7th Jun 2005 07:01
Penna Consulting PLC07 June 2005 PENNA CONSULTING PLC FULL YEAR RESULTS 7 June 2005 Penna Consulting Plc (PNA) the human resources group today announces preliminaryresults for the year ended 31 March 2005. Headlines • New management team in place • Significant cost base reductions and corporate restructuring achieved by year-end • New Recruitment Advertising Agency launched • Turnover £41.8m (2004: £43.0m) • Earnings before interest, tax, amortisation, impairment and exceptionals, (EBITA) £12,000 (2004: £2.1m) • Pre tax loss of £7.2m (2004: £3.3m) • Loss per share 35.3p (2004: 19.9p) Commenting on the results, Stephen Rowlinson, Chairman said: "We are reporting figures for another disappointing year but we have nowimplemented a change of management and of some key policies and have begun thenew financial year on plan and in profit. We are looking forward to the futurewith confidence." For further information please contact: Stephen Rowlinson, Chairman 0771 00 23699 Gary Browning, Managing Director 020 7334 8054 David Firth, Finance Director 020 7334 8054 Chairman's Review I joined the Board in December 2004 and became Chairman on 3rd February 2005. On21st February we announced that Suzie Mumme had stepped down as Chief Executiveand that Gary Browning had been appointed Managing Director in her stead. InFebruary and March we completed a vigorous programme to restructure the Companyto ensure that it can provide both the highest quality of service to clients anda good and growing level of profitability. As a result of these measures webegan the new financial year on 1st April 2005 with costs, on an annualisedbasis, £3.6m lower than the same time last year. The long established strengths of Penna are its client focus and the commitmentto act at all times with the highest level of integrity. Penna people arerecognised to be the leaders in each sector in which we operate and theresources we provide to support them are second to none. The Company has theability to emerge as the leading human resource group in the UK and we areembarking on an ambitious plan to achieve this goal. An exciting first step is our entry into Recruitment Advertising announced on23rd May. Penna Recruitment Communications will be a full service Advertisingagency and will provide clients with highly creative and cost effectiveapproaches to recruitment through all types of media including particularly thePress and the Internet. We have taken the opportunity to appoint some of themost outstanding and successful people in the sector. We expect that the newAgency will make a significant contribution to Penna profits in the 2006/07financial year. Financial Review Total revenues for the year amounted to £41.8m, which was down 3% compared with2004. At the operating level the group reported nominal profits, before restructuringcosts, goodwill amortisation and impairment, and interest costs of in total£7.2m. The board will not recommend payment of a final dividend in respect of thefinancial year to 31 March 2005 (2004; total 3.6p) At 31 March 2005 the Group had net debt (including loan notes) of £2.8m (2004:£4.1m), which includes a cash balance of £1.7m on restricted deposit toguarantee the payment of the issued loan notes. Capital expenditure of £0.7m inthe year has been made on improvements in the Group's office network and intechnology infrastructure. Revenues for our career transition services have reduced by 25% in the year to£18.9m (2004: £25.3m). The company's business model of using associates fordelivery has helped to mitigate the impact of this fall in direct contribution. We announced in September 2004 that we have replaced our current internationalcareer management partnership with an alliance with Lee Hecht Harrison ("LHH"),a leading global career management services company and subsidiary of Adecco SA. This new arrangement will be a mutually beneficial partnership founded on LeeHecht Harrison's and Penna's common aim to be the premier international careertransition providers and deliver superior performance to global clients. Wehave begun to see the benefits of this new alliance and are bidding jointly fora number of large international contracts, the financial benefits of whichshould materialise later in the year. Our resourcing activities have seen good top line growth primarily due to asignificant increase in our executive interim activities, where total grossrevenues have grown to £10.3m (2004: £3.9m). Our search and selection businesshas reported revenues of £7.8m (2004: £7.8m), which is at similar levels to lastyear. Our other consulting services, which include HR consulting, organisationdevelopment, employee communication, assessment, executive development andexecutive coaching have contributed revenues of £5.1m (2004: £6.3m), reflectingprimarily the absence of the larger contracts that we delivered in the previousyear. Approximately 7% of the Group's revenues are delivered outside of the UK and wehave permanent offices in Dublin, Paris, Stockholm, Madrid and Munich. Whilstsmall in scale these operations provide Penna's clients with the internationalreach they need, especially in resourcing and developing local talent. In accordance with FRS 11 we have looked carefully at the carrying value of thegoodwill attributed to acquisitions made since 1998. We have adjusted thevaluation of these businesses in line with current market conditions and haverecognised a goodwill impairment charge of £0.5m. In addition we incurredcompensation and redundancy costs of £1.5m, and established a provision of £2.9mrelating to the costs of reducing the number of permanent properties from whichwe operate. Other one-off costs relating to the restructuring project,including asset write downs, total £0.9m. Organisation and outlook Under Gary Browning's leadership the new management team is making considerableprogress in marketing the Group's services and controlling costs. Our servicesare grouped into six areas covering the entire employment cycle. • Recruitment communications • Resourcing (executive search and selection) • Executive interim • Leadership services (executive coaching and development) • HR Consulting • Career Transition (outplacement and career management) These service lines have been given greater accountability for client serviceand revenues than in the recent past, we will however ensure that Penna'sability to marshal a whole range of services from across the firm to meetclients' needs will be maintained and refined. The management team is focusedon improving operating profits and margins and increasing cost flexibility,particularly in the area of people and property. The group now operates fromtwelve regional centres capable of providing clients and staff with all theresources they need to deliver all our services. Suzie Mumme and Allen Thomas have indicated that they will stand down from theBoard at the Annual General Meeting in September. They have served on the Boardfor 9 and 11 years respectively and we thank them for their considerablecontributions to the Company. I am very pleased to confirm that preliminary indications for April and May, thefirst two months of the new financial year, are consistent with our plans and weare looking forward to the next phase of the Company's development withconfidence. Stephen RowlinsonChairman GROUP PROFIT AND LOSS ACCOUNTFor the year ended 31 March 2005(unaudited) Results before Amortisation of Amortisation of Goodwill & Goodwill & Exceptional items Exceptional items 2005 2005 2005 2004 Note £000's £000's £000's £000's Turnover 3 41,831 - 41,831 42,960 Operating costs Amortisation and impairment of goodwill - (1,565) (1,565) (3,883) Other operating costs (41,866) (4,859) (46,725) (42,087) Total operating costs (41,866) (6,424) (48,290) (45,970) Operating loss (35) (6,424) (6,459) (3,010) Share of operating profit/(loss) of associate 47 (68) (21) (15) Group operating profit/(loss) 12 (6,492) (6,480) (3,025) Loss on disposal of fixed assets - (399) (399) (90) Net interest payable (320) (320) (226) -Loss on ordinary activities before taxation (308) (6,891) (7,199) (3,341) Taxation on loss on ordinary activities 668 (257) Loss on ordinary activities after taxation (6,531) (3,598)Equity dividends paid and proposed 4 - (654) Retained loss for the year (6,531) (4,252) Loss per share 5 Basic (35.3p) (19.9)pDiluted (35.3p) (19.9)p Consolidated statement of total recognised gains and lossesFor the year ended 31 March 2005 (unaudited) 2005 2004 £000's £000's Loss for the financial year (6,531) (3,598) Gain on foreign currency translation 37 19 Total recognised gains and losses relating to the year (6,494) (3,579) GROUP BALANCE SHEET31 March 2005 (unaudited) 2005 2004 £000's £000's Note Fixed assetsIntangible assets - goodwill 13,012 14,398Tangible assets 1,584 2,372Investment in Associate 2,453 2,486 17,049 19,256 Current assetsDebtors 12,935 10,919Cash at bank & in hand 6 1,680 3,891 14,615 14,810Creditors: amounts falling due within one year (15,048) (9,947) Net current (liabilities)/assets (433) 4,863 Total assets less current liabilities 16,616 24,119 (7,071)Creditors: amounts falling due after more than one year (3,898) Provisions for liabilities & charges 7 (1,695) (782) Net assets 11,023 16,266 Capital & reserves Called up share capital 961 914Share premium account 11,701 10,497Merger reserve 10,170 10,170ESOP (397) (397)Profit and loss account (11,412) (4,918) Shareholders' fundsEquity interests 11,023 16,266 GROUP CASH FLOW STATEMENTFor the year ended 31 March 2005 (unaudited) 2005 2004 £000's £000's Operating loss (6,459) (3,010)Depreciation charges 779 957Amortisation & impairment of goodwill 1,565 3,883 (Increase)/decrease in debtors (1,171) 2,337Increase/(decrease) in creditors 6,175 (5,308) Net cash inflow/(outflow) from operating activities 889 (1,141) Returns on investments and servicing of financeInterest received 39 11Interest paid Finance lease (51) (107) Other (296) - Net cash outflow from returns on investments and servicing of finance (308) (96) Taxation paid (177) (430) Capital expenditure and financial investment Purchase of tangible fixed assets (680) (1,148)Sale of tangible fixed assets 290 44 Net cash outflow from capital expenditure and financial investment (390) (1,104) Acquisitions & disposals Payment of deferred acquisition consideration (300) (51) Net cash outflow from acquisitions & disposals (300) (51) Equity dividends paid (384) (654) Cash outflow before management of liquid resources and financing (670) (3,476) Management of liquid resourcesCash withdrawn from /(placed on) short-term deposit 200 (200)Cash received from restricted deposit - 540Cash placed on restricted deposit (1,195) (333)Net cash (outflow)/inflow from management of liquid resources (1,665) 7 Financing Issue of ordinary share capital 1,221 -Repayments of loan notes (68) (540)Net proceeds from finance leases 342 -(Repayment of loan)/New borrowings (2,500) 2,500 Net cash (outflow)/inflow from financing (1,005) 1,960 Decrease in cash in the year (2,670) (1,509) RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSFor the year ended 31 March 2005 (unaudited) 2005 2004 £000's £000's Loss for the financial year (6,531) (3,598)Dividends - (654)Shares issued during the year 1,251 276Gain on foreign currency translation 37 19Net reduction to shareholders' funds (5,243) (3,957)Opening shareholder's funds 16,266 20,223 Closing shareholder's funds 11,023 16,266 NOTES FORMING PART OF THE ACCOUNTSFor the year ended 31 March 2005 1. Accounting Policies There have been no changes to the accounting policies set out in the 2004 Reportand Accounts. 2. Accounts The financial information set out in this document does not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985. Statutoryaccounts for the year ended 31 March 2004, on which the auditors gave anunqualified audit report, have been delivered to the Registrar of Companies.The statutory accounts for the year ended 31 March 2005 will be finalised on thebasis of the financial information presented by the Directors in thispreliminary announcement and will be delivered to the Registrar of Companiesfollowing the Company's Annual General Meeting. The Report and Accounts for2005 will be posted to shareholders in July and copies will be available fromour Registered Office at 15 Welbeck Street, London W1G 9XT. 3. Segmental Analysis The Group's turnover was attributable to the following activities: 2005 2004 Unaudited Audited £000's £000's Career Transition 18,866 25,297Resourcing 7,758 7,777Interim 10,288 3,873Leadership Services 2,413 2,148HR Consulting 2,698 4,190 Intercompany sales (192) (325) Total 41,831 42,960 Included in turnover are recharged expenses of £9,753,000 (2004: £5,346,000) on which no profit is made. The Group's turnover is derived from the following geographical segments: Operating Turnover Profit/(loss) £000's £000's 2005 (Unaudited) UK 38,984 65Rest of World 2,847 (53)Goodwill and exceptional items - (6,492) 41,831 (6,480) 2004 (Audited) UK 40,067 2,456Rest of World 2,893 (303)Goodwill and exceptional items - (5,178) 42,960 (3,025) 4. Dividends No dividend is proposed for the year (2004: 3.6p) per ordinary share. 5. Loss per share Loss per share has been calculated by dividing the loss attributable toshareholders for the financial year by the weighted average number of ordinaryshares in issue during the year: 2005 2004 Number Number Weighted average number of shared in issue per basic earnings 18,517,363 18,084,458 Diluted effect of: Share options 361,752 227,140 Weighted average number of shares in issue per diluted earnings 18,879,115 18,311,598 Basic EPS 2005 (pence) 2005 Diluted EPS £000's £000's (pence) Loss attributable to shareholders (6,531) (35.3) (6,531) (35.3)* 2004 Basic EPS 2004 Diluted EPS £000's (pence) £000's (pence) Loss attributable to shareholders (3,598) (19.9) (3,598) (19.9)* * FRS 14 requires presentation of diluted EPS when a company could be calledupon to issue shares that would decrease net profit or increase net loss pershare. For a loss-making company with outstanding share options, net loss pershare would only be increased by the exercise of out-of-the-money options.Since it seems inappropriate to assume that option holders would actirrationally, diluted EPS equals basic EPS. 6. Cash at bank and in hand Included within cash at bank and in hand cash is £1.7m (2004: £3.4m) held on arestricted deposit account to guarantee the payment of certain loan notes issuedas consideration for acquisitions made in prior years. 7. Provisions for Liabilities and Charges This item, amounting to £1,695,000 (2004: £782,000) reflects a provision of£1,324,000 (2004: £471,000) for the dilapidations liability arising from theGroup's leased property portfolio and the estimated deferred consideration dueunder the acquisition of The James Black Partnership of £371,000. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PNA.L