Interim Results
Pennant International Group PLC
06 September 2006
Pennant International Group plc
Interim results for the six months ended 30 June 2006
Profit before tax, EPS and Dividend up; Gearing down;
Pennant International Group plc ('Pennant' or the 'Company'), the AIM listed
supplier of technology solutions to the defence and industrial sectors,
including simulation and training systems, technical data services and data
management systems, announces Interim Results for the six months ended 30 June
2006.
In his Statement to shareholders, Chairman Christopher Powell said:
'Pennant is pleased to announce a substantial increase in profit before tax. All
operating divisions were profitable, the order book is strong and there are good
prospects for the medium term'
Highlights:
• Group profit before tax up to £322,000 (2005: £25,000).
• Earnings per share (basic) up 600% to 0.96p (2005: 0.16p)
• Increased interim dividend of 0.20p per share (2005: 0.13p).
• Strong cash generation with net debt down to £233,000; Gearing further
reduced to 5% (2005: 21%) at period end.
• Completion of sale of Southampton freehold site expected shortly,
generating profit of £300,000
• Consolidation of market position in naval defence sector; significant
short to medium term prospects in the international rail market.
On current trading and prospects, Mr Powell added:
'The Board is pleased and encouraged with progress during the period and
continues to position Pennant to take further advantage of the potential in its
current markets including its recent entry into the naval sector. The balance
sheet is strong and relationships with major customers are excellent, bringing
good prospects of new and repeat business for the future.
For further information contact:
Pennant International Group plc Tel: 01452 714881
Chris Snook, Chief Executive
John Waller, Finance Director
W.H. Ireland Tel: 0121 616 2101
Tim Cofman
Winningtons Financial Tel: 0117 920 0092 or 07768 807631
Paul Vann
Pennant International Group Plc
Interim results for the period ended 30 June 2006
6 September 2006
CHAIRMAN'S STATEMENT
Pennant International Group plc ('Pennant') is pleased to announce a substantial
increase in profit before tax compared with the corresponding period last year
Turnover increased by 11% and net operating expenses fell 14%. All operating
divisions were profitable, cash flow was positive, the order book is strong and
there are good prospects for the medium term. The proposed interim dividend
represents an increase of 53% over 2005.
RESULTS AND DIVIDEND
On group turnover of £5.78 million, profit on ordinary activities before
taxation amounted to £322,000 (June 2005: £25,000).
Basic earnings per share rose to 0.96p (June 2005: 0.16p)
During the period cash generated from operations was £327,000 (June 2005: cash
absorbed was £208,000). Net debt reduced to £223,000 (June 2005: £769,000) with
gearing at the period-end standing at 5% (June 2005: 21%)
Your Board is declaring an increased interim cash dividend of 0.20p per share
(June 2005: 0.13p). The dividend will be paid on 20 October 2006 to shareholders
on the register at the close of business on 29 September 2006. The shares are
expected to go ex dividend on 27 September 2006. This increased dividend
reflects your Board's confidence in the future.
CURRENT TRADING AND PROSPECTS
Current trading in Pennant's traditional markets has been strong. In addition,
Pennant has secured significant work in the naval sector where previously it had
limited presence. The forward order book gives a firm foundation for 2007 and
beyond.
The UK Defence Industrial Strategy has confirmed new 'platform' opportunities
for the near future in Pennant's existing and recently entered markets in air,
land and sea. Pennant also has opportunities for work in significant overseas
programmes where new 'platforms' are being acquired in the defence and rail
transportation markets.
Joint Venture Company (Pennant Sonovision -ITEP Ltd)
The financial performance of our Joint Venture Company, engaged in the provision
of technical documentation and engineering services to Airbus UK Limited, was
affected by delays to the Airbus A380 programme. Trading is expected to improve
during the second half.
OTHER FINACIAL MATTERS
Sale of Southampton Property
As reported in my last statement to shareholders, in February 2006 Pennant
exchanged conditional contracts for the sale of property in Southampton. The
sale is conditional upon the purchaser being able to obtain planning permission
within nine months of the date of exchange. The purchaser registered a planning
application on 28 June 2006 and a decision from the planning authority is
expected in the near future. If, as expected, the transaction is completed it
will realise a profit of approximately £300,000 and a cash inflow of
approximately £700,000.
Cancellation of Deferred Shares
The cancellation of the deferred shares in accordance with the special
resolution passed at the AGM on 4 May 2006 has been confirmed by the High Court.
It is expected that the conditions attaching to the confirmation will be
satisfied in the second half and as a result the distributable reserves of the
Company will be increased by £1,445,400 at the year end.
CONCLUSION
The Board is pleased and encouraged with progress during the period and
continues to position Pennant to take further advantage of the potential in its
current markets including its recent entry into the naval sector. The balance
sheet is strong and relationships with major customers are excellent bringing
further prospects of new and repeat business for the future.
C C Powell
Chairman
6 September 2006
Pennant International Group plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2006 2005 2005
Notes (Restated) (Restated)
£'000 £'000 £'000
Turnover
Group and share of joint venture 5,867 5,298 10,785
Less: Share of joint venture (85) (82) (223)
Group turnover 5,782 5,216 10,562
Cost of sales (3,641) (3,138) (6,165)
Gross profit 2,141 2,078 4,397
Net operating expenses (1,742) (2,028) (3,900)
Group operating profit 399 50 497
Share of joint venture's operating profit (35) 17 5
Profit on ordinary activities before 364 67 502
interest
Interest - Group (38) (42) (86)
- Joint Venture (4) - (1)
Profit on ordinary activities before
taxation 322 25 415
Taxation 3 (18) (3) (26)
Profit on ordinary activities after
taxation for group and its share of Joint
Venture attributable to members of the 304 22 389
parent undertaking
Earnings per share 4
Basic 0.96p 0.16p 1.22p
Diluted 0.89p 0.14p 1.12p
Group Statement of Total Recognised
Gains and Losses
Profit for the period 304 22 389
Currency translation differences on foreign
currency net investments (19) 24 35
Total recognized gains and losses relating 285 46 424
to the period
Prior year adjustment - - 86
285 46 510
Pennant International Group plc
SUMMARISED CONSOLIDATED BALANCE SHEET
As at As at As at
30 June 30 June 31 Dec
Note 2006 2005 2005
(Restated) (Restated)
£'000 £'000 £'000
Fixed assets
Intangible assets 830 966 857
Tangible assets 2,566 2,598 2,562
Investment in joint venture
Share of gross assets 86 155
Share of gross liabilities (67) (148)
- 19 7
Investments 6 6 6
3,402 3,589 3,432
Current assets
Stocks 640 631 751
Debtors 2,406 2,457 2,345
Cash at bank and in hand 1,136 770 940
4,182 3,858 4,036
Creditors: amounts falling due within one year (2,517) (2,735) (2,521)
Net current assets 1,665 1,123 1,515
Total assets less current liabilities 5067 4,712 4,947
Creditors:
amounts falling due after more than one year (848) (995) (920)
Interest in net liabilities of joint venture
Share of gross assets 145
Share of gross liabilities (177)
(32) - -
Provisions for liabilities and charges
- deferred tax (8) - (16)
4,179 3,717 4,011
Called up share capital 1,600 3,045 3,045
Share premium 3,564 3,564 3,564
Special reserve 1,445 - -
Reserves (2,430) (2,892) (2,598)
Shareholders' funds 5 4,179 3,717 4,011
Pennant International Group plc
CONSOLIDATED GROUP CASH FLOW
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2006 2005 2005
£'000 £'000 £'000
Cash inflow/(outflow) from operating activities 327 (208) 484
Returns on investment and servicing of finance (38) (42) (86)
Taxation (26) (38) (32)
Capital expenditure (99) (31) (71)
Investment in joint venture - (5) (5)
Equity dividends (98) (87) (128)
Cash inflow/(outflow) before financing 66 (411) 162
Financing
Repayment of loan and hire purchase (74) (49) (129)
Transactions in Treasury Shares (27) - (50)
Decrease in net cash (35) (460) (17)
Reconciliation of net cash flow to movement in net debt
Decrease in net cash (35) (460) (17)
Cash to repurchase debt 74 49 129
New loans and hire purchase contracts - - (16)
Movement in net debt in period 39 (411) 96
Net debt at beginning of period (262) (358) (358)
Net debt at end of period (223) (769) (262)
Reconciliation of operating profit to cash flow from
operating activities
Operating profit 399 50 497
Depreciation 94 106 202
Amortisation of intangible assets 27 101 203
Profit on sale of fixed assets - (1) (3)
Increase in work in progress and debtors (30) (857) (867)
Increase/(decrease) in creditors (153) 349 385
Other movements (10) 44 67
327 (208) 484
Pennant International Group plc
Notes to Interim Statement
1. This interim statement, which is neither audited nor reviewed, has
been prepared on the basis of the accounting policies set out in the Group's
2005 annual report with the exception of the policy in respect of
share-based payments. The group will implement the requirements of FRS
20 in the 2006 Financial Statements, and this standard has accordingly been
adopted in this Interim Statement with the comparative figures restated. This
change in accounting policy has resulted in a pre-tax charge of £8000 for the
six months ended 30 June 2006, £28000 for the six months ended 30 June 2005 and
£36000 for the year ended 31 December 2005.
Share-based payments accounting policy:
In accordance with FRS 20 'Share - based payment', the Group
reflects the economic cost of awarding shares and share options to employees
by recording an expense in the profit and loss account equal to the
fair value of the benefit awarded; fair value being estimated by an independent
third party using a proprietary binomial probability model.
The expense is recognised in the income statement over the vesting period of the
award.
2. The balance sheet at 31 December 2005 and the results for the year
then ended have been abridged from the financial statements in the Group's
Annual Report subject only to re-statement for share-based payments
explained in 1. above. They do not constitute full financial statements
within the meaning of s240 of the Companies Act 1985. The Annual Report has been
filed with the Registrar of Companies: the auditors' opinion on the financial
statements was unqualified and did not contain a statement under s237(2) or
s237(3) of the Companies Act 1985.
3. 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 2006.
4. The calculation of earnings per share is based on the profit
attributable to the shareholders and the weighted average number of
shares as set out below:
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2006 2005 2005
(Restated) (Restated)
£ £ £
Profit attributable to shareholders 304,000 22,000 389,000
Number Number Number
Basic weighted average number of shares 31,557,786 32,000,000 31,971,463
Employee share options 2,757,500 2,844,500 2,777,500
Diluted weighted average number of shares 34,315,286 34,844,500 34,748,963
per share per share per share
Basic 0.96 0.07 1.22
Diluted 0.89 0.06 1.12
5. Movements in Shareholders' Funds in the period were as follows:
Share Share premium Profit and Special
capital loss account reserve Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2006 (Restated) 3,045 3,564 (2,598) 0 4,011
Profit for the period 304 304
Translation differences on foreign
currency net investments (19) (19)
Transactions in Treasury Shares (27) (27)
Share-based payments 8 8
Dividends (98) (98)
Cancellation of Deferred Shares (1,445) 1,445 0
(see below)
At 30 June 2006 1,600 3,564 (2,430) 1,445 4,179
At the AGM of the Company on 4 May 2006 the shareholders agreed by
special resolution to reduce the share capital of the Company by the
cancellation of all the Deferred Shares of 15p each in the capital of the
Company.
The special resolution was confirmed by the High Court of Justice
Chancery Division on 14 June 2006 and registered with the Registrar of
Companies on 22 June 2006. The High Court required that a sum equal
to the amount of the reduction in share capital, £1,445,400, be transferred to a
non-distributable Special Reserve. The Company is entitled to release the
Special Reserve upon transferring to a blocked trust bank account a sum equal to
the amount of the non-consenting creditors of the Company who were (a) creditors
of the Company on 14 June 2006 and (b) creditors of the Company at the date of
the release ('Relevant Creditors') Such trust bank account to be used solely for
discharging the claims of the relevant creditors. The Directors expect to be
able to treat the Special Reserve as a distributable reserve in the balance
sheet at 31 December 2006 and all Relevant Creditors will be discharged by that
date.
6. This announcement is being circulated to all shareholders of the
Company and copies will be available to the public at the Company's Registered
Office at Pennant Court, Staverton Technology Park, Cheltenham GL51 6TL
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