Cornwell Management Consultants

‘We’d like to think our problems are behind us’, says Keith Cornwell, the chairman who has returned to running this beleaguered management and IT consulting company following managing director Jonathan Broadhurst’s resignation in April due to ill health.

As trailed in earlier trading statements Cornwell, which provides advice and consulting to public and private sector clients across government, defence, health, and financial services, posted woeful interims to June with pre-tax profits of £969,000 giving way to losses of £476,000. Earnings of 4.2p slipped to a loss per share of 2.3p, and the interim dividend was skipped.

Turnover was up a decent 15.3% to £11.5m – organic growth, stripping out the disappointing Quantum Plus acquisition, was 8.6% – reflecting good customer base and client assignment growth. However after a good first quarter in which sales and profits were ahead of forecasts, the second quarter was marked by a dramatic downturn reversing all the earlier good work.

In April, there was a sharp slowdown in revenues from the core public sector market, with the changeover to the new government financial year causing major ‘slippage’ in clients giving the go-ahead for projects. This seriously hit Cornwell’s gross margins, with consultant utilisation levels lower than budgeted. ‘The work wasn’t there in April, May and June’, explained Cornwell, 'and our consultants were stuck on the bench’.

On the plus side, a strategic review has completed, some £1m of annualised savings should come through, and the chairman has a cautious eye on rising utilisation rates and underlying profits. Demand generally remains strong in the public sector, though competition in the private sphere remains cut throat with clients under pressure to reign in consultant spend. Until trading and management stability returns however, we urge investors to give the depressed shares a wide berth.