Pennant Share Discussion Threads

[masurenguy] 31/8/2021 07:14

Trading Update & Notice of 2021 Interim Results

First Half performance

In a financial year that is again predicted to be second half weighted, the Group expects to report revenues for the First Half of approximately GBP7.4m (2020: GBP6.3m) resulting in a loss before interest, taxation and amortisation of GBP1m (2020: EBITA loss of GBP2.5m). Net debt at the end of the period was GBP1.9m (2020: GBP2.0m net cash), reflecting the expected cash outflows from materials purchasing and production activities during the period.

The Group's overall trading performance during the First Half was satisfactory, given the economic backdrop, with progress made across the majority of contracted programmes and with the cost savings implemented in prior periods starting to be realised.

Within the Integrated Product Support ("IPS") division, performance was strong with revenues of GBP2.6m, with the division tracking revenue of GBP5.8m for the full year, and several new customers and contracts secured.

In the Technical Training division, delivery of the UK Helicopter trainer programme and the Qatar contract was in line with or ahead of budget. The division's technical services contracts in the UK and Australia also continued to perform well.

However, the Group's H1 performance was significantly impacted by factors relating to its contract with General Dynamics for the Ajax training devices including:

-- the engineering complexity of emulating a vehicle which itself remains under ongoing review and development;

- deficiencies in the provision of OEM data and dependencies;

-- challenges within Pennant's own supply chain, including delays and increases in the prices of parts and materials due to global shortages; and

-- workplace restrictions and residual impacts relating to Covid-19.

In resolving these challenges, Pennant anticipates that the Ajax programme will extend beyond the planned schedule (with the attendant cost implications) and the Company is working closely with General Dynamics to address the above issues and ensure a successful delivery.

Order Book & Pipeline

The contracted order book scheduled for delivery over the next three years stood at GBP25m at the end of the First Half (31 December 2020: GBP31m). Pipeline conversion during the period has been suppressed by reduced customer procurement activity induced by the Covid-19 pandemic and, in the UK, the completion of the Integrated Review of Security, Defence, Development and Foreign Policy. For example, Pennant has been informed that further substantial customer consideration of the 'Major Programme' will likely not take place until November this year, in which case any potential contract award might not take place until 2022.

The Group is working hard to accelerate pipeline conversion wherever possible and active negotiations are ongoing in relation to multiple new opportunities, including several potential sales of substantial software and services packages through the IPS division and significant bid activity within Technical Training division predominantly comprising software solutions for rail and aviation sector customers.

Outlook

The Company anticipates that its financial performance will improve significantly in the second half (as programme deliveries continue and forecast pipeline is converted) and expects to make an EBITA profit for the current six months to the 2021 year-end. On this basis, the Company's trading remains in line with market expectations for the year as a whole.

[big7ime] 16/8/2021 10:18

a bargain hb, there has been no negative news and price just drifted down on very low vols

[hybrasil] 16/8/2021 10:03

Bought another 25k this am had to pay .3275p

[aqc888] 15/8/2021 21:26

Huge share price movements on very little news flow. I’d say this is oversold and ripe for another Simon Thompson re-tip to see the price surge. This will probably happen when pennant release their next results. I have just under 1% of my portfolio here, not got a great deal of conviction here, but can’t see much justification for the huge share price fall

[big7ime] 12/8/2021 18:08

Bought some this afternoon as appears to me oversold, trade shows as a sell so I suppose most were buys

[aqc888] 11/8/2021 18:34

I’d say it’s reached the bottom now...

[hybrasil] 10/8/2021 09:17

Bought 25k I think this am.
Edit
And another 25 making 50

[aqc888] 09/8/2021 13:49

Bought a small amount after reading a Simon Thompson article and sold them incredibly luckily at 49p as I didn’t really know much about Pennant. What’s with the share price fall? Haven’t looked into this in any detail but noticed the dramatic fall. I guess those orders ST mentioned look unlikely now and that’s why it’s fallen?

[aqc888] 09/8/2021 12:58

Due another ST tip soon I should think. He always comes back to old picks which have come off the boil...

[dolittle1] 10/6/2021 08:51

Another ST tip struggling.

[hastings] 29/4/2021 13:17

Spoke with the CEO yesterday, write up for interest.https://martinflitton1.wixsite.com/privatepunter/post/pennant-international-recovery-still-in-play-29-04-21

[mfhmfh] 29/4/2021 08:10

If they can conclude some deals from the pipeline so revenue from this year increases from the current £14m then this will do well.

IMHO.

[masurenguy] 29/4/2021 06:37

Cheers gersemi.

[gersemi] 28/4/2021 19:41

Tipped by the small-cap guru ST in the IC -

---

1 In active contract talks worth “seven figures” in revenue.
2 Contracted order book covers 90 per cent of 2021 estimates.
3 Proforma net cash and access to low-cost debt facilities.

Annual results from Pennant (PEN:39p), an Aim-traded supplier of products and services that train and assist engineers in the defence and civilian sectors, were in line with the directors’ guidance given at the interim results (‘Companies on the rebound’, 24 September 2020).

A Covid-19 pandemic induced first half underlying operating loss of £2m on revenue of £6m, reversed into a second half operating profit of £1m on revenue of £9.1m. These figures exclude £0.54m of restructuring expenses which will produce £1m of cost savings in 2021. Prospects for the momentum to build are undeniably positive.

Firstly, £14.4m of Pennant’s £31m order book is for delivery in 2021 and includes two valuable government multi-year contracts (£5.4m of annual revenue) with the Canadian and Australian defence departments to use Pennant’s Oracle-based OmegaPS software product (reduces the support cost of major capital equipment). The 2021 order book also includes £1.4m of revenue from Absolute Data Group (ADG), a Brisbane-based software company that complements Pennant’s OmegaPS software. ADG helps its client base (military aviation, commercial aerospace, and marine, rail, nuclear and automotive sectors) to manage vast quantities of maintenance and training data.

Pennant’s chief executive Phil Walker informed me that ADG, which was acquired for £3.4m last year, is “performing exceptionally well” and is in active contract talks with a US defence original equipment manufacturer (OEM) and an Australian company in relation to contracts worth “seven figures in revenue”. ADG’s North American trading subsidiary accounts for two-thirds of its annual sales. Winning either award would drive up earnings markedly given the high margins earned on software sales.

Secondly, having landed a £1.5m training aids contract from a long standing Middle East customer last year, Walker revealed that the balance of the contract (around £3m) needs to be signed by the autumn for it to be fulfilled for the start of the 2022 academic year.

Thirdly, Pennant’s £50m bid pipeline includes the 'Major Programme', for which it was 'down-selected' in August 2018. Progress to contract award (£15m to £20m) has been impacted by the UK Government's 'Integrated Review of Security, Defence, Development and Foreign Policy'. The Review was finally published last month and reaffirmed the UK Government's commitment to the relevant military platform. This means that the overarching programme should proceed, albeit Walker doesn’t expect any contract award until the latter part of 2021, at the earliest.

Importantly, Pennant has balance sheet flexibility to fulfil its working capital requirements as business ramps up again. Proforma net cash is £1.1m and Pennant has a £4m low-cost bank facility with HSBC.

The bottom line is that although house broker WH Ireland’s 2021 revenue estimate of £16m produces a modest pre-tax profit, there is a live chance of material outperformance if ADG lands any one of several live contracts in its pipeline. Buy.


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[varies] 28/4/2021 15:50

mcfly
I am certainly not seeking to trash this stock. By good fortune I sold over half my holding at higher prices a couple of years ago and have recently been buying these shares back and I intend to retain them indefinitely.
40 fathoms
Thank you for your comforting words about the cash position. I hope very much that you are proved right

[40 fathoms] 28/4/2021 14:37

Hard to see why they would need to cash anytime soon.

Most of last years loss was non cash, The EBITA loss was actually only 1 million last year. They were profitable in the second half of 2020. Cash flow for last year was strongly positive and net debt dropped. They also mention that they have a new GBP 4 million facility with HSBC and that they received additional cash flow of GBP2.5 million in January.

They have somethings to take care of but cash is not one of them.

[dolittle1] 28/4/2021 14:19

Let's see whether they are able to raise money in low 30s.

[varies] 28/4/2021 10:43

Although I regret adding to my holding recently, including a purchase at 45p yesterday, I expect to see a recovery over the next 12 months.
These results are uninspiring. The contract awards from the MOD are not expected until the autumn but the UK's share of PEN's turnover is less than 50% and we may reasonably hope for good business elsewhere.
It is a little worrying to find net current assets reduced from £4400K to £165K and to read that PEN is still "in dialogue" with two businesses which it was thinking of buying 12 months ago.
It seems to me that there is a substantial risk here of PEN needing to raise more capital but I intend to hold on.

[spooky] 28/4/2021 10:41

No real view on the stock but the results were as expected IMO.

[boadicea] 28/4/2021 10:37

Yes - At the time of writing the share had hit a low of 37.5 and then recovered to 41p which I found surprising until I noted the delayed buy (line 34). I call that a bounce (if possibly a dead cat one!) when I had expected a further slide to 35/36p on the disappointing results. However, I have to agree the bounce was not maintained and a further drop is possibly on the cards.

[spooky] 28/4/2021 09:52

'Unexpected bounce'?

[boadicea] 28/4/2021 09:36

Interesting price action with an unexpected bounce after the initial sell-off. Line 34 is almost certainly a buy (1hr delayed). The price recovery appears to be leading the buy/sell ratio - indicating other hidden buys in the pipeline perhaps?

[masurenguy] 19/4/2021 07:26

"The audit is substantially complete, with no material items outstanding. However, to allow some additional time to finalise the process, which is being conducted remotely, the Company will now announce its final results for FY20 on 28 April 2021." RNS: 19 April

[boadicea] 18/4/2021 17:18

Results on Wednesday, I believe.