Report and Accounts
2016
Report and Financial Statements
For the year ended Friday 31 December 2016
Officers and professional advisers
Chairman’s review
Chief Executive review and strategic report
Directors’ report
Corporate governance
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
Contents
3
4-5
6-9
11-13
15-16
17
19
20
21
22-23
24
25-51
52
53
54
55
Notes to the company financial statements
57-60
Pennant International Group PLC
Officers and Professional Advisors
Director
S Moore
P Walker FCA
C Powell FCA
T Rice
C Snook
(Chairman)
(Chief Executive Officer)
(Appointed 26 September 2016)
(Stepped down 21 February 2017)
Secretary
P H Walker
Registered office
Pennant Court
Staverton Technology Park
Cheltenham
Gloucestershire
GL51 6TL
Company number
3187528
Auditor
Bankers
Nominated Adviser and Broker
Mazars LLP
45 Church Street
Birmingham
B3 2RT
Barclays Bank Plc
Bridgewater House
Finzels Reach
Counterslip
Bristol
BS1 6BX
W H Ireland Ltd
4 Colston Avenue
Bristol
BS1 4ST
3
Pennant International Group PLC
Chairman’s Review
This followed the earlier announcement in June that the
Company had secured work on two major new contracts,
both with Middle East customers, which have an aggregate
value in excess of £13 million. The success of the share issue
and the award of the major contract wins, together with a
robust Order Book, positions the Group well for the medium
and longer term.
Key financials
For the year ended 31 December 2016, the Group delivered
consolidated revenues of £17.21 million (2015: £9.89 million),
driven by the commencement of work on the two new major
contract awards highlighted above.
The Group posted consolidated operating profit of £1.90
million (2015: operating loss of £2.36 million), reflecting the
significant turn-around in trading.
This much improved trading performance, combined with the
fundraising, has resulted in a near doubling of the Group’s
consolidated net assets to £11.82 million (2015: £6.26 million).
Gross profit margin for the period also improved substantially
to 40% (2015: 23%) as a result of previously implemented cost
controls and changes to the sales mix.
Basic earnings per share of 6.48p also compares very
favourably to the reported loss per share of 8.71p for the
same period last year.
‘‘
a year of strategic change for
Pennant, supported by our
shareholders, customers and
staff, restoring profitability
‘‘
On behalf of the Board of Directors I am pleased to
Cash used in operations amounted to £0.25 million (2015: cash
present to shareholders my first annual results statement as
generated £1.1 million), reflecting the phase of production on
Chairman. In the Trading Update published in June 2016 the
several major programmes. The Group continues to have nil
Board stated that, following modest pre-tax profit in the first
borrowings with a healthy year-end cash balance of £3.52
half, an improvement in trading was expected in the second
million (2015: £1.12 million).
half of the financial year. I am pleased to confirm that this
improvement materialised, delivering a strong result across
The Group’s tax position shows a small tax credit of £17,691
for the full year.
(2015: £72,445), which relates to a refund received by an
overseas subsidiary. The Group’s effective tax rate is NIL%
During the period under review, a number of significant
(2015: NIL%). Profits generated from operations utilised
operational and strategic objectives were achieved, most
£2.2m of UK tax losses and the Group has unrelieved tax
notably the Company’s first equity fund-raising since 2001 by
losses carried forward of £2.5m (2015: £4.7m). There were
way of an oversubscribed Institutional Placing which raised
no Research and Development tax credits claimed in the UK
over £3.5million of new share capital before expenses.
during the year (2015: £0.5m).
4
Pennant International Group PLC
Chairman’s Review
The year-end order book stood at £38 million (2015: £38
I would also like to take this opportunity to thank all
million) of which £18 million (2015: £10 million) is deliverable
staff across the Group for their hard work and dedication
within one year. Of the total order book, 70% (2015: 70%) is
throughout this transitional year. Their commitment and
denominated in sterling and 25% (2015: 25%) is
drive to ensure that the business continues to deliver the
denominated in Canadian dollars. Delivery achieved in the
high quality solutions that our customers require and
second half together with a strong closing order book
expect, operating under tight timescales, are key factors to
provides a firm platform for future performance.
maintaining and enhancing the ongoing and longstanding
Dividends
The Board fully appreciates the importance of maintaining
a progressive dividend. However, notwithstanding the much
improved trading performance and outlook, positive cash
generation and nil net borrowings, the Directors have
concluded that it is in the Company’s and shareholders’
current best interests to retain cash for working capital and
investment. The Board will therefore not be recommending
the payment of a final dividend for the year ended 31
December 2016.
Governance
relationships we have with our customers.
Outlook
Prospects remain positive, taking into the account the
contracted order book valued at more than £38 million which
underpins the forward visibility of revenues well into 2019.
The Board is confident that it can continue to increase
revenues through organic growth but it will also consider
complementary strategic acquisitions which can both
increase the depth and range of the Group’s offering and
enhance underlying revenues.
We are experiencing an encouraging start to 2017 and
anticipate a healthy first half outcome and further good
The Board believes in robust corporate governance. We have
progress for the year as a whole.
worked closely with our advisors and have reviewed our
governance frameworks to ensure that the business
Approved by the Board on 9 March 2017
continues to establish strong Governance throughout the
And signed on its behalf
Group, appropriate for a company of its size. Our risk
management procedures continue to be reviewed and
tightened where necessary.
Our people
S A Moore
Chairman
On 21 February 2017 Chris Snook stepped down from the
company as CEO.
The Board has appointed Philip Walker as Chief Executive
Officer to succeed him having been identified as a potential
successor in 2014. This is a key appointment which provides
fundamental continuity with the brand, knowledge base
and strategy of the business. I am delighted that Philip has
agreed to step up to assume the leadership of the Group.
He has moved quickly to build a leadership team around
him and will be making more key appointments over the
coming months.
5
Pennant International Group PLC
Chief Executive Review & Strategic Report
The Board is confident that the underlying strengths of Pennant –
our long-term customer relationships, our specialist
services and our quality-assured reputation - remain the
solid foundation of our offerings across the Group.
Operational changes
The Group has recently formed a Management Committee
under the leadership of Philip Walker, Chief Executive Officer.
The committee comprises the senior managers and heads
of departments across the Group. It will meet monthly to
discuss operational matters and will be responsible for
supporting the Chief Executive run the Company day-to-day.
Gary Barnes has been appointed Head of Finance. Gary has over
17 years’ experience as Group Finance Controller and will be
responsible for all day-to-day financial functions in the Group.
The Company has made a formal offer to an individual to join
the Group as Company Secretary and in-house legal counsel,
which has been accepted. The new Company Secretary will
be responsible for ensuring compliance with all regulatory
and legal matters. The appointment will add greater depth to
our risk management and commercial functions.
Restructuring of Group
Throughout the period under review the Group has operated
three trading divisions, namely Training Systems, Software
Services and Data Services, with offices in the UK, Canada
and Australia.
The Board is always seeking to enhance and improve the
strength and operating efficiency of the Group and has taken
the opportunity to refine the existing Group structure.
Post year-end, Pennant Information Services Limited has
been renamed Pennant Support & Development Services
Limited (“PSDSL”). The Board’s intention is to integrate the
Support Services Division with the existing Information
Services Division. The practical effect of this will be to
consolidate in one operating unit the contract support
functions currently spread across the Group and is expected
to transfer approximately £2 million of revenue to PSDSL.
This will result in the Group operating three focused
divisions, Training, Software and Support and Development.
Strengthening the balance sheet
On 15 August, 2016, the Company announced its first equity
fund-raising since 2001. This followed the earlier
returning to profitability was
our number one priority
‘‘
‘‘
Pennant
The Group has a diverse portfolio of capabilities enabling
it to offer services that cover training equipment hardware
and related support, including simulation, virtual reality and
computer based training, plus technical documentation,
media development, software development and related
consultancy. It operates principally in the defence, rail, power
and aerospace sectors and with government departments.
A challenging year behind us – back on track
Following a disappointing first half, brought about largely by
contract delays beyond our control, our highest priority was
to get back on track during the second half of the year in
order to demonstrate that the Group’s businesses are
fundamentally strong and that they could recover quickly.
We remained confident that the contract delays would be
resolved and that the Group would deliver a strong
performance during the second half of the year, which it did.
6
Pennant International Group PLC
Chief Executive Review & Strategic Report
announcement in June that it had secured work on two
major new contracts. These contracts, both with Middle East
customers, have an aggregate value in excess of £13 million.
Having considered the working capital requirements of the
contracts and to ensure sufficient headroom to cover
commitments to other existing and potential work, the
Directors believed it prudent to supplement the Company’s
existing working capital resources by way of an equity
fundraising. This was successfully concluded with an
oversubscribed institutional placing of 1,527,739 treasury
shares and 4,943,533 new ordinary shares at 55 pence
per share which raised in aggregate £3.56 million for the
Company before expenses.
Investment for the future
During the year the Company also announced that it had
taken possession of three commercial premises at Staverton
Connection Business Park, Cheltenham, adjacent to the
Group’s Head Office, representing a total investment of over
£1 million in new facilities.
Post period end, the Company took possession of two
additional new commercial premises at the same location,
investing a further £500,000 in new facilities. Together these
new premises increase the Groups production capacity to
over 30,000 sq. ft. (2015: 12,000 sq. ft.) and will facilitate
significant expansion and growth.
The Division delivers and supports specialist training
systems based on software emulation, hardware simulation,
virtual reality and computer based training, principally within
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 bespoke new
devices for specific applications.
The Division has significant ongoing orders that will
provide work through 2017 and beyond and there are further
prospects with both existing and new customers regarding
a number of opportunities. Although the timing of major
contract awards has proved to be both difficult to predict and
beyond the Group’s control, the Board considers that a
number of factors point towards 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;
• there is a continuing trend for defence forces to
outsource training services, including updating their
training devices; and
• increase in global defence expenditure.
Divisional performance
New contract awards and operational achievements during
the year are set out below:
The Group delivered a very solid performance during the
second half of the year, demonstrating an ability to convert
major contract wins into both revenue and profit. Most
positively we have been able to meet contractual milestones,
delivering on time and securing payment.
Training Systems Division
The Training Systems Division continues to be the main
driver within the Group. Revenues for the year were strong
at £12.1 million (2015: £4.9 million) as a direct result of key
contract awards highlighted above.
Revenue
Gross margin contribution
Divisional contribution
2016
£m
12.08
4.99
1.69
2015
£m
4.85
0.55
(2.66)
• Secured second phase contract with undisclosed
Middle East customer worth in excess of £7 million
for the supply of a range of equipment, hardware and
software, and maintenance support to an aeronautical
engineering training college in the Middle East.
The equipment supplied includes Part Task Trainers,
mechanical and avionics systems for practicing
maintenance activities and a virtual reality procedure
trainer for aircraft marshalling and ground
handling activities;
• Secured the first phase of a supply contract with a new
strategic Middle East customer worth £6 million
for the supply of a range of equipment, hardware and
software, and maintenance support to aeronautical
engineering training college in the Middle East. The
equipment supplied includes Part Task Trainers and
mechanical and avionics systems for practicing
maintenance activities;
7
Pennant International Group PLC
Chief Executive Review & Strategic Report
• Awarded a landmark contract with Lockheed Martin
Corporation MST (LMC) with a potential value of £2.2m
over 18 months. The contract is for the development of
computer-based training for aircrew and engineering staff.
• Secured second contract with LMC to provide Rotary
Wing Rear Crew Winch Trainer (RCWT) in support of
Rear Crew Training for the United Kingdom Military Flight
Training System (UKMFTS). The RCWT is a representative
cabin of the Maritime Advanced Rotary Training Aircraft
and will support all aspects of Winch Operator training.
• Successful completion of contract with an Indian
customer for the provision of software based
training capability.
Software Services Division
The Division has offices in Canada, Australia and the UK. It owns
the rights to the market leading OmegaPS suite of Logistics
Support Analysis software which is sold and used worldwide
by major defence contractors and exclusively by the defence
authorities in Canada and Australia to maximize efficient logistics
support to complex long-life equipment asset fleets.
Revenues are generated from the sale of licences, associated
maintenance agreements, software training course and
consultant services in support of the product implementation.
The product is regularly updated to enhance functionality,
keep in line with emerging industry standards and changing
technology. Regular updates are issued to users.
The Division achieved revenues of £4.3 million (2015: £4.0
million), an increase of 7.5% on the prior year. This increase
has been driven by strong growth in consultancy revenues,
in particular by the use of OmegaPS on some major long
term capital programmes and the recent re-profiling of the
CAN$19.7 million Canadian Department of Defence special-
ist consultant support contract which is now fully operational
and expected to grow through 2017 and beyond.
The contribution to Group operating profit increased to
£205,288 (2015: £149,110). This growth has been driven by
increased consultant activity.
The main contracts and operational highlights contributing
to trading during the year were:
• Re-profiling of strategic single source contract due to
run rate progressing ahead of expected levels. Early
discussions commenced to renew the contract and
increase its value;
• Sale of new licenses for the use of the Group’s
Integrated Logistics Support Software product,
OmegaPS, to Oshkosh Truck Corporation, USA and
Fleetway Incorporated, Canada in support of major
defence programmes.
Support & Development Division
As mentioned above, the Board is committed to enhancing
the strengths and capabilities of the Group and has taken the
opportunity to refine the Group structure. On 6th January 2017
Pennant Information Services Limited (“PISL”) was renamed
Pennant Support & Development Services Limited (“PSDSL”).
The intention is to integrate the Support Services Division with
the existing Information Services Division. The practical effect
of this will be to consolidate in one operating unit the contract
support functions currently spread across the Group and is
expected to transfer approximately £2 million of revenue to
PSDSL. This will result in the Group operating three divisions,
Software, Support and Development, and Training.
The Support area of the division provides bespoke service
support solutions in the form of integrated logistical hardware,
software and post design services support to its customers
through long term contract agreements.
The Development element of division represents the historic PISL
business which provides high quality media, graphics, virtual
reality software and technical documentation to the defence,
rail, power and government sectors. Revenues for the year were
lower at £1.8 million (2015: £2.0 million) which resulted in an
operating loss of £94,759 (2015: £138,138 loss). This was largely
the result of a delay in the award of a rail contract which is
expected to be secured during the first half of the current year
and which will contribute to current year performance.
2016
£m
4.33
1.42
0.21
2015
£m
4.00
1.13
0.15
Revenue
Gross margin contribution
Divisional contribution
2016
£m
1.78
0.56
(0.10)
2015
£m
2.04
0.62
(0.14)
Revenue
Gross margin contribution
Divisional contribution
8
Pennant International Group PLC
Chief Executive Review & Strategic Report
The main contracts and operational highlights contributing
to trading during the year were:
Innovation
• 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 continuing 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 new contract with Network Rail to produce five
Electrical Control Room (ECR) simulators to train
Electrical Control Room Operators (ECO’s).
The Division has many years’ experience in the rail sector
and is actively involved with a number of significant
opportunities in USA and the Far East.
Our people and recruitment
Our employees remain core to our future business success.
During 2016 we saw growth in the size of our teams in our
UK, Canadian and Australian operations attracting talented
and specialist skills across the Group. The Group’s
employees have diverse experience and educational,
professional and cultural backgrounds. They have
responded exceptionally 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.
Diversification
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.
It is the Board’s intention to augment
organic growth by taking advantage of
potential opportunities which may arise
for complementary, earnings enhancing
acquisitions.
This strategy continued to be implemented throughout 2016
and generated considerable tendering activity, particularly
for Training Systems, and regular involvement with customers
in respect of a strong pipeline of opportunities.
New growth initiatives have been launched with the aim of
extending sales penetration beyond traditional territories and
significant investment is planned in developing new product
offerings, exploiting gaps in the market wherever possible.
We will continue to monitor currency fluctuations however
notwithstanding current economic uncertainty surrounding
the formal commencement of the UK’s exit from the EU, the
Group has not yet detected any loss of confidence from its
global customer base.
At the same time we will look to complement our organic
growth strategy by pursuing opportunities for strategic
acquisitions, carefully considering expanding our capabilities
and service offering.
Approved by the Board on 9 March 2017
and signed on its behalf
Future strategy
Our core strategic objective remains largely unchanged;
consistently applying a strategy across the Group of increasing
shareholder value primarily through organic growth. This
strategy is built upon:
P. H. Walker
Director
Customer focus Building relationships with existing and
potential new customers, understanding
their requirements, being flexible and
delivering on time and to budget.
9
Pennant International Group PLC
Directors’ Report
The directors present their report and the audited financial
statements for the year ended 31 December 2016.
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 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.
Dividends
No dividends were paid during the year (2015: £794,168). As
highlighted in the Chairman’s Statement the Board is not
recommending the payment of a final dividend in respect of
the year ended 31 December 2016.
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.
Post Balance sheet events
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 exposure and approach to capital and financial
risk, and approach to managing these is set out in note 35 to
the Consolidated Financial Statements.
Employee engagement
The Group engages with its employees regularly through
various media including emails, intranet, newsletters,
employee opinion surveys, team briefings and twice yearly
financial results presentations to all staff. Details of the
Group performance are shared with all employees at
appropriate times using these methods.
Employee policies
The Group has established employment policies to ensure
compliance with current legislation and codes of practice,
including equal opportunities.
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.
Policy on payment of suppliers
The Group’s policy during the year was to pay suppliers in
accordance with agreed terms.
There are no post balance sheet events to report.
Authority for company to purchase its own shares
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.
Under a shareholders’ resolution of 20 April 2016, the
directors were granted authority to purchase through the
market 3,970,839 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
11
Pennant International Group PLC
Directors’ Report
five business days immediately preceding the purchase.
Since 20 April 2016 the directors have purchased through the
market NIL ordinary shares for Treasury and have remaining
authority to purchase 3,970,839 ordinary shares. A proposal
to renew the authority will be made at the 2017 AGM.
One third of the Directors are subject to re-election every
year. Accordingly, Mr P Walker retires by rotation at the
Annual General Meeting and, being eligible, offers himself
for re-election.
The Board
During the year the Group has seen a number of changes to
the composition of the Board.
On 3 March 2016, Jennifer Powell stepped down as a
Non-Executive Director. The Board would like to thank
Jennifer for her contribution during her time on the Board.
On 18 May 2016 Mr S A Moore was appointed Chairman.
On 18 May 2016, Christopher Powell stepped down as Chairman
to become a Non-Executive Director. I take this opportunity
on behalf of the Board and the Group’s shareholders to thank
Christopher for his contribution during his time as Chairman.
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 Group and
Company and of the profit or loss of the Group and Company
for that period.
On 26 September 2016 Mr T Rice was appointed to the Board
as a Non-Executive Director and is a member of the
Remuneration Committee.
In preparing these financial statements, the directors are
required to:
On 21 February 2017, Chris Snook stepped down from the
Board as Chief Executive Officer.
The Board has appointed Philip Walker as Chief Executive
Officer. This appointment provides fundamental continuity
with the brand, knowledge base and strategy of the business.
The Board comprises the Chairman, the Chief Executive and
the Non-Executive Directors. It meets ten times a year 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.
• 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;
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
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 Group and Company, and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
12
Pennant International Group PLC
Directors’ Report
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions..
Political donations
The Group has not made any political donations during the
current or prior year.
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.
Directors’ conflicts of interest
The Company has procedures in place for managing
conflicts of interest. Should a Director become aware that
they, or their connected parties, have an interest in an
existing or proposed transaction with Pennant, they should
notify the Board in writing or at the next Board meeting.
Directors have an ongoing duty to update the Board in
relation to any changes to these conflicts.
Significant shareholdings
As at 31 December 2016 the Group has been notified, in
accordance with Chapter 5 of the Disclosure and Transparency
Rules, of the voting rights held as a shareholder of the
Company as shown in the table below.
Investor
Number of % interest
in the total
shares held
voting rights
of Pennant
Powell C C Esq
Hargreave Hale & Co
Business Growth Fund Plc
6,301,533
4,292,305
3,636,364
Liontrust Asset Management
3,224,485
Downing LLP
Seal D J Esq
2,408,172
1,300,000
Barclays Stockbrokers Limited
1,129,951
19.13
13.03
11.04
9.79
7.31
3.95
3.43
Matters covered in the Chairman’s
Statement and Financial Statements
As permitted by paragraph 1A of schedule 7 to the Large and
Medium sized Companies and Groups (Accounts and
Reports) Regulations 2008 certain matters which are
required to be disclosed in the Directors Report have been
omitted as they are included in the Chairman’s Statement on
pages 4 and 5, the CEO review & Strategic Report on pages 6
to 9 and in notes 35 and 37 of the Finance Statements.
Annual General Meeting
The Company’s Annual General Meeting will be held at its
offices located at Pennant Court, Staverton Technology Park,
Cheltenham, GL51 6TL on Wednesday 19th April 2017 at
10:30am. The Notice convening the Annual General Meeting
and an explanation of the business to be put to the meeting is
contained in the separate notice sent to shareholders and is
also available on the website at www.pennant.co.uk by following
the links under “News & Events” on the home page.
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.
Auditor
Mazars LLP have signified their willingness to continue in
office and a resolution to reappoint Mazars LLP as auditor to
the Company will be proposed at the 2017 AGM.
Approved by the Board on 9 March 2017
and signed on its behalf
P H Walker
Director
13
Pennant International Group PLC
Corporate Governance
Introduction
As an AIM listed company, Pennant International Group PLC
(the “Company”) is not required to comply with the Financial
Reporting Council’s UK Corporate Governance Code (the
“Code”). Nevertheless Pennant International Group Plc
Board (the “Board”) recognises the importance of good
corporate governance and embraces the principles set out
in the Code. The Board seeks to achieve compliance with the
Code wherever appropriate and proportionate, having regard
to the size of the Company and its subsidiaries (the “Group”)
and the resources available to it. The Board is providing the
following sections to further its commitment to high standards
of corporate governance and effective board practice.
The Audit Committee
The Audit Committee’s role is to determine and apply policy
on behalf of the Board to the financial reporting and internal
control principles of the Company and for maintaining an
appropriate relationship with the Company’s auditors.
The audit committee consists of the Chairman and the
Non-executive directors. It meets at least two times a year
at appropriate times in the reporting and audit cycle and
otherwise as required.
During the year the Audit Committee, operating under
its new terms of reference adopted on 15 November
2016, discharged its responsibilities, including reviewing
and monitoring:
• the consistency of, and any changes to, accounting
policies both on a year-on-year basis and across the
Company/Group;
• the methods used to account for significant or unusual
transactions;
• whether the Company has followed appropriate
accounting standards and made appropriate estimates
and judgements, taking into account the views of the
external auditor;
• the clarity of disclosure in the Company’s financial
reports and the context in which statements are
made, and;
• all material information presented with the financial
statements, such as the operating and financial review
and the corporate governance statement (insofar as it
relates to the audit and risk management);
Given the nature of the Group’s business, the Audit Committee
pays particularly close attention to reviewing and discussing
with the external auditors, the management’s judgments on
the application of revenue recognition policies in relation to
material projects.
Internal Control and Risk Management Systems
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.
During the year, operating under its revised terms of
reference the Audit Committee has the responsibility to:
• keep under review the effectiveness of the Company’s
internal controls and risk management systems; and
• review and approve the statements to be included
in the Annual Report concerning internal controls and
risk management.
The Directors have established an organisational structure
with clear operating procedures, lines of responsibility and
delegated authority.
The Remuneration Committee
The Remuneration Committee’s role is to determine and
apply policy on behalf of the Board to the remuneration and
benefits of executive directors and to ensure compliance with
best practice (including reporting to shareholders).
The Company’s remuneration committee comprises the
Chairman and the Non-Executive Directors.
During the year, the Remuneration Committee, operating
under its new terms of reference adopted on 15 November
2016, discharged its responsibilities, including determining
and agreeing with the Board the framework or broad policy
for the remuneration of the Company’s Chief Executive,
Chairman, the executive directors, the Company Secretary
and such other members of the executive management as it
is designated to consider.
The full Terms of Reference for all Board Committees are
available on the Company website www.pennantplc.co.uk/
investors/corporate_governance.php
15
Pennant International Group PLC
Corporate Governance
Directors’ remuneration
Fees for
services
Salary
Bonus
Benefits
and car
allowance
Pension
Total
2016
2015
C C Powell
C Snook
J K Powell
P H Walker
S A Moore
T J Rice
J Waller
£
125,000
-
-
-
-
-
-
£
35,000
200,364
23,333
£
-
78,325
-
£
18,000
26,460
-
£
-
20,000
-
£
178,000
325,149
23,333
148,902
108,325
19,899
15,000
292,126
54,385
10,769
-
-
-
-
-
-
-
-
-
-
54,385
10,769 -
-
14,154
£
149,000
288,070
35,000
167,349
7,500
125,000
472,753
186,650
64,359
35,000
883,762
661,073
Pension contributions shown above are pension payments into the Pennant International Group plc Pension Scheme, a defined
contribution scheme.
There were 297,619 (2015: 297,619) 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.
Directors and their interests
The following directors have held office since 1 January 2016 except where indicated otherwise and their beneficial interests in
the ordinary shares of the Company were as stated below:
C C Powell
C Snook (stepped down 21 February 2017)
P H Walker
S A Moore
T Rice (appointed 26 September 2016)
31 December 2016
5p ordinary shares
31 December 2015
5p ordinary shares
Number
6,301,533
487,500
-
18,183
-
Number
10,301,533
1,487,500
-
-
-
Mr P Walker has a beneficial interest in 700,000 C shares of £0.001 each (2015: 700,000). Mr C Snook has a beneficial interest in
1,400,000 B shares of £0.001 each (2015: 1,400,000). There have been no movements between the year-end and the date of this report.
16
C C Powell
C Snook
J K Powell
P H Walker
S A Moore
T J Rice
J Waller
125,000
78,325
20,000
18,000
26,460
£
-
-
-
-
-
-
£
35,000
200,364
23,333
54,385
10,769
-
£
-
-
-
-
-
£
-
-
-
-
£
-
-
-
-
-
£
178,000
325,149
23,333
54,385
10,769 -
£
149,000
288,070
35,000
167,349
7,500
-
14,154
148,902
108,325
19,899
15,000
292,126
125,000
472,753
186,650
64,359
35,000
883,762
661,073
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
2016 which comprise the Consolidated Income Statement,
Consolidated and Parent Company Statements of Comprehensive
Income, the Consolidated and Parent Company Statements
of Financial Position, the Consolidated and Parent Company
Statement of Cash Flows, 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 pages 15 - 16, 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 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
• the financial statements have been properly prepared
in accordance with IFRSs as adopted by the European
Union; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the course
of the audit:
• the information given in the Strategic Report and
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
• the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report
by exception
In light of the knowledge and understanding of the group
and the parent company and its environment obtained in the
course of the audit, we have not identified material
misstatements in the Chairman’s Review and Strategic
Report or the Directors’ Report.
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.
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 2016 and of the group’s and
the parent company’s profit for the year then ended;
Louis Burns (Senior Statutory Auditor)
for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
45 Church Street, Birmingham B3 2RT
9 March 2017
17
Pennant International Group PLC
Consolidated Income Statement
For the year ended 31 December 2016
Continuing operations
£ £
Notes
2016
2015
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit/(loss)
Finance costs
Finance income
Profit/(loss) before taxation
Taxation credit
Profit/(loss) for the year attributable to the equity
holders of the parent
Earnings per share
Basic
Diluted
5
17,211,455
9,892,685
(10,249,472)
(7,591,942)
6,961,983
2,300,743
(5,057,374)
(4,658,145)
1,904,609
(2,357,402)
(9,051)
7,781
(25,682)
4,905
1,903,339
(2,378,179)
17,691
72,445
1,921,030
(2,305,734)
6.48p
6.06p
(8.71)p
(8.71)p
8
10
11
12
14
19
Pennant International Group PLC
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Profit/(loss) 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 impairment
Deferred tax
Notes
2016
2015
£ £
1,921,030
(2,305,734)
17
(276,212) -
46,956 -
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Total comprehensive income for the period attributable to the
equity holders of the parent
413,469
(132,558)
2,105,243
(2,438,292)
20
Pennant International Group PLC
Consolidated Statement of Financial Position
For the year ended 31 December 2016
Notes
2016
2015
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
Asset held for sales
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
Warranty provisions
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
Approved by the Board and authorised for issue on 9 March 2017
P H Walker
Director
15
16
17
18
27
19
21
22
17
23
24
26
24
26
27
28
29
30
£ £
964,159
295,780
2,642,448
-
482,989
4,385,376
-
7,820,128
3,517,541
575,000 -
11,912,669
16,298,045
3,824,925
1,610
4,070
162,500
3,993,105
7,919,564
31,957
18,403 -
287,625
150,000 -
487,985
4,481,090
11,816,955
1,649,277
2,685,971
200,000
-
6,347,343
417,067
517,297
11,816,955
929,606
566,822
2,707,326
3,700
530,622
4,738,076
29,854
3,743,435
1,123,456
4,896,745
9,634,821
2,657,910
123,465
13,761
174,168
2,969,304
1,927,441
8,424
391,857
400,281
3,369,585
6,265,236
1,402,100
8,400
200,000
(418,225)
4,230,206
3,598
839,157
6,265,236
21
Pennant International Group PLC
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
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 2015
1,401,400
5,600
200,000
(418,225)
7,207,603
136,156
884,805
9,417,339
Loss for the year
Other comprehensive income
-
-
-
-
-
-
-
(2,305,734)
-
-
(2,305,734)
-
-
(132,558)
-
(132,558)
Total comprehensive income
1,401,400
5,600
200,000
(418,225)
4,901,869
3,598
884,805
6,979,047
Issue of C shares
700
2,800
Recognition of share based payment
Transfer from revaluation reserve
Dividends paid
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
76,857
45,648
(794,168)
-
-
-
-
-
-
3,500
76,857
(45,648)
-
-
(794,168)
At 1 January 2016
1,402,100
8,400
200,000
(418,225)
4,230,206
3,598
839,157
6,265,236
Profit for the year
Other comprehensive income
-
-
-
-
-
-
-
1,921,030
-
-
1,921,030
-
-
413,469
(276,212)
137,257
Total comprehensive income
1,402,100
8,400
200,000
(418,225)
6,151,236
417,067
562,945
8,323,523
Issue of ordinary shares
247,177
2,677,571
Recognition of share based payment
Deferred tax on revaluation loss
Transfer from revaluation reserve
-
-
-
-
-
-
-
-
-
-
418,225
-
-
-
-
103,503
46,956
45,648
-
-
-
-
-
3,342,973
-
-
103,503
46,956
(45,648)
-
At 31 December 2016
1,649,277
2,685,971
200,000
-
6,347,343
417,067
517,297
11,816,955
22
Pennant International Group PLC
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016 (Continued)
Share premium account
Translation reserve
Represents the amount by which shares have been issued at
a price greater than nominal value less issue costs.
Capital redemption 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.
This represents the amount by which the Company’s share capital
has been diminished by the cancellation of shares held in treasury.
Revaluation reserve
Retained earnings
This represents the extent to which the revaluation of such
land and buildings at fair value exceed the carrying amount.
This represents the accumulated realised earnings from the
prior and current periods.
Treasury shares
Treasury shares represent the cost of shares purchased in
the market and held by Pennant Employee Benefit Trust to
satisfy options under the group’s share options schemes.
23
Pennant International Group PLC
Consolidated Statement of Cash Flows
For the year ended 31 December 2016
Net cash from operations
Investing activities
Interest received
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds from sale of motor vehicles
Proceeds from sale of available-for-sale investments
Notes
2016
2015
£
31
£
(249,248)
7,781
(28,438)
(1,086,896)
12,491 -
4,314 -
1,097,287
4,905
(30,413)
(18,367)
Net cash used in investing activities
(1,090,748)
(43,875)
Financing activities
Issue of C shares
Dividends paid
Proceeds from sale of ordinary shares
Net funds from obligations under finance leases
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rates
-
-
3,342,973 -
13,842
3,356,815
2,016,819
1,123,456
377,266
Cash and cash equivalents at end of year
22
3,517,541
3,500
(794,168)
(11,600)
(802,268)
251,144
1,068,632
(196,320)
1,123,456
24
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
1 General information
Pennant International Group plc is a company
incorporated in the United Kingdom under the
Companies Act 2006. The address of the registered
office is Pennant Court, Staverton Technology Park,
Cheltenham, GL51 6TL.
The principal activity of the Group 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 adoption of the following mentioned standards,
amendments and interpretations in the current year have
not had a material impact on the Group’s financial
statements for the year ended 31 December 2016:
Endorsed
Effective for
periods beginning
on or after:
Amendment to IAS 1 Presentation of Financial Statements: Disclosure initiative
1 January 2016
Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets:
Clarification of acceptable methods of depreciation and amortisation
1 January 2016
Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture: Bearer plants
1 January 2016
Amendment to IAS 19 Employee Benefits: Defined benefit plans - Employee contributions
1 February 2015
Amendment to IAS 27 Separate Financial Statements: Equity method in separate financial statements
1 January 2016
Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other
Entities and IAS 28 Investments in Associates and Joint Ventures: Investment entities -
Applying the consolidation exception
1 January 2016
Amendment to IFRS 11 Joint Arrangements: Accounting for acquisitions of interests in joint operations
1 January 2016
Annual Improvements to IFRSs (2010 - 2012)
Annual Improvements to IFRSs (2012 - 2014)
1 February 2015
1 January 2016
25
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
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
Amendment to IAS 7 Statement of Cash Flows: Disclosure initiative
Amendment to IAS 12 Income Taxes: Recognition of deferred tax assets for unrealised losses
Amendment to IAS 40 Investment Property: Transfers of investment property
Amendment to IFRS 2 Share-based Payment: Classification and measurement of share-based
payment transactions
Amendment to IFRS 4 Insurance Contracts: Applying IFRS 9 Financial Instruments with IFRS 4
Insurance Contracts
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
Clarifications to IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
Annual Improvements to IFRSs (2014 - 2016)
IFRIC 22 Foreign Currency Transactions and Advance Consideration
26
Effective for
periods beginning
on or after:
Expected to be
endorsed Q2 2017
Expected to be
endorsed Q2 2017
Expected to be
endorsed Q3 2017
Expected to be
endorsed Q3 2017
Expected to be
endorsed Q3 2017
1 January 2018
1 January 2018
Expected to be
endorsed Q1 2017
Expected to be
endorsed Q4 2017
Expected to be
endorsed Q3 2017
Expected to be
endorsed Q3 2017
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
2 Adoption of new and revised standards
Going concern
(continued)
The adoption of the above mentioned standards,
amendments and interpretations in future years are not
expected to have a material impact except in the case of
the following:
IFRS 15 - Revenue from Contracts with Customers
Support, Development & Consultancy Services - revenue
is recognised over time in line with the customer
receiving and consuming the benefits provided by the
performance of the service.
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.
Engineered solutions - revenue is recognised over time in
accordance with the contracted performance obligations.
Basis of consolidation
Generic or COTS products - contracts will be reviewed
on a case by case basis to determine the underlying
performance obligation. Revenue will be recognised at a
point in time in line with achievement of contracted
performance obligations.
IFRS 16 - Leases
We anticipate that the standard will impact almost all
commonly used financial metrics including gearing ratio,
current ratio, asset turnover, EBITA, operating profit, EPS
and operating cash flows.
The Board continues to assess the impact of the above
standard on the Groups arrangements, in particular with
stakeholders such as banks, investors and analysts.
It is anticipated that the adoption of the above standard
will create an asset and an equal liability on the balance
sheet, thereafter the amortisation profile of the asset and
liability will be different.
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.
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.
27
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
3 Accounting policies (continued)
Leases
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).
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
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 a 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.
total contract revenue, the expected loss is recognised as
an expense immediately.
Exchange differences arising on the settlement of
monetary items, and on the retranslation of monetary
28
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
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.
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.
Provisions
Provisions are made in respect of contractual obligations
and warranties based on the judgement of management
taking into account the nature of the claim or contractual
obligation, the range of possible outcomes, past
experience and any mitigation.
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.
29
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
3 Accounting policies (continued)
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
Nil
Freehold buildings
Net book value at 1 January 2007
being written off over 35 years
Short leasehold buildings
on a straight line basis or
Long leasehold buildings
over the life of the lease if shorter
Plant and equipment
10% to 25% of cost per annum
Computers
Motor vehicle
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.
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.
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
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.
30
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
Financial instruments
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.
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 £252,000 (2015:
£504,000). 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.
Trade payables
Key source of estimation uncertainty
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 an amortised cost 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
Company are recorded at the proceeds received net of
direct issue costs.
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
£964,159 (2015: £929,606) and the review carried out has
shown no impairment.
31
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
5 Revenue
An analysis of the Group’s revenue is as follows:
2016
2015
Sale of goods
Rendering of services
Revenue from construction contracts
Software maintenance programmes
Investment income
6 Segment information
£
£
153,133
2,948,960
13,412,304
697,058
17,211,455
7,781
101,512
2,379,283
6,803,194
608,696
9,892,685
4,905
17,219,236
9,897,590
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
Segment Revenue
Segment Profit
2016
2015
2016
2015
£
12,080,290
1,782,516
4,331,681
£
4,852,576
2,045,418
4,002,977
£ £
1,693,501
(2,654,828)
(98,103)
221,637
(138,138)
149,110
18,194,487
10,900,971
1,817,035
(2,643,856)
- -
(450,502)
(532,530)
(94,800)
(913,486)
17,211,455
9,892,685
Net unallocated corporate receipts
Net finance costs
Profit/(loss) before tax
Inter-segment sales are made on an arm’s length basis.
87,574
(1,270)
286,454
(20,777)
1,903,339
(2,378,179)
32
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
6.2 Segment assets and liabilities
Sale of goods
Rendering of services
Revenue from construction contracts
Software maintenance programmes
Investment income
£
£
153,133
2,948,960
13,412,304
697,058
17,211,455
7,781
101,512
2,379,283
6,803,194
608,696
9,892,685
4,905
Segment assets
Training Systems
Data Services
Software
Eliminations on consolidation
Unallocated
£ £
10,111,893
1,574,163
4,401,754
16,087,810
(2,603,448)
2,813,683
7,560,224
1,704,114
3,788,688
13,053,026
(3,392,563)
(25,642)
17,219,236
9,897,590
Consolidated assets
16,298,045
9,634,821
An analysis of the Group’s revenue is as follows:
2016
2015
Segment liabilities
Training Systems
Data Services
Software
Unallocated
Consolidated liabilities
6.3 Other segment information
Training Systems
Data Services
Software
3,531,488
207,161
547,438
4,286,087
195,003
2,396,568
294,796
615,248
3,306,612
62,973
4,481,090
3,369,585
Depreciation and amortisation
Additions to non-current assets
2016
2015
2016
2015
£
508,499
44,174
31,447
584,120
£
517,957
53,489
48,074
619,520
£ £
1,046,812
5,302
63,220
1,115,334
11,788
6,792
30,200
48,780
33
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
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
Non-current assets*
2016
2015
2016
2015
£
13,650,129
12,029
3,229,943
319,354
£
7,009,006
11,979
2,576,451
295,249
£ £
3,617,519
3,956,265
- -
7,513
277,355
6,577
240,912
17,211,455
9,892,685
3,902,387
4,203,754
* Non-current assets excluding financial instruments and deferred tax assets.
6.5 Information about major customers
Included in the revenues of each segment are the following sales to individual external customers amounting to 10% or
more of the Group’s revenues.
Training Systems
Customer 1
Customer 2
Customer 3
Customer 4
Software services
Customer 3
34
£
2016
2015
£
-
-
4,254,480 -
2,065,140 -
1,333,141
1,742,575
3,199,160
2,442,329
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
7 Staff costs
Wages and salaries
Social security costs
Pension costs
£
2016
2015
£
5,392,158
539,555
284,701
5,011,498
622,232
281,148
6,216,414
5,914,878
The average number of persons, including executive directors employed by the Group during the year was:
Office and management
Production
Selling
Number
Number
14
85
8 8
107
14
89
111
Training Systems
Customer 1
Customer 2
Customer 3
Customer 4
Software services
Customer 3
£
-
-
4,254,480 -
2,065,140 -
1,333,141
1,742,575
3,199,160
2,442,329
8 Operating profit/(loss) for the year
£
Operating profit/(loss) for the year has been arrived at after charging:
Net foreign exchange losses
Research and development costs
Amortisation of intangible assets
Depreciation of property, plant and equipment
Loss on disposal of motor vehicles
Share-based payment (note 33)
Redundancy cost
2016
2015
£
£
139,759
-
299,801
284,319
16,877 -
103,503
42,345
15,510
509,682
313,580
305,940
76,857
148,291
35
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
9 Auditor remuneration
2016
2015
£
£
Fees payable to the company’s auditor 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
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
£
£
36
17,000
33,000
50,000
-
- -
-
50,000
14,000
31,000
45,000
10,537
10,537
55,537
2016
2015
£
834
57
8,160
9,051
1,943
22,830
909
25,682
2016
2015
£
3,772
25 -
3,984
7,781
464
4,441
4,905
£
£
Fees payable to the company’s auditor for:
- The audit of the annual financial statements
- The audit of the company’s group undertakings
Total audit fees
services to the Group:
- Tax compliance services
- Other services relating to tax
Total non-audit fees
Fees payable to the company’s auditor and its associates for other
Interest expense for financial lease arrangements
Interest expense for bank overdraft
Other interest expense
Income from bank deposits
Other interest receivable
Dividends receivable from available-for-sale investments
£
£
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
12 Taxation
2016
2015
2016
2015
17,000
33,000
50,000
-
- -
-
50,000
£
834
57
8,160
9,051
£
3,772
25 -
3,984
7,781
2016
2015
2016
2015
14,000
31,000
45,000
10,537
10,537
55,537
1,943
22,830
909
25,682
464
4,441
4,905
Recognised in the income statement
Current UK tax expense
Foreign tax
In respect of prior years
Deferred tax expense relating to origination and reversal of
temporary differences
Effect of tax rate change on opening balance
Total tax expense
Reconciliation of effective tax rate
Profit/(loss) before tax
Tax at the applicable rate of 20% (2015: 20.25%)
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 change of deferred tax rate
Losses arising not recognised in deferred tax
Utilisation of unrecognised deferred tax
Effect of adjustments for prior years
Other differences
Total tax expense
£ £
3,511
64,657
(82,156)
(13,988)
17,720
(21,423)
(17,691)
-
113,334
107,959
221,293
(256,627)
(37,111)
(72,445)
1,903,339
(2,378,179)
380,666
57,418
-
-
29,265
4,437
(33,529)
-
(367,922)
(82,156)
(5,870)
(481,582)
48,897
(152,405)
(1,423)
76,500
7,770
53,217
287,222
-
101,068
(11,709)
(17,691)
(72,445)
13 Dividends
No dividends were paid during the year (2015: 3.00p). No final dividend will be proposed at the Annual General Meeting
(2015: NIL).
37
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
14 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 / (loss) after tax attributable to equity holders
1,921,030
(2,305,734)
2016
2015
£
£
Weighted average number of ordinary shares in issue during the year
Diluting effect of share options
Diluted average number of ordinary shares
Number
Number
29,647,844
2,026,786
26,472,261
1,610,714
31,674,630
28,082,975
15 Goodwill
Carrying amount
At 1 January 2015
Currency translation
At 1 January 2016
Currency translation
At 31 December 2016
£
941,457
(11,851)
929,606
34,553
964,159
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
38
£
2016
2015
£
583,900
380,259
964,159
583,900
345,706
929,606
Profit / (loss) after tax attributable to equity holders
1,921,030
(2,305,734)
Weighted average number of ordinary shares in issue during the year
Diluting effect of share options
Diluted average number of ordinary shares
2016
2015
£
£
Number
Number
29,647,844
2,026,786
26,472,261
1,610,714
31,674,630
28,082,975
£
£
941,457
(11,851)
929,606
34,553
964,159
2016
2015
£
583,900
380,259
964,159
583,900
345,706
929,606
Carrying amount
At 1 January 2015
Currency translation
At 1 January 2016
Currency translation
At 31 December 2016
Cash generating unit
Data Services division
Software division
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
15 Goodwill (continued)
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
3.0% (2015: 3.0%). These forecast cash flows are discounted at 10% per annum (2015: 7.5% per annum) to provide the value
in use for each CGU.
Key assumptions are based on past experience and external sources. No impairment of goodwill has been recorded in
previous years and the most recent tests confirm no impairment. The Directors have assessed the sensitivity of the
assumptions detailed above and consider that it would require significant adverse variance in any of the assumptions to
reduce fair value to a level where it matched the carrying value.
16 Other intangible assets
Software
Development
Costs
Total
£
Cost
At 1 January 2015
Currency translation
Additions
At 1 January 2016
Currency translation
Additions
Disposals
At 31 December 2016
Amortisation
At 1 January 2015
Currency translation
Charge for the year
At 1 January 2016
Currency translation
Charge for the year
Disposals
At 31 December 2016
Carrying amount
At 31 December 2016
At 31 December 2015
358,415
(2,849)
30,413
385,979
6,488
28,438
(358,548)
62,357
263,929
(2,352)
61,580
323,157
6,167
47,801
(358,548)
18,577
43,780
62,822
£
£
907,753
1,266,168
-
-
(2,849)
30,413
907,753
1,293,732
-
-
-
907,753
151,753
-
252,000
403,753
-
252,000
-
655,753
252,000
504,000
6,488
28,438
(358,548)
970,110
415,682
(2,352)
313,580
726,910
6,167
299,801
(358,548)
674,330
295,780
566,822
39
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
17 Property, plant and equipment
Land and
Buildings
Fixtures and
Equipment
Motor
Vehicles
Total
£
£
£
£
2,320,000
-
-
-
2,320,000
-
827,398
(276,212)
(643,788)
-
2,096,098
(13,477)
18,367
(14,681)
2,086,307
32,994
230,100
-
-
54,740
(2,900)
-
-
51,840
9,477
29,398
-
-
(408,712)
(48,058)
4,470,838
(16,377)
18,367
(14,681)
4,458,147
42,471
1,086,896
(276,212)
(643,788)
(456,770)
Cost / Valuation
At 1 January 2015
Currency translation
Additions
Disposal
At 1 January 2016
Currency translation
Additions
Impairment
Assets held for sale
Disposals
At 31 December 2016
2,227,398
1,940,689
42,657
4,210,744
Depreciation
At 1 January 2015
Currency translation
Charge for year
Disposal
At 1 January 2016
Currency translation
Charge for year
Assets held for sale
Disposals
At 31 December 2016
Carrying amount
At 31 December 2016
At 31 December 2015
-
-
91,704
-
91,704
-
97,282
(68,788)
-
120,198
1,454,515
(11,555)
207,447
(14,681)
1,635,726
28,237
182,594
-
(408,712)
16,723
(121)
6,789
-
23,391
1,109
4,443
-
(18,690)
1,471,238
(11,676)
305,940
(14,681)
1,750,821
29,346
284,319
(68,788)
(427,402)
1,437,845
10,253
1,568,296
2,107,200
2,228,296
502,844
450,581
32,404
28,449
2,642,448
2,707,326
Included within land and buildings is land valued at £575,000 (2015: £575,000).
40
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
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 and rental yields for similar properties.
At 31 December 2016, 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 £1.16 million (2015: £1.21 million;
2014: £1.26 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 2016.
In January 2017 an offer of £575,000 was accepted on Land and buildings with a year-end carrying value of £851,212 and
therefore an impairment loss of £276,212 has been recognised at 31 December 2016.
18 Available-for-sale investments
The Group owned 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. The shares were sold in June 2016.
19 Inventories
Raw materials and consumables
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)
2016
2015
£
-
29,854
2016
2015
£
4,942,292
(1,728,759)
1,260,534
(972,899)
3,213,533
287,635
Contract costs incurred plus recognised profits less recognised losses to date
27,626,304
34,767,715
Less: progress billings
(24,412,771)
(34,480,080)
3,213,533
287,635
41
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
21 Trade and other receivables
2016
2015
Trade receivables
Amounts due from construction customers (note 20)
Other debtors
Prepayments and accrued income
£
2,511,789
4,942,292
50,745
315,302
£
2,058,363
1,260,534
151,556
272,982
7,820,128
3,743,435
There are no unimpaired trade receivables that are past due as at the reporting date.
No receivables have been written off as uncollectible during the year (2015: 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.
22 Cash and cash equivalents
Bank
Petty cash
£
2016
2015
£
3,514,253
1,120,780
3,288
2,676
3,517,541
1,123,456
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
2016
2015
Amounts due to construction contract customers (note 20)
£
Trade payables
Taxes and social security costs
Accruals
1,728,759
1,552,710
23,265
520,191
£
972,899
567,881
849,560
267,570
3,824,925
2,657,910
The directors consider that the carrying amount of trade and other payables approximates their fair value.
42
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
24 Obligations under finance leases
Amounts payable
Within 1 year
Within 2 to 5 years inclusive
Less: future finance charges
Minimum payments
Present value of
minimum payments
2016
2015
2016
2015
£
£
£ £
8,183
39,130
(11,286)
36,027
14,098
8,603
(516)
22,185
4,070
31,957
- -
13,761
8,424
36,027
22,185
Carrying amount of assets subject to finance lease:
Property, plant and equipment
27,621
29,913
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 £1,500,000 (2015: £1,500,000). Any overdraft arising from the
facility is repayable on demand and carries interest at 2.00% (2015: 2.00%) 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 Support & Development Services Limited (formerly known as Pennant
Information Services Limited) and by cross-guarantees between those companies.
2016
2015
26 Deferred revenue
2016
2015
Amounts due to construction contract customers (note 20)
Deferred revenue arises in respect of prepaid software maintenance contracts
£
Trade payables
Taxes and social security costs
Accruals
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.
£
174,168
-
174,168
162,500
18,403
180,903
The directors consider that the carrying amount of trade and other payables approximates their fair value.
The directors consider that the carrying amount of trade and other payables approximates their fair value.
43
Trade receivables
Amounts due from construction customers (note 20)
Other debtors
Prepayments and accrued income
There are no unimpaired trade receivables that are past due as at the reporting date.
No receivables have been written off as uncollectible during the year (2015: 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.
Bank
Petty cash
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.
£
£
£
2016
2015
2,511,789
4,942,292
50,745
315,302
£
2,058,363
1,260,534
151,556
272,982
7,820,128
3,743,435
2016
2015
£
3,514,253
1,120,780
3,288
2,676
3,517,541
1,123,456
1,728,759
1,552,710
23,265
520,191
£
972,899
567,881
849,560
267,570
3,824,925
2,657,910
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
27 Deferred tax
At 1 January 2015
Change in rate
Credit/(charge) to income
Exchange differences
At 1 January 2016
Change in rate
Credit/(charge) to income
Exchange differences
At 31 December 2016
Accelerated
tax
depreciation
Other
temporary
differences
Tax losses
Total
£
(373,672)
37,367
(51,239)
-
(387,544)
21,530
82,747
-
(283,267)
£
31,592
(256)
3,629
(1,660)
33,305
8,986
10,058
(21,327)
31,022
£
188,767
-
304,237
-
493,004
-
(45,395)
-
447,609
£
(153,313)
37,111
256,627
(1,660)
138,765
30,516
47,410
(21,327)
195,364
Included in the movement above was £46,956 that was accounted for in the Consolidated Statement of Comprehensive Income.
In the statement of financial position deferred assets and liabilities are shown without any set off as follows:
£
Deferred tax assets
Deferred tax liabilities
2016
2015
2014
482,989
(287,625)
195,364
£
530,622
(391,857)
138,765
£
226,639
(379,952)
(153,313)
Deferred tax has been provided at 17% (2015: 18%), the corporation tax rate that will be effective from 1 April 2016.
At the reporting date the Group had unused tax losses of approximately £2,500,000 (2015: £4,650,000) 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 tax losses are available indefinitely
for offsetting against future taxable profits.
44
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
28 Warranty provisions
Warranty provisions
£
2016
2015
150,000
£
-
The Group has recognised warranty provisions in respect of contractual obligations on two major programmes. The Group
expects the provision to be utilised within the next three years.
29 Share capital
2016
2015
Authorised, issued and fully paid
32,943,533 ordinary shares of 5p each (2015: 28,000,000)
1,400,000 B shares of 0.1p each
700,000 C shares of 0.1p each
£
£
1,647,177
1,400,000
1,400
700
1,400
700
1,649,277
1,402,100
The ordinary shares carry no right to fixed income. The shares have a right to receive notice of, or to attend or vote at, any
general meeting. The shares are traded on AIM.
2016
2015
2014
The rights and obligations attaching to the B and C shares are, in summary:
£
Deferred tax assets
Deferred tax liabilities
482,989
(287,625)
195,364
£
530,622
(391,857)
138,765
£
226,639
(379,952)
(153,313)
Deferred tax has been provided at 17% (2015: 18%), the corporation tax rate that will be effective from 1 April 2016.
At the reporting date the Group had unused tax losses of approximately £2,500,000 (2015: £4,650,000) 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 tax losses are available indefinitely
for offsetting against future taxable profits.
1
2
3
4
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 C 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 C 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 with each ordinary share after 91p has been paid on each
ordinary share;
b.
5
The obligation for the C shares to be redeemed by the Company, at the price at which the C shares were issued, at any
time following Mr Walker ceasing for any reason whatsoever to be a director and full time employee of the Company or
any of its subsidiaries.
No application will be made for the B or C shares to be admitted to trading on AIM or any other public market.
45
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
30 Treasury shares
As at 1 January 2015
Shares sold to satisfy placing
As at 31 December 2016
Number
£
1,527,739
(1,527,739)
418,225
(418,225)
-
-
31 Note to consolidated statement of cash flows
2016
2015
Cash generated from operations
Profit/(loss) 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
Profit on disposal of available-for-sale investments
Share-based payment
Operating cash flows before movement in working capital
(Increase) / decrease in receivables
Decrease / (increase) in inventories
Increase in payables and provisions
(Increase) / decrease in deferred revenue
Cash generated from operations
Tax refund / (paid)
Interest paid
£
£
1,921,030
(2,305,734)
(7,781)
9,051
(17,691)
284,319
299,801
16,877
(614)
103,503
2,608,495
(4,076,693)
29,854
1,317,015
6,735
(114,594)
(125,603)
(9,051)
(4,905)
25,682
(72,445)
305,940
313,580
-
-
76,857
(1,661,025)
1,639,691
(854)
478,900
(54,511)
402,201
720,768
(25,682)
Net cash (used) / generated from operations
(249,248)
1,097,287
46
As at 1 January 2015
Shares sold to satisfy placing
As at 31 December 2016
£
Cash generated from operations
Profit/(loss) 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
Profit on disposal of available-for-sale investments
Share-based payment
Operating cash flows before movement in working capital
(Increase) / decrease in receivables
Decrease / (increase) in inventories
Increase in payables and provisions
(Increase) / decrease in deferred revenue
Cash generated from operations
Tax refund / (paid)
Interest paid
Number
1,527,739
(1,527,739)
-
418,225
(418,225)
2016
2015
1,921,030
(2,305,734)
£
-
£
-
-
(4,905)
25,682
(72,445)
305,940
313,580
76,857
(1,661,025)
1,639,691
(854)
478,900
(54,511)
402,201
720,768
(25,682)
(7,781)
9,051
(17,691)
284,319
299,801
16,877
(614)
103,503
2,608,495
(4,076,693)
29,854
1,317,015
6,735
(114,594)
(125,603)
(9,051)
Net cash (used) / generated from operations
(249,248)
1,097,287
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
32 Operating lease arrangements
2016
2015
Lease payments under operating leases recognised as an expense in the year
232,724
240,338
£
£
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
Other
2016
2015
2016
2015
£
147,204
265,521
32,750
236,788
682,263
£
106,001
241,444
32,750
236,788
616,983
£ £
58,991
72,873
- -
- -
56,576
65,999
131,864
122,575
Commitments after ten years relate to ground rents on long leasehold properties that run until 2098.
47
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
33 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:
2016
2015
Number
of
share
options
2,077,619
-
(70,000)
2,007,619
530,000
Weighted
average
exercise
price
64.38p
-
38.79p
65.58p
36.06p
Number
of
share
options
1,070,000
1,047,619
(40,000)
2,077,619
410,000
Weighted
average
exercise
price
59.21p
70.50p
86.00p
64.38p
25.85p
Outstanding at 1 January 2016
Granted during the year
Exercised during the year
Outstanding at 31 December 2016
Exercisable at 31 December 2016
The options outstanding at 31 December 2016 had a weighted average remaining contractual life of 7.40 years
(2015: 8.36 years).
No new options were granted during the period.
The Group recognised total expenses related to equity-settled share-based payment transactions of £103,503 (2015: £76,857).
Any share based payment in respect of B and C shares is not material.
34 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
284,701
281,148
2016
2015
£
£
48
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
35 Financial instruments
35.1 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.
35.2 Categories of financial instruments
2016
2015
£
£
Financial assets
Available-for-sale financial assets
Loans and receivables
Trade and other receivables
Asset held for sale
Cash and cash equivalents
Financial liabilities
Measured at amortised cost
Trade and other payables
-
3,700
2,877,836
575,000
3,517,541
2,482,901
-
1,123,456
6,970,377
3,610,057
2,096,166
1,685,021
35.3 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.
Contributions payable by the Group for the year
284,701
281,148
£
£
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 2016 and 31 December 2015 the Group had no
commitments under forward exchange contracts.
2016
2015
35.4 Foreign currency risk
49
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
35 Financial instruments (continued)
35.4 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
2016
2015
2016
2015
£
172,589
9,766
80,516
£
181,128
482
168,041
£ £
1,677,967
224,575
239,500
826,539
11,850
231,337
262,871
349,651
2,142,042
1,069,726
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 $
35.5 Credit risk
£
Impact on profit
2016
2015
75,269
10,740
7,949
£
32,271
568
3,165
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. No significant
impairments for bad or doubtful debts have made. At the end of the financial year there are no material debts that are
deemed to be past due.
At 31 December 2016 and 31 December 2015 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.
50
Pennant International Group PLC
Notes to the Consolidated Financial Statements
For the year ended 31 December 2016
35 Financial instruments (continued)
35.6 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 £3,517,541 (2015: £1,123,456) and undrawn facilities of £1,500,000 (2015:
£1,500,000). The level of the Group’s overdraft facility is reviewed annually.
The Groups financial obligations consist of trade and other payables and obligations under finance leases which are all
payable within 12 months with the exception of the non-current obligations under finance leases set out in note 24.
Trade and other payables are all payable within three months.
35.7 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% (2015: 2.00%) over base rate. 1%
rise/fall in interest rates would have decreased / increased profit for the year by an immaterial amount (2015: immaterial).
36 Capital commitments
At 31 December 2016 and 31 December 2015 the Group had no capital commitments.
37 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 £769,938 (2015: £179,000), 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 Corporate
Governance Report.
Dividends paid to Directors
Dividends totalling £NIL (2015: £353,671) 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 £47,665. As at 1 January 2016 balance of £148,012
remained outstanding. On 15 November 2016 a loan of £100,347 was repaid. A loan of £47,665 remains outstanding.
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.
51
Canadian $
American $
Australian $
£
2016
2015
75,269
10,740
7,949
£
32,271
568
3,165
Pennant International Group PLC
Company Statement of Comprehensive Income
For the year ended 31 December 2016
Continuing operations
Management charges receivable
Administrative expenses
Operating profit
Finance costs
Finance income
Profit before tax
Tax charge
Total comprehensive income attributable to equity holders
Notes
2016
2015
£
£
2,314,430
(2,226,856)
87,574
(28)
25 -
87,571
(37,638)
49,933
1,779,591
(1,493,136)
286,455
(5,638)
280,817
(79,755)
201,062
3
4
5
52
Pennant International Group PLC
Company Statement of Changes in Equity
For the year ended 31 December 2016
Share
capital
Share
premium
Capital
redemption
reserve
Treasury
shares
Retained
earnings
Total
equity
£
£
£
£
£
£
At 1 January 2015
1,401,400
5,600
200,000
(418,225)
3,751,833
4,940,608
Total comprehensive income for the year
Issue of C shares
Recognition of share-based payment
Dividends paid
At 1 January 2016
-
700
-
-
-
2,800
-
-
-
-
-
-
-
-
-
-
201,062
-
76,857
201,062
3,500
76,857
(794,168)
(794,168)
1,402,100
8,400
200,000
(418,225)
3,235,584
4,427,859
Total comprehensive income for the year
-
-
Issue of new ordinary shares
247,177
2,677,571
Recognition of share-based payment
-
-
-
-
-
At 31 December 2016
1,649,277
2,685,971
200,000
-
49,933
49,933
418,225
-
3,342,973
-
-
103,503
103,503
3,389,020
7,924,268
53
Pennant International Group PLC
Company Statement of Financial Position
For the year ended 31 December 2016
Notes
2016
2015
£
6
11
7
8
10
£
7,909,037
-
-
7,909,037
5,129
743,179
2,760,889 -
3,509,197
7,909,037
3,700
37,638
7,950,375
22,054
148,012
170,066
11,418,234
8,120,441
195,003
3,298,963
-
3,493,966
62,973
3,392,563
237,046
3,692,582
15,231
(3,522,516)
3,493,966
7,924,268
1,649,277
2,685,971
200,000
-
3,389,020
7,924,268
3,692,582
4,427,859
1,402,100
8,400
200,000
(418,225)
3,235,584
4,427,859
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
Approved by the Board and authorised for issue on 9 March 2017
P H Walker
Director
54
Pennant International Group PLC
Company Statement of Cash Flows
For the year ended 31 December 2016
Net cash from operations
Investing activities
Dividend received
Proceeds from sale of available-for-sale investments
Net cash from investing activities
Financing activities
Issue of C Shares
Dividends paid
Proceeds from sale of ordinary shares
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
2016
2015
£
12
£
(349,377)
449,033
25 -
4,314 -
4,339
-
-
3,342,973 -
3,342,973
2,997,935
(237,046)
2,760,889
-
3,500
(794,168)
(790,668)
(341,635)
104,589
(237,046)
55
Pennant International Group PLC
Notes to the Company Financial Statements
For the year ended 31 December 2016
1 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.
2 Operating profit
The auditor 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
Dividend from available-for-sale financial asset
5 Tax
Deferred tax charge for the period
Deferred tax credit in respect of previous period
Tax charge for the year
Reconciliation of effective tax rate
Profit before tax
Tax at applicable rate 20.00% (2015: 20.25%)
Tax effect of:
Expenses that are not deductible for tax
Changes in rate on deferred tax
Group relief
Total tax charge
£
£
£
2016
28
2015
£
5,638
2016
2015
25
£
-
2016
2015
37,638
-
37,638
87,571
17,514
23,823
(4,186)
487
37,638
£
79,755
-
79,755
280,817
56,865
19,650
3,240
-
79,755
57
Pennant International Group PLC
Notes to the Company Financial Statements
For the year ended 31 December 2016
6 Subsidiaries
Details of the Company’s subsidiaries at 31 December 2016 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
The investments in subsidiaries are all stated at cost.
7 Cash and cash equivalents
Place of
incorporation
Proposition of
ownership
England
England
England
Canada
Australia
U.S.A
England
100%
100%
100%
100%
100%
100%
100%
These comprise cash held by the company and short-term bank deposits with an original maturity of three months or less.
8 Trade and other payables
Trade payables principally comprise amounts outstanding for services and ongoing costs. The carrying amount approximates
their fair value.
9 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 29 to the consolidated financial statements.
11 Deferred tax
Tax losses
Total
At 1 January 2015
Credit to income
At 31 December 2015
Charge to income
At 31 December 2016
58
£
117,393
(79,755)
37,638
(37,638)
-
£
17,393
(79,755)
37,638
( 37,638)
-
Pennant International Group PLC
Notes to the Company Financial Statements
For the year ended 31 December 2016
12 Note to statement of cash flows
2016
2015
£
Cash generated from operations
Profit before tax
Tax charge
Finance costs
Finance income
Profit on available-for-sale investments
Share-based payment
Operating cash flows before movement in working capital
(Increase) in receivables
Increase in payables
Cash generated from operations
Interest paid
Net cash generated from operations
13 Financial instruments
£
280,817
-
5,638
-
-
76,857
363,312
(20,542)
111,901
454,671
(5,638)
449,033
87,571
-
28
(25)
(614)
103,503
190,463
(578,242)
38,430
(349,349)
(28)
(349,377)
The Company’s approach to the management of capital and market risks is set out in note 35 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% (2015: 2.00%) over base rate. 1% rise/fall
in interest rates would have decreased/ increased profit for the year by an immaterial amount (2015: immaterial). The Company
is not exposed to foreign currency risks.
Tax losses
Total
59
Pennant International Group PLC
Notes to the Company Financial Statements
For the year ended 31 December 2016
Categories of financial instruments
2016
2015
£
£
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
-
3,700
5,129
743,179
2,760,889
22,054
-
-
3,509,197
25,754
195,003
3,298,963
-
62,973
3,244,551
237,046
3,493,966
3,544,570
14 Contingent liabilities
The Company is party to a group registration for the purposes of Value Added Tax (VAT). Members of the group are jointly and
severally liable for the total tax due. The total amount of VAT payable by the group registration and not accrued in the
statement of financial position was £NIL (2015: £436,475).
15 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 to the consolidated financial statements.
The Company has guaranteed the payment of rent under a lease agreement for office premises occupied by a subsidiary
company. The lease runs for five 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.
60
2016
2015
Pennant Court
Staverton Technology Park
Cheltenham
Gloucestershire
GL51 6TL
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