Last checked at 7 Sep 2009 07:00
Pennant International Group Plc
Interim Report for the six months ended 30 June 2009
7 September 2009
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 interim results for the six months ended 30 June 2009.
Commenting on the Group's performance, Chairman Christopher Powell said:
"I am pleased to report a return to profit despite trading conditions remaining challenging. The main contributors to this turnaround have been a strong performance in the Canadian branch of the Software Division, a much improved contribution from the Data Services Division and, in particular, the positive steps taken by the Board to reduce costs and improve efficiency."
Highlights: Financial
Group revenues for the period of £4.8million (June 2008: £5.4million);
Gross margin increased to 37% (Second half of 2008: 31%);
Operating profit of £113,000 (June 2008: £108,000)
Profit attributable to equity holders of £87,000 (June 2008: £44,000);
Earnings per share of 0.29pence (June 2008: 0.14pence);
Net debt at period end of £260,000 (June 2008: Nil);
Strong cash inflows expected in 2nd half;
Highlights: Operational
Strong tendering activities across all divisions;
Training Systems: good first half including submission of first Middle-East tender following signing of Memorandum of Understanding with Saudi Arabian company; further significant extensions and work-in-progress on contracts with BAE supporting sales of HAWK aircraft;
Data Services: Improved performance with successful rationalisation of management and resources; new enabling contract signed with Network Rail;
Software Services: Trading underpinned by strong order book; good performance from Canada following signing of new consultancy agreement with Canadian Department of National Defence; sale of OmegaPS software to Vitrociset for use on Galileo project;
Continuing work on contracts with BAE Insyte including Type 45 Destroyer; continued work with Kawasaki Industries of Japan;
Commencement of work for ALSTOM Power in Switzerland;
On current trading and prospects, Mr Powell added:
"Business is expected to continue to be challenging in the second half and beyond. However, the Group's revenues are underpinned by a number of support contracts and maintenance and consultancy agreements with good visibility of revenue streams.
"Tendering activity continues to be strong and we are actively seeking opportunities for diversification, whilst there are also major programmes in the pipeline with new and existing customers."
Enquiries:
Pennant International Group plc
Chris Snook, Chief Executive
John Waller, Finance Director
Tel: 01452 714881
W.H. Ireland
Tim Cofman/Katy Birkin
Tel: 0121 265 6330
Winningtons Financial
Paul Vann/Tom Cooper
Tel: 0117 920 0092
Chairman's Statement
I am pleased to report a return to profit despite trading conditions remaining challenging. The main contributors to this turnaround have been a strong performance in the Canadian branch of the Software Division following the new consultancy agreement worth up to CA$15 million from the Department of National Defence ('DND') highlighted in my 2008 Annual Report, a much improved contribution from the Data Services division and, in particular, the positive steps taken by your Board to reduce costs and improve efficiency.
Results
Revenue for the period was £4.8 million (30 June 2008: £5.4 million). Gross margin was 37%, a significant increase over the 31% achieved in the second half of 2008. Administration costs were £1.7 million an 11% reduction compared to the first half of 2008. Redundancy costs included were £37,000 (30 June 2008: £65,000). Operating profit was £113,000 (30 June 2008: £108,000) and the Group's share of joint venture profits was £2,000 (30 June 2008: Loss of £33,000). Earnings were £87,000 (30 June 2008: £44,000) equating to basic earnings per share of 0.29p (30 June 2008: 0.14p).
Cash absorbed in operations was £155,000 (30 June 2008: £477,000) attributable to an increase in amounts due on contracts. Cash at the end of the period was £268,000 (30 June 2008: £736,000) and net debt was £260,000 (30 June 2008: £nil). Cash inflow in the second half is expected to be strong as contract milestones are achieved.
Your Board is keeping dividend policy under review, but in the current economic climate does not consider it appropriate to pay an interim dividend.
Current Trading
During the period the following have been the principal activities and achievements:
Strong tendering activity particularly in the Training Division including submission of the first tender following the signing of a Memorandum of Understanding with a Saudi Arabian company, referred to in my statement in the 2008 Annual Report, to enable the Group to pursue existing and future opportunities arising from defence spending in the Middle East.
Successful rationalisation of the management and resources of the Data Services Division.
A strong start to work on the new consultancy agreement with the Canadian DND.
Further significant extensions and continuing work in progress on the contracts with BAE in support of their sales of Hawk aircraft.
A new enabling contract with Network Rail for the Data Services Division and the successful completion of the first tasks including a set of DVD's for training track and maintenance staff, emulation of signalling scenarios for competency testing and web-deliverable multi-media projects used for briefing senior management on accidents and incidents on the rail network.
Continuing work on two contracts with BAE Insyte for the Maritime Composite Training System and the Type 45 Destroyer Warfare System.
An extension to a support contract with the MOD for Graphics/Design and Associated Services.
Successful completion under the contract with Specialist Computer Centres for Her Majesty's Revenue and Customs of the CD-ROM released to all employers operating PAYE for the tax year 2008/2009. Work was also commenced on the CD-ROM for the tax year 2009/2010.
Commencement of work under a significant contract with ALSTOM Power in Switzerland for technical documentation for the auxiliary systems of a gas powered turbine.
Continued work with Kawasaki Heavy Industries in Japan to provide a suite of documentation for the Xinyi/Songshan line contract in Taiwan.
Successful delivery to DCAE Cosford of an enhanced Synthetic Environment Procedures Trainer ('SEPT'). SEPT provides training in marshalling and handling of both fixed and rotary winged aircraft in a safe synthetic environment.
A sale of OmegaPS software to Vitrociset for use on the Galileo project.
Joint Venture
Despite ongoing difficulties and delays at Airbus, the joint venture made a small profit in the period. Negotiations are in hand for the termination of the joint venture agreement with effect from 30 September 2009.
Outlook
Business is expected to continue to be challenging in the second half and beyond. However, the Group's revenues are underpinned by a number of support contracts, maintenance agreements and consultancy agreements with ongoing revenue streams. Tendering activity continues to be strong, we are actively seeking opportunities for diversification and there are major programmes in the pipeline with new and existing customers.
C C Powell
Chairman
7 September 2009
PENNANT INTERNATIONAL GROUP plc
CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2009
| Notes | Six months ended 30 June 2009 | Six months ended 30 June 2008 | Year ended 31 December 2008 | |
| £ | £ | £ | ||
| Revenue | 4,828,042 | 5,408,658 | 9,839,547 | |
| Cost of sales | (2,983,568) | (3,357,548) | (6,419,631) | |
| Gross profit | 1,844,474 | 2,051,110 | 3,419,916 | |
| Administrative expenses | (1,730,788) | (1,943,226) | (3,847,137) | |
| Operating profit | 113,686 | 107,884 | (427,221) | |
| Share of results of Joint Venture | 2,119 | (31,611) | (33,705) | |
| 115,805 | 76,273 | (460,926) | ||
| Finance costs | (9,116) | (23,176) | (48,222) | |
| Finance income | 177 | 1,790 | 8,765 | |
| Profit before taxation | 106,866 | 54,887 | (500,383) | |
| Taxation | 2 | (20,000) | (10,489) | 19,516 |
| Profit for the period | 86,866 | 44,398 | (480,867) | |
| Earnings per share | 3 | |||
| Basic | 0.29p | 0.14p | (1.57)p | |
| Diluted | 0.27p | 0.13p | (1.47)p |
PENNANT INTERNATIONAL GROUP plc
CONSOLIDATED BALANCE SHEET as at 30 June 2009
| 30 June 2009 | 30 June 2008 | 31 December 2008 | |
| £ | £ | £ | |
| Non-current assets | |||
| Goodwill | 879,846 | 901,249 | 923,299 |
| Other intangible assets | 90,068 | 148,717 | 121,475 |
| Property plant and equipment | 1,864,094 | 1,987,525 | 1,925,918 |
| Interest in Joint Venture | 5,370 | 5,345 | 3,251 |
| Available-for-sale investments | 6,135 | 6,135 | 6,135 |
| Deferred tax asset | 29,339 | 19,430 | 26,627 |
| Total non-current assets | 2,874,852 | 3,068,401 | 3,006,705 |
| Current assets | |||
| Inventories | 19,340 | 29,823 | 24,970 |
| Trade and other receivables | 3,442,332 | 3,644,223 | 3,196,215 |
| Cash and cash equivalents | 267,792 | 735,847 | 600,631 |
| Total current assets | 3,729,464 | 4,409,893 | 3,821,816 |
| Total assets | 6,604,316 | 7,478,294 | 6,828,521 |
| Current liabilities | |||
| Trade and other payables | 1,278,354 | 1,412,218 | 1,313,601 |
| Current tax liabilities | 15,569 | 10,000 | 14,920 |
| Obligations under finance leases | 2,490 | 836 | 3,603 |
| Bank loan | 189,461 | 156,725 | 174,550 |
| Deferred revenue | 364,535 | 383,086 | 432,221 |
| Total current liabilities | 1,850,409 | 1,962,865 | 1,938,895 |
| Net current assets | 1,879,055 | 2,447,028 | 1,882,921 |
| Non current liabilities | |||
| Bank loan | 318,761 | 528,736 | 428,608 |
| Obligations under finance leases | 17,190 | 1,691 | 17,138 |
| Deferred tax liabilities | - | 32,000 | - |
| Deferred revenue | 10,583 | 12,890 | 21,279 |
| Total non-current liabilities | 346,534 | 575,317 | 467,025 |
| Total liabilities | 2,196,943 | 2,538,182 | 2,405,920 |
| Net assets | 4,407,373 | 4,940,112 | 4,422,601 |
| Equity | |||
| Share capital | 1,600,000 | 1,600,000 | 1,600,000 |
| Treasury shares | (363,016) | (310,516) | (363,016) |
| Share premium account | 3,582,329 | 3,582,329 | 3,582,329 |
| Retained earnings | (484,334) | 36,959 | (571,200) |
| Translation reserve | 72,394 | 31,340 | 174,488 |
| Total equity | 4,407,373 | 4,940,112 | 4,422,601 |
PENNANT INTERNATIONAL GROUP plc
CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2009
| Notes | Six months ended 30 June 2009 | Six months ended 30 June 2008 | Year ended 31 December 2008 | |
| £ | £ | £ | ||
| Net cash (used in) operating activities | 4 | (155,000) | (477,070) | (574,815) |
| Investing activities | ||||
| Interest received | 177 | 1,790 | 8,765 | |
| Proceeds from sale of property, plant and equipment | - | 959 | - | |
| Purchase of intangible assets | (300) | (48,900) | (49,301) | |
| Purchase of property plant and equipment | (19,788) | (19,449) | (42,775) | |
| Loan to Joint Venture | - | (20,000) | (20,000) | |
| Net cash used in investing activities | (19,911) | (85,600) | (103,311) | |
| Financing activities | ||||
| Dividends paid | - | (134,143) | (201,214) | |
| Transactions in own shares | - | (61,218) | (61,218) | |
| Repayment of borrowings | (94,936) | (76,528) | (158,831) | |
| Net increase in/repayment of obligations under finance leases | (1,061) | (94) | 18,120 | |
| Increase in bank overdrafts | - | - | - | |
| Net cash used in financing activities | (95,997) | (271,983) | (403,143) | |
| Net decrease in cash and cash equivalents | (270,908) | (834,653) | (1,081,269) | |
| Cash and cash equivalents at beginning of period | 600,631 | 1,568,620 | 1,568,620 | |
| Effect of foreign exchange rates | (61,931) | 1,880 | 113,280 | |
| Cash and cash equivalents at end of period | 267,792 | 735,847 | 600,631 | |
PENNANT INTERNATIONAL GROUP plc
STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2008
| Share capital | Treasury shares | Share premium account | 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 |
| Loss for the year | - | - | (480,867) | - | (480,867) | |
| Dividends paid | - | - | (201,214) | - | (201,214) | |
| Transactions in treasury shares | - | (113,718) | - | - | - | (113,718) |
| Share based payment | - | - | (9,823) | - | (9,823) | |
| Currency translation differences on foreign currency net investments | - | - | - | 136,533 | 136,533 | |
| At 31 December 2008 | 1,600,000 | (363,016) | 3,582,329 | (571,200) | 174,488 | 4,422,601 |
| Profit for the half year | - | - | 86,866 | - | 86,866 | |
| Dividends paid | - | - | - | - | - | |
| Transactions in treasury shares | - | - | - | - | - | |
| Share based payment | - | - | - | - | - | |
| Currency translation differences on foreign currency net investments | - | - | - | (102,094) | (102,094) | |
| At 30 June 2009 | 1,600,000 | (363,016) | 3,582,329 | (484,334) | 72,394 | 4,407,373 |
NOTES TO THE FINANCIAL INFORMATION for the six months ended 30 June 2009
1. Basis of preparation
This condensed set of financial statements has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs). The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied to the Group's latest annual audited financial statements. The following standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009 but have had no effect on the information presented in this condensed set of financial statements:
IAS 1 Presentation of financial statements
IFRS 8 Operating Segments
IAS 23 (amendment) Borrowing costs
IFRS 2 (amendment) Share-based payment
IFRS 32 (amendment) Financial instruments: presentation
IFRIC 13 Customer loyalty payments
IFRIC 15 Agreements for the construction of real estate
IFRIC 16 Hedges of a net investment in a foreign operation
IAS 39 (amendment) Financial instruments: recognition and measurement
While the financial figures included in this half-yearly report have been computed in accordance with IFRSs applicable to interim periods and include the information required to be disclosed by the AIM Rules for Companies, they do not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34.
The results for the year ended 31 December 2008 are not statutory accounts. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s237 (2) or (3) of the Companies Act 1985.
2. Taxation
The taxation charge for the period is based on the estimated rate of tax that is likely to be effective for the full year to 31 December 2009.
3. Earnings per share
Basic earnings per share are calculated by dividing the profit for the period attributable to the shareholders by the weighted average number of shares in issue. The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options.
| Six months ended 30 June 2009 | Six months ended 30 June 2008 | Year ended 31 December 2008 | |
| £ | £ | £ | |
| Earnings | |||
| Net profit attributable to equity shareholders | 86,866 | 44,398 | (480,867) |
| Number of shares | |||
| Weighted average number of ordinary shares | 29,487,045 | 30,769,156 | 30,641,321 |
| Number of dilutive shares under option | 2,160,000 | 2,250,000 | 2,180,000 |
| Weighted average number of ordinary shares for the purpose of dilutive earnings per share | 31,647,045 | 33,019,156 | 32,821,321 |
4. Cash (used in) /generated from operations
| Six months ended 30 June 2009 | Six months ended 30 June 2008 | Year ended 31 December 2008 | |
| £ | £ | £ | |
| Profit for the period | 86,866 | 44,398 | (480,867) |
| Share of results of Joint Venture | (2,119) | 31,611 | 33,705 |
| Finance income | (177) | (1,790) | (8,765) |
| Finance costs | 9,116 | 23,175 | 48,222 |
| Income tax expense | 20,000 | 10,489 | (19,516) |
| Share-based payment | - | 6,000 | (9,823) |
| Depreciation charge | 112,871 | 101,430 | 222,927 |
| Profit on sale of assets | - | (959) | - |
| Operating cash flows before movement in working capital | 226,557 | 214,354 | (214,117) |
| (Increase) in receivables | (246,117) | (482,628) | (34,620) |
| Decrease/(increase) in inventories | 5,630 | (2,445) | 2,408 |
| (Decrease) in payables | (35,247) | (33,302) | (184,419) |
| (Decrease)/increase in deferred revenue | (78,382) | (44,643) | 12,881 |
| Cash (used in) operations | (127,559) | (348,664) | (417,867) |
| Tax paid | (18,325) | (105,231) | (108,726) |
| Interest paid | (9,116) | (23,175) | (48,222) |
| Net cash (used in) operations | (155,000) | (477,070) | (574,815) |
Copies of this statement will be sent to shareholders and will be available on the Group's website (www.pennantplc.co.uk) and from Pennant International Group plc, Pennant Court, Staverton Technology Park, Cheltenham, GL51 6TL.