Last checked at 19 Mar 2013 07:00
For immediate release 19 March 2013
Pennant International Group plc
Preliminary Results for the year ended 31 December 2012
"A step change in the performance of the Group"
Largest ever contract worth £16 million over 5 years signed 18 March 2013
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 2012.
Commenting on the Group's performance, Chairman Christopher Powell said:
"I am pleased to report that 2012 has seen a step change in the performance of the Group. This change has been driven mainly by the Training Systems Division, strongly supported by the Software and Data Services Divisions which have also achieved significant increases in both revenue and profit.
"I am also delighted to report that the Group has this month signed its largest ever contract, valued at approximately £16million over the next five years with the potential for extensions up to 20 years. In addition, the pipeline is strong and there is on-going dialogue with prime contractors and other potential customers in respect of major contracts in the short, medium and long term. We will continue our successful strategy of building shareholder value through organic growth."
Highlights: Financial
·; Group revenues increased by 40% to £14.47 million (2011: £10.35 million);
·; Profit before tax more than doubled to £1.6 million (2011: £0.71 million);
·; Profit for the year attributable to shareholders of £1.17 million (2011: £0.55 million);
·; Basic earnings per share rose 124% to 4.46p (2011: 1.99p);
·; Cash generated from operations of £0.8 million (2011: £2.2 million) ;
·; Net cash at year-end of £2.17 million (2011: £2.34 million); Nil borrowings;
·; Proposed Final Dividend increased by 40% to 1.4p per share (2010: 1p) making total for year of 2.0p per share (2011: 1.5p);
Highlights: Operational
Pennant's three operating divisions enjoyed strong organic growth, all increasing turnover and profits during the year, led by Training Systems Division;
Training Systems Division
·; Revenues increased by 61% to £8.7 million, (2011: £5.4 million) with contribution to Group operating profit more than doubled;
·; Increasing international enquiries and contracts won including Parachute Flight Simulation System ("PFS") contract worth in excess of £1.5 million for delivery to Singapore Defence Science and Technology Agency; £1.4 million contract with BAE Systems for supply of training devices to Saudi Arabian Technical Studies Institute;
·; Major £12 million contract in progress with AgustaWestland for development of Maintenance Training Equipment for the AW159 Lynx Wildcat helicopter; will make significant contribution in 2013;
·; Contract successfully completed for UK MoD to upgrade Virtual Reality Parachute Trainer ("VRPT") and supply deployable version;
·; Since the year-end, largest ever contract signed worth approximately £16 million over five years to supply and provide maintenance support for suite of leading edge training aids.
Data Services Division
·; Revenues increased by 31% to £2.8 million (2011: £2.1 million);
·; Continuing to develop expertise in virtual reality; working with Training Systems on Singapore PFS contract;
·; Major contract completed for ALSTOM Power in Switzerland to produce Operator and Maintenance Documentation for systems associated with GT24 Gas Turbine;
·; Work continuing on Professional Services Agreement with Capgemini UK PLC to develop next generation Basic PAYE Tools supporting HMRC Real Time Information into PAYE process from April 2013;
Software Services Division
·; Revenues increased by 9% to £3.7 million (2011: £3.4 million); profitable and cash generative;
·; During year, new licence sales made to Oshkosh Trucks Corporation and Rheinmetall. Licences sold with associated annual maintenance agreements providing good recurring revenue streams;
·; Canada Office had excellent year with value of ongoing OmegaPS contract with Canadian Department of National Defence substantially increased; now in penultimate year of five year contract with remaining value of approx. C$3.6 million
·; Work continuing on Consultancy Agreement with Babcock Canada Inc. in support of Royal Canadian Navy projects with options to run until 2015;
On current trading and prospects, Mr. Powell added:
"The Group is well placed with a record order book providing good visibility of revenues through 2013, 2014 and beyond. Relationships with customers are good and the Group's products and services are well received. In consequence, the pipeline is strong with good prospects for the short, medium and long term. Your Board is confident 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
Winningtons Financial Tel: 0117 985 8989
Paul Vann/Tom Cooper
CHAIRMAN'S STATEMENT AND BUSINESS REVIEW
I am pleased to report that 2012 has seen a step change in the performance of the Group. This change has been driven mainly by the Training Systems Division strongly supported by the Software and Data Services Divisions that have also achieved significant increases in revenue and profit.
I am also pleased to report that the Training Systems Division has, since the year end, been awarded a contract with a value of approximately £16 million over five years with the potential for extensions up to 20 years. The contract is for the supply, maintenance and support of a suite of training aids and is the largest ever won by the Group. It will provide high quality earnings and good forward visibility.
In addition, the pipeline remains strong and there is on-going dialogue with prime contractors and other customers in respect of potential major contracts for the short, medium and long term.
Results and Dividend
Revenues for the year grew by 40% to £14.47 million (2011: £10.35 million) and operating profit more than doubled to £1.60 million (2011: £0.71million) being 11% of revenue (2011: £6.8% of revenue). Basic earnings per share increased by 124% to 4.46p (2011: 1.99p).
Cash generated from operations was £0.8 million (2011: £2.2 million). The Group has no borrowings and at the year-end had cash funds of £2.17 million (2011: £2.34 million).
Your Board is recommending the payment of a final dividend of 1.4p per share which, together with the interim dividend of 0.6p, gives total dividends for the year of 2.0p (2011: 1.5p), an increase of 33% compared to the previous year. The final dividend will be paid on 19 April 2013 to shareholders on the register at close of business on 2 April 2013. The ex-dividend date will be 27 March 2013.
Strategy
We are continuing our successful strategy of building shareholder value through organic growth.
The Group operates mainly in the defence market but also has a presence in the rail and power generation sectors and with Governments around the world. In these markets contracts usually have long gestation periods requiring a strategy that looks to the medium term and beyond.
A common approach has been applied across the Group; the main objectives are:
·; To build close relationships with original equipment manufacturers, prime contractors and other customers, both before and after contract award, to better understand their requirements and to become their partner of choice.
·; To continue to develop our products and services to ensure that they satisfy the demands of the market using current technology and standards.
·; To increase the number of long-term support contracts to provide on-going revenue streams and earnings visibility.
This strategy has proved successful generating recent major contract awards and continues to provide a strong pipeline of opportunities. The current order book is expected to realise £25 million.
Current Trading
The Group is managed in three operating divisions all of which are growing and profitable. They are dealt with separately below.
Training Systems Division
The Training Systems Division has been the main engine of growth for the Group and your Board believes it has significant potential for further growth. Revenues increased by 61% to £8.7 million (2011: £5.4 million) during the year and the contribution to Group operating profit more than doubled.
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. The main areas in which opportunities arise in this market and which lead your Board to believe that there is significant opportunity for growth are:
·; The continuing development of new platforms and the upgrade of existing platforms by original equipment manufacturers requiring either new training aids or upgrading of existing training solutions.
·; The growing trend for defence forces to look at outsourcing training services. A good example of this is the contract in Australia for the Aviation Technical Training at RAAF Wagga.
·; A continued move towards simulation in training programmes as it saves costs compared to the use of the actual equipment and reduces risk.
The Division has been working on a number of contracts in the UK but with UK Government budgets constrained we are actively pursuing a number of opportunities in other regions of the world. Contracts have recently been won for delivery to Singapore, Saudi Arabia and Oman.
During the year work has continued on the major £12 million contract with AgustaWestland for the development of Maintenance Training Equipment for the AW159 Lynx Wildcat helicopter. This contract will contribute significantly in 2013 with delivery expected during the second half.
Contracts successfully completed during the year include:
·; The upgrade of the Virtual Reality Parachute Trainer (VRPT) for the UK Ministry of Defence ('UK MOD') and the supply of a deployable version of that trainer.
·; The upgrade of the Synthetic Environment Procedures Trainer (SEPT), also for the UK MOD, to teach the marshalling of aircraft.
The Division has won the Group's largest ever contract. The five year contract provides for annual one-year extensions up to 20 years. Pennant will supply a suite of leading-edge training aids including simulation, virtual reality, computer based training and related support services with a total value of approximately £16 million. The training aids will be delivered during the first 2 years with support revenues running for the remainder of the term.
Other contracts won include:
·; A contract with a value in excess of £1.5 million for delivery to the Singapore Defence, Science and Technology Agency of a Parachute Flight Simulation System ('PFS'). This contract will further develop our understanding and expertise in parachute training. It will run through 2013 and into 2014.
·; A contract with BAE Systems with a value of approximately £1.4 million for the supply a number of off-the-shelf training devices to Saudi Arabia as part of the upgrade of their Technical Studies Institute. This contract will run into the second half of 2013.
In my report with the interim results I mentioned that the UK MOD were tendering a contract for the support of training aids at a number of MOD training establishments in the UK. This contract combined the Group's existing contracts with contracts run by other contractors. The tender has now been submitted and the result is expected in the near future.
Data Services Division
The Data Services Division has had a successful and profitable year with revenues increasing by 31% to £2.8 million (2011: £2.1 million).
The division provides high quality media, graphics, virtual reality software and technical documentation to the defence, rail, power and government sectors.
The division has continued to develop its expertise in virtual reality and has worked with the Training Systems Division providing the virtual reality software for the VRPT and the SEPT. It is currently developing the software for the PFS for Singapore.
Other major contracts running through the year included:
·; Continuing work on the supply of operator and maintainer manuals, training material and training delivery in support of a major US programme for the supply of rolling stock. The work runs into the first half of 2013 with training delivery running through to 2015.
·; In the power sector, a major contract was completed for ALSTOM Power in Switzerland to produce Operator and Maintenance Documentation for the auxiliary systems associated with the GT24 Gas Turbine.
·; Work has continued on the Professional Services Agreement with Capgemini UK PLC developing the next generation Basic PAYE Tools to support the introduction of Her Majesty's Revenue and Customs Real Time Information into the PAYE process from April 2013. It is expected that each year two new editions will be released in February and April to reflect changes made by the Chancellor in his budget statements.
Software Services Division
The Software Services Division has also had a successful and profitable year with revenues increasing by 9% to £3.7 million (2011:£3.4 million).
The Division has offices in Canada, Australia and UK. It owns the rights to the market leading OmegaPS suite of software which is sold worldwide and used by many 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 it in line with industry standards and changing technology. Regular updates are issued to users.
During the year new licence sales were made to Oshkosh Trucks Corporation and Rheinmetall. Licences are sold with associated annual maintenance agreements that provide an on-going revenue stream.
The Canadian office had a particularly good year. They have a contract with the Canadian Department of National Defence (DND) to provide specialist consultant support to maximise the use of OmegaPS within the DND. The contract is a 5 year contract that it now in its penultimate year. During the year the value of the contract was substantially increased due to the high demand for the services. The remaining value of this contract is approximately C$3.6 million.
Work has also continued in Canada on a consultancy agreement with Babcock Canada Inc. in support of Royal Canadian Navy projects. This contract has options to run out to 2015.
In Australia an extension for a further 2 years to the contract with the Australian Department of Defence, Defence Material Organisation to support OmegaPS is being negotiated.
People
The Group would not have achieved the growth it has shown in 2012 without the considerable commitment and expertise of the staff. They have responded superbly to significant challenges during the year and I would like to take this opportunity to thank them for their efforts.
Outlook
The Group is well placed with a record order book providing good visibility of revenues through 2013, 2014 and beyond. Relationships with customers are good and the Group's products are well received. In consequence, the pipeline is strong with good prospects for the short, medium and long term. Your Board is confident for the future.
C C Powell
Chairman
18 March 2013
PENNANT INTERNATIONAL GROUP plc
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2012
Continuing operations | Notes | 2012 £ | 2011 £ | |
Revenue | 14,469,715 | 10,353,534 | ||
Cost of sales | (8,952,086) | (6,254,383) | ||
Gross profit | 5,517,629 | 4,099,151 | ||
Administration expenses | (3,920,782) | (3,392,049) | ||
Operating profit | 1,596,847 | 707,102 | ||
Finance costs | (3,832) | (10,598) | ||
Finance income | 9,950 | 600 | ||
Profit before taxation | 1,602,965 | 697,104 | ||
Taxation | 1 | (428,649) | (145,925) | |
Profit for the year attributable to equity holders of parent | 1,174,316 | 551,179 | ||
Earnings per share | ||||
Basic | 4.46p | 1.99p | ||
Diluted | 4.39p | 1.97p |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
2012 £ | 2011 £ | ||
Profit for the year attributable to equity holders of parent | 1,174,316 | 551,179 | |
Other comprehensive income: | |||
Exchange differences on translation of foreign operations | (49,910) | (10,433) | |
Comprehensive income for the period | 1,124,406 | 540,746 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2012
2012 £ | 2011 £ | |||
Non-current assets | ||||
Goodwill | 985,400 | 992,044 | ||
Other intangible assets | 105,036 | 126,622 | ||
Property, plant and equipment | 1,821,559 | 1,791,413 | ||
Available for sale investments | 3,700 | 3,700 | ||
Deferred tax assets | 25,734 | 96,880 | ||
Total non-current assets | 2,941,429 | 3,010,659 | ||
Current assets | ||||
Inventories | 13,340 | 13,340 | ||
Trade and other receivables | 3,918,737 | 2,802,780 | ||
Cash and cash equivalents | 2,173,237 | 2,343,105 | ||
Total current assets | 6,105,314 | 5,159,225 | ||
Total assets | 9,046,743 | 8,169,884 | ||
Current liabilities | ||||
Trade and other payables | 2,875,690 | 2,757,472 | ||
Current tax liabilities | 374,927 | 6,953 | ||
Obligations under finance leases | 4,726 | 15,279 | ||
Deferred revenue | 341,016 | 352,324 | ||
Total current liabilities | 3,596,359 | 3,132,028 | ||
Net current assets | 2,508,955 | 2,027,197 | ||
Non-current liabilities | ||||
Obligations under finance leases | 24,477 | - | ||
Deferred revenue | 12,251 | 28,465 | ||
Deferred tax liabilities | 107,340 | 132,342 | ||
Total non-current liabilities | 144,068 | 160,807 | ||
Total liabilities | 3,740,427 | 3,292,835 | ||
Net assets | 5,306,316 | 4,877,049 | ||
Share capital | 1,400,000 | 1,400,000 | ||
Capital redemption reserve | 200,000 | 200,000 | ||
Treasury shares | (402,690) | (191,214) | ||
Retained earnings | 3,771,398 | 3,080,745 | ||
Translation reserve | 337,608 | 387,518 | ||
Total equity | 5,306,316 | 4,877,049 | ||
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
2012 | 2011 | |||
£ | £ | |||
Net cash from operations | 795,409 | 2,217,399 | ||
Investing activities | ||||
Interest received | 9,950 | 600 | ||
Proceeds of sale of property, plant and equipment | 10,358 | - | ||
Purchase of intangible assets | (36,860) | (94,220) | ||
Purchase of property, plant and equipment | (215,446) | (155,800) | ||
Loan to Employee Benefit Trust | - | - | ||
Net cash used in investing activities | (231,998) | (249,420) | ||
Financing activities | ||||
Dividends paid | (422,353) | (409,083) | ||
Purchase of own shares for treasury | (343,315) | (381,559) | ||
Proceeds from sale of treasury sales | 61,425 | - | ||
Repayment of borrowings | - | (233,369) | ||
Net funds from/(repayment of) obligations under finance leases | 13,924 | (4,900) | ||
Net cash used in financing activities | (690,319) | (1,028,911) | ||
Net increase in cash and cash equivalents | (126,908) | 939,068 | ||
Cash and cash equivalents at beginning of year | 2,343,105 | 1,414,759 | ||
Effect of foreign exchange rates | (42,960) | (10,722) | ||
Cash and cash equivalents at end of year | 2,173,237 | 2,343,105 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Share capital | Capital redemption reserve |
Treasury shares |
Retained earnings |
Translation reserve |
Total equity | |
£ | £ | £ | £ | £ | £ | |
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 |
Purchase of own shares for treasury | - | - | (381,559) | - | - | (381,559) |
Dividends paid | - | - | - | (409,083) | - | (409,083) |
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 31 December 2012 | 1,400,000 | 200,000 | (402,690) | 3,771,398 | 337,608 | 5,306,316 |
ABBREVIATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1. | Taxation |
Recognised in the income statement | 2012 £ | 2011 £ | |
Current tax expense | 378,442 | 6,953 | |
In respect of prior year | 4,221 | 12,106 | |
382,663 | 19,059 | ||
Deferred tax expense relating to origination and reversal of temporary differences | 45,986 | 126,866 | |
Total tax (credit)/expense in income statement | 428,649 | 145,925 | |
Reconciliation of effective tax rate | |||
Profit before tax | 1,602,965 | 697,104 | |
Tax at the applicable tax rate of 24.5% (2011: 26.49%) | 392,726 | 184,663 | |
Tax effect of expenses not deductible in determining taxable income | 23,151 | 26,046 | |
Tax effect of utilisation of losses not previously recognised | (9,946) | (20,627) | |
Tax effect of recognition of previously unrecognised tax losses | - | (55,258) | |
Effect of different tax rates of subsidiaries operating in other jurisdictions | 2,440 | 1,086 | |
Effect of small companies rate | (2,036) | - | |
Effect of change of differed tax rate | (8,313) | (2,045) | |
Effect of adjustments for prior years | 45,892 | 12,106 | |
Effect of share options exercised | (15,224) | - | |
Other | (41) | (46) | |
428,649 | 145,925 |
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 2012 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 2012 financial statements upon which the auditors opinion is unqualified.
Copies of the 2012 Annual Report and Accounts will be posted to shareholders 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.