REG - Pennant Int. Group - Interim Results
23/09/2024 07:00
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RNS Number : 1358F Pennant International Group PLC 23 September 2024
FOR IMMEDIATE RELEASE
23 September
2024
PENNANT INTERNATIONAL GROUP PLC
("Pennant", the "Company" or the "Group")
Interim Results
Pennant International Group plc (AIM:PEN), the systems support software and
training solutions company, announces its Interim Results for the six months
ended 30 June 2024 (the "First Half", the "Period", or "H1 2024").
Commenting on the results, Chairman Ian Dighé said:
"I am pleased to report that the Group has maintained positive earnings before
interest, taxation and amortisation for the First Half."
"We remain firm in our strategic direction, and with the impending launch of
our Auxilium software suite, we believe we are well-placed to deliver growth.
The necessary restructuring of the Group's training systems business will
allow us to focus on longer-term opportunities for our software, systems and
services offerings in the defence space and beyond."
Financial Summary
ADJUSTED RESULTS (1) - GROUP H1 24 H1 23 Change
Revenue £7.4m £7.1m 4%
EBITA £0.6m £0.6m -4%
Loss before tax £(0.4)m £(0.3)m -57%
Loss per share - basic £(1.11)p £(0.74)p -50%
Net debt (excluding lease liabilities) £1.6m £1.9m 19%
IFRS RESULTS - GROUP H1 24 H1 23 Change
Revenue £7.4m £7.1m 4%
EBITA £0.6m £0.5m 17%
Loss before tax £(0.4)m £(0.4)m -12%
Loss per share - basic £(1.08)p £(1.01)p -7%
Net debt (including lease liabilities) £2.2m £2.6m 14%
(1) Note: the 'Adjusted Results' exclude the impact of (1) circa £0.3
million of exceptional aborted transaction costs and (2) other income from the
sale of one the Group's properties in March 2024 (£0.2m) See note 4 to the
Notes for a reconciliation between operating loss and EBITA.
Business Operations & Strategy
· Continuing investment in the Group's new Auxilium software suite,
funded by a successful placing in May raising £1.36 million (as well as a
further share subscription by the Directors post Period end). Auxilium will be
a market-leading suite of integrated product support applications.
· Appointment of a new, highly-experienced Chair, Ian Dighé, and
(post Period end) strengthening of the Board through the appointments of Jon
Kempster and Klaas van der Leest as independent Non-Executive Directors.
· Excellent progress on the UK Apache contract (which is scheduled
to complete in October 2024) including further contract uplifts bringing the
total contract value to £9.2 million.
· Strong revenue growth in the Indo-Pacific region, up 60% over H1
2023, primarily due to growing services contracts.
· Post Period end, plan underway to re-shape the UK training systems
business, retaining capability within the Group while significantly reducing
costs.
Enquiries:
Pennant International Group plc www.pennantplc.com (http://www.pennantplc.com/)
David Clements, Company Secretary +44 (0) 1452 714 914
Zeus (Nomad) www.zeuscapital.co.uk (http://www.zeuscapital.co.uk/)
Mike Coe / Sarah Mather (Investment Banking) +44 (0) 203 829 5000 (tel:+44%20203%20829%205000)
Cavendish Capital Markets Limited (Broker) www.cavendish.com (http://www.cavendish.com/)
Ben Jeynes / Callum Davidson / George Lawson (Corporate Finance) +44 (0) 207 220 0500
Michael Johnson / Dale Bellis / Sunila de Silva (Sales and Corporate
Broking)
Walbrook PR (Financial PR) pennant@walbrookpr.com (mailto:pennant@walbrookpr.com)
Tom Cooper +44 (0)20 7933 8780
Joe Walker Mob: +44 (0)7971 221 972
Notes to editors:
Pennant International Group plc (AIM: PEN) is a technology driven, leading
global provider of system support software and services, technical services,
and training solutions. It supports its global customer base in the design,
development, operation, maintenance, and training of complex assets, to
maximise operational and maintenance efficiency.
Its key markets include Aerospace, Defence and Rail, and adjacent
safety-critical markets such as Shipping, Nuclear and Space.
The Group addresses the market through three key business lines:
• Systems support software: a suite of software tools designed to
help clients: manage and use complex data; ensure equipment availability at
optimal cost; and comply with industry standards. Its Integrated Product
Support (IPS) and Integrated Logistics Support (ILS) software and services
equips customers with powerful market-leading toolsets to manage, model and
utilise complex equipment data.
• Training systems: provide hardware, software and virtual
solutions, critical skills training for maintainers and operators of aircraft,
ships and land systems.
• Technical services: support all Pennant's software and training
solutions including consultancy, support and maintenance, training and bespoke
development.
The Company's full product suite encompasses consultancy, technical
documentation, rail services, training services, and bespoke engineering
solutions.
Pennant is strategically focused on sustainable recurring revenue and
profitability growth, shifting its model towards high margin software and
services. Against a climate of rising defence budgets and the burgeoning
technological complexity of military, aviation and rail platforms, the demand
for these solutions is expected to grow substantially.
Headquartered in Cheltenham, UK, the Group operates worldwide, with offices in
Europe, North America and Indo-Pacific, serving markets with high barriers to
entry often in regulated industries.
Pennant International Group plc
Interim Report for the six months ended 30 June 2024
Chairman's Statement
Results and dividend
On behalf of the Board of Directors, I am pleased to report the Group's
Interim Results for the six months ended 30 June 2024.
The Group recorded revenues for the Period of £7.4 million (H1 2023: £7.1
million), generating adjusted EBITA of £0.6 million (H1 2023: £0.6 million).
The gross profit margin for the Period was 48% (H1 2023: 47%) .
The adjusted pre-tax loss for the Period was £0.4 million which compares with
a pre-tax loss of £0.3 million in H1 2023.
Administrative costs for the Period were £4.0 million (H1 2023: £3.6
million), although this includes £0.3 million of exceptional costs relating
to aborted corporate activity, so a modest net increase.
At the Period-end net debt stood at £2.2 million (H1 2023: net debt of £2.6
million), inclusive of £0.7 million of liabilities relating to leasing. Total
assets at Period end stood at £17.9 million (H1 2023: £20.5 million).
The adjusted basic loss per share for the First Half was (1.11)p compared to a
loss of (0.74)p for the same period last year.
Corporation taxes payable for the full year are expected to be reduced by
unrelieved tax losses of £6.8 million as at Period end (H1 2023: £7.1
million) and with R&D tax credit claims in progress.
The Directors have concluded that it is in the best interests of the Company
and its shareholders to retain cash at this time for expected working capital
requirements, particularly as the Auxilium software development reaches its
critical later stages.
The Board will therefore not be declaring an interim dividend but will
continue to review the Group's dividend policy based on performance, cash
generation and working capital and investment requirements.
Board evolution
With Phil Cotton departing the Board at the recent AGM, I assumed the role of
Chair on 14 May 2024, and was delighted to secure the services of Jon Kempster
as chair of the Audit & Risk Committee, whose appointment commenced in
July, and (more recently) Klaas van der Leest as an independent Non-Executive
Director who has a great track record in successfully growing software
businesses. As Chair, I am committed to keeping the Board's composition and
skills under review, to ensure we have the best mix of experience and
abilities to help Pennant realise its full potential. With the departure of
Michael Brinson post Period end, we also welcome as interim CFO, Darren
Wiggins, a chartered accountant with extensive financial and operational
experience in executive roles.
Performance Review
The contribution made by each region and business line during the Period is
shown in the tables below:
H1 2024 H1 2023
Revenue by Region £ m £ m
UK & Europe 4.1 3.7
North America 1.4 2.2
Indo-Pacific 1.9 1.2
Total 7.4 7.1
Revenues in the UK & Europe region were strong, reflecting significant
progress on the UK Apache contract as it moved into its final stages.
Similarly, the Indo-Pacific region saw respectable revenue growth through
growing services contracts. North American revenues reduced, which was
expected given that the long-standing overarching consultancy contract with
Canadian Defence had expired in the second half of 2023, with the Group in the
process of re-building that workstream through individual contract wins during
the Period.
H1 2024 H1 2023
Revenue by business line £ m £ m
Software Licences 0.2 0.7
Software Maintenance 1.0 0.7
Software Services 2.1 1.9
Engineered-to-order training solutions 2.4 1.9
Generic training solutions 0.1 0.5
Technical Services 1.6 1.4
Total 7.4 7.1
All business lines saw revenue growth, bar (1) software licensing (with the
new Auxilium suite in the process of development, minimal licence income was
expected from the legacy OmegaPS and Analyzer products in the meantime), and
(2) generic training solutions, reflecting lower-than-expected sales of
smaller generic training aids such as the GenSkills.
I would like to thank all Pennant employees for their efforts during the First
Half.
Post Period End
As detailed in the 'Business Update' announcement on 14 May 2024, the Group
was engaged in significant bid activity during the First Half, although
increasingly protracted procurement timeframes were identified as a risk in
that announcement.
Since then, this challenge has persisted and it seems clear that the
recently-announced Strategic Defence Review in the UK has resulted in contract
awards being deferred pending the outcome of the review (expected mid-2025),
and this includes prospective programmes for which Pennant is a potential
supplier.
In light of this situation and the imminent conclusion of the UK Apache
programme (and taking into account the Group's focus on its Auxilium software
suite), management has undertaken a comprehensive review of the UK training
systems business, and determined a plan to reshape it to reflect the
much-reduced workflow while retaining the skills, intellectual property and
know-how to enable the delivery of future programmes, training software and
associated services contracts in the UK and overseas.
As a result, the Group has entered into collective consultation with its UK
workforce re potential redundancies and (subject to consultation) is expecting
to reduce headcount by approximately 20 roles. It is anticipated that this
will generate annualised cost savings of circa £1.2 million. Furthermore, the
Group will imminently commence marketing of its freehold properties in
Cheltenham with the intention of reducing its real estate footprint given its
decreased focus on space-intensive equipment programmes, and thereby further
reducing operating costs. The one-off cash cost of implementing this plan is
currently estimated to be in the region of £0.4 million and the Company's
bankers have agreed in principle to provide a short term facility to assist
with this expenditure, if required.
At the same time, the Group is ensuring that the appropriate skilled resource
is in place to accelerate and complete the development of the Auxilium suite
(including through redeployment of software engineers from other parts of the
business where possible) and to enable the roll out and deployment of the
suite to customers.
The integration of the GenS and updated Analyzer applications will be
previewed to industry at the IPS User Forum later this month. The fully
integrated suite (comprising GenS, Analyzer and R4i) is now expected to be
released in the first quarter of 2025 and will, we believe, address
significant industry demand for an integrated, data-driven enterprise solution
which supports capital equipment programmes through life.
Outlook
The Group has contracted revenue for the full year in the region of £13
million, and has a high level of confidence of generating revenue of not less
that £0.5m in the fourth quarter, and on that basis the Board considers that
the Group is currently on track to meet market expectations for the year as a
whole.
While we pro-actively address the short-term challenges of restructuring and
re-positioning the Group, we remain firm in our strategic direction and the
growth opportunity we are targeting. With the impending launch of the Auxilium
suite, we believe we are extremely well-placed to capitalise on the
longer-term opportunities for our software, systems and services offerings in
the defence space and beyond.
Ian Dighé
Chairman
PENNANT INTERNATIONAL GROUP plc
CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2024
Six months ended 30 June 2024 Unaudited Six months ended 30 June 2023 Unaudited Year ended 31 December 2023
Audited
Notes
£000s £000s £000s
Revenue 7,382 7,092 15,535
Cost of sales (3,871) (3,750) (7,808)
Gross profit 3,511 3,342 7,727
Administration expenses (3,828) (3,516) (7,516)
Exceptional costs (218) (100) (325)
Profit on sale of land and buildings 231 - -
Other income 75 75 209
Operating (loss)/profit (229) (199) 95
Finance costs (190) (176) (463)
Finance income - - 1
(Loss) before taxation (419) (375) (367)
Taxation - - (566)
(Loss) for the period (419) (375) (933)
Loss per share 2
Basic (1.08p) (1.01p) (2.53p)
Diluted (1.08p) (1.01p) (2.53p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2024
Six months ended 30 June 2024 Unaudited Six months ended 30 June 2023 Unaudited Year ended 31 December 2023 Audited
£000s £000s £000s
(Loss) attributable to equity
holders of the parent (419) (375) (933)
Other comprehensive income
Exchange differences on (79) (124) (120)
translation of foreign operations
Net revaluation gain - - 113
Deferred tax credit - property, plant and equipment and intangibles - - (28)
(Loss) attributable to equity (498) (499) (968)
holders of the parent
PENNANT INTERNATIONAL GROUP plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2024
Six months ended 30 June 2024 Unaudited Six months ended 30 June 2023 Unaudited Year ended 31 December 2023
Audited
£000s £000s £000s
Non-current assets
Goodwill 2,574 2,459 2,595
Other intangible assets 5,216 5,251 5,335
Property plant and equipment 3,974 3,958 4,155
Right Of use asset 618 624 860
Deferred tax asset 400 1,530 399
Total non-current assets 12,782 13,822 13,344
Current assets
Inventories / work-in-progress 1,013 1,207 980
Trade and other receivables 2,238 4,204 2,647
Cash and cash equivalents 1,282 749 1,099
Current tax asset 629 492 641
Total current assets 5,162 6,652 5,367
Total assets 17,944 20,474 18,711
Current liabilities
Trade and other payables 3,487 5,871 4,099
Current tax liabilities - 151 1
Lease liabilities 141 351 420
Bank overdraft 2,844 2,668 2,978
Deferred consideration on acquisition 245 615 468
Total current liabilities 6,717 9,656 7,966
Net current (liabilities) / assets (1,555) (3,004) (2,599)
Non-current liabilities
Lease liabilities 534 323 501
Deferred consideration on acquisition - 152 283
Warranty provisions 159 108 144
Total non-current liabilities 693 583 928
Total liabilities 7,410 10,239 8,894
Net assets 10,534 10,235 9,817
Equity
Share capital 2,116 1,840 1,844
Share premium 6,291 5,366 5,383
Capital redemption reserve 200 200 200
Retained earnings 1,618 2,508 1,990
Translation reserve 136 211 215
Revaluation reserve 173 110 185
Total equity 10,534 10,235 9,817
PENNANT INTERNATIONAL GROUP plc
CONSOLIDATED STATEMENT OF CASH FLOWS for the six months ended 30 June 2024
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended 31 December 2023
Unaudited Unaudited Audited
£000s £000s £000s
Net cash generated from operating activities 144 159 1,294
Investing activities
Interest received - - 1
Payment for acquisition of subsidiary, net of cash acquired - (643) (214)
Deferred consideration paid in respect of prior year acquisition (511) (352) (352)
Purchase of intangible assets (703) (730) (1,453)
Purchase of property plant and equipment (226) (107) (305)
Proceeds from disposal of property, plant and equipment 465 - -
Net cash used in investing activities (975) (1,832) (2,323)
Financing activities
Proceeds from issue of ordinary shares 1,358 - 21
Issue costs (178) - -
Net repayment of lease liabilities (38) (97) (195)
Net cash generated from/(used) in financing activities 1,142 (97) (174)
Net increase/(decrease) in cash and cash equivalents 311 (1,770) (1,203)
Cash and cash equivalents at beginning of period (1,879) (426) (426)
Effect of foreign exchange rates 6 277 (250)
Cash and cash equivalents at end of period (1,562) (1,919) (1,879)
PENNANT INTERNATIONAL GROUP plc
STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2024
Share capital Share premium Capital redemption reserve Retained earnings Translation reserve Revaluation reserve Total equity
At 1 January 2024 1,844 5,383 200 1,990 215 185 9,817
(Loss) for the period - - - (419) - - (419)
Other comprehensive (loss) - - - - (79) - (79)
1,844 5,383 200 1,571 136 185 9,319
Issue of new ordinary shares 272 1,086 - - - - 1,358
Issue costs - (178) - - - - (178)
Recognition of share based payment - - - 35 - - 35
Transfer from revaluation reserve - - - 12 - (12) -
At 30 June 2024 2,116 6,291 200 1,618 136 173 10,534
Share capital Share premium Capital redemption reserve Retained earnings Translation reserve Revaluation reserve Total equity
At 1 January 2023 1,840 5,366 200 2,844 335 110 10,695
(Loss) for the period - - - (375) - - (375)
Other comprehensive (loss) - - - - (124) - (124)
1,840 5,366 200 2,469 211 110 10,196
Recognition of share based payment - - - 39 - - 39
At 30 June 2023 1,840 5,366 200 2,508 211 110 10,235
Share capital Share premium Capital redemption reserve Retained earnings Translation reserve Revaluation reserve Total equity
At 1 January 2023 1,840 5,366 200 2,844 335 110 10,695
(Loss) for the period - - - (933) - - (933)
Other comprehensive (loss) - - - - (120) 85 (35)
1,840 5,366 200 1,911 215 195 9,727
Issue of new ordinary shares 4 17 - - - - 21
Recognition of share based payment - - - 69 - - 69
Transfer from revaluation reserve - - - 10 - (10) -
At 31 December 2023 1,844 5,383 200 1,990 215 185 9,817
PENNANT INTERNATIONAL GROUP plc
NOTES TO THE FINANCIAL INFORMATION for the six months ended 30 June 2024
1. Basis of preparation
This condensed set of financial statements has been prepared using accounting
policies expected to be adopted for the year ending 31 December 2024.
The interim financial information in this report has been prepared using
accounting policies consistent with International Financial Reporting
Standards (IFRS) as adopted by the United Kingdom.
The comparative figures for the year ended 31 December 2023 set out in this
Interim Report are not statutory accounts within the meaning of section 434 of
the Companies Act 2006 ("the Act"). 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 and did not contain a
statement under s498 (2) or s498(3) of the Companies Act 2006. The audit
report drew attention by way of emphasis to a material uncertainty relating to
going concern. Whilst the underlying conditions behind that uncertainty
remain, the Directors have, at the time of approving these interim results, a
reasonable expectation that the Group has or will have adequate resources to
continue in operational existence for at least the next 12 months.
AIM-quoted companies are not required to comply with IAS34 'Interim Financial
Reporting' and the Company has taken advantage of this exemption.
2. Loss per share
Basic loss per share are calculated by dividing the loss for the period
attributable to the shareholders by the weighted average number of shares in
issue. The calculation of diluted loss per share does not take into account
the potentially diluting effect of share options as this impact would be
antidilutive to the losses attributable to equity shareholders.
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended 31 December 2023
Unaudited Unaudited Audited
£000s £000s £000s
Loss
Loss attributable to equity shareholders (419) (375) (933)
Adjusted loss attributable to equity shareholders (432) (275) (608)
Number of shares Number Number Number
Weighted average number of ordinary shares 38,693,027 36,790,447 36,836,443
Diluting effect of share options 1,655,000 1,626,667 1,610,000
Weighted average number of ordinary shares for the purpose of dilutive loss 40,348,027 38,417,114 38,446,443
per share
Loss per share (basic) (1.08p) (1.01p) (2.53p)
Loss per share (diluted) (1.08p) (1.01p) (2.53p)
Adjusted loss per share (basic) (1.11p) (0.74p) (1.65p)
Adjusted loss per share (diluted) (1.11p) (0.74p) (1.65p)
3. Cash generated from operations
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended 31 December 2023
Unaudited Unaudited Audited
£000s £000s £000s
(Loss) for the period (419) (375) (933)
Finance income - - (1)
Finance costs 190 176 463
Income tax credit - - 566
Depreciation of property, plant and equipment 164 151 305
Depreciation of right of use assets 108 91 200
Profit on disposal of property (231) - -
Amortisation of other intangible assets 822 705 1,330
Reversal of impairment on land and building valuation - - (39)
Other income - RDEC (75) (75) (205)
Share-based payment 35 39 69
Operating cash flows before movement in working capital 594 712 1,755
Decrease / (increase) in receivables 409 (75) 1,482
(Increase) / decrease in inventories (33) (206) 21
(Decrease) / increase in payables and provisions (596) 85 (1,726)
Cash generated from operations 374 516 1,532
Tax (paid) / received - (142) 117
Interest paid (230) (215) (355)
Net cash generated from operations 144 159 1,294
4. Reconciliation of operating loss to EBITA for the Period
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Unaudited
£'000s £'000s £'000s
Loss for the period (419) (375) (933)
Exceptional costs 218 100 325
Profit from sale of land and buildings (231) - -
Adjusted loss for the period (432) (275) (608)
Interest (net) 190 176 462
Taxation - - 566
Amortisation 822 705 1,330
Adjusted EBITA 580 606 1,750
Exceptional costs (218) (100) (325)
Income from sale of land and buildings 231 - -
EBITA 593 506 1,425
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