Employees of CMG Plc will be hugging themselves with glee this week as they watch their shares soar higher than they could ever have hoped for even in their wildest dreams. Net profits at the Anglo-Dutch information technology consultancy group grew 44% to 25m pounds in the year to December 31 on revenue that rose 24% to 303m pounds, and the shares, which already looked top heavy six months ago, rose 70 pence to 2342.5 pence. CMG’s army of consultants and programmers collectively own 25% of the company’s shares, which were placed in December 1995 at 290 pence, and have since risen in value eight times. And the four million currently outstanding share options are probably worth more to CMG’s employees than the company made in profits this year. Head count is a vital statistic for a firm making three quarters of its revenues from billing its consultant’s time, and unsurprisingly, CMG continues to have a unique pulling power; even though it’s a buyer in a sellers market. Employee numbers rose to 5,000 against just 3,500 a year ago. Salary inflation has been a factor, said executive chairman Cor Stutterheim but, CMG takes pride in being both good and expensive, he said. Operating margins grew from 11% to 12.3% in the period, and finance director Chris Banks estimates that there is still scope for slack to be squeezed from the UK and German divisions, which are 24% and 7% of revenue respectively. The bigger Dutch operation, which has been running at an operating margin of around 15% for several years is unlikely to improve on this, said Banks. Like all consulting firms involved in Year 2000 and EURO compliance work, CMG is constantly de-emphasizing the importance of these revenue streams to the long term picture. Stutterheim estimates that less than 10% of CMG’s revenues are Year 2000/Euro related. And when this bubble does burst, he estimates that projects deferred in favor of emergency compliance for Year 2000 will easily fill the hole. If not, then the revolution in networking and communications will keep CMG busier than ever, he said. Chief executive Tom Rusting concluded that short of an economic recession, there really is no end in sight for Europe’s insatiable demand for IT related services. The total dividend for the year is up 30% at 5.2 pence per share.
