Proudfoot parent Management Consulting Group sees income fall
London-headquartered firm Management Consulting Group saw its income decline over 2017, according to its annual financial report. However, according to the consultancy, it almost halved pre-tax losses compared to the previous financial year, by way of a stringent cost-cutting campaign.
Established in 1946 in Chicago as Alexander Proudfoot, after its namesake founder, the firm now known as Management Consulting Group has undergone 70 years of change since. Having since relocated headquarters to UK capital London, and rebranded in 2001, the firm still retains ownership of the Proudfoot name – with the wing of the network recently winning high commendation from the UK’s 2018 MCA Awards for its work with the Rio Tinto (Oyu Tolgoi) copper-mining project in Mongolia – however the firm parted company with another of its more famous brands three years ago.
The sale of Kurt Salmon commenced in 2015, when Solucom acquired a large share of the 80 year old brand, including all of aspects of its business, including 750 consultants in France, Switzerland, Belgium, Luxembourg and Morocco. The following year, Accenture acquired the remaining portion, purchasing Kurt Salmon’s retail and consumer goods business for a reported fee of $165 million. The deal saw Kurt Salmon’s brand exit the global stage after eight decades of business – but more importantly to Management Consulting Group, it saw a further team of around 260 retail experts in five countries, including in the UK, exit, along with their revenue streams.
Management Consulting Group subsequently became significantly smaller after its divestment of Kurt Salmon – with its profit margins following suit. The consulting company reported revenues for 2017 of £35.1 million, plummeting 22% from £45.2 million the prior year. Due to drastic cuts in costs, which helped to reduce operating fees by 20% year-on-year, the firm has avoided a further slide on its pre-tax losses – which amounted to £26.3 million, compared to being £40.8 million in the red in 2016 – however following non-recurring items, including impairments against intangible assets, the firm ended up with a retained loss of £31.0 million, massively widened from a £100,000 loss in 2016.
Looking ahead, the group said that it remains confident to deliver sustainable improvement and change for its customers after Proudfoot grew revenue in the first quarter of 2018 compared with a particularly low fourth quarter of 2017. However, overall, Proudfoot revenues for 2018 are anticipated to be lower than reported last year, prompting the firm to actively consider a campaign of fundraising in a bid to return to a profit-margin in future.
The company announced that it still had £16.1 million in cash as at the end of March including £6 million in respect of the Kurt Salmon escrow funds, however it remains uncertain regarding its short-term funding position and the release of funds. The professional services provider had previously flagged at the time of its interim results in August that it had made changes in its North America operations, but it is "taking more time than originally anticipated", while Proudfoot’s new offering and strategy in Europe, Asia targeting key sectors such as Natural Resources is yet to yield major improvements.
Shares in Management Consulting Group closed 16% down at £5 per following the news – however this fell further after the additional body-blow of the loss of the firm’s Chief Finance Officer. Shares languished at £2.70 each after CFO Michael Comras stepped down, following a reported period of ill health. The company said for the near-term it has "sufficient resources" within its financial team to not make an immediate appointment.
Commenting on Comras’ exit, Chairman & Chief Executive Nick Stagg said, "Michael has made a very valuable contribution to the board during a challenging year.”
