Pennant Share Discussion Threads

[shanklin] 28/9/2015 09:29

rivaldo

Management seem to be hiding behind the following sentence from the 2014 final results:

"The Board looks forward to further progress across the Group in the current year, with an anticipated weighting towards the second half. The forward visibility of the order book also provides additional confidence in Group revenues for 2015 and beyond."

Presumably they have hung on and hung on to this statement in the hope that their pipeline would deliver contracts soon enough for the FY results to meet estimates. The need to issue H1 results has forced them to face this issue in today's RNS.

IMHO they should have highlighted the issue much earlier, especially given that the £7m contract win announced today will apparently not rescue the situation.

Each to their own, but PEN has become uninvestable for me as management seem either lacking in honesty or, less likely, incompetent.

All IMHO. Martin

[rivaldo] 28/9/2015 09:07

PEN have been on my watchlist for ages (similarly to PLA who also issued an unconvincing RNS this morning), but today's news is definitively bad!

In particular, surely the notice of results RNS only 3 or so weeks ago should have included some sort of warning that the interims would not be as hoped, and that it would be H2 which may or may not make up the shortfall?

If it's down to late management reporting/accounting of the financials, that's bad enough in itself given we're three months on from the 30/6 H1 date. If it's down to management policy then it doesn't exactly encourage trust from shareholders.

I agree with topvest that PEN could be pretty cheap at some point if it falls low enough and then recovers in H2. But it's going to take a stonking H2 to recover lost confidence.

[topvest] 28/9/2015 08:46

No, I think you will find they have not actually warned categorically. They have said that full year results will either be in line or significantly below so they have been justified not warning if they thought they could still get the H2 revenue.

I would guess that they will undershoot in 2015 and overshoot in 2016, but it sounds like it is still in the balance. To be honest it looks like they are already doing some work on new contracts given the large balances due under construction contracts in debtors.

Anyway, looks to me like there may be a very good market opportunity here if they warn again as the bounce back could be very fast with this amount of new work coming in.

I only have a very small holding left after having made very good profits on these, but it is looking like there may be another opportunity coming up. Will probably await the final results or clarification on H2. Could be a chance to get in for well below 50p and then a big bounce.

It does show that their business can be very volatile though and influenced by a few material contracts, maybe more so than we appreciated.

[rcturner2] 28/9/2015 08:19

They should be reported to the FCA, they quite clearly should have issued a profit warning here. They have a legal duty to issue a warning once they know that results will be more than 10% adrift from forecasts.

[robsy2] 28/9/2015 08:18

Yes this looks difficult.Income uncertainty.Chunky contracts that can be delayed, cutback postponed or even cancelled?
R2

[topvest] 28/9/2015 08:11

Wow. Double surprise. Truly awful H1 results..loss and very high debtors relative to the level of turnover. Massive contract win and talk of another £15m of contracts that are imminent. The share price is tanking. I don't think anyone quite expected results this bad.

[varies] 30/3/2015 15:34

The market in these shares is usually thin.
Seeing the 25% fall since the results makes me regret, of course, that I did not sell a few shares the week before these came out when there must have been buyers about.
As it is, the rating is now modest with a PE of about 11 if we strip out the exceptional tax credit and a yield of c.4%. The share price is unlikely to recover in the short term unless some big new contracts are announced but, having missed the chance to sell at 95p, I am reasonably confident that we will see this price again later this year.

[boadicea] 17/3/2015 15:08

Gengulphus - Thanks for that commentary, with which I entirely agree.
It would have been helpful if they had stated an adjusted or underlying eps to iron out the exceptionals and provide a truer progression of earnings.
I do note that the property revaluation was taken direct to the balance sheet, not through P&L, but the tax position needs normalising to get a proper view.

The share price response does not surprise me based on the view that further rapid appreciation is unlikely and that many folk may therefore think now is a good time to crystallise their profit.

[dasv] 17/3/2015 14:47

NB I don't think this is a bad company. I just think it's lost it's growth premium and I can probably reallocate to a more liquid co. with better growth prospects.

[gengulphus] 17/3/2015 14:22

PJ 1,

EPS boosted by R& D refunds and tax credits outstanding. Co should have advised of this beofre results imo

They did tell us about that - in they said:

"The reported profit after tax for the year is now expected to be significantly ahead of current market expectations. This is because the Group has successfully made claims in respect of Research and Development Qualifying Expenditure for the periods ending 31 December 2012 and 31 December 2013. This has resulted in a cash refund of approximately GBP0.645m and an increase in the allowable tax losses carried forward within the Group to GBP0.833m.

A further claim in respect of the year ending 31st December 2014 will be submitted in due course. As a result of these claims, the expectation is that the Group will now pay no tax in 2014 and that a tax credit will be recognised in respect of the period."

The fact that such claims have succeeded for two years and are expected to succeed for a third does suggest that the taxation boost to profits might well continue. But as we're probably getting 2-3 years' worth of that boost in this set of results, future boosts will probably only be about a third to a half of this year's.

Overall Revs down?, reference to delayed contract and weighting to 2nd half weighting 2015

The somewhat-down revenues and operating profits, largely due to "a delay in the award of a significant contract which is now expected to contribute to current year performance" are IMHO the bits they should quite possibly have advised about earlier... :-(

Is it a smokescreen or not is the concern I suspect.

Unconvinced either way so still on W/L

I don't see any real signs of a smokescreen - just of somewhat disappointing trading. But given that this is a company that is largely dependent on a relatively small number of relatively large contracts, some lumpiness in their trading is par for the course, I think.

I am quite pleased though that I did a minor top-slice of my holding yesterday, partly based on my holding having grown a bit too large for comfort, partly on a general feeling of unease. I couldn't pin that feeling down yesterday, but have now managed to do so - it's that the "trading update" I've linked to above didn't actually say anything about the company's underlying trading, just about exceptional tax items, which implies that the underlying trading was nothing to write home about. Pity I didn't work that out yesterday - I would have top-sliced rather more significantly if I had!

But I don't see anything basically wrong with the company or its trading, so I will probably be reinvesting the proceeds of the top-slice I did do if the share price drops low enough. Not there yet, though!

Gengulphus

[dasv] 17/3/2015 12:33

ex growth. PEG > 1. Rev down. Sold because I think I can probably get similar value elsewhere with some EPS growth (hopefully which isn't as lumpy as PEN either).

[deucetoace] 17/3/2015 12:16

So let's see. Flat earnings then a tax benefit that boosts them significantly. Revenue down. Profits this year second half weighted, never a good sign and to top it all purchased intangibles increased from 95k to 803k ie they have capitalised a lot of expenditure well above anything they have ever done in the past, although they are of course confident that the project to which it relates will do well.

I sold, albeit after pondering the matter far too long this morning.

[ganthorpe] 17/3/2015 10:02

Stripping out the "exceptionals" leaves the figures pretty flat . If you exclude the R&D grants , tax allowances and property revaluation , there isn't much progress.
For 2015 even allowing for a nil tax charge if the tax losses are offset , seems to leave Earnings per share of about 8P at best , and weighted to H2.
It is interesting that the contract expected to boost 2014 earnings doesn't seem to be expected to boost H1 2015 earnings.
I think the price of about 90p is about right for now.
But that's just my take on it. FWIW
Holding but not increasing
Regards
GAN

[vulgaris] 17/3/2015 09:35

Looks rather positive, without major fears expressed in the 'Outlook'

...... but price down almost 10%

Am I missing something?



-- Profit for the year attributable to shareholders of GBP2.98m
(2013: GBP1.70m);
-- Basic earnings per share increased by 76% to 11.32p (2013:
6.43p);
-- Group net assets increased by 52% to GBP9.42m (2013: GBP6.19m);
-- Group revenues marginally reduced to GBP17.98m (2013: GBP18.68m);
-- Operating margins maintained at 12.2% (2013: 12.1%);
-- Cash generated from operating activities of GBP1.69m (2013:
GBP0.17m);
-- Net cash at period end of GBP1.07m (2013: GBP1.16m); nil
borrowings;
-- Proposed Final Dividend increased by 11% to 2.0p per share
(2013: 1.8p) making a total dividend for the year of 2.9p
per share (2013: 2.6p);
-- Successful claim of Research and Development tax credits
in the UK in respect of financial years 2012 to 2014 producing
a tax credit of GBP1.3m;
-- Revaluation of land and buildings produces GBP1.1m net
asset uplift;
-- Unrelieved tax losses of GBP3m carried forward;
-- Underlying EBITA fully in line with expectations.

[pj 1] 17/3/2015 09:32

EPS boosted by R& D refunds and tax credits outstanding. Co should have advised of this beofre results imo

Overall Revs down?, reference to delayed contract and weighting to 2nd half weighting 2015

Is it a smokescreen or not is the concern I suspect.

Unconvinced either way so still on W/L

[snowydays] 17/3/2015 09:29

Can't really see anything in the results to justifya near 10% fall in the shareprice. EPS up 76% seems good to me. Certainly good enough to justify a PE higher than 8.

[ganthorpe] 04/3/2015 08:45

Results due next week or Friday?

[dasv] 04/3/2015 08:37

leak or just volatility?

[hastings] 02/3/2015 16:53

A few thoughts that may be of interest, to others taking a look.

[ganthorpe] 03/2/2015 09:51

I think I posted when the incentive was announced , that it could be a precursor to a sale.It looks a bit over-generous as a routine incentive scheme.
Looking at all the potential good news around at present , there will not be better times to sell?
It's a good time to do due diligence while the year end work is being completed , and announce with the preliminary results next month?
All speculation but may come about.
GAN
If not
What about a special dividend?

[dgwinterbottom] 30/1/2015 08:06

I am still wondering at the back of my mind if the incentive to the CEO (see posts after 573)is with a view to a possible Company sale any time soon, given the age of the Chairman. Also the forecast growth seems to be tailing off somewhat, though it could improve as time goes on. Any thoughts pleaase?

[topvest] 22/1/2015 20:57

Yes, a good update. A quality company. Could do with a few new contract wins to move this to the next level. Happy to hold in the meantime, albeit I have a much smaller holding now than I did have.

[boadicea] 22/1/2015 08:06

Very positive statement -


Underlying profit at market expectation on turnover marginally below expectation
Statutory profit notably above expectation
No tax payable on account of R&D recognition (prior years), current year yet to be claimed.
Tax credit to be recognised (a one-off) against previously accumulated losses
Over £1m property revaluation to balance sheet.

[skyracer] 03/11/2014 10:08

There was a article in the Times yesterday about a small company, Strat Aero, coming to AIM. They offer training to fly unmanned drones, a fast growing market with huge potential. Would seem to me to be a possible lucrative diversification for Pennant.