Interim Results

RNS Number : 4526E

Pennant International Group PLC

29 September 2008

 

                                                                                                                       29 September 2008

PENNANT INTERNATIONAL GROUP plc

Interim Results for the six months ended 30 June 2008

Pennant International Group plc ('Pennant' or 'the Company'), the AIM listed supplier of integrated logistic support solutions principally to the defence, rail, aerospace and naval markets, and products and services to a number of Government Departments, announces interim results for the 6 months ended 30 June 2008.

Commenting on the results, Chairman Christopher Powell said:

'I am pleased to report that the Group has remained profitable despite the adverse effects of the current economic climate. Importantly, the Group has continued to win new contracts which will provide good revenue streams going forward.'

Highlights:

• Turnover for the period of £5.4 million (2007: £6.5 million).

• Gross margin increased to 37% (2007: 35%).

• Operating profit of £108,000 (2007: £437,000).

• Pre-tax profit of £55,000 (2007: £375,000).

• Earnings per Share (basic) of 0.14 pence (2007: 1.10 pence).

• Net Cash at period end of £48,000 (2007: Net Debt of £868,000).

• Maintained Interim Dividend per Share of 0.22p (2007: 0.22p).

• Major new contract award expected from DND in Canada worth up to C$15 million over 2-5 years.

• Further contract renewals/extensions with DWP, HMRC, MoD (Type 45 Destroyer), BAE Systems (Hawk).

• New OmegaPS licence sales to Alenia of Italy and Gentex Corporation of US.

On current trading and prospects, Mr. Powell added:

'Although current global economic conditions will continue to have an impact on trading, all operating divisions within the Group are well positioned to take advantage of opportunities as they arise.

'With a positive net cash position and a strong balance sheet, your Board remains confident for the future.'

Enquiries:

Pennant International Group plc

Chris Snook, Chief Executive             Tel: [phone]

W.H. Ireland    

Katy Birkin                                        Tel: [phone]

Winningtons Financial 

Paul Vann / Tom Cooper                   Tel: [phone]

Chairman's Statement

I am pleased to report that the Group has remained profitable despite the adverse effects of the current global economic climate which, as highlighted in my statement in the 2007 Annual Report, has caused delays to the letting of contracts and pressure on budgets. Importantly, the Group has continued to win new long-term contracts which provide good revenue streams going forward. The Group's balance sheet remains strong and the cash position is positive.

Results and Dividend

Turnover for the period was £5.4million (June 2007: £6.5 million). The gross margin achieved was 37%, a 2% improvement over the first half of 2007. Operating profit was £108,000 (June 2007: £437,000) and earnings were £44,000 (June 2007: £345,000), equating to basic earnings per share of 0.14p (June 2007: 1.10p)

During the period, cash was absorbed into working capital as the result of the timing of certain milestone payments. Cash used in operating activities totalled £477,000, whilst net cash at the end of the period was £48,000 (June 2007: net debt of £868,000). Stage payments and a substantial software maintenance annual renewal payment due in the second half are expected to increase the net cash position by the year end.

Your Board is maintaining the interim cash dividend at 0.22p per share. The dividend will be paid on 7 November 2008 to shareholders on the register at close of business on 10 October 2008. The shares are expected to go ex-dividend on 8 October 2008.

Current Trading 

The principal activities and achievements in the period include:

• A major new contract in Canada:
  Negotiations are in progress with the Department of National Defence ('DND') in respect of the non-competitive award of a major new contract (replacing an existing contract that has run its term) for training, installation and specialist consultant support to maximise the effective use of OmegaPS within the DND. This is a significant contract having a term of 2 years with options for 3 one-year extensions. The value is considerably higher than the current contract with the potential to reach C$15 million. 

• A new contract with Specialist Computer Centres plc for the development of Her Majesty's Revenue and Custom's  CD-ROM that brings together a wide range of guidance booklets and interactive forms to help employers carry out their payroll responsibilities and which will be issued to all 1.7 million employers and agents. The contract is expected to run for up to 3 years. 

• An extension to April 2010 of the contract to support the Learning Highway Blended Learning Solution for the Department of Work and Pensions.

• The successful completion of a 2 year contract with Kawasaki Heavy Industries in Japan to provide maintenance manuals and training for the Taipei Subway EMU project.

• The extension of a draughting services contract with TOTAL E&P UK Limited to September 2010.

• The successful continuation of two major Hawk programmes for BAE Systems. The order value of both programmes has increased and they are now expected to extend well into 2009.

• Continuation of a major data services contract for the Type 45 destroyer

• Completion of the development of a major upgrade to OmegaPS, Pennant's world-leading logistics support analysis software package.

• Sale of new OmegaPS licences to Alenia in Italy and Gentex Corporation in the USA.

Joint Venture

Ongoing difficulties and delays at Airbus continue to adversely affect the joint venture with Sonovision-ITEP which made a loss of £31,000 in the period. Whilst these delays continue to affect performance,  other sources of revenue are actively being pursued.

Outlook

Although global economic conditions are expected to continue to have an impact on trading, all operating divisions enjoy good relationships with customers and are well positioned to take advantage of opportunities as they arise from the Group's established pipeline of prospects.

With the foundation of a positive net cash position and a strong balance sheet your Board remains confident for the future.

C C Powell

Chairman

29 September 2008

PENNANT INTERNATIONAL GROUP plc

CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2008

	Notes	Six months ended 30 June 2008	Six months ended 30 June 2007	Year ended 31 December 2007
		£	£	£
Revenue		5,408,658	6,495,123	12,349,683
Cost of sales		(3,357,548)	(4,225,355)	(7,936,361)
Gross profit		2,051,110	2,269,768	4,413,322
Administrative expenses		(1,943,226)	(1,832,645)	(3,555,765)
Profit on sale of assets held for sale		-	-	375,997
Operating profit		107,884	437,123	1,233,554
Share of results of Joint Venture		(31,611)	(20,720)	(33,070)
		76,273	416,403	1,200,484
Finance costs		(23,176)	(41,900)	(92,292)
Finance income		1,790	96	9,991
Profit before taxation		54,887	374,599	1,118,183
Taxation	2	(10,489)	(30,000)	(104,924)
Profit for the period		44,398	344,599	1,013,259
Earnings per share	3
Basic		0.14p	1.10p	3.23p
Diluted		0.13p	1.02p	3.02p

PENNANT INTERNATIONAL GROUP plc

CONSOLIDATED BALANCE SHEET as at 30 June 2008 

	30 June 2008	30 June 2007	31 December 2007
	£	£	£
Non-current assets
Goodwill	901,249	902,373	909,697
Other intangible assets	148,717	30,115	117,731
Property plant and equ ipment	1,987,525	2,102,094	2,051,477
Interest in Joint Venture	5,345	69,307	16,956
Available-for-sale investments	6,135	6,135	6,135
Deferred tax asset	19,430	12,966	19,629
Total non-current assets	3,068,401	3,122,990	3,121,625
Current assets
Inventories	29,823	90,297	27,378
Trade and other receivables	3,644,223	3,986,080	3,161,595
Cash and cash equivalents	735,847	278,802	1,568,620
Assets held for sale	-	372,522	-
Total current assets	4,409,893	4,727,701	4,757,593
Total assets	7,478,294	7,850,691	7,879,218
Current liabilities
Trade and other payables	1,412,218	1,771,168	1,445,520
Current tax liabilities	10,000	24,729	104,779
Obligations under finance leases	836	0	1,089
Bank overdraft and loan	156,725	454,134	147,559
Deferred revenue	383,086	351,393	414,838
Total current liabilities	1,962,865	2,601,424	2,113,785
Net current assets	2,447,028	2,126,277	2,643,808
Non current liabilities
Bank loan	528,736	692,770	614,430
Obligations under finance leases	1,691	0	1,532
Deferred tax liabilities	32,000	32,000	32,000
Deferred revenue	12,890	2,598	25,781
Total non-current liabilities	575,317	727,368	673,743
Total liabilities	2,538,182	3,328,792	2,787,528
Net assets	4,940,112	4,521,899	5,091,690
Equity
Share capital	1,600,000	1,600,000	1,600,000
Share premium account	3,582,329	3,582,329	3,582,329
Retained earnings	(273,557)	(631,128)	(128,594)
Translation reserve	31,340	(29,302)	37,955
Total equity	4,940,112	4,521,899	5,091,690

PENNANT INTERNATIONAL GROUP plc

CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2008 

	Notes	Six months ended 30 June 2008	Six months ended 30 June 2007	Year ended 31 December 2007
		£	£	£
Net cash (used in)/generated from operating activities	4	(477,070)	(502,715)	563,799
Investing activities
Interest received		1,790	96	9,991
Proceeds of sale of assets held for sale		-	-	748,519
Proceeds from sale of property, plant and equipment		959	-	-
Purchase of intangible assets		(48,900)	(11,576)	(107,542)
Purchase of property plant and equipment		(19,449)	(120,639)	(154,120)
Loan to Joint Venture		(20,000)	(30,000)	10,000
Net cash used in investing activities		(85,600)	(162,119)	506,848
Financing activities
Dividends paid		(134,143)	(125,828)	(194,098)
Transactions in own shares		(61,218)	(117,975)	(176,225)
Repayment of borrowings		(76,528)	(71,182)	(143,301)
Repayment of obligations under finance leases		(94)	(2,798)	(177)
Increase in bank overdrafts		-	312,796	-
Net cash used in financing activities		(271,983)	(4,987)	(513,801)
Net (decrease)/increase in cash and cash equivalents		(834,653)	(669,821)	556,846
Cash and cash equivalents at beginning of period		1,568,620	909,609	909,609
Effect of foreign exchange rates		1,880	39,014	102,165
Cash and cash equivalents at end of period		735,847	278,802	1,568,620

 PENNANT INTERNATIONAL GROUP plc

STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2008 

	Share capital	Share premium account	Retained earnings	Translation reserve	Total equity
	£	£	£	£	£
At 1 January 2007	1,600,000	3,582,329	(744,302)	(63,905)	4,374,122
Profit for the year	-	-	1,013,259	-	1,013,259
Dividends paid	-	-	(194,098)	-	(194,098)
Transactions in treasury shares	-	-	(176,225)	-	(176,225)
Share based payment	-	-	(27,228)	-	(27,228)
Currency translation differences on foreign currency net investments	-	-	-	101,860	101,860
At 31 December 2007	1,600,000	3,582,329	(128,594)	37,955	5,091,690
Profit for the half year	-	-	44,398	-	44,398
Dividends paid	-	-	(134,143)	-	(134,143)
Transactions in treasury shares	-	-	(61,218)	-	(61,218)
Share based payment	-	-	6,000	-	6,000
Currency translation differences on foreign currency net investments	-	-	-	(6,615)	(6,615)
At 30 June 2008	1,600,000	3,582,329	(273,557)	31,340	4,940,112

NOTES TO THE FINANCIAL INFORMATION for the six months ended 30 June 2008

1.  Basis of preparation

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 2007 annual report. It does not comply with IAS 34 'Interim Financial Reporting' as is permissible under the rules of the AIM Market ('AIM').

The balance sheet at 31 December 2007 and the results for the year then ended do not constitute full financial statements within he 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.

 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 2008.

3. Earnings per share

Basic earnings per share is 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 2008	Six months ended 30 June 2007	Year ended 31 December 2007
	£	£	£
Earnings
Net profit attributable to equity shareholders	44,398	344,599	1,013,259
Number of shares
Weighted average number of ordinary shares	30,769,156	31,426,167	31,349,821
Number of dilutive shares under option	2,250,000	2,247,500	2,230,000
Weighted average number of ordinary shares for the purpose of dilutive earnings per share	33,019,156	33,673,667	33,579,821

4.  Cash (used in) /generated from operations

	Six months ended 30 June 2008	Six months ended 30 June 2007	Year ended 31 December 2007
	£	£	£
Profit for the period	44,398	344,599	1,013,259
Share of results of Joint Venture	31,611	20,720	33,070
Finance income	(1,790)	(96)	(9,991)
Finance costs	23,175	41,900	92,292
Income tax expense	10,489	30,000	104,924
Share-based payment	6,000	12,378	(27,228)
Depreciation charge	101,430	117,401	210,613
Profit on sale of assets	(959)	-	(375,997)
Operating cash flows before movement in working capital	214,354	566,902	1,040,942
(Increase)/decrease in receivables	(482,628)	(1,191,946)	(367,319)
(Increase)/decrease in inventories	(2,445)	22,642	85,561
(Decrease)/increase in payables	(33,302)	241,164	(84,484)
(Decrease)/increase in deferred revenue	(44,643)	(41,927)	44,701
Cash (used in)/ generated from operations	(348,664)	(403,165)	719,401
Tax paid	(105,231)	(57,650)	(63,310)
Interest paid	(23,175)	(41,900)	(92,292)
Net cash (used in)/generated from operations	(477,070)	(502,715)	563,799

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.

 

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