25 May 2012

Penna plunges on profit warning

04/06/2010 Ben Jaglom

AIM-listed human resources play Penna Consulting has warned a government recruitment freeze will result in only ‘marginal’ interim profitability.

Penna, which specialises in recruitment as well as career transition services, first cheered followers with news of 22 per cent growth in adjusted pre-tax profits to £7.3 million for the year to March. Turnover grew by more than 70 per cent to £108.5 million, boosted by the acquisition of rival Barkers out of administration a year ago. And from earnings per share up 12 per cent to 19.3p, the strongly cash-generative Penna held final dividends at 4p, thereby increasing the annual total by 17 per cent to 7p.

However, investors were spooked by chairman Stephen Rowlinson’s warning that Penna has recently been impacted ‘by the announcement from the Coalition Government of its intention to freeze recruitment across central government’. Since half the group’s revenue is derived from the public sector, Penna now expects to post ‘only marginal profits’ for the current half-year, although a far stronger second half is expected, ‘as downsizing projects in the public sector are implemented' and 'recruitment in the private sector continues to recover’.

Following the announcement, analysts at broker Seymour Pierce downgraded Penna from a ‘buy’ to a ‘hold’ and the shares surrendered 33.5p, or 18.4 per cent, to trade at 149p in early dealings, valuing the business at £38.4 million.

Tags: AIM, Dividend, Mergers & acquisitions, Profit warning

Sector: Support Services

Companies: Penna Consulting

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