Anglo-Dutch computer services company, CMG Plc stands out in today’s global services market as a company that’s set on remaining a strong, regional European player. With one of the highest gross margin rates in the business, the company knows what it does best and has no ambitions to break into the US market. It strives to hire the best locally available professional staff and is able to price at a premium as a result. The simple strategy pays off. The company is expected to show 40% revenue growth for 1998 touching 420 million pounds. Rated as one of the surest bets by investment bank Credit Suisse First Boston in an appraisal of UK service providers, CMG’s other key strength is its high level of customer retention, especially in the lucrative European insurance and retail banking sectors. CMG’s strategy for future growth is to concentrate on maintaining sustainable client relationships and building market share in its core geographic markets of Benelux, the UK and Germany. Who could argue with its decision to ‘stick to the knitting’ as UK director Chris Harrison describes it. With its track record of above-average growth the Anglo-Dutch IT consultancy and systems integrator, is closing in on a position as one of the top ten home grown European services company. Its last interim results saw net profits up 64%, to 15.6m pounds, and revenues increased by 38% to 194m pounds. But for the strength of the British pound these figures would have been even higher (at constant exchange rates, 76% and 47% respectively). Since its creation in 1964, CMG has never made a loss and for the last five full years revenues have grown by 135% to 303m pounds and pre-tax profits have jumped by 245% to 38.6m pounds. These revenue increases are the result of organic growth, rather than merger or acquisitions, which added only 4%. When CMG does move in the M&A market it targets small companies, which can provide in-fill technology or experienced staff. This normally cash-funded small-company purchase strategy is unlikely to change, although CMG naturally does not rule out the possibility of acquiring larger rivals. CMG has made five purchases, all under 15m pounds, in the last year: three in France, and one each in Germany and the UK. Three of the companies acquired provide it with SAP consulting skills: CMS Data Consult in Germany; and Cometh Conseil and Alias in France. The other two acquisitions were made in the UK with Microlex, a small financial software house and in France where CMG bought Techside Consultants, to bolster its local presence. It also announced on December 22 1998 that it had paid 1.25m pounds for Rohirst, a UK financial software company. CMG has traditionally operated out of the Netherlands, Germany and the UK but in 1997 it set up offices in Belgium and in 1998, in France in order to be closer to its clients. At the last interim results, Belgium contributed 2%, 26,000 pounds, to the Benelux region’s revenues, which were up 32% at 127,000 pounds. In the UK, CMG’s revenues increased 48% to 49.5m pounds and operating margins increased from 6% to 8.2%, closer towards the target of 10%. In Germany, CMG’s revenues increased 42% to 15.2m pounds and margins rose from 4.7% to 6%. In the French market, CMG made a start-up loss of 800,000 pounds on revenues of 2.3m pounds. Excluding France and Belgium, CMG aims to improve margins by recruiting more experienced staff. Its total number of employees at the last count was 5,725 with a net income per employee at 89,000 pounds. In France, and elsewhere, CMG aims to bolster its ERP service offering. The ERP business accounts for only 8% of its revenues, mainly from the implementation of SAP and Baan suites. CMG does some work with Peoplesoft, mainly for payroll and human resources applications, and Oracle, but has concentrated on the European ERP software suites because they are stronger in its target geographic markets.
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