Interim Results

About this update from Pennant International Group Plc

  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 David Clements, Company Secretary +44 (0) 1452 714 914 Zeus (Nomad)   www.zeuscapital.co.uk     Mike Coe / Sarah Mather (Investment Banking) +44 (0) 203 829 5000 Cavendish Capital Markets Limited (Broker) 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) [email protected] Tom Cooper Joe Walker +44 (0)20 7933 8780 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              Unaudited Six months ended     30 June 2023               Unaudited Year ended              31 December 2023 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 Unaudited Six months ended 30 June 2023 Unaudited Year ended 31 December 2023 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 per share           40,348,027 38,417,114 38,446,443 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 Unaudited Six months ended     30 June 2023 Unaudited   Year ended               31 December 2023 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 30 June 2024 Unaudited Six months ended 30 June 2023 Unaudited Year ended 31 December 2023 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            

View stock analysis, news, and events for Pennant International Group Plc