Half Yearly Report

RNS Number : 1611S
Pennant International Group PLC
06 September 2010
 



Pennant International Group plc

Interim Report for the six months ended 30 June 2010

 

6 September 2010

 

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 2010.

 

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

"I am pleased to be able to report continued improvement in profitability, strong cash generation and encouraging opportunities for major orders following the selection of Pennant Training Systems Limited as potential suppliers for the Lynx Wildcat Training Programme and also for a major Land Systems programme."

 

"Our strategy of building strong relationships with prime contractors and original equipment manufacturers continues to produce improving results across the Group, with a strong pipeline of new prospects both in the UK and abroad."

 

Highlights: Financial

·      Group revenues for the period of £4.9million (2009: £4.8million);

·      Gross margin further increased to 41% (2009: 38%);

·      Operating profit of £220,000 (2009: £114,000);

·      Profit attributable to  equity holders of £189,000 (2009: £87,000);

·      Net cash at period end of £1,025,000 (2009: Net debt of £260,000);

·      Earnings per share of 0.67pence (2009: 0.29pence);

·      Interim dividend of 0.25pence per share

Highlights: Operational

·      Strong tendering activity.

·      Training Systems: selection as potential supplier for two major projects - Lynx Wildcat Training Programme and a new Land Systems Programme; new contracts include: Sultanate of Oman for supply of 12 Handskill Trainers; new MOD contract to provide support for training equipment for the Warrior Infantry Fighting Vehicle; supply of 8 Virtual Reality Parachute Trainers to the Parachute Training School at RAF Brize Norton.

·      Data Services: improved performance continued; new contract with Rail Safety and Standards Board; ongoing work with Alstom Switzerland Limited; three year contract extension to September 2013 with TOTAL.

·      Software Services: continued successful support and consultancy under five year contract with Canadian Department of National Defence; new licence sales of OmegaPS software to Vitrociset, BN Group and Daimler AG.

On current trading and prospects, Mr Powell added:

 

"Defence spending in the UK is currently subject to a major review. However your Board remains optimistic of significant orders in the short to medium term, providing good visibility of work running forward from 2011.The Group is well placed to take advantage of a number of excellent opportunities in the UK and abroad, backed by an excellent reputation, strong balance sheet and a healthy cash position."

 

Enquiries:

 

Pennant International Group plc                       Tel: 01452 714881

Chris Snook, Chief Executive

John Waller, Finance Director

 

Winningtons Financial                                       Tel: 0117 985 8989

Paul Vann/Tom Cooper

 

WH Ireland                                                           Tel: 0117 945 3470

Mike Coe/Marc Davies



PENNANT INTERNATIONAL GROUP plc

INTERIM REPORT for the six months ended 30 June 2010

 

Chairman's Statement

 

I am pleased to be able to report continued improvement in profitability, strong cash generation and encouraging opportunities for major orders following the selection of Pennant Training Systems Limited as potential suppliers for the Lynx Wildcat Training Programme and also for a major Land Systems programme.

 

Results

Revenue for the period was £4.9 million (Interim 2009: £4.8 million). Gross margin increased to 41% (2009: 38%).  Operating profit was £220,000 (Interim 2009: £114,000). The tax charge of £20,000 (interim 2009: £20,000) reflects the use of brought forward tax losses. Earnings were £189,000 (Interim 2009: £87,000) equating to basic earnings per share of 0.67p (Interim 2009: 0.29p).

 

Cash generated from operations was £489,000 (Interim 2009: cash absorbed £155,000). Cash at the end of the period was £1,372,000 (Interim 2009: £268,000). The Group had net cash of £1,025,000 (Interim 2009: net debt £260,000).

 

Your Board recommends the payment of an interim cash dividend of 0.25p. The dividend will be paid on 15 October 2010 to shareholders on the register at close of business on 17 September 2010. The shares are expected to go ex-dividend on 15 September 2010.

 

Current Trading

Our strategy of building strong relationships with prime contractors and original equipment manufacturers has not only produced improved results during the period, but has also given  the Group  a strong pipeline of good prospects with both new and existing customers.

 

In particular, the Training Systems Division has been selected as potential supplier for two major contracts:

 

·      The Lynx Wildcat Training programme for Westland Helicopters Limited, a multi-million pound contract that will make use of hardware and software models developed by Pennant for previous Lynx helicopter training systems.

·      A major Land Systems programme (another multi-million pound opportunity) to supply computer based training and part task trainers.

 

Other principal activities and achievements during the period are shown below by trading division:

 

Training Systems Division

 

·      Continued significant tendering activity.

·      A new contract with the UK MOD for the design, manufacture, installation and support of eight Virtual Reality Parachute Trainers for the Parachute Training School at RAF Brize Norton.

·      Further extensions to contracts with BAE Systems in support of their sales of Hawk aircraft.

·      Contracts with UK MOD for the update of existing courseware for the Sea King helicopter for RNAS Culdrose and the Jaguar aircraft for DCAE Cosford.

·      A new contract with Thales Avionics Limited for the supply of computer based training for aircrew and ground crew for the Chinook HC Mk4; Project Julius.

·      A new contract with Quintec Associates Limited to design and develop courseware in support of the Joint Operations Fuel System (JOFS) programme for the UK military.

·      A contract with the Sultanate of Oman for the supply of 12 Handskill Trainers.

·      A new contract with the MOD for the support of four Frame Electrical Layouts (FELs) located at the British Army's School of Electrical and Mechanical Engineering, Bordon. The FELs are used to provide basic training in the repair and fault diagnosis of the Warrior Infantry Fighting Vehicle.

 

Data Services Division

 

·      A three year extension, to September 2013, of a contract with TOTAL for the supply of specialist drawing services.

·      Completion of the budget update to the CD ROM for HMRC delivered to all operators of the PAYE system and extension of the contract to cover work to the end of 2010.

·      A new contract to provide the Rail Safety and Standards Board with a Shunter Training package that can be delivered on DVD or alternatively hosted on-line.

·      On going work with Alstom Switzerland Limited creating Operation and Maintenance Manuals in respect of the auxiliary systems required to keep gas turbines operational.

 

Software Services Division

 

·      Successful development and re-engineering of the OmegaPS software suite as a multi-lingual product to support the growing needs of the global customer base.

·      New licence sales of OmegaPS to Vitrociset (in respect of the Galileo project), BN Group and Daimler AG.

·      Consultancy and training for DCNS Group in connection with the integration of OmegaPS with their OASIS product.

·      Continued successful support and consultancy, under a five year contract with the Canadian DND in connection with their implementation of OmegaPS.

 

Outlook

 

The Group has a number of excellent opportunities in the UK and abroad and is very well placed as the potential supplier on two major contracts in the UK. Defence spending in the UK is currently subject to a major review, however, your Board remains optimistic of significant orders in the short to medium term providing visibility of work running forward from 2011.

 

The Group is well placed to take advantage of these opportunities backed by an excellent reputation, a strong balance sheet and a healthy cash position.

 

 

C C Powell

Chairman

6 September 2010

PENNANT INTERNATIONAL GROUP plc

CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2010

 


Notes

Six months ended 30 June 2010

Six months ended 30 June 2009

Year ended 31 December 2009



Unaudited

Unaudited

Audited



£

£

£

Revenue


4,892,160

4,828,042

9,485,858

Cost of sales


(2,888,655)

(2,983,568)

(5,778,263)

Gross profit


2,003,505

1,844,474

3,707,595






Administrative expenses


(1,783,472)

(1,730,788)

(3,402,742)

Operating profit


220,033

113,686

304,853






Joint venture


-

2,119

20,390



220,033

115,805

325,243






Finance costs


(11,023)

(9,116)

(24,932)

Finance income


68

177

639

Profit before taxation


209,078

106,866

300,950






Taxation

2

(20,000)

(20,000)

(7,715)

Profit for the period


189,078

86,866

293,235






Earnings per share

3




Basic


0.67p

0.29p

1.00p

Diluted


0.61p

0.27p

0.91p

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2010

 



Six months ended 30 June 2010

Six months ended 30 June 2009

Year ended 31 December 2009



Unaudited

Unaudited

Audited



£

£

£

Profit attributable to equity holders of the parent


 

189,078

 

86,866

 

293,235

Other comprehensive income:





Exchange differences on translation of foreign operations


 

 

68,412

 

 

(102,094)

 

 

71,868

Comprehensive income attributable to equity holders of the parent


 

 

257,490

 

 

(15,228)

 

 

365,103



PENNANT INTERNATIONAL GROUP plc

CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2010

 


30 June 2010

30 June 2009

31 December 2009


Unaudited

Unaudited

Audited


£

£

£

Non-current assets




Goodwill

954,198

879,846

952,939

Other intangible assets

78,361

90,068

64,832

Property plant and equipment

1,789,942

1,864,094

1,802,587

Interest in Joint Venture

-

5,370

-

Available-for-sale investments

3,700

6,135

3,700

Deferred tax asset

41,542

29,339

38,304

Total non-current assets

2,867,743

2,874,852

2,862,362





Current assets




Inventories

26,840

19,340

16,340

Trade and other receivables

2,226,901

3,442,332

2,347,179

Cash and cash equivalents

1,371,938

267,792

1,284,384

Total current assets

3,625,679

3,729,464

3,647,903





Total assets

6,493,422

6,604,316

6,510,265





Current liabilities




Trade and other payables

1,124,425

1,278,354

989,819

Current tax liabilities

18,335

15,569

14,089

Obligations under finance leases

4,373

2,490

4,612

Bank loan

187,616

189,461

172,334

Deferred revenue

336,969

364,535

377,294

Total current liabilities

1,671,718

1,850,409

1,558,148





Net current assets

1,953,961

1,879,055

2,089,755





Non current liabilities




Bank loan

140,118

318,761

245,225

Obligations under finance leases

14,321

17,190

15,661

Deferred tax liabilities

-

-

-

Deferred revenue

4,887

10,583

7,700

Total non-current liabilities

159,326

346,534

268,586





Total liabilities

1,831,044

2,196,943

1,826,734





Net assets

4,662,378

4,407,373

4,683,531





Equity




Share capital

1,600,000

1,600,000

1,600,000

Treasury shares

(474,518)

(363,016)

(470,318)

Share premium account

-

3,582,329

-

Retained earnings

3,222,128

(484,334)

3,307,493

Translation reserve

314,768

72,394

246,356

Total equity

4,662,378

4,407,373

4,683,531

 

 

PENNANT INTERNATIONAL GROUP plc

CONSOLIDATED STATEMENT OF CASH FLOWS for the six months ended 30 June 2010

 

 


Notes

Six months ended 30 June 2010

Six months ended 30 June 2009

Year ended 31 December 2009



Unaudited

Unaudited

Audited



£

£

£

Net cash generated from /(used in) operating activities

 

4

 

489,464

 

(155,000)

 

961,688






Investing activities





Interest received


68

177

639

Purchase of intangible assets


(38,475)

(300)

(4,488)

Purchase of property plant and equipment


(50,625)

(19,788)

(31,469)

Net cash inflow from closure of joint venture


-

-

18,639

Net cash used in investing activities


(89,032)

(19,911)

(16,679)






Financing activities





Dividends paid


(280,701)

-

-

Transactions in own shares


(4,200)

-

(107,302)

Repayment of borrowings


(89,825)

(94,936)

(185,599)

Repayment of obligations under finance leases


(1,579)

(1,061)

(468)

Net cash used in financing activities


(376,305)

(95,997)

(293,369)






Net increase/(decrease) in cash and cash equivalents


 

24,127

 

(270,908)

 

651,640






Cash and cash equivalents at beginning of period


1,284,384

600,631

600,631

Effect of foreign exchange rates


63,427

(61,931)

32,113

 

Cash and cash equivalents at end of period


 

1,371,938

 

267,792

 

1,284,384






 



PENNANT INTERNATIONAL GROUP plc

STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2010

 

 


Share capital

Treasury shares

Share premium account

Retained earnings

Translation reserve

Total equity


£

£

£

£

£

£

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

Purchase of treasury shares

-

(107,302)

-

-

-

(107,302)

Recognition of share based payment

 

-

 

-

 

-

 

3,129

 

-

 

3,129

At 31 December 2009

1,600,000

(470,318)

-

3,307,493

246,356

4,683,531

Total comprehensive income for the half year

 

-

 

-

 

-

 

189,078

 

68,412

 

257,490

Dividends paid

-

-

-

(280,701)

-

(280,701)

Transactions in treasury shares

 

-

 

(4,200)

 

-

 

-

 

-

 

(4,200)

Share based payment

-

-

-

6,258

-

6,258

At 30 June 2010

1,600,000

(474,518)

-

3,222,128

314,768

4,662,378

 



PENNANT INTERNATIONAL GROUP plc

NOTES TO THE FINANCIAL INFORMATION for the six months ended 30 June 2010

 

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 have been adopted by the EU and are mandatory for the first time for the financial year beginning 1 January 2010 but have had no effect on the information presented in this condensed set of financial statements:

 

IFRS 3 (Revised)

Business Combinations - Comprehensive revision on applying the        acquisition method.

IAS 27 (Revised)

Consolidated and Separate Financial Statements - Consequent amendments arising from the revision of IFRS 3.

IAS 39 (Amendment)

Financial Instruments: Recognition and Measurement - Amendments for eligible hedged items

IAS 39 (Amendment)

Financial Instruments: Recognition and Measurement - Amendments for Embedded Derivatives when Reclassifying Financial Instruments

IFRIC 15

Agreements for the Construction of Real Estate

IFRIC 16

Hedges of Net Investment in a Foreign Subsidiary

IFRIC 17

Distribution of Non Cash Assets to Owners

IFRIC 18

Transfer of Assets from Customers

 

In addition, as a result of the April 2009 and May 2008 Annual Improvements to IFRSs there have been numerous amendments which have become effective from 1 January 2010 and are relevant to the Group, none of these amendments have had any impact on the presented financial information.

 

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, 'Interim Financial Reporting'.

 

The results for the year ended 31 December 2009 set out in this Interim Report 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 s498 (2) or s498(3) of the Companies Act 2006.

 

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 2010.

 

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 2010

Six months ended 30 June 2009

Year ended 31 December 2009


£

£

£

Earnings




Net profit attributable to equity shareholders

 

189,078

 

86,866

 

293,235





Number of shares

Number

Number

Number

Weighted average number of ordinary shares

 

28,070,116

 

29,487,045

 

29,325,900

Number of dilutive shares under option

2,760,000

2,160,000

2,820,000

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

 

 

30,830,116

 

 

31,647,045

 

 

 

32,145,900

 

4.             Cash generated from/(used in) operations

 


Six months ended 30 June 2010

Six months ended 30 June 2009

Year ended 31 December 2009


£

£

£

Profit for the period

189,078

86,866

293,235

Joint venture

-

(2,119)

(20,390)

Finance income

(68)

(177)

(639)

Finance costs

11,023

9,116

24,932

Income tax expense

20,000

20,000

7,715

Share-based payment

6,258

-

3,129

Depreciation charge

88,704

112,871

219,730

Impairment loss on available-for-sale investments

 

-

 

-

 

2,435

Operating cash flows before movement in working capital

 

314,995

 

226,557

 

530,147





Decrease/(increase) in receivables

120,278

(246,117)

854,036

(Increase)/decrease in inventories

(10,500)

5,630

8,630

Increase/(decrease) in payables

134,606

(35,247)

(323,782)

Decrease in deferred revenue

(43,138)

(78,382)

(68,506)

Cash generated from (used in) operations

 

516,241

 

(127,559)

 

1,000,525





Tax paid

(15,754)

(18,325)

(13,905)

Interest paid

(11,023)

(9,116)

(24,932)

Net cash generated from/(used in) operations

 

489,464

 

(155,000)

 

961,688

 

5.             Copies of this statement

 

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 Court, Staverton Technology Park, Cheltenham, GL51 6TL.


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