Pennant International provides a range of services that extend across e-Learning, Computer Based Training, Emulation and Simulation, Technical Documentation, Media Services, Cartography, Supportability Engineering Software products and related services. I have a holding in my growth portfolio (epic code: PEN)
Pennant released a post year-end update on Thursday stating that underlying pre-tax profits for the group are expected to be in line with
market expectations on revenues slightly below expectations. So similar to the interim results discussed here.
The reported profit after tax though is expected to be significantly ahead of current market expectations. This
is due to claims in respect of R&D Expenditure for the periods ending 31 December 2012 and
31 December 2013. These claims have resulted in a cash refund of approximately £0.65m
and an increase in the allowable tax losses carried forward within the Group to
£0.83m. Management expect there to be no tax charge in 2014.
Management have also taken the decision to restate
tangible fixed assets to market value, this will result in an uplift of approximately
£1.1m in the value of the Group's net assets at the year-end.
Whilst the tax credits are welcome, it would be good to see the company return to growth on the top line.
I have a holding in this company, bought over several years, in my SIPP. Agree with the comments above. Somewhat mystified by the heavy fall in the price since the results announcement last week. Continuing to hold, might even increase holding at 70p level. My one worry is the extent to which the company relies on contracts to Canadian military (recently renewed) and the Australian military/BAe. Chris C
ReplyDeleteHi Chris,
ReplyDeleteThanks for taking the time to comment. In addition to the concerns you expressed, is also the over reliance on one customer that represented over 25% of sales in 2013 and almost 40% in 2014.
As for the drop in the SP, as I mentioned in my comments on their final results it is probably due to the uncertainty created by their comment in their outlook - "...anticipated weighting towards the second half..." so management expect a weak first half and hope that the second half will improve as those delayed contracts arrive - or possibly not!
Personally I think it is a company worth holding with strong long-term cash flows and high returns on capital employed.
Regards,
Jeff