COMPANY NUMBER: 3187528
PENNANT INTERNATIONAL GROUP PLC
FINANCIAL STATEMENTS
31 DECEMBER 2012
PENNANT INTERNATIONAL GROUP PLC
REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
CONTENTS
Officers and professional advisers
Chairman’s statement and business review
Directors’ report
Independent Auditors’ report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Page
1
2-5
6-10
11-12
13
13
14
15
16
Notes to the consolidated financial statements
17-40
Company statement of comprehensive income
Company statement of changes in equity
Company statement of financial position
Company statement of cash flows
41
41
42
43
Notes to the company financial statements
44-46
PENNANT INTERNATIONAL GROUP PLC
OFFICERS AND PROFESSIONAL ADVISERS
Directors
C C Powell
C Snook
J M Waller
J K Powell
(Chairman)
(Chief Executive)
(Finance)
(Non-executive)
Secretary
J M Waller
Registered office
Pennant Court
Staverton Technology Park
Cheltenham
Gloucestershire
GL51 6TL
Company number
3187528
Auditors
Bankers
Nominated Adviser
and Broker
Mazars LLP
Tower Bridge House
St Katharine’s Way
London
E1W 1DD
Barclays Bank Plc
Park House
Newbrick Road
Stoke Gifford
Bristol
BS34 8TN
W H Ireland Ltd
4 Colston Avenue
Bristol
BS1 4ST
Page 1
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S STATEMENT AND BUSINESS REVIEW.
I am pleased to report that 2012 has seen a step change in the performance of the Group. This change has
been driven mainly by the Training Systems Division strongly supported by the Software and Data
Services Divisions that have also achieved significant increases in revenue and profit.
I am also pleased to report that the Training Systems Division has, since the year end, been awarded a
contract with a value of approximately £16 million over five years with potential for extensions up to 20
years. The contract is for the supply, maintenance and support of a suite of training aids and is the largest
ever won by the Group. It will provide high quality earnings and good forward visibility.
In addition, the pipeline remains strong and there is on-going dialogue with prime contractors and other
customers in respect of potential major contracts for the short, medium and long term.
Results and Dividend
Revenues for the year grew by 40% to £14.47 million (2011: £10.35 million) and operating profit more
than doubled to £1.60 million (2011: £0.71million) being 11% of revenue (2011: £6.8% of revenue).
Basic earnings per share increased by 124% to 4.46p (2011: 1.99p).
Cash generated from operations was £0.8 million (2011: £2.2 million). The Group has no borrowings and
at the year-end had cash funds of £2.17 million (2011: £2.34 million).
Your Board is recommending the payment of a final dividend of 1.4p per share which, together with the
interim dividend of 0.6p, gives total dividends for the year of 2.0p (2011: 1.5p), an increase of 33%
compared to the previous year. The final dividend will be paid on 19 April 2013 to shareholders on the
register at close of business on 2 April 2013. The ex-dividend date will be 27 March 2013.
Strategy
We are continuing our successful strategy of building shareholder value through organic growth.
The Group operates mainly in the defence market but also has a presence in the rail and power generation
sectors and with Governments around the world. In these markets contracts usually have long gestation
periods requiring a strategy that looks to the medium term and beyond.
A common approach has been applied across the Group; the main objectives are:
• To build close relationships with original equipment manufacturers, prime contractors and other
customers, both before and after contract award, to better understand their requirements and to
become their partner of choice.
• To continue to develop our products and services to ensure that they satisfy the demands of the
market using current technology and standards.
• To increase the number of long-term support contracts to provide on-going revenue streams and
earnings visibility.
This strategy has proved successful generating recent major contract awards and continues to provide a
strong pipeline of opportunities. The current order book is expected to realise £25 million.
Page 2
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (Continued).
Current Trading
The Group is managed in three operating divisions all of which are growing and profitable. They are dealt
with separately below.
Training Systems Division
The Training Systems Division has been the main engine of growth for the Group and your Board
believes it has significant potential for further growth. Revenues increased by 61% to £8.7 million (2011:
£5.4 million) during the year and the contribution to Group operating profit more than doubled.
The Division provides and supports specialist training systems based on software emulation, hardware
simulation, virtual reality and computer based training principally in the defence sector. The main areas in
which opportunities arise in this market and which lead your Board to believe that there is significant
opportunity for growth are:
• The continuing development of new platforms and the upgrade of existing platforms by original
equipment manufacturers requiring either new training aids or upgrading of existing training
solutions.
• The growing trend for defence forces to look at outsourcing training services. A good example of
this is the contract in Australia for the Aviation Technical Training at RAAF Wagga.
• A continued move towards simulation in training programmes as it saves costs compared to the
use of the actual equipment and reduces risk.
The Division has been working on a number of contracts in the UK but with UK Government budgets
constrained we are actively pursuing a number of opportunities in other regions of the world. Contracts
have recently been won for delivery to Singapore, Saudi Arabia and Oman.
During the year work has continued on the major £12 million contract with AgustaWestland for the
development of Maintenance Training Equipment for the AW159 Lynx Wildcat helicopter. This contract
will contribute significantly in 2013 with delivery expected during the second half.
Contracts successfully completed during the year include:
• The upgrade of the Virtual Reality Parachute Trainer (VRPT) for the UK Ministry of Defence
(‘UK MOD’ )and the supply of a deployable version of that trainer.
• The upgrade of the Synthetic Environment Procedures Trainer (SEPT), also for the UK MOD, to
teach the marshalling of aircraft.
The Division has won the Group’s largest ever contract. The five year contract provides for annual one-
year extensions up to 20 years. Pennant will supply a suite of leading-edge training aids including
simulation, virtual reality, computer based training and related support services with a total value of
approximately £16 million. The training aids will be delivered during the first 2 years with support
revenues running for the remainder of the term.
Page 3
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (Continued).
Other contracts won include:
• A contract with a value in excess of £1.5 million for delivery to the Singapore Defence, Science
and Technology Agency of a Parachute Flight Simulation System (‘PFS’). This contract will
further develop our understanding and expertise in parachute training. It will run through 2013
and into 2014.
• A contract with BAE Systems with a value of approximately £1.4 million for the supply a number
of off-the-shelf training devices to Saudi Arabia as part of the upgrade of their Technical Studies
Institute. This contract will run into the second half of 2013.
In my report with the interim results I mentioned that the UK MOD were tendering a contract for the
support of training aids at a number of MOD training establishments in the UK. This contract combined
the Group’s existing contracts with contracts run by other contractors. The tender has now been submitted
and the result is expected in the near future.
Data Services Division
The Data Services Division has had a successful and profitable year with revenues increasing by 31% to
£2.8 million (2011: £2.1 million).
The division provides high quality media, graphics, virtual reality software and technical documentation
to the defence, rail, power and government sectors.
The division has continued to develop its expertise in virtual reality and has worked with the Training
Systems Division providing the virtual reality software for the VRPT and the SEPT. It is currently
developing the software for the PFS for Singapore.
Other major contracts running through the year included:
• Continuing work on the supply of operator and maintainer manuals, training material and training
delivery in support of a major US programme for the supply of rolling stock. The work runs into
the first half of 2013 with training delivery running through to 2015.
In the power sector, a major contract was completed for ALSTOM Power in Switzerland to
produce Operator and Maintenance Documentation for the auxiliary systems associated with the
GT24 Gas Turbine.
•
• Work has continued on the Professional Services Agreement with Capgemini UK PLC
developing the next generation Basic PAYE Tools to support the introduction of Her Majesty’s
Revenue and Customs Real Time Information into the PAYE process from April 2013. It is
expected that each year two new editions will be released in February and April to reflect changes
made by the Chancellor in his budget statements.
Page 4
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S STATEMENT AND BUSINESS REVIEW (Continued).
Software Services Division
The Software Services Division has also had a successful and profitable year with revenues increasing by
9% to £3.7 million (2011:£3.4 million).
The Division has offices in Canada, Australia and UK. It owns the rights to the market leading OmegaPS
suite of software which is sold worldwide and used by many major defence contractors and by the defence
authorities in Canada and Australia to support complex long life assets. Revenues are generated from the
sale of licences, associated maintenance agreements and consultancy. The product is regularly updated to
keep it in line with industry standards and changing technology. Regular updates are issued to users.
During the year new licence sales were made to Oshkosh Trucks Corporation and Rheinmetall. Licences
are sold with associated annual maintenance agreements that provide an on-going revenue stream.
The Canadian office had a particularly good year. They have a contract with the Canadian Department of
National Defence (DND) to provide specialist consultant support to maximise the use of OmegaPS within
the DND. The contract is a 5 year contract that it now in its penultimate year. During the year the value of
the contract was substantially increased due to the high demand for the services. The remaining value of
this contract is approximately C$3.6 million.
Work has also continued in Canada on a consultancy agreement with Babcock Canada Inc. in support of
Royal Canadian Navy projects. This contract has options to run out to 2015.
In Australia an extension for a further 2 years to the contract with the Australian Department of Defence,
Defence Material Organisation to support OmegaPS is being negotiated.
People
The Group would not have achieved the growth it has shown in 2012 without the considerable
commitment and expertise of the staff. They have responded superbly to significant challenges during the
year and I would like to take this opportunity to thank them for their efforts.
Outlook
The Group is well placed with a record order book providing good visibility of revenues through 2013,
2014 and beyond. Relationships with customers are good and the Group’s products are well received. In
consequence, the pipeline is strong with good prospects for the short, medium and long term. Your Board
is confident for the future.
C C Powell
Chairman
18 March 2013
Page 5
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT
COMPANY NUMBER: 3187528
The directors present their report and the audited financial statements for the year ended 31 December
2012.
Principal activities and review of the business
The principal activity of the Company is the provision of management services to the Group.
The principal activity of Group companies during the year was the delivery of integrated logistic support
solutions. These comprise Logistic Support Analysis Report software, technical documentation,
simulation and computer based training systems to customers worldwide; principally those in defence and
aerospace, but also in rail transport, oil and gas, petro-chemical, power, customer goods retail,
information technology and telecommunications industries.
The Group’s existing business and future prospects are reviewed by the Chairman in his statement and
business review which is included in this report by reference.
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that the
Company and the Group have adequate resources to continue in operational existence for the foreseeable
future. In reaching this conclusion the directors have considered the financial position of the Group, its
cash, liquidity position and borrowing facilities together with its forecasts and projections for 18 months
from the reporting date that take into account reasonably possible changes in trading performance. The
going concern basis of accounting has therefore continued to be adopted in preparing the financial
statements.
Results and dividends
There was a Group profit after taxation for the year of £1,174,316 (2011: £551,179) which has been
added to reserves. Dividends totalling £422,353 were paid during the year (2011: £409,083).
Treasury operations and financial instruments
The Group operates a centralised treasury function which is responsible for managing liquidity, interest
and foreign currency risks associated with the Group’s activities.
The Group’s principal financial instrument is cash, the main purpose of which is to provide finance for
the Group’s operations. In addition the Group has various other financial assets and liabilities such as
trade receivables and trade payables arising directly from its operations.
In accordance with the Group’s treasury policy, derivative instruments are not entered into for speculative
purposes.
The Group’s approach to capital and financial risk management is set out in note 34 to the Consolidated
Financial Statements.
Page 6
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT
Market value of land and buildings
The directors are of the opinion that the market value of land and buildings approximates the carrying
value. It is not the Group’s policy to revalue fixed assets.
Research and development
The Group continually invests in activities in order to develop systems and products that will enhance its
ability to meet the exacting requirement of its customers.
Employees
Employees are kept informed on matters affecting them and made aware of the general financial
economic factors influencing the Group which operates a systematic approach to employee
communication through regular briefings, meetings and internal communications.
The Group is an equal opportunities employer and applications from disabled persons are fully and fairly
considered, having regard to the aptitudes of the applicant. In the event of disability, every effort is made
to ensure that employment continues and appropriate training, career development and promotion of
disabled people should, as far as possible, be identical to that of other employees.
Payment policy
It is the Group’s policy to settle all debts with its creditors in the credit period given by each supplier. At
the year end the Group had an average of 58 days (2011: 36 days) purchases outstanding in trade
creditors.
Authority for company to purchase its own shares
Under a shareholders’ resolution of 15 May 2012, the directors were granted authority to purchase
through the market 3,965,045 of the Company’s ordinary shares, at a maximum price equal to 105% of
the average of the middle market quotations for an ordinary share taken from the Daily Official List of the
London Stock Exchange for the five business days immediately preceding the purchase. Since 15 May
2012 the directors have purchased through the market 369,500 ordinary shares for Treasury and have
remaining authority to purchase 3,595,545 ordinary shares.
The authority will be renewed at the 2013 AGM.
Page 7
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT
Directors and their interests
The following directors have held office since 1 January 2012 and their beneficial interests in the ordinary
shares of the Company were stated below:
C C Powell
J K Powell
C Snook
J M Waller
31 December
2012
5p ordinary
shares
31 December
2011
5p ordinary
shares
Number
10,301,533
10,301,533
1,487,500
1,566,875
Number
10,301,533
10,301,533
1,487,500
1,566,875
There have been no movements between the year end and the date of this report.
Corporate governance
The Company is committed to the principles of corporate governance contained in the UK Corporate
Governance Code that was issued in 2010. Although not required to do so by the AIM rules for
Companies, the Directors set out the following corporate governance and directors’ remuneration
disclosures.
The Board
The Board consists of the Chairman, the Chief Executive, the Finance Director and the Non-executive
Director. It meets quarterly and relevant information is distributed to directors in advance of the
meetings. The Directors have access to all information and if required, external advice at the expense of
the Company and access to the Company Secretary. The Board makes decisions on all material matters
including long term and commercial strategy, annual operating and capital budgets, capital structure and
financial and internal controls without having a formal schedule of reserved matters.
The Board attaches a high priority to communication with shareholders. The Group’s annual and half
yearly reports are sent to all shareholders. The Group liaises regularly with major shareholders and there
is an opportunity for individual shareholders to question the Chairman at the Annual General Meeting.
One third of the Directors are subject to re-election every year. Accordingly, C Snook retires by rotation
at the Annual General Meeting and, being eligible, offers himself for re-election.
The audit committee
The audit committee consists of the Chairman and the Non-executive director and offers a forum for
reporting by the Group’s external auditors. It meets at least annually and reviews the scope and results of
the external audit.
Page 8
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT
Internal control
The Board has overall responsibility for the Group’s system of internal control and for reviewing its
effectiveness. The purpose of the system of internal control is to manage rather than eliminate the risk of
failure to achieve business objectives and can only provide reasonable, but not absolute, assurance against
misstatement or loss.
The Directors have established an organisational structure with clear operating procedures, lines of
responsibility and delegated authority. In particular, there are clear procedures for capital investment
appraisal and approval and financial reporting with a comprehensive financial planning and accountancy
framework.
Remuneration committee
The Company’s remuneration committee consists of the Chairman and the Non-Executive Director. The
objective of the Committee’s policy is to attract, retain and motivate high calibre individuals as executive
directors with a competitive package of basic salary, incentives and rewards, including share options,
which are linked to the overall performance of the Group and interest of shareholders. The committee is
also responsible for the remuneration packages of the directors of subsidiary companies.
Directors’ remuneration
Fees for
services
£
Salary and
bonus
£
180,000
-
-
-
180,000
-
223,000
207,000
25,000
455,000
Benefits
and car
allowance
£
24,000
25,831
11,722
-
61,553
Pension
contributions
£
Total 2012
£
2011
£
-
15,800
14,200
-
30,000
204,000
264,631
232,922
25,000
726,553
151,250
198,506
167,145
18,000
534,901
C C Powell
C Snook
J M Waller
J K Powell
Pension contributions shown above are pension payments into the Pennant International Group plc
Pension Scheme, a defined contribution scheme.
Long term incentives
C Snook and J M Waller both hold 1,475,000 shares in the Company that are subject to restrictions as to
their disposal. The restrictions apply until the announcement of the Company’s results for the year ending
31 December 2012.
Service contracts
There are no directors’ service contracts or contracts for services with notice periods in excess of one
year.
Page 9
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT
Responsibilities of the directors
Company law requires the directors to prepare financial statements for each financial year which give a
true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the
Group and the Company for that period. In preparing those financial statements, the directors are required
to:
*
*
*
*
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
comply with International Financial Reporting Standards as adopted by the European Union
subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the company will continue in business.
The directors are responsible for maintaining proper accounting records which disclose with reasonable
accuracy at any time the financial position of the Company and to enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
Directors’ indemnity
The Company’s Articles of Association provide, subject to the provisions of UK legislation, an indemnity
for directors and officers of the Company in respect of liabilities they may incur in the discharge of their
duties or in the exercise of their powers, including any liabilities relating to the defence of any
proceedings brought against them which relate to anything done or omitted, or alleged to have been done
or omitted, by them as officers or employees of the Company. Appropriate directors’ and officers’
liability insurance cover is in place in respect of all the Company’s directors.
Statement as to disclosure of information to auditors
As far as the directors are aware they have taken all necessary steps to make the auditors aware, of any
relevant audit information and to establish that the auditors are aware of that information.
As far as the directors are aware, there is no relevant audit information of which the Company’s auditors
are unaware.
Auditors
Mazars LLP have signified their willingness to continue in office and a resolution to reappoint Mazars LLP
as auditors to the Company will be proposed at the forthcoming Annual General Meeting.
Approved by the Board on 18 March 2013
and signed on its behalf
J M Waller
Director
Page 10
PENNANT INTERNATIONAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT
INTERNATIONAL GROUP PLC
We have audited the financial statements of Pennant International Group plc for the year ended 31
December 2012 which comprise the Consolidated and Parent Company Income Statements, the
Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent
Company Statements of Comprehensive Income, the Consolidated and Parent Company Cash Flow
Statements, the Consolidated and Parent Company Statements of Changes in Equity and the related notes.
The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 9, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. This report is made
solely to the company’s members, as a body in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the company and
the company’s members as a body for our audit work, for this report, or for the opinions we have formed.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting
Council’s web-site at www.frc.org.uk/auditscopeukprivate
Opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2012 and of the Group’s profit and the Parent Company’s profit
for the year then ended;
• the financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Page 11
PENNANT INTERNATIONAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT
INTERNATIONAL GROUP PLC (continued)
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns;
or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
Jonathan Seaman (Senior Statutory Auditor)
for and on behalf of Mazars LLP, Chartered Accountants and Statutory Auditor
Tower Bridge House
St Katharine’s Way
London
E1W 1DD
18 March 2013
Page 12
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2012
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance costs
Finance income
Profit before taxation
Taxation
Profit for the year attributable to equity
holders of parent
Notes
2012
£
2011
£
5
14,469,715
10,353,534
(8,952,086)
(6,254,383)
5,517,629
4,099,151
(3,920,782)
(3,392,049)
1,596,847
707,102
(3,832)
(10,598)
9,950
600
1,602,965
697,104
8
10
11
12
(428,649)
(145,925)
1,174,316
551,179
Earnings per share
14
Basic
Diluted
4.46p
4.39p
1.99p
1.97p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
Profit for the year attributable to equity
holders of parent
Other comprehensive income:
2012
2011
£
£
1,174,316
551,179
Exchange differences on translation of foreign operations
(49,910)
(10,433)
Total comprehensive income for the period attributable to the equity
holders of parent
1,124,406
540,746
Page 13
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2012
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Available-for-sale investments
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Obligations under finance leases
Deferred revenue
Total current liabilities
Net current assets
Non-current liabilities
Obligations under finance leases
Deferred revenue
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Capital redemption reserve
Treasury shares
Retained earnings
Translation reserve
Total equity
Notes
2012
£
2011
£
15
16
17
18
27
19
21
22
23
24
26
24
26
27
28
29
985,400
105,036
1,821,559
3,700
25,734
2,941,429
992,044
126,622
1,791,413
3,700
96,880
3,010,659
13,340
3,918,737
2,173,237
6,105,314
13,340
2,802,780
2,343,105
5,159,225
9,046,743
8,169,884
2,875,690
374,927
4,726
341,016
3,596,359
2,757,472
6,953
15,279
352,324
3,132,028
2,508,955
2,027,197
24,477
12,251
107,340
144,068
-
28,465
132,342
160,807
3,740,427
3,292,835
5,306,316
4,877,049
1,400,000
200,000
(402,690)
3,771,398
337,608
1,400,000
200,000
(191,214)
3,080,745
387,518
5,306,316
4,877,049
Approved by the Board and authorised for issue on 18 March 2013
C C Powell
Director
J M Waller
Director
Page 14
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Share
capital
£
Capital
redemption
reserve
(see below)
£
Treasury
shares
(Note 29)
Retained
earnings
Translation
reserve
(see below)
Total
equity
£
£
£
£
At 1 January 2011
1,475,000
125,000
(81,076)
3,205,824
397,951
5,122,699
Total comprehensive
income for the year
-
-
-
551,179
(10,433)
540,746
Capital reduction
(75,000)
75,000
271,421
(271,421)
Recognition of share based
payment
Purchase of own shares for
treasury
Dividends paid
-
-
-
-
-
-
-
4,246
(381,559)
-
-
(409,083)
-
-
-
-
-
4,246
(381,559)
(409,083)
At 1 January 2012
1,400,000
200,000
(191,214)
3,080,745
387,518
4,877,049
1,174,316
(49,910)
1,124,406
Total comprehensive
income for the year
Recognition of share based
payment
Purchase of own shares for
treasury
Sale of treasury shares to
satisfy share options
Loss on sale of treasury
shares transferred to
retained earnings
Dividends paid
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(343,315)
61,425
9,104
-
-
70,414
(70,414)
-
(422,353)
-
-
-
-
-
9,104
(343,315)
61,425
-
(422,353)
At 31 December 2012
1,400,000
200,000
(402,690)
3,771,398
337,608
5,306,316
Capital redemption reserve
This represents the amount by which the Company’s share capital has been diminished by the
cancellation of shares held in treasury.
Translation reserve
Exchange differences relating to the translation of the net assets of the Group’s foreign subsidiaries
from their functional currency to the functional currency of the parent, being sterling, are recognised
directly in the translation reserve.
Page 15
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
Net cash from operations
30
795,409
2,217,399
Notes
2012
£
2011
£
Investing activities
Interest received
Proceeds of sale of property, plant and equipment
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash used in investing activities
Financing activities
Dividends paid
Purchase of own shares for treasury
Proceeds from sale of treasury shares
Repayment of borrowings
Net funds from/(repayment of) obligations under finance leases
Net cash used in financing activities
9,950
10,358
(36,860)
(215,446)
600
-
(94,220)
(155,800)
(231,998)
(249,420)
(422,353)
(343,315)
61,425
-
13,924
(409,083)
(381,559)
-
(233,369)
(4,900)
(690,319)
(1,028,911)
Net (decrease)/increase in cash and cash equivalents
(126,908)
939,068
Cash and cash equivalents at beginning of year
2,343,105
1,414,759
Effect of foreign exchange rates
(42,960)
(10,722)
Cash and cash equivalents at end of year
22
2,173,237
2,343,105
Page 16
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1
2
General information
Pennant International Group plc is a company incorporated in the United Kingdom under the
Companies Act. The address of the registered office is Pennant Court, Staverton Technology
Park, Cheltenham, GL51 6TL.
The principal activity of Group companies during the year was the delivery of integrated logistic
support solutions. These comprise Logistic Support Analysis Report software, technical
documentation, simulation and computer based training systems to customers worldwide;
principally those in defence and aerospace, but also in rail transport, oil and gas, petro-chemical,
power, customer goods retail, information technology and telecommunications industries.
These financial statements are presented in pounds sterling because that is the currency of the
primary economic environment in which the Group operates. Foreign operations are included in
accordance with the policies set out in note 3.
Adoption of new and revised standards
The following standard has been adopted by the EU and is mandatory for the first time for the
financial year beginning 1 January 2012 and has been adopted in the current year. Its adoption has
not had any impact on the information presented in these financial statements:
Amendment to IFRS 7 Financial
instruments disclosures
Enhances disclosure about transfers of financial assets.
There are a number of standards or amendments in issue that have not yet been endorsed by the
European Union or are not yet effective and therefore have not been adopted by the Group. When
endorsed or effective for the Group, these may have an impact on the accounting for future
transactions and events. The Group is still assessing what, if any, impact these changes to
accounting standards will have when they are applied for the first time.
3
Accounting policies
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
The financial statements have been prepared on the historical cost basis. The principal accounting
policies set out below have been consistently applied to all periods presented.
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that
the Company and the Group have adequate resources to continue in operational existence for the
foreseeable future. In reaching this conclusion the directors have considered the financial position
of the Group, its cash, liquidity position and borrowing facilities together with its forecasts and
projections for 18 months from the reporting date that take into account reasonably possible
changes in trading performance. The going concern basis of accounting has therefore continued to
be adopted in preparing the financial statements.
Page 17
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
3
Accounting policies (continued)
Basis of consolidation
The financial statements incorporate the results of the Company and entities controlled by the
Company (its subsidiaries). Control is achieved where the Company has power to govern the
financial and operating policies of the investee entity so as to obtain benefits from its activities.
Where necessary, adjustments are made to the results of subsidiaries to bring accounting policies
used into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Business combinations and goodwill
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The
assets and liabilities and contingent liabilities of the subsidiaries are measured at their fair value at
the date of acquisition. Any excess of cost of acquisition over fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of cost of acquisition below the fair
value of the identified net assets acquired (i.e. discount on acquisition) is credited in profit or loss
in the period of acquisition. Goodwill arising on consolidation is recognised as an asset and
reviewed for impairment at least annually. Any impairment is recognised immediately in profit or
loss account and is not subsequently reversed. Acquisition related costs are recognised in the
income statement as incurred.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents
amounts receivable for goods and services provided in the normal course of business, net of
discounts, VAT and other sales related taxes.
Sales of goods are recognised when goods are delivered and title has passed.
Rendering of services relates to the services of contractors provided to customers on a time basis
it is invoiced and recognised as revenue on a time basis.
Revenues arising from the software maintenance programme provided to customers are invoiced
in advance but recognised as revenue across the period to which the maintenance agreements
relate. Amounts not taken to revenue at a period end are shown in the statement of financial
position as deferred revenue.
Revenue from construction contracts is recognised in accordance with the Group’s accounting
policy on construction contracts (see below).
Page 18
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
3
Accounting policies (continued)
Construction contracts
Where the outcome of a construction contract can be estimated reliably, revenue and costs are
recognised by reference to the stage of completion of the contract activity at the reporting date.
This is normally measured by the proportion that contract costs incurred for work performed to
date bear to the estimated total contract costs, except where this would not be representative of the
stage of completion. Variations in contract work, claims and incentive payments are included to
the extent that they have been agreed with the customer.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is
recognised to the extent of contract costs incurred where it is probable they will be recoverable.
Contract costs are recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is
recognised as an expense immediately.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if
lower at the present value of the minimum lease payments, each determined at the inception of the
lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease
obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation
so as to achieve a constant rate of interest on the remaining balance of the liability. Finance
expenses are recognised immediately in profit or loss.
Rentals payable under operating leases are charged to income on a straight-line basis over the
term of the relevant lease.
Foreign currency
The individual financial statements of each group company are presented in the currency of the
primary economic environment in which it operates (its functional currency). For the purpose of
the consolidated financial statements, the results and financial position of each group company are
expressed in pound sterling, which is the functional currency of the Company, and the
presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other
than the group company’s functional currency (foreign currencies) are recorded at rates of
exchange prevailing on the dates of the transactions. At the reporting date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the
reporting date. Non-monetary items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in foreign currency are not
retranslated.
Page 19
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
3
Accounting policies (continued)
Foreign currency (continued)
Exchange differences arising on the settlement of monetary items, and on the retranslation of
monetary items, are included in profit or loss for the period. Exchange differences arising on the
retranslation of non-monetary items carried at fair value are included in profit or loss for the
period except for differences arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such non-monetary items, any
exchange component of the gain or loss is also recognised directly in equity.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the
Group’s foreign operations are translated at exchange rates prevailing on the reporting date.
Income and expense items are translated at the average exchange rates for the period, unless
exchange rates fluctuate significantly during the period, in which case the exchange rates at the
date of transactions are used. Exchange differences arising, if any, are classified as equity and
transferred to the Group’s translation reserve. Such translation differences are recognised as
income and expense in the period in which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rates.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax
currently payable is based on taxable profit for the year. Taxable profit differs from the net profits
as reported on the income statement because it excludes items of income and expense that are
taxable or deductible in other years and it further excludes items that are never taxable or
deductible. The Group’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used
in the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all temporary differences and deferred tax
assets are recognised to the extent that it is probable that the taxable profits will be available
against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of goodwill or from the
initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for temporary differences arising on investments in
subsidiaries and interest in joint ventures, except where the Group is able to control the reversal of
the temporary differences and it is probable that the temporary differences will not reverse in the
foreseeable future.
Page 20
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
3
Accounting policies (continued)
Taxation (continued)
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability
is settled or at least realised based on the tax rates that have been enacted or substantively enacted
at the reporting date. Deferred tax is charged or credited in the income statement, except when it
relates to items charged or credited directly to equity, in which case the deferred tax is also dealt
with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to income taxes levied by the
same taxation authority and the Group intends to settle its current tax assets and liabilities on a net
basis.
Share-based payment
The Group issues equity-settled share based payments to certain employees. Equity-settled share
based payments are measured at fair value (excluding the effect of non market-based vesting
conditions) at the date of grant. The fair value determined at the date of grant is expensed on a
straight-line basis over the vesting period, based on the Group’s estimate of shares that will
eventually vest and adjusted for the effect of non market-based vesting conditions.
Fair value is measured by use of an option pricing model. The expected life used in the model has
been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural conditions.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised
impairment loss.
Depreciation is charged to write off the cost of assets over their estimated useful lives on the
following bases:
Freehold land
Freehold buildings
Short leasehold buildings
Long leasehold buildings
Plant and equipment
Computers
Motor vehicle
Nil
Net book value at 1 January 2007 being
written off over 35 years on a straight line basis.
10% to 25% of cost per annum
33.33% of cost per annum
25% of cost per annum
Page 21
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
3
Accounting policies (continued)
Internally-generated intangible assets
An internally-generated intangible asset arising from the Group’s software development is
capitalised and held as an intangible asset in the statement of financial position when the costs
relate to a clearly defined project; the costs are separately identifiable; the outcome of such a
project has been assessed with reasonable certainty as to its technical feasibility and its ultimate
commercial viability; the aggregate of the defined costs plus all future expected costs in bringing
the product to market is exceeded by the future expected sales revenue; and adequate resources
are expected to exist to enable the project to be completed. Internally-generated intangible assets
are amortised over their useful lives, normally three years, from completion of development.
Where no internally-generated intangible asset can be recognised, development expenditure is
recognised as an expense in the income statement in the period in which it is incurred.
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and any recognised impairment
loss. Amortisation is charged to write off intangible assets on a straight line basis over their
estimated useful lives on the following basis:
Computer software
33.33% of cost per annum
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials
and, where applicable, direct labour costs and overheads that have been incurred in bringing the
inventories to their present location and condition. Net realisable value represents the estimated
selling price less all estimated costs of completion and costs to be incurred in marketing, selling
and distribution.
Financial instruments
The Group classifies financial instruments, or their component parts, on initial recognition as a
financial asset, a financial liability or an equity instrument.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and subsequently
measured at amortised cost. A provision is established when there is objective evidence that the
Group will not be able to collect all amounts due. The amount of any provision is recognised in
profit or loss.
Cash and cash equivalents
Cash and cash equivalents are recognised as financial assets. They comprise cash held by the
Group and short term bank deposits with an original maturity date of three months or less.
Page 22
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
3
Accounting policies (continued)
Financial instruments (continued)
Available-for-sale investments
Available-for-sale investments are recognised as financial assets and are initially measured at fair
value, including transaction costs. At subsequent reporting dates available-for-sale investments
are measured at fair value or cost where fair value is not readily ascertainable. Gains and losses
arising from changes in fair value are recognised directly in equity until the investment is disposed
of or is determined to be impaired, at which time the cumulative gain or loss recognised
previously in equity is included in profit or loss for the period. Dividends are recognised in the
income statement when the right to receive payment has been established.
Trade payables
Trade payables are initially recognised as financial liabilities measured at fair value, and
subsequent to initial recognition measured at amortised cost.
Bank borrowings
Interest bearing bank loans, overdrafts and other loans are recognised as financial liabilities and
recorded at fair value, net of direct issue costs. Finance costs are accounted for on the accruals
basis in the income statement using the effective interest rate.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deduction of all its liabilities. Equity instruments issued by the Group are recorded at the
proceeds received net of direct issue costs.
4
Critical accounting judgements
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the
cash-generating units to which goodwill has been allocated. The value in use calculation
requires estimates of the future cash flows expected to arise from the cash-generating unit and
a suitable discount rate in order to calculate the present value. The carrying amount of
goodwill at the balance sheet date was £985,400 and the review carried out has shown no
impairment.
Revenue recognition
A significant proportion of the Group’s revenue derives from construction contracts. The directors
are satisfied that revenue is recognised when, and to the extent that, the group obtains the right to
consideration which is derived on a contract-by-contract basis from the stage of completion of the
contract activity at the reporting date. This is measured by the proportion that contract costs
incurred for work performed to date bear to the estimated total contract cost. Judgement has been
required in the estimation of the total costs of each contract.
Page 23
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
5
Revenue
An analysis of the Group’s revenue is as follows:
Sale of goods
Rendering of services
Revenue from construction contracts
Software maintenance programmes
Investment income
2012
£
195,606
2,473,310
10,910,146
890,653
2011
£
216,502
2,119,063
7,113,890
904,079
14,469,715
9,950
14,479,665
10,353,534
600
10,354,134
6
Segment information
The operating segments that are regularly reviewed by the chief operating decision maker (the
Chief Executive) in order to allocate resources to segments and to assess performance are
Training Systems, Data Services and Software. The accounting policies of the reporting segments
are the same as those adopted by the Group and set out in note 3.
6.1
Segment revenues and results
Training Systems
Data Services
Software
Inter-segment sales
Training Systems
Data Services
Software
External sales
Unallocated corporate expenses
Net finance income/(costs)
Profit before tax
Segment revenue
2011
2012
£
£
5,382,693
8,716,820
2,112,351
2,776,508
3,394,382
3,718,610
10,889,426
15,211,938
Segment profit
2012
£
1,252,876
356,251
255,362
1,864,489
2011
£
580,572
64,725
155,830
801,127
-
(583,183)
(159,040)
14,469,715
-
(381,154)
(154,738)
10,353,534
(267,642)
6,118
1,602,965
(94,025)
(9,998)
697,104
The segments above also represent the Group’s major goods and services.
Inter-segment sales are made on an arm’s length basis.
Page 24
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
6.2
Segment assets and liabilities
Segment assets
Training Systems
Data Services
Software
Eliminations on consolidation
Unallocated
Consolidated assets
Segment liabilities
Training Systems
Data Services
Software
Eliminations on consolidation
Unallocated
Consolidated liabilities
6.3
Other segment information
Training Systems
Data Services
Software
2012
£
7,067,912
1,611,056
4,181,864
12,860,832
(4,634,253)
820,164
9,046,743
2011
£
6,370,843
1,124,412
3,369,900
10,865,155
(3,408,237)
712,966
8,169,884
2,339,946
495,371
1,332,462
4,167,779
(533,581)
106,229
3,740,427
2,355,473
283,938
620,984
3,260,395
(14,060)
46,500
3,292,835
Depreciation and
amortisation
Additions to non-current
assets
2012
£
178,257
25,882
26,516
230,655
2011
£
125,341
18,056
40,152
183,549
2012
£
178,300
13,469
60,537
252,306
2011
£
218,192
31,680
148
250,020
Page 25
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
6.4
Geographical information
The Group operates in four geographical areas – United Kingdom, USA, Canada and Australia.
The Group’s revenue from external customers and information about its non-current assets by
geographical location are detailed below.
United Kingdom
USA
Canada
Australia
Revenue from external
customers
2012
£
11,191,256
42,195
2,862,695
373,569
14,469,715
2011
£
7,507,214
52,324
2,417,290
376,706
10,353,534
Non-current assets*
2011
2012
£
£
2,639,946
2,630,285
-
-
1,477
10,083
268,656
271,627
2,910,079
2,911,995
* Non-current assets excluding financial instruments and deferred tax assets.
6.5
Information about major customers
Included in the revenues of each segment are the following sales to individual external customers
amounting to 10% or more of the Group’s revenues.
Training Systems
Customer 1
Customer 2
Customer 4
Data Services
Customer 1
Customer 2
Software services
Customer 1
Customer 2
Customer 3
2012
£
2011
£
1,478,499
1,921,217
4,265,150
-
1,468,731
2,342,875
105,324
75,842
-
220,107
5,155
-
2,475,475
-
8,800
2,242,750
Page 26
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
7
Staff costs
Wages and salaries
Social security costs
Pension costs
2012
£
5,109,836
505,974
210,135
5,825,945
2011
£
4,447,466
446,902
192,104
5,086,472
The average number of persons, including executive directors employed by the Group during the
year was:
Office and management
Production
Selling
8
Operating profit for the year
Profit for the year has been arrived at after charging:
Net foreign exchange losses
Amortisation of intangible assets
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Staff costs (note 7)
Share-based payment (note 32)
Redundancy cost
9
Auditors’ remuneration
Fees payable to the company’s auditors for:
- The audit of the annual financial statements
- The audit of the company’s group undertakings
Total audit fees
Fees payable to the company’s auditor and its associates for
other services to the Group:
- Tax compliance services
- Other services
Total non-audit fees
Number
Number
14
98
7
119
14
88
8
110
2012
£
2011
£
27,637
58,458
172,197
2,159
5,825,945
9,104
44,580
24,595
42,721
140,828
-
5,086,472
4,246
62,246
2012
£
2011
£
11,000
27,000
38,000
24,565
4,600
29,165
67,165
8,700
26,000
34,700
5,000
5,370
10,370
45,070
Page 27
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
10
Finance costs
Interest expense for financial lease arrangements
Interest expense for bank overdraft
11
Finance income
Income from bank deposits
Dividends receivable from available-for-sale investments
12
Taxation
Recognised in the income statement
Current tax expense
In respect of prior years
Deferred tax expense relating to origination and reversal of
temporary differences
Total tax expense
Reconciliation of effective tax rate
Profit before tax
Tax at the applicable rate of 24.5% (2011: 26.49%)
Tax effect of expenses not deductible in determining taxable
profit
Tax effect of utilisation of losses not previously recognised
Tax effect of recognition of previously unrecognised tax
losses
Effect of different tax rates of subsidiaries operating in other
jurisdictions
Effect of small companies rate
Effect of change of deferred tax rate
Effect of adjustments for prior years
Effect of share options exercised
Other differences
Total tax expense
2012
£
2,613
1,219
3,832
2012
£
9,775
175
9,950
2012
£
378,442
4,221
382,663
45,986
428,649
2011
£
1,905
8,693
10,598
2011
£
425
175
600
2011
£
6,953
12,106
19,059
126,866
145,925
1,602,965
392,726
697,104
184,663
23,151
(9,946)
26,046
(20,627)
-
(55,258)
2,440
(2,036)
(8,313)
45,892
(15,224)
(41)
428,649
1,086
-
(2,045)
12,106
-
(46)
145,925
Page 28
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
13
14
Dividends
Two dividends were paid during the year amounting to 1.60p per share in aggregate (2011: 1.50p).
A final dividend of 1.40p per share will be proposed at the Annual General Meeting.
Earnings per share
Earnings per share has been calculated by dividing the net profit attributable to equity holders by
the weighted average number of ordinary shares in issue during the year as follows:
Profit after tax attributable to equity holders
Weighted average number of ordinary shares in issue during
the year
Diluting effect of share options
Diluted average number of ordinary shares
2012
£
1,174,316
2011
£
551,179
Number
Number
26,343,553
411,559
26,755,112
27,672,928
310,278
27,983,206
15
Goodwill
Carrying amount
At 1 January 2011
Currency translation
At 1 January 2012
Currency translation
At 31 December 2012
£
991,557
487
992,044
(6,644)
985,400
Goodwill acquired in a business combination is allocated, at acquisition, to cash generating units
(CGUs) that are expected to benefit from that business combination. The carrying amount of
goodwill has been allocated as follows:
Cash generating unit
Data Services division
Software division
2012
£
583,900
401,500
985,400
2011
£
583,900
408,144
992,044
The Group tests goodwill annually for impairment. The recoverable amounts of the CGU’s are
determined from value in use calculations. The Group prepares cash flow forecasts derived from
the most recent annual financial budgets approved by the management and extrapolates cash
flows for the following 3 years based on a growth rate of 3.5% (2011: 3.5%). These forecast cash
flows are discounted at 7.5% per annum (2011:7.5% per annum) to provide the value in use for
each CGU. No impairment of goodwill has been recorded in previous years and the most recent
tests confirm no impairment.
Page 29
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
16
Other intangible assets
Cost
At 1 January 2011
Currency translation
Additions
Disposals
At 1 January 2012
Currency translation
Additions
At 31 December 2012
Amortisation
At 1 January 2011
Currency translation
Charge for the year
Eliminated on disposals
At 1 January 2012
Currency translation
Charge for the year
At 31 December 2012
Carrying amount
At 31 December 2012
At 31 December 2011
Software
£
Development
costs
£
404,126
(1,254)
94,220
(310,706)
186,386
(704)
36,860
222,542
373,579
(1,254)
17,332
(310,706)
78,951
(716)
45,666
123,901
151,753
-
-
-
151,753
-
-
151,753
107,177
-
25,389
-
132,566
-
12,792
145,358
Total
£
555,879
(1,254)
94,220
(310,706)
338,139
(704)
36,860
374,295
480,756
(1,254)
42,721
(310,706)
211,517
(716)
58,458
269,259
98,641
107,435
6,395
19,187
105,036
126,622
Page 30
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
17
Property, plant and equipment
Cost
At 1 January 2011
Currency translation
Additions
Disposals
At 1 January 2012
Currency translation
Additions
Disposals
At 31 December 2012
Depreciation
At 1 January 2011
Currency translation
Charge for year
Eliminated on disposals
At 1 January 2012
Currency translation
Charge for year
Eliminated on disposals
At 31 December 2012
Carrying amount
At 31 December 2012
At 31 December 2011
Land and
Buildings
£
Fixtures and
Equipment
£
Motor
vehicles
£
1,827,992
-
-
-
1,827,992
-
-
-
1,827,992
429,774
-
46,056
-
475,830
-
46,056
-
521,886
1,764,199
(2,696)
155,800
(498,410)
1,418,893
(3,344)
183,322
-
1,598,871
1,406,149
(2,607)
89,555
(498,410)
994,687
(3,342)
121,261
-
1,112,606
26,694
52
-
-
26,746
(705)
32,124
(26,041)
32,124
6,403
81
5,217
-
11,701
(121)
4,880
(13,524)
2,936
Total
£
3,618,885
(2,644)
155,800
(498,410)
3,273,631
(4,049)
215,446
(26,041)
3,458,987
1,842,326
(2,526)
140,828
(498,410)
1,482,218
(3,463)
172,197
(13,524)
1,637,428
1,306,106
1,352,162
486,265
424,206
29,188
15,045
1,821,559
1,791,413
Page 31
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
18
Available-for-sale investments
The Group owns a non-controlling interest of less than 1% in Synectics plc. The shares are not
held for trading and accordingly are classified as available for sale. At 31 December 2012 the
market value of this investment was £8,625 (2011: £5,913)
19
Inventories
Raw materials and consumables
2012
£
13,340
2011
£
13,340
There is no material difference between the carrying value of inventories and their
replacement cost.
20
Construction contracts
Contracts in progress:
Amounts due from contract customers included in trade and
other receivables
Amounts due to contract customers included in trade and
other payables
Contract costs incurred plus recognised profits less
recognised losses to date
Less: progress billings
21
Trade and other receivables
Trade receivables
Amounts due from construction customers (note 20)
Other debtors
Prepayments and accrued income
2012
£
2011
£
325,599
965,774
(907,889)
(582,290)
(1,537,291)
(571,517)
19,160,910
(19,743,200)
(582,290)
17,170,404
(17,741,921)
(571,517)
2012
£
2,884,513
325,599
294,307
414,318
3,918,737
2011
£
1,276,042
965,774
293,535
267,429
2,802,780
Some of the unimpaired trade receivables are past due as at the reporting date. The age of the
trade receivables past due but not impaired is as follows:
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 9 months
-
-
7,442
7,442
67,350
42,900
-
110,250
No receivables have been written off as uncollectible during the year (2011: nil) and it has not
been necessary to recognise any impairment loss. The directors consider that the carrying amount
of trade and other receivables approximates their fair value.
Page 32
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
22
Cash and cash equivalents
Bank balances
Petty cash
2012
£
2,170,086
3,150
2,173,237
2011
£
2,340,400
2,705
2,343,105
Cash and cash equivalents comprise cash held by the Group and short term deposits with an
original maturity date of three months or less. The carrying amount approximates their fair
value.
23
Trade and other payables
Amounts due to construction contract customers (note 20)
Trade payables
Taxes and social security costs
Accruals and deferred income
2012
£
907,889
1,101,199
587,752
278,850
2,875,690
2011
£
1,537,291
457,432
512,054
250,695
2,757,472
The directors consider that the carrying amount of trade and other payables approximates their fair
value.
24
Obligations under finance leases
Amounts payable
Within 1 year
Within 2 to 5 years inclusive
Less: future finance charges
Minimum payments
2011
2012
£
£
Present value of minimum
payments
2012
£
2011
£
7,816
27,346
(5,959)
29,203
16,163
-
(884)
15,279
4,726
24,477
-
29,203
15,279
-
-
15,279
Carrying amount of assets subject to finance lease:
Property, plant and equipment
24,389
14,655
The Group’s obligations under finance leases are secured by the lessor’s rights to the leased
assets.
25
Borrowings
The Group has available unused bank overdraft facilities of £750,000. Any overdraft arising from
the facility is repayable on demand and carries interest at 2.75% (2011: 2.75%) plus the bank’s
base rate. Any facilities used are secured by fixed and floating charges over the assets of Pennant
International Group plc, Pennant Training Systems Limited, Pennant Software Services Limited
and Pennant Information Services Limited and by cross-guarantees between those companies.
Page 33
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
26 Deferred revenue
Deferred revenue arises in respect of prepaid software
maintenance contracts and is shown as:
Revenue that can be recognised within 1 year included in
current liabilities.
Revenue that can be recognised after 1 year included in
non-current liabilities.
2012
£
2011
£
341,016
352,324
12,251
353,267
28,465
380,789
27
Deferred tax
Accelerated
tax
depreciation
£
(114,123)
(102)
(10,786)
(125,011)
(83)
17,754
(107,340)
Other
temporary
differences
£
(4,205)
-
7,117
2,912
-
22,822
25,734
Tax losses
£
209,812
22
(123,197)
86,637
(75)
(86,562)
-
Total
£
91,484
(80)
(126,866)
(35,462)
(158)
(45,986)
(81,606)
At 1 January 2011
Currency translation
Credit/(charge) to income
At 1 January 2012
Currency translation
Credit/(charge) to income
At 31 December 2012
In the statement of financial position deferred assets and liabilities are shown without any set off
as follows:
Deferred tax assets
Deferred tax liabilities
2012
£
25,734
(107,340)
(81,606)
2011
£
96,880
(132,342)
(35,462)
2010
£
226,452
(134,968)
91,484
Deferred tax has been provided at 23% (2011: 25%), the corporation tax rate that will be effective
from 1 April 2013.
At the reporting date the Group had unused tax losses of approximately £1,800,000 (2011:
£2,000,000) available for set-off against future profits. A deferred tax asset has been recognised in
respect of £Nil (2011: £344,000) of such losses. No deferred tax asset has been recognised in
respect of the balance of the losses due to the unpredictability of future profit streams in the
subsidiary in which they arise. The unrecognised losses are available for set off indefinitely.
Page 34
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
28
Share capital
Issued and fully paid
28,000,000 (2010: 29,500,000) ordinary shares of 5p each
2012
£
2011
£
1,400,000
1,400,000
The Company has one class of ordinary shares which carry no right to fixed income.
29
Treasury shares
As at 1 January 2011
Shares purchased in the market under authority for Company
to purchase its own shares
Shares cancelled
As at 1 January 2012
Shares purchased in the market under authority for Company
to purchase its own shares
Shares sold to satisfy share options
Loss on sale of shares
As at 31 December 2012
Number
693,123
£
81,076
1,859,782
(1,500,000)
1,052,905
381,559
(271,421)
191,214
1,232,959
(650,000)
-
1,635,864
343,315
(61,425)
(70,414)
402,690
30
Note to consolidated statement of cash flows
Cash generated from operations
Profit for the year
Finance income
Finance costs
Income tax expense
Depreciation of property, plant and equipment
Amortisation of other intangible assets
Loss on disposal of property, plant and equipment
Share-based payment
Operating cash flows before movement in working capital
Increase in receivables
Decrease in inventories
Increase in payables
(Decrease)/increase in deferred revenue
Cash generated from operations
Tax paid
Interest paid
Net cash generated from operations
2012
£
2011
£
1,174,316
(9,950)
3,832
428,649
172,197
58,458
2,159
9,104
1,838,765
(1,115,957)
-
118,218
(27,522)
813,504
(14,263)
(3,832)
795,409
551,179
(600)
10,598
145,925
140,828
42,721
-
4,246
894,897
(414,041)
31,035
1,709,886
35,326
2,257,103
(29,106)
(10,598)
2,217,399
Page 35
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
31 Operating lease arrangements
Lease payments under operating leases recognised as an
expense in the year
2012
£
2011
£
233,953
212,274
The Group had commitments under non-cancellable operating leases as follows:
Within one year
In the second to fifth years
In the sixth to tenth years
After ten years
Land and buildings
2011
2012
£
£
127,763
287,840
134,208
248,338
798,149
128,777
321,847
182,908
254,888
888,420
Other
2012
£
62,384
67,452
-
-
129,836
2011
£
88,778
125,177
-
-
213,955
Commitments after ten years relate to ground rents on long leasehold properties that run until
2098.
32 Share-based payment
The Company operates a share option scheme for certain employees of the Group. Options are
exercisable at the price equal to the quoted mid-market price at the close of business on the date of
grant. Exercise is subject to conditions based on the performance of the Group. Options are
forfeited if the employee leaves the Group before the options vest. Details of the share options
outstanding during the year are as follows:
2012
2011
Number of
share
options
870,000
390,000
(650,000)
Weighted
average
exercise
price
10.78p
26.75p
9.35p
Number of
share
options
720,000
150,000
-
Weighted
average
exercise
price
9.33p
17.75p
-
610,000
21.41p
870,000
10.78p
70,000
8.25p
240,000
11.50p
Outstanding at 1 January 2012
Granted during the year
Exercised during the year
Outstanding at 31 December
2012
Exercisable at 31 December
2012
The options outstanding at 31 December 2012 had a weighted average remaining contractual life
of 8.7 years (2011: 5.35 years)
Page 36
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
32
Share-based payment (continued)
New options over 390,000 shares were granted on 9 May 2012. The aggregate fair value of the
options granted was £17,460.
The inputs to the Black Scholes model for the 2012 grant were as follows:
Share price at date of grant
Exercise price
Expected volatility (based on historic volatility)
Risk free rate
Expected dividend yield
Option life
Vesting period
27p
27p
25%
4%
5%
10 years
3 years
The Group recognised total expenses related to equity-settled share-based payment transactions
of £9,104 (2011: £4,246).
33
Employee benefits
Defined contribution
The Group operates defined contribution pension schemes. The assets of the schemes are held
separately from those of the Group in independently administered funds. The pension cost charge
represents contributions payable by the Group to the funds.
Contributions payable by the Group for the year
210,135
192,104
2012
£
2011
£
Page 37
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
34
Financial instruments
34.1 Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern while
maximising the return to shareholders. The capital structure of the Group consists of cash and
cash equivalents and equity comprising issued share capital, reserves and retained earnings. The
Group is not subject to any externally imposed capital requirements.
34.2 Categories of financial instruments
Financial assets
Available-for-sale financial assets
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Measured at amortised cost
Trade payables
Obligations under finance leases
2012
£
2011
£
3,700
3,700
3,918,737
2,173,237
6,095,674
2,802,780
2,343,105
5,149,585
1,688,951
29,203
1,718,154
969,486
15,279
984,765
34.3 Financial risk management
Financial risks include market risk (principally foreign currency risk), credit risk, liquidity risk
and interest risk. The Group seeks to minimise the effect of these risks by developing and
applying policies and procedures which are regularly reviewed for appropriateness and
effectiveness. The Group’s principal financial instruments comprise cash held in current accounts,
trade receivables, amounts due from and to construction contract customers, trade payables, other
payables and borrowings that arise directly from its operations.
34.4 Foreign currency risk
The Group operates internationally giving rise to exposure from changes in foreign exchange
rates. The Group’s policy permits but does not demand that these exposures are hedged in order to
fix their cost in sterling. Forward foreign exchange contracts are entered into in respect of forecast
foreign exchange transactions when the amount and timing of such transactions becomes
reasonably certain. At 31 December 2012 and 31 December 2011 the Group had no commitments
under forward exchange contracts.
Page 38
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
34.
Financial Instruments (continued)
34.4
Foreign currency risk (continued)
The Canadian dollar, the Australian dollar and the American dollar are the main foreign
currencies in which the Group operates. The carrying amounts of the Group’s monetary assets and
liabilities denominated in these currencies at the reporting date are as follows:
Canadian $
American $
Australian $
Total
Liabilities
Assets
2012
£
200,099
1,845
120,706
322,650
2011
£
132,581
2,259
34,897
169,737
2012
£
1,592,280
202,164
290,550
2,084,994
2011
£
1,548,893
84,587
245,553
1,879,033
The following table details the Group’s sensitivity to a 5% increase in Sterling against the relevant
foreign currencies. The analysis includes outstanding foreign currency denominated monetary
items including amounts due to and from operations within the Group where denominated in a
currency other than the functional currency of the debtor or creditor. A positive number indicates
an increase in profits and a negative number a decrease in profit. A 5% weakening of Sterling
against the relevant currencies would have an equal and opposite effect on profit.
Canadian $
American $
Australian $
34.5 Credit risk
Impact on profit
2012
£
(27,221)
22,477
25,463
2011
£
(34,170)
21,760
15,958
Credit risk refers to the risk that a customer or counterparty to a financial instrument fails to meet
its contractual obligations, resulting in financial loss to the Group, and arises principally from the
Group’s receivables from customers and bank current accounts. Major customers that wish to
trade on credit terms are subject to credit verification procedures and receivable balances are
monitored on an on-going basis. The credit risk on bank current account balances is limited
because the counterparties are banks with high credit ratings assigned by international credit-
rating agencies.
At 31 December 2012 and 31 December 2011 there were no significant concentrations of credit
risk. The maximum exposure to credit risk is represented by the carrying amount of each financial
asset in the statement of financial position.
Page 39
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
34
Financial instruments (continued)
34.6 Liquidity risk
Liquidity risk is the risk that the Group does not have sufficient cash to meet its financial
obligations as they fall due. The Group ensures that sufficient cash and undrawn facilities are
available to fund ongoing operations and to meet its medium term capital and funding obligations.
At the year end the Group had net cash funds of £2,173,237 (2011: £2,343,105) and undrawn
facilities of £750,000 (2011: £750,000). The level of the Group’s overdraft facility is reviewed
annually.
The Group’s financial obligations consist of trade creditors, and obligations under finance leases.
Trade payables are all payable within 12 months. The maturities of obligations arising from
finance leasing are set out in note 24.
34.7
Interest risk
The Group has no liabilities subject to interest rate risk at the balance sheet date. However, the
Group is from time to time exposed to interest rate risk on bank overdraft. Interest is paid on bank
overdraft at 2.75% (2011: 2.75%) over base rate. 1% rise/fall in interest rates would have
decreased/ increased profit for the year by an immaterial amount (2011: immaterial).
35
36
Capital commitments
At 31 December 2012 and 31 December 2011 the Group had no capital commitments.
Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note.
Remuneration of key management personnel
Amounts paid to Group directors who are the only key management personnel of the Group are
set out in the Directors’ Report.
Dividends paid to Directors
Dividends totalling £213,695 (2011: £200,339) were paid in the year in respect of ordinary shares
in which the Company’s Directors had a beneficial interest.
Employee Benefit Trust
Included in Trade and Other Receivables are loans to Mr C Snook (£148,012) and Mr J Waller
(£144,763) who are both directors of the Company. The loans were made in accordance with
the purposes of the Pennant Employee Benefit Trust and used to purchase shares in the
Company. They are secured by a charge on the shares and repayable when the shares are sold.
Page 40
PENNANT INTERNATIONAL GROUP PLC
COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
Continuing operations
Management charges receivable
Dividends received from subsidiaries
Administrative expenses
Management charges payable
Operating profit/(loss)
Finance costs
Finance income
Profit/(loss) before tax
Tax (charge)/credit
Total comprehensive income/(loss) attributable to equity
holders
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Notes
2012
£
2011
£
104,000
295,000
340,000
60,000
(227,641)
(199,025)
(144,000)
(190,000)
72,359
(34,025)
(344)
(6,309)
4,179
175
76,194
(40,159)
(40,085)
40,085
36,109
(74)
3
4
5
Share
capital
£
Capital
redemption
reserve
£
Treasury
shares
Retained
earnings
Total equity
£
£
£
At 1 January 2011
1,475,000
125,000
(81,076)
4,448,553
5,967,477
Total comprehensive income for the
year
Capital reduction
Recognition of share-based payment
Transactions in treasury shares
Dividends paid
At 1 January 2012
Total comprehensive income for the
year
Recognition of share-based payment
Purchase of own shares for treasury
Sale of treasury shares to satisfy
share options
Loss on sale of treasury sales
transferred to retained earnings
Dividends paid
-
-
-
(74)
(74)
-
4,246
(75,000)
75,000
271,421
(271,421)
-
-
-
-
-
-
-
4,246
(381,559)
-
(381,559)
-
(409,083)
(409,083)
1,400,000
200,000
(191,214)
3,772,221
5,181,007
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(343,315)
61,425
70,414
-
36,109
36,109
9,104
9,104
-
-
(343,315)
61,425
(70,414)
(422,353)
-
(422,353)
At 31 December 2012
1,400,000
200,000
(402,690)
3,324,667
4,521,977
Page 41
PENNANT INTERNATIONAL GROUP PLC
COMPANY NUMBER: 3187528
COMPANY STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2012
Non-current assets
Investment in subsidiaries
Available-for-sale investments
Deferred tax
Total non-current assets
Current assets
Trade and other receivables
Amounts due from subsidiaries
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Amounts due to subsidiaries
Total current liabilities
Net current liabilities
Total liabilities
Net assets
Equity
Share capital
Capital redemption reserve
Treasury shares
Retained earnings
Total equity
Notes
2012
£
2011
£
6
7
8
7,909,037
3,700
-
7,912,737
7,909,037
3,700
40,085
7,952,822
4,299
826,355
519,070
1,349,724
2,032
326,839
374,051
702,922
9,262,461
8,655,744
106,231
4,634,253
4,740,484
46,499
3,428,238
3,474,737
(3,390,760)
(2,771,815)
4,740,484
3,474,737
4,521,977
5,181,007
10
1,400,000
200,000
(402,690)
3,324,667
1,400,000
200,000
(191,214)
3,772,221
4,521,977
5,181,007
Approved by the Board and authorised for issue on 18 March 2013
C C Powell
Director
J M Waller
Director
Page 42
PENNANT INTERNATIONAL GROUP PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
Net cash from operations
11
505,083
1,166,374
Notes
2012
£
2011
£
Investing activities
Dividend received from subsidiary
Dividend received
Interest received
Net cash from/(used) in investing activities
Financing activities
Dividends paid
Purchase of own shares for treasury
Proceeds from sale of treasury shares
Repayment of borrowings
Net cash used in financing activities
340,000
175
4,004
60,000
175
-
344,179
60,175
(422,353)
(343,315)
61,425
-
(409,083)
(381,559)
-
(233,369)
(704,243)
(1,024,011)
Net increase/(decrease) in cash and cash equivalents
145,019
202,538
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
374,051
171,513
519,070
374,051
Page 43
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1
2
Accounting policies
The separate financial statements of the Company are presented as required by the Companies Act
2006. As permitted by the Act the separate financial statements have been prepared in accordance
with International Financial Reporting Standards as adopted by the European Union. The
principal accounting policies adopted are the same as those set out in note 3 to the consolidated
financial statements except as noted below:
•
Investments in subsidiaries are stated at cost less, where appropriate, provisions for
impairment.
Operating loss
The auditors’ remuneration for audit and other services is disclosed in note 9 to the consolidated
financial statements.
3
Finance costs
Interest expense for borrowing at amortised cost
4
Finance income
Interest received
Dividend from available-for-sale financial asset
5
Tax
Deferred tax charge/(credit) relating to origination and
reversal of temporary differences
Reconciliation of effective tax rate
Profit/(loss) before tax
Tax at applicable rate 24.5% (2011: 26.49%)
Tax effect of:
Expenses that are not deductible for tax
Group income
Share options exercised
Losses utilised not previously recognised in deferred tax
Losses recognised in deferred tax for the first time
Losses arising not recognised in deferred tax
Franked investment income
Group relief
Total tax charge/(credit)
2012
£
344
2011
£
6,309
2012
£
4,004
175
4,179
2011
£
-
175
175
2012
£
2011
£
40,085
(40,085)
76,194
18,668
2,406
(83,300)
(15,224)
-
-
40,085
(43)
77,493
40,085
(40,159)
(10,638)
4,345
(15,894)
-
(8,037)
(40,085)
-
(46)
30,270
(40,085)
Page 44
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
6
Subsidiaries
Details of the Company’s subsidiaries at 31 December 2012 are as follows:
Pennant Training Systems Limited
Pennant Information Services Limited
Pennant Software Services Limited
Pennant Canada Limited
Pennant Australasia Pty Limited
Pennant Information Services Inc.
Pennant EBT Trustee Limited
Place of
incorporation
England
England
England
Canada
Australia
U.S.A
England
Proportion of
ownership
100%
100%
100%
100%
100%
100%
100%
The investments in subsidiaries are all stated at cost.
7
8
9
Cash and cash equivalents
These comprise cash held by the company and short-term bank deposits with an original maturity
of three months or less.
Trade and other payables
Trade payables principally comprise amounts outstanding for services and ongoing costs. The
carrying amount approximates their fair value.
Borrowings
Details of the Group overdraft arrangements are set out in note 25 to the consolidated financial
statements.
10
Share capital
Details are set out in note 28 to the consolidated financial statements.
11
Note to statement of cash flows
Cash generated from operations
Profit/(loss) for the year
Dividend received from subsidiary
Tax charge/(credit)
Finance costs
Finance income
Share-based payment
Operating cash flows before movement in working capital
(Increase)/decrease in receivables
Increase in payables
Cash generated from operations
Interest paid
Net cash generated from operations
2012
£
2011
£
36,109
(340,000)
40,085
344
(4,179)
9,104
(258,537)
(501,783)
1,265,747
505,427
(344)
505,083
(74)
(60,000)
(40,085)
6,309
(175)
4,246
(89,779)
292,018
970,444
1,172,683
(6,309)
1,166,374
Page 45
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
12
Financial instruments
The Company’s approach to the management of capital and market risks is set out in note 34 to
the consolidated financial statements.
Categories of financial instruments
Financial assets
Available for sale financial assets
Loans and receivables
Trade and other receivables
Amounts due from subsidiaries
Cash and cash equivalents
Financial liabilities
Measured at amortised cost
Trade and other payables
Amounts due to subsidiaries
2012
£
2011
£
3,700
3,700
4,299
826,355
519,070
1,353,424
2,032
326,839
374,051
706,622
106,231
4,634,253
4,740,484
46,499
3,428,238
3,474,737
13
Contingent liabilities
The Company is party to a group registration for the purposes of Value Added Tax (VAT).
Members of the group are jointly and severally liable for the total tax due. The total amount of
VAT payable by the group registration and not accrued in the statement of financial position was
£ 296,851 (2011: £314,674).
14
Related party transactions
The Company has provided guarantees to the Bank in respect of its bank borrowings and any bank
borrowings of its subsidiaries as set out in note 25.
Barclays Bank Plc have given performance guarantees of £416,304 (2011: £Nil), in the normal
course of business, to a customer of Pennant Training Systems Limited. These are secured by
fixed and floating charges over the assets of the Company.
The Company has guaranteed the payment of rent under a lease agreement for office premises
occupied by a subsidiary company. The lease runs for 10 years from 1 February 2010 at an annual
rental of £48,700.
Other transactions with related parties include management charges for services provided to and
by subsidiary companies as disclosed on the face of the statement of comprehensive income.
Page 46