Pennant finals

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 announced their full year results on 17 March and were as indicated in their trading update (see here).  Sales were down 4.7% to £17,798k and operating profit was 3.6% lower at £2,175k, due to delayed contracts in the Training and Data Services Divisions that will benefit 2015. 

Following a £815k tax credit, EPS was 10.88p up 71.9% on last year and a final dividend of 2p was proposed, making the full year 2.9p up 11.5% on last year.

Free cash flow (FCF) was £643.9k up substantially on last year's outflow of -£223.7k.  Dividends paid out of £710.7k exceeded FCF, which was the main reason for a £77.7k decline in the net cash balance to £1,034.9k.  The FCF improvement reflected improved working capital and the effect of the receipt of contracted stage payments on major contracts.  There is a tax asset of £743k on the balance sheet, which I assume is part of the uncollected element of the R&D tax credits claimed for, which should benefit 2015's FCF.  Management also state that there are unrelieved tax losses of £3m.

With respect to the outlook management stated that "...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..."  On the subject of the order book, it would help investors if greater clarity was given, so that we were able to see the growth in the order book and calculate book/bill ratios.

The SP fell 15% on the day of the announcement to 84p and are now at 78.5p, rather bizarre since these results were telegraphed by management and 2015 should benefit from some of the contract delays and possibly further tax credits.  It is probably the part of their outlook statement "...anticipated weighting towards the second half..." that concerned the market, with management anticipating a weak first half and hoping that the second half will improve as those delayed contracts arrive - or not!

Pennant sit on a low forward  P/E of about 8 and a forward yield of 4%.