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CMG FINDS YEAR 2000 CREATES OTHER WORK

CMG Plc, the Anglo-Dutch computer services firm today announced its operating results for the year ended 31 December 1996 with the group picture being one of continuing growth and increased profitability. CMG Plc which is listed on the London and Amsterdam stock exchanges saw pre-tax profits rise by 37.3% to 27.5m pounds on revenue of 245.2m pounds, up 25% on the same period last year. The continued success of the group masks less spectacular results from the UK and German operations. Only 3.1m pounds of pre-tax profits were contributed by the UK with Germany posting a 1.2m pound loss. Group finance director Chris Banks attributed the disproportionate success of the Dutch element of CMG to a less competitive market place in Holland encouraging better margins and a faster growth rate. However, future plans for the German operation include a shift in focus towards the larger commercial clients, which should prove more profitable. The 1996 figures include 900,000 pounds of restructuring costs towards this end. Perhaps surprisingly, management consultancy, which includes revenues from Year 2000 compliance work, contributed only 8% towards total revenue, up from 5% in 1995. Banks stated that CMG find itself working more often on projects that have been awarded as a direct result of client’s own internal computing staff working full time on Year 2000 issues. CMG also expressed a fairly lukewarm attitude to the potential markets opening up in European Economic & Monetary Union compliance. Banks’s policy appeared to be that CMG will address this problem if it ever happens. CMG’s biggest problem continues to be the management of its phenomenal growth rate (a compound growth in revenue of 19% since 1982). Banks stressed the importance to CMG of maintaining organic growth as opposed to growth by acquisition. Organic growth enables CMG to keep its homogeneous corporate culture intact, a factor that it sees as central to its success in a highly competitive industry. With the shortage of skilled consultants in this growth sector becoming ever more acute, it remains to be seen whether this is a realistic proposition. The company has proposed a final dividend of 4.0p per ordinary share, bringing the total for the year to 6.0p.

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