Good morning! Pennant International (LON:PEN 89p) issues its interim results for the six months to 30 Jun 2013. These shares have risen a remarkable nine-fold in the last three years (see chart below). Pennant supplies flight simulators for training pilots, and other similar services. The figures this morning look very impressive - turnover is up 38% on last year's H1, and pre-tax profit has risen from £755k to £1,140k, a 51% increase.
EPS is 3.31p, so doubling that to annualise it, that's 6.6p. At 89p that puts the shares on a PER of 13.5, which doesn't look expensive for that rate of growth. The key question is whether the growth is sustainable, and although the outlook section contains very little specific information, it generally sounds good (my bolding of the key sentence):
The order book provides good visibility through 2014 and beyond and during the period there has been significant on-going activity with a broad global spread of potential customers on a number of significant opportunities particularly in the defence and rail sectors.
In the defence sector these requirements range from basic training aids for ab-initio students to complex platform specific simulators, computer based training and virtual reality. In the rail sector there are major new opportunities relating to the provision of documentation and training for operators and maintainers of rail assets.
The pipeline is robust and active and the Group's good relationships with its customers and its strong balance sheet continue to provide a firm position from which to build and realise the opportunities arising.
Instead of all that waffle, I would have preferred a clear statement about where the company is versus market expectations for profits. Although it looks to be on track, as broker consensus is for 6.56p EPS this year, and that looks about right, as mentioned above.
The Balance Sheet is strong, with net cash of £1.2m, although I note that cashflow has been poor for this six months, with debtors ballooning to £5.8m. This is mentioned in the narrative, as being something they see unwinding in H2, so I shall be looking out for an improved cashflow & debtors picture with the full year results in early 2014.
I hold some shares in Pennant in my long-term portfolio, and…
