Since flotation on the London and Amsterdam stock exchanges in December, CMG Plc’s share price has just kept on rising. It added a further 12 pence yesterday afternoon as the company turned in a sturdy set of interim results; shares stood at 682 pence from a flotation price of 290 pence. It now finds itself in an enviable position, with the main problem the company sees itself facing over the next few years is that of managing its growth. The group made a good start to its first full year as a public company, in what has traditionally been the weaker of the two periods. Pre-tax profits were up 31% at UKP 11.3m on revenue that rose by 23% to UKP 116.6m. Chairman Cor Stutterheim said the flotation had greatly increased the awareness and understanding of CMG in the marketplace, and said there was no doubt that it had contributed to the group’s success. The group operates in the Netherlands, the UK and Germany, and in that order in terms of size and profitability. CMG attributed lower margins in the Netherlands to the cost of both investing new and upgraded facilities and products and of recruiting and training the staff needed to support the increased growth. But the region nevertheless managed to turn in a 20% rise in pre-tax profits to UKP 10.7m on revenue that rose by 32% to UKP 79.7m. The firm said it expects margins at the full year stage to be similar to that of the 1995 level of 15.3%.
Disappointing performance
Contract wins during the half included a three year preferred supplier contract with the Dutch government’s tax automation centre BAC and a large outsourcing deal from TNO, a leading technical research institute. The Trade & Industry business won over 30 new clients and the finance sector mantained its strong growth. Lastly, the group’s Telecommunications business thrived during the half and a small office was opened in Nashua, New Hampshire to support US telecommunications customers. UK revenue was affected by the completion of the British Petroleum Plc share registration contract, but profitability improved and Stutterheim said underlying growth was stong and in line with medium term objectives. Systems development and consultancy revenue increased 17% during the period. CMG said its strategy of developing long-term relationships with major clients in the form of preferred supplier of framework agreements has proved increasingly successful and pointed to recent contracts signed with Esso, the Department of Social Security, the Post Office and HM Customs & Excise. The UK turned in pre-tax profits that soared 78% to UKP 1.7m on revenue that inched up about 6% to UKP 26.3m. In Germany the company blamed a disappointing performance and a slide back into the red on poor results from the Frankfurt Industry division. While the Finance sector, some two-thirds of the area’s revenue, increased both revenue and profit in line with budget and the Munich division did better, losses were up at UKP 391,000 compared with UKP 224,000 last time around. Frankfurt will now focus more strongly on consultancy and project management services in an effort to bring the division back into line. Trading has continued well as the s econd half has got underway, it says, and CMG is confident it will deliver very good results for the full year. An interim dividend of two pence, a rise of 25% from last time, has been recommended.
