Half Yearly Report

RNS Number : 5855Y
Pennant International Group PLC
07 September 2009
 




Pennant International Group Plc


Interim Report for the six months ended 30 June 2009


7 September 2009


Pennant International Group plc ('Pennant' or 'the Group'), 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 interim results for the six months ended 30 June 2009.


Commenting on the Group's performance, Chairman Christopher Powell said:

'I am pleased to report a return to profit despite trading conditions remaining challenging. The main contributors to this turnaround have been a strong performance in the Canadian branch of the Software Division, a much improved contribution from the Data Services Division and, in particular, the positive steps taken by the Board to reduce costs and improve efficiency.'


Highlights: Financial

  • Group revenues for the period of £4.8million (June 2008: £5.4million);

  • Gross margin increased to 37% (Second half of 2008: 31%);

  • Operating profit of £113,000 (June 2008: £108,000)

  • Profit attributable to equity holders of £87,000 (June 2008: £44,000);

  • Earnings per share of 0.29pence (June 2008: 0.14pence);

  • Net debt at period end of £260,000 (June 2008: Nil);

  • Strong cash inflows expected in 2nd half;

Highlights: Operational

  • Strong tendering activities across all divisions;

  • Training Systems: good first half including submission of first Middle-East tender following signing of Memorandum of Understanding with Saudi Arabian company; further significant extensions and work-in-progress on contracts with BAE supporting sales of HAWK aircraft;

  • Data Services: Improved performance with successful rationalisation of management and resources; new enabling contract signed with Network Rail;

  • Software Services: Trading underpinned by strong order book; good performance from Canada following signing of new consultancy agreement with Canadian Department of National Defence; sale of OmegaPS software to Vitrociset for use on Galileo project;

  • Continuing work on contracts with BAE Insyte including Type 45 Destroyer; continued work with Kawasaki Industries of Japan;

  • Commencement of work for ALSTOM Power in Switzerland;  

On current trading and prospects, Mr Powell added:

'Business is expected to continue to be challenging in the second half and beyond. However, the Group's revenues are underpinned by a number of support contracts and maintenance and consultancy agreements with good visibility of revenue streams.


'Tendering activity continues to be strong and we are actively seeking opportunities for diversification, whilst there are also major programmes in the pipeline with new and existing customers.'


Enquiries:


Pennant International Group plc                

Chris Snook, Chief Executive                    

John Waller, Finance Director

Tel: 01452 714881


W.H. Ireland            

Tim Cofman/Katy Birkin            

Tel: 0121 265 6330


Winningtons Financial    

Paul Vann/Tom Cooper

Tel: 0117 920 0092


Chairman's Statement


I am pleased to report a return to profit despite trading conditions remaining challenging. The main contributors to this turnaround have been a strong performance in the Canadian branch of the Software Division following the new consultancy agreement worth up to CA$15 million from the Department of National Defence ('DND') highlighted in my 2008 Annual Report, a much improved contribution from the Data Services division and, in particular, the positive steps taken by your Board to reduce costs and improve efficiency.


Results


Revenue for the period was £4.8 million (30 June 2008: £5.4 million). Gross margin was 37%, a significant increase over the 31% achieved in the second half of 2008. Administration costs were £1.7 million an 11% reduction compared to the first half of 2008. Redundancy costs included were £37,000 (30 June 2008: £65,000). Operating profit was £113,000 (30 June 2008: £108,000) and the Group's share of joint venture profits was £2,000 (30 June 2008: Loss of £33,000). Earnings were £87,000 (30 June 2008: £44,000) equating to basic earnings per share of 0.29p (30 June 2008: 0.14p).


Cash absorbed in operations was £155,000 (30 June 2008: £477,000) attributable to an increase in amounts due on contracts. Cash at the end of the period was £268,000 (30 June 2008: £736,000) and net debt was £260,000 (30 June 2008: £nil). Cash inflow in the second half is expected to be strong as contract milestones are achieved.


Your Board is keeping dividend policy under review, but in the current economic climate does not consider it appropriate to pay an interim dividend.


Current Trading


During the period the following have been the principal activities and achievements:


  • Strong tendering activity particularly in the Training Division including submission of the first tender following the signing of a Memorandum of Understanding with a Saudi Arabian company, referred to in my statement in the 2008 Annual Report, to enable the Group to pursue existing and future opportunities arising from defence spending in the Middle East.


  • Successful rationalisation of the management and resources of the Data Services Division.


  • A strong start to work on the new consultancy agreement with the Canadian DND.


  • Further significant extensions and continuing work in progress on the contracts with BAE in support of their sales of Hawk aircraft.


  • A new enabling contract with Network Rail for the Data Services Division and the successful completion of the first tasks including a set of DVD's for training track and maintenance staff, emulation of signalling scenarios for competency testing and web-deliverable multi-media projects used for briefing senior management on accidents and incidents on the rail network.


  • Continuing work on two contracts with BAE Insyte for the Maritime Composite Training System and the Type 45 Destroyer Warfare System.


  • An extension to a support contract with the MOD for Graphics/Design and Associated Services.


  • Successful completion under the contract with Specialist Computer Centres for Her Majesty's Revenue and Customs of the CD-ROM released to all employers operating PAYE for the tax year 2008/2009. Work was also commenced on the CD-ROM for the tax year 2009/2010.


  • Commencement of work under a significant contract with ALSTOM Power in Switzerland for technical documentation for the auxiliary systems of a gas powered turbine.


  • Continued work with Kawasaki Heavy Industries in Japan to provide a suite of documentation for the Xinyi/Songshan line contract in Taiwan.


  • Successful delivery to DCAE Cosford of an enhanced Synthetic Environment Procedures Trainer ('SEPT'). SEPT provides training in marshalling and handling of both fixed and rotary winged aircraft in a safe synthetic environment.


  • A sale of OmegaPS software to Vitrociset for use on the Galileo project.


Joint Venture


Despite ongoing difficulties and delays at Airbus, the joint venture made a small profit in the period. Negotiations are in hand for the termination of the joint venture agreement with effect from 30 September 2009.


Outlook 


Business is expected to continue to be challenging in the second half and beyond. However, the Group's revenues are underpinned by a number of support contracts, maintenance agreements and consultancy agreements with ongoing revenue streams. Tendering activity continues to be strong, we are actively seeking opportunities for diversification and there are major programmes in the pipeline with new and existing customers. 




C C Powell

Chairman

7 September 2009



PENNANT INTERNATIONAL GROUP plc

CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2009





Notes

Six months ended 30 June 2009

Six months ended 30 June 2008

Year ended 31 December 2008



£

£

£

Revenue


4,828,042

5,408,658

9,839,547

Cost of sales


(2,983,568)

(3,357,548)

(6,419,631)






Gross profit


1,844,474

2,051,110

3,419,916






Administrative expenses


(1,730,788)

(1,943,226)

(3,847,137)






Operating profit


113,686

107,884

(427,221)






Share of results of Joint Venture



2,119


(31,611)


(33,705)








115,805

76,273

(460,926)






Finance costs


(9,116)

(23,176)

(48,222)

Finance income


177

1,790

8,765






Profit before taxation


106,866

54,887

(500,383)






Taxation

2

(20,000)

(10,489)

19,516






Profit for the period


86,866

44,398

(480,867)






Earnings per share

3




Basic


0.29p

0.14p

(1.57)p

Diluted


0.27p

0.13p

(1.47)p

  PENNANT INTERNATIONAL GROUP plc

CONSOLIDATED BALANCE SHEET as at 30 June 2009 



30 June 2009

30 June 2008

31 December 2008


£

£

£

Non-current assets




Goodwill

879,846

901,249

923,299

Other intangible assets

90,068

148,717

121,475

Property plant and equipment

1,864,094

1,987,525

1,925,918

Interest in Joint Venture

5,370

5,345

3,251

Available-for-sale investments

6,135

6,135

6,135

Deferred tax asset

29,339

19,430

26,627

Total non-current assets

2,874,852

3,068,401

3,006,705





Current assets




Inventories

19,340

29,823

24,970

Trade and other receivables

3,442,332

3,644,223

3,196,215

Cash and cash equivalents

267,792

735,847

600,631

Total current assets

3,729,464

4,409,893

3,821,816





Total assets

6,604,316

7,478,294

6,828,521





Current liabilities




Trade and other payables

1,278,354

1,412,218

1,313,601

Current tax liabilities

15,569

10,000

14,920

Obligations under finance leases

2,490

836

3,603

Bank loan

189,461

156,725

174,550

Deferred revenue

364,535

383,086

432,221

Total current liabilities

1,850,409

1,962,865

1,938,895





Net current assets

1,879,055

2,447,028

1,882,921





Non current liabilities




Bank loan

318,761

528,736

428,608

Obligations under finance leases

17,190

1,691

17,138

Deferred tax liabilities

-

32,000

-

Deferred revenue

10,583

12,890

21,279

Total non-current liabilities

346,534

575,317

467,025





Total liabilities

2,196,943

2,538,182

2,405,920





Net assets

4,407,373

4,940,112

4,422,601





Equity




Share capital

1,600,000

1,600,000

1,600,000

Treasury shares

(363,016)

(310,516)

(363,016)

Share premium account

3,582,329

3,582,329

3,582,329

Retained earnings

(484,334)

36,959

(571,200)

Translation reserve

72,394

31,340

174,488

Total equity

4,407,373

4,940,112

4,422,601



PENNANT INTERNATIONAL GROUP plc

CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2009




Notes

Six months ended 30 June 2009

Six months ended 30 June 2008

Year ended 31 December 2008



£

£

£

Net cash (used in) operating activities

4

(155,000)

(477,070)

(574,815)






Investing activities





Interest received


177

1,790

8,765

Proceeds from sale of property, plant and equipment



-


959


-

Purchase of intangible assets


(300)

(48,900)

(49,301)

Purchase of property plant and equipment


(19,788)

(19,449)

(42,775)

Loan to Joint Venture


-

(20,000)

(20,000)

Net cash used in investing activities


(19,911)

(85,600)

(103,311)






Financing activities





Dividends paid


-

(134,143)

(201,214)

Transactions in own shares


-

(61,218)

(61,218)

Repayment of borrowings


(94,936)

(76,528)

(158,831)

Net increase in/repayment of obligations under finance leases



(1,061)


(94)


18,120

Increase in bank overdrafts


-

-

-

Net cash used in financing activities


(95,997)

(271,983)

(403,143)






Net decrease in cash and cash equivalents


(270,908)

(834,653)

(1,081,269)






Cash and cash equivalents at beginning of period



600,631


1,568,620


1,568,620






Effect of foreign exchange rates


(61,931)

1,880

113,280






Cash and cash equivalents at end of period



267,792


735,847


600,631







  PENNANT INTERNATIONAL GROUP plc

STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2008 




Share capital

Treasury shares

Share premium account

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

Loss for the year

-


-

(480,867)

-

(480,867)

Dividends paid

-


-

(201,214)

-

(201,214)

Transactions in treasury shares


-


(113,718)


-


-


-


(113,718)

Share based payment

-


-

(9,823)

-

(9,823)

Currency translation differences on foreign currency net investments



-




-



-



136,533



136,533

At 31 December 2008

1,600,000

(363,016)

3,582,329

(571,200)

174,488

4,422,601

Profit for the half year

-


-

86,866

-

86,866

Dividends paid

-


-

-

-

-

Transactions in treasury shares


-



-


-


-


-

Share based payment

-


-

-

-

-

Currency translation differences on foreign currency net investments



-




-



-



(102,094)



(102,094)

At 30 June 2009

1,600,000

(363,016)

3,582,329

(484,334)

72,394

4,407,373



NOTES TO THE FINANCIAL INFORMATION for the six months ended 30 June 2009


1.  Basis of preparation


This condensed set of financial statements has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs). The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied to the Group's latest annual audited financial statements. The following standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009 but have had no effect on the information presented in this condensed set of financial statements:


IAS 1                Presentation of financial statements

IFRS 8                Operating Segments

IAS 23     (amendment)        Borrowing costs

IFRS 2 (amendment)        Share-based payment

IFRS 32 (amendment)        Financial instruments: presentation

IFRIC 13            Customer loyalty payments

IFRIC 15            Agreements for the construction of real estate

IFRIC 16            Hedges of a net investment in a foreign operation

IAS 39 (amendment)        Financial instruments: recognition and measurement


While the financial figures included in this half-yearly report have been computed in accordance with IFRSs applicable to interim periods and include the information required to be disclosed by the AIM Rules for Companies, they do not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34. 


The results for the year ended 31 December 2008 are not statutory accounts. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s237 (2) or (3) of the Companies Act 1985.


2.  Taxation


The taxation charge for the period is based on the estimated rate of tax that is likely to be effective for the full year to 31 December 2009.


3. Earnings per share


Basic earnings per share are calculated by dividing the profit for the period attributable to the shareholders by the weighted average number of shares in issue. The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. 



Six months ended 30 June 2009

Six months ended 30 June 2008

Year ended 31 December 2008


£

£

£

Earnings




Net profit attributable to equity shareholders


86,866


44,398


(480,867)





Number of shares




Weighted average number of ordinary shares


29,487,045


30,769,156


30,641,321

Number of dilutive shares under option


2,160,000


2,250,000


2,180,000

Weighted average number of ordinary shares for the purpose of dilutive earnings per share



31,647,045




33,019,156




32,821,321

  4.  Cash (used in) /generated from operations



Six months ended 30 June 2009

Six months ended 30 June 2008

Year ended 31 December 2008


£

£

£

Profit for the period

86,866

44,398

(480,867)

Share of results of Joint Venture

(2,119)

31,611

33,705

Finance income

(177)

(1,790)

(8,765)

Finance costs

9,116

23,175

48,222

Income tax expense

20,000

10,489

(19,516)

Share-based payment 

-

6,000

(9,823)

Depreciation charge

112,871

101,430

222,927

Profit on sale of assets

-

(959)

-





Operating cash flows before movement in working capital


226,557


214,354


(214,117)





(Increase) in receivables

(246,117)

(482,628)

(34,620)

Decrease/(increase) in inventories

5,630

(2,445)

2,408

(Decrease) in payables

(35,247)

(33,302)

(184,419)

(Decrease)/increase in deferred revenue


(78,382)


(44,643)


12,881

Cash (used in) operations

(127,559)

(348,664)

(417,867)





Tax paid

(18,325)

(105,231)

(108,726)

Interest paid

(9,116)

(23,175)

(48,222)






Net cash (used in) operations



(155,000)


(477,070)


(574,815)


Copies of this statement will be sent to shareholders and will be available on the Group's website (www.pennantplc.co.uk) and from Pennant International Group plc, Pennant CourtStaverton Technology ParkCheltenhamGL51 6TL.



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