Commenting on the 2001 results, CMG Chairman Cor Stutterheim said:
2001 was a tough year for the ICT services industry, but we have delivered strong revenue growth and taken market share. Our profitability levels have come under pressure due to lower utilisation rates, but we are well placed to take advantage of an upturn in the marketplace when it comes. On the outlook for 2002, he commented:
CMG has an experienced management team, supported by strong underlying disciplines that ensure tight control of costs and cash flow. Over the last year, we have brought additional focus to our sales, business development and account management functions, recognising that our industry was moving into a phase where demand no longer always outstrips supply. In countries and market niches where we have both scale and track record, we are taking a larger share of the available business as customers rationalise the number of suppliers they use and recognise CMG’s status as a trusted partner. However, we are not immune to economic cycles and performance in 2002 will be determined to a considerable extent by the arrival of an economic upturn.
For the first half of 2002 in ICT Services, we currently do not see scope for revenue growth over the second half of 2001, which had revenues of £383 million. In the early part of 2002, there has been a rise in the number of customer proposals being worked on, but competition for these opportunities is inevitably fiercer than in more demand-driven market conditions. In the UK, the actions already taken will allow us to return to higher profitability than the second half of 2001 in the first half of 2002, although not at the level of the corresponding period last year. Our position in the Benelux gives us confidence that we can contain reduced utilisation levels and pricing pressure, although the margin in the first half of 2002 will be well below the full year margin in 2001 (which was 16.3%). Germany is likely to remain under pressure in the first half given the current economic environment, but we expect some progress in France. Revenue and profit growth in ICT services for the full year will require the upward trend in customer activity and conversion to sales to continue along with an upturn in the European economies.
In Wireless Data Solutions (WDS), we expect to grow overall revenues significantly in 2002 by continuing to build market share in developing geographies and by securing further customers for our new products. There remains considerable scope for developing SMS applications in both the entertainment and commercial arenas; but the European operator market for SMS capacity upgrades will continue to slow as the interpersonal messaging market matures and, in the years ahead, migrates to multimedia. The contract from Hutchison 3G announced after the year-end is a clear endorsement of our WDS product strategy and the investment we have made and continue to make in it. We have demonstrated that we are a leader in new mobile data technologies and, because of this and other successes; we expect significant revenues in 2002 to be derived from new 2.5/3G related products. We also expect that research & development investment will remain at around £55 million for 2002, including the accelerated investment needed to support our Hutchison 3G contract. However, we recognise the necessity to balance R&D investment with the need to deliver a profit for the full year 2002.
In the challenging year ahead, CMG people will employ all their skill and commitment to deliver solid results from tightly managed operations, while strengthening our platform for future growth.
