Good afternoon!
Pennant International (LON:PEN)
Share price: 41p (down 15.5% today)
No. shares: 26.5m
Market cap: £10.9m
Trading update - this company describes itself as 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
That's as clear as mud then! I think they basically make simulators, and other training equipment. This link is for the products section of their website.
In my report of 28 Sep 2015 I concluded that another profit warning was likely this year, due to the dreaded H2-weighted year expectations commentary which accompanied poor interim results. And so it has come to pass, with the company today saying;
In the Group's interim statement published on 28th September 2015, the Board stated that the outcome for the full year would be dependent on the timing of securing certain contracts with an aggregate tender value in excess of £15m. One of these contracts has now been secured, pre contract work has been agreed and has commenced on another and the Directors' confidence of signing the remaining major contract with a Middle Eastern client has been further enhanced following recent further developments.
Despite this progress, the delays in these contracts have adversely impacted the results for H2. As a result the loss for H2 is now expected to be significantly greater than that reported in H1. H2 has however, as expected, seen a significant improvement in the cash position from interims, with year-end balance likely to be in line with the opening net cash position at circa £1m.
An H2 weighted year commentary is nearly always a deferred profit warning, so it's a sell, or at the very least, not one to buy, whenever companies come out with that type of language. Companies are always optimistic, but reality usually disappoints.
Looking back at the interims, the company made a £756k loss, so the H2 loss being "significantly greater", says to me that we're probably looking at >£1m loss in H2, which is terrible. That means the full year loss of probably going to be close to £2m, an appalling result which might have been enough to bring down a company with a weak balance sheet.
Thankfully, Pennant has quite a strong balance sheet, although as I commented on 28 Sep…
