Pennant International returns to positive EBITA; significant gross margin improvement

Pennant International Group plc (LON:PEN), a leading global provider of training technology and integrated product support solutions, announces its Interim Results for the six months ended 30th June 2022.

Commenting on the results, Chairman John Ponsonby said:

“I am pleased to report that the Period saw the Group return to positive earnings before interest, taxation and amortisation as gross margin significantly improved and costs remained under tight control.”

“As a result of management’s continued efforts to deliver the Group’s strategy, we now have a leaner, more streamlined organisation, with an increasing proportion of recurring revenues from software and services, providing greater forward visibility and a solid platform from which to grow the business and enhance shareholder value.”

Key points: Financial

·     oup revenues for the Period of £6.9 million (H1 2021: £7.4 million) of which circa 65% were recurring (H1 2021: 53% recurring);

·      52% of revenues generated from software licensing and associated activities (H1 2021: 35%);

·      Gross margin doubles to 41% (H1 2021: 21%);

·      EBITA profit of £0.1 million (H1 2021: EBITA loss of £1.0 million);

·      EBITDA profit of £0.4 million (H1 2021: EBITDA loss of £0.7 million);

·      Loss before tax of £0.8 million (H1 2021: loss before tax of £1.7 million);

·      Net debt at Period end of £4.1 million (H1 2021: net debt of £1.9 million);

·      Trade and other receivables due at Period end of £5.1 million (H1 2021: £3.7 million);

·      Basic loss of (2.21)p per share (H1 2021: basic loss per share of (4.64)p per share);

·      Unrelieved tax losses of £6.7 million carried forward (H1 2021: £4.5 million carried forward);

·      Three-year order book at Period end stood at £27 million (H1 2021: £26 million).

Key points: Operational

·    Secured the ‘Major Programme’ a contract from Boeing Defence UK Limited for the upgrade of Apache training equipment, worth £8.8 million over three years.

·   Following contract award, successfully passed the initial engineering milestone event on the Apache upgrade programme.

·     Factory acceptance achieved on the UK Helicopter programme (overall contract value: £3.5 million), with the training device delivered to the end user’s site post Period end.

·     A second software and services order secured in the commercial aerospace sector (overall order value: USD$1.7 million), a key target market for the Group’s IPS business line.

·     evelopment work completed on prototype simulator for rail infrastructure organisation which is intended to be rolled out to numerous sites in the future.

Post Period end highlights:

·    First ‘Launch Partner’ to participate in programme of testing and product promotion for new GenS product signed in Australasia.

·    Circa £1 million of orders for software and equipment upgrades received across July and August, taking orders received during 2022 to approximately £12 million.

·      GD MTE programme almost complete – all four devices have been built and achieved factory acceptance – and will be finished before year-end.

·    Surplus freehold site (Pennant Court) sold in August for £2.1 million with proceeds used to paydown borrowings (reduced to £2 million as at 20 September 2022).

Commenting on the Pennant International prospects, John Ponsonby added:

“We are securing new customers for our IPS software and services lines in important adjacent sectors including commercial aerospace, while at the same time gearing up for the launch of the new GenS software suite next year.

“Furthermore, with the prevailing global security situation, we are seeing real signs that defence procurement programmes are unlocking in our key regions, with several new opportunities already being pursued. 

“With a stable contracted order book, good forward visibility of revenues over the next three years, and a leaner, optimised organisational structure, the Board is confident about the Group’s future prospects.”

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