Pennant International Group plc (LON:PEN), the systems support software and training solutions company, has provided the following business update.
FY24 Trading
The Group expects to report trading results for the year ending 31 December 2024 in line with market expectations, with revenues of approximately £14 million and adjusted earnings before interest, taxation and amortisation of circa £1.2 million.
Re-positioning the business
During FY24, Pennant has taken significant steps to streamline its legacy Training Systems business segment and focus investment and resources on the growth of its Software and Technical Services segments which provide more predictable revenue streams, higher margins, greater scalability and have a shorter working capital cycle.
The workforce restructuring programme, as announced on 23 September 2024, has been completed, with a headcount reduction of circa 30 roles achieved, and three commercial units at the Staverton site have been sold subject to contract for consideration totalling £1.2 million (marketing of the remainder of the site continues).
The Training Systems business is now focused on delivering modifications, retrofits and overhauls to its installed base, and has an active pipeline of such opportunities. This pipeline includes the GenFly upgrade announced by the UK Ministry of Defence on 23 October 2024, which has an expected contract value of £5 million and is scheduled for award in April 2025.
The anticipated annualised cost savings resulting from the restructuring (comprising reductions in wage costs, operating expenditure relating to the properties, and finance costs) are expected to be in the region of £2.0 million. There is a one-off expense associated with implementing the restructuring which will include staff termination payments, the cost of exiting properties, and associated professional costs. The cash element of the one-off restructuring charge is circa £0.5 million; the potential charge to the profit and loss account (which management considers to be exceptional) is being quantified, and will include non-cash items such as the write-off of assets associated with the aspects of Training Systems which are no longer core.
The Group now has three clear business segments – Software; Technical Services; Training Systems – delivered through its three core regions – EMEA, Americas and Asia Pacific.
Auxilium Software
The fully-integrated Auxilium software suite is expected to be launched on 31 March 2025, bringing together Pennant’s three proven proprietary applications – GenS, Analyzer and R4i – into one integrated solution.
Auxilium will build on Pennant International’s 25 year track record of developing and supporting trusted software products for the defence sector, delivering an updated, modern suite of applications to existing and new customers on a flexible, subscription basis. The Group has already received initial orders for the suite and is bidding on several key opportunities ahead of full launch.
Outlook
With a growing proportion of Pennant International’s trading coming from the higher margin Software and Technical Services segments, together with the cost savings from the restructuring programme outlined above, management expects the Group to report a modest profit before tax (adjusted for acquired amortisation) for the financial year ending 31 December 2025 and for a strong conversion of operating profit to operating cash.
For FY25, revenues are expected to increase in the Software and Technical Services business segments (as a proportion, and in absolute terms). Turnover is anticipated to reduce in the Training Systems segment following successful completion of the Apache programme, which was a major contributor to revenues in that segment in FY24.
Order coverage for FY25 currently stands at £7 million, which management considers to be a strong position given that the full launch of Auxilium is still to come.
