Last checked at 29 Mar 2010 07:00
For Immediate Release 29 March 2010
Pennant International Group plc
Preliminary Results for the year ended 31 December 2009
Return to profitability and dividend; all three divisions profitable and cash generative;
Pennant International Group plc ("Pennant" or "the Company"), 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 2009.
In his Statement to shareholders, Chairman, Mr. Christopher Powell said:
"I am pleased to report that all segments of the business have been profitable and cash generative. Tender activity has been high, particularly in the defence, rail and power sectors. Considerable effort has been expended building relationships with existing and potential customers which is paying off as our reputation grows and our pipeline of prospects increases. The wide range of prospects together with their broad geographical spread will help mitigate the inevitable effect of budget constraints, particularly in the defence market, on the funding and timing of orders."
Highlights: Financial
·; Group revenues of £9.5million (2008: £9.8million).
·; Gross margins significantly increased to 39.1% (2008: 34.8%).
·; Group operating profit of £305,000 (2008: £427,000.loss).
·; Profit attributable to equity holders of £293,000 (2008: £480,000 loss).
·; Basic earnings per share of 1.00p (2008: loss per share of 1.57p).
·; Net cash at year end of £846,000 (2008: net debt of £23,000).
·; Interim Dividend of 1.00p per share paid on 19 March 2010.
·; Strong balance sheet.
Highlights: Operational
·; All three divisions profitable and cash generative
·; Training Systems strongly cash generative as stage payments on long-term contracts achieved; tender activity high with significantly increased pipeline of prospects; several new contracts from Flight Simulation & Synthetic Trainers Project Team of the MOD; successful completion of Type 45 Destroyer Warfare Package for Royal Navy;
·; Data Services enjoyed much improved performance and return to profitability following rationalisation measures instigated in 2008; strong tender activity in rail and power sectors worldwide including major contract with Alstom Power in Switzerland and new enabling contract with Network Rail;
·; Software Services performed well, helped by ongoing major consultancy contract with Canadian DND worth up to C$15million; proprietary OmegaPS software licences, related support contracts and consultancy services for customers including BAE Systems, Boeing and Thales; new contracts won with Boeing Australia, Lockheed Martin Canada and Shenyang Aircraft Design and research Institute, China;
On current trading and prospects, Mr. Powell added:
"We expect continuing pressure on defence budgets that will determine which programmes are funded and in particular, the timing of orders. However, this will also re-inforce the move towards the use of simulation and computer based training products as a cost effective solution. Pennant is well positioned on a wide range of long-term programmes involving defence, rail transport and power generation and our business is underpinned by ongoing recurring revenues from support and maintenance contracts and consultancy agreements
"The balance Sheet is strong and your Board is confident for the future."
| Enquiries: |
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| Pennant International Group plc | www.pennantplc.co.uk |
| Chris Snook, Chief Executive | +44 (0) 1452 714 881 |
| John Waller, Finance Director | +44 (0) 1452 714 881 |
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| WH Ireland Limited | www.wh-ireland.co.uk |
| Mike Coe / Marc Davies | +44 (0) 117 945 3470 |
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| Winningtons Financial | www.winningtons.co.uk |
| Paul Vann / Tom Cooper | +44 (0)117 920 0092 |
PENNANT INTERNATIONAL GROUP PLC:
Preliminary results for the year ended 31 December 2009
CHAIRMAN'S STATEMENT AND BUSINESS REVIEW
I am pleased to report a return to profitability and a year of significant cash generation that has enabled us to pay a dividend of 1.0p per share.
All segments of the business have been profitable and cash generative. Tender activity has been high particularly in the defence, rail and power sectors.
Considerable effort has been expended building relationships with existing and potential customers which is paying off as our reputation grows and our pipeline of prospects increases. The wide range of prospects together with their broad geographical spread will help mitigate the inevitable effect of budget restraints, particularly in the defence market, on the funding and timing of orders.
Results
Revenue for the year was £9.5 million (2008: £9.8million). Gross margin increased significantly to 39.1% (2008: 34.8%) and administrative expenses reduced by 12% as the result of restructuring. Earnings were £293,000 (2008: loss £481,000) and basic earnings per share were 1.00p (2008: loss per share 1.57p).
Cash generation from operations was strong at £962,000 (2008: cash used £575,000). Cash balances at the end of the year were £1.28 million (2008: 0.6 million) and net funds stood at £846,000 (2008: net debt £23,000).
An interim dividend of 1p per share was paid on 19 March 2010.
About Pennant
The Group offers a range of services that extends across computer based training and emulation, virtual reality, simulation, technical documentation, media production and supportability engineering software.
For management and accounting purposes the Group is run as three operating divisions each of which is a significant contributor to the Group's overall results.
|
| Proportion of 2009 Group Revenues |
| Training Systems | 42% |
| Data Services | 26% |
| Software Services | 32% |
The Group operates principally in the defence market but has a growing presence, mainly through the Data Services division, in the rail transport and power generation markets and UK Government departments.
Training Systems
Training Systems division was profitable and strongly cash generative as stage payments were achieved. Tender activity was high and the pipeline of prospects increased significantly providing considerable opportunity for growth.
The division operates principally in the defence market and revenues relate to the design, manufacture and delivery of simulation and computer-based training products for defence projects including new platforms (e.g. aircraft, ships, fighting vehicles etc) and updates to existing platforms. Revenues are underpinned by ongoing contracts for the support and modification of equipment in service.
There is a continuing move towards the use of synthetic training products. The cost of using real equipment for training is high whilst in practice it is inefficient and has significant health and safety implications. Simulation based training provides a more cost-effective, flexible, focussed and safe alternative. With continuing pressure on global defence budgets we expect the use of synthetic training products to continue to increase as governments, defence forces and other operators of complex assets look for value-for-money solutions.
Major contracts for new platforms and the update of existing platforms are normally awarded by defence authorities around the world to the original equipment manufacturers and/or major prime contractors ("primes") who in-turn subcontract the provision of training devices related to those platforms to specialist subcontractors.
Our strategy in this market has three main thrusts:
·; to enhance and extend our working relationships and reputation with the OEMs and primes so that we become the partner of choice;
·; to extend our reach, both in the UK and worldwide, into each of the defence naval, land systems and air sectors;
·; to increase the number of support contracts providing on-going revenue streams.
This strategy has shown considerable success producing a number of short and medium-term opportunities. In addition there are significant potential extensions to current contracts.
UK primes often 'package' our services when tendering for the sale of platforms worldwide and we have positioned ourselves, through a memorandum of understanding with a Saudi Arabian company, to benefit from the major defence spending planned in the Middle East.
Recent highlights include:
·; Contracts from the Flight Simulation and Synthetic Trainers Project Team of the MOD for:
o 8 Virtual Reality Parachute Trainers for the Parachute Training School at RAF Brize Norton;
o the update of computer-based courseware for the Sea King helicopter for RNAS Culdrose;
o the update of computer-based courseware for the Jaguar aircraft for DCAE Cosford;
o modifications to a number of hardware/simulation based trainers
·; Successful completion to schedule and within budget of the Type 45 Destroyer Warfare Package for the Royal Navy. Pennant produced a range of training media objects and 3D rotational models for the Electro-Optical Gun Control System, the Combat Management System and the Link 11 Communication System.
·; Continued development of highly interactive computer-based training for the command systems of the Royal Navy Type 23 frigates and Type 45 destroyers as part of the Maritime Composite Training System.
·; Successful delivery of enhancements to the Synthetic Environment Procedural Trainer at DCAE Cosford. These enhancements allow Army students to practice their aircraft marshalling skills in complete safety without the high cost of using real aircraft.
·; Continuing development of computer-based training and emulation products in support of BAE Systems delivery of Hawk Aircraft to two major customers.
·; Ongoing support contracts with MOD supporting over 120 aircraft related training devices, BAE Systems Australia supporting Hawk jet training and British Energy.
·; Completion of a computer 3-D model of the Lynx Wildcat helicopter for Westland.
Data Services
The Data Services division covers a range of products including high quality media production, graphics, virtual reality and technical documentation. It operates principally in the defence, rail, power, oil and gas and Government sectors.
The division returned to profitability and was cash generative in 2009 following the completion of the rationalisation that was begun in 2008. The management is now based in new premises in Manchester and significant cost savings have been achieved.
Recent activities and achievements include:
·; Strong tendering activity in both the rail and power sectors worldwide creating a strong pipeline of opportunities.
·; A new enabling contract with Network Rail. Tasks completed under this contract include a set of DVDs for training track and maintenance staff, emulation of signalling scenarios for competency testing and web-deliverable multi media projects for briefing senior management on accidents and incidents on the rail network.
·; Satisfactory completion, in a short timescale, of a major contract with ALSTOM Power in Switzerland for technical documentation for the auxiliary systems of a gas-powered turbine.
·; Successful delivery to HMRC of the Employer CD ROM for 2010. This is distributed to all employers who operate PAYE. This contract has now run for two years and it is expected that the option for a third year will be taken up.
·; Continuing work with each of Kawasaki and Siemens for operator and maintainer manuals and training on rail projects.
Software Services
Pennant owns the OmegaPS suite of software which is used to reduce the support cost of major capital equipment. It is continually updated to keep in line with current practice and standards and has obvious relevance in the current period when defence budgets are stretched.
The division, which operates in the defence and aerospace markets, is profitable and cash generative. Revenues accrue from the sale of software licences, related annual support contracts and consultancy services. Work is continuing successfully on the major consultancy agreement with the Canadian DND that was won in April 2009 and has the potential to run until March 2014 and realise total revenues of C$15 million. In addition there are a further two years to run on the three year A$1.0million software support contract with the Australian Defence Organisation.
OmegaPS has an impressive customer list. The software is used by a growing number of major defence and aerospace contractors worldwide including BAE Systems, Boeing, Lockheed Martin, Northrop Grumman, Agusta Westland, Thales, VT Group, Eurocopter, and Man-Erf. It is also used extensively by the Canadian and Australian defence authorities.
Recent new licence sales have been made to Vitrociset for the Galileo Project (an entry to the space market) Boeing Australia, Lockheed Martin in Canada and the Shenyang Aircraft Design and Research Institute in China .
Joint venture
The joint venture with Sonovision SAS ceased trading by agreement on 31 October 2009. Since this date, Pennant's Data Services division has continued to work profitably as a subcontractor to Sonovision on technical documentation projects for Airbus.
People
Our business depends on the commitment and high skill levels of our staff and I am pleased to take this opportunity to thank them for their major contribution to a successful year.
Outlook
We expect there will be continuing pressure on defence budgets that will determine which programmes are funded and, in particular, affect the timing of orders. However, we consider that it will also reinforce the move towards the use of simulation and computer based training products as a cost effective solution.
We are well positioned on a wide range of programmes involving fighter and transport aircraft, helicopters, destroyers, fighting vehicles, rail transport and power generation. These platforms have long programme lives ahead of them that will drive opportunities in the future. In addition the business is underpinned by a number of ongoing revenue streams from equipment support contracts, software maintenance contracts and consultancy agreements.
The balance sheet is strong and your board is confident for the future.
C C Powell
Chairman
26 March 2010
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2009
|
| Notes | 2009 £ |
| 2008 £ |
| Revenue |
| 9,485,858 |
| 9,839,547 |
| Cost of sales |
| (5,778,263) |
| (6,419,631) |
|
|
|
|
|
|
| Gross profit |
| 3,707,595 |
| 3,419,916 |
| Administration expenses |
| (3,402,742) |
| (3,847,137) |
|
|
|
|
|
|
| Operating profit/(loss) |
| 304,853 |
| (427,221) |
| Share of results of joint venture |
| - |
| (33,705) |
| Net gain on closure of joint venture |
| 20,390 |
| - |
|
|
| 325,243 |
| (460,926) |
|
|
|
|
|
|
| Finance costs |
| (24,932) |
| (48,222) |
| Finance income |
| 639 |
| 8,765 |
|
|
|
|
|
|
| Profit/(loss) before taxation |
| 300,950 |
| (500,383) |
| Taxation | 1 | (7,715) |
| 19,516 |
| Profit/(loss) for the year attributable to equity holders of parent |
| 293,235 |
| (480,867) |
|
|
|
|
|
|
| Earnings per share |
|
|
|
|
| Basic |
| 1.00p |
| (1.57p) |
| Diluted |
| 0.91p |
| (1.57p) |
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 2009
|
| 2009 £ |
| 2008 £ |
| Profit/(loss) for the year attributable to equity holders of parent | 293,235 |
| (480,867) |
| Other comprehensive income: |
|
|
|
| Exchange differences on translation of foreign operations | 71,868 |
| 136,533 |
| Comprehensive income/(loss) for the period | 365,103 |
| (344,334) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2009
|
|
| 2009 £ |
| 2008 £ |
| Non-current assets |
|
|
|
|
| Goodwill |
| 952,939 |
| 923,299 |
| Other intangible assets |
| 64,832 |
| 121,475 |
| Property, plant and equipment |
| 1,802,587 |
| 1,925,918 |
| Equity accounted interest in joint venture |
| - |
| (1,749) |
| Available for sale investments |
| 3,700 |
| 6,135 |
| Deferred tax assets |
| 38,304 |
| 26,627 |
| Total non-current assets |
| 2,862,362 |
| 3,001,705 |
| Current assets |
|
|
|
|
| Inventories |
| 16,340 |
| 24,970 |
| Trade and other receivables |
| 2,347,179 |
| 3,201,215 |
| Cash and cash equivalents |
| 1,284,384 |
| 600,631 |
| Total current assets |
| 3,647,903 |
| 3,826,816 |
| Total assets |
| 6,510,265 |
| 6,828,521 |
| Current liabilities |
|
|
|
|
| Trade and other payables |
| 989,819 |
| 1,313,601 |
| Current tax liabilities |
| 14,089 |
| 14,920 |
| Obligations under finance leases |
| 4,612 |
| 3,603 |
| Bank loan |
| 172,334 |
| 174,550 |
| Deferred revenue |
| 377,294 |
| 432,221 |
| Total current liabilities |
| 1,558,148 |
| 1,938,895 |
| Net current assets |
| 2,089,755 |
| 1,887,921 |
| Non-current liabilities |
|
|
|
|
| Bank loan |
| 245,225 |
| 428,608 |
| Obligations under finance leases |
| 15,661 |
| 17,138 |
| Deferred revenue |
| 7,700 |
| 21,279 |
| Deferred tax liabilities |
| - |
| - |
| Total non-current liabilities |
| 268,586 |
| 467,025 |
| Total liabilities |
| 1,826,734 |
| 2,405,920 |
| Net assets |
| 4,683,531 |
| 4,422,601 |
|
|
|
|
|
|
| Equity |
|
|
|
|
| Share capital |
| 1,600,000 |
| 1,600,000 |
| Treasury shares |
| (470,318) |
| (363,016) |
| Share premium account |
| - |
| 3,582,329 |
| Retained earnings |
| 3,307,493 |
| (571,200) |
| Translation reserve |
| 246,356 |
| 174,488 |
| Total equity |
| 4,683,531 |
| 4,422,601 |
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2009
|
|
| 2009 |
| 2008 |
|
|
| £ |
| £ |
| Net cash from/ (used in) operations |
| 961,688 |
| (574,815) |
| Investing activities |
|
|
|
|
| Interest received |
| 639 |
| 8,765 |
| Purchase of intangible assets |
| (4,488) |
| (49,301) |
| Purchase of property, plant and equipment |
| (31,469) |
| (42,775) |
| Loan to joint venture |
| - |
| (20,000) |
| Net cash inflow from closure of joint venture |
| 18,639 |
| - |
| Net cash used in investing activities |
| (16,679) |
| (103,311) |
| Financing activities |
|
|
|
|
| Dividends paid |
| - |
| (201,214) |
| Transactions in own shares |
| (107,302) |
| (61,218) |
| Repayment of borrowings |
| (185,599) |
| (158,831) |
| Net (repayment of)/increase in obligations under finance leases |
| (468) |
| 18,120 |
| Net cash used in financing activities |
| (293,369) |
| (403,143) |
| Net increase/(decrease) in cash and cash equivalents |
| 651,640 |
| (1,081,269) |
| Cash and cash equivalents at beginning of year |
| 600,631 |
| 1,568,620 |
| Effect of foreign exchange rates |
| 32,113 |
| 113,280 |
| Cash and cash equivalents at end of year |
| 1,284,384 |
| 600,631 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2009
|
| Issued share capital | Treasury shares | Share premium | Retained earnings | Translation reserve | Total equity |
|
| £ | £ | £ | £ | £ | £ |
| At 1 January 2008 | 1,600,000 | (249,298) | 3,582,329 | 120,704 | 37,955 | 5,091,690 |
| Payment of dividend | - | - | - | (201,214) | - | (201,214) |
| Total comprehensive income for the year | - | - | - | (480,867) | 136,533 | (344,334) |
| Recognition of share based payment | - | - | - | (9,823) | - | (9,823) |
| Purchase of treasury shares | - | (113,718) | - | - | - | (113,718) |
| At 1 January 2009 | 1,600,000 | (363,016) | 3,582,329 | (571,200) | 174,488 | 4,422,601 |
| Capital reduction | - | - | (3,582,329) | 3,582,329 | - | - |
| Total comprehensive income for the year | - | - | - | 293,235 | 71,868 | 365,103 |
| Recognition of share based payment | - | - | - | 3,129 | - | 3,129 |
| Purchase of treasury shares | - | (107,302) | - | - | - | (107,302) |
| At 31 December 2009 | 1,600,000 | (470,318) | - | 3,307,493 | 246,356 | 4,683,531 |
ABBREVIATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2009
| 1. | Taxation |
| Recognised in the income statement | 2009 £ | 2008 £ |
| Current tax expense | 13,498 | 18,415 |
| In respect of prior year | 526 | 487 |
|
| 14,024 | 18,902 |
| Deferred tax expense relating to origination and reversal of temporary differences | (7,020) | (38,418) |
| In respect of prior years | 711 | - |
| Total tax (credit)/expense in income statement | 7,715 | (19,516) |
| Reconciliation of effective tax rate |
|
|
| Profit/ (loss) before tax | 300,950 | (500,383) |
| Tax at the applicable tax rate of 28% (2008: 28%) | 84,266 | (140,108) |
| Tax effect of: |
|
|
| Share of results of joint venture | (23,750) | 9,437 |
| Expenses not deductible for tax | 48,654 | 46,016 |
| Income not taxable | (13,140) | - |
| Capital loss | 14,522 | 99,709 |
| Unused losses not recognised in deferred tax | (106,096) | 4,092 |
| Different tax rates for overseas subsidiaries | 1,965 | (731) |
| Other differences | 57 | (38,418) |
| In respect of prior year | 1,237 | 487 |
| Tax (credit)/expense | 7,715 | (19,516) |
| 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 2009 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 2009 financial statements upon which the auditors opinion is unqualified.
Copies of the 2009 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.