COMPANY NUMBER: 3187528
PENNANT INTERNATIONAL GROUP PLC
FINANCIAL STATEMENTS
31 DECEMBER 2013
PENNANT INTERNATIONAL GROUP PLC
REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
CONTENTS
Officers and professional advisers
Chairman’s review and strategic report
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
17-41
Company statement of comprehensive income
Company statement of changes in equity
Company statement of financial position
Company statement of cash flows
42
42
43
44
Notes to the company financial statements
45-48
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 REVIEW AND STRATEGIC REPORT.
I am pleased to report a year of further significant growth in both revenues and profits enabling the
directors to recommend a 30% increase in dividend.
The current order book gives good visibility of revenues for 2014 and the level of tendering and
associated contact with prospective customers, particularly in the Training Systems Division, enables us
to plan with confidence for the medium and longer term.
Results and Dividend
Consolidated revenues reached £18.68 million an increase of 29% (2012: £14.47 million). Revenues rose
in all operating divisions but principally in the Training Systems Division.
Earnings attributable to shareholders increased by 45% to £1.70 million (2012: £1.17 million). Basic
earnings per share were 6.43p (2012: 4.46p).
Cash generated from operations was £165,319 (2012: £795,409). There was a requirement for increased
working capital during the year as major contracts progressed. Contracted stage payments are expected to
reduce this requirement in the first half of 2014.
Your Board is recommending payment of a final cash dividend of 1.8p per share, bringing the total
dividends for the year to 2.6p per share which is covered 2.5 times by earnings and is an increase of 30%
on the previous year. The final dividend is payable on 25 April 2014 to shareholders on the register at
close of business on 11 April 2014. The ex-dividend date will be 9 April 2014.
About Pennant
Pennant International Group plc (‘the Group’) has a diverse portfolio of capabilities enabling it to offer
services that cover training equipment and related support, technical documentation, media development,
software development and related consultancy. It operates principally in the defence, rail, and aerospace
sectors and with government departments.
The Group operates as three trading divisions and has offices in UK, Australia and Canada.
Strategy
The Board has consistently applied a successful strategy across the Group of increasing shareholder value
through organic growth. This strategy is built upon:
Customer focus
Innovation
Diversification
Building relationships with existing and potential new customers,
understanding their requirements, being flexible and delivering on
time and to budget.
Developing new capabilities by applying new and existing proven
technologies and continually updating existing products and services
to meet market demands, current standards and new technologies.
Pursuing opportunities in closely related sectors and in particular
those with potential long term revenue streams.
Page 2
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S REVIEW AND STRATEGIC REPORT (continued).
This strategy continues to be successful and during 2013 has generated considerable tendering activity,
particularly for Training Systems, and regular involvement with customers in respect of a strong pipeline
of opportunities. Record new orders having the potential to realise revenues in excess of £20 million were
received in 2013.
Training Systems Division
Training Systems Division continues to be the main driver of growth for the Group. Revenues increased
by 44% to £12.55 million (2012: £8.72 million) and the contribution to Group operating profits increased
by 42% to £1.78 million.
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. It has a strong
portfolio of proven training devices ranging from simple hand skill trainers to sophisticated simulators. It
also has a track record of successfully designing and manufacturing new devices for specific applications.
There are significant ongoing orders that provide work through 2014 and beyond and active involvement
with potential customers for a number of significant opportunities. Although the timing of major contracts
is difficult to predict and usually beyond the Group’s control, the Board considers that a number of factors
suggest that there is significant potential for further growth:
• New capital equipment platforms are becoming more sophisticated and complex increasing the
requirement for training.
• The use of ‘real’ equipment for training has safety implications, is expensive and often
impractical.
• There is a continuing trend for defence forces to outsource training services including updating
their training devices.
New contract awards and operational achievements during the year are set out below:
•
In March 2013, the Division won a contract with BAE Systems Australia Limited to supply and
support a suite of training aids for the Australian Defence Force. A number of the training devices
were successfully manufactured, delivered and accepted in 2013 and manufacture of the
remaining requirements will continue through 2014 and into 2015. Support of the delivered items
runs into 2018. The contract has a value of approximately £16 million with a 5 year term and
provides for one year extensions up to 20 years.
• Successful negotiation of a contract with a potential value of £5 million running over up to 5
years, to March 2018, for the support of training aids at a number of UK Ministry of Defence
establishments.
• A contract with a value in excess of £1 million for the supply of a software-based training
capability to an Indian customer.
Page 3
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S REVIEW AND STRATEGIC REPORT (continued).
• Successful on-schedule completion, delivery and acceptance of two maintenance trainers for the
AW159 Wildcat helicopter under a contract with Agusta Westland having a value in excess of
£12 million. Work will continue through 2014 to upgrade the delivered simulators to the latest
aircraft specification. The division has been awarded an additional contract for the support of the
simulators in service.
• Successful completion of factory acceptance and delivery of a leading edge Parachute Flight
Simulator to a far-eastern customer.
• Completion, on time and to budget, under a contract with BAE Systems for the supply of a suite
of training aids to Saudi Arabia as part of the upgrade of their Technical Studies Institute.
Data Services Division
The Data Services Division provides high quality media, graphics, virtual reality software and technical
documentation to the defence, rail, power and government sectors. It increased its revenues by 6% to
£2.95 million (2012: £2.78 million) and contributed £307,000 (2012: £356,000) to Group operating
profits.
The main contracts contributing to trading during the year were:
• An on-going contract to provide operator and maintainer manuals, training documentation and
computer based training and training delivery for the R188 Rail Car Project currently being built
by Kawasaki Rail Car Inc. for New York City Transit Department.
• Continuing work on a professional services contract with Capgemini UK PLC for the
development for Her Majesty’s Revenue and Customs (HMRC) of a Basic PAYE Tools (BPT)
product that operates in unison with HMRC’s Real Time Initiative for PAYE. During 2014 this
contract will move from the development phase into the on-going support phase. It is expected
that two new editions will be released each year to reflect changes made by the Chancellor in his
budget statements.
• The Division has built a team of software developers specialising in virtual reality. They have
worked successfully with the Training Systems Division to provide software for the Parachute
Flight Simulator for a far-eastern customer and to upgrade the capabilities of the Virtual Reality
Parachute Trainer for the UK Ministry of Defence (‘MOD’) and the Synthetic Environment
Procedures Trainer (an aircraft marshalling trainer) for the MOD, Saudi Arabia and Australia.
The Division has many years’ experience in the rail sector and is actively involved with a number of
significant opportunities in USA and the Far East.
Page 4
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S REVIEW AND STRATEGIC REPORT (continued).
Software Services Division
The Division has offices in Canada, Australia and UK. It owns the rights to the market leading OmegaPS
suite of software which is sold world-wide and used by 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 in line with industry standards and changing technology. Regular
updates are issued to users.
The Division has had a successful year with revenues increasing by 17% to £4.3 million (2012: £3.7
million). The contribution to the Group’s operating profit has increased significantly by 70% to £435,000
(2012: £255,000). The increase has arisen mainly from increased consultancy revenues and a number of
new licence sales.
The Canadian office has a contract with the Canadian Department of National Defence (DND) to provide
specialist consultant support to maximise use of OmegaPS within the DND. The contract is a 5 year
contract that is now in its last year. During the year the value of the contract was substantially increased
due to demand for the services. This is a significant contract for the Division and the DND has confirmed
their strategy for a new single source consulting contract and extensions to the existing contract until the
new contract is in place.
In Australia there is a contract with the Australian Department of Defence, Defence Materiel
Organisation to support OmegaPS. An extension to the contract to 31 March 2015 was negotiated during
the year.
People
The Group has staff with diverse experience and educational, professional and cultural backgrounds. They
have responded well to the challenges of the year and the Group’s good reputation and relationships with
customers are the measure of their success. I should like to take this opportunity to thank them for their
efforts.
Outlook
The strategy followed consistently over the last 5 years has been successful in achieving its goal of
increasing shareholder value and this strategy will be continued. A number of major contracts have been
won and completed to customer satisfaction, enhancing the Group’s profile and reputation. As a result,
the Group is currently actively involved in a number of significant opportunities with existing and
prospective customers. These opportunities together with the visibility from the current order book give
confidence for the future.
Approved by the Board on 6 March 2014
And signed on its behalf
C C Powell
Chairman
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
2013.
Principal activities
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 simulation, virtual reality and computer based training systems, technical
documentation, software solutions and Logistic Support Analysis Software to customers worldwide;
principally those in defence and aerospace, but also in rail transport, oil and gas, power, information
technology and to government departments.
Details on future developments and research and developments activities are included in the Chairman’s
Review and Strategic Report.
Dividends
Dividends totalling £581,110 were paid during the year (2012: £422,353). The Board is recommending
payment of a final cash dividend of 1.8p per share.
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.
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
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.
Authority for company to purchase its own shares
Under a shareholders’ resolution of 11 April 2013, the directors were granted authority to purchase
through the market 3,962,120 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 11 April
2013 the directors have purchased through the market 91,875 ordinary shares for Treasury and have
remaining authority to purchase 3,870,245 ordinary shares.
A proposal to renew the authority will be made at the 2014 AGM.
Directors and their interests
The following directors have held office since 1 January 2013 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
2013
5p ordinary
shares
Number
10,301,533
10,301,533
1,487,500
1,475,000
31 December
2012
5p ordinary
shares
Number
10,301,533
10,301,533
1,487,500
1,566,875
*These holdings are duplicated and represent the combined holdings of Mr C C Powell, his wife Mrs J K
Powell, their pension funds and their children.
There have been no movements between the year end and the date of this report.
Page 7
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT
Corporate governance
The Company is committed to the principles of corporate governance. 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, Mrs J K. Powell retires by
rotation at the Annual General Meeting and, being eligible, offers herself 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.
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.
Page 8
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT
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
£
223,500
-
-
-
223,500
-
257,500
262,250
27,000
546,750
Benefits
and car
allowance
£
24,000
25,747
12,950
-
62,697
Pension
contributions
£
Total 2013
£
2012
£
-
32,000
5,250
-
37,250
247,500
315,247
280,450
27,000
870,197
204,000
264,631
232,922
25,000
726,553
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.
Service contracts
There are no directors’ service contracts or contracts for services with notice periods in excess of one
year.
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.
Page 9
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT
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.
Political donations
The Group have not made any political donations during the current or prior year.
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 6 March 2014
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 2013 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 6, 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 2013 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 Chairman’s Review and Strategic Report and 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
6 March 2014
Page 12
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
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
2013
£
2012
£
5
18,676,969
14,469,715
(12,226,023)
(8,952,086)
6,450,946
5,517,629
(4,195,236)
(3,920,782)
2,255,710
1,596,847
(11,733)
(3,832)
2,651
9,950
2,246,628
1,602,965
8
10
11
12
(550,830)
(428,649)
1,695,798
1,174,316
Earnings per share
14
Basic
Diluted
6.43p
6.33p
4.46p
4.39p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
Profit for the year attributable to equity
holders of parent
Other comprehensive income:
2013
2012
£
£
1,695,798
1,174,316
Exchange differences on translation of foreign operations
(189,217)
(49,910)
Total comprehensive income for the period attributable to the equity
holders of parent
1,506,581
1,124,406
Page 13
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2013
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
2013
£
2012
£
15
16
17
18
27
19
21
22
23
24
26
24
26
27
28
29
946,749
128,174
1,910,187
3,700
33,490
3,022,300
985,400
105,036
1,821,559
3,700
25,734
2,941,429
4,000
5,750,546
1,156,950
6,911,496
13,340
3,918,737
2,173,237
6,105,314
9,933,796
9,046,743
3,010,744
243,930
8,171
326,116
3,588,961
2,875,690
374,927
4,726
341,016
3,596,359
3,322,535
2,508,955
36,229
-
121,866
158,095
24,477
12,251
107,340
144,068
3,747,056
3,740,427
6,186,740
5,306,316
1,400,000
200,000
(459,288)
4,897,637
148,391
1,400,000
200,000
(402,690)
3,771,398
337,608
6,186,740
5,306,316
Approved by the Board and authorised for issue on 6 March 2014
C Snook
Director
J M Waller
Director
Page 14
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Share
capital
Capital
redemption
reserve
(see below)
Treasury
shares
(Note 29)
Retained
earnings
Translation
reserve
(see below)
Total
equity
£
£
£
£
£
£
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)
At 1 January 2013
1,400,000
200,000
(402,690)
3,771,398
337,608
5,306,316
1,695,798
(189,217)
1,506,581
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(68,906)
4,125
19,734
-
-
8,183
(8,183)
-
(581,110)
-
-
-
-
-
9,104
(343,315)
61,425
-
(422,353)
-
-
-
-
-
19,734
(68,906)
4,125
-
(581,110)
At 31 December 2013
1,400,000
200,000
(459,288)
4,897,637
148,391
6,186,740
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 presentational currency of the Group, 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 2013
Net cash from operations
30
165,319
795,409
Notes
2013
£
2012
£
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
Net funds from obligations under finance leases
Net cash used in financing activities
Net decrease in cash and cash equivalents
2,651
1,000
(94,603)
(298,089)
9,950
10,358
(36,860)
(215,446)
(389,041)
(231,998)
(581,110)
(68,906)
4,125
15,197
(422,353)
(343,315)
61,425
13,924
(630,694)
(690,319)
(854,416)
(126,908)
Cash and cash equivalents at beginning of year
2,173,237
2,343,105
Effect of foreign exchange rates
(161,871)
(42,960)
Cash and cash equivalents at end of year
22
1,156,950
2,173,237
Page 16
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
1
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.
2
Adoption of new and revised standards
The following standards and interpretations have been adopted in the financial statements as
they are mandatory for the year ended 31 December 2013:
Endorsed
Amendments to
IAS 12
Amendments to
IAS 1
IFRS 13
IAS 19
Amendments to
IFRS 7
Annual
Improvements
2009-2011
Deferred Tax: recovery of Underlying Assets
Presentation of Items of Other Comprehensive Income
Fair Value Measurement
Employee Benefits - Revised
Effective for periods
beginning on or
after:
1 January 2013
1 July 2012
1 January 2013
1 January 2013
Disclosures: Offsetting Financial Assets and Liabilities
1 January 2013
Minor amendments to a number of standards
1 January 2013
The adoption of the standards and interpretations above has not had a material impact on the
Group’s financial statements.
The following standards and interpretations are available for early adoption but have not been
applied by the Group in these financial statements:
Endorsed
Amendments
to IAS 32
Amendments
to IAS 39
Amendment to
IFRS 10
IFRS 11
IFRS 12
IAS 27
Offsetting Financial Assets and Financial Liabilities
1 January 2014
Novation of Derivatives and Continuation of Hedge Accounting
1 January 2014
Effective for periods
beginning on or
after:
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Separate Financial Statements
1 January 2014
1 January 2014
1 January 2014
1 January 2014
Page 17
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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.
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.
Page 18
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
3
Accounting policies (continued)
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).
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.
Page 19
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
3
Accounting policies (continued)
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.
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.
Page 20
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
3
Accounting policies (continued)
Taxation (continued)
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.
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 model has been adjusted, based on
management’s best estimate, for the effects of non-transferability, exercise restrictions and
behavioural conditions.
Page 21
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
3
Accounting policies (continued)
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
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.
Page 22
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
3
Accounting policies (continued)
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.
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 where material 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.
Page 23
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
4
Critical accounting judgements and key sources of estimation uncertainty
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, as
described in note 15, 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 £946,749 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 24
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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
2013
£
274,012
2,595,636
14,932,633
874,688
2012
£
195,606
2,473,310
10,910,146
890,653
18,676,969
2,651
18,679,620
14,469,715
9,950
14,479,665
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 (costs)/income
Profit before tax
Segment revenue
2012
2013
£
£
8,716,820
12,553,789
2,776,508
2,949,360
3,718,610
4,344,411
15,211,938
19,847,560
Segment profit
2013
£
1,778,748
306,979
435,165
2,520,892
2012
£
1,252,876
356,251
255,362
1,864,489
-
(570,513)
(600,078)
18,676,969
-
(583,183)
(159,040)
14,469,715
(265,182)
(9,082)
2,246,628
(267,642)
6,118
1,602,965
The segments above also represent the Group’s major goods and services.
Inter-segment sales are made on an arm’s length basis.
Page 25
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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
2013
£
6,964,257
1,794,667
3,796,581
12,555,505
(2,782,222)
160,513
9,933,796
2012
£
7,067,912
1,611,056
4,181,864
12,860,832
(4,634,253)
820,164
9,046,743
2,443,725
342,822
803,675
3,590,222
-
156,834
3,747,056
2,339,946
495,371
1,332,462
4,167,779
(533,581)
106,229
3,740,427
Depreciation and
amortisation
Additions to non-current
assets
2013
£
206,367
33,974
37,026
277,367
2012
£
178,257
25,882
26,516
230,655
2013
£
273,771
30,876
88,045
392,692
2012
£
178,300
13,469
60,537
252,306
Page 26
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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
2013
£
15,181,214
31,821
3,114,348
349,586
18,676,969
2012
£
11,191,256
42,195
2,862,695
373,569
14,469,715
Non-current assets*
2012
2013
£
£
2,630,285
2,708,893
-
-
10,083
19,449
271,627
245,764
2,911,995
2,974,106
* 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
Customer 5
Data Services
Customer 1
Customer 2
Software services
Customer 1
Customer 3
2013
£
2012
£
Not 10%
Not 10%
2,648,600
4,886,755
1,478,499
1,921,217
4,265,150
-
Not 10%
Not 10%
105,324
75,842
Not 10%
2,673,517
5,155
2,475,475
Page 27
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
7
Staff costs
Wages and salaries
Social security costs
Pension costs
2013
£
5,602,135
658,925
245,829
6,506,889
2012
£
5,109,836
505,974
210,135
5,825,945
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 (profits)/ 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
104
7
125
14
98
7
119
2013
£
2012
£
(88,301)
71,269
206,098
435
6,506,889
19,734
40,000
27,637
58,458
172,197
2,159
5,825,945
9,104
44,580
2013
£
2012
£
12,000
27,000
39,000
5,950
4,620
10,570
49,570
11,000
27,000
38,000
24,565
4,600
29,165
67,165
Page 28
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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 UK tax expense
Foreign tax
Double taxation relief
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 23.25% (2012: 24.5%)
Tax effect of expenses not deductible in determining taxable
profit
Tax effect of utilisation of losses not previously recognised
Foreign tax credits
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
2013
£
4,619
7,114
11,733
2013
£
2,451
200
2,651
2013
£
412,127
176,742
(36,809)
(4,288)
547,772
3,058
550,830
2012
£
2,613
1,219
3,832
2012
£
9,775
175
9,950
2012
£
314,390
64,052
-
4,221
382,663
45,986
428,649
2,246,628
1,602,965
522,341
392,726
19,206
(6,947)
39,691
6,024
(156)
(18,135)
(3,999)
(7,148)
(47)
550,830
23,151
(9,946)
2,440
(2,036)
(8,313)
45,892
(15,224)
(41)
428,649
Page 29
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
13
14
Dividends
Two dividends were paid during the year amounting to 2.20p per share in aggregate (2012: 1.60p).
A final dividend of 1.80p 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
2013
£
1,695,798
2012
£
1,174,316
Number
Number
26,382,834
391,185
26,774,019
26,343,553
411,559
26,755,112
15
Goodwill
Carrying amount
At 1 January 2012
Currency translation
At 1 January 2013
Currency translation
At 31 December 2013
£
992,044
(6,644)
985,400
(38,651)
946,749
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
2013
£
583,900
362,849
946,749
2012
£
583,900
401,500
985,400
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% (2012: 3.5%). These forecast cash
flows are discounted at 7.5% per annum (2012:7.5% 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 30
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
16
Other intangible assets
Cost
At 1 January 2012
Currency translation
Additions
At 1 January 2013
Currency translation
Additions
At 31 December 2013
Amortisation
At 1 January 2012
Currency translation
Charge for the year
At 1 January 2013
Currency translation
Charge for the year
At 31 December 2013
Carrying amount
At 31 December 2013
At 31 December 2012
Software
£
Development
costs
£
Total
£
186,386
(704)
36,860
222,542
(4,444)
94,603
312,701
78,951
(716)
45,666
123,901
(4,248)
64,874
184,527
151,753
-
-
151,753
-
-
151,753
132,566
-
12,792
145,358
-
6,395
151,753
338,139
(704)
36,860
374,295
(4,444)
94,603
464,454
211,517
(716)
58,458
269,259
(4,248)
71,269
336,280
128,174
98,641
0
6,395
128,174
105,036
Page 31
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
17
Property, plant and equipment
Cost
At 1 January 2012
Currency translation
Additions
Disposals
At 1 January 2013
Currency translation
Additions
Disposals
At 31 December 2013
Depreciation
At 1 January 2012
Currency translation
Charge for year
Eliminated on disposals
At 1 January 2013
Currency translation
Charge for year
Eliminated on disposals
At 31 December 2013
Carrying amount
At 31 December 2013
At 31 December 2012
Land and
Buildings
£
Fixtures and
Equipment
£
Motor
vehicles
£
1,827,992
-
-
-
1,827,992
-
-
-
1,827,992
475,830
-
46,056
-
521,886
-
46,056
-
567,942
1,418,893
(3,344)
183,322
-
1,598,871
(14,605)
275,437
(5,500)
1,854,203
994,687
(3,342)
121,261
-
1,112,606
(16,033)
152,928
(4,935)
1,244,566
26,746
(705)
32,124
(26,041)
32,124
(5,068)
22,652
-
49,708
11,701
(121)
4,880
(13,524)
2,936
(842)
7,114
-
9,208
Total
£
3,273,631
(4,049)
215,446
(26,041)
3,458,987
(19,673)
298,089
(5,500)
3,731,903
1,482,218
(3,463)
172,197
(13,524)
1,637,428
(16,875)
206,098
(4,935)
1,821,716
1,260,050
1,306,106
609,637
486,265
40,500
29,188
1,910,187
1,821,559
Page 32
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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. They are held on the balance
sheet at their original cost and at 31 December 2013 the market value of this investment was
£14,187 (2012: £8,625).
19
Inventories
Raw materials and consumables
2013
£
4,000
2012
£
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 (note 21)
Amounts due to contract customers included in trade and
other payables (note 23)
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
2013
£
2012
£
2,893,526
325,599
(1,163,241)
1,730,285
(907,889)
(582,290)
22,043,587
(20,313,302)
1,730,285
19,160,910
(19,743,200)
(582,290)
2013
£
2,224,990
2,893,526
295,285
336,745
5,750,546
2012
£
2,884,513
325,599
294,307
414,318
3,918,737
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
18,177
-
-
18,177
-
-
7,442
7,442
No receivables have been written off as uncollectible during the year (2012: 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 33
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
22
Cash and cash equivalents
Bank balances
Petty cash
2013
£
1,153,388
3,562
1,156,950
2012
£
2,170,086
3,151
2,173,237
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
2013
£
1,163,241
1,001,004
446,353
400,146
3,010,744
2012
£
907,889
1,101,199
587,752
278,850
2,875,690
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
2012
2013
£
£
Present value of minimum
payments
2013
£
2012
£
11,477
37,245
(4,322)
44,400
7,816
27,346
(5,959)
29,203
8,171
36,229
-
44,400
4,726
24,477
-
29,203
Carrying amount of assets subject to finance lease:
Property, plant and equipment
44,845
24,389
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% (2012: 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 34
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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.
2013
£
2012
£
326,116
341,016
-
326,116
12,251
353,267
27
Deferred tax
Accelerated
tax
depreciation
£
Other
temporary
differences
£
(125,011)
(83)
17,754
(107,340)
(124)
(9,256)
(116,720)
2,912
-
22,822
25,734
(3,588)
6,198
28,344
Tax losses
£
86,637
(75)
(86,562)
-
-
-
-
Total
£
(35,462)
(158)
(45,986)
(81,606)
(3,712)
(3,058)
88,376
At 1 January 2012
Currency translation
Credit/(charge) to income
At 1 January 2013
Currency translation
Credit/(charge) to income
At 31 December 2013
In the statement of financial position deferred assets and liabilities are shown without any set off
as follows:
Deferred tax assets
Deferred tax liabilities
2013
£
33,490
(121,866)
88,376
2012
£
25,734
(107,340)
(81,606)
2011
£
96,880
(132,342)
(35,462)
Deferred tax has been provided at 20% (2012: 23%), the corporation tax rate that will be effective
from 1 April 2015.
At the reporting date the Group had unused tax losses of approximately £1,650,000 (2012:
£1,800,000) available for set-off against future profits. No deferred tax asset has been recognised
in respect of these available losses due to the unpredictability of future profit streams in the
subsidiary in which they arise as this subsidiary has limited activity. The unrecognised losses are
available for set off indefinitely.
Page 35
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
28
Share capital
Issued and fully paid
28,000,000 ordinary shares of 5p each
2013
£
2012
£
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 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 1 January 2013
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 2013
Number
1,052,905
1,232,959
(650,000)
-
1,635,864
91,875
(50,000)
-
1,677,739
£
191,214
343,315
(61,425)
(70,414)
402,690
68,906
(4,125)
(8,183)
459,288
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
(Profit)/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 in deferred revenue
Cash generated from operations
Tax paid
Interest paid
Net cash generated from operations
2013
£
2012
£
1,695,798
(2,651)
11,733
550,830
206,098
71,269
(435)
19,734
2,552,376
(1,831,809)
9,340
135,054
(27,151)
837,810
(660,758)
(11,733)
165,319
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
Page 36
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
31 Operating lease arrangements
Lease payments under operating leases recognised as an
expense in the year
2013
£
2012
£
241,647
233,953
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
2012
2013
£
£
123,229
381,386
85,508
241,788
831,911
127,763
287,840
134,208
248,338
798,149
Other
2013
£
81,770
85,002
-
-
166,772
2012
£
62,384
67,452
-
-
129,836
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:
2013
2012
Number of
share
options
610,000
140,000
(50,000)
Weighted
average
exercise
price
21.41p
61.75p
8.25p
Number of
share
options
870,000
390,000
(650,000)
Weighted
average
exercise
price
10.78p
26.75p
9.35p
700,000
30.42p
610,000
21.41p
20,000
8.25p
70,000
8.25p
Outstanding at 1 January 2013
Granted during the year
Exercised during the year
Outstanding at 31 December
2013
Exercisable at 31 December
2013
The options outstanding at 31 December 2013 had a weighted average remaining contractual life
of 8.32 years (2012: 8.7 years)
Page 37
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
32
Share-based payment (continued)
New options over 140,000 shares were granted on 22 April 2013. The aggregate fair value of the
options granted was £47,560.
The inputs to the Black Scholes model for the 2013 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
61.75p
61.75p
66%
3%
2.55%
10 years
3 years
The Group recognised total expenses related to equity-settled share-based payment transactions
of £19,734 (2012: £9,104).
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
245,829
210,135
2013
£
2012
£
Page 38
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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
2013
£
2012
£
3,700
3,700
5,750,546
1,156,950
6,911,196
3,918,737
2,173,237
6,095,674
1,447,357
1,688,951
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 2013 and 31 December 2012 the Group had no commitments
under forward exchange contracts.
Page 39
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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 expressed in sterling at the reporting date are as
follows:
Canadian $
American $
Australian $
Total
Liabilities
Assets
2013
£
206,098
2,588
162,941
371,627
2012
£
200,099
1,845
120,706
322,650
2013
£
977,660
210,530
415,938
1,604,128
2012
£
1,592,280
202,164
290,550
2,084,994
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 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
2013
£
8,476
29,216
27,821
2012
£
(27,221)
22,477
25,463
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 2013 and 31 December 2012 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 40
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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 £1,156,950 (2012: £2,173,237) and undrawn
facilities of £750,000 (2012: £750,000). The level of the Group’s overdraft facility is reviewed
annually.
The Group’s financial obligations consist of trade creditors which are all payable within 12
months.
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% (2012: 2.75%) over base rate. 1% rise/fall in interest rates would have
decreased/ increased profit for the year by an immaterial amount (2012: immaterial).
35
36
Capital commitments
At 31 December 2013 and 31 December 2012 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.
Transaction with a Director
On 18 October 2013, the Company purchased 91,875 of its own shares from Mr J M Waller. The
purchase was made through the Market under the authority for the Company to purchase its own
shares granted by the shareholders on 11 April 2013.
Dividends paid to Directors
Dividends totalling £581,110 (2012: £213,695) 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 41
PENNANT INTERNATIONAL GROUP PLC
COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
Continuing operations
Management charges receivable
Dividends received from subsidiaries
Administrative expenses
Management charges payable
Operating profit
Finance costs
Finance income
Profit before tax
Tax charge
Total comprehensive income attributable to equity holders
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Notes
2013
£
2012
£
50,000
104,000
1,500,000
340,000
(150,182)
(227,641)
(165,000)
(144,000)
1,234,818
72,359
(344)
200
(344)
4,179
1,234,674
76,194
-
(40,085)
1,234,674
36,109
3
4
5
Share
capital
£
Capital
redemption
reserve
£
Treasury
shares
Retained
earnings
Total equity
£
£
£
At 1 January 2012
1,400,000
200,000
(191,214)
3,772,221
5,181,007
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(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 1 January 2013
1,400,000
200,000
(402,690)
3,324,667
4,521,977
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
(68,906)
4,125
8,183
1,234,674
19,734
1,234,674
19,734
(68,906)
4,125
(8,183)
(581,110)
-
(581,110)
At 31 December 2013
1,400,000
200,000
(459,288)
3,989,782
5,130,494
Page 42
PENNANT INTERNATIONAL GROUP PLC
COMPANY NUMBER: 3187528
COMPANY STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2013
Non-current assets
Investment in subsidiaries
Available-for-sale investments
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
Bank overdraft
Total current liabilities
Net current liabilities
Total liabilities
Net assets
Equity
Share capital
Capital redemption reserve
Treasury shares
Retained earnings
Total equity
Notes
2013
£
2012
£
6
7
8
7,909,037
3,700
7,912,737
7,909,037
3,700
7,912,737
2,543
292,775
-
295,318
4,299
826,355
519,070
1,349,724
8,208,055
9,262,461
156,835
2,782,221
138,505
3,077,561
106,231
4,634,253
-
4,740,484
(2,782,243)
(3,390,760)
3,077,561
4,740,484
5,130,494
4,521,977
10
1,400,000
200,000
(459,288)
3,989,782
1,400,000
200,000
(402,690)
3,324,667
5,130,494
4,521,977
Approved by the Board and authorised for issue on 6 March 2014
C Snook
Director
J M Waller
Director
Page 43
PENNANT INTERNATIONAL GROUP PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
Net cash from operations
11
(1,511,884)
505,083
Notes
2013
£
2012
£
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
Net cash used in financing activities
1,500,000
200
-
340,000
175
4,004
1,500,200
344,179
(581,110)
(68,906)
4,125
(422,353)
(343,315)
61,425
(645,891)
(704,243)
Net (decrease)/increase in cash and cash equivalents
(657,575)
145,019
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
519,070
374,051
(138,505)
519,070
Page 44
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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 bank overdraft
`
4
Finance income
Interest received
Dividend from available-for-sale financial asset
5
Tax
Deferred tax charge relating to origination and
reversal
of temporary differences
Reconciliation of effective tax rate
Profit before tax
Tax at applicable rate 23.25% (2012: 24.5%)
Tax effect of:
Expenses that are not deductible for tax
Group income
Share options exercised
Losses arising not recognised in deferred tax
Franked investment income
Group relief
Total tax charge/(credit)
2013
£
2012
£
344
344
2013
£
-
200
200
2011
£
4,004
175
4,179
2013
£
2012
£
-
40,085
1,234,674
76,194
287,062
18,668
2,805
(348,750)
(7,148)
-
(47)
66,078
-
2,406
(83,300)
(15,224)
40,085
(43)
77,493
40,085
Page 45
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
6
Subsidiaries
Details of the Company’s subsidiaries at 31 December 2013 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,short-term bank deposits with an original maturity of
three months or less and overdrafts payable on demand.
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 for the year
Dividend received from subsidiary
Tax charge
Finance costs
Finance income
Share-based payment
Operating cash flows before movement in working capital
Decrease/(increase in receivables)
(Decrease)/increase in payables
Cash generated from operations
Interest paid
Net cash generated from operations
2013
£
2012
£
1,234,674
(1,500,000)
-
344
(200)
19,734
(245,448)
535,336
(1,801,428)
(1,511,540)
(344)
(1,511,884)
36,109
(340,000)
40,085
344
(4,179)
9,104
(258,537)
(501,783)
1,265,747
505,427
(344)
505,083
Page 46
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
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. To address its liquidity risk the Company ensures that
sufficient cash and undrawn facilities are available to fund ongoing operations and to meet its
medium term capital and funding obligations. The Company is from time to time exposed to
interest rate risk on a bank overdraft. Interest is paid on its bank overdraft at 2.75% (2012: 2.75%)
over base rate. 1% rise/fall in interest rates would have decreased/ increased profit for the year by
an immaterial amount (2012: immaterial). The Company is not exposed to foreign currency risks.
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
Bank overdraft
2013
£
2012
£
3,700
3,700
2,543
292,775
-
299,018
4,299
826,355
519,070
1,353,424
156,835
2,782,221
138,505
3,077,561
106,231
4,634,253
-
4,740,484
13
14
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
£24,680 (2012: £296,851).
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 £1,416,304 (2012: £416,304), 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 47
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
15
Transaction with a Director
On 18 October 2013, the Company purchased 91,875 of its own shares from Mr J M Waller. The
purchase was made through the Market under the authority for the Company to purchase its own
shares granted by the shareholders on 11 April 2013.
Page 48