COMPANY NUMBER: 3187528
PENNANT INTERNATIONAL GROUP PLC
FINANCIAL STATEMENTS
31 DECEMBER 2014
PENNANT INTERNATIONAL GROUP PLC
REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
CONTENTS
Officers and professional advisers
Chairman’s review and strategic report
Directors’ report
Independent Auditor’s 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
Notes to the consolidated financial statements
Company statement of comprehensive income
Company statement of changes in equity
Company statement of financial position
Company statement of cash flows
Page
2
3-6
7-12
13-14
15
16
17
18-19
20
21-47
48
49
50
51
Notes to the company financial statements
52-55
1
PENNANT INTERNATIONAL GROUP PLC
OFFICERS AND PROFESSIONAL ADVISERS
Directors
C C Powell
C Snook
J K Powell
P H Walker
(Chairman)
(Chief Executive)
(Non-executive)
Secretary
P H Walker
(Appointed 3 November 2014)
Registered office
Pennant Court
Staverton Technology Park
Cheltenham
Gloucestershire
GL51 6TL
Company number
3187528
Auditor
Bankers
Nominated Adviser
and Broker
Mazars LLP
Tower Bridge House
St Katharine’s Way
London
E1W 1DD
Barclays Bank Plc
Bridgewater House
Finzels Reach
Counterslip
Bristol
BS1 6BX
W H Ireland Ltd
4 Colston Avenue
Bristol
BS1 4ST
2
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S REVIEW AND STRATEGIC REPORT
I am pleased to report that 2014 has been another year of sustained progress, maintaining the trading
momentum experienced over the last three years. The Group delivered significantly enhanced earnings
and a strengthened balance sheet, enabling the directors to recommend an 11% increase in the final
dividend per share.
Results and Dividend
Profit for the year increased by 76% to £2.98 million (2013: £1.70 million) having been enhanced by the
successful claim of Research and Development tax credits amounting to £1.3 million across the Group in
respect of financial years 2012 to 2014. This has resulted in significantly enhanced earnings per share of
11.32p (2012: 6.43p).
Consolidated net assets have increased by 52% to £9.42 million (2013: £6.19 million). This
strengthening of the net asset position resulted from a revaluation of the Group’s land and buildings (£1.1
million uplift) and the earnings enhancement.
Consolidated revenues were marginally lower at £17.98 million (2013: £18.68 million).
Group operating margins were maintained at 12.2% (2013: 12.1%) demonstrating a well-controlled cost
base.
Cash generated from operations amounted to £1.69 million (2013: £0.17 million) reflecting the improved
working capital position and the positive impact of the receipt of contracted stage payments on major
contracts.
The Group has unrelieved tax losses of £3 million carried forward into 2015.
Your Board is recommending the payment of a final cash dividend of 2.0p per share, bringing the total
dividend for the year to 2.9p per share which is covered 5.0 times by earnings and represents an increase
of 12% over the previous year. The final dividend is payable on 1 May 2015 to shareholders on the
register at the close of business on 17 April 2015. The ex-dividend date will be 16 April 2015.
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 the UK, Australia and Canada.
3
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S REVIEW AND STRATEGIC REPORT (continued)
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 newly developed 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.
This strategy continues to be successful and during 2014 has generated considerable tendering activity,
particularly for Training Systems, and regular involvement with customers in respect of a strong pipeline
of opportunities.
Training Systems Division
Training Systems Division continues to be the main driver within the Group. Revenues for the year were
marginally below anticipated levels at £12.2 million (2013: £12.6 million). This reduction arose due to a
contract that had been expected to be awarded in 2014 being deferred into 2015.
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 2015 and beyond and active involvement
with existing and new customers for a number of major opportunities. Although the timing of major
contracts is difficult to predict and 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 thereby
increasing the requirement for training;
the use of ‘real’ equipment for training has safety implications, is expensive and often impractical;
and
there is a continuing trend for defence forces to outsource training services including updating
their training devices.
4
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S REVIEW AND STRATEGIC REPORT (continued)
New contract awards and operational achievements during the year are set out below:
A contract worth £1.6m was secured to supply a suite of training aids to the Military
Technological College, Oman. All training devices were manufactured, delivered and accepted in
2014
A contract with a value of £1.7m was secured with Agustawestland to provide an upgrade
program to the Wildcat training devices delivered in 2013 and 2014.
Ongoing manufacture of a number of training devices for BAE Systems Australia Limited as part
of a £16m contract. Work will continue through 2015 to deliver the training devices to the end
user. This is due to be achieved during the second quarter of 2015. The Company has begun
operating the contract to support the devices in service which is renewable on an annual basis for
a five year rolling period.
The Company has begun operating the contract to support the devices in service which is
renewable on an annual basis for a five year rolling period.
Successful completion and delivery of the Wildcat maintenance training equipment under the
terms of a £12.5m contract completed in 2014.
Successful completion of the six month performance phase of the leading edge Parachute Flight
Simulator to a far-eastern customer.
Successful on schedule delivery and acceptance of a software-based training capability to an
Indian customer.
Software Services Division
The Division has offices in Canada, Australia and the 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 licenses, 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 7% to £4.6 million (2013: £4.3
million). The contribution to Group operating profit reduced to £332,000 (2013: £435,000). The reduction
has arisen mainly from a reallocation of centralised administrative costs.
In September 2014 the renewal of the existing contract with the Canadian Department of National
Defence (DND) to provide specialist consultant support to maximise use of OmegaPS within the DND
was secured. The CA$19.7 million contract is for an initial two year term through to September 2016 with
three additional one year extension options.
In Australia, the Division is in the process of negotiating a multi-year contract extension to the current
contract with the Australian Department of Defence, Defence Materiel Organisation to support OmegaPS.
5
PENNANT INTERNATIONAL GROUP PLC
CHAIRMAN’S REVIEW AND STRATEGIC REPORT (continued)
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. Revenues and operating profits for the
year were lower at £2.4 million (2013: £2.95 million) and £21,000 (2013: £307,000) respectively. This is
largely a result of a delay in the award of a significant contract which is now expected to contribute to
current year performance.
The main contracts contributing to trading during the year were:
an on-going contract to provide all Operation, Maintenance and Training Documentation for the
R188 Rail Car Project currently being built by Kawasaki Rail Car Inc. for New York City Transit
Department;
an on-going contract with Capgemini UK PLC for the development for Her Majesty’s Revenue
and Customs (HMRC) of a Basic PAYE Tools (BPT) product as a multi-platform, client side
application that operates in unison with HMRC’s Real Time Initiative for PAYE; and
a contract with EDF to design and build a second generation simulator for teaching Basic
Substation Switching Principles.
The Division has many years’ experience in the rail sector and is actively involved with a number of
noteworthy opportunities in USA and the Far East.
People
The Group has staff with diverse experience and educational, professional and cultural backgrounds. They
have responded well to the challenges presented during the year and the Group’s strong reputation and
longstanding relationships with many of its customers are the measure of their success.
Outlook
The strategy followed consistently over the last five years has been successful in achieving its goal of
significantly increasing shareholder value and this strategy will be continued. Over this period a number
of major contracts have been won and completed to the satisfaction of our customers, 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.
The Board looks forward to further progress across the Group in the current year, with an anticipated
weighting towards the second half. The forward visibility of the order book also provides additional
confidence in Group revenues for 2015 and beyond.
Approved by the Board on 16 March 2015
and signed on its behalf
C C Powell
Chairman
6
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
2014.
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 £710,700 were paid during the year (2013: £581,110). The Board is recommending
payment of a final cash dividend of 2.00p 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.
7
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT (Continued)
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 10 April 2014, the directors were granted authority to purchase
through the market 3,948,339 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 10 April
2014 the directors have purchased through the market NIL ordinary shares for Treasury and have
remaining authority to purchase 3,948,339 ordinary shares.
A proposal to renew the authority will be made at the 2015 AGM.
Directors and their interests
The following directors have held office since 1 January 2014 except where indicated otherwise 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 (resigned 31 December 2014)
P H Walker (appointed 3 November 2014)
31 December
2014
5p ordinary
shares
Number
10,301,533
10,301,533
1,487,500
75,000
-
31 December
2013
5p ordinary
shares
Number
10,301,533
10,301,533
1,487,500
1,475,000
-
*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.
Mr C Snook also has a beneficial interest in 1,400,000 B shares of £0.001 each that were issued on 29
April 2014 (2013: NIL).
There have been no movements between the year end and the date of this report.
8
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT (Continued)
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
On 3 November 2014 Mr P H Walker was appointed to the Board to take over responsibility for finance
from Mr J M Waller. Mr Waller retired on 31 December 2014.
The Board consists of the Chairman, the Chief Executive, the Chief Financial Officer 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, Mr 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.
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.
9
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT (Continued)
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
£
222,000
-
-
-
-
222,000
-
359,178
222,351
35,000
28,209
644,738
Benefits
and car
allowance
£
24,000
25,963
17,944
-
-
67,907
Pension
contributions
£
Total 2014
£
2013
£
-
20,000
-
-
2,000
22,000
246,000
405,141
240,295
35,000
30,209
956,645
247,500
315,247
280,450
27,000
-
870,197
C C Powell
C Snook
J M Waller
J K Powell
P H Walker
Pension contributions shown above are pension payments into the Pennant International Group plc
Pension Scheme, a defined contribution scheme. Pension contributions for 2013 were C Snook £32,000
and J M Waller £5,250.
A review of the incentive arrangements in place for Mr C Snook, Chief Executive Officer, was carried out
by the Remuneration Committee as the result of which, on 29 April 2014, 1,400,000 B shares of £0.001
per share were allotted and issued to Mr Snook at a price of £0.005 per share. The B shares only acquire a
value if the Company is sold at a price in excess of £1 per share or if the Company is liquidated and there
is a capital distribution of more than £1 per share. In both cases they will be entitled to a sum per share
equal to the amount paid per ordinary share less 91p per share.
There were nil (2013: nil) share options held by the directors at the year-end.
Service contracts
There are no directors’ service contracts or contracts for services with notice periods in excess of one
year.
10
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT (Continued)
Responsibilities of the directors
The directors are responsible for preparing the Chairman’s Review and Strategic Report, the
Directors’ Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that
law the directors have elected to prepare the financial statements in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by the European Union and applicable law. Under
company law the directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the company and of the profit or loss of the company
for that period.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state whether IFRS as adopted by the European Union have been followed subject to any
material departures disclosed and explained in the financial statements;
provide additional disclosures when compliance with specific requirements in IFRS is
insufficient to enable users to understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial performance.
The directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the company’s transactions and disclose with reasonable accuracy at any time the financial
position of the company and 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.
Political donations
The Group has not made any political donations during the current or prior year.
11
PENNANT INTERNATIONAL GROUP PLC
DIRECTORS’ REPORT (Continued)
Statement as to disclosure of information to auditor
As far as the directors are aware they have taken all necessary steps to make the auditor aware, of any
relevant audit information and to establish that the auditor is aware of that information.
As far as the directors are aware, there is no relevant audit information of which the Company and
Group’s auditor is 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 16 March 2015
and signed on its behalf
P H Walker
Director
12
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 2014 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 11, 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 2014 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.
13
PENNANT INTERNATIONAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT
INTERNATIONAL GROUP PLC (continued)
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.
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
16 March 2015
14
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance costs
Finance income
Profit before taxation
Taxation credit/(charge)
Profit for the year attributable to the equity
holders of the parent
Earnings per share
Basic
Diluted
Notes
2014
£
2013
£
5
17,798,023
18,676,969
(10,841,174)
(12,226,023)
6,956,849
6,450,946
(4,782,146)
(4,195,236)
2,174,703
2,255,710
(10,569)
(11,733)
2,684
2,651
2,166,818
2,246,628
814,612
(550,830)
2,981,430
1,695,798
11.32p
10.88p
6.43p
6.33p
8
10
11
12
14
15
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
Profit for the year attributable to the equity
holders of the parent
Other comprehensive income:
Items that will not be reclassified to profit and loss
Property revaluation gain
Deferred tax
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
2014
2013
£
£
2,981,430
1,695,798
1,106,006
(221,201)
-
-
(12,235)
(189,217)
Total comprehensive income for the period attributable to the equity
holders of the parent
3,854,000
1,506,581
16
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2014
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
Current tax asset
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
Share premium account
Capital redemption reserve
Treasury shares
Retained earnings
Translation reserve
Revaluation reserve
Total equity
Notes
2014
£
2013
£
15
16
17
18
27
19
21
22
23
24
26
24
26
27
28
29
941,457
850,486
2,999,600
3,700
226,639
5,021,882
29,000
5,383,126
1,068,632
743,056
7,223,814
946,749
128,174
1,910,187
3,700
33,490
3,022,300
4,000
5,750,546
1,156,950
-
6,911,496
12,245,696
9,933,796
2,179,010
6,931
15,347
223,440
2,424,728
3,010,744
243,930
8,171
326,116
3,588,961
4,799,086
3,322,535
18,438
5,239
379,952
403,629
36,229
-
121,866
158,095
2,828,357
3,747,056
9,417,339
6,186,740
1,401,400
5,600
200,000
(418,225)
7,207,603
136,156
884,805
1,400,000
-
200,000
(459,288)
4,897,637
148,391
-
9,417,339
6,186,740
Approved by the Board and authorised for issue on 16 March 2015
C Snook
Director
P H Walker
Director
17
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
Share
capital
Share
Premium
(see
below)
Capital
redemption
reserve
(see below)
Treasury
shares
(Note 29)
Retained
earnings
Translation
reserve
(see below)
Revaluation
reserve
(see below)
Total
equity
£
£
£
£
£
£
£
£
At 1 January 2013
1,400,000
Profit for the year
Other comprehensive
income
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
-
-
-
-
-
-
-
At 1 January 2014
1,400,000
Profit for the year
Other comprehensive
income
-
-
-
-
-
-
-
-
-
-
-
-
-
Issue of B shares
1,400
5,600
Recognition of share
based payment
Sale of treasury shares
to satisfy share options
Loss on sale of treasury
shares transferred to
retained earnings
Dividends paid
-
-
-
-
-
-
-
-
200,000
(402,690)
3,771,398
337,608
1,695,798
-
-
(189,217)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(68,906)
4,125
19,734
-
-
8,183
(8,183)
-
(581,110)
-
-
-
-
-
-
53,674
26,625
-
14,438
(14,438)
-
(710,700)
-
-
-
-
-
-
-
-
-
5,306,316
1,695,798
(189,217)
19,734
(68,906)
4,125
-
(581,110)
6,186,740
-
-
-
-
-
(12,235)
884,805
872,570
-
-
-
-
-
-
-
-
-
-
7,000
53,674
26,625
-
(710,700)
200,000
(459,288)
4,897,637
148,391
2,981,430
-
-
2,981,430
At 31 December 2014
1,401,400
5,600
200,000
(418,225)
7,207,603
136,156
884,805
9,417,339
18
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014 (Continued)
Share premium account
Represents the amount by which shares have been issued at a price greater than nominal value less issue
costs.
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.
Retained earnings
This represents the accumulated realised earnings from the prior and current periods.
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.
Revaluation reserve
This represents the extent to which the revaluation of such land and buildings at fair value exceed the
carrying amount.
19
PENNANT INTERNATIONAL GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
Net cash from operations
30
1,694,866
165,319
Notes
2014
£
2013
£
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
Issue of B shares
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
2,684
-
(802,565)
(251,100)
2,651
1,000
(94,603)
(298,089)
(1,050,981)
(389,041)
7,000
(710,700)
-
26,625
(10,615)
-
(581,110)
(68,906)
4,125
15,197
(687,690)
(630,694)
(43,805)
(854,416)
Cash and cash equivalents at beginning of year
1,156,950
2,173,237
Effect of foreign exchange rates
(44,513)
(161,871)
Cash and cash equivalents at end of year
22
1,068,632
1,156,950
20
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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 2014:
Endorsed
IFRS 10
IFRS 11
IFRS 12
IAS 27
IAS 28
Effective
beginning on or after:
for periods
‘Consolidated Financial Statements’
‘Joint Arrangements’
1 January 2014
1 January 2014
‘Disclosure of Interests in Other Entities’
1 January 2014
‘Separate Financial Statements’
‘Investments in Associates and Joint Ventures’
(Revised)
IFRIC 21
‘Levies’
Amendments to IAS 32
Financial instruments: Presentation, Offsetting
financial assets and financial liabilities
Amendments to IAS 36
‘Impairment of Assets’, Recoverable amounts
disclosures for non-financial assets
Amendments to IAS 39
‘Financial Instruments: Recognition and
Measurement’, Novation of derivatives and
continuation of hedge accounting
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
1 January 2014
The adoption of the standards and interpretations above has not had a material impact on the
Group’s financial statements.
21
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
2
Adoption of new and revised standards (continued)
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 19
Annual Improvements to
IFRS (2010 - 2012)
Annual Improvements to
IFRS (2011 - 2013)
Effective
beginning on or after:
for periods
‘Employee Benefits’, Defined benefit plans:
employee contributions
1 July 2014
Minor amendments to a number of standards
1 July 2014
Minor amendments to a number of standards
1 July 2014
IFRS 14
‘Regulatory Deferral Accounts’
Amendments to IFRS 11
‘Joint Arrangements’, Accounting for acquisitions
of interests in joint operations
Amendments to IAS 16
‘Property, Plant and Equipment’
Amendments to IAS 38
‘Intangible Assets’, Clarification of acceptable
methods of depreciation and amortisation
1 January 2016
1 January 2016
1 January 2016
1 January 2016
IAS 41
‘Agriculture’, Agriculture: Bearer Plants
1 January 2016
Amendments to IAS 27
‘Equity Method in Separate Financial Statements’
1 January 2016
IFRS 15
IFRS 9
‘Revenue from Contracts with Customers’
1 January 2017
‘Financial instruments’
1 January 2018
The Directors do not expect that the adoption of the standards listed above will have a material
impact on the financial statements of the Group in future periods.
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 or a revaluation basis
where indicated. The principal accounting policies set out below have been consistently applied to
all periods presented with the exception of the revaluation of properties which has a new policy
adopted in 2014.
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.
22
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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 consultancy 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).
23
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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.
24
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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.
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.
25
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3
Accounting policies (continued)
Taxation (continued)
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
within 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.
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 or
over the life of the lease if shorter
10% to 25% of cost per annum
33.33% of cost per annum
25% of cost per annum
Land and buildings held for use in the production or supply of goods or services, or for
administrative purposes, are stated in the balance sheet at their revalued amounts, being the fair
value at the date of revaluation, less any subsequent accumulated depreciation and subsequent
accumulated impairment losses. Revaluations are performed with sufficient regularity such that
the carrying amount does not differ materially from that which would be determined using fair
values at the balance sheet date.
26
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3
Accounting policies (continued)
Property, plant and equipment (continued)
Any revaluation increase arising on the revaluation of such land and buildings is credited to
the properties revaluation reserve, except to the extent that it reverses a revaluation decrease
for the same asset previously recognised as an expense, in which case the increase is credited
to the income statement to the extent of the decrease previously expensed. A decrease in
carrying value amount arising on the revaluation of such land and buildings is charged as an
expense to the extent that it exceeds the balance, if any, held in the properties revaluation
reserve relating to a previous revaluation of that asset.
Land and buildings are measured at fair value less accumulated depreciation on buildings and
impairment losses recognised at the date of revaluation. Valuations are performed with
sufficient frequency to ensure that the carrying amount of a revalued asset does not differ
materially from its fair value.
A revaluation surplus is recorded in OCI and credited to the asset revaluation surplus in
equity. However, to the extent that it reverses a revaluation deficit of the same asset previously
recognised in profit or loss, the increase is recognised in profit and loss. A revaluation deficit
is recognised in the statement of profit or loss, except to the extent that it offsets an existing
surplus on the same asset recognised in the asset revaluation reserve.
An annual transfer from the asset revaluation reserve to retained earnings is made for the
difference between depreciation based on the revalued carrying amount of the asset and
depreciation based on the asset’s original cost. Additionally, accumulated depreciation as at
the revaluation date is eliminated against the gross carrying amount of the asset and the net
amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve
relating to the particular asset being sold is transferred to retained earnings.
Internally-generated intangible assets
An internally-generated intangible asset arising from the Group’s development activities 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
27
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3
Accounting policies (continued)
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.
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.
28
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
4
Critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgements
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.
Recoverability of internally-generated intangible asset
During the year, management reconsidered the recoverability of its internally-generated intangible
asset which is included in its balance sheet at £756,000. The project continues to progress in a
very satisfactory manner, and customer reaction has reconfirmed management’s previous
estimates of anticipated revenues from the project.
Key source 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 £941,457 and the review carried out has shown no
impairment.
29
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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
2014
£
211,257
2,400,519
14,406,871
779,376
2013
£
274,012
2,595,636
14,932,633
874,688
17,798,023
2,684
17,800,707
18,676,969
2,651
18,679,620
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 as these represent the way the Group organises its
products and services. 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
Allocated / (Unallocated) corporate
expenses
Net finance (costs) / income
Profit before tax
Segment revenue
2013
2014
£
£
12,553,789
12,262,320
2,949,360
2,399,887
4,344,411
4,889,293
19,847,560
19,551,500
Segment profit
2014
£
1,498,156
20,905
338,632
1,857,693
2013
£
1,778,748
306,979
435,165
2,520,892
-
(255,336)
(1,498,141)
17,798,023
-
(570,513)
(600,078)
18,676,969
317,010
(265,182)
(7,885)
2,166,818
(9,082)
2,246,628
Inter-segment sales are made on an arm’s length basis.
30
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
6
Segment information (continued)
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
2014
£
9,337,064
1,806,876
3,923,426
15,067,366
(3,196,877)
375,207
12,245,696
2013
£
6,964,257
1,794,667
3,796,581
12,555,505
(2,782,222)
160,513
9,933,796
1,747,144
320,995
613,461
2,681,600
-
146,757
2,828,357
2,443,725
342,822
803,675
3,590,222
-
156,834
3,747,056
6.3
Other segment information
Training Systems
Data Services
Software
Depreciation and
amortisation
Additions to non-current
assets
2014
£
260,712
42,976
42,957
346,645
2013
£
206,367
33,974
37,026
277,367
2014
£
936,333
83,321
34,011
1,053,665
2013
£
273,771
30,876
88,045
392,692
31
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
6
Segment information (continued)
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
2014
£
14,717,943
20,453
2,727,138
332,489
17,798,023
2013
£
15,181,214
31,821
3,114,348
349,586
18,676,969
Non-current assets*
2013
2014
£
£
2,708,893
4,511,189
-
-
19,449
12,251
245,764
268,103
2,974,106
4,791,543
* 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
Software services
Customer 3
2014
£
2013
£
Less than
10%
6,858,964
2,648,600
4,886,755
2,483,146
2,673,517
32
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
7
Staff costs
Wages and salaries
Social security costs
Pension costs
2014
£
5,938,094
708,343
250,641
6,897,078
2013
£
5,602,135
658,925
245,829
6,506,889
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/(crediting):
Net foreign exchange losses/(profits)
Research and development costs
Amortisation of intangible assets
Depreciation of property, plant and equipment
Profit 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 relating to tax
Total non-audit fees
Number
Number
15
105
8
128
14
104
7
125
2014
£
2013
£
24,587
1,603,395
80,010
266,635
-
6,897,078
53,674
83,491
(88,301)
1,681,076
71,269
206,098
(435)
6,506,889
19,734
40,000
2014
£
2013
£
12,000
27,000
39,000
5,950
96,082
102,032
141,032
12,000
27,000
39,000
5,950
4,620
10,570
49,570
33
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
10
Finance costs
Interest expense for financial lease arrangements
Interest expense for bank overdraft
Other interest expense
11
Finance income
Income from bank deposits
Dividends receivable from available-for-sale investments
Other interest receivable
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 21.5% (2013: 23.25%)
Tax effect of expenses not deductible in determining taxable
profit
Additional deduction for R&D expenditure
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
Losses arising not recognised in deferred tax
Effect of adjustments for prior years
Effect of share options exercised
Other differences
Total tax expense
2014
£
4,846
3,788
1,935
10,569
2014
£
2,424
138
122
2,684
2014
£
-
26,175
-
(684,938)
(658,763)
(155,849)
(814,612)
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
2,166,818
2,246,628
465,717
522,341
56,921
(474,588)
(871,341)
-
6,612
-
(67,151)
93,043
-
(23,213)
(612)
(814,612)
19,206
-
(6,947)
39,691
6,024
(156)
(18,135)
-
(3,999)
(7,148)
(47)
550,830
34
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
13
14
Dividends
Two dividends were paid during the year amounting to 2.70p per share in aggregate (2013: 2.20p).
A final dividend of 2.00p per share (2013: 1.80p) 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
2014
£
2,981,430
2013
£
1,695,798
Number
Number
26,347,261
1,065,000
27,412,261
26,382,834
391,185
26,774,019
15
Goodwill
Carrying amount
At 1 January 2013
Currency translation
At 1 January 2014
Currency translation
At 31 December 2014
£
985,400
(38,651)
946,749
(5,292)
941,457
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
2014
£
583,900
357,557
941,457
2013
£
583,900
362,849
946,749
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 for the
following 12 months derived from the most recent annual financial budgets approved by the
management and extrapolates cash flows for a further 3 years based on a growth rate of 3.5%
(2013: 3.5%). These forecast cash flows are discounted at 7.5% per annum (2013: 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.
35
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
16
Other intangible assets
Cost
At 1 January 2013
Currency translation
Additions
At 1 January 2014
Currency translation
Additions
At 31 December 2014
Amortisation
At 1 January 2013
Currency translation
Charge for the year
At 1 January 2014
Currency translation
Charge for the year
At 31 December 2014
Carrying amount
At 31 December 2014
At 31 December 2013
Software
£
Development
costs
£
222,542
(4,444)
94,603
312,701
(851)
46,565
358,415
123,901
(4,248)
64,874
184,527
(608)
80,010
263,929
151,753
-
-
151,753
-
756,000
907,753
145,358
-
6,395
151,753
-
-
151,753
Total
£
374,295
(4,444)
94,603
464,454
(851)
802,565
1,266,168
269,259
(4,248)
71,269
336,280
(608)
80,010
415,682
94,486
128,174
756,000
-
850,486
128,174
36
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
17
Property, plant and equipment
Cost / Valuation
At 1 January 2013
Currency translation
Additions
Disposals
At 1 January 2014
Currency translation
Additions
Revaluation
At 31 December 2014
Depreciation
At 1 January 2013
Currency translation
Charge for year
Eliminated on disposals
At 1 January 2014
Currency translation
Charge for year
At 31 December 2014
Carrying amount
At 31 December 2014
At 31 December 2013
Land and
buildings
£
Fixtures and
equipment
£
Motor
vehicles
£
1,827,992
-
-
-
1,827,992
-
-
1,106,006
2,933,998
521,886
-
46,056
-
567,942
-
46,056
613,998
1,598,871
(14,605)
275,437
(5,500)
1,854,203
(3,040)
244,935
-
2,096,098
1,112,606
(16,033)
152,928
(4,935)
1,244,566
(3,236)
213,185
1,454,515
32,124
(5,068)
22,652
-
49,708
(1,133)
6,165
-
54,740
2,936
(842)
7,114
-
9,208
121
7,394
16,723
Total
£
3,458,987
(19,673)
298,089
(5,500)
3,731,903
(4,173)
251,100
1,106,006
5,084,836
1,637,428
(16,875)
206,098
(4,935)
1,821,716
(3,115)
266,635
2,085,236
2,320,000
1,260,050
641,583
609,637
38,017
40,500
2,999,600
1,910,187
Included within land and buildings is land valued at £575,000 (2013: £510,000).
Land and buildings were revalued at 31 December 2014 to £2,320,000 by ETP Property
Consultants, independent valuers not connected with the group, on the basis of market value. The
valuation conforms to International Valuation Standards and was based on recent market
transactions on arm’s lengths terms for similar properties.
At 31 December 2014, had the land and buildings of the group been carried at historical cost less
accumulated depreciation and accumulated impairment losses, their carrying amount would have
been approximately £1.21 million (2013: £1.26 million; 2012: £1.31 million).
The revaluation surplus is disclosed in the Statement of Changes in Equity. The revaluation
surplus arises in a subsidiary and cannot be distributed to the parent due to legal restrictions in the
country of incorporation.
All of the Group’s properties are categorised as Level 2 in the fair value hierarchy as defined by
IFRS 13 Fair Value Management. There are no transfers of properties between Levels 1,2 and 3
during the year ended 31 December 2014.
37
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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 2014 the market value of this investment was
£3,062 (2013: £14,187).
19
Inventories
Raw materials and consumables
2014
£
29,000
2013
£
4,000
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
2014
£
2013
£
3,236,573
2,893,526
(124,725)
3,111,848
(1,163,241)
1,730,285
27,922,969
(24,811,121)
3,111,848
22,043,587
(20,313,302)
1,730,285
2014
£
1,725,296
3,236,573
152,180
269,077
5,383,126
2013
£
2,224,990
2,893,526
295,285
336,745
5,750,546
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
No receivables have been written off as uncollectible during the year (2013: 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.
38
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
22
Cash and cash equivalents
Bank balances
Petty cash
2014
£
1,065,538
3,094
1,068,632
2013
£
1,153,388
3,562
1,156,950
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
2014
£
124,725
1,132,713
395,856
525,716
2,179,010
2013
£
1,163,241
1,001,004
446,353
400,146
3,010,744
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
2013
2014
£
£
Present value of minimum
payments
2014
£
2013
£
12,173
23,944
(2,332)
33,785
11,477
37,245
(4,322)
44,400
10,120
23,665
-
33,785
8,171
36,229
-
44,400
Carrying amount of assets subject to finance lease:
Property, plant and equipment
40,000
44,845
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 £1,000,000. Any overdraft arising
from the facility is repayable on demand and carries interest at 2.00% (2013: 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.
39
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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.
2014
£
2013
£
223,440
326,116
5,239
228,679
-
326,116
27
Deferred tax
Accelerated
tax
depreciation
£
(107,340)
(124)
(9,256)
(116,720)
-
(42,031))
(158,751)
Other
temporary
differences
£
25,734
(3,588)
6,198
28,344
(221,201)
9,528
(183,329)
Tax losses
£
-
-
-
-
-
188,767
188,767
Total
£
(81,606)
(3,712)
(3,058)
(88,376)
(221,201)
156,264
(153,313)
At 1 January 2013
Currency translation
Credit/(charge) to income
At 1 January 2014
Property revaluation
Credit/(charge) to income
At 31 December 2014
In the statement of financial position deferred assets and liabilities are shown without any set off
as follows:
Deferred tax assets
Deferred tax liabilities
2014
£
226,639
(379,952)
(153,313)
2013
£
33,490
(121,866)
(88,376)
2012
£
25,734
(107,340)
(81,606)
Deferred tax has been provided at 20% (2013: 20%), the corporation tax rate that will be effective
from 1 April 2015.
At the reporting date the Group had unused tax losses of approximately £3,000,000 (2013:
£1,650,000) available for set-off against future profits. No deferred tax asset has been recognised
in respect of some of these available losses due to the unpredictability of future profit streams in
some of the subsidiaries in which they arise. The unrecognised losses are available for set off
indefinitely.
40
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
28
Share capital
Issued and fully paid
28,000,000 ordinary shares of 5p each
1,400,000 B shares of 0.1p each
2014
£
2013
£
1,400,000
1,400
1,401,400
1,400,000
-
1,400,000
The ordinary shares carry no right to fixed income.
On 29 April 2014, the Company issued 1,400,000 B shares of 0.1p each. The consideration paid
resulted in a share premium of £5,600. The rights and obligations attaching to the B shares are, in
summary:
1
2
3
4
5
No right to receive any dividend or other distribution of an income nature;
No right to receive notice of, or to attend or vote at, any general meeting;
No right to transfer any B share save upon an offer for the ordinary shares becoming
unconditional in all respects;
Conditional upon the ordinary shares having traded on AIM at a price of 100p or more for
10 business days within a 20 day period:
a.
The right upon an offer for all the ordinary shares being declared unconditional in
all respects or upon a scheme of arrangement to effect such an offer becoming
effective, to sell each B share to the offeror at a price equal to the amount by
which the price offered for each ordinary share exceeds 91p and otherwise upon
such terms as are the same as those applying to the offer for ordinary shares; and
In the event of a capital distribution following the sale of the Company’s assets
and business, whether upon a liquidation or otherwise, the right to rank pari passu
b.
with each ordinary share after 91p has been paid on each ordinary share;
The obligation for the B shares to be redeemed by the Company, at the price at which the
B shares were issued, at any time following Mr Snook ceasing for any reason whatsoever
to be a full time employee of the Company or any of its subsidiaries.
No application will be made for the B shares to be admitted to trading on AIM or any other public
market.
29
Treasury 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 1 January 2014
Shares sold to satisfy share options
Loss on sale of shares
As at 31 December 2014
Number
1,635,864
91,875
(50,000)
-
1,677,739
(150,000)
-
1,527,739
£
402,690
68,906
(4,125)
(8,183)
459,288
(26,625)
(14,438)
418,225
41
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
30
Note to consolidated statement of cash flows
Cash generated from operations
Profit for the year
Finance income
Finance costs
Income tax (credit)/expense
Depreciation of property, plant and equipment
Amortisation of other intangible assets
Profit 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
31 Operating lease arrangements
Lease payments under operating leases recognised as an
expense in the year
2014
£
2013
£
2,981,430
(2,684)
10,569
(814,612)
266,635
80,010
-
53,674
2,575,022
367,420
(25,000)
(831,734)
(97,437)
1,988,271
(282,836)
(10,569)
1,694,866
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
2014
£
2013
£
236,581
241,647
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
2013
2014
£
£
125,918
328,046
37,016
235,238
726,218
123,229
381,386
85,508
241,788
831,911
Other
2014
£
77,216
73,058
-
-
150,274
2013
£
81,770
85,002
-
-
166,772
Commitments after ten years relate to ground rents on long leasehold properties that run until
2098.
42
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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 non-market conditions as 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:
2014
2013
Number of
share
options
700,000
520,000
(150,000)
Weighted
average
exercise
price
30.42p
86.00p
17.75p
Number of
share
options
610,000
140,000
(50,000)
Weighted
average
exercise
price
21.41p
61.75p
8.25p
1,070,000
59.21p
700,000
30.42p
20,000
8.25p
20,000
8.25p
Outstanding at 1 January 2014
Granted during the year
Exercised during the year
Outstanding at 31 December
2014
Exercisable at 31 December
2014
The options outstanding at 31 December 2014 had a weighted average remaining contractual life
of 8.31 years (2013: 8.32 years).
New options over 520,000 shares were granted on 17 March 2014. The aggregate fair value of the
options granted was £123,240.
The inputs to the Black Scholes model for the 2014 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
86.00p
86.00p
42%
1.76%
4.20%
10 years
3 years
The Group recognised total expenses related to equity-settled share-based payment transactions
of £53,674 (2013: £19,734).
43
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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
250,641
245,829
2014
£
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
2014
£
2013
£
3,700
3,700
5,383,126
1,068,632
6,455,458
5,750,546
1,156,950
6,911,196
1,528,569
1,447,357
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 2014 and 31 December 2013 the Group had no commitments
under forward exchange contracts.
44
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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
2014
£
142,673
98
141,524
284,295
2013
£
206,098
2,588
162,941
371,627
2014
£
1,215,837
109,674
246,000
1,571,511
2013
£
977,660
210,530
415,938
1,604,128
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
2014
£
48,458
3,412
4,277
2013
£
8,476
29,216
27,821
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 2014 and 31 December 2013 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.
45
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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 £1,068,632 (2013: £1,156,950) and undrawn
facilities of £1,000,000 (2013: £750,000). The level of the Group’s overdraft facility is reviewed
annually.
The Group’s financial obligations consist of trade and other creditors and obligations under
finance leases 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 2.00% (2013: 2.75%) over base rate. 1% rise/fall in interest rates would have
decreased/ increased profit for the year by an immaterial amount (2013: immaterial).
35
36
Capital commitments
At 31 December 2014 and 31 December 2013 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.
Barclays Bank Plc have given performance guarantees of £1,835,000 (2013: £1,416,304), 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.
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.
46
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
36
Related party transactions (continued)
Transaction with a Director
On 29 April 2014, as part of an incentive arrangement, Mr C Snook purchased 1,400,000 B shares
of £.001per share in the Company at a price of £0.005 per share. The rights and obligations
attaching to the B shares are set out in note 28.
Dividends paid to Directors
Dividends totalling £345,529 (2013: £293,829) 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 is a loan to Mr C Snook of £148,012. At 31 December
2013 there were loans outstanding from Mr C Snook and Mr J M Waller of £148,012 and
£144,763 respectively. On 25 June 2014, in accordance with the terms of his loan agreement,
Mr J M Waller repaid his loan in full.
The loans were made in accordance with the purposes of the Pennant Employee Benefit Trust to
purchase shares in the Company. The outstanding loan to Mr C Snook is interest free and secured
by a charge on the shares and is repayable when the shares are sold.
47
PENNANT INTERNATIONAL GROUP PLC
COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
Continuing operations
Management charges receivable
Dividends received from subsidiaries
Administrative expenses
Management charges payable
Operating profit
Finance costs
Finance income
Profit before tax
Tax credit
Notes
2014
£
2013
£
2,036,910
50,000
-
1,500,000
(576,900)
(150,182)
(1,143,000)
(165,000)
317,010
1,234,818
(1,026)
138
(344)
200
316,122
1,234,674
117,393
-
3
4
5
Total comprehensive income attributable to equity holders
433,515
1,234,674
48
PENNANT INTERNATIONAL GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
Share
capital
Share
premium
£
1,400,000
-
-
-
-
-
-
1,400,000
-
-
-
-
-
-
-
-
-
-
1,400
5,600
-
-
-
-
-
-
-
-
-
-
At 1 January 2013
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
At 1 January 2014
Total comprehensive income for the
year
Issue of B shares
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
Capital
redemption
reserve
£
Treasury
shares
Retained
earnings
Total equity
£
£
£
200,000
(402,690)
3,324,667
4,521,977
-
-
-
-
-
-
-
-
1,234,674
19,734
1,234,674
19,734
(68,906)
4,125
-
-
(8,183)
(581,110)
-
(581,110)
(68,906)
4,125
8,183
200,000
(459,288)
3,989,782
5,130,494
-
-
-
-
-
-
-
-
-
-
-
26,625
14,438
-
433,515
433,515
-
53,674
-
-
7,000
53,674
-
26,625
(14,438)
(710,700)
-
(710,700)
At 31 December 2014
1,401,400
5,600
200,000
(418,225)
3,751,833
4,940,608
49
PENNANT INTERNATIONAL GROUP PLC
COMPANY NUMBER: 3187528
COMPANY STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2014
Non-current assets
Investment in subsidiaries
Available-for-sale investments
Deferred tax asset
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
Share premium account
Capital redemption reserve
Treasury shares
Retained earnings
Total equity
Notes
2014
£
2013
£
6
11
7
8
10
7,909,037
3,700
117,393
8,030,130
7,909,037
3,700
-
7,912,737
1,512
-
104,589
106,101
2,543
292,775
-
295,318
8,136,231
8,208,055
146,758
3,048,865
-
3,195,623
156,835
2,782,221
138,505
3,077,561
(3,089,522)
(2,782,243)
3,195,623
3,077,561
4,940,608
5,130,494
1,401,400
5,600
200,000
(418,225)
3,751,833
1,400,000
-
200,000
(459,288)
3,989,782
4,940,608
5,130,494
Approved by the Board and authorised for issue on 16 March 2015
C Snook
Director
P H Walker
Director
50
PENNANT INTERNATIONAL GROUP PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
Net cash from operations
11
920,031
(1,511,884)
Notes
2014
£
2013
£
Investing activities
Dividend received from subsidiary
Dividend received
Interest received
Net cash from/(used) in investing activities
Financing activities
Issue of B Shares
Dividends paid
Purchase of own shares for treasury
Proceeds from sale of treasury shares
Net cash used in financing activities
-
138
-
138
1,500,000
200
-
1,500,200
7,000
(710,700)
-
26,625
-
(581,110)
(68,906)
4,125
(677,075)
(645,891)
Net (decrease)/increase in cash and cash equivalents
243,094
(657,575)
Cash and cash equivalents at beginning of year
(138,505)
519,070
Cash and cash equivalents at end of year
104,589
(138,505)
51
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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 for the period
Deferred tax credit in respect of previous period
Tax credit for the year
Reconciliation of effective tax rate
Profit before tax
Tax at applicable rate 21.5% (2013: 23.25%)
Tax effect of:
Expenses that are not deductible for tax
Group income
Share options exercised
Adjustment to tax charge in respect of previous
Losses utilised no previously recognised in
Deferred tax
Changes in rate on deferred tax
Franked investment income
Group relief
Total tax charge/(credit)
2014
£
1,026
2013
£
344
2014
£
2013
£
-
138
138
2014
£
(10,721)
(106,672)
(117,393)
-
200
200
2013
£
-
-
-
316,122
1,234,674
67,945
287,062
14,568
-
(23,213)
(106,672)
(66,606)
(4,172)
(30)
787
(117,393)
2,805
(348,750)
(7,148)
-
-
(47)
66,078
-
52
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
6
Subsidiaries
Details of the Company’s subsidiaries at 31 December 2014 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
Deferred tax
Accelerated
tax
depreciation
£
Other
temporary
differences
£
-
-
-
-
-
-
Tax losses
£
-
117,393
117,393
Total
£
-
117,393
117,393
At 1 January 2014
Credit to income
At 31 December 2014
53
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
12
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
2014
£
2013
£
316,122
-
-
1,026
(138)
53,674
370,684
293,806
256,567
921,057
(1,026)
920,031
1,234,674
(1,500,000)
-
344
(200)
19,734
(245,448)
535,336
(1,801,428)
(1,511,540)
(344)
(1,511,884)
13
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 2.00% (2013: 2.75%)
over base rate. 1% rise/fall in interest rates would have decreased/ increased profit for the year by
an immaterial amount (2013: 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
2014
£
2013
£
3,700
3,700
1,512
-
104,589
109,801
2,543
292,775
-
299,018
146,758
3,048,865
-
3,195,623
156,835
2,782,221
138,505
3,077,561
54
PENNANT INTERNATIONAL GROUP PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
14
15
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
£46,182 (2013: £24,680).
Transaction with a Director
On 29 April 2014, as part of an incentive arrangement, Mr C Snook purchased 1,400,000 B shares
of £.001per share in the Company at a price of £0.005 per share. The rights and obligations
attaching to the B shares are set out in note 28.
16
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.
The Company has guaranteed the payment of rent under a lease agreement for office premises
occupied by a subsidiary company. The lease runs for 5 years from 1 February 2015 at an annual
rental of £51,135.
Other transactions with related parties consist of management charges for services provided to and
by subsidiary companies as disclosed on the face of the statement of comprehensive income.
55