Final Results

Pennant International Group PLC 25 March 2003 25 March 2003 Pennant International Group plc The AIM listed specialist in computer based training systems and logistic support and data management software for the defence industry today announces its results for the year ended 31 December 2002 'As indicated in my Interim statement in August 2002, the Board's expectations were for an improving situation in the second half of the year resulting from significant cost reductions and an upturn in order intake. I am pleased to say that these expectations were realised. Whilst losses continued in the second half they were at a reduced level and the year ended with a healthy firm order bank, a strong cash position and significant new business prospects. ' 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 CHAIRMAN'S STATEMENT For the year ended 31 December 2002 As indicated in my Interim statement in August 2002, the Board's expectations were for an improving situation in the second half of the year resulting from significant cost reductions and an upturn in order intake. I am pleased to say that these expectations were realised. Whilst losses continued in the second half they were at a reduced level and the year ended with a healthy firm order bank, a strong cash position and significant new business prospects. Delays to contract awards in the early part of 2002, combined with delays in the provision of data by customers, resulted in revenues being deferred to the second half and into 2003. Other delayed contracts were placed late in the second half and made little contribution to the 2002 results. 2003 is expected to benefit from these delayed revenues and the significant increase in orders which has resulted in a near doubling of the order bank. RESULTS AND DIVIDEND The Group loss on ordinary activities after taxation was £1,483,329 (2001: Loss £2,311,058). Again, as last year, your Board is not recommending a dividend. At the year-end the Group had cash balances of £599,265, and unused overdraft facilities of £1,500,000, compared with a net overdraft of £1,678,125 at 31 December 2001. This financial improvement follows the Placing and Open Offer in March 2002, which raised £1,995,112 net of expenses, the sale of surplus property in Southampton, a reduction in working capital as work in progress continues to be converted to cash and by improved progress payments. In March 2002, the Company's short-term bank loan of £1,500,000 at 31 December 2001 was converted to a ten-year term loan repayable by monthly instalments. Gearing at 31 December 2002 was 50% (2001: 140%). CURRENT TRADING AND OPERATIONS I am pleased to report that the higher levels of tendering activity and order intake achieved in the final quarter of 2002 have continued into the first quarter of 2003. All parts of the Group have contributed to the significantly strengthened firm order bank, even under the difficult market conditions being experienced last year. The near doubling of the firm order bank, compared to the December 2001 figure, has the potential to generate revenues of approximately £10,000,000. Much of the new business was secured in competitive tender, with some 45% by value with new customers. Pennant Training Systems Limited started the year with a major contract from Westland Helicopters Limited for two training devices in support of a new sale by the manufacturer of Lynx 300 helicopters, having a significant value and with revenues extending into the first quarter of 2004. Also in the early part of the year, the company received the renewal and extension to the Full Contractor Support and Post Design Services contracts by the Ministry of Defence, with revenues extending out to 2005. In addition, the company announced in November 2002 the award by BAE Systems of Phase 1a of a programme to supply a Computer Based Training and Virtual Aircraft Training System in support of the South African Air Force Hawk Lead-In Fighter Trainer programme. Phase 1a has been completed and the order for Phase 1b was received in March 2003. Work is on going whilst detailed discussions leading to a contract for Phase 2, the main design and production phase, are in progress. Phase 2 has a significant value and is expected to generate revenues in the period 2003 to 2005. A third phase to this programme is anticipated, to bring the training systems up to the final technical standard of the aircraft, starting in 2005 and for delivery in 2006. Another major order, in the second half, was the software upgrade programme awarded to Pennant Australasia Pty Limited by the Australian Defence Organisation that was announced in November 2002. This programme has a significant value with the main revenues in 2003 and 2004, but with support revenues extending to 2009. In addition to regular maintenance and support contract work, numerous smaller orders were received in all businesses. Pennant Training Systems Limited recorded a two-year high for a single month's intake when lower value, short schedule orders aggregating £1,000,000 were received in November 2002 for completion and delivery in 2003. Pennant Information Services Limited secured the renewal of key enabling contracts including a BT corporate contract, a Ministry of Defence contract in support of Naval documentation and a new business outsourcing contract from a major defence industry prime contractor. The company also completed orders from a major defence contractor, in support of their Private Finance Initiative new equipment programme for the Ministry of Defence. These orders included the design of a training system, production of the training media and production of technical manuals for the equipment. A further order with a substantial value is anticipated covering the delivery of training on this new equipment over a 27-month period to the Army, Royal Marines and the Royal Air Force. This is a new activity that extends the company's portfolio of services. Pennant Software Services Limited, in addition to product sales in the UK and Europe, provided software development and product support to Pennant companies in Australia, the USA and Canada, and also recorded repeat product sales in the Czech Republic and Taiwan. In North America, the Canadian office was particularly busy providing specialist consultancy for the implementation of the major logistic support software developed and in service with agencies of the Department of National Defence. The USA office continued to provide technical support to its major defence contractor clients as well as recording product sales to a number of existing and new clients. In Australia, product support and the introduction of the OmegaPS Analyzer product into the Materiel Systems Branch in mid year was followed by the award, referred to above, of the major software upgrade contract by the Commonwealth of Australia in November. Work on this programme is underway and the Commonwealth of Australia decision has opened the door for discussions with Australian defence industry prime contractors for the upgrade of their logistic support analysis software, with the first product sales forecast for the second half of 2003. PROSPECTS AND THE FUTURE Building relationships and the promotion of the Pennant businesses as an integrated suite of capabilities, products and services has been a prominent activity in past months. Promoting Group companies and getting the key messages to current and prospective clients in Defence Ministries, defence contractors and prime contractors in our target non-defence industries - information technology and telecommunications, oil and gas, petro-chemical, consumer goods retail, rail transport and aerospace - is an important channel for keeping them abreast of product and technology developments. It is also the platform to outline the business objectives of Pennant companies, which has been doubly important as the Group has been re-positioning itself in the market place as a technology partner, a provider of services and with the capability to deliver solutions. Pennant businesses depend on data and the Pennant approach is aimed at co-ordinating the one-off collection, collation and analysis of that data as a base to a coherent integrated logistic support process. Organised data creates information and putting information into context generates knowledge. It is Pennant's objective to deliver those elements of data, information and knowledge required by an individual to carry out a specific task when, where, in the form and at the time it is needed. This approach applies equally to defence and non-defence applications. This reflects the need for major contractors and operating organisations to put the delivery of solutions and through-life support of products into sharper focus. The immediate future for Group businesses is based on the strong order bank and its position and potential in its markets. Notwithstanding the many new business opportunities in prospect, the directors have taken a prudent approach in their 2003 business plan. This is predicated on the experience of the extremely difficult market conditions of 2001 and 2002. Much depends, as ever, on orders being placed and contracts awarded in a timely fashion and then running to schedule. CONCLUSION With the benefit of cost reducing measures taken in 2002, efficiency gains during the year and with further cost reductions in the first quarter of this year, combined with the high level of activity arising from the order intake in the second half of last year, the prospects for a return to profitability in 2003 are very strong. Unlike the situation described in my statement last year, we enter 2003 with a solid platform on which to develop and there is no doubt that the Group, with its lower cost base, a healthy firm order bank and sound cash position, is very much stronger than it was 12 months ago. It is these reasons that give your Board every confidence in the future. Finally, I express my thanks to our clients for their confidence and business, to our shareholders for their support to the Placing in March 2002, and to my colleagues and staff for their commitment and energy throughout the year. Christopher Powell CHAIRMAN 24th March 2003 _______________________________________________________________________________________ GROUP PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2002 _______________________________________________________________________________________ 2002 2001 as restated £ £ Turnover 9,030,396 10,905,296 Cost of sales (5,488,050) (7,400,650) ---------------- ---------------- Gross profit 3,542,346 3,504,646 Administration expenses (4,947,563) (5,756,935) Other operating income 8,904 - __________ __________ Operating loss (1,396,313) (2,252,289) Profit on sale of property 110,255 - __________ __________ Loss on ordinary activities before interest (1,286,058) (2,252,289) Interest receivable and similar income 999 158 Interest payable (198,270) (246,035) _________ __________ Loss on ordinary activities before taxation (1,483,329) (2,498,166) Tax on loss on ordinary activities - 187,108 Loss on ordinary activities after taxation attributable to members of the __________ __________ parent undertaking - retained (1,483,329) (2,311,058) __________ __________ Loss per share Basic (7.01p) (28.76p) Diluted (6.66p) (27.91p) The profit and loss account has been prepared on the basis that all operations are continuing operations. GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 DECEMBER 2002 2002 2001 as restated £ £ Loss for the financial year (1,483,329) (2,311,058) Currency translation differences on foreign currency net investments 47,373 (11,177) __________ __________ Total gains and losses recognised since last annual report (1,435,956) (2,322,235) _________ __________ _______________________________________________________________________________________ GROUP BALANCE SHEET AS AT 31 DECEMBER 2002 _______________________________________________________________________________________ 2002 2001 as restated £ £ Fixed assets Intangible assets 1,410,813 1,651,114 Tangible assets 2,900,535 2,588,952 Investments 6,135 6,135 ________ ________ 4,317,483 4,246,201 Current assets Stocks 498,402 1,068,177 Debtors 2,581,263 3,537,834 Cash at bank and in hand 599,265 96,172 ________ ________ 3,678,930 4,702,183 Creditors: amounts falling due within one year (2,825,206) (5,863,105) ________ ________ Net current assets/(liabilities) 853,724 (1,160,922) ________ ________ Total assets less current liabilities 5,171,207 3,085,279 Creditors: amounts falling due after more than one year (1,974,244) (447,472) Provisions for liabilities and charges - - ________ ________ 3,196,963 2,637,807 ________ ________ Capital and reserves Called up share capital 3,045,400 1,847,200 Share premium 3,563,504 2,766,592 Profit and loss account (3,411,941) (1,975,985) ________ ________ Shareholders' funds 3,196,963 2,637,807 ________ ________ The financial statements were approved by the Board on 24 March 2003 J J J Thompson J M Waller Director Director _______________________________________________________________________________________ BALANCE SHEET AS AT 31 DECEMBER 2002 _______________________________________________________________________________________ 2002 2001 £ £ Fixed assets Tangible assets - - Investments 8,171,828 4,921,830 ________ ________ 8,171,828 4,921,830 Current assets Debtors (including £1,585,000 (2001 - £Nil) due after more than one year) 1,852,963 4,008,848 Cash at bank 556,452 154 __________ __________ 2,409,415 4,009,002 Creditors: amounts falling due within one year (2,062,643) (3,731,157) ________ ________ Net current assets 346,772 277,845 ________ ________ Total assets less current liabilities 8,518,600 5,199,675 Creditors: amounts falling due after more than one year (1,305,384) _ ________ ________ 7,213,216 5,199,675 ________ ________ Capital and reserves Called up share capital 3,045,400 1,847,200 Share premium 3,563,504 2,766,592 Profit and loss account 604,312 585,883 ________ ________ Shareholders' funds 7,213,216 5,199,675 ________ ________ The financial statements were approved by the Board on 24 March 2003 J J J Thompson J M Waller Director Director _______________________________________________________________________________________ GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 _______________________________________________________________________________________ Notes 2002 2001 £ £ Net cash inflow from/(outflow for) operating activities 1 860,606 (81,859) Returns on investments and servicing of finance 2 (259,792) (245,877) Taxation 680 (1,595) Capital expenditure 2 (506,205) (152,184) Acquisitions and disposals 2 - (215,169) Equity dividends paid - (224,929) _________ __________ Cash inflow/(outflow) before financing 95,289 (921,613) Financing 2 2,182,101 (124,684) _________ __________ Increase/(decrease) in cash 4 2,277,390 (1,046,297) _________ _________ _______________________________________________________________________________________ NOTES TO THE GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 _______________________________________________________________________________________ 1 Reconciliation of group operating loss to net cash 2002 2001 inflow from/(outflow for) operating activities £ £ Operating loss (1,396,313) (2,252,289) Depreciation 302,148 460,806 Profit on sale of tangible fixed assets ( 357) (4,552) Amortisation of intangible fixed assets 240,301 240,284 Decrease/(increase) in stocks 569,775 (51,284) Decrease in debtors 952,280 1,780,045 Increase/(decrease) in creditors 79,792 (242,412) Other movements 112,980 (12,457) _______ _______ Net cash inflow from/(outflow for) operating activities 860,606 (81,859) _______ _______ 2 Analysis of cash flows for headings netted 2002 2001 in the cash flow statement £ £ Returns on investments and servicing of finance Interest received 999 158 Interest paid (198,270) (246,035) Currency translation loss (62,521) - _______ _______ Net cash outflow for returns on investments and servicing of finance (259,792) (245,877) _______ _______ Capital expenditure Payments to acquire tangible fixed assets (950,708) (177,759) Receipts from sales of tangible fixed assets 444,503 25,575 _______ _______ Net cash outflow for capital expenditure (506,205) (152,184) _______ _______ Acquisitions and disposals Purchase of subsidiary undertakings - goodwill - (215,169) _______ _______ Financing Issue of ordinary share capital 2,156,760 - New loans and hire purchase contracts 649,885 49,500 Repayment of hire purchase and finance leases (68,220) (83,577) Repayment of loans (394,676) (90,607) Expenses paid in connection with share issue (161,648) - _______ _________ Net cash inflow from/(outflow for) financing 2,182,101 (124,684) _______ _________ 3 Analysis of net debt 1 January 2002 Cash flow Other non-cash 31 December 2002 changes £ £ £ £ Cash in hand and at bank 96,172 503,093 599,265 Bank overdraft (1,774,297) 1,774,297 - ________ 2,277,390 Hire purchase due within one year (32,120) 32,120 (2,231) (2,231) Hire purchase due after one year (33,749) 26,215 2,231 (5,303) Loans due within one year (1,549,428) (245,324) 1,560,695 (234,057) Loans due after one year (408,246) - (1,560,695) (1,968,941) _________ ________ _________ __________ (3,701,668) 2,090,401 - (1,611,267) ________ _________ _________ __________ On 6 March 2002, a short-term bank loan of £1,500,000 was converted to a ten year term loan repayable by monthly instalments. 4 Reconciliation of net cash flow to movement in net debt 2002 2001 £ £ Increase/(decrease) in cash in the year 2,277,390 (1,046,297) Cash to repurchase debt 462,896 174,184 New loans and hire purchase contracts (649,885) (49,500) _______ _______ Movement in net debt in the year 2,090,401 (921,613) Opening net debt (3,701,668) (2,780,055) ________ ________ Closing net debt (1,611,267) (3,701,668) ________ ________ This information is provided by RNS The company news service from the London Stock Exchange

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