Pennant International (LON: PEN) is reducing its dependence on the aerospace and defence sector through the acquisition of UK rail services business Track Access Productions. This should be earnings enhancing and adds to the recurring revenues base.
Bedfordshire-based Track Access Productions provides driver training and route mapping services to train operators, freight companies and infrastructure providers. AIM-quoted Pennant International is paying an initial £798,500, which takes account of the cash in the business, and a further £175,500 in 12 months. In the year to March 2023, revenues were £600,000 – 50% recurring – and pre-tax profit was around £200,000.
The acquisition fits well with an existing group business and the combined entity should generate annualised revenues of £850,000.
Active investor Rockwood Strategic (LON: RKW) has been building up a stake in Pennant International and it currently owns 5.16%. It tends to build up a stake over time and try to take an active role in improving the performance of a business.
The share price rose by 2.7% to 38p and it is one-quarter higher than at the end of 2022. WH Ireland plans to upgrade its earnings forecast. The broker anticipates a return to profit in 2022 and a significant improvement to £1.2m in 2023. The 2023 earnings estimate before the acquisition was 3.3p a share.
