MIDAS SHARE TIPS: Penna Consulting's on the march... as it helps firms hire and fire
Five days after Sainsbury’s made an agreed £1.3 billion offer for Argos’s parent, Home Retail Group, the jury is still out on whether this is a good deal or not. But Sainsbury’s rationale for launching the deal is clear. Supermarkets are under pressure and they are looking for ways to succeed in a world where discounters Aldi and Lidl are grabbing market share and online shopping is increasingly popular.
In the process, the supermarket giants are making thousands of redundancies while the new kids on the block are busy recruiting. Penna Consulting is involved in both sides of the story.
The company made its name as an adviser to firms with big redundancy programmes, helping staff to find other jobs or, at the very least, leave with dignity. Over the past two to three years, however, it has branched into specialised recruitment and training.
Wide blue line: Penna is helping the Metropolitan Police to create a more ethnically diverse workforce
Along the way, the shares have been strong performers but, at 338½p, there is plenty more potential. Chief executive Gary Browning is ambitious and, as a recruitment firm with a twist, Penna is well positioned to grow.
The company divides its operations into three parts – recruitment, development and ‘transition’. Most recruitment businesses work by amassing huge databases of potential employees so that when companies come to them looking for new staff, they can easily send off a selection of possible candidates. But Penna does not have a database because it does not do standard recruitment. Instead, it helps organisations with recruitment projects that need a bit more advice and ingenuity.
For example, the company is helping the Metropolitan Police to create a more diverse workforce by advertising in ethnic minority publications and guiding candidates through the interview process. Penna also uses specific websites, such as Mumsnet, to help firms that want more female workers.
Aldi is another client. The German chain was keen to recruit more graduates, but top students were put off by the group’s ‘pile them high, sell them cheap’ reputation. Penna has worked with Aldi to improve its image and graduates are now flocking to join. It is also heavily involved in the technology and security sectors, often working with government bodies to find computer and internet experts for projects ranging from IT security to creating plans for the HS2 railway.
Transition could be seen as a posh word for redundancy, but Penna has an impressive track record in finding new work for staff who are no longer needed by their employers. The market leader in this field, Penna worked with 30,000 people last year, mainly in oil and gas, and food retailing. Eight out of nine found a new job with a higher salary and 60 per cent were re-employed within three months – twice as fast as the national average. A strong jobs market helps, but Penna’s training, advice and contacts are clearly beneficial.
Browning is particularly excited about Penna’s third arm, development, which in essence helps organisations and their staff to adapt to changing times.
Local authorities, for example, have suffered swingeing cuts since the financial crisis and some are now realising that they can no longer continue simply to reduce staff numbers. Instead, they need either to employ different people or train existing workers to do things differently, using the internet to drive down costs and increase efficiency, for instance. These kinds of programmes can be tough to introduce, but Penna is a pioneer in the field.
Browning also works with companies that are trying to create decent senior managers as baby-boomers retire. According to the Chartered Management Institute, the UK will have a shortfall of more than a million managers by 2020. Penna is advising firms on how to address this gap in advance and how to train suitable candidates.
City analysts expect Penna to deliver an 18 per cent increase in sales to £99.8 million for the year to March, rising to almost £110 million in 2017. Profits are forecast to climb 23 per cent to £6.9 million this year, and to £7.9 million next. Penna also pays a dividend, with 8p expected for this year and 8.7p for 2017.
Midas verdict: Penna is smaller than most listed recruitment firms, but it is growing fast and its transition division makes the group less exposed to economic cycles than rivals. At 338½p, the shares are a long-term buy.
Traded on: AIM Ticker: PNA Contact: penna.com or 0800 028 1715
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