Half Yearly Report

3rd Nov 2009 07:00



PENNA CONSULTING PLC

("Penna" or "the Group")

Interim Results for the six months ended 30 September 2009

Penna Announces Further Strong Results

3 November 2009

Penna Consulting Plc (PNA:AIM), the international human resources consulting group, today announces its interim unaudited results for the six months ended 30 September 2009. 

HIGHLIGHTS 

Commenting on the results and outlook, Stephen Rowlinson, Chairman, said:

"Once again our long established businesses produced growth in revenue and a very substantial increase in profit before tax. This was a result of improving margins and close control of operating costs. At the same time as delivering this excellent performance the Group completed the important strategic acquisition of Barkers, which doubles the size of Penna and has great potential for the future.

Because our cyclical recruitment business is three times bigger than our counter cyclical outplacement business we can be confident that Penna will be a major beneficiary of the upturn when it comes.

 Meanwhile we can expect that our profitability and cash generation will allow us to take advantage of opportunities to make further acquisitions of substantial companies in the Human Resource sector. The Group has been successfully reorganised to accommodate the acquisition of the Barkers business in the first half of the year and is focussed on delivering profitable growth in each of the new service groups."

ENDS

For further information please contact:

Stephen Rowlinson, Chairman  Gary Browning, Chief Executive  David Firth, Finance Director	0771 00 23699 020 7648 2448 020 7648 2423
Hawkpoint Partners Graham Paton/Serge Rissi	020 7665 4500
Collins Stewart  Adrian Hadden	020 7523 8350
Pelham PR  Polly Fergusson/Zoë Pocock/Archie Berens	020 7337 1519

  Penna Consulting Plc

Chairman's Review

I am pleased to present the results of a very successful half year.

Once again our long established businesses produced growth in revenue and a very substantial increase in profit before tax. This was a result of improving margins and close control of operating costs. At the same time as delivering this excellent performance the Group completed the important strategic acquisition of Barkers, which doubles the size of Penna and has great potential for the future.

Revenue for the six months ended 30 September 2009 was up 68% to £48.4m (2008: £28.9m) and profit before tax (before non-recurring post acquisition costs) increased by 56% to £3.5m (2008: £2.2m).

On a like for like basis (i.e. excluding Barkers) revenues were £32.0m (2008: £28.9m) up 11% on the same period of the previous year and margins continued to improve to produce profits of £3.4m (2008: £2.3m), up 47%. In the last Annual Report I noted that operating margins had improved from 4.5% in 2007/08 to 9.3% in 2008/09. I am therefore very pleased to highlight the further improvement to 10.4% achieved in the first half of the current year.

Barkers was acquired in the middle of the period under review and the acquisition is part of our strategy to become the leading HR services firm in the UK. The services acquired complement our existing business and give Penna access to a wider range of clients.  We will continue to grow our service offering both organically and through acquisitions.

In the three months trading since its acquisition, Barkers produced Revenue of £16.4m and a profit before tax of £0.1m. This positive contribution to the Group's profit was gained during a period of intense and dramatic change in operations and we are very proud of the resilience of our talented and dedicated new colleagues.

Penna's businesses are highly cash generative and our balance sheet is strong.  We have no bank debt and facilities established in 2007 remain undrawn.  Cash at the period end was £6.7m.

Your Board has declared an interim dividend of 3p per share (2008: 2p) which will be payable on 5th March 2010 to shareholders on the register on 5th February 2010.

  Operations

Following the Barkers acquisition in June we have organised the enlarged company into four service groups each led by a Managing Director responsible to the Group Chief Executive.  Annualising 2nd Quarter revenues suggests that the current annual revenue run rate of the Company is around £120m. Outplacement, which is part of HR Consulting, remains an important core business and represents around 25% of Group turnover.

Revenues	Six months to 30 September 2009	Six months to 30 September 2008	Year to 31 March 2009
Recruitment & Marketing Communications	£16.4m	£2.8m	£5.3m
Resourcing	£5.4m	£0.9m	£3.4m
Executive Recruitment & Interim	£8.2m	£9.2m	£18.8m
HR Consulting	£18.4m	£16.0m	£35.7m
Total revenue	£48.4m	£28.9m	£63.2m

Penna Recruitment and Marketing Communications is the UK's largest recruitment advertising agency, creating candidate attraction strategies using print, digital and other media. These include complex online offerings and employer reputation management for clients. These services are typically provided under long term arrangements with clients.

Recently the business has migrated to digital led services and project solutions, with products including advertising (online and offline), search engine marketing, media planning and buying, branding and reputation management, response handling, candidate management and assessment.

Clients include major UK and international blue chip companies and public sector and government organisations.  The public and private sectors each account for approximately 50% of income, giving a stable and balanced mix of opportunity and exposure. We provide services to over 200 companies, 50 central government departments, 40 universities and 30 local government authorities.

In the period under review, Recruitment and Marketing Communications reported revenues of £16.4m (2008: £2.8m) with the acquired business contributing £14.4m in the three months since June.  The service group has 125 London-based employees and 55 regionally located across the UK. As part of the integration of the acquisition, teams from Barkers are moving into Penna's existing offices in Edinburgh, Leeds and Birmingham and new leases have been negotiated on favourable terms in London, Bristol, Slough and Wilmslow.  A series of onerous leases have lapsed following our acquisition of the business from the administrators of its parent company.

We expect that demand for recruitment related services will remain subdued in the near term and the cost structure established for the combined Penna Barkers business reflects this view.

Our strategy is to ensure that this part of the Group will operate profitably at much lower levels of turnover than those seen in recent years. Our staffing levels, office costs and all other overheads are organised around this principle. When the market recovers we will be ready to respond immediately and to grow rapidly.

Penna Resourcing is one of the UK's three leading providers of integrated recruitment project solutions.  The service group has over 40 clients including both international companies and government departments. Penna Resourcing provides a "turnkey" recruitment service to clients setting up or relocating a major unit. Services include the development of attraction strategies, delivery of recruitment campaigns, response handling and assessment leading to selection recommendations. Resourcing projects are normally contracted for a number of years.

The service group reported revenues of £5.4m (2008: £0.9m) in the period with the acquired business, contributing £1.9m in the three months since June. Penna Resourcing employs approximately 60 people based both in Penna's offices and on-site at client premises.

As the economy recovers organisations will look for new and more effective ways to recruit the best people and our Resourcing business is well placed to continue to play a leading role in this important market sector.  New and innovative methods of talent sourcing are being developed for a number of clients in anticipation of higher levels of recruitment activity next year.

Penna Executive Recruitment and Interim is a leading public sector executive search consultancy and its Executive Interim team is the second largest in the UK.  Penna employs 50 people in this service group and reported revenues of £8.2m (2008: £9.2m) in the first half of the year.  Our focus on the public sector through the recession has proved an effective strategy in maintaining volumes and we intend to expand business in commercial sectors as markets improve.

Penna HR Consulting is a leader in Organisational Design, Executive Coaching, Leadership Development and is the UK's largest Career Transition consultancy. Penna provides consultancy services across a broad range of sectors including financial services (40% of revenues), the public sector (11%), telecoms and technology (19%).  Services are procured by HR Directors normally on a project basis under preferred supplier agreements that are typically renewed every two to three years.   The service group employs approximately 230 people located in London and the regions and in the first half of the year reported revenues up 15% at £18.4m (2008: £16.0m). The majority of Penna's consultancy services are delivered by highly skilled, Penna-trained, self-employed associates. These associates enable the company to meet the specific needs of clients as demand changes and, together with the use of temporary office space and the extensive use of technology, ensures the business maintains a flexible cost structure.

Demand for career transition services is driven by the continuing process of change in industry, commerce and public sector. Employees must be efficiently transferred from declining activities into growing businesses and services. Penna consultants work with redundant employees to bring them to an understanding of new opportunities and facilitate their entry into new fields.

This activity continues through periods of healthy economic expansion and is particularly marked at times of high levels of merger and acquisition activity. During periods of recession however, there is an additional factor that is the necessity for organisations to downsize in response to falling demand. As a result our career transition business is somewhat protected from any cyclical drop in demand for recruitment related businesses.

Board Changes

We announced on 24th September that David Banks had stepped down after 14 years as a director of the Company. I would like to take this opportunity to thank David Banks for his long and valuable contribution to Penna.

Outlook

Penna HR Consulting will continue to see strong demand for its outplacement services during the recession and experience of the 1990/91 and 2001/02 periods suggests that demand will remain at a high level for two or more years after economic recovery begins.  Because outplacement is 25% of Penna's turnover, its contribution to Group profits will continue to be significant.

Over the same period the 75% of our business that is focussed on recruitment and related services can be expected to enjoy slow but steady recovery from the current low levels of market demand. However, we are not anticipating rapid growth of recruitment and we have ensured that our cost structure reflects fully the realities of today's markets.  We expect all of our service groups to trade profitably at current levels of turnover.

We can, of course, look forward to a time of strong economic recovery and if at that time there is some flattening out of the demand for our outplacement services this will be more than offset by the growth of our recruitment and related businesses. Because our cyclical recruitment business is three times bigger than our counter-cyclical outplacement business, we can be confident that Penna will be a major beneficiary of the upturn when it comes.

Meanwhile we can expect that our profitability and cash generation will allow us to take advantage of opportunities to make further acquisitions of substantial companies in the human resource sector.

The Group has been successfully reorganised to accommodate the acquisition of the Barkers business in the first half of the year and is focussed on delivering profitable growth in each of the new service groups.

Stephen Rowlinson

Chairman

3 November 2009

 

 

Penna Consulting Plc

Consolidated statement of comprehensive income

for the six months ended 30 September 2009 (unaudited)

	Notes	Six Months Ended 30 September 2009 Unaudited £'000	Six Months Ended 30 September 2008 Unaudited Restated * £'000	Year Ended 31 March 2009 Audited £'000
Continuing operations
Revenue		48,423	28,814	63,162
Normal operating expenses		(44,964)	(26,588)	(57,276)
Normal operating profit		3,459	2,226	5,886
Non-recurring post acquisition expenses	2	(996)	-	-
Operating profit		2,463	2,226	5,886
Finance income		16	66	141
Finance costs		(1)	(4)	(24)
Profit before tax		2,478	2,288	6,003
Tax expense	3	(840)	(642)	(1,497)
Profit from continuing operations		1,638	1,646	4,506
Post tax loss on disposal of discontinued activities		-	(107)	(788)
Profit for the period		1,638	1,539	3,718
Other comprehensive income:
Currency translation differences		(47)	(123)	(129)
Total comprehensive income for the period		1,591	1,416	3,589
Attributable to:
Equity holders of the parent		1,638	1,539	3,718
Earnings per share:	4
Basic		6.5p	6.1p	14.8p
Diluted		6.0p	6.0p	14.2p
Earnings per share from continuing operations before non-recurring acquisition expenses:	4
Basic		9.4p	6.5p	17.9p
Diluted		8.6p	6.4p	17.1p

* The comparative figures have been restated for discontinued operations

Penna Consulting Plc

Consolidated balance sheet

at 30 September 2009 (unaudited)

		30 September 2009 £'000	30 September 2008 £'000	31 March  2009 £'000
Non-current assets
Goodwill		17,802	14,036	14,036
Tangibles		2,695	1,667	1,823
Intangibles - software		167	24	24
Deferred tax		75	24	75
		20,739	15,751	15,958
Current assets
Trade debtors		17,781	10,748	12,672
Other current assets		3,177	2,290	2,419
Cash and short term deposits		6,657	5,149	8,875
		27,615	18,187	23,966
Total assets		48,354	33,938	39,924
Current liabilities
Trade creditors		5,215	2,303	2,520
Loan notes		24	111	41
Obligations under finance leases		-	42	-
Provisions		88	129	78
Corporation tax		906	753	838
Other creditors and accruals	7	17,737	9,434	13,840
		23,970	12,772	17,317
Non-current liabilities
Provision for liabilities and charges		495	390	458
Total liabilities		24,465	13,162	17,775
Net assets		23,889	20,776	22,149
Capital and reserves
Called up share capital		1,289	1,264	1,270
Share premium account		15,620	15,109	15,209
Merger reserve		10,170	10,170	10,170
Employee Share Option Plan reserve		(767)	(397)	(397)
Foreign currency translation reserve		(173)	(120)	(126)
Retained loss		(2,250)	(5,250)	(3,977)
Total equity		23,889	20,776	22,149

  

Penna Consulting Plc 

Consolidated statement of changes in equity 

at 30 September 2009 (unaudited)

	Called up share capital £'000	Share premium £'000	Merger reserve £'000	ESOP reserve £'000	Foreign currency translation £'000	Retained loss £'000	Total equity £'000
At 1 April 2008	1,264	15,109	10,170	(397)	3	(6,818)	19,331
Currency translation differences	-	-	-	-	(123)	-	(123)
Profit	-	-	-	-	-	1,539	1,539
Total comprehensive income or the period	-	-	-	-	(123)	1,539	1,416
Share option credit	-	-	-	-	-	29	29
At 30 September 2008	1,264	15,109	10,170	(397)	(120)	(5,250)	20,776
Currency translation differences	-	-	-	-	(6)	-	(6)
Profit	-	-	-	-	-	2,179	2,179
Total comprehensive income or the period	-	-	-	-	(6)	2,179	2,173
Share issue	6	100	-	-	-	-	106
Equity dividend paid						(1,007)	(1,007)
Share option credit	-	-	-	-	-	101	101
At 31 March 2009	1,270	15,209	10,170	(397)	(126)	(3,977)	22,149
Currency translation differences	-	-	-	-	(47)	-	(47)
Profit	-	-	-	-	-	1,638	1,638
Total comprehensive income or the period	-	-	-	-	(47)	1,638	1,591
Share issue	19	411	-	-	-	-	430
Shares purchased	-	-	-	(370)	-	-	(370)
Share option credit	-	-	-	-	-	89	89
At 30 September 2009	1,289	15,620	10,170	(767)	(173)	(2,250)	23,889

  

Penna Consulting Plc

Consolidated group cash flow statement

for the six months ended 30 September 2009 (unaudited)

	Note	Six Months Ended 30 September  2009 £'000	Six Months Ended 30 September  2008  £'000	Year  Ended 31 March  2009  £'000
Cash flows from operating activities
Cash generated by operations	6a	8,044	2,240	7,915
Tax paid Interest received - bank interest		(743) 15	(1) 69	(605) 122
Net cash generated by operating activities		7,316	2,308	7,432
Cash flows from investing activities
Net purchase of property, plant and equipment		(1,059)	(67)	(454)
Purchase of financial assets held for trading		(8,888)	-	-
Net cash used by investing activities		(9,947)	(67)	(454)
Cash flows from financing activities
Interest paid - finance leases		-	(3)	(5)
Repayment of finance leases		-	(50)	(88)
Repayment of loan notes		(17)	-	(70)
Issue of ordinary share capital		430	-	106
Dividends paid		-	-	(1,007)
Net cash generated/(used) by financing activities		413	(53)	(1,064)
Net (decrease)/increase in cash and cash equivalents		(2,218)	2,188	5,914
Cash and cash equivalents at start of period		8,875	2,961	2,961
Cash and cash equivalents at end of period	6b	6,657	5,149	8,875

  

Penna Consulting Plc

Notes to the interim financial statements

for the six months ended 30 September 2009 (unaudited)

1. Accounting policies

The consolidated interim financial statements are for the six months ended 30 September 2009. They have been prepared under the historical cost convention using accounting policies that are consistent with current International Financial Reporting Standards (IFRS). The interim financial statements have neither been audited nor reviewed pursuant to guidance issued by the Auditing Practices Board 

2. Non-recurring post acquisition expenses

Non-recurring post acquisition expenses comprise items incurred by the Group in integrating the trade and assets of the Barkers Group purchased on 29 June 2009. They are highlighted in the income statement because separate disclosure is considered relevant in understanding the underlying performance of the business. The highlighted items arise from redundancy expenses, surplus property and other costs. 

 

	Six Months Ended 30 September 2009	Six Months Ended 30 September 2008	Year Ended 31 March 2009
	£’000	£’000	£’000
Non recurring:
Personnel costs	480	-	-
Property costs	325	-	-
Other costs	191	-	-
Total	996	-	-

3. Taxation Taxation has been provided for at a corporation tax rate of 28% (2009:28%), for the UK and appropriate rates for overseas earnings.

  

4.  Earnings per share

The calculation of basic and diluted earnings per share is based on the following amounts:

	Six months ended 30 September 2009	Six months ended 30 September 2008	Year  ended  31 March  2009
Earnings (£'000)
Profit for the period	1,638	1,539	3,718
Loss on disposal of discontinued activities (after tax)	-	107	788
Non-recurring post acquisition expenses (after tax)	717	-	-
Profit from continuing operations and before non-recurring acquisition expenses	2,355	1,646	4,506
Profit for the period (£'000)	1,638	1,539	3,718
Number of shares
Weighted average number of  Shares	25,118,822	25,173,348	25,184,491
Dilution effect of share option  Schemes	2,144,229	515,572	1,093,230
Diluted weighted average number  of Shares	27,263,051	25,688,920	26,277,721
Earnings per share:
Basic	6.5p	6.1p	14.8p
Diluted	6.0p	6.0p	14.2p
Earnings per share from continuing operations and before non-recurring acquisition expenses:
Basic	9.4p	6.5p	17.9p
Diluted	8.6p	6.4p	17.1p

5. Dividends

An interim dividend of 3 pence per Ordinary is proposed (2008: 2p) for the six months ended 30 September 2009. This will be paid on 5 February 2010 to shareholders on the register on 5 March 2010.

  

Penna Consulting Plc

Notes to the interim financial statements (continued)

for the six months ended 30 September 2009 (unaudited)

6a. Reconciliation of operating profit to net cash outflow from operating activities	Six Months Ended 30 September 2009 £'000	Six Months Ended 30 September 2008 £'000	Year Ended 31 March 2009 £'000
Profit for the period	1,638	1,539	3,718
Adjustments for:
Loss on disposal of discontinued operations	-	107	788
Income tax expense	840	642	1,497
Finance income	(16)	(66)	(141)
Finance expense	1	4	24
Depreciation and amortisation	311	258	495
Share option expense	89	29	130
Changes in working capital:
Decrease/(increase) in trade and other receivables	2,960	21	(2,032)
Increase/(decrease) in trade and other payables Increase/(decrease) in provisions	2,236 (15)	(309) 15	3,404 32
Cash generated by operations	8,044	2,240	7,915
6b. Cash and cash equivalents	At 30 September 2009 £'000	At 30 September 2008 £'000	At 31 March 2009 £'000
Cash and cash equivalents are made up as follows:
Net cash	6,633	5,038	8,834
Cash on restricted deposit	24	111	41
Cash and cash equivalents	6,657	5,149	8,875

  

Penna Consulting Plc

Notes to the interim financial statements (continued)

for the six months ended 30 September 2009 (unaudited)

7. Other payables and accruals	30 September 2009 £'000	30 September 2008 £'000	31 March  2009 £'000
Delivery	7,200	2,492	3,228
Staff related	577	775	1,621
Overheads	3,055	1,354	1,432
Other	2,267	1,825	2,847
Deferred income	2,904	1,676	3,082
Other taxes and social security	1,734	1,312	1,630
Total	17,737	9,434	13,840

8. Goodwill and intangible assets

Following the acquisition of Barkers an exercise to identify and assess the value of intangible assets acquired will be carried out.

Any value identified for intangible assets following this review will be separated from goodwill and amortised over the intangible assets' useful economic life.

9. Nature of the financial information

The financial information for the period ended 30 September 2009 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 March 2009 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2009 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 237(2) or 237(3) of the Companies Act 1985.

The Board of Directors approved the Interim Report on 3rd November 2009.  The financial information in respect of the six months to 30 September 2009 is unaudited.

ENDIR CKBKBFBDDKDK

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