MCN Direct Newswire

Vol. 2 No. 27, 14 July 2003

This issue is sponsored by:

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This issue news

1. Deloitte down despite Andersen fillip
2. Anite acquisitions take their toll
3. Icon Medialab returns to the UK
4. Management Consulting Group warns of revenue slide
5. Unisys secures McKinsey talent
6. Further information - feedback/forward to a colleague/unsubscribe

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1. DELOITTE DOWN DESPITE ANDERSEN FILLIP

Consulting revenues at Deloitte & Touche UK slipped 1% to $525 million in the year to 31 May 2003 - despite the arrival of over 400 staff from Andersen's business consulting operation last August and the decision to maintain Deloitte Consulting within the fold (MCN Direct 2-21).

Deloitte & Touche described the revenue as "pretty good compared to the market as a whole". John Connolly, the UK firm's senior partner and chief executive, said: "The consulting business has enjoyed reasonable success, but no growth, in very tough markets in which corporate investment has slowed considerably."

Following Deloitte & Touche's failure to separate Deloitte Consulting from the audit business, it has been integrated with the business consulting, human capital and insurance management practices. The consulting operation is no longer called 'Deloitte Consulting', and is expected to be called nothing more eye-catching than 'the consulting practice within Deloitte & Touche'.

The firm said a "handful" of redundancies have been made as a result of the integration, adding that it has no immediate plans for a redundancy programme but could not rule one out.

The practice ended the year with 1,646 staff - behind Deloitte's tax practice (with 2,195 staff and a revenue gain of 74% to $582 million) and the audit business (with 3,158 staff and revenues up 31% at $576 million).

Connolly sought to reassure clients and competitors about the independence of the firm, saying the business environment means Deloitte & Touche is not likely to be in a situation where a major audit client will choose to spend substantial sums of money buying consultancy from the firm.

Deloitte & Touche audits 20% of the FTSE 100 companies, leaving it plenty of leeway to seek non-audit work elsewhere in the top tier and below.

2. ANITE ACQUISITIONS TAKE THEIR TOLL

Anite is paying the price of its acquisitive past, reporting a pre-tax loss for the year to 30 April 2003 of $183.9 million. This reverses a 2002 profit of $9.5 million and includes goodwill impairment and amortisation charges of $161.8 million, plus redundancy and restructuring costs of $3.3 million.

Anite's underlying pre-tax profits from its ongoing businesses also fell 38% to $30.4 million, on total turnover up 7% at $353.4 million.

The IT solutions and services provider said its public sector, telecoms and travel businesses grew revenues through the year, while consultancy fell slightly. Order intake totalled $359.4 million, with managed services and support revenues increasing from 18% to 21% of total revenues.

Headcount dropped by around 100 last year, with a further 130 jobs being cut in the first half of this year - predominantly from the public sector, telecoms and travel units.

The results were down on expectations, but Anite chairman Alec Daly said: "The year under review has been a year of transition for Anite and the current financial year is expected to be one of consolidation.

The board remains confident, however, in the fundamental strengths of the business, its people, its strong market positions, cashflow and long-term prospects. Once the restructuring has been completed, we look forward to renewed growth." The board said that no further acquisitions are expected and that, following the significant charges taken in fiscal 2003, it is satisfied with the carrying value of goodwill.

John Hawkins, CEO of six years who was dismissed in May (MCN Direct 2-20) has yet to be replaced, with Anite saying it will update shareholders on the search for a new CEO at its AGM on 24 September.

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3. ICON MEDIALAB RETURNS TO THE UK

Swedish internet consultancy Icon Medialab is returning to the UK market via the acquisition of Dutch consultancy Escador's internet and customer relationship management (CRM) operations.

Icon Medialab pulled out of the UK in spring 2002, just months after merging with e-consultancy Lost Boys. It now plans to rebuild its presence in the London market, which it expects to be an area of strong growth.

As well as Escador's London base, Icon Medialab will acquire the company's Munich operations, complementing its own German business activities in Hamburg and Berlin as well as its IT division in The Netherlands.

The London and Munich operations are focused on CRM system development and integration, primarily around Siebel solutions, with UK customers including BT and Hewlett-Packard.

The financial terms of the deal were not disclosed, but the combination of the Escador units with Icon Medialab and subsidiary Lost Boys is expected to add $9 million to revenues plus 40 consultants and engineers.

Icon Medialab and Lost Boys chief operating officer Theo Cordesius said: "This acquisition is small in size, but significant to us considering the strong management and talent of the people, as well as their technology focus. We see this is as an opportunity to increase the type and value of services offered to our clients."

The sale leaves Escador concentrating on boardroom consultancy, the discipline it was founded on in 2000.

Icon Medialab International, parent of Icon Medialab and Lost Boys, is struggling to recover from the dotcom bust that wiped out hundreds of jobs at the consultancy, closed offices and caused financial losses to deepen. In its most recent quarter, the company reduced a loss of $27 million in last year's first quarter to a loss of $600,000, on sales down 44% at $16 million.

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4. MANAGEMENT CONSULTING GROUP WARNS OF REVENUE SLIDE

Management Consulting Group (MCG), which comprises Proudfoot Consulting and Parson Consulting, is forecasting first-half revenues down on last year's comparable period because clients made "abnormally slow decisions" on spending after war broke out in Iraq.

In March MCG reported a stellar full-year performance for fiscal 2002, but said in a trading update last week that revenues for the six months to 30 June 2003 are expected to be 25% down on last year's comparable period, at $69 million. Revenue for the year as a whole is also expected to be below market expectations.

First-half revenues from Proudfoot Consulting, the group's operational improvement consultancy, are expected to drop 38% year-on-year to $54 million. Interim revenues at financial management consultancy Parson Consulting are expected to come in at about $15 million - Parson was acquired in May 2002 and reported second-half 2002 revenues of $19 million.

The update stated: "Revenues in the first half of 2003 were adversely affected by the low order book in Proudfoot Consulting at 31 December 2002. New work was won at a satisfactory rate in the first quarter of 2003, but the level of input slowed in the second quarter. While the pattern of slow decision making is continuing, recent weeks have seen new work levels improve as clients have authorised work previously deferred."

The order book at Proudfoot is now 40% higher than at the close of 2002, with new work won in the six months to the end of June 36% higher than in the six months to the end of December.

At Parson Consulting, which operates primarily in the US, the group claims revenues are steadily increasing as actions to turn the business around have begun to bear fruit.

Management and sales teams have been strengthened and Management Consulting Group said opportunities arising from the Sarbanes-Oxley Act "continue to arise at a satisfactory rate" and that the business remains on track to reach monthly operating profitability during the second half of this year.

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5. UNISYS SECURES MCKINSEY TALENT

Unisys has hired McKinsey & Company partner Stephen Warrington to head up its banking division.

Warrington's role at Unisys will be to develop the banking division's abilities as a provider of performance transformation solutions, building on Unisys' banking industry experience. Unisys claims that value creation through operations and technology is currently central to banks' competitive strategies and to shareholder value.

Prior to his post as a partner with McKinsey, Warrington held management roles at Barclays Bank and HSBC. His departure adds to a steady stream of partners and consultants leaving the strategy consultancy in search of new roles (MCN Direct 2-21).

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