Penna Consulting is acquiring fellow Aim-quoted outplacement business Savile Group for £1.1m and expects to make considerable cost savings.
The recommended bid is 7p a share in cash, which is more than double the previous market price. The bid is at a discount to NAV of £1.47m at the end of June 2013, which includes £703,000 of cash.
Penna can take on Savile’s career transition and outplacement operations with a minimal increase in its admin costs. There should be other marketing and management cost savings and this should be enough to return Savile to profit. Penna will also be able to strip out the costs of Savile’s Aim quotation. Savile’s non-executives and finance director will step down.
In the year to June 2013, Savile generated revenues of £8.11m and reported a loss of £326,000 after £446,000 of exceptional charges. However, trading since then has been weaker than expected and losses have reduced the cash pile. Costs are already being cut.
Penna is trading more strongly than Savile. In the six months to September 2013, Penna increased profit from £1m to £1.08m even though revenues dipped by 3% to £31.9m. There was a fall in revenues and profit from outplacement services but a strong recovery in recruitment solutions profit. Penna expects continued organic growth.
Penna has net cash of £1.96m and it has increased its interim dividend by 50% to 1.5p a share. Penna has enough cash to cover the dividend, the cash for the Savile bid and to purchase its own shares.
At 90p a share, Penna is valued at £23.2m.
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