Interim Results

PENNA CONSULTING PLC

("Penna" or "the Group")

Interim Results for the six months ended 30 September 2011

2 November 2011

Penna Consulting Plc (PNA:AIM), the international human resources consulting group, today announces its interim unaudited results for the six months ended 30 September 2011.

FINANCIAL HIGHLIGHTS

·; Revenue £34.2m (2010: £45.1m) and net revenues £18.9m (2010: £21.7m)

·; Pre tax profits £0.8m (2010: Loss £0.8m)

·; Cash at period end £1.7m (31 March 2011: £3.4m)

·; Earnings per share 2.4p (2010: Loss per share 2.4p)

·; Interim dividend 1p (2010: 3p) payable on 16 March 2012

OPERATIONAL HIGHLIGHTS

·; Growing pipeline of revenue from outplacement and related restructuring services in the public and financial services sectors

·; UK recruitment market remains difficult

·; Fixed cost base reduced by £3.9m, a 22% reduction compared to last year

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

"Profits for the first half of the year were in line with our expectations and showed a marked improvement on both first and second halves of last year.

Forward commitments from our clients suggest that demand for our outplacement services will continue to grow during the second half of this year and this is likely to account for the majority of our profits this year and into 2012/13. We do not expect a marked recovery in recruitment over that same period. We have reduced our fixed costs significantly and our cost structure is now flexible and appropriate to current market conditions. We believe we have gained market share albeit in an environment where expenditure per client is subdued. We therefore expect to achieve increased profitability in the medium term from outplacement and in the longer term from our whole range of services."

ENDS

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Penna Consulting Plc

Chairman's Review

Profits for the first half of the year were in line with our expectations and showed a marked improvement on both first and second halves of last year.

Operating profit was £835,000 (2010: £130,000). There were no exceptional items during the period (2010: £952,000) and profit after tax was £602,000 compared to a loss of £598,000 in 2010.

The turn round from loss to profit was achieved despite a fall of 24% in revenue to £34.2m (2010:£45.1m) as we saw the benefits of the cost reduction programme implemented during last year. Operating expenses in the half year fell by 26% from £44.9m in 2010 to £33.4m in the period under review with fixed costs down by £3.9m (22%) from £17.9m to £14.0m.

As anticipated, the pattern of trading this year has been that our Recruitment Solutions (RS) division has broken even while our Human Resource Consulting (HRC) division produced an operating profit of £1.1m (2010:£1.0m) on revenues of £12.5m (2010: £13.4m), of which our outplacement business accounted for £8.8m (2010: £9.9m).

Earnings per share for the six months was 2.4p (2010: Loss per share 2.4p).

Dividend

Our balance sheet is robust. Cash at 30th September 2011 was £1.7m and our only debt is a finance lease of £1.1m (2010: £1.6m). An interim dividend of 1p (2010: 3p) has been declared and this will be paid on 16 March 2012 to shareholders on the register on 19 February 2012.

Operating Review

The Company was consolidated into two service groups at the start of the financial year each with a managing director reporting to the Chief Executive.

Divisional Breakdown

HR Consulting, includes our market leading outplacement service, board and executive coaching, executive assessment, leadership and management development, and organisational and change management.

We provide services across a broad range of sectors with 20% (2010: 12%) of HR Consulting revenues derived from the public sector, which in value terms is 16% higher than last year. To achieve Government spending targets the public sector has, up to this point largely, relied on natural attrition, a recruitment freeze, and voluntary redundancies. However, it is clear that this will not achieve the large number (est. 600,000) of expected job reductions over the medium term and therefore all public sector organisations are preparing to take more proactive action. The Company has won 180 new contracts since last year's Comprehensive Spending Review to advise on re-organisations, to assess employees objectively in order to select people for redundancy and to provide support to ensure the individuals affected have the best possible opportunity to return to the job market as quickly as possible. We are proud to point to the statistic that people who are provided with professional career support redeploy into the job market on average 40% faster than those who are not supported in an appropriate way. Penna is the leading provider of outplacement services to public organisations and we expect to see a steady increase in revenues from this sector. 

The private sector accounts for 80% of HRC revenues and Penna has recently won a number of significant contracts to provide a broad range of HR services both in the UK and internationally. Towards the end of the period under review we saw a marked increase in outplacement demand from our clients in financial services, which represents 27% of the division's revenues. Demand for outplacement from the financial services sector peaked in 2009 following the crisis of 2008 and this is the first time since then that we have seen rising demand from our 64 financial services clients.

Recruitment Solutions combines our service capabilities in recruitment advertising and communications, managed recruitment and assessment, executive search and executive interim. This broad range of recruitment activities enables us to offer clients in both the commercial and public sector innovative solutions to their recruitment needs. 50% of recruitment revenues are derived from clients in the public sector and this market remains extremely challenging with revenues down 38% compared with this period last year. Private sector revenues are down by 25% for the same period. Our client list across both sectors remains strong with ongoing contracts and good relationships over a broad range of organisations. When activity returns we will be well positioned to expand. However it is likely that demand for our recruitment services will remain subdued for the rest of this financial year and throughout 2012. Accordingly, we have reduced operating costs significantly with employee costs down £2.3m and overheads £0.7m lower than for the same period last year.

The unrelenting trend across all markets for the Group's services is the demand for low cost solutions. We are well placed to respond to this through service innovation and use of technology. We are pleased to report that in the period under review we increased our client base by gaining 317 new clients and this also positions us well for the future.

Outlook

Forward commitments from our clients suggest that demand for our outplacement services will continue to grow during the second half of this year and this is likely to account for the majority of our profits this year and into 2012/13. We do not expect a marked recovery in recruitment over that same period.

We have significantly reduced our fixed costs and our cost structure is now flexible and appropriate to current market conditions. We believe we have gained market share albeit in an environment where expenditure per client is subdued. We therefore expect to achieve increased profitability in the medium term from outplacement and in the longer term from our whole range of services.

Stephen Rowlinson

Chairman

2 November 2011

Unaudited condensed consolidated interim statement of comprehensive income

for the six months ended 30 September 2011

Penna Consulting Plc

Unaudited condensed consolidated interim statement of changes in equity

at 30 September 2011

Penna Consulting Plc

Unaudited condensed consolidated interim statement of financial position

at 30 September 2011

Penna Consulting Plc

Unaudited condensed consolidated interim statement of cash flow

for the six months ended 30 September 2011

Penna Consulting Plc

Notes to the unaudited condensed consolidated interim report

for the six months ended 30 September 2011

1. Basis of preparation

The unaudited condensed consolidated interim report for the period ended 30 September 2011 has been prepared under the historical cost convention, using accounting polices that are consistent with current International Financial Reporting Standards (IFRS) as endorsed by the European Union and also comply with IFRIC interpretation and Common Law applicable to companies reporting under IFRS. The condensed consolidated interim report should be read in conjunction with the annual financial statements for the year ended 31 March 2011, which were prepared in accordance with IFRS, as adopted by the European Union.

The unaudited condensed consolidated interim report has been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 March 2011 and applied consistently throughout the Group.

2. Non-recurring exceptional items

Non-recurring exceptional items from prior periods comprised expenses incurred by the Group in restructuring the cost base. 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.

In addition a provision was made in the year ended 31 March 2011 against the carrying value of a trade receivable which relates to invoices raised in 2009 and whilst the Directors believe it is fully recoverable, they believe that, due its age, it was appropriate to make a full provision.

Penna Consulting Plc

Notes to the unaudited condensed consolidated interim report (continued)

for the six months ended 30 September 2011 

4. Earnings per share

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

Penna Consulting Plc

Notes to the unaudited condensed consolidated interim report (continued)

for the six months ended 30 September 2011