Recently, DirectorsTalk Interviews caught up with Nick Spoliar, Analyst at WH Ireland – the conversation turned to Pennant International Group plc (LON:PEN).
Q. Nick, thanks for highlighting Pennant. What were your thoughts about their last update, which came out a couple of months ago?
A. The update confirmed that the team had delivered significant upside to numbers in FY23E, in line with our forecasts (£15.5m sales, £1.3m adj. PBT). They were successful in pushing the gross margin ahead, to 50% (H1-23E: 47%, FY22A: 42%) on the back of an improved business mix (more software services and other higher margin work). Net debt at the year end was higher than we expected, but this was about timing, since receipts post-period resulted in a net cash situation better than we had forecast for the year end (£0.3m net cash as against our year end forecast of £0.1m).
Q. How do you see the company strategy?
A. Going back to the February update, the evidence suggests that the strategy of engaging with higher margin activities is working. FY24E forecasts receive some support from ongoing projects as previously highlighted and software-derived earnings are likely to receive a further lift in the current year with the launch in April of the company’s GenS technology, which will update its long-standing and successful OmegaPS series.
Q. How do you see the outlook for the company?
A. We anticipate a cash-generative year in FY24E and also that the business will continue to invest in its faster growing and more profitable activities. We trimmed back our net cash forecast for the year end to £1.2m on the back of the February update (was: £1.8m) to allow for further investment. This said, we expect that software investment is likely to reduce in the coming year, leading to further increased cash generation and profitability.
Pennant International Group plc was established over 60 years ago and is a leading global provider of technology-based maintainer training and integrated product support solutions. The Group operates worldwide, with offices in Europe, North America and Australasia. The extensive portfolio for Pennant’s technology-based training solutions and ILS Software (OmegaPS and R4i) and services is achieved through its global teams.
