Pennant International Regulatory News (PEN)

18 Apr 2005 07:00

Pennant International Group PLC18 April 2005 PENNANT INTERNATIONAL GROUP PLC RESULTS FOR YEAR ENDED 31 DECEMBER 2004 Pennant International Group plc, listed on AIM, is a leading supplier oftechnology solutions to the defence and industrial sectors, including specialistsoftware, technical data services and data management systems, simulation andtraining systems. CHAIRMAN'S STATEMENT Results for the year to December 2004 were in line with expectations as revisedat the time of my Interim Statement. The first half held up well despite delays,outside the Group's control, in programmes and contract awards but these had animpact upon the second half and will continue to affect the first half of thecurrent year. I am pleased, however, to report that the rescheduling ofprogrammes and an increase in contract awards since the year end should see animprovement in the second half with the Group achieving expectations for 2005 asa whole. RESULTS AND DIVIDEND Group profit on ordinary activities before taxation was £103,283 (2003:£711,498) after restructuring costs of £130,689. As expected, there has been an outflow of cash of £1,150,565 that has resultedfrom the repayment of £505,830 of loans ahead of schedule, and the unwinding ofupfront contract payments received at the end of 2003. Net debt was £358,281(2003: net cash £140,361). Gearing was 9.6% (2003: nil) Basic earnings per share were 0.32p (2003: 2.08p). Your Board is recommending a final cash dividend of 0.27p per share (2003: 0.4p)that, together with the interim dividend of 0.13p, gives a total dividend forthe year of 0.4p (2003: 0.4p). The final dividend will be paid on 27 May 2005 toshareholders on the register at the close of business on 6 May 2005. The sharesare expected to go ex dividend on 4 May 2005. The cash dividend reflects your Board's confidence in the future having regardto improved trading and current prospects. BOARD AND STRATEGY As set out in my Interim Statement, Christopher Snook stepped up to assume theappointment of Chief Executive with effect from 1 January 2005, taking over fromJoe Thompson who has been retained as a consultant until 31 December 2006. YourBoard has continued to review strategy in order to improve profitability andshareholder value. The focus is to concentrate on the core strengths of each ofthe Group's businesses, to identify new markets appropriate for those corestrengths and to build on the good established relationships with existingcustomers by gaining a better understanding of their requirements. We are alsostructuring operations in order to continue to achieve the efficiency andquality necessary to meet customers' expectations. It is clear that the majorprime contractors are looking for longer term relationships with a smallernumber of preferred suppliers and the Group's businesses have been working tomaximise opportunities here. CURRENT TRADING AND OPERATIONS Training Systems Pennant Training Systems is a provider of market-leading training solutions forthe defence, aviation and industrial markets. Its products, which are wellrespected by the market, include simulation training systems, computer basedtraining and emulation. Pennant Training Systems has experienced a high level of tendering activity andhas reached the final stages of selection, either in its own right or inconjunction with prime contractors, for significant programmes that are maturingin the short to medium term or are already funded and running. It is buildingrelationships for the longer term with PFI (Private Finance Initiative)contractors with a view to securing future revenue streams. Also, there isconsiderable interest shown in overseas markets for existing Pennant products. The MOD enabling contract that generates significant income from the provisionof support to the many Pennant Training devices throughout the UK has beenextended for a year to April 2006, with an option for a further two one-yearextensions. A number of upgrades to existing equipment have been carried out in2004 under this contract. Two major training devices were successfully delivered, on time and to budget,to Westland Helicopters Ltd in support of its Lynx 300 programme. The deviceswere well received by both Westland and the ultimate customer. The largest single project running during the year was the BAE SYSTEMS HawkLead-in Fighter Trainer programme for The South African Air Force; theproduction phase is in progress and runs into the first half of 2006. Additionalwork to bring the training material up to the final technical standard of theaircraft is expected later this year. The company has continued to provide support, through a BAE SYSTEMS contract, tothe Royal Australian Air Force. This contract runs until the middle of 2006 anddiscussions have already begun for an extension of a further 5 years. Technical Data Services is a major supplier of technical documentation, supportproducts and information systems. Its capabilities cover e-learning, technicalauthoring, graphics design, technical manuals, interactive electronic technicalmanuals, SGML/XML and internet/intranet publishing and on-site data services. Technical Data Services benefits from a number of enabling and frameworkagreements with the MOD, other Government bodies and major contractors thatgenerate a significant and continuing revenue stream. The MOD contracts havebeen extended to March 2007 with an option to extend for a further 2 years. New customers have been won, particularly in the Rail sector, with significantorders for technical manuals and training from Kawasaki in the USA and Japan andfrom Interfleet Technology Limited in the UK. Work has also been carried outfor BT in both the telecommunications and IT arenas and e-learning products havebeen developed for the Department of Work and Pensions.. There is significantadditional business potential from these customers. New Joint Venture -Pennant Sonovision ITEP Limited This 50:50 joint venture company was set up in February 2005 as a logicalprogression to the teaming agreement signed between Pennant and Sonovision-ITEPSAS in 2003 and in response to the requirements of European projects in theaerospace and defence sectors involving French and UK companies. It willinitially concentrate on providing technical data services for programmes forAirbus aircraft, including the A380, A400M and A350. The joint venture companywill be based in Filton, Bristol the UK headquarters of Airbus. Software Services Pennant's OmegaPS product is a world leading supportability engineering softwaresuite that is widely used by defence forces and defence contractors around theworld. In Australia, the product has been developed for the Australian DefenceOrganisation in a programme running through 2003 and 2004. The product wasaccepted in March 2005 and is due to be rolled out across Australian DefenceForce establishments later in the year. Pennant has a support contract to assistthe introduction and implementation generating revenues through until 2009. In Canada, Pennant provides consultancy services to the Canadian Department ofNational Defence (DND), first to support the ten year rollout of a SAP R/3management system, that includes OmegaPS, to the three branches of the armedforces and, secondly to support the use of OmegaPS throughout the DND. In addition Software Services has a significant annual maintenance income fromsupport contracts for the OmegaPS applications in use by contractors andgovernment departments in many countries. These revenue streams are augmented by new licence sales to new and existingcustomers. In 2004 sales were made to, among others, Northrop Grumman in theUSA, Blohm & Voss in Germany, Mercedes Benz in Canada and BAE SYSTEMS inAustralia. PROSPECTS As outlined above Pennant Training Systems, in particular, has a pipeline ofsignificant opportunities. These have to be won and are subject to competitionand to schedules that may be changed, but they are well advanced in theprocurement cycle and are expected to mature in the short to medium term. Anumber of these opportunities are with existing customers with whom we have goodrelationships and to whom we have previously demonstrated our ability to delivera reliable product on time and to budget. The Technical Data Services business has opportunities to develop follow-onpotential with its substantial new customers. Also, there are majoropportunities with existing customers such as BAESYSTEMS and General Dynamics.The new joint venture company is expected to contribute as it builds itsrelationships with Airbus and other customers. Software Services has a number of potential product sales to build on its firmbase of consultancy and maintenance revenues. CONCLUSION 2004 was a tough year and business will continue to be tough and competitive.Nevertheless, the Group has a clear strategy and high quality committed staff.The Group's businesses are positioned to take advantage of opportunities as theyarise. Order intake in 2005 has started well with some good contract wins in thefirst quarter that underpin the second half of 2005 running into 2006. Also,there are significant real prospects in the pipeline following major programmewins by our largest customers. These factors give your Board confidence forprogress in the future. Finally, my sincere thanks to my colleagues and all employees for their sterlingefforts and to Joe Thompson for his valuable contribution to the Group. Christopher PowellChairman For further information contact: Christopher Snook, Chief Executive, Pennant International Group plc on 01452714914 Barrie Newton, Rowan Dartington & Co, Limited on 0117 933 0011 GROUP PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 £ £ Turnover 11,550,645 11,879,580 Cost of sales (7,332,524) (7,064,508) Gross profit 4,218,121 4,815,072Administration expenses (4,035,503) (4,165,665)Other operating income - 5,616 Operating profit 182,618 655,023 Profit on sale of property - 163,729 Profit on ordinary activities before interest 182,618 818,752Interest receivable and similar income 6,332 13,005Interest payable (85,667) (120,259) Profit on ordinary activities before taxation 103,283 711,498 Tax on profit on ordinary activities (2,457) (46,340) Profit on ordinary activities after taxation attributable to members of the parent 100,826 665,158undertaking - retained Dividends (128,000) (128,000) Deficit (2003 retained profit) for the year (27,174) 537,158 Earnings per shareBasic 0.32p 2.08pDiluted 0.29p 1.93p GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 £ £ Profit for the financial year 100,826 665,158Currency translation differences on foreign currency net investments (56,289) (7,386) Total gains and losses recognised since last annual report 44,537 657,772 GROUP BALANCE SHEETAS AT 31 DECEMBER 2004 2004 2003 £ £ Fixed assetsIntangible assets 1,060,569 1,273,960Tangible assets 2,670,671 2,628,813Investments 6,135 6,135 3,737,375 3,908,908Current assetsStocks 510,860 514,165Debtors 1,719,936 2,204,782Cash at bank and in hand 1,242,152 1,965,649 3,472,948 4,684,596 Creditors: amounts falling due within one year (2,516,960) (3,687,326) Net current assets 955,988 997,270 Total assets less current liabilities 4,693,363 4,906,178 Creditors: amounts falling due after more than one year (1,050,091) (1,179,443) Provisions for liabilities and charges - - 3,643,272 3,726,735 Capital and reservesCalled up share capital 3,045,400 3,045,400Share premium 3,563,504 3,563,504Profit and loss account (2,965,632) (2,882,169) Shareholders' funds 3,643,272 3,726,735 GROUP CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 £ £ Net cash (outflow)/inflow from operating activities (7,917) 1,726,030 Returns on investments and servicing of finance (79,335) (107,254) Taxation (19,202) (3,248) Capital expenditure (222,588) 263,300 Acquisitions and disposals - (127,200) Equity dividends (169,600) - Cash (outflow)/inflow before financing (498,642) 1,751,628 Financing (651,923) (385,244) (Decrease)/increase in cash (1,150,565) 1,366,384 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004 Earnings per share Earnings per share has been calculated by dividing the profit attributable toshareholders by the weighted average number of ordinary shares in issue duringthe year as follows: 2004 2003 £ £ Profit after tax attributable to shareholders 100,826 665,158 Number Number Weighted average number of ordinary shares in issue during the year 32,000,000 32,000,000Diluting effect of share options 2,564,500 2,495,500 Diluted average number of ordinary shares 34,564,500 34,495,500 Earnings per share p p Basic 0.32 2.08 Diluted 0.29 1.93 Annual Report The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2004 or 2003. The financialinformation for 2003 is derived from the statutory accounts for 2003 which havebeen delivered to the Registrar of companies. The auditors have reported on the2003 accounts; their report was unqualified and did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. The statutory accountsfor 2004 will be finalised on the basis of the financial information presentedby the Directors in this preliminary announcement and will be delivered to theRegistrar of companies following the Company's Annual General Meeting. This information is provided by RNS The company news service from the London Stock Exchange