Pennant International (LON:PEN), a leading provider of training systems and support for defence equipment maintenance, has announced two new contract wins worth approximately £3.8 million. These deals mark a significant step in the company’s ongoing efforts to convert its robust £10 million+ sales pipeline, as outlined in September’s interim results.
The most substantial of the two contracts comes under Pennant’s long-term agreement with BAE Systems Australia. Valued at £3.6 million, the contract will deliver five upgraded training systems, which are advanced versions of Pennant’s existing Integrated Avionics Maintenance Trainers. These systems will enhance the maintenance training capability for defence clients and are expected to be delivered over a 2.5-year period. Crucially, the milestone-based payment terms are designed to be working capital neutral, helping Pennant manage cash flow effectively.
In addition, Pennant has secured a new customer – a European aircraft equipment original equipment manufacturer (OEM) – for an interactive 3D training package. The initial phase of this contract is valued at £150,000 and is expected to be completed within six months. Further phases could take the total value of the contract to £800,000, highlighting a promising new revenue stream.
These contract wins align well with Pennant’s strategic focus on high-margin upgrades and virtual training solutions, and they demonstrate the company’s ability to win repeat business while also bringing new customers on board.
Andrew Renton, Director of Research at Cavendish, highlighted the significance of these developments, stating:
“These wins demonstrate solid progress in converting the identified pipeline and validate Pennant’s capability to secure both repeat business from existing clients and establishing new customer relationships.”
Renton also noted that these developments bolster confidence in the firm’s unchanged forecasts. Pennant continues to trade at a discount relative to its peers, with a FY26E EV/adj EBITDA multiple of 6.4x, compared to 8.6x for the UK small-cap data and productivity software peer group.
Key Financial Highlights (as of FY2024 and Estimates)
- FY2024 Revenue: £13.8m
- FY2025 Revenue Estimate: £10.0m
- FY2026 Revenue Estimate: £13.0m
- FY2024 Adj. EBITDA: £1.7m
- FY2026 Adj. EBITDA Estimate: £1.6m
- Target Share Price: 40.0p (current: 20.5p, implying 95% upside)
Despite a challenging year forecast for 2025, these new contracts suggest a rebound in growth is on the horizon, with projected revenue growth of 30% in 2026 and a return to EBITDA profitability.
On a Final Note
Pennant’s recent contract wins with both an established defence partner and a new European OEM client reflect strong strategic execution and a solidifying reputation in virtual training systems. With growth potential reaffirmed and valuation remaining attractive, Cavendish maintains its bullish stance, forecasting significant upside for investors who back Pennant’s vision.
