Final Results

RNS Number : 2777J
Pennant International Group PLC
29 March 2010
 



For Immediate Release                                                                                                      29 March 2010

Pennant International Group plc

Preliminary Results for the year ended 31 December 2009

Return to profitability and dividend; all three divisions profitable and cash generative;

 

Pennant International Group plc ("Pennant" or "the Company"), the AIM quoted supplier of integrated logistic support solutions, products and services, principally to the defence, rail, aerospace, and naval sectors and to Government Departments, announces preliminary results for the year ended 31 December 2009.

 

In his Statement to shareholders, Chairman, Mr. Christopher Powell said:

"I am pleased to report that all segments of the business have been profitable and cash generative. Tender activity has been high, particularly in the defence, rail and power sectors. Considerable effort has been expended building relationships with existing and potential customers which is paying off as our reputation grows and our pipeline of prospects increases. The wide range of prospects together with their broad geographical spread will help mitigate the inevitable effect of budget constraints, particularly in the defence market, on the funding and timing of orders."

 

Highlights: Financial

 

·     Group revenues of £9.5million (2008: £9.8million).

·     Gross margins significantly increased to 39.1% (2008: 34.8%).

·     Group operating profit of £305,000 (2008: £427,000.loss).

·     Profit attributable to equity holders of £293,000 (2008: £480,000 loss).

·     Basic earnings per share of 1.00p (2008: loss per share of 1.57p).

·     Net cash at year end of £846,000 (2008: net debt of £23,000).

·     Interim Dividend of 1.00p per share paid on 19 March 2010.

·     Strong balance sheet.

 

Highlights: Operational

 

·     All three divisions profitable and cash generative

·     Training Systems strongly cash generative as stage payments on long-term contracts achieved; tender activity high with significantly increased pipeline of prospects; several new contracts from Flight Simulation & Synthetic Trainers Project Team of the MOD; successful completion of Type 45 Destroyer Warfare Package for Royal Navy;

·     Data Services enjoyed much improved performance and return to profitability following rationalisation measures instigated in 2008; strong tender activity in rail and power sectors worldwide including major contract with Alstom Power in Switzerland and new enabling contract with Network Rail;

·     Software Services performed well, helped by ongoing major consultancy contract with Canadian DND worth up to C$15million; proprietary OmegaPS software licences, related support contracts and consultancy services for customers including BAE Systems, Boeing and Thales; new contracts won with Boeing Australia, Lockheed Martin Canada and Shenyang Aircraft Design and research Institute, China;

 

On current trading and prospects, Mr. Powell added:

"We expect continuing pressure on defence budgets that will determine which programmes are funded and in particular, the timing of orders. However, this will also re-inforce the move towards the use of simulation and computer based training products as a cost effective solution. Pennant is well positioned on a wide range of long-term programmes involving defence, rail transport and power generation and our business is underpinned by ongoing recurring revenues from support and maintenance contracts and consultancy agreements

 

"The balance Sheet is strong and your Board is confident for the future."

 

Enquiries:




Pennant International Group plc

www.pennantplc.co.uk

Chris Snook, Chief Executive

+44 (0) 1452 714 881

John Waller, Finance Director

+44 (0) 1452 714 881



WH Ireland Limited

www.wh-ireland.co.uk

Mike Coe / Marc Davies

+44 (0) 117 945 3470



Winningtons Financial                                  

www.winningtons.co.uk

Paul Vann / Tom Cooper

+44 (0)117 920 0092



PENNANT INTERNATIONAL GROUP PLC:

Preliminary results for the year ended 31 December 2009

 

CHAIRMAN'S STATEMENT AND BUSINESS REVIEW

 

I am pleased to report a return to profitability and a year of significant cash generation that has enabled us to pay a dividend of 1.0p per share.

 

All segments of the business have been profitable and cash generative. Tender activity has been high particularly in the defence, rail and power sectors.

 

Considerable effort has been expended building relationships with existing and potential customers which is paying off as our reputation grows and our pipeline of prospects increases. The wide  range of prospects together with their broad geographical spread will help mitigate the inevitable effect of budget restraints, particularly in the defence market, on the funding and timing of orders.

 

Results

 

Revenue for the year was £9.5 million (2008: £9.8million). Gross margin increased significantly to 39.1% (2008: 34.8%) and administrative expenses reduced by 12% as the result of restructuring. Earnings were £293,000 (2008: loss £481,000) and basic earnings per share were 1.00p (2008: loss per share 1.57p).

 

Cash generation from operations was strong at £962,000 (2008: cash used £575,000). Cash balances at the end of the year were £1.28 million (2008: 0.6 million) and net funds stood at £846,000 (2008: net debt £23,000).

 

An interim dividend of 1p per share was paid on 19 March 2010.

 

About Pennant

 

The Group offers a range of services that extends across computer based training and emulation, virtual reality, simulation, technical documentation, media production and supportability engineering software.

 

For management and accounting purposes the Group is run as three operating divisions each of which is a significant contributor to the Group's overall results.

 


Proportion of 2009 Group Revenues

Training Systems

42%

Data Services

26%

Software Services

32%

 

The Group operates principally in the defence market but has a growing presence, mainly through the Data Services division, in the rail transport and power generation markets and UK Government departments.

 

Training Systems

 

Training Systems division was profitable and strongly cash generative as stage payments were achieved. Tender activity was high and the pipeline of prospects increased significantly providing considerable opportunity for growth.

 

The division operates principally in the defence market and revenues relate to the design, manufacture and delivery of simulation and computer-based training products for defence projects including new platforms (e.g. aircraft, ships, fighting vehicles etc) and updates to existing platforms. Revenues are underpinned by ongoing contracts for the support and modification of equipment in service.

 

There is a continuing move towards the use of synthetic training products. The cost of using real equipment for training is high whilst in practice it is inefficient and has significant health and safety implications. Simulation based training provides a more cost-effective, flexible, focussed and safe alternative. With continuing pressure on global defence budgets we expect the use of synthetic training products to continue to increase as governments, defence forces and other operators of complex assets look for value-for-money solutions.

 

Major contracts for new platforms and the update of existing platforms are normally awarded by defence authorities around the world to the original equipment manufacturers and/or major prime contractors ("primes") who in-turn subcontract the provision of training devices related to those platforms to specialist subcontractors.

 

Our strategy in this market has three main thrusts:

 

·     to enhance and extend our working relationships and reputation with the OEMs and primes so that we become the partner of choice;

·     to extend our reach, both in the UK and worldwide, into each of the defence naval, land systems and air sectors;

·     to increase the number of support contracts providing on-going revenue streams.

 

This strategy has shown considerable success producing a number of short and medium-term opportunities. In addition there are significant potential extensions to current contracts.

 

UK primes  often 'package' our services when tendering for the sale of platforms worldwide and we have positioned ourselves, through a memorandum of understanding with a Saudi Arabian company, to benefit from the major defence spending planned in the Middle East.

 

 Recent highlights include:

 

·     Contracts from the Flight Simulation and Synthetic Trainers Project Team of the MOD for:

8 Virtual Reality Parachute Trainers for the Parachute Training School at RAF Brize Norton;

the update of computer-based courseware for the Sea King helicopter for RNAS Culdrose;

the update of computer-based courseware for the Jaguar aircraft for DCAE Cosford;

modifications to a number of hardware/simulation based trainers

·     Successful completion to schedule and within budget of the Type 45 Destroyer Warfare Package for the Royal Navy. Pennant produced a range of training media objects and 3D rotational models for the Electro-Optical Gun Control System, the Combat Management System and the Link 11 Communication System.

·     Continued development of highly interactive computer-based training for the command systems of the Royal Navy Type 23 frigates and Type 45 destroyers as part of the Maritime Composite Training System.

·     Successful delivery of enhancements to the Synthetic Environment Procedural Trainer at DCAE Cosford. These enhancements allow Army students to practice their aircraft marshalling skills in complete safety without the high cost of using real aircraft.

·     Continuing development of computer-based training and emulation products in support of BAE Systems delivery of Hawk Aircraft to two major customers.

·     Ongoing support contracts with MOD supporting over 120 aircraft related training devices, BAE Systems Australia supporting Hawk jet training and British Energy.

·     Completion of a computer 3-D model of the Lynx Wildcat helicopter for Westland.

 

Data Services

 

The Data Services division covers a range of products including high quality media production, graphics, virtual reality and technical documentation. It operates principally in the defence, rail, power, oil and gas and Government sectors.

 

The division returned to profitability and was cash generative in 2009 following the completion of the rationalisation that was begun in 2008. The management is now based in new premises in Manchester and significant cost savings have been achieved.

 

Recent activities and achievements include:

 

·     Strong tendering activity in both the rail and power sectors worldwide creating a strong pipeline of opportunities.

·     A new enabling contract with Network Rail. Tasks completed under this contract include a set of DVDs for training track and maintenance staff, emulation of signalling scenarios for competency testing and web-deliverable multi media projects for briefing senior management on accidents and incidents on the rail network.

·     Satisfactory completion, in a short timescale, of a major contract with ALSTOM Power in Switzerland for technical documentation for the auxiliary systems of a gas-powered turbine.

·     Successful delivery to HMRC of the Employer CD ROM for 2010. This is distributed to all employers who operate PAYE. This contract has now run for two years and it is expected that the option for a third year will be taken up.

·     Continuing work with each of Kawasaki and Siemens for operator and maintainer manuals and training on rail projects.

 

Software Services

 

Pennant owns the OmegaPS suite of software which is used to reduce the support cost of major capital equipment. It is continually updated to keep in line with current practice and standards and has obvious relevance in the current period when defence budgets are stretched.

 

The division, which operates in the defence and aerospace markets, is profitable and cash generative. Revenues accrue from the sale of software licences, related annual support contracts and consultancy services. Work is continuing successfully on the major consultancy agreement with the Canadian DND that was won in April 2009 and has the potential to run until March 2014 and realise total revenues of C$15 million. In addition there are a further two years to run on the three year A$1.0million software support contract with the Australian Defence Organisation.

 

OmegaPS has an impressive customer list. The software is used by a growing number of major defence and aerospace contractors worldwide including BAE Systems, Boeing, Lockheed Martin, Northrop Grumman, Agusta Westland, Thales, VT Group, Eurocopter, and Man-Erf. It is also used extensively by the Canadian and Australian defence authorities.

 

Recent new licence sales have been made to Vitrociset for the Galileo Project (an entry to the space market) Boeing Australia, Lockheed Martin in Canada and the Shenyang Aircraft Design and Research Institute in China .

 

Joint venture

 

The joint venture with Sonovision SAS ceased trading by agreement on 31 October 2009. Since this date, Pennant's Data Services division has continued to work profitably as a subcontractor to Sonovision on technical documentation projects for Airbus.

 

People

 

Our business depends on the commitment and high skill levels of our staff and I am pleased to take this opportunity to thank them for their major contribution to a successful year.

 

Outlook

 

We expect there will be continuing pressure on defence budgets that will determine which programmes are funded and, in particular, affect the timing of orders. However, we consider that it will also reinforce the move towards the use of simulation and computer based training products as a cost effective solution.

 

We are well positioned on a wide range of programmes involving fighter and transport aircraft, helicopters, destroyers, fighting vehicles, rail transport and power generation. These platforms have long programme lives ahead of them that will drive opportunities in the future. In addition the business is underpinned by a number of ongoing revenue streams from equipment support contracts, software maintenance contracts and consultancy agreements.

 

The balance sheet is strong and your board is confident for the future.

 

C C Powell

Chairman

26 March 2010

 



PENNANT INTERNATIONAL GROUP PLC

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2009

 


Notes

2009

£


2008

£

Revenue


9,485,858


9,839,547

Cost of sales


(5,778,263)


(6,419,631)






Gross profit


3,707,595


3,419,916

Administration expenses


(3,402,742)


(3,847,137)






Operating profit/(loss)


304,853


(427,221)

Share of results of joint venture


-


(33,705)

Net gain on closure of joint venture


20,390


-



325,243


(460,926)






Finance costs


(24,932)


(48,222)

Finance income


639


8,765






Profit/(loss) before taxation


300,950


(500,383)

Taxation

1

(7,715)


19,516

Profit/(loss) for the year attributable to equity holders of parent


293,235


(480,867)






Earnings per share





Basic


1.00p


(1.57p)

Diluted


0.91p


(1.57p)

 

The Income Statement has been prepared on the basis that all operations are continuing operations.

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2009

 


2009

£


2008

£

Profit/(loss) for the year attributable to equity holders of parent

293,235


(480,867)

Other comprehensive income:




Exchange differences on translation of foreign operations

71,868


136,533

Comprehensive income/(loss) for the period

365,103


(344,334)

 


CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2009

 



2009

£


2008

£

Non-current assets





Goodwill


952,939


923,299

Other intangible assets


64,832


121,475

Property, plant and equipment


1,802,587


1,925,918

Equity accounted interest in joint venture


-


(1,749)

Available for sale investments


3,700


6,135

Deferred tax assets


38,304


26,627

Total non-current assets


2,862,362


3,001,705

Current assets





Inventories


16,340


24,970

Trade and other receivables


2,347,179


3,201,215

Cash and cash equivalents


1,284,384


600,631

Total current assets


3,647,903


3,826,816

Total assets


6,510,265


6,828,521

Current liabilities





Trade and other payables


989,819


1,313,601

Current tax liabilities


14,089


14,920

Obligations under finance leases


4,612


3,603

Bank loan


172,334


174,550

Deferred revenue


377,294


432,221

Total current liabilities


1,558,148


1,938,895

Net current assets


2,089,755


1,887,921

Non-current liabilities





Bank loan


245,225


428,608

Obligations under finance leases


15,661


17,138

Deferred revenue


7,700


21,279

Deferred tax liabilities


-


-

Total non-current liabilities


268,586


467,025

Total liabilities


1,826,734


2,405,920

Net assets


4,683,531


4,422,601






Equity





Share capital


1,600,000


1,600,000

Treasury shares


(470,318)


(363,016)

Share premium account


-


3,582,329

Retained earnings


3,307,493


(571,200)

Translation reserve


246,356


174,488

Total equity


4,683,531


4,422,601






 



CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2009

 



2009


2008



£


£

Net cash from/ (used in) operations


961,688


(574,815)

Investing activities





Interest received


639


8,765

Purchase of intangible assets


(4,488)


(49,301)

Purchase of property, plant and equipment


(31,469)


(42,775)

Loan to joint venture


-


(20,000)

Net cash inflow from closure of joint venture


18,639


-

Net cash used in investing activities


(16,679)


(103,311)

Financing activities





Dividends paid


-


(201,214)

Transactions in own shares


(107,302)


(61,218)

Repayment of borrowings


(185,599)


(158,831)

Net (repayment of)/increase in obligations under finance leases


(468)


18,120

Net cash used in financing activities


(293,369)


(403,143)

Net increase/(decrease) in cash and cash equivalents


651,640


(1,081,269)

Cash and cash equivalents at beginning of year


600,631


1,568,620

Effect of foreign exchange rates


32,113


113,280

Cash and cash equivalents at end of year


1,284,384


600,631

 



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2009

 


Issued share capital

Treasury shares

Share premium

Retained earnings

Translation reserve

Total equity


£

£

£

£

£

£

At 1 January 2008

1,600,000

(249,298)

3,582,329

120,704

37,955

5,091,690

Payment of dividend

-

-

-

(201,214)

-

(201,214)

Total comprehensive income for the year

-

-

-

(480,867)

136,533

(344,334)

Recognition of share based payment

-

-

-

(9,823)

-

(9,823)

Purchase of treasury shares

-

(113,718)

-

-

-

(113,718)

At 1 January 2009

1,600,000

(363,016)

3,582,329

(571,200)

174,488

4,422,601

Capital reduction

-

-

(3,582,329)

3,582,329

-

-

Total comprehensive income for the year

-

-

-

293,235

71,868

365,103

Recognition of share based payment

-

-

-

3,129

-

3,129

Purchase of treasury shares

-

(107,302)

-

-

-

(107,302)

At 31 December 2009

1,600,000

(470,318)

-

3,307,493

246,356

4,683,531

 



ABBREVIATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2009

 

1.

Taxation

 

Recognised in the income statement

2009

£

2008

£

Current tax expense

13,498

18,415

In respect of prior year

526

487


14,024

18,902

Deferred tax expense relating to origination and reversal of temporary differences

(7,020)

(38,418)

In respect of prior years

711

-

Total tax (credit)/expense in income statement

7,715

(19,516)

Reconciliation of effective tax rate



Profit/ (loss) before tax

300,950

(500,383)

Tax at the applicable tax rate of 28% (2008: 28%)

84,266

(140,108)

Tax effect of:



Share of results of joint venture

(23,750)

9,437

Expenses not deductible for tax

48,654

46,016

Income not taxable

(13,140)

-

Capital loss

14,522

99,709

Unused losses not recognised in deferred tax

(106,096)

4,092

Different tax rates for overseas subsidiaries

1,965

(731)

Other differences

57

(38,418)

In respect of prior year

1,237

487

Tax (credit)/expense

7,715

(19,516)

 

2.

Publication of non-statutory accounts

 

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in the Companies Act 2006.

 

The statement of financial position at 31 December 2009 and income statement, statement of changes in equity, statement of cash flows and associated notes for the year then ended have been extracted from the Company's 2009 financial statements upon which the auditors opinion is unqualified.

 

Copies of the 2009 Annual Report and Accounts will be posted to shareholders in April and will be available on the Company's website at www.pennantplc.co.uk. Further copies may be obtained by contacting the Company Secretary at Pennant Court, Staverton Technology Park, Cheltenham, Gloucestershire GL51 6TL.


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