Last checked at 26 Mar 2012 07:00
For immediate release 26 March 2012
Pennant International Group plc
Preliminary Results for the year ended 31 December 2011
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 preliminary results for the year ended 31 December 2011.
Commenting on the Group's performance, Chairman Christopher Powell said:
"I am pleased to report a year of solid progress with further improved profitability and cash generation. The order book is strong and will provide work well into 2013. There has been a high level of tendering in support of both UK and export opportunities.
Highlights: Financial
·; Group revenues increased by 8.2% to £10.35 million (2010: £9.57 million);
·; Operating profit increased by 30% to £707,000 representing 6.8% of revenue (2010: £542,000 and 5.7% of revenue);
·; Profit before tax rose 33% to £697,000 ( 2010: £525,000);
·; Cash generated from operations of £2.2 million (2010: £0.96 million);
·; Net funds at year-end of £2.33 million (2010: £1.16 million);
·; Recommended Final Dividend of 1pence per share (2010: 1pence);
Highlights: Operational
Significant opportunities for continued profitable growth throughout the Group and, in particular, in the Training Systems Division;
Training Systems Division
·; Division provided 52% of the Group's revenue in 2011 (2010: 45%) and was profitable and cash generative
·; Increasingly enquiries originating from regions with growing defence budgets, such as Asia and the Middle East;
·; Major contract in progress with AgustaWestland for development of Maintenance Training Equipment for the AW159 Lynx Wildcat helicopter has increased in scope and now has a value of £12 million;
·; Contract with the MOD for the support of training equipment for the Warrior vehicle system has been extended for another year to December 2012.
Data Services Division
·; Division provided 17% of the Group's revenue in 2011 (2010: 20%) and was profitable
·; Worked with the Training Systems Division to win contracts for an upgrade to the capability of the Virtual Reality Parachute Trainer,
·; Rail sector work includes projects for a major US supplier of rolling stock, the UK Rail Safety and Standards Board, Network Rail and Siemens.
·; Awarded major contract from ALSTOM Power in Switzerland to produce Operator and Maintenance Documentation for auxiliary systems associated with the GT24 Gas Turbine
Software Services Division
·; The division provided 31% of the Group's revenue in 2011 (2010: 35%) and was profitable and cash generative.
·; OmegaPS contract with Canadian DND has potential to run for a further two years with a value in excess of C$6 million
·; Agreement, with options out to 2015, to provide consultancy services to Babcock Canada Inc. in support of Royal Canadian Navy projects and new licence sale to a customer in Turkey
On current trading and prospects, Mr. Powell added:
"The Group has a strong cash position and balance sheet and the order book provides good visibility of revenues through 2012 and into 2013. Attention is now being concentrated on the medium term and on major opportunities expected to generate revenues for 2013 and beyond. The Group's good relationships with equipment manufacturers and prime contractors and the consequent high level of tendering give your Board confidence for the future."
Enquiries:
Pennant International Group plc Tel: 01452 714881
Chris Snook, Chief Executive
John Waller, Finance Director
WH Ireland Tel: 0117 945 3470
Mike Coe/Marc Davies
Winningtons Financial Tel: 0117 985 8989
Paul Vann/Tom Cooper
CHAIRMAN'S STATEMENT AND BUSINESS REVIEW
I am pleased to report a year of solid progress with further improved profitability and cash generation. The order book is strong and will provide work well into 2013. There has been a high level of tendering in support of both UK and export opportunities.
Results and dividend
Revenue for the year grew by 8.2% to £10.35 million (2010: £9.57 million). Operating profit increased by 30% to £707,000 being 6.8% of revenue (2010: £542,000 and 5.7% of revenue).
Basic earnings per share are 1.99p (2010: 2.01p).The recognition, for the first time, of tax losses as a deferred tax asset in the annual accounts to 31 December 2010 resulted in a tax credit of £35,000 in 2010 and a full tax charge for 2011 of £146,000. The effect of this has been reflected in the basic earnings per share. If 2010 figures are amended to reflect a comparable full tax charge the basic earnings per share for that year were 1.36p.
Cash generated from operations was £2.2 million (2010: £0.96 million). The Group's bank borrowings were repaid in full leaving the Group with net funds of £2.33 million at the year end (2010: £1.16 million).
Your Board recommends the payment of a final dividend of 1p per share (2010: 1p). Subject to approval at the Annual General Meeting, the dividend will be paid on 25 May 2012 to shareholders on the register at the close of business on 4 May 2012. The shares are expected to go ex-dividend on 2 May 2012.
Strategy
The nature of the markets in which the Group operates requires a strategy that looks to the medium term and beyond. A consistent and increasingly successful approach has been adopted over a number of years and has resulted in improved shareholder value. This strategy has concentrated on achieving organic growth by improving our reputation with existing customers, building relationships with new customers, pursuing opportunities into closely related business sectors and ensuring that our products and services remain good value for money and in line with current technology and standards. The Board believes that there continues to be significant opportunity for growth throughout the Group and, in particular, in the Training Systems Division.
Current trading
The Group is managed as three operating divisions which are covered separately below.
Training Systems Division
The Training Systems Division provides and supports specialist training systems based on software emulation, hardware simulation, virtual reality and computer based training for engineers principally in the defence arena. The division provided 52% of the Group's revenue in 2011 (2010: 45%) and was profitable and cash generative. Based on its current order book and high tendering activity arising from an increasing level of enquiries, your board believes that it has strong potential for growth in the medium term.
As military acquire new equipment with increasingly sophisticated technology there is a continuing need to lift the skill base for operating and maintaining that equipment. The cost of training using real military equipment is often prohibitive leading budget-conscious operators to seek simulation based training aids. This process is accelerating as computer and modelling technologies continue to improve making training aids more capable.
The current order book relates largely to UK defence projects and there continue to be some new opportunities from this source despite the budget constraints. However, increasingly enquiries are originating from regions with growing defence budgets, such as Asia and the Middle East; mainly these come through UK prime contractors who are competing to sell defence platforms in those markets. Inevitably these opportunities have long gestation periods making the timing of order placement difficult to forecast.
The major contract in progress with AgustaWestland for development of Maintenance Training Equipment for the AW159 Lynx Wildcat helicopter has increased in scope and now has a value of £12 million. Significant progress has been made with the recent achievement of the major milestone of Critical Design Review. Work on detailed design, manufacture and installation will continue throughout 2012 and 2013.
The division has a number of contracts with the UK Ministry of Defence ('MOD') for the support of some 200 training aids at MOD establishments throughout the UK. These contracts are due for renewal during 2012 and the MOD, as part of its review of costs, has made the decision to combine our contracts with a number of other similar contracts run by other contractors. The new combined contract is being competitively tendered. This is both a risk and a significant opportunity.
The contract with the MOD for the support of training equipment for the Warrior armoured vehicle has been extended for another year to December 2012.
Work has continued on the contract to supply electronic classrooms, computer based training and emulation to BAE Systems in support of an export sale of Hawk aircraft. There have been further increases in scope during the year and successful completion of the project is expected in the first half of 2012.
The contract with BAE Systems for the support of classrooms and training equipment for the Hawk Lead in Fighter for the Royal Australian Air Force has recently been extended to June 2013 and a number of separately priced upgrades have been completed.
Data Services Division
The Data Services Division provides a wide portfolio of product and services in support of technical products and skills. The services include the provision of high quality media, graphics, virtual reality and technical documentation principally to the defence, rail, power and government sectors. The division provided 17% of the Group's revenue in 2011 (2010: 20%) and was profitable.
During the year the division has invested in developing its competence in the field of Virtual Reality where there is growing demand. It has worked with the Training Systems Division to win contracts for an upgrade to the capability of the Virtual Reality Parachute Trainer, previously supplied to RAF Brize Norton, and the supply of a new deployable version of that trainer. Both contracts are for the MOD and run through the first half of 2012.
Work has continued successfully on the contract with a potential value in excess of $2 million to supply manuals, training material and training delivery in support of a major US programme for the supply of rail rolling stock. This work will run through 2012 with the training delivery extending into 2015.
Other work in the rail sector has included projects for the UK Rail Safety and Standards Board, Network Rail and Siemens. Also, following increased sales effort in the Middle East, a new contract has been won with Serco Middle East Ltd on the Dubai Metro project.
In the power sector a major contract has been awarded by ALSTOM Power in Switzerland to produce Operator and Maintenance Documentation for the auxiliary systems associated with the GT24 Gas Turbine.
The division has a Professional Services Agreement with Capgemini UK PLC for substantial ongoing work developing the next generation of Basic PAYE Tools to support the introduction by Her Majesty's Revenue and Customs of Real Time Information into the PAYE process.
Software Services Division
The Software Services Division's market leading OmegaPS and Analyser software suites are sold worldwide and used by many major defence contractors and by the Defence Authorities in Canada and Australia to support complex long life assets. The division provided 31% of the Group's revenue in 2011 (2010: 35%) and was profitable and cash generative.
Capital projects for complex assets are assessed not only on the capital cost of the asset but principally on the through-life cost required to keep them in service. OmegaPS is used to optimise design and to plan and monitor through life support processes. Analyser allows users to carry out level of repair, spares requirement and life-cycle cost analyses. Use of these tools has helped customers make substantial savings to through-life costs.
New licences are sold at an initial price together with associated annual maintenance agreements that provide an ongoing revenue stream. The software is continually improved in line with changing technology and industry standards and regular updates are issued to users.
In Canada the software is used extensively and there is an on-going agreement with the Department of National Defence ('DND') for training, installation and specialist consultant support to maximise the use of OmegaPS within the DND. The contract has the potential to run for a further two years with a value in excess of C$6 million. The Australian Defence Organisation are also a significant user of the software and there is an ongoing support contract in place.
Recent successes include:
·; a software and consultancy sale to a major US tactical vehicle supplier to support various Canadian DND vehicle procurement programmes;
·; an agreement, with options out to 2015, to provide consultancy services to Babcock Canada Inc. in support of Royal Canadian Navy projects and;
·; a new licence sale to a customer in Turkey.
People
The Group is fortunate to have a committed and skilled staff. They have coped well with the challenges of the business during the year, in particular the high level of tendering activity and I should like to take this opportunity to thank them for their considerable efforts.
Outlook
The Group has a strong cash position and balance sheet and the order book provides good visibility of revenues through 2012 and into 2013. Attention is now being concentrated on the medium term and major opportunities expected to generate revenues for 2013 and beyond. The Group's good relationships with equipment manufacturers and prime contractors and the consequent high level of tendering give your Board confidence for the future.
C C Powell
Chairman
23 March 2012
PENNANT INTERNATIONAL GROUP plc
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2011
Notes | 2011 £ | 2010 £ | ||
Revenue | 10,353,534 | 9,572,948 | ||
Cost of sales | (6,254,383) | (5,605,421) | ||
Gross profit | 4,099,151 | 3,967,527 | ||
Administration expenses | (3,392,049) | (3,425,368) | ||
Operating profit | 707,102 | 542,159 | ||
Finance costs | (10,598) | (17,051) | ||
Finance income | 600 | 340 | ||
Profit before taxation | 697,104 | 525,448 | ||
Taxation | 1 | (145,925) | 35,017 | |
Profit for the year attributable to equity holders of parent | 551,179 | 560,465 | ||
Earnings per share | ||||
Basic | 1.99p | 2.01p | ||
Diluted | 1.97p | 1.96p |
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 2011
2011 £ | 2010 £ | ||
Profit for the year attributable to equity holders of parent | 551,179 | 560,465 | |
Other comprehensive income: | |||
Exchange differences on translation of foreign operations | (10,433) | 151,595 | |
Comprehensive income for the period | 540,746 | 712,060 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2011
2011 £ | 2010 £ | |||
Non-current assets | ||||
Goodwill | 992,044 | 991,557 | ||
Other intangible assets | 126,622 | 75,123 | ||
Property, plant and equipment | 1,791,413 | 1,776,559 | ||
Available for sale investments | 3,700 | 3,700 | ||
Deferred tax assets | 96,880 | 226,452 | ||
Total non-current assets | 3,010,659 | 3,073,391 | ||
Current assets | ||||
Inventories | 13,340 | 44,375 | ||
Trade and other receivables | 2,802,780 | 2,388,739 | ||
Cash and cash equivalents | 2,343,105 | 1,414,759 | ||
Total current assets | 5,159,225 | 3,847,873 | ||
Total assets | 8,169,884 | 6,921,264 | ||
Current liabilities | ||||
Trade and other payables | 2,757,472 | 1,047,586 | ||
Current tax liabilities | 6,953 | 17,000 | ||
Obligations under finance leases | 15,279 | 20,179 | ||
Bank loan | - | 190,730 | ||
Deferred revenue | 352,324 | 338,815 | ||
Total current liabilities | 3,132,028 | 1,614,310 | ||
Net current assets | 2,027,197 | 2,233,563 | ||
Non-current liabilities | ||||
Bank loan | - | 42,639 | ||
Deferred revenue | 28,465 | 6,648 | ||
Deferred tax liabilities | 132,342 | 134,968 | ||
Total non-current liabilities | 160,807 | 184,255 | ||
Total liabilities | 3,292,835 | 1,798,565 | ||
Net assets | 4,877,049 | 5,122,699 | ||
Equity | ||||
Share capital | 1,400,000 | 1,475,000 | ||
Capital redemption reserve | 200,000 | 125,000 | ||
Treasury shares | (191,214) | (81,076) | ||
Retained earnings | 3,080,745 | 3,205,824 | ||
Translation reserve | 387,518 | 397,951 | ||
Total equity | 4,877,049 | 5,122,699 | ||
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2011
2011 | 2010 | |||
£ | £ | |||
Net cash from operations | 2,217,399 | 962,295 | ||
Investing activities | ||||
Interest received | 600 | 340 | ||
Purchase of intangible assets | (94,220) | (66,074) | ||
Purchase of property, plant and equipment | (155,800) | (92,529) | ||
Loan to Employee Benefit Trust | - | (292,775) | ||
Net cash used in investing activities | (249,420) | (451,038) | ||
Financing activities | ||||
Dividends paid | (409,083) | (349,698) | ||
Transactions in own shares | (381,559) | 44,529 | ||
Repayment of borrowings | (233,369) | (184,190) | ||
Net repayment of obligations under finance leases | (4,900) | (94) | ||
Net cash used in financing activities | (1,028,911) | (489,453) | ||
Net increase in cash and cash equivalents | 939,068 | 21,804 | ||
Cash and cash equivalents at beginning of year | 1,414,759 | 1,284,384 | ||
Effect of foreign exchange rates | (10,722) | 108,571 | ||
Cash and cash equivalents at end of year | 2,343,105 | 1,414,759 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Share capital | Capital redemption reserve |
Treasury shares |
Retained earnings |
Translation reserve |
Total equity | |
£ | £ | £ | £ | £ | £ | |
At 1 January 2010 | 1,600,000 | - | (470,318) | 3,307,493 | 246,356 | 4,683,531 |
Total comprehensive income for the year | - | - | - | 560,465 | 151,595 | 712,060 |
Capital reduction | (125,000) | 125,000 | 292,425 | (292,425) | - | - |
Recognition of share based payment | - | - | - | 32,277 | - | 32,277 |
Transactions in treasury shares | - | - | 96,817 | (52,288) | - | 44,529 |
Dividends paid | - | - | - | (349,698) | - | (349,698) |
At 1 January 2011 | 1,475,000 | 125,000 | (81,076) | 3,205,824 | 397,951 | 5,122,699 |
Total comprehensive income for the year | - | - | - | 551,179 | (10,433) | 540,746 |
Capital reduction | (75,000) | 75,000 | 271,421 | (271,421) | - | - |
Recognition of share based payment | - | - | - | 4,246 | - | 4,246 |
Transactions in treasury shares | - | - | (381,559) | - | - | (381,559) |
Dividends paid | - | - | - | (409,083) | - | (409,083) |
At 31 December 2011 | 1,400,000 | 200,000 | (191,214) | 3,080,745 | 387,518 | 4,877,049 |
ABBREVIATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1. | Taxation |
Recognised in the income statement | 2011 £ | 2010 £ | |
Current tax expense | 6,953 | 16,513 | |
In respect of prior year | 12,106 | (863) | |
19,059 | 15,650 | ||
Deferred tax expense relating to origination and reversal of temporary differences | 126,866 | (50,667) | |
Total tax (credit)/expense in income statement | 145,925 | (35,017) | |
Reconciliation of effective tax rate | |||
Profit before tax | 697,104 | 525,448 | |
Tax at the applicable tax rate of 26.49% (2010: 28%) | 184,663 | 147,125 | |
Tax effect of expenses not deductible in determining taxable income | 26,046 | 47,763 | |
Tax effect of utilisation o losses not previously recognised | (20,627) | (82,084) | |
Tax effect of recognition of previously unrecognised tax losses | (55,258) | (153,519) | |
Effect of different tax rates of subsidiaries operating in other jurisdictions | 1,086 | 3,428 | |
Effect of change of differed tax rate | (2,045) | 3,168 | |
Effect of adjustments for prior years | 12,106 | (863) | |
Other | (46) | (35) | |
145,925 | (35,017) |
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 2011 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 2011 financial statements upon which the auditors opinion is unqualified.
Copies of the 2011 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.