8th Nov 2005 07:00
Penna Consulting PLC08 November 2005 PENNA CONSULTING PLC ANNOUNCES INTERIM RESULTS 8 November 2005 Penna Consulting Plc (PNA) the Human Capital Management Consultancy group todayannounces its interim results for the six month period ended 30 September 2005. Headlines • Business returned to profit • Turnover up 8% to £22.0m (2004: £20.4m) • Profit before tax £1.2m (2004: loss £37k) • Diluted earnings per share 4.1p (2004: loss 0.8p) • Satisfactory outcome for the year expected Commenting on the results, Stephen Rowlinson, Chairman said: "The Company has returned to profit and has made good progress in implementingits new operating structure. We are looking forward to a satisfactory outcomefor the year as a whole." For further information please contact: Stephen Rowlinson, Chairman 0771 00 23699Gary Browning, Chief Executive 020 7334 8054David Firth, Finance Director 020 7334 8054 These interim results are the Group's first set of results prepared under theInternational Financial Reporting Standards (IFRS). Whilst the application ofIFRS has no significant impact on the reported results for the Group, theresults for the six months ended 30 September 2005 and the comparative periodshave been restated in accordance with IFRS and have not been audited. Penna Consulting Plc Interim Report 2005 Chairman's Review The encouraging first half results announced today show the impact of theactions taken at the end of last year. The Company has returned to profit andhas made good progress in implementing its new operating structure. The normalseasonal pattern is for the second half to produce higher profits than the firsthalf and we are looking forward to a satisfactory outcome for the year as awhole. Financial Review Turnover for the period amounted to £22.0m (2004: £20.4m), which was an increaseof 8% compared with the first half of last year. Underlying net revenues (i.e.before recharges to clients) were £15.9m (2004: £16.0m). Despite net revenuesbeing flat the Company reported profits of £1.2m for the period compared withbreak-even last year. This reflects the reduction in overheads we implementedat the start of the year. At 30 September 2005 the Group had net debt (including loan notes) of £6.0m (31March 2005: £3.5m). Whilst the Company has returned to profit the Board do not recommend the paymentof an interim dividend (2004: Nil) for the period. The Board expects toreinstate the dividend when the level of debt has been reduced. Turnover by service line Six months to Six months to 30 Sept 2005 30 Sept 2004 £'000 £'000 Career Transition 9,598 9,214Resourcing 4,806 4,276Interim 5,635 4,343Recruitment Advertising 117 0Leadership Services 1,104 1,020HR Consulting 839 1,568Intercompany sales (131) (51)Total Turnover 21,968 20,370 Turnover for our career transition services has increased by 4% in the period to£9.6m (2004: £9.2m). The pipeline of activity in career transition is lookingsatisfactory for the second half of the year with a number of major projectscommencing in the public and financial services sectors. 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 £5.6m (2004: £4.3m). Our search and selection businesshas reported turnover of £4.8m, which is 12% above last year. Recruitment advertising made its first billings in September and it is expectedthat this service line will be making a significant contribution to profits in2006/7. Our other consulting services, which include HR consulting, organisationdevelopment, employee communication, assessment, executive development andexecutive coaching have contributed turnover of £1.9m (2004: £2.6m). During the 1st half we completed the reorganisation changes announced last year.Ten smaller offices have been decommissioned, of which four leases have beendisposed, and we are pursuing an active programme to dispose of the remainder.Total headcount has been reduced by a net 35 since December 2004 and 65 sinceApril 2004. These actions mean that we are on track to achieve annualised costsavings of £3.6m in the year. Approximately 5% of the Group's turnover is delivered outside of the UK and wehave offices in Dublin, Paris, Stockholm, Madrid and Munich. Whilst small inscale these operations provide Penna's clients with the international reach theyneed, especially in resourcing and developing local talent. Outlook Under the leadership of Gary Browning the new management team has made goodprogress in the first half of the year. • The Company has returned to profitability despite flat revenues through the implementation of a significant reorganisation project and on going cost control. • Six service lines have been established which are led by six individuals who have clear accountabilities for revenues and profits within their service line. • All the group's systems have been simplified. A single billing system was introduced in July which interfaces directly with a single client relationship management system and the accounting system. In addition a new recruitment database and candidate management system has been introduced which provides candidates and clients with on-line access to our recruitment teams. • A new service line of Recruitment Advertising has been established through the recruitment of an industry leading team who are now in position to provide a full range of advertising services to our existing Resourcing clients and to third parties. The Penna team are to be congratulated on the progress achieved in the year todate and I am looking forward to the next phase of the Company's development. Stephen RowlinsonChairman8th November 2005 Penna Consulting PlcConsolidated income statementfor the six months ended 30 September 2005 (unaudited) As restated Six Months Ended Six Months Ended Year Ended 30 September 30 September 31 March Notes 2005 2004 2005 £'000 £'000 £'000Continuing operations Turnover 21,968 20,370 41,831 Operating costs (20,648) (20,225) (47,281) Operating profit/(loss) 1,320 145 (5,450) Share option expense (52) (57) (128)Goodwill impairment - - (508)Interest payable (141) (100) (320)Share of results of associate 48 (25) 47 Profit/(loss) before tax 1,175 (37) (6,359) Tax 2 (376) (118) 668 Profit/(loss) for the period 799 (155) (5,691) Attributable to: Equity holders of the parent 799 (155) (5,691) Earnings/(loss) per share: 3 - basic 4.2p (0.8)p (30.7)p- diluted 4.1p (0.8)p (30.1)p Penna Consulting PlcConsolidated balance sheetat 30 September 2005 (unaudited) As restated 30 September 30 September 31 March 2005 2004 2005 £'000 £'000 £'000Non-current assetsTangibles 1,991 1,344 1,507Intangibles - software 100 752 77Goodwill 14,036 14,578 14,070Investments 2,661 3,140 2,623 18,788 19,814 18,277 Current assetsTrade debtors 10,982 8,313 10,513Corporation tax 480 - 904Cash and cash equivalents 2,117 1,151 1,680Other prepayments 1,517 1,562 1,518 15,096 11,026 14,615 Total assets 33,884 30,840 32,892 Current liabilitiesTrade creditors 2,811 1,464 1,841Bank overdraft 5,307 - 2,400Corporation tax - 17 -Finance leases 80 72 75Provision for liabilities and charges 444 619 671Other creditors and accruals 8,106 8,979 10,908 16,748 11,151 15,895 Non-current liabilitiesLoan notes 2,462 2,667 2,467Finance leases 226 306 267Provision for liabilities and charges 660 254 1,024Other creditors and accruals 864 - 1,164 4,212 3,227 4,922 Total liabilities 20,960 14,378 20,817 Net assets 12,924 16,462 12,075 Capital and reservesCalled up share capital 961 915 961Share premium account 11,706 10,526 11,701Merger reserve 10,170 10,170 10,170Employee Share Option Plan reserve (397) (397) (397)Share option reserve 264 141 212Foreign currency translation reserve 33 28 40Retained loss (9,813) (4,921) (10,612) Total equity 12,924 16,462 12,075 Penna Consulting PlcConsolidated statement of changes in equityat 30 September 2005 (unaudited) Called up Share Foreign share Share Merger ESOP option currency Retained Total capital premium reserve reserve reserve translation loss equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2004 (restated) 914 10,497 10,170 (397) 84 - (4,336) 16,932 Share issue 1 29 - - - - - 30Currency translation differences - - - - - 28 (46) (18) Loss - - - - - - (155) (155) Share option charge - - - - 57 - - 57 Equity dividends - - - - - - (384) (384)At 30 September 2004 (restated) 915 10,526 10,170 (397) 141 28 (4,921) 16,462 Share issue 46 1,175 - - - - - 1,221 Currency translation differences - - - - - 12 - 12 Loss - - - - - - (5,691) (5,691) Share option charge - - - - 71 - - 71 At 31 March 2005 (restated) 961 11,701 10,170 (397) 212 40 (10,612) 12,075 Share issue - 5 - - - - - 5 Currency translation differences - - - - - (7) - (7) Profit - - - - - - 799 799 Share option charge - - - - 52 - - 52At 30 September 2005 961 11,706 10,170 (397) 264 33 (9,813) 12,924 Penna Consulting PlcConsolidated group cash flow statementfor the six months ended 30 September 2005 (unaudited) As restated Six Months Six Months Year Ended Ended Ended 30 September 30 September 31 March 2005 2004 2005 Note £'000 £'000 £'000 Cash flows from operating activities Cash (used)/generated by operations 5a (1,226) 265 889Tax refunded/(paid) 48 (32) (177) Net cash (used)/generated by operating activities (1,178) 233 712 Cash flows from investing activities Net purchase of property, plant and equipment (783) (183) (680)Sale of tangible fixed assets - - 290 Payment of deferred consideration - (144) (300) Net cash used in investing activities (783) (327) (690) Cash flows from financing activities Interest paid - finance leases (18) (26) (51) - other (113) (74) (257)Net proceeds from finance leases - - 342Repayment of finance leases (36) (36) -Repayment of loan notes (342) (10) (3,004)Issue of ordinary share capital - - 1,221Repayment of loan - (2,500) (2,500)Dividends paid - - (384) Net cash used in financing activities (509) (2,646) (4,633) Net decrease in cash and cash equivalents (2,470) (2,740) (4,611) Cash and cash equivalents at start of period (720) 3,891 3,891 Cash and cash equivalents at end of period 5b (3,190) 1,151 (720) Penna Consulting PlcNotes to the interim financial statementsfor the six months ended 30 September 2005 (unaudited) 1. Accounting policies The consolidated interim financial statements are for the six months ended 30September 2005. They have been prepared under the historical cost conventionusing accounting polices that are consistent with current InternationalFinancial Reporting Standards (IFRS). IFRS 1, "First-time Adoption ofInternational Financial Reporting Standards", applies to these interim financialstatements because they are part of a period, the year to 31 March 2006, towhich IFRS apply for the first time. The interim financial statements areunaudited. The Group's consolidated financial statements were prepared in accordance withthe United Kingdom Generally Accepted Accounting Principles (UK GAAP) until 31March 2005. In preparing the 2005 interim financial statements, the directorshave amended certain accounting disclosures and valuation methods applied in theUK GAAP financial statements so that the comparative information has beenprepared on a consistent basis. The adjustments to the Group's equity and itsincome are shown in Note 6. These restated financial statements have not beenaudited. The Group has taken advantage of the exemption available under IFRS 1 wherecumulative translation differences for all foreign operations are deemed to bezero at 1 April 2004, the date of transition. The Group has also elected toapply IFRS 2, "Share-based Payment" to all relevant share based paymenttransactions granted after 7 November 2002 that had not fully vested at 1 April2004. Under IFRS 3, "Business Combinations" the Group has also taken advantageof the exemption to not apply IFRS 3 to business combinations occurring beforethe date of transition. The adopted IFRS that will be effective in the annual financial statements forthe year ending 31 March 2006 are still subject to change and to additionalinterpretations and therefore cannot be determined with certainty. Accordingly,the accounting policies for the year ending 31 March 2006 will be determinedonly when the financial statements are prepared for this period. The changes necessary to the Group's accounting policies under UK GAAP as setout in the Group's financial statements for the year ended 31 March 2005 are: • IAS 1 "Presentation of Financial statements" and IAS 7 "Cash Flow Statements" have affected the overall presentation and certain disclosures; • IFRS 2 "Share-based Payment" requires that the fair value of employee options at grant date be expensed and recognised over the vesting period; • IAS 10 "Events After the Balance Sheet Date" has the effect of prohibiting the recognition of the final dividend until shareholder approval has been received. Previously a liability was recognised. • IAS 19 "Employee Benefits" has the effect of recognising a liability for unused accumulated employee holiday entitlement at balance date. Previously no accrual was made. • IFRS 3 "Business Combinations", IAS 36 "Impairment of Assets" and IAS 38 "Intangible Assets" have resulted in a change in the accounting policy for goodwill. In accordance with the provisions of IFRS 3, the Group ceased amortisation of goodwill from 1 April 2004. From the year ended 31 March 2004 onwards, goodwill is tested annually for impairment, as well as when there are indications of impairment. The adjustments to the Group's equity and income as previously reported are setout in Note 6. 2. Taxation Taxation has been provided for at 30% (2005:30%), for the UK and appropriaterates for overseas earnings. 3. Earnings/(loss) per share The calculation of basic and diluted earnings per share are based on the following amounts: As restated Six months ended Six months ended Year ended 30 September 30 September 31 March 2005 2004 2005EarningsProfit/(loss) from continuing operations 799 (155) (5,691)(£'000)Profit/(loss) for the period (£'000) 799 (155) (5,691)Number of sharesWeighted average number of 19,215,987 18,279,462 18,517,363sharesDilution effect of share option 292,984 280,385 361,752schemesDiluted weighted average number 19,508,971 18,559,847 18,879,115of SharesEarnings/(loss) per share: Basic 4.2p (0.8)p (30.7)p Diluted 4.1p (0.8)p (30.1)p 4. Dividends No interim dividend was proposed (2004: nil) for the six months ended 30 September 2005. 5a. Reconciliation of operating profit to net cash outflow from operating activities As restated Six Months Six Months Year Ended Ended Ended 30 September 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 Operating profit/(loss) 1,320 145 (5,450)Adjustments for:Depreciation 276 459 779Profit on disposal of fixed assets - - 399 Changes in working capital:(Increase)/decrease in trade and other receivables (468) 812 (1,171)(Decrease)/increase in trade and other payables* (2,354) (1,151) 6,332 Cash (used)/generated by operations (1,226) 265 889 *Included in the decrease in other payables at 30 September 2005 are payments of £1,691,000 relating to the exceptional items accrued at 31 March 2005. At 30 At 30 At 31 September September March 2005 2004 2005 £'000 £'000 £'0005b. Cash and cash equivalents Cash and cash equivalents are made up as follows:(Bank overdraft)/cash at bank (5,307) 274 (2,400)Cash on restricted deposit 2,117 877 1,680 Cash and cash equivalents (3,190) 1,151 (720) 6. IFRS restatement and prior period adjustments The accounting policies were changed on 1 April 2005 to be consistent with IFRS.The transition to IFRS is accounted for in accordance with IFRS 1, "First-timeAdoption of International Financial Reporting Standards" with 1 April 2004 asthe date of transition. The changes in accounting policies are described belowtogether with reconciliations of the restated shareholders' equity and profit tothat previously reported. The transition to IFRS resulted in the following changes in accounting policies: • Cumulative translation differences are deemed to be zero at the date of transition, per IFRS 1. 6. IFRS restatement and prior period adjustments (continued) • Share option costs were previously based on the intrinsic value of the option at the date of grant. These costs are now accounted for in accordance with IFRS 2 (FRS 20) "Share-based Payments". In accordance with the transitional provisions, IFRS 2 has been applied to grants after 7 November 2002, which had not vested by the balance sheet date. The value of share-based payments is measured at the date of grant. The value determined is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. The value of the options is measured using the Black-Scholes model. • Dividends to shareholders declared after the balance sheet date but before the financial statements are authorised for issue are not recognised as a liability at the balance sheet date. • Unused accumulated employee holiday entitlement at balance date are now recognised as a liability. • In accordance with IFRS 3, the goodwill that arose prior to 1 April 2004 was amortised until that date. From 1 April 2004 the goodwill was no longer amortised on an annual basis, but rather subjected to an impairment test on that date and all subsequent reporting periods. Accordingly, the goodwill that was reported as amortised in the year ended 31 March 2005 under UK GAAP has therefore been reversed. At the 30 September 2005 the Group has reassessed the useful lives of its intangible assets in accordance with the provisions of IAS 38. No adjustment resulted from this reassessment. • Capitalised computer software previously included within tangible fixed assets has now been reclassified as intangible fixed assets. Under IAS 38, only computer software integral to the hardware operating system should be included as plant and equipment. All other computer software should be recorded as an intangible asset. Reconciliations of equity Called up Share Foreign share Share Merger ESOP option currency Retained Total capital premium reserve reserve reserve translation loss equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 April 2004As previously stated 914 10,497 10,170 (397) - - (4,918) 16,266Share option charge - - - - 84 - (84) -Goodwill amortisation - - - - - - 282 282written backDividend not recognised as - - - - - - 384 384a liability until paidAt 1 April 2004 (restated) 914 10,497 10,170 (397) 84 - (4,336) 16,932 Called up Share Foreign share Share Merger ESOP option currency Retained Total capital premium reserve shares reserve translation loss equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 30 September 2004 As previously stated 915 10,526 10,170 (397) - - (5,508) 15,706Share option charge - - - - 141 - (141) -Goodwill amortisation - - - - - - 1,140 1,140written backCurrency translation - - - - - 28 (28) -Dividend liability - - - - - - (384) (384)At 30 September 2004 915 10,526 10,170 (397) 141 28 (4,921) 16,462(restated) Called up Share Foreign share Share Merger ESOP option currency Retained Total capital premium reserve reserve reserve translation loss equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 31 March 2005As previously stated 961 11,701 10,170 (397) - - (11,412) 11,023Share option charge - - - - 212 - (212) -Goodwill amortisation - - - - - - 1,227 1,227written backCurrency translation - - - - - 40 (40) -Employee benefit accrual - - - - - - (175) (175)At 31 March 2005 961 11,701 10,170 (397) 212 40 (10,612) 12,075(restated) Reconciliation of previously stated loss Six months ended 30 September 2004 £'000Loss after tax as previously stated (637)Currency translation 18Goodwill amortisation written back 521Share option charges (57)Loss for the period after tax (restated) (155) Six months ended 31 March 2005 £'000Loss after tax as previously stated (6,531)Currency translation 18Goodwill amortisation written back 1,125Accrual for holiday pay (175)Share option charges (128)Loss for the period after tax (restated) (5,691) 7. Nature of the financial information 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 2005, on which the auditors gave anunqualified audit report, have been delivered to the Registrar of Companies andcopies of the Interim Report can be obtained from our Registered Office at 15Welbeck Street, London W1G 9XT. The Board of Directors approved the Interim Report on 8 November 2005. Thefinancial information in respect of the six months to 30 September 2005 isunaudited. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PNA.L