Preliminary results

PENNA CONSULTING PLC

("Penna" or "the Group")

Preliminary Results for the year ended 31 March 2013

11 June 2013

Penna Consulting Plc (PNA: AIM), the international human resources consulting group, today announces its preliminary unaudited results for the year ended 31 March 2013.

FINANCIAL HIGHLIGHTS

·; Revenue £66.6m (2012: £67.6m)

·; Net revenues £38.3m (2012: £38.3m)

·; Pre tax profits £2.2m (2012: £2.0m)

·; Net cash at year end £2.4m (31 March 2012: £2.0m)

·; Final dividend 1p (2012: 1p); total dividend for the year 2p (2012: 2p)

·; Diluted earnings per share 7.5p (2012: 6.8p) from continuing operations

OPERATIONAL HIGHLIGHTS

·; Pre tax profits of continuing businesses up 11% despite flat overall revenue

·; Recruitment solutions returns to profitability with 9.4% growth in net revenue

·; UK No1 position in outplacement retained for the sixth year running

·; Career Star network now in 66 countries, 770 offices, with 1800 consultants

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

" I am pleased to report that despite flat revenue resulting from continuing weak market conditions Penna delivered 11% growth in profits before tax from continuing businesses.

The current financial year has started well and current trading remains in line with management's expectations. Our recruitment teams have seen some tentative signs of recovery in the markets we serve but overall the UK economy remains characterised by caution and restraint. We are planning on the basis that the economy will show only weak growth in the current year. Our approach ensures that even in challenging conditions Penna will continue to be profitable and cash generative. 

However, we are ready to respond immediately to recovery and our cost and margin structure will deliver substantial incremental profits from relatively modest increases in revenue."

ENDS

For further information please contact:

Stephen Rowlinson, Chairman 0771 00 23699

Gary Browning, Chief Executive 020 7332 7753

David Firth, Finance Director 020 7332 7753

Charles Stanley Securities

Marc Milmo 020 7149 6000

Karri Vuori 020 7149 6000

Penna Consulting Plc

Chairman's Review

I am pleased to report that despite flat revenue resulting from continuing weak market conditions Penna delivered 11% growth in profits before tax from continuing businesses.

Group revenues for the year were £66.6m (2012: £67.6m) and net revenues were £38.3m (2012: £38.3m), pre tax profits grew by 11% to £2.2m (2012: £2.0m) and fully diluted earnings per share by 10% to 7.5p (2012: 6.8p).

Recruitment Solutions net revenue grew by £1.2 million (9.4%) but this modest growth produced an impressive £0.8m turnaround from loss to profit. This was a vivid demonstration of how the cost and margin structure of the Group will deliver substantial profits as the market recovers.

In the year under review the majority of revenue and operating profit continued to come from our HR Consulting business which includes our market leading Career Transition (outplacement) consultancy representing 49.6% of Group net revenue. It appears that only a small proportion of outplacement revenue in the year resulted directly from recession driven downsizing in either the private or public sectors and that most large scale restructuring was completed in the financial years of 2011 and 2012 - notably in the important Financial Services sector. Accordingly, revenue from Career Transition has reverted to the levels expected in non-recessionary times when demand for outplacement services is driven by post-merger rationalisation, technical innovation, relocation and management changes not directly related to downsizing.

It has been a long term aim to grow the proportion of Group activity in Recruitment, Assessment, Coaching and other HR services so that Career Transition would represent no more than 50% of net revenue. This has been achieved and Penna has a formidable and comprehensive range of services including many where we are the market leader within a key sector of the market. All of our units are profitable and as noted above have cost and margin structures that will ensure excellent returns as volume increases.

Earnings per share and Dividends

Earnings per share for the year from continuing operations was 7.5p (2012: 6.8p) on a fully diluted basis. An interim dividend of 1p per share (2012: 1p) was paid on 7 March 2013. The Board is recommending a final dividend of 1p per share making a total dividend for the year of 2p (2012: 2p). The proposed final dividend will be payable on 7 November 2013 to shareholders on the register on 11 October 2013.

Board changes

During the year there have been a number of changes among Non-executive members of the Board. Richard Stillwell stepped down at the AGM in September 2012 after ten years service. We thank him for his very considerable contribution to Penna. Graham Paton and Leslie Ferrar joined the Board as non executive directors in November 2012 and January 2013 respectively. Graham has considerable experience advising public companies and was a founder and Managing Director of Hawkpoint Partners Limited. Leslie was a partner in KPMG's Human Capital Tax Practice and then in 2005 she became Treasurer to TRH The Prince of Wales and The Duchess of Cornwall. Following the completion of the 2013 audit Leslie has succeeded Sir James Harvie-Watt as Chair of the Audit Committee. Sir James will retire from the Board at the AGM in September 2013. Sir James has been a Director of Penna since 1996 and his detailed understanding of the Company has been invaluable throughout the many stages of Penna's development.

Operational and Financial Review

The Group offers a broad range of HR services to clients, from recruitment activities, through assessment and development services to career transition support. These services are organised into two service groups, namely Recruitment Solutions and HR Consulting,each led by a Managing Director reporting directly to the Chief Executive.

HR Consulting includes our market leading outplacement consultancy as well as services which are focused on selecting and developing individual leaders and their teams, identifying and developing talent and helping clients manage the people aspects of change. These services include coaching, assessment, leadership consulting, leadership development and career development.

Net revenues for the year were £24.3m (2012: £25.5m), comprising £19.0m (2012: £19.8m) of outplacement revenues and £5.3m (2012: £5.7m) from other HR Consulting services.

In April 2012 Penna founded the Career Star Group - an international network of outplacement and career services providers - to provide a marketing and delivery capability to international clients. Progress since its inception has been rapid and the network now has 24 partner organisations operating out of 770 offices, with 1800 consultants, delivering in 66 countries. Career Star enables us to support clients and deliver career services on a global basis. In the year ended 31 March 2013 referral income of over US$ 2.0m was generated across the network of which Penna received over £180,000.

Our market leading outplacement business has performed robustly and has maintained margins well through adopting new technologies to provide on-line and remote delivery mechanisms.

During the year we closed our loss making Swedish operation and the costs of closure and losses incurred have been fully provided for at the year end.

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 public sector and commercial sectors with innovative solutions to their recruitment needs.

Net revenues increased by £1.2m (9.4%) in the year to £14.0m (2012: £12.8m). We increased market share and had a series of new client wins. The return to profitability of Recruitment Solutions reported at the half year has continued and we are pleased with the year end position showing a £0.8m turnaround compared to the previous year and a profit of £0.3m (2012: loss £0.5m).

The shift in recruitment work away from commission based traditional advertising to fee based work and consultancy has continued and margins have continued to improve accordingly.

Investment in hiring consultants in executive search and executive interim has continued and already resulted in improved revenues. Year on year revenue grew by 18% in executive search and by 14.5% in executive interim.

A total of 466 Clients were provided with recruitment solutions in the year. This included the growth areas of graduate recruitment, social recruitment (the use of social media in recruitment) and assessment in support of selection. Major projects in these areas included work for the Metropolitan Police, John Lewis, Telefonica and Sky.

Balance sheet

The Group's net assets at 31 March 2013 were £20.0m (2012: £19.4m) including cash balances of £2.6m (2012: £2.8m). The Group has no debt other than outstanding finance leases of £0.2m (2012: £0.8m). The Group has working capital facilities of £5.0m and these remained un-utilised during the year.

Cashflow

Cash generated by operations amounted to £1.4m (2012: £0.4m). Capital expenditure amounted to £0.4m (2012: £0.6m) and a further £0.6m (2012: £0.6m) was repaid on finance leases taken out in 2011 to finance the fit-out of our then new offices in Fleet Place, London. Dividends paid in the year amounted to £0.5m (2012: £0.5m).

Outlook

The current financial year has started well and current trading remains in line with management's expectations. Our Recruitment teams have seen some tentative signs of recovery in the markets we serve but overall the UK economy remains characterised by caution and restraint. We are planning on the basis that the economy will show only weak growth in the current year. Our approach ensures that even in challenging conditions Penna will continue to be profitable and cash generative. 

However, we are ready to respond immediately to recovery and our cost and margin structure will deliver substantial incremental profits from relatively modest increases in revenue. 

Stephen Rowlinson

Chairman

11 June 2013

Consolidated statement of comprehensive income

for the year ended 31 March 2013 (unaudited)

Penna Consulting Plc

Consolidated statement of changes in equity

at 31 March 2013 (unaudited)

Penna Consulting Plc

Penna Consulting Plc

Consolidated statement of cash flow

for the year ended 31 March 2013 (unaudited)

Penna Consulting Plc

Notes to the preliminary announcement

for the year ended 31 March 2013 (unaudited)