Last checked at 10 Mar 2014 07:00
For immediate release 10 March 2014
Pennant International Group plc
Preliminary Results for the year ended 31 December 2013
Strong trading performance gathering further momentum;
Earnings per share up 44%; Final Dividend raised by 30%; Record New Order Intake;
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 2013.
Commenting on the Group's performance, Chairman Christopher Powell said:
"I am pleased to report a year of further significant growth in both revenues and profits, enabling the Directors to recommend a 30% increase in the Final Dividend. Furthermore, the current order book provides good visibility of revenues for 2014 and the level of tendering and associated contact with prospective customers, particularly in the Training Systems Division, enables us to plan with confidence for the medium and longer term."
Highlights: Financial
· Group revenues increased by 29% to £18.68million (2012: £14.47million);
· Profit before tax up 40% to £2.25million (2012: £1.60million);
· Profit for the year attributable to shareholders of £1.70million (2012: £1.17million);
· Basic earnings per share increased by 44% to 6.43p (2012: 4.46p);
· Cash generated from operation of £0.17m (2012: £0.80m);
· Net cash at period end of £1.16million (2012: £2.17million); Nil borrowings;
· Proposed Final Dividend of 1.8p per share (2012: 1.4p) making a total dividend for the year of 2.6p per share (2012: 2.0p) an increase of 30%;
· Record new orders taken during the year worth in excess of £20m;
Highlights: Operational
The Board has consistently applied a successful strategy across the Group of increasing shareholder value through organic growth built on customer focus, innovation and diversification. All three of the Group's operating divisions increased revenues during the year, led by Training Systems.
Training Systems Division:
· Revenues increased by 44% to £12.55m (2102: £8.72m), contributing £1.78m to Group operating profits;
· Largest ever contract worth £16million over 5 years awarded during the year by BAE Systems Australia Limited on behalf of Australian Defence Force to supply and support a suite of training aids; contract provides for further one year extensions up to 20 years;
· Contract worth up to £5million over five years awarded for support of training aids at a number of UK Ministry of Defence establishments;
· On schedule completion, delivery and acceptance of two maintenance trainers for the AW 159 Wildcat helicopter under contract with Agusta Westland; value in excess of £12million; additional contract awarded for the support of the simulators in service;
· Successful completion of factory acceptance and delivery of leading edge Parachute Flight Simulator to a far-eastern customer;
· Completion on time and to budget, under contract with BAE Systems for supply of a suite of training aids to Saudi Arabia as part of the upgrade of their Technical Studies Institute;
Data Services Division:
· Revenues increased by 6% to £2.95m (2012: £2.78m), contributing £0.31m to Group operating profits;
· On-going contract to provide operator and maintainer manuals, training documentation and computer based training for R188 Rail Car Project being built by Kawasaki Rail Car Inc. for New York City Transit Department;
· Professional Services Contract with Capgemini UK PLC on behalf of HMRC relating to its Real Time Initiative for PAYE, which will move from development phase to ongoing support during 2014;
· Working with Training Systems Division to provide software for Parachute Flight Simulator for far-eastern customer and to upgrade Virtual Reality Parachute Trainer for UK MOD and aircraft marshalling trainer for the MOD, Saudi Arabia and Australia;
Software Services Division:
· Revenues increased by 17% to £4.3m (2012: £3.7m), significantly increasing its operating profit contribution by 70% to £0.43m driven by increased consultancy revenues and new licence sales;
· From offices in Canada, Australia and the UK, the Division owns the rights to the market-leading OmegaPS suite of software sold worldwide and used by major defence contractors and defence authorities to support complex long-life assets;
· Contract with Canadian Department of National Defence (DND) to provide specialist consultant support to maximize use of OmegaPS within the DND significantly increased during the year; DND confirmed extensions to existing important contract pending agreement of new contract;
· Contract extension to March 2015 agreed with Australian Department of Defence to support OmegaPS in service;
On current trading and prospects, Mr. Powell added:
"The strategy followed consistently over the last 5 years has been successful in achieving its goal of increasing shareholder value and this strategy will be continued.
A number of major new contracts have been won and completed to customer satisfaction, enhancing the Group's profile and reputation. As a result, the Group is currently actively involved in a number of significant opportunities with existing and prospective customers. These opportunities, together with the size and visibility from the current order book give confidence for the future."
Enquiries:
Pennant International Group plc Tel: 01452 714914
Chris Snook, Chief Executive
John Waller, Finance Director
WH Ireland Tel: 0117 945 3470
Mike Coe/Ed Allsopp
Winningtons Financial Tel: 0117 985 8989
Paul Vann/Tom Cooper
CHAIRMAN'S STATEMENT AND BUSINESS REVIEW
Chairman's Review and Strategic Report
I am pleased to report a year of further significant growth in both revenues and profits enabling the directors to recommend a 30% increase in dividend.
The current order book gives good visibility of revenues for 2014 and the level of tendering and associated contact with prospective customers, particularly in the Training Systems Division, enables us to plan with confidence for the medium and longer term.
Results and Dividend
Consolidated revenues reached £18.68 million an increase of 29% (2012: £14.47 million). Revenues increased in all operating divisions, but principally in the Training Systems Division.
Earnings attributable to shareholders increased by 45% to £1.70 million (2012: £1.17 million). Basic earnings per share were 6.43p (2012: 4.46p).
Cash generated from operations was £165,319 (2012: £795,409). There was a requirement for increased working capital during the year as major contracts progressed. Major stage payments are expected to reduce this requirement in the first half of 2014.
Your Board is recommending payment of a final cash dividend of 1.8p per share, bringing the total dividends for the year to 2.6p per share which is covered 2.5 times by earnings and is an increase of 30% on the previous year. The final dividend is payable on 25 April 2014 to shareholders on the register at close of business on 11 April 2014. The ex-dividend date will be 9 April 2014.
About Pennant
Pennant International Group plc ('the Group') has a diverse portfolio of capabilities enabling it to offer services that cover training equipment and related support, technical documentation, media development, software development and related consultancy. It operates principally in the defence, rail, and aerospace sectors and with Government departments.
The Group operates as three trading divisions and has offices in UK, Australia and Canada.
Strategy
The Board has consistently applied a successful strategy across the Group of increasing shareholder value through organic growth. This strategy is built upon:
Customer focus | Building relationships with existing and potential new customers, understanding their requirements, being flexible and delivering on time and to budget. |
Innovation | Developing new capabilities by applying new and existing proven technologies and continually updating existing products and services to meet market demands, current standards and new technologies. |
Diversification | Pursuing opportunities in closely related sectors and in particular those with potential long term revenue streams. |
This strategy continues to be successful and during 2013 has generated considerable tendering activity, particularly for Training Systems, and regular involvement with customers in respect of a strong pipeline of opportunities. Record new orders having the potential to realise revenues in excess of £20 million were received in 2013.
Training Systems Division
Training Systems Division continues to be the main driver of growth for the Group. Revenues increased by 44% to £12.55 million (2012: £8.72 million) and the contribution to Group operating profits increased by 42% to £1.78 million.
The Division provides and supports specialist training systems based on software emulation, hardware simulation, virtual reality and computer based training principally in the defence sector. It has a strong portfolio of proven training devices ranging from simple hand skill trainers to sophisticated simulators. It also has a track record of successfully designing and manufacturing new devices for specific applications.
There are significant ongoing orders that provide work through 2014 and beyond and active involvement with potential customers for a number of significant opportunities. Although the timing of major contracts is difficult to predict and usually beyond the Group's control, the Board considers that a number of factors suggest that there is significant potential for further growth.
· New capital equipment platforms are becoming more sophisticated and complex increasing the requirement for training.
· The use of 'real' equipment for training has safety implications, is expensive and often impractical.
· There is a continuing trend for defence forces to outsource training services including updating their training devices.
New contract awards and operational achievements during the year are set out below:
· In March 2013, the Division won a contract with BAE Systems Australia Limited to supply and support a suite of training aids for the Australian Defence Force. A number of the training devices were successfully manufactured, delivered and accepted in 2013 and manufacture of the remaining requirements will continue through 2014 and into 2015. Support of the delivered items runs into 2018. The contract has a value of approximately £16 million with a 5 year term and provides for one year extensions up to 20 years.
· Successful negotiation of a contract with a potential value of £5 million running over up to 5 years, to March 2018, for the support of training aids at a number of UK Ministry of Defence establishments.
· A contract with a value in excess of £1 million for the supply of a software-based training capability to an Indian customer.
· Successful on-schedule completion, delivery and acceptance of two maintenance trainers for the AW159 Wildcat helicopter under a contract with Agusta Westland having a value in excess of £12 million. Work will continue through 2014 to upgrade the delivered simulators to the latest aircraft specification. The division has been awarded an additional contract for the support of the simulators in service.
· Successful completion of factory acceptance and delivery of a leading edge Parachute Flight Simulator to a far-eastern customer.
· Completion, on time and to budget, under a contract with BAE Systems for the supply of a suite of training aids to Saudi Arabia as part of the upgrade of their Technical Studies Institute.
Data Services Division
The Data Services Division provides high quality media, graphics, virtual reality software and technical documentation to the defence, rail, power and government sectors. It increased its revenues by 6% to £2.95 million (2012: £2.78 million) and contributed £307,000 (2012: £356,000) to Group operating profits.
The main contracts contributing to trading during the year were:
· An on-going contract to provide operator and maintainer manuals, training documentation and computer based training and training delivery for the R188 Rail Car Project currently being built by Kawasaki Rail Car Inc. for New York City Transit Department.
· Continuing work on a professional services contract with Capgemini UK PLC for the development for Her Majesty's Revenue and Customs (HMRC) of a Basic PAYE Tools (BPT) product that operates in unison with HMRC's Real Time Initiative for PAYE. During 2014 this contract will move from the development phase into the on-going support phase. It is expected that two new editions will be released each year to reflect changes made by the Chancellor in his budget statements.
· The Division has built a team of software developers specialising in virtual reality. They have worked successfully with the Training Systems Division to provide software for the Parachute Flight Simulator for a far-eastern customer and to upgrade the capabilities of the Virtual Reality Parachute Trainer for the UK Ministry of Defence ('MOD') and the Synthetic Environment Procedures Trainer (an aircraft marshalling trainer) for the MOD, Saudi Arabia and Australia.
The Division has many years' experience in the rail sector and is actively involved with a number of significant opportunities in USA and the Far East.
Software Services Division
The Division has offices in Canada, Australia and UK. It owns the rights to the market leading OmegaPS suite of software which is sold world-wide and used by major defence contractors and by the defence authorities in Canada and Australia to support complex long-life assets.
Revenues are generated from the sale of licences, associated maintenance agreements and consultancy. The product is regularly updated to keep in line with industry standards and changing technology. Regular updates are issued to users.
The Division has had a successful year with revenues increasing by 17% to £4.3 million (2012: £3.7 million). The contribution to the Group's operating profit has increased significantly by 70% to £435,000 (2012: £255,000). The increase has arisen mainly from increased consultancy revenues and a number of new licence sales.
The Canadian office has a contract with the Canadian Department of National Defence (DND) to provide specialist consultant support to maximise use of OmegaPS within the DND. The contract is a 5 year contract that is now in its last year. During the year the value of the contract was substantially increased due to demand for the services. This is a significant contract for the Division and the DND has confirmed their strategy for a new single source consulting contract and extensions to the existing contract until the new contract is in place.
In Australia there is a contract with the Australian Department of Defence Defence Materiel Organisation to support OmegaPS in service. An extension to the contract to 31 March 2015 was negotiated during the year.
People
The Group has staff with diverse experience and educational, professional and cultural backgrounds. They have responded well to the challenges of the year and the Group's good reputation and relationships with customers are the measure of their success. I should like to take this opportunity to thank them for their efforts.
Outlook
The strategy followed consistently over the last 5 years has been successful in achieving its goal of increasing shareholder value and this strategy will be continued. A number of major contracts have been won and completed to customer satisfaction enhancing the Group's profile and reputation. As a result, the Group is currently actively involved in a number of significant opportunities with existing and prospective customers. These opportunities together with the visibility from the current order book give confidence for the future.
Approved by the Board on 6 March 2014
And signed on its behalf
C C Powell
Chairman
PENNANT INTERNATIONAL GROUP plc
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
Continuing operations | Notes | 2013 £ | 2012 £ | |
Revenue | 18,676,969 | 14,469,715 | ||
Cost of sales | (12,226,023) | (8,952,086) | ||
Gross profit | 6,450,946 | 5,517,629 | ||
Administration expenses | (4,195,236) | (3,920,782) | ||
Operating profit | 2,255,710 | 1,596,847 | ||
Finance costs | (11,733) | (3,832) | ||
Finance income | 2,651 | 9,950 | ||
Profit before taxation | 2,246,628 | 1,602,965 | ||
Taxation | 1 | (550,830) | (428,649) | |
Profit for the year attributable to equity holders of parent | 1,695,798 | 1,174,316 | ||
Earnings per share | ||||
Basic | 6.43p | 4.46p | ||
Diluted | 6.33p | 4.39p |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
2013 £ | 2012 £ | ||
Profit for the year attributable to equity holders of parent | 1,695,798 | 1,174,316 | |
Other comprehensive income: | |||
Exchange differences on translation of foreign operations | (189,217) | (49,910) | |
Comprehensive income for the period | 1,506,581 | 1,124,406 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2013
2013 £ | 2012 £ | |||
Non-current assets | ||||
Goodwill | 946,749 | 985,400 | ||
Other intangible assets | 128,174 | 105,036 | ||
Property, plant and equipment | 1,910,187 | 1,821,559 | ||
Available for sale investments | 3,700 | 3,700 | ||
Deferred tax assets | 33,490 | 25,734 | ||
Total non-current assets | 3,022,300 | 2,941,429 | ||
Current assets | ||||
Inventories | 4,000 | 13,340 | ||
Trade and other receivables | 5,750,546 | 3,918,737 | ||
Cash and cash equivalents | 1,156,950 | 2,173,237 | ||
Total current assets | 6,911,496 | 6,105,314 | ||
Total assets | 9,933,796 | 9,046,743 | ||
Current liabilities | ||||
Trade and other payables | 3,010,744 | 2,875,690 | ||
Current tax liabilities | 243,930 | 374,927 | ||
Obligations under finance leases | 8,171 | 4,726 | ||
Deferred revenue | 326,116 | 341,016 | ||
Total current liabilities | 3,588,961 | 3,596,359 | ||
Net current assets | 3,322,535 | 2,508,955 | ||
Non-current liabilities | ||||
Obligations under finance leases | 36,229 | 24,477 | ||
Deferred revenue | - | 12,251 | ||
Deferred tax liabilities | 121,866 | 107,340 | ||
Total non-current liabilities | 158,095 | 144,068 | ||
Total liabilities | 3,747,056 | 3,740,427 | ||
Net assets | 6,186,740 | 5,306,316 | ||
Share capital | 1,400,000 | 1,400,000 | ||
Capital redemption reserve | 200,000 | 200,000 | ||
Treasury shares | (459,288) | (402,690) | ||
Retained earnings | 4,897,637 | 3,771,398 | ||
Translation reserve | 148,391 | 337,608 | ||
Total equity | 6,186,740 | 5,306,316 | ||
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
2013 | 2012 | |||
£ | £ | |||
Net cash from operations | 165,319 | 795,409 | ||
Investing activities | ||||
Interest received | 2,651 | 9,950 | ||
Proceeds of sale of property, plant and equipment | 1,000 | 10,358 | ||
Purchase of intangible assets | (94,603) | (36,860) | ||
Purchase of property, plant and equipment | (298,089) | (215,446) | ||
Net cash used in investing activities | (389,041) | (231,998) | ||
Financing activities | ||||
Dividends paid | (581,110) | (422,353) | ||
Purchase of own shares for treasury | (68,906) | (343,315) | ||
Proceeds from sale of treasury sales | 4,125 | 61,425 | ||
Net funds from/(repayment of) obligations under finance leases | 15,197 | 13,924 | ||
Net cash used in financing activities | (630,694) | (690,319) | ||
Net increase in cash and cash equivalents | (854,416) | (126,908) | ||
Cash and cash equivalents at beginning of year | 2,173,237 | 2,343,105 | ||
Effect of foreign exchange rates | (161,871) | (42,960) | ||
Cash and cash equivalents at end of year | 1,156,950 | 2,173,237 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Share capital | Capital redemption reserve |
Treasury shares |
Retained earnings |
Translation reserve |
Total equity | |
£ | £ | £ | £ | £ | £ | |
At 1 January 2012 | 1,400,000 | 200,000 | (191,214) | 3,080,745 | 387,518 | 4,877,049 |
Total comprehensive income for the year | - | - | - | 1,174,316 | (49,910) | 1,124,406 |
Recognition of share based payment | - | - | - | 9,104 | - | 9,104 |
Purchase of own shares for treasury | - | - | (343,315) | - | - | (343,315) |
Sale of treasury sales to satisfy share options | - | - | 61,425 | - | - | 61,425 |
Loss on sale of treasury shares transferred to retained earnings | - | - | 70,414 | (70,414) | - | - |
Dividends paid | - | - | - | (422,353) | - | (422,353) |
At 1 January 2013 | 1,400,000 | 200,000 | (402,690) | 3,771,398 | 337,608 | 5,306,316 |
Total comprehensive income for the year | - | - | - | 1,695,798 | (189,217) | 1,506,581 |
Recognition of share based payment | - | - | - | 19,734 | - | 19,734 |
Purchase of own shares for treasury | - | - | (68,906) | - | - | (68,906) |
Sale of treasury sales to satisfy share options | - | - | 4,125 | - | - | 4,125 |
Loss on sale of treasury shares transferred to retained earnings | - | - | 8,183 | (8,183) | - | - |
Dividends paid | - | - | - | (581,110) | - | (581,110) |
At 31 December 2013 | 1,400,000 | 200,000 | (459,288) | 4,897,637 | 148,391 | 6,186,740 |
ABBREVIATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
1. | Taxation |
Recognised in the income statement | 2013 £ | 2012 £ |
| ||
Current tax expense | 412,127 | 314,390 |
| ||
Foreign tax | 176,742 | 64,052 |
| ||
Double taxation relief | (36,809) | - |
| ||
In respect of prior year | (4,288) | 4,221 | 4,221 | ||
547,772 | 382,663 |
| |||
Deferred tax expense relating to origination and reversal of temporary differences | 3,058 | 45,986 |
| ||
Total tax (credit)/expense in income statement | 550,830 | 428,649 |
| ||
Reconciliation of effective tax rate |
| ||||
Profit before tax | 2,246,628 | 1,602,965 |
| ||
Tax at the applicable tax rate of 23.25% (2012: 24.5%) | 522,341 | 392,726 |
| ||
Tax effect of expenses not deductible in determining taxable income | 19,206 | 23,151 |
| ||
Tax effect of utilisation of losses not previously recognised | (6,947) | (9,946) |
| ||
Foreign tax credits | 39,691 | - |
| ||
Effect of different tax rates of subsidiaries operating in other jurisdictions | 6,024 | 2,440 |
| ||
Effect of small companies rate | (156) | (2,036) |
| ||
Effect of change of differed tax rate | (18,135) | (8,313) |
| ||
Effect of adjustments for prior years | (3,999) | 45,892 |
| ||
Effect of share options exercised | (7,148) | (15,224) |
| ||
Other | (47) | (41) |
| ||
550,830 | 428,649 |
| |||
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 2013 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 2013 financial statements upon which the auditors opinion is unqualified.
Copies of the 2013 Annual Report and Accounts 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.