604 Amortisation of intangible assets 200 234 462 Gain on disposal of plant and equipment - 16 14 Management incentive plan - (56) (56) Adjustment for pension funding (1,235) (920) (2,528) Adjustment for share options charge 444 332 640 Decrease in provisions (395) (886) (903) --------- -------- --------- Operating cash flows beforemovements in working capital 6,309 3,573 11,792 Decrease/(Increase) in receivables 1,912 (1,940) (4,153)(Decrease)/Increase in payables (1,429) (1,980) 3,911 --------- -------- ---------Cash generated by operations 6,792 (347) 11,550Income taxes paid (1,102) (1,795) (2,724) --------- -------- ---------Net cash from operating activities 5,690 (2,142) 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. 9. Retirement benefits The retirement benefits liability relates to the closed US defined benefitpension scheme and to the closed US post-retirement medical benefits plan. Entitlement to additional benefits under the US defined benefits pension schemeceased on 31 December 2001. The US post-retirement medical benefits plan relatesto certain former employees who retired prior to 30 September 1995 and to asmall number of current and former employees who were employed at that date.Accordingly, further benefit accruals under this plan are insignificant. The retirement benefits liability at 30 June 2006 has been estimated by theactuaries on the basis described in the last annual report except that thediscount rate applied to the liabilities has been increased by 1% to 6.25%. Anactuarial gain of £3.7 million arose in the period (30 June 2005: loss of £3.2million). 10. Share based payments The fair value of options granted was determined using the stochastic valuationmodel. An expense of £0.4 million has been recognised in the period in respectof the share options granted above (six months ended 30 June 2005: £0.3 million;2005 full year: £0.6 million). The cumulative share compensation reserve at 30June 2006 is £1.1 million (30 June 2005: £0.9 million; 31 December 2005: £1.3million). Options scheduled to vest in March 2006 did not meet the performancecriteria and have now lapsed. 11. Events after the balance sheet date On 25 July 2006 the Group announced the proposed acquistion of Ineum for totalconsideration of €120 million (£82 million) plus the assumption of up to €13.8million (£9 million) of debt. The acquisition is due to complete in September2006. Important note This trading update contains certain forward-looking statements with respect tothe financial condition, results, operations and businesses of ManagementConsulting 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 or developments to differ materially from those expressed or implied bythese forward-looking statements and forecasts. Nothing in this trading updateshould be construed as a profit forecast. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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