Final Results

Pennant International Group PLC 2 May 2001 2nd May 2001 Pennant International Group plc, The Aim listed specialist in computer based training systems and logistical support and data management software for the defence industry today announces its preliminary results for the year ended 31st December 2000. Highlights * Pre tax profit after exceptionals £231,000 * Final Dividend 2.8p per share making a total of 4.2p for the year (1999: 4.2p ) * Acquisitions, loss-making at the time of purchase, successfully integrated and now profitable. 'The acquisition and establishment of our new logistics software and data services divisions have been a particular success. Loss making businesses have been turned around and this has resulted in exciting new opportunities for Pennant. Across the group we now have strength in depth and a high level of enquiries and tenders for new business. The residual effects of the defence industry slow down continue to affect trading in our training systems company but we expect a steady improvement in this area of our business.' Joe Thompson, Chief Executive. SUMMARY CHAIRMAN'S STATEMENT (Full text follows) 'We remain confident for further business development and growth. The broad range of products we can now offer and the favourable reaction from customers is already resulting in an increased number of significant enquiries. The successful re-organisation and integration of the Solvera plc subsidiaries which were acquired in December 1999 enables us to offer complementary products and services in the field of Integrated Logistic Support to customers worldwide, not just in defence and aerospace but also oil and gas, power, transportation information technology and telecommunications. The company's prospects remain good and I expect to see a return to a much higher level of activity in the near future.' Christopher Powell, Chairman. Full Chairman's Statement and financial details follow: For further information, please contact: Joe Thompson, Pennant International Group Plc: Tel: 01452 714881 Ken Rees, Winningtons: Tel: 0117 317 9477 Mobile: 07802 466567 Mike Coe, Rowan Dartington: Tel: 0117 9330020 PENNANT INTERNATIONAL GROUP plc CHAIRMAN'S STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2000 _____________________________________________________________________________ The principal achievements of 2000 have been significant product development by Pennant Training Systems Limited and the successful reorganisation and integration of the subsidiaries of Solvera plc, acquired in December 1999, now trading as Pennant Information Services Limited and Pennant Information Services Inc. Significant cost reductions have been achieved and the Group is now able to offer complementary products and services in the broad field of Integrated Logistic Support to customers worldwide, principally those in defence and aerospace, but also in the oil & gas, power, transportation, information technologies and telecommunications industries. The acquisitions taken as a whole, which were loss making at the time of purchase, became profitable during the group's first year of ownership. Results and dividends Group profit on ordinary activities before taxation, and after exceptional items of £481,000 for the year ended 31 December 2000, was £231,000. Your Board is recommending a final dividend of 2.8p per share which, together with the interim of 1.4p, makes a total of 4.2p for the year (1999: 4.2p). The final dividend is payable on 15 June 2001 to shareholders on the register on 11 May 2001. On 29 March 2000 a placing of 1,066,000 Ordinary Shares at £1.875 was completed raising £1,845,000 net of expenses. This has reduced gearing from 71% after the acquisition in December 1999 to 55% at 31 December 2000 and funded capital expenditure and additional working capital. Trading In my interim statement I referred to a number of items which had an impact on profits for the period to 30 June 2000. Pennant Information Services Inc. made a loss of approximately £130,000 before exceptionals in the first half, against management expectations of breakeven, but achieved a comparable profit of £135,000 in the second half. Exceptional reorganisation costs for both the UK and US acquisitions, originally estimated at £200,000 in total, amounted to £334,000 in the first half and £481,000 for the full year. I am pleased to say that these additional costs have resulted in greater ongoing savings than expected. Profits in Pennant Training Systems Limited were reduced by approximately £120,000 pending the outcome of negotiations between the company, the prime contractor and the ultimate customer in respect of additional work carried out on a major contract. I am pleased to report a satisfactory outcome to these negotiations. Development expenditure of £740,000 has been capitalised. This planned expenditure to develop generic products relates to three items. First, the operating system software for a core training systems product, CBT&VATS. This generic media delivery and student management system is network ready and can be employed in a variety of training applications. Secondly, the GenFly product including the platform, which was provisionally written off in the first half, and development of the systems software. Thirdly, development of the new generation training management information system. There has been significant interest in these products and further orders are expected in the coming months. I also referred to tender activity being at a satisfactory level, albeit some major programmes were experiencing delays. This has continued and effected the second half and more significantly the start of the current year. The delays have occurred mainly as a result of changes within the Defence Procurement Agency, the awaited publication of the Defence Training Review and consolidation amongst the prime contractors. In particular, a major export order for a training system where the prime contract, which was expected to be signed in March 2001, was subject to delay at the last minute. Notwithstanding these factors significant enquiries are being received, and negotiations taking place, with a much broader customer base than hitherto. Pennant Training Systems Limited is the operating subsidiary primarily affected as a result of the substantial nature of its contracts. Manning levels are being adjusted accordingly. This subsidiary has also been adversely affected by an under recovery of overheads amounting to £270,000 on a Ministry of Defence contract where problems occurred towards the end of the contract with tooling and components supplied by an engineering sub-contractor. Alternative sourcing and production methods have overcome the problem with a much improved end product. A further order is expected shortly for operational enhancements to the developed product. Your Board is pleased with the trading levels being achieved by the UK and US acquisitions and is confident of significant contributions from these activities in the future. In support of this confidence the Group is at an advanced stage of negotiation for the acquisition of the freehold of the Southampton property occupied by Pennant Information Services Limited. The property is expected to provide cost-effective accommodation for the foreseeable future. In January 2001 we purchased the minority interest in Pennant Information Services Inc. making the company a wholly owned subsidiary. Pennant Information Services Limited was down-selected by the Australian Department of Defence to provide software and related services to all three services of the Armed Forces. To support full contract award later this year, the group has formed a new subsidiary, Pennant Australasia Pty Limited, which itself has purchased the defence division of Logistics Pty Limited based, in Melbourne, Australia, on 17 April 2001. Prospects The group's trading performance for 2001 will be significantly affected by the current delays in contract awards being experienced by Pennant Training Systems Limited. Your Board believes these to be largely of a timing nature which are expected to affect the first half of the year more significantly than the second half. The current number of significant enquiries from a much broader customer base than hitherto gives confidence for a return to a higher level of activity in the near future. These delays whilst they continue, will have an adverse effect on the company's trading performance. As a result management expectations for the first half are breakeven at best. At this stage it is your Board's intention to maintain the interim dividend for 2001 provided the improved business prospects show through as firm orders. Pennant Information Services Limited is trading satisfactorily and Pennant Information Services Inc. is expected to make an overall contribution for the year. As a result of the delay in confirmed orders in Pennant Training Systems Limited, work in progress is converting to cash in the first half of the year thereby reducing overall gearing. Conclusion The acquisitions have been a great success and placed the group in a position to offer integrated solutions to its increasing numbers of customers throughout the world. The ability to offer integrated logistic support with a solid background in the demanding defence and aerospace industries is creating new opportunities in other industries. This, together with the newly developed products, gives your Board confidence in the future. Finally, a thank you to shareholders for supporting the placing in March 2000 and to my colleagues and all staff for their efforts throughout the year. Christopher Powell Chairman 1 May 2001 PENNANT INTERNATIONAL GROUP plc GROUP PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2000 2000 1999 £ £ Turnover Continuing operations 7,256,468 7,118,732 Acquisitions 6,937,753 - _________ _________ 14,194,221 7,118,732 Cost of sales (7,912,322) (3,100,487) _______ _______ Gross profit 6,281,899 4,018,245 Administration expenses (5,370,457) (2,910,7170 ________ ________ Operating profit Continuing operations 600,904 1,107,528 Acquisitions 310,538 - ________ ________ 911,442 1,107,528 Cost of fundamental reorganisation (481,042) - ________ ________ Profit on ordinary activities before interest 430,400 1,107,528 Interest receivable and similar income 28,500 3,689 Interest payable (227,120) (106,563) ________ ________ Profit on ordinary activities before taxation 231,780 1,004,654 Tax on profit on ordinary activities (56,525) (262,106) ________ ________ Profit on ordinary activities after taxation 175,255 742,548 attributable to members of the parent undertaking Dividends (337,512 (292,740) ________ ________ Retained (loss)/profit for the year (162,257) 449,808 ________ ________ Earnings per share 2.25p 11.07p The profit and loss account has been prepared on the basis that all operations are continuing operations. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 DECEMBER 2000 2000 1999 £ £ Profit for the financial year 175,255 742,548 Currency translation differences on foreign currency net (24,328) - investments ________ ________ Total gains and losses recognised since last annual report 150,927 742,548 ________ ________ PENNANT INTERNATIONAL GROUP plc GROUP BALANCE SHEET AS AT 31 DECEMBER 2000 2000 1999 £ £ Fixed assets Intangible assets 1,676,229 1,031,152 Tangible assets 2,891,742 3,111,857 Investments 6,135 6,135 ___________ __________ 4,574,106 4,149,144 Current assets Stocks 1,016,893 1,015,109 Debtors 5,313,588 4,099,746 Cash at bank and in hand 1,153,375 767,422 ________ ________ 7,483,856 5,882,277 Creditors: amounts falling due within one year (6,484,752) (6,008,099) ________ ________ Net current assets/(liabilities) 999,104 (125,822) ________ ________ Total assets less current liabilities 5,573,210 4,023,322 Creditors: amounts falling due after more than one year (507,645) (616,616) ________ ________ 5,065,565 3,406,706 ________ ________ Capital and reserves Called up share capital 1,847,200 1,634,000 Share premium 2,766,592 1,134,348 Profit and loss account 451,773 638,358 ________ ________ Shareholders' funds 5,065,565 3,406,706 ________ ________ The financial statements were approved by the Board on 1 May 2001. C C Powell J M Waller Director Director PENNANT INTERNATIONAL GROUP plc BALANCE SHEET AS AT 31 DECEMBER 2000 2000 1999 £ £ Fixed assets Tangible assets 31,415 - Investments 4,886,795 4,886,795 ________ ________ 4,918,210 4,886,795 Current assets Debtors 2,995,028 1,690,346 Cash at bank 973,319 274,291 ________ ________ 3,968,347 1,964,637 Creditors: amounts falling due within one year (3,732,964) (3,586,235) ________ ________ Net current assets/(liabilities) 235,383 (1,621,598) ________ ________ Total assets less current liabilities 5,153,593 3,265,197 ________ ________ Capital and reserves Called up share capital 1,847,200 1,634,000 Share premium 2,766,592 1,134,348 Profit and loss account 539,801 496,849 ________ ________ Shareholders' funds 5,153,593 3,265,197 ________ ________ The financial statements were approved by the Board on 1 May 2001. C C Powell J M Waller Director Director PENNANT INTERNATIONAL GROUP plc GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2000 Notes 2000 1999 £ £ Net cash outflow (1999 inflow) from 1 operating activities (484,744) 680,242 Returns on investments and servicing of finance 2 (198,620) (102,874) Taxation (248,818) (60,442) Capital expenditure 2 (955,747) (763,938) Acquisitions and disposals 2 - (1,447,234) Equity dividends paid (307,617) (256,029) ________ ________ Cash outflow before financing (2,195,546 (1,950,275) Financing 2 1,643,066 2,101,494 ________ ________ Decrease (1999 increase) in cash 4 (552,480) 151,219 ________ ________ PENNANT INTERNATIONAL GROUP plc NOTES TO THE GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2000 1 Reconciliation of group operating profit to net cash 2000 1999 inflow from operating activities £ £ Operating profit 911,442 1,107,528 Exceptional item (481,042) - Depreciation 438,164 273,130 Loss on sale of tangible fixed assets 604 3,144 Amortisation of intangible fixed assets 95,079 55,258 Increase in stocks (1,784) (380,937) Increase in debtors (1,213,842) (1,054,820) Decrease (1999 increase) in creditors (206,131) 676,939 Other movements (27,234) - __________ ___________ Net cash outflow (1999 inflow) from operating (484,744) 680,242 activities _______ _______ 2 Analysis of cash flows for headings netted 2000 1999 in the cash flow statement £ £ Returns on investments and servicing of finance Interest received 440 3,689 Interest paid (227,120) (106,563) Currency translation profit 28,060 - _______ _______ Net cash outflow for returns on investments (198,620) (102,874) and servicing of finance _______ _______ Capital expenditure Payments to acquire intangible fixed assets (740,000) (19,875) Payments to acquire tangible fixed assets (250,927) (762,769) Receipts from sales of tangible fixed assets 35,180 18,706 _______ _______ Net cash outflow for capital expenditure (955,747) (763,938) _______ _______ Acquisitions and disposals Purchase of subsidiary undertakings - (1,096,895) Net overdrafts acquired with subsidiary undertakings - (350,339) _______ _________ Net cash outflow for acquisitions and disposals - (1,447,234) _______ _________ Financing Issue of ordinary share capital 1,998,750 615,950 New loans and hire purchase contracts 90,941 1,866,017 Repayment of hire purchase and finance leases (199,894) (131,319) Repayment of loans (93,425) (241,995) Expenses paid in connection with share issue (153,306) (7,159) _______ _________ Net cash inflow from financing 1,643,066 2,101,494 _______ _________ PENNANT INTERNATIONAL GROUP plc NOTES TO THE GROUP CASH FLOW STATEMENT (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2000 3 Analysis of net debt Other 1 January Cash non-cash 31 December 2000 flow changes 2000 £ £ £ £ Cash in hand and at bank 767,422 385,953 1,153,375 Bank overdraft (846,770) (938,433) (1,785,203) __________ (552,480) Hire purchase due within one year (133,457) 108,953 (48,595) (73,099) Hire purchase due after one year (75,442) - 48,595 (26,847) Loans due within one year (1,600,532) 93,425 (75,915) (1,583,022) Loans due after one year (541,174) - 75,915 (465,259) _______ _______ _________ _______ (2,429,953) (350,102) - (2,780,055) _________ _______ _________ _______ 4 Reconciliation of net cash flow to movement in net 2000 1999 debt £ £ Decrease (1999 increase) in cash in the year (552,480) 151,219 Cash to repurchase debt 293,319 373,314 _______ _______ Change in net debt resulting from cash flows (259,161) 524,533 New loans and hire purchase contracts (90,941) (1,866,017) Debt acquired with subsidiary undertakings - (69,155) _________ ________ Movement in net debt in the year (350,102) (1,410,639) Opening net debt (2,429,953) (1,019,314) ________ ________ Closing net debt (2,780,055) (2,429,953) ________ ________

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