Ineum Consulting Adding depth and expertise. 25 July 2006

Transcription

1 Ineum Consulting Adding depth and expertise 25 July 2006

2 Management Consulting Group PLC All rights reserved Contents 1. Transaction highlights 2. Strategic rationale 3. Ineum overview 4. MCG and Ineum combined 5. Financing 6. Expected timetable 7. MCG prospects 8. Summary

4 Management Consulting Group PLC All rights reserved Ineum Consulting The management consulting business of Deloitte France was separated out as Ineum due to the French law preventing auditors from providing consulting services the separation was realised in 2003 through an MBO backed by 3i The largest independent national management consultancy practice in France (excluding IT systems integrators and outsourcers) Business centred on France, with new offices recently opened in Brussels and Luxembourg 675 employees, of which 42 are partners Business is divided along industry and functional lines Serving over 30 of CAC 40 and the Public Sector Financial overview: Notes: Based on audited accounts prepared under IFRS accounting standards Financial Years run to 31 st May FY2004 FY2005 FY2006 m m m Sales EBIT before non-recurring items

5 Management Consulting Group PLC All rights reserved Key financial aspects of the transaction Acquisition for 120m* ( 81.9m) financed through Cash: 37.0m ( 25.2m) to exiting investors (3i and Tecnet Participations), 17.0m ( 11.7m) to working Partners and non-executive Chairman Shares: 66.0m* ( 45.0m) to working Partners and to non-executive Chairman Ineum partners to receive 81,020,798m vested MCG shares cumulatively a shareholding of 29.9%, but held in individual capacity Partners locked in until 2010 with heavy penalties for exits Cash requirement financed through existing cash and new term debt of 30m with revolver of 20m for any working capital needs. MCG will assume up to 13.8m ( 9.4m) of Ineum debt Expected to be earnings and operating margin enhancing in 2007 (before synergy benefits) Integration costs and IT platform investments estimated at 2.1m in 2006 and 1.7m in 2007 Approval being sought for unfunded option capacity to be increased by 2.6% of fully diluted enlarged share capital for medium term retention (to 12.8% in aggregate) Subject to shareholders approval, completion expected September 2006 reached by using MCG share price and :: exchange rate averaged over 30 trading days prior to announcement to 56p (closing price on 24 July 2006 was 60 pence)

7 Management Consulting Group PLC All rights reserved MCG strategy We aim to be a multidisciplinary consulting and rofessional services group delivering sustainable revenue and margin growth through broadening and deepening our onsultancy offerings in existing and new geographies. Strategy Multi-disciplinary advice Risk North America Information Technology MIS infrastructure Pension & actuarial Human Resources Operational improvement Corporate restructuring Financial management Valuations & econometrics Forensic & litigation Tax Change management Europe Outsourcing Equity investment Manufacturing Financial services Communications, technology, media Government Healthcare Wholesale / retail Natural resources / utilities Other sectors Rest of world

8 Management Consulting Group PLC All rights reserved Strategic rationale: Operational and Management Secures France s largest independent management consultancy (excluding IT systems integration and outsourcers) Broadens the Group s range of consulting offerings Industry-led business consulting introduced Strong Ineum Consulting brand raises the Group s profile in Europe significantly strengthens the Group s existing service offerings in Europe by gaining a strong foothold in France and thereby creating a leading financial management practice in 2 of the 3 largest European markets* Improves Parson s ability to handle international clients Platform from which to grow industry business consulting Opportunities to cross-refer to and from other businesses within the Group Deepens the Group s talent pool with internationally experienced partners Source: Xerfi700, Conseil en management, March 2006

9 Management Consulting Group PLC All rights reserved Strategic rationale: Geographic Secures strong position in France, the world s fourth largest management consulting marketplace which is forecast to grow at 7.2% in 2007* Gives access to a client base of leading French businesses, requiring services in France and internationally Diversifies Group s geographic balance by increasing its European presence Creates strong platform for further geographic growth * Source: Kennedy Information Services

10 Management Consulting Group PLC All rights reserved Strategic rationale: Financial Adds well-managed and profitable business with growing revenues Expected to be earnings and operating margin enhancing in 2007* (pre synergies) Creates opportunity to reduce unit infrastructure costs Offers more balanced revenue mix in terms of market and type of services Reduces exposure to US$ earnings Creates more efficient capital structure by introducing debt with pro forma ratios such that further strategy implementation will not be constrained Moves MCG into the same management consulting revenue size bracket as PA Consulting, Roland Berger, Atos and the Hay Group * This should not be taken as profit forecast

12 Management Consulting Group PLC All rights reserved World consulting market and MCG s changing geographic revenue split The Global market for consulting (%) MCG 2005 revenue by geography (%) Rest of the World 8% Rest of the World 7% EMEA 38% North America 54% EMEA 32% North America 61% Source: Kennedy Information The European market for consulting (%) Note: based on MCG FY2005 audited accounts Combined MCG 2005 and Ineum 2006 revenue by geography (%) Switzerland 4% Holland 4% Others 13% UK 30% Rest of the World 5% Italy 4% Spain 6% EMEA 54% North America 41% France 12% Germany 28% Source: Xerfi700, Conseil en management, March 2006 Note: based on FY2005 for MCG and FY2006 for Ineum

13 Management Consulting Group PLC All rights reserved The consulting market in France Market size French consulting market Total market size is c. 11bn IT Consulting represents 70% of the total market, but projected growth rates in Management Consulting are higher CAGR : IT Consulting 4.7% m m Management Consulting 6.3% 4000 Projected growth in 2007: IT Consulting 4.9% Management Consulting 7.2% Management Consulting IT Consulting Source: Kennedy, Consulting Opportunities in France and Belgium 2006

14 Management Consulting Group PLC All rights reserved The consulting market in France Macroeconomic factors Net profitability of the CAC GDP growth in the French economy has been weak relative to the US and UK: % % Nevertheless the larger French companies emerged from recession in 2002/03 and reported record profitability in 2005 bn The CAC 40 represents the largest source of consulting spend in France /2005 Est 9/2005 Est Source: Kennedy, Consulting Opportunities in France and Belgium 2006

15 Management Consulting Group PLC All rights reserved Ineum market position vs Management Consulting firms operating France 2005 Revenues m McKinsey 120 Mercer 112 Alteida (Adecco) 97 Boston Consulting Group 90 Ineum 88 A.T. Kearney 61 Eurogroup 60 Group BPI 60 Bain 46 Booz Allen Hamilton 35 Source: Kennedy, Consulting Opportunities in France and Belgium 2006

16 Management Consulting Group PLC All rights reserved Ineum FY2006 revenues by Industry and Financial Management Financial Services Manufacturing Energy Telco Public Middle Utilities Transport Media Sector Other Market Strategy rketing & Sales Supply Chain HR/Change IT Financial Management 2 Revenue ( m) Note: Ineum structure allows multi-line approach to clients Total revenues ( m) 105

17 Management Consulting Group PLC All rights reserved Summary Ineum income statements Notes: Based on audited accounts prepared under IFRS accounting standards Financial Years run to 31 st May FY2004 FY2005 FY2006 m m m Sales growth 7% 22% Gross Margin growth 21% 27% margin 42% 48% 50% Administrative & selling expenses EBIT before non-recurring items growth 110% 74% margin 4% 8% 12%

19 Management Consulting Group PLC All rights reserved Updated business and management structure and Board appointment Kevin Parry Board Jacques Manardo to join the board as non-executive from completion Luiz Carvalho Didier Taupin* Didier Taupin Central Central Services Global Global Clients Clients Miguel de Fontenay * Rick Fumo to take partial retirement

20 Management Consulting Group PLC All rights reserved Integration Ineum operates successfully as a standalone business Combination of Parson and the financial management group of Ineum, with Didier Taupin as CEO, delivers clear business grouping under talented proven leadership Ineum s industry consulting group to remain standalone with links to Proudfoot and Parson Integration planning is underway with team in place to develop detailed plan for implementation from completion Integration and IT platform investment costs (e.g. knowledge management, facilities, ERP system integration) estimated to be 3.8m ( 5.5m), incurred approximately in: 2.1m ( 3.1m) in m ( 2.4m) in 2007

21 Management Consulting Group PLC All rights reserved Opportunities Since inception Ineum has achieved above-market revenue growth. This is expected to continue due to talent recruitment, market and international opportunities Further top line growth potential resulting from optimising of fee structures Scope for cross geographic servicing of Ineum and MCG clients specific opportunities identified and underway Opportunities to deliver further margin enhancement through operational gearing No synergy benefits have been taken into account in determining earnings enhancement

23 Management Consulting Group PLC All rights reserved Debt Cash element of transaction 54.0m ( 36.9m) to be paid 37.0m ( 25.2m) to exiting investors including 3i 17.0m ( 11.7m) to Ineum partners and Jacques Manardo Cash consideration to be satisfied from MCG s own resources and new facilities Assumed Ineum debt of a maximum on completion of 13.8m ( 9.4m) to be refinanced through acquisition facility 30m 3 year multicurrency term acquisition facility, drawn down in : base rate plus 150bp and a non-utilised facility fee of 67.5bp 3m semi-annual repayment, with a bullet repayment of 15m at end of year three, unless refinanced Additional 20m 3 year revolver for working capital base rate plus 150bp

24 Management Consulting Group PLC All rights reserved Share consideration 81,020,798 shares*, representing 29.9% of the enlarged MCG share capital to be issued to Ineum partners and Jacques Manardo Former Ineum shareholders to hold shares in individual capacity Claw back: shares issued are subject to claw back, to ensure commitment to MCG If leave voluntarily within the first 4 years (forfeit 75%, 60%, 45%, 30%) If leave involuntarily within the first 4 years (forfeit 50%, 35%, 20%, 20%) In the event of claims under the warranties and indemnities Lock up: shares may be sold as to 50% after the third anniversary of completion 50% after the fourth anniversary The scope to claw back shares and the lock up fall away in specific defined circumstances involving a material change in the Group s strategic direction to which the former Ineum Partners object Share disposals to be through MCG brokers (Hoare Govett) * Number of shares to be issued was arrived at based on a share consideration of 66.0m and the average : exchange rate and MCG share price even the 30 days prior to 25 July 2006

26 Management Consulting Group PLC All rights reserved Expected timetable August Prospectus and class 1 circular posted MCG Interim results announced 0 August EGM to approve Acquisition Appointment of Jacques Manardo Increased share option capacity September Completion

28 Management Consulting Group PLC All rights reserved MCG prospects MCG interim results are expected to be announced on 7 August In the six months to 30 June the Group has made significant progress: Proudfoot Consulting has performed well with all geographies delivering strong revenue growth Parson Consulting has shown good revenue growth in all areas with the exception of North America, where it has suffered from a combination of a softer than expected market and prospecting deficiencies in the sales function Overall results for the first half are expected to be in line with expectations The Group strategy remains unchanged The Enlarged Group will continue to explore ways to develop service offerings both organically and by acquisition Group results for the first half remain in line with the board s expectations

30 Management Consulting Group PLC All rights reserved Summary Strong strategic rationale: commercial, geographic, managerial and financial Rare opportunity to acquire a high quality firm Former Ineum partners interests fully aligned with MCG Integration planning is underway Expected to be earnings and operating margin enhancing in 2007 (before synergy benefits); immediately improves group capital efficiency Major step forward in group s size providing a platform for further growth