Trading Statement

Pennant International Group PLC
21 August 2000

Pennant International Group plc

TRADING UPDATE

It is intended to announce the half-year results to 30 June 2000 on 2 October.
In the meantime your Board considers it appropriate to issue the following
statement on trading.

RECENT CONTRACTS INCLUDE:

*  A major contract between Pennant Information Services Inc. and a Canadian
   customer using OmegaPS as part of a Material Acquisition and Support System
   has been reactivated. The contract had originally been awarded and then
   suspended by the customer prior to our acquisition of the company in
   December 1999. The remaining value is CND$4.4 million.

*  Pennant Information Services Limited has secured a number of OmegaPS
   software contracts with major defence contractors and delivered the first
   web-enabled version, 'e-OmegaPS', to Thomson CSF Naval Combat Systems.

*  The Genfly contract previously awarded to Pennant Training Systems Limited
   for two Basic and two Advanced units has been amended by the Ministry of
   Defence, with significant uplift, such that four units will be delivered as
   Advanced versions.

*  A number of existing significant support contracts between Pennant
   Training Systems Limited and the Ministry of Defence have been amalgamated
   into one contract for Full Contractor Support and extended to March 2003. 
 
*  An export order for a Synthetic Environment Procedural Trainer ('SEPT') and
   CBT courseware.  The SEPT is a repeat order for a product which first
   entered service in the UK earlier this year and the CBT courseware is a
   follow-on order, from the same customer, to a similar order in 1999.

BUSINESSES ACQUIRED IN DECEMBER 1999

The principal feature of the first half has been the successful reorganisation
and integration of the acquisitions completed in December 1999. Full details
of these acquisitions are included in the Chairman's statement accompanying
the 1999 Annual Report. 

The acquired UK companies, now trading as Pennant Information Services
Limited, are expected to contribute a profit in the first half before
exceptional reorganisation costs.

The acquired American company, now trading as Pennant Information Services
Inc., will show a loss of approximately £130,000 before exceptionals in the
first half against a forecast break even position.  Following the
reinstatement of the major contract referred to above, however, it is expected
to return to profit for the second half. 

Exceptional reorganisation costs, originally estimated at £200,000, are now
expected to be approximately £400,000, including America, for the full year,
with circa 85 per cent. falling into the first half. These costs cover the
closure of 4 branches, the relocation of another branch to smaller more
efficient premises and personnel reductions of 84 compared with an original
estimate of 50. 

CONTINUING BUSINESS

Turnover of the continuing business, carried on by Pennant Training Systems
Limited, during the first half was ahead of the corresponding period last
year. Profits will however be less than expected. Recently planned development
expenditure of £165,000 has been absorbed during the period. This relates to
the development of the Genfly platform, following the enhancement of all four
trainers to advanced units. With these enhancements in mind and being aware of
future Ministry of Defence requirements, the company has funded additional
developmental design. This centred upon the mechanical design of the Genfly
platform, where a number of fundamental modules have been created that can be
configured into a family of synthetic aircraft trainers. The cost has been
written off in accordance with FRS10. Also, margins on a major contract are
restricted pending the outcome of negotiations between the company, the prime
contractor and the ultimate customer in respect of potential significant
additional revenues to cover additional work done. The effect on the first
half is to reduce profits by £123,000. The results of the second half will
also be affected until the additional revenues are agreed. 

CONCLUSION

The initial integration of the acquired companies has been successfully
completed, the exceptional reorganisation costs have been higher than
expected, but more costs than estimated have been eliminated and a rational
cost base set for the future.

The Group results for the year will be affected by the outcome of negotiations
for additional revenues on a major contract that cannot yet be quantified. The
results will also reflect first half losses in America, higher than expected
charges for exceptional reorganisation costs in the acquired companies and
development costs in Pennant Training Systems Limited. 

Response to the broader based capability of the enlarged Group, offering
integrated solutions, has been highly positive and has positioned the Group
for a number of new opportunities in defence and other high technology
industries.