Pennant Share Discussion Threads

[hybrasil] 24/5/2022 10:45

Try and buy some shares. None available

[mfhmfh] 23/5/2022 19:25

Results on 25th

[hybrasil] 23/5/2022 19:14

I suspect this is due a serious kick upwards

[matthew palmer] 09/4/2022 12:10

Anyone on TECHINVEST, I am wanting to form a group of similar minded people to discuss its views etc and information.

Click my name and send a message.

[masurenguy] 28/3/2022 07:16

Interview with Phil Walker, CEO of Pennant International, who sees a positive shift in momentum.

[40 fathoms] 26/3/2022 03:57

Chique, I think you raise two pertinent areas for consideration. I think the easier one to deal with is demand destruction, I think in essence that is zero. They predominantly sell in to protected (by regulation or qualification) supply chains on both sides of the business and their product suite is focused on areas of structural, non cyclical growth.

Cost inflation will have some impact on the business, both in terms of the cost of staff (particularly software engineers) and cost of materials. However, I think there are two aspects to consider that will help mitigate this impact. Firstly, due to the delivery of the fixed price contract (Ajax)agreed in 2013 their gross margins have been significantly impacted as this has been delivered over the last 18 months. As this large contract is now rolling off, gross margins should significantly improve (it should also be noted that they have changed their approach towards pricing these large engineered solutions).

Secondly, you need to look at the impact on group level net margins as the ILS/IPS tips in to profitability and will start to contribute rather than subtract from the bottom line. When coupled with the growth we are likely to see in revenue this will very significantly outweigh any inflationary impacts.

[chique] 25/3/2022 12:30

I am considering adding - how do you thimk Pennat will cope with inflation and demand destruction recession - happy to hold what I have as don't want to miss out , but trying to work out possibilities before adding

[rimau1] 25/3/2022 12:09

Excellent write up Martin, much appreciated. £5m freehold property and the business currently valued at £9m will be in a net cash position by y/e 2022 with a £30m+ order book.
This is one of those under the radar/hidden value stocks that offer compelling value to the patient long term investor.

[hastings] 25/3/2022 11:08

Write up for interest.Https://martinflitton1.wixsite.com/privatepunter/post/pennant-on-the-recovery-road-25-03-22

[cockerhoop] 24/3/2022 21:29

Cheers Martin, that sounds more promising for the companies ambition. Look forward to your observations tomorrow.

[hastings] 24/3/2022 15:29

Enjoyed a great catch up with Phil Walker and will add a write up tomorrow. Suffice to say though, the property for disposal isn't that acquired in 2018, it's the original HQ from 1986. I'll include more on this interesting area in my piece!

[hastings] 24/3/2022 07:06

Speaking with the CEO this afternoon, so I'll hopefully add a write up tomorrow morning for interest.

[cockerhoop] 23/3/2022 09:57

I presume this is the property they bought in 2018 to address the operational needs of the (now re-scoped) major programme. The sale doesn't suggest they expect to see a step change in revenue from the training device business going forwards.

[40 fathoms] 23/3/2022 08:44

This was highlighted in this morning’s note from WH Ireland. In addition the highlight that disposal of the property will generate @300k in efficiencies. They also highlight the active pipeline at between 50 and 60 million.

[rimau1] 23/3/2022 08:25

Agree Hastings/40F. Order book now £32m with £12m for delivery in 2022. For me that totally derisks the buy case here and provided the bullish outlook i was hoping for. I particularly like the move into civilian training which should be low hanging fruit to capture especially with Boeing as a new customer. Happy to tuck these away. Noting also that Ultra in their results announcement today talked about strong growth drivers for the year ahead from “near peer activity and threats”

[hastings] 23/3/2022 08:02

Echo your thoughts 40 Fathoms.
From WH Ireland this morning, where I note forecasts left unchanged, for the time being!

Following yesterday’s update from PEN highlighting the return to profit in H2-21, we note that the company has now been named as a key supplier by Boeing, in connection with the “Major Programme” which the company had previously highlighted. The announcement was made by the Minister of Defence Procurement, Jeremy Quinn, and aligns with the company’s announcement on December 3rd which highlighted potential for a c£9m contract with a major OEM in the course of Q1-22. We anticipate that this will be spread over three years, as suggested in PEN’s earlier update. This is exciting news, and brings clarity to a long-running negotiation.

PEN will supply simulated training systems as part of the overall contract announced this morning by Boeing, which has agreed terms with the UK’s Ministry of Defence to supply long-term “training, support and sustainment” to the new 50 Apache AH-64E helicopter fleet of the British Army. Notably PEN will supply Part-Task trainers, providing well-established, sophisticated and proven technology, hence enabling robust and effective maintenance of the new fleet. WHI view: Providing software and analytical services in parallel with highly technical engineering simulations, PEN is in our view ideally placed to support its clients’ evolving requirements, while remaining mainly focused on training and asset maintenance. Yesterday’s update from the company highlighted the progress of PEN’s software division, which experienced strong demand in FY2021. Against this backdrop, we view the Boeing contract as a major affirmation of the company’s skill-sets and as supporting a strong platform for the future. With a £22m order book as announced yesterday, this morning’s announcement increases the visibility materially and is highly supportive of forecasts, which we leave unchanged for the time being.

[40 fathoms] 23/3/2022 07:40

I am happy with my mid single digit P/E forecast for this year with potential upside given we still have 9 more months to run and some chunky high margin software contracts to reel in.. Also very happy to see they have agreed a milestone payment plan for the Apache contract so as to smooth out the cash flow impact.

[masurenguy] 23/3/2022 07:14

More positive news !

Contracts & Order Book Update

Pennant International Group plc (AIM:PEN)("Pennant", the "Group" or "Company"), a leading global provider of training technology and integrated product support solutions, is pleased to provide the following update.

Major Programme

The contract for the Major Programme has now been formally awarded to Pennant by Boeing Defence United Kingdom Limited (BDUK). The contract is for the significant redesign and upgrade of several Apache training devices in support of the UK Apache Mk 2 programme. The contract value is £8.8 million and, being an 'engineered-to-order' programme, the associated revenue will be recognised over the next three years on a 'cost-to-complete' basis. Pennant has agreed a milestone payment plan over the course of the contract with the customer such that additional working capital facilities should not be required. BDUK is a new customer for Pennant.

Other Contract Wins & Order Book

The Group has finalised and signed contracts for the supply of software and services to a new customer in the North American commercial aerospace market (an opportunity mentioned in the Group's announcement of 20 January 2022). The contract is worth circa $1.8 million, comprising software licences to be supplied this financial year, consultancy services and a multi-year maintenance package. This contract win demonstrates significant progress in the Group's strategy to increase the proportion of its revenues from civilian customers, which was further boosted this January when the Group secured circa GBP200,000 in new orders from rail industry customers in the UK.

Pennant has also received an order worth up to £250,000 from UK Defence for the supply of the Group's sophisticated, proprietary rotary-wing aircraft systems training software and related maintenance services. Taking into account orders received since the year-end, the Group's three-year order book now stands at £32 million (of which circa £13 million is scheduled for delivery in 2022, and £12 million in 2023).

MTE Programme

The first of the four devices has now successfully passed Factory Acceptance Testing (FAT) and has been delivered to the end-user's site. The second device is currently proceeding through the FAT process. The final two devices (which are repeat builds of the first two) have been substantially completed and remain on track to be tested and delivered before the end of the second quarter. Having now overseen the successful design and build of the 'first off' devices, Mervyn Skates will step down as Operations Director at the end of this month.

Outlook

Commenting on these developments, Phil Walker, CEO, said: "We are delighted with these recent contract wins, and the good progress made on the MTE Programme. They provide an excellent start to the current financial year and are helping to build firm foundations for the future growth of the Group."

[hastings] 23/3/2022 07:12

And good news this morning with formal award of the Boeing contract along with other smaller wins. Importantly, another new customer won in N. America and order book up to £32m.

[hastings] 20/3/2022 07:57

Well, I agree with the potential you highlight and the various contracts that could drop through anytime would make a marked difference!However for now, the broker is sticking with EPS of 1.4p this year rising to 2.6p next year, which has arguably anchored the shares in the current territory. I do expect those to be revised upwards in due course though given the Boeing news and others in the pipeline that could land in the coming months.

[40 fathoms] 20/3/2022 01:48

There are lots of moving parts re contract signings/ delivery schedules timings etc but without being too cleaver about it the EPS range I have for this year is 5p and 8p per share.

You can get to the lower end of the range even if you assume no revenue growth (it is clear already we will see some) and a normalisation of margins on the training side of the business with the completion of the Ajax contract.

Just as a reminder target gross margins on the training solutions side are 40% and on the IPS/ILS side are in excess of 60%. Clearly we are seeing some good growth here note the recent broad recruitment drive

There is a GBP 22 million backlog of contracted work that will reach GBP 30 million once the Boeing deal is signed and @ GBP40 million of qualified opportunities that they are bidding for which is very likely to grow substantially over the next 18 to 24 months. Add to this the tax losses and the real estate they own (debt free) in Cheltenham and you are looking at an exceptionally cheap company.

What I think is under appreciated about Pennant is the size of its moat, it is one of those companies where this is not obvious and at first glance. You have a look at what they do and think well anyone could do that. But to gain qualification as a military supplier (they supply many militaries and military supply chains) in crucial areas like, training, maintenance and logistics is hugely difficult and once embedded in to the supply chain it becomes very sticky work. Over the next 18-24 months the market perceptions of this business will be transformed in my humble opinion.

[hastings] 19/3/2022 14:33

What EPS numbers are you working on for full year 2022 40 Fathoms?

[40 fathoms] 19/3/2022 13:11

Working forward from the 2018 annual report Mr. Powell is @ 76 years old. Over the last few years, in the Powell concert party, shares have been shifting from him and his wife towards other Powells, one would assume these are his children. Also from a CGT perspective and an IHT perspective there may be an argument against exiting.

We should be hearing from the company soon, I think the results will be ho hum and will look a bit messy on the cash side of things. But both the short term and longer term outlook should be really strong. With margins normalising on the technical training solutions side of things and the IPS/ILS division now profitable and high margin. It is clear we are currently on a middish single digit P/E for this year and should be looking at a minimum of 25% pa profit growth in 2023 and 2024.

For what I expect the profit to be this year a 10x P/E would be represent a share price of about 55p

[hastings] 19/3/2022 09:34

Personally, I do think that PEN could conceivably attract a predator and at the right price it would in my view go through at the right price of course. That would have to be someway north from here though.Christopher Powell still holds circa 17% I believe, followed by Miton and others.Not sure how old Powell is, but the former Chairman seems to have been here forever, so one would assume an exit may well appeal. That said, the company looks extremely well placed on a number of fronts moving forward.