Professional Services Index

Time for reflection

MPF/Noble Professional Services Index:

TIME TO REFLECT ON THE PAST 5 MONTHS

Morse plc has seen a turnaround in its fortunes by focusing on its core activities and disposing of its Australian and French divisions.  In particular, a strong operating performance across the infrastructure services and technology businesses has significantly contributed to a return to profitability.  The company believes it is well placed to deliver further improved profits and could be in a position to declare a dividend at the year end.

Next Fifteen Communications plc has reported that many of its clients are increasing their spending relative to last year, when public relations budgets were cut as the recession took hold.  With profits expected to be “comfortably ahead” last year, led by new business from Kellogg’s and Schneider Electric, it is likely that Next Fifteen will seek to make complementary acquisitions in the coming year.  However, after being solicited by Huntsworth plc and Chime Communications plc last year, the company has not ruled out being takeover where such a deal would enable it to achieve its plans quicker.

Toluna plc a bullish trading statement at the beginning of February confirmed the market’s view that both revenue and profits were likely to be ahead of expectations for the year ended December 2009.  With integration synergies from previous acquisitions being achieved ahead of management expectations, the company is optimistic of further growth in 2010.

Management Consulting Group plc saw slower than expected trading during the summer months as potential clients adopted a “wait and see” approach.  As a result, each of the three reporting divisions has reduced revenue forecasts for the full year.  Profits are not expected to be as adversely affected after active cost management across the group (in the form of a reduction in headcount and accrued discretionary bonus payments) has been deemed a success.

Colliers CRE plc suffered from a very poor 1H 2009 and expects to post an £10m loss for the year before interest and exceptional items.  The company said around £8m of the operating loss came from 1H 2009, but that improving conditions toward the end of the year were unable to offset this.

Vantis plc reported and pretax loss on reduced revenue, citing the challenging period of the six months ended 31 October 2009 with results dominated by exceptional charges primarily addressing impairment issues.  The company has embarked on a cost reduction program though continues to recruit into its growing divisions.

Summary of trends:

• Clients have been cautious in the discretionary spend services of marketing, PR and consulting.  Although this has already begun to improve and we are likely to revisit talks of industry consolidation.
• A number of constituents reported strong performance in North America and this is perhaps a leader to the recovery of the UK and Europe in 3-6 months time.
• Attempts to manage costs have largely been successful with some immediate cash improvements.  However, some schemes, such as reduced discretionary bonuses, will have their positive cash effect in the 2010 results.

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