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ANNUAL REPORT & ACCOUNTS 2022
COMPANY NUMBER: 03187528
GLOSSARY
AGM – Annual General Meeting
EASA – European Union Aviation Safety Agency
EBITA – earnings before interest, taxation and amortisation
EBITDA – earnings before interest, taxation, depreciation and amortisation
EMAR – European Military Aviation Requirements
H1 – the six months ended 30 June 2022
H2 – the six months ended 31 December 2022
IBP – Integrated Business Plan
IPS – Integrated Product Support
ILS – Integrated Logistics Support
OEM – Original Equipment Manufacturer
Q1 – the three months ended 31 March 2022
Q2 – the three months ended 30 June 2022
Q3 – the three months ended 30 September 2022
2
Q4 – the three months ended 31 December 2022
Glossary
Strategic Report
Group key financials
Chairman’s statement
Chief Executive’s review
Chief Financial Officer’s review
Group strategic framework
About Pennant
Governance & Risk
Board of Directors
Audit & Risk committee
Remuneration committee
Attendance
Operational governance
Financial control
Risk management & principal risks
Remuneration report
Audit & Risk committee report
Directors’ report
Directors’ responsibility statement
Financial Statements
Independent Auditor’s report
The Group
Consolidated income statement
Consolidated statement of other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
The Company
Company statement of comprehensive income
Company statement of changes in equity
Company statement of financial position
Company statement of cash flows
2
4
5
6-7
8-9
10-11
12-13
14-19
20
21-23
23
23
24
24
25
26-35
36-38
39
40-43
44
46
47-54
55
56
57
58-59
60
61-91
92
93
94
95
Notes to the company financial statements
96-105
Shareholder information & financial calendar
Officers & professional advisers
106
107
3
Our vision
To be the leading provider of world-class integrated training
technologies and product support for the defence, rail, and other
safety critical industries.
Our mission
To deliver sustainable growth in shareholder value through
innovation, diversification, the execution of delivery excellence
and corporate expansion.
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Group Key Financials
Revenues £13.7 million
(2021: £16.0 million)
Gross profit margin 42%
(2021: 27%)
Loss before tax £1.4 million
(2021: £2.5 million)
EBITA profit £0.5 million
(2021: EBITA loss £0.8 million)
EBITDA profit of £1.0 million
(2021: EBITDA loss of £0.1 million)
Net debt at year-end of £0.4 million
(2021: net debt of £3.5 million)*
* excluding lease liabilities
Other highlights:
• Three-year contracted order book at year-end stood at £25 million (2021: £22 million) of which
approximately £13 million is scheduled for recognition in 2023.
• Operating loss £1.0 million (2021: ((£2.2) million)
• Net assets £10.7 million (2021: £11.1 million)
• Basic loss per share of 2.45p (2021: basic loss per share of 4.41p)
• Unrelieved tax losses carried forward of £7.1 million (2021: £6.7 million)
• No final dividend recommended (2021: £NIL).
5
CHAIRMAN'S
STATEMENT
Results in-line, software & technical
services focus, strong order book
The Group has delivered a much-improved performance
in the year ended 31 December 2022 (the “Period”) with
profitability in-line with market expectations despite an
expected decrease in revenue, achieving an EBITA profit of
£0.5 million for the year (2021: EBITA loss of £0.8 million)
and an EBITDA profit of £1.0 million (2021: EBITDA loss of
£0.1 million).
The improved performance was primarily the result of
the progress made towards our technology and software
transformation, coupled with the completion of the
legacy engineered solution contract. The Group’s ongoing
focus on increasing higher margin revenues from software
and technical services is being reflected in the results, and
generated revenues totalling £10.2 million in 2022 (2021:
£9.1 million).
Following a strong order intake in 2022, including securing
an £8.8 million contract with Boeing Defence UK for the
upgrade of Apache training devices, the Group has a
contracted year-end order book of £25 million (2021: £22
million), underpinning forecasts and providing a good
visibility for 2023 and beyond.
Strategy
Our focus remains firmly on increasing the proportion
of the Group’s revenues which derive from the sale of
software and technical services, particularly those of a
recurring nature, while expanding the Group’s market
coverage and addressing gaps in the product range
through the Group’s ‘Innovation’ programmes.
Key Financials
For the year ended 31 December 2022, the Group
recorded consolidated revenues of £13.7 million (2021:
£16.0 million). Turnover was underpinned by the Group’s
contracted revenue base, in particular the continued
delivery of the Group’s overseas services contracts and
the successful achievement of programme deliveries as
outlined in the operational review on page 8.
The Group’s gross margin for the year
increased
significantly to 42% (2021: 27%) due the change in sales
mix and, as a result, the Group posted a consolidated
EBITA profit of £0.5 million (2021: EBITA loss £0.8 million)
which is in line with market expectations.
The Group's net debt significantly reduced during
the Period from £3.5 million to £0.4 million as a result
of improved trading performance, delivering against
contract milestones and the rationalisation of the property
portfolio.
Dividend
Taking account of the Group’s 2022 financial performance,
the trading outlook and the Group’s cash position,
the Directors believe that it is both prudent and in the
Company’s and shareholders’ current best interests to
retain cash for working capital.
The Board will therefore not be recommending the
payment of a final dividend for the year ended 31
December 2022.
In addition, the Group continues to seek other strategic
opportunities to partner with or acquire complementary
businesses.
Our People
Post Period-end, the Group has announced the completion
of the acquisition of Track Access Productions- see pages
18 & 19. This acquisition is aligned with the Group’s
software and technical services strategy and is designed
to enhance the Group’s rail capability.
6
To deliver a successful performance in 2023, the Group
must have a committed workforce, appropriately
incentivised and motivated. I would like to publicly thank
all our employees for their commitment to supporting
the Group and for the resilience and flexibility they have
demonstrated in meeting our customers' needs.
CHAIRMAN'S
STATEMENT
Chairman’s Statement
The Group is constantly seeking ways to attract, retain
and reward the specialist skills that we need in order
to deliver. During the Period the business undertook a
detailed review of Pennant’s Employee Value Proposition,
which resulted in the implementation of an enhanced set
of employee benefits across the Group coupled with an
unbudgeted interim pay award.
It is our people we rely on to deliver our strategy and in
order to deliver successful results in the current period
and beyond. We must continue to pay particular attention
to their needs and as a Board we remain focused on
supporting them.
Our Culture
The Board remains committed to ensuring that all Group
employees understand and embody the Group’s ‘Core
Values’. These underpin the approach to all activities
whether they be in an operational or customer facing
environment. These values are also critical in terms
of the approach taken to all our policies whether they
are mandated by law (such as anti-bribery or anti-
counterfeiting laws) or mandated by behavioural ethics
(such as fair treatment and equality of opportunity),
treating all individuals with the respect they deserve
regardless of their position. This requires strong leadership
at all levels.
Governance
The Board also committed to maintaining robust corporate
governance. It has worked closely with its advisors and in
2022 monitored governance frameworks to ensure strong,
proportionate governance throughout the Group; this
is important given the number of geographies in which
we are present. The Board has established appropriate
risk management procedures and keeps key risks to the
Group under regular, rigorous review. Further details of
the Group’s principal risks and uncertainties are provided
in the Governance & Risks section of the Annual Report.
Board Changes
On 24 February 2023 it was announced that I would be
succeeding John as Chair. It is an honour and a privilege to
be appointed and to have the opportunity to continue the
work John started.
We were delighted to appoint Michael Brinson to the
Board as Group Chief Financial Officer with effect from
1 January 2023. Michael joined the Group as Head of
Finance in February 2020.
Also
in January 2023, the Group announced the
appointment of Deborah Wilkinson as Non-Executive
Director with effect from 1 February 2023.
Further details on the new Board members can be found
in the Governance and Risks section of this document.
Encouraging outlook
Over the past Period the business has become more
resilient as we continue to deliver on the critical objective
of
increasing visibility and recurrence of earnings,
especially those derived from software and technical
services.
The global economic and geo-political environment and
supportive strategic backdrop for Pennant’s capabilities
means that the Board believes that the Group's underlying
strengths - our long-term customer relationships with
governments and major OEMs, our specialist services
together with our quality-assured reputation - will
continue to provide solid foundations for a continued
recovery and long-term success.
With our contracted three-year order book, valued at
over £25m (with £13m scheduled for delivery in 2023)
underpinning forecasts, further enhanced by the post
Period-end acquisition the Board is confident about
prospects for 2023 and beyond.
Approved by the Board on 25 April 2023
and signed on its behalf
During the Period and post period end there were a
number of Board changes.
Sadly, in the Autumn of 2022 our Chairman, John
Ponsonby OBE died following a short period of illness. On
behalf of the Board, I would like to take this opportunity
to recognise the significant contribution John made to
Pennant during his tenure – he was an inspirational leader
and is sadly missed by everyone at Pennant.
P Cotton
Chairman
7
CHIEF
EXECUTIVE’S
REVIEW
Software & services transformation,
momentum building
2022 saw the acceleration of the Group’s strategy with
the focus on software and higher margin software-linked
activities, the impact of which is now starting to come
through in our financial performance.
As a result, the Group’s profit performance for the year
was in line with expectations and represents the third
consecutive six-month trading period where we have
reported a positive EBITA.
UK & Europe
North America
Australasia
Total
Pennant’s return to EBITA profitability, coupled with
expanding gross margins and strong order intake, indicates
momentum is building.
UK & Europe
Regional revenue
2022
£000s
5,557
4,985
3,144
2021
£000s
8,161
4,451
3,353
13,686
15,965
Operational Highlights
During the Period, Pennant realigned its operations to
enable effective and efficient global delivery, by organising
the Group into three key regions (UK & Europe, North
America, and Australasia).
This was designed to allow the ‘full spectrum’ of Pennant
products and services to be offered and delivered across
all three geographical regions.
Over the Period the strategic backdrop for our products
and services has shifted. The Russian invasion of Ukraine
has seen a heightened focus amongst governments,
particularly European and NATO members on their
spending plans on defence.
It is difficult to predict the duration of the conflict and
its impact on the Group’s trading but it is clear that
Pennant is well positioned, in particular the Integrated
product solutions process and the management of data is
becoming evermore critical and the cost and complexity of
programs is directly impacting the training requirements.
The table right highlights Pennant’s regional revenue for
2021 and 2022.
8
Revenue generated in the UK & Europe region during
2022 was low by historic levels, at £5.6 million (2021:
£8.2 million).
Order intake improved with the Group securing an £8.8
million contract, over three years, with Boeing Defence
UK and with recent events highlighting the importance
of national security and strategic investment in capability
the outlook appears to be improving.
In terms of operational delivery, the region had a
successful Period with notable highlights including site
acceptance and final delivery of a UK Helicopter trainer
programme, achieved on time and on budget. Following
the contract award, the business successfully passed
the initial engineering milestone event on the Apache
upgrade programme and completed delivery of all four
MTE training devices to General Dynamics UK.
With the Group’s increasing software focus and reduced
reliance on resource-intensive hardware engineering
activities, during 2022 the Board commissioned a
comprehensive review of the Group’s UK facilities.
Recognising a reduced requirement for space at its
Cheltenham operating sites, the Board decided to market
for sale the Group’s former Cheltenham head office,
Pennant Court which was sold in August 2022 for £2.1
million with proceeds used to pay down borrowings. The
profit generated on this disposal was £374k.
As a result of the aforementioned facilities review, the
Group also terminated its office lease in Stevenage. The
Group continues to have sufficient UK facilities to service
its order book and pipeline opportunities with 30,000
square feet of retained facilities in Cheltenham alone.
North America
Our North America business performed well in 2022
reporting 12% growth in revenue, with approximately
75% of its annual revenue recurring.
Pennant’s long-term contract with the Canadian Department
of National Defence was successfully extended to the end
of 2023 and the business secured a second software and
services order in the commercial aerospace sector (overall
order value: USD$1.7 million), for a new strategic customer
which underpinned the growth.
Australasia
Our Australasia business enjoyed a solid year and delivered
results broadly in line with the prior year.
Pennant’s existing long term technical services contract
in Wagga Wagga continued to perform well and was
extended into 2025 (year 12 of a 20 year framework).
The transformation to longer term software and technical
services has been accelerated with new contracts
secured with the Australian Defence Force for technical
publications and data conversion.
The Group also secured its first ‘Launch Partner’ to
participate in a programme of testing and product
promotion for the new GenS product signed in Australasia.
Investing in the future
In
line with the Group’s core strategic objectives,
investment in innovation has been targeted to drive
growth and expand the Group’s market coverage.
During the Period the Group invested circa £1.1 million in
the development of new and enhanced solutions with the
aim of improving the overall customer proposition.
The following new products are under development:
• Continued development of the new GenS software
solution (OmegaPS successor product) with release of
version 2.0 scheduled for May 2023
• Development of next generation of training aids –
modular, software / technology led
Pennant anticipates that it will continue to invest in its
software products and technology-led software solutions
Chief Executive's Review
during 2023 and expects the level of investment to be at a
higher level than 2022.
The Group also has an active pipeline of potential product
innovations and improvements that are undergoing a
detailed assessment process with a view to obtaining
Board funding approval
if a business case can be
established.
Year-end order book & pipeline
At 31 December 2022, the Group’s three year contracted
order book stood at £25 million (2021: £22 million),
of which £13 million of revenue (2021: £10 million) is
scheduled for recognition in 2023 based on anticipated
completion of generic products, execution of software &
services projects and progress made on engineered-to-
order contracts.
Of the total order book, 50% (2021: 42%) is denominated
in sterling, 12% (2021: 31%) is denominated in Canadian
dollars, 15% is denominated in US dollars (2021: 5%) and
23% (2021: 22%) is denominated in Australian dollars.
The overall value of the Group’s active pipeline at Period-
end was in excess of £70 million.
Post Period-end – acquisition
Post Period-end, the Group successfully completed the
acquisition of Track Access Productions. Track Access
provides driver training, route mapping and route
familiarisation services to the rail industry. Its acquisition
aligns with the Company’s strategy, in particular by
enhancing recurring revenues and further diversifying into
civilian markets while enhancing the Group’s existing rail
capabilities and complementing Pennant’s Track Access
Services business. More information can be found on pages
18 & 19.
Implementing our strategy
The mix shift towards higher margin software and
technical services, diversified global revenues and order
intake momentum together with the evolving strategic
backdrop provide a firm platform for continued progress
in the current year.
Approved by the Board on 25 April 2023
and signed on its behalf
P H Walker
Director
9
CHIEF
FINANCIAL
OFFICER’S
REVIEW
Record gross margins and,
strengthened balance sheet
Financial review
The results and the key financial performance indicators
are set out below.
Performance
Revenue for the year was delivered broadly in line with
expectations at £13.7 million (2021: £16.0 million) with
equal contributions to revenue in the first and second half
of the year.
There was significant growth in the gross profit margin for
the Period to 42% (2021: 27%) which is at record levels
for the Group. This reflects the change in the sales mix in
the Period and shift in the strategic direction of the Group
towards higher margin, software-related products.
Despite inflation-linked remuneration reviews in the
Period to support the workforce with increasing costs of
living, overall staff costs were held in line with 2021 at
£8.7 million (2021: £8.7 million).
The improved margins coupled with the controlled cost
base, resulted in the operating margin recovering to a loss
of £1.0 million (2021: operating loss £2.2 million) and an
EBITA profit of £0.5 million (2021: EBITA loss £0.8 million).
The Group has now reported an EBITA profit in both the
first and second half of 2022 per the table below. H2 2021
also delivered a profit at an EBITA level, meaning the
Group has reported an EBITA profit in the last three six-
month periods.
£m
Revenue
Gross profit
Gross profit %
Admin costs
(net of other Income)
H1
6.9
2.8
41%
H2
6.8
3.08
44%
2022
2021
13.7
5.8
42%
16.0
4.3
27%
(3.6)
(3.2)
(6.8)
(6.5)
Operating loss
(0.8)
(0.2)
(1.0)
EBITA
0.1
0.4
0.5
(2.2)
(0.8)
Growth in Software and Services
An analysis of the Group’s revenue by product group is as
follows:
Software licences & products
Software maintenance
Software and technical services
2022
£000s
1,377
1,458
7,410
Sub-total Software and Services
10,245
Engineered solutions
Generic products
Sub-total Training Solutions
2,410
1,031
3,441
2021
£000s
1,080
1,056
6,994
9,130
4,211
2,624
6,835
Total Group Revenue
13,686
15,965
Revenues contributed by Software and Services have
increased to £10.2 million in 2022 (2021: £9.1 million)
representing 75% of the total revenue in the Period (2021:
57%). The upturn in software product sales has resulted in
increased maintenance revenues in the Period which will
be recurring in nature.
Recurring revenues, a key performance indicator, increased
to £7.7 million (2021: £7.4 million) in 2022 representing
56% (2021: 46%) of the total revenue for the Period.
10
Software and Services
Cashflow
Chief Financial Officer’s Review
Cash generated in operations amounted to £2.6 million
(2021: cash used in operations of £0.1 million). This
reflects milestone achievements on major programmes in
2022 and associated cash payments being received.
The Group had net borrowings at the year-end of £0.4
million (2021: net borrowings of £3.5 million) excluding
lease liabilities. The net borrowings have significantly
reduced through the cash generated in operations and
the sale of the Group’s Headquarters, Pennant Court, for
£2.1 million.
Research & development
Research and development tax credits claimed in the UK
during the year amounted to £1.9 million (2021: £1.8
million) with further claims on current projects expected
to be made during 2023. These claims mostly relate to the
development of innovative new software products.
Taxation
The Group’s tax position shows a tax credit of £0.5 million
(2021: tax credit of £0.9 million). The Group has unrelieved
UK tax losses carried forward of £7.1 million (2021: £6.7
million), all of which have been recognised in the deferred
tax balance as at 31 December 2022.
Looking forward
With the shift towards software and services driving
improved gross margins, and a strengthened balance
sheet, the course is set for the Group’s continued financial
progress.
M J Brinson
Director
Software licences & products
The circa 30% increase in software products between 2021
and 2022 was primarily driven by R4i software sales, with
the associated recurring maintenance revenues (circa
20% per annum) to follow on a recurring basis. Revenues
are recognised upon installation of the software and tend
to be non-recurring in nature.
Software maintenance
Software maintenance revenues are recurring by nature
and are growing year on year driven by the growth in the
global customer base for the Group’s software solutions.
The revenue is recognised over the duration of the
maintenance period for each customer which can range
from annual renewals to multi-year agreements. The
average longevity of the customer relationship is in excess
of 10 years.
Software and technical services
The predominantly recurring software and technical
services revenue stream has grown from 57% of the
Group’s revenues in 2021 to 75% in 2022. In addition to
the long-standing, recurring revenue streams there are
a number of consultancy related tasks across the Group.
The revenues are typically recognised on a consumption
of benefit basis over time.
Training Solutions
Engineered solutions
Revenues associated with engineered solutions reduced
from £4.2 million in 2021 to £2.4 million in 2022. This is
reflective of the stages of the major programmes which
form the basis of this revenue stream which is recognised
over time under IFRS 15. Revenue on engineered solutions
is expected to increase in 2023 as progress is made on
engineered solutions workstreams.
Generic products
The revenue recognition for generic products is at a point
in time (typically on delivery) under IFRS 15. The reason
for the reduced revenues for these products in 2022 (£1.0
million) compared to 2021 (£2.6 million) is due to timing
of delivery of the various generic products to customers
with the final Qatar installations occurring in 2021.
11
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Group Strategic Framework
Our vision
To be the leading provider of world-class integrated training technologies and product
support for the defence, aerospace, rail and other safety critical industries.
Our mission
To deliver sustainable growth in shareholder value through innovation, diversification, the
execution of delivery excellence and corporate expansion.
Strategic objectives
1. Continuously review and enhance the Group’s product range
2. To grow and improve our service offering
3. Accelerate the Group’s presence in civilian training and regulated engineering markets
4. Expand the Group’s business in innovative ways
Our strategy in action:
Integration and
acceleration of Pennant IPS
software suite to create the
next generation of
IPS solutions
Completion of the Engine
Systems Start Trainer
(ESST) – modular software
training solution
Enhancement of
Loadmaster virtual
software training system
developed for US market
Development of Omega
GenS software partnering
programme
Completion of a
prototype simulator
for rail infrastructure
organisation
Post period-end
acquisition of Track
Access Productions
13
13
About Pennant
Founded in 1958, Pennant has evolved over the past eight decades, from modest beginnings, into a market-leading
technology-led software and services business with a truly global customer base.
The Group operates principally in the areas of civil and military aviation, defence, space and rail with customers
including global defence primes, government departments, overseas aviation colleges, and rail operators.
We are confident that the supportive strategic backdrop for our products and services point towards significant
potential for growth:
• we have few competitors that can provide our end-to-end solutions and services, and there is more we can
do for existing customers and many customers in existing areas who need our services;
•
•
•
•
•
increasing global investment (land, naval, air, rail) means platforms are becoming more sophisticated and
complex, thereby increasing the requirement for specialist technical training and integrated product support;
the use of ‘real’ equipment for training has safety implications, is expensive and often impractical which is
driving the use of technology whilst supporting the environmental agenda;
there is a continuing trend for defence forces and other organisations to outsource training and integrated
product support services, including updating their training devices and managing their data;
the integrated product support process and the management of data is becoming evermore critical and the
cost and complexity of programs is increasing; and
from a global perspective the uncertain global outlook is driving commitments to increase expenditure in
defence, the aviation sector is starting to return to pre-pandemic levels and delayed investments in sectors
such as rail are returning.
Pennant has a diverse portfolio of technology-based training solutions and integrated product support capabilities that
enables it to offer a wide range of solutions to both the defence and regulated civilian sectors and is ideally placed to
take advantage of the trends outlined above.
The Group has offices worldwide: in the UK (with its head office sites in Cheltenham and offices in Manchester and
Fareham), Australia (in Melbourne and Wagga Wagga), Ottawa in Canada and an office in the US (West Chester).
The Company was admitted to trading on the AIM market in 1998 and has traded as a public company ever since.
14
About Pennant
Products and services
Pennant is a global, leading provider of integrated product support and technology-based training
solutions to the defence, aerospace, rail and safety critical industries.
Over recent years, the Group’s offering has expanded into civil markets with the alignment and mapping
of our training aids and software solutions to aviation regulations.
Software licences, products and maintenance
Pennant owns a market leading suite of software products that integrate together to create an end-to-
end solution – the next generation of IPS solutions.
The core software products within the Pennant toolbox are as follows:
• GenS Product Suite (OmegaPS successor product) which is a logistics support analysis software which is used
worldwide by major defence contractors and by the defence authorities in Canada and Australia to maximise
efficient logistical support on complex long-life assets.
• Analyser toolkit which is a fast, accurate and user-friendly optimisation tool. It identifies preferred product
sustainment strategies through options analysis and supports operational readiness at an affordable life cycle
cost.
• R4i product suite provides its users with a dynamic, S1000D-compliant publication solution. The R4i solution is
licenced software and provides related support, maintenance and consultancy services.
The Group’s software development and investment continues to be focused on the integration of Analyser and GenS,
providing users with an end to end solution.
Software and Technical Services
Pennant takes a “Through Life Support” approach to technical services for both Pennant and third-party systems in the
regulated sectors.
From Training Needs Analysis (TNA) Development to final disposal, Pennant can plan, implement and manage every
stage of a support life cycle.
Pennant’s dedicated technical teams have a core level of qualified and experienced subject matter experts, providing
us with the skills and knowledge to establish Pennant’s reputation for delivering highly professional, reliable and cost-
effective technical services.
Pennant has a proven track record in providing technical services across a wide range of sectors and around the globe.
Technical services capabilities include:
Training needs analysis (TNA)
•
• Courseware development
•
Software development
•
Technical publications, IETMS, S1000D etc.
•
Studio services - 2D & 3D design, VR media development, film and media production, E-learning and CBT,
illustration, authoring, copywriting and translation
Facilities planning
•
• Competency mapping to EASA, EMAR, City of Guilds etc.
•
In service support
15
About Pennant
Instruction and training delivery
• Preventative and corrective maintenance
•
• Consultancy spares and obsolescence management
• Dismantling and disposal
•
Integrated logistic support (ILS) services and planning
Rail technical services
Track Access Services (“TAS”) provides safety-critical services to train operating companies and rail infrastructure
providers. TAS’s current capabilities include rail driver training, rail survey services, laser and video scanning, 3D track
models, signal siting and a subscription-based route video and mapping service. Customers include Network Rail and
Govia Thameslink Railway.
Acquisition of Track Access Productions
Post Period-end, on 12 April 2023, Pennant acquired the entire issued share capital of Track
Access Productions Limited (“TAP”).
TAP is a UK business, incorporated in 2001 and based in Bedfordshire, which provides driver training, route mapping
and route familiarisation services to the UK rail industry. Its clients comprise train operating companies, freight
operating companies, engineering prime contractors and infrastructure providers. TAP has two key revenue streams: a
subscription-based web portal through which its clients can access training content, and project-specific route mapping
work.
For the financial year ended 31 March 2023, TAP’s management accounts indicate revenues of circa £600k of which
50% is recurring, relating to portal subscriptions. TAP’s profit before tax for the period is expected to be circa £200k (for
the year ended 31 March 2022, profit before tax was £181k).
The vendors, Ian and Jill Heys, the founders and owner/managers of TAP, will work a short transitional period to
ensure a smooth handover of customers and contacts before retiring. The rest of TAP’s employees and consultants are
expected to remain with the business.
Summary of the key terms of the Acquisition
•
•
The consideration payable in respect of the Acquisition comprises an enterprise value of £585,000, plus an
amount of circa £389,000 in respect of TAP’s ‘free cash’ after allowing for normalised working capital and
repayment of debt (“Cash Free, Debt Free Adjustment”).
The initial consideration payable is circa £798,500 (being 70% of the enterprise value, i.e. £409,500, plus the
Cash Free, Debt Free Adjustment).
• A completion payment of £638,610 has been settled, based on verified estimates of the Cash Free, Debt Free
Adjustment, with a balancing payment of circa £160,000 within the next two months following the production
of completion accounts (to allow for any correction of estimates).
The balance of the overall consideration, comprising a deferred payment of £175,500 (being the remaining 30%
of the enterprise value) is due 12 months after completion.
The acquisition agreement contains customary warranties and indemnities in respect of title, tax and various
commercial matters as well as buyer protections in the form of restrictions on the future activities of the
vendors and rights of setoff.
The Acquisition is being funded from the Group’s existing cash resources.
•
•
•
16
About Pennant
Benefits of the Acquisition
The Board believes that the TAP business is highly complementary to the Group’s existing business and that the
acquisition was in the Company’s best interests for the following reasons inter alia:
•
•
TAP’s business aligns closely with Pennant’s existing Track Access business unit and the Acquisition will
consolidate the Group’s presence in this market. The combined unit is expected to generate revenues for 2023
in the region of £850,000 and will be able to provide an enhanced offering to a broader customer base.
The Acquisition also aligns with the Company’s strategy, in particular it enhances the Group’s recurring revenues,
further diversifying into civilian markets, whilst bolstering the Group’s ‘third pillar’ of rail products and services,
complementing the Group’s traditional core of IPS software and training technology.
Training Solutions
Engineered Solutions & Generic Products
An established supplier to the UK Ministry of Defence (MoD) and other major defence contractors, Pennant has a
proven capability in the design, development, manufacture and delivery of training solutions including:
• Translating and developing a training requirement into a deliverable product
• Providing Subject Matter Expertise in specialist and technical areas Virtual Reality (VR), Augmented Reality
(AR) & 3D walk-through applications
• Hardware & software based Part Task Trainers (PTT)
• Hardware & software based simulators for Operators and Maintainers
•
ILS and IPS
Pennant equipment offers a modern, blended training solution enabling ab-initio students to benefit from a suite of
modern, generic, and bespoke training aids offering operation and maintenance savings and improved safety outcomes.
These training aids complement training on real equipment and include basic hand skills devices, virtual reality trainers
and maintenance emulators for regulated sectors.
Pennant has a wide range of generic products based on real or simulated equipment interfaced with software emulations
and instructor control facilities. Ranging from basic hand-skills training aids to complex multi-function simulators, these
devices provide an end-to-end training solution for non-type specific training requirements.
In addition to the suite of generic training products, Pennant has an experienced team of systems engineers that
analyse, design, and manufacture bespoke engineering solutions to satisfy specific training needs. This equipment can
be platform specific or custom-built, and can include simulators, part-task trainers, and procedural trainers for both
defence and civilian customers.
17
About Pennant
Section 172 Statement
•
•
•
This section serves as our section 172 statement and should be read in conjunction with the rest of the
Strategic Report set out on pages 4 to 19 (inclusive).
The Directors are fully aware of their duty to promote the success of the Company in accordance with
section 172 of the Companies Act 2006.
Section 172 of the Companies Act 2006 requires Directors to take into consideration various matters
including the interests of certain stakeholders in their decision making.
• Board decision-making primarily takes place at Board meetings via full and open discussions facilitated by
the Chair and with reference to Board papers prepared and circulated in advance of the meeting. Where
possible, decisions are reached through consensus or, where this is not possible, a vote. The key points of
any decision are captured in Board minutes and, where applicable, incorporated into the Group’s Integrated
Business Plan (IBP).
• With a view to supporting such decision-making, the Company maintains a written policy statement (with
a periodic review cycle) which sets out its key business relationships including customers and suppliers, as
well as insurance and advisory engagements, and how the Company approaches its relationships with these
parties.
•
•
The Company’s strategy is focused on realising long-term profitable growth for the benefit of all stakeholders.
To ensure that this overriding objective is kept in mind, the strategy exists as a written, Board-approved
statement (containing multi-year targets) and the specific actions which underpin its implementation
are recorded within the IBP. Decisions can then be taken with this long-term statement in mind and with
reference to the effects or relationship with existing actions in the IBP. The CEO Review on pages 8 to 9
contains further details on the strategy and its implementation.
The following bullet points provide some detail as to the approach taken in relation to key matters and
stakeholders.
o Shareholders: Investors are at the centre of all financial discussions including equity, distributions
and corporate finance, with the Board taking advice from the Company’s nominated adviser and its
corporate lawyers as appropriate. As examples during the period: the decisions as to non-payment of
a dividend, and the continued internal investment in the new IPS software suite.
Led by the Chairman and CEO, the Company is active in engaging with its investors, holding periodic
meetings, calls and an open Q&A at the AGM. Fairness between investors is prioritised during such
engagements, and presentations are made available on the Company’s website so that all investors
can view them.
o Customers: of course, customers are absolutely key to the Company’s business. Often working to-
gether on long-term multi-year programmes, the Company endeavours to build strong relationships
with its customers at every level.
The Board places a significant premium on the Group’s reputation for quality and gives its full support
to the maintenance of the Group’s ISO9001 status.
o Employees: without employees, there is no business. The Company’s approach to the interests of its
employees is detailed on page 41 of this report. With global economic challenges, and in particular
inflationary pressures, employee welfare was very much at the forefront of Directors’ minds during
2022 and the details from page 41 onwards explain how the Company has sought to engage with, and
properly take account of, its valued employees.
18
About Pennant
o Suppliers: the Group works closely with its suppliers, and has a core cohort of trusted partners engaged in
delivering its long-term programmes. The Group is committed to fair dealing with its suppliers, including
meeting agreed payment terms, and favours building lasting relationships.
o Community and environment: the Board is mindful of the Group’s impact on the environment and the
communities within which it operates. The Group has implemented various recycling, energy usage mon-
itoring and waste reduction programmes, incentivises electrical vehicle use and tracks products which
may need safe disposal in the future. Community engagement is highly regarded at Board level, with
apprenticeships, work experience and science fairs all being supported.
•
In addition, the Commercial & Risk Director (as a practising solicitor, with substantial company law experience) is
available to provide guidance to his fellow Board members as to the substance of the duties in question.
Approved by the Board on 25 April 2023
and signed on its behalf
P H Walker
Director
19
The Group is committed to good corporate governance and this
section of the annual report details the Group’s current governance
arrangements, including those in relation to risk management.
G
O
V
E
R
N
A
N
C
E
&
R
I
S
K
20
The Board
The business of the Group is ultimately managed by the
Directors of Pennant International Group plc, who are
responsible for running the Group for the benefit of its
shareholders in accordance with their fiduciary and
statutory duties.
The Board is led by the Chairman, who is responsible for
the Group’s corporate governance arrangements and
who ensures that all members of the Board are able to
contribute to Board discussions and decision-making.
All Directors acknowledge their collective responsibility
and legal obligation to promote the best interests of the
Group.
The effectiveness of the Board is kept under review by the
Chairman, and the Group’s nominated adviser is regularly
invited to Board meetings to review the Board in action
and the contributions of its members (with any feedback
being shared with the Chairman). The Chairman also
regularly solicits feedback on Board effectiveness from the
nominated adviser, institutions and other shareholders.
Feedback indicates that investors remain supportive of
the Company’s strategy and approach, with no proposals
received that efforts ought to be targeted elsewhere.
Succession planning for the Board is kept under review by
the Chairman having regard to the current composition of
the Board and taking into account corporate governance
guidelines and business requirements. In matters relating
to the Chairman’s succession, the lead is taken by the
other independent Non-Executive Director, consulting
with stakeholders as appropriate.
In discharging its duties, the Board is supported by two
standing committees (the “Committees”): the Audit
& Risk Committee and the Remuneration Committee.
The Terms of Reference for each of the Committees are
available on the Group’s website (www.pennantplc.com/
corporate-governance) and a summary of their respective
functions is provided below. The Terms of Reference for
each of the Committees were last substantively updated,
and reviewed and approved by the Board, with effect
from 2 February 2023.
The Board does not have a nominations committee
and any nominations for appointment to the Board are
considered by the full Board (with any appointment
subject to a shareholder vote at the next Annual General
Meeting).
Corporate Governance Review
The Board has two Non-Executive Directors and three
Executive Directors. The Board considers that all of its
Non-Executive Directors are independent.
The Group has a written strategic plan to expand the
business with a view to growth in shareholder value. In
essence, the strategy focuses on four core themes: making
innovative, world-class products; providing excellent
customer service (before and after sale); diversifying into
regulated civilian markets; and corporate development
(exploring partnerships, acquisitions and other ways to
grow the business). See page 13 for a summary of the
strategy.
This strategy is kept under review by, and evolves
under the guidance of, the Board. The key challenges in
implementing the Group's business model and strategy
are documented on pages 27 to 34.
The Board typically holds six scheduled meetings per year
and usually holds Committee meetings on separate days
from Board meetings so as to allow greater time to be
devoted to Committee matters. The Group’s corporate
governance arrangements are explained in more detail on
the governance pages of the Group’s website:
https://www.pennantplc.com/corporate-governance/
The Directors
Philip Cotton
Mr Cotton (64) is an independent Non-Executive Director
and the Company’s Chairman. He joined the Board in June
2019 and is a member of the Audit & Risk Committee and
currently chairs the Remuneration Committee.
Mr Cotton is a Chartered Accountant (FCA) and former
KPMG audit partner with extensive experience of working
with businesses in the defence and aerospace sectors.
He was also the Bristol office senior partner and South
Regional Chairman
Mr Cotton is also Chair of Governors and Pro Chancellor
of Solent University, Southampton where he also chairs
the Governance Committee and is a member of the
Remuneration Committee.
Mr Cotton also chairs the Audit Committee of World
Sailing. World Sailing is the global governing body for the
sport of sailing.
21
Corporate Governance Review
Deborah Wilkinson
Ms Wilkinson (48) is an independent Non-Executive Director. She is the chair of the Audit & Risk Committee and a
member of the Remuneration Committee.
Ms Wilkinson is a Chartered Accountant (FCA) who trained with Deloitte and holds a BEng (Hons) in Mechanical
Engineering. She has held various financial and commercial leadership roles with a range of businesses and has
extensive experience in the defence aviation sector with Airborne Systems Group and IrvinGQ Limited.
Ms Wilkinson is also a Non-Executive Director and Chair of the Audit & Risk Committee of Compound Semiconductor
Applications Catapult Limited
Philip Walker
Mr Walker (42) is the Group’s Chief Executive Officer. He joined Pennant in 2014 as Chief Financial Officer, being
promoted to CEO in February 2017.
He is a Chartered Accountant (FCA) and qualified corporate finance professional with an extensive background in
corporate transactions (both buy side and sell side).
Since joining Pennant, Mr Walker has been responsible for leading the review, renewal and implementation of the
Group strategic plan. In this role, Mr Walker has brought his experience to bear by driving the acquisition strategy and
the Group’s technology and software transformation.
As Chief Executive Officer, Mr Walker is responsible for the day-to-day running of all Group businesses and the execution
of Group strategy.
David Clements
Mr Clements (43) is the Commercial & Risk Director. He joined the Group in June 2017 and was appointed to the Board
in October 2017.
He is a practising solicitor with extensive experience in corporate and commercial law and practice, gained advising
AIM-quoted and private companies particularly in the engineering, manufacturing and software sectors. Prior to joining
Pennant, he was with the law firm Charles Russell Speechlys.
As Commercial & Risk Director, Mr Clements is responsible for commercial, risk management, administrative and
infrastructure functions across the Group.
Mr Clements also acts as Company Secretary to all Group companies, advising the Chairman on corporate governance
matters and being available as a ‘sounding board’ for other Directors. Mr Clements works closely with the Company’s
nominated adviser to ensure proper management of investor relations, company law and AIM compliance. He is
experienced on public company regulatory compliance and Takeover Code matters.
Michael Brinson
Michael Brinson (36) is the Group’s Chief Financial Officer. He joined Pennant in February 2020 as Head of Finance and
was appointed to the Board on 1 January 2023.
Mr Brinson is a Chartered Accountant (ACMA) with significant financial experience of the engineering, manufacturing,
defence, and training industries. Prior to joining Pennant he was the Financial Controller responsible for Customer
Support and Training at Leonardo Helicopters UK.
Mr Brinson is responsible for the day-to-day financial management of the Group and leads the relationships with its
auditors, bankers and tax advisors.
22
Corporate Governance Review
John Ponsonby
Mr Ponsonby served as an independent Non-Executive Director and the Company’s Chairman during the Period until
he sadly passed away on 22 October 2022.
Mervyn Skates
Mr Skates served as Operations Director during the first three months of the Period, retiring from the Board on 31
March 2022.
Maintaining the Board’s Skills
The Directors acknowledge their responsibility to maintain their skills, knowledge and competences. For example,
Directors complete appropriate ‘continuing professional development’ in support of their respective professional
qualifications and attend forums and briefings organised by trade bodies and others on industry developments and
wider changes.
Prior to any appointment being made to the Board, any prospective Director is subject to a full due diligence exercise
conducted by the Company’s nominated adviser which addresses such issues as experience, skills and competences (as
well as vetting for adverse court judgements and disqualifications).
The Board will seek guidance from external advisers when appropriate and regularly obtains independent legal, tax and
financial advice. For example, during the period, the Directors sought advice in respect of restructuring a commercial
partnership and also overseas tax.
Based on the skills and expertise highlighted in the profiles of each Director above, the Board is confident that it has the
necessary mix of capabilities, experience and personal qualities to deliver the Group’s strategic objectives.
The Committees
Audit & Risk Committee
The Audit & Risk Committee’s role is to determine and apply policy on behalf of the Board to the financial reporting,
internal controls and risk management framework of the Group and to maintain an appropriate relationship with the
Group’s auditors.
The Committee comprises the Non-Executive Directors. It typically meets at least twice a year at appropriate times in
the reporting and audit cycle and otherwise as required.
Given the nature of the Group’s business, the Committee pays particularly close attention to reviewing and discussing
with the external auditors the management’s judgements on the application of revenue recognition policies in relation
to material projects as well as carefully reviewing matters relating to the valuation of the Group’s assets and its status
as a going concern.
The Group does not engage its auditors for non-audit services.
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
Committee comprises the Non-Executive Directors.
During the year, the Committee, operating under its Terms of Reference, discharged its responsibilities, including
determining and agreeing with the Board the framework or broad policy for the remuneration of the Group’s Chief
Executive Officer, Chairman, the Executive Directors, the Company Secretary and such other members of the Group’s
Executive management as it is designated to consider.
23
Corporate Governance Review
The Committee also reviews and approves the Executive Directors’ proposals (if any) following annual review of
employee pay and benefits.
Attendance
Directors are required to devote such time and effort to their duties as is required to secure their proper discharge
and, for Non-Executive Directors, this typically entails one or two days of meetings per month as well as reading and
preparation time. A full pack of management information (in consistent, agreed form) is provided to the Board in
advance of every meeting. Each Executive Director has a full-time service agreement.
Directors’ attendances at meetings of the Board and its Committees during 2022 were as follows:
John Ponsonby
Philip Cotton
Philip Walker
David Clements
Mervyn Skates
Board
Audit & Risk Committee Remuneration Committee
5/5
6/6
6/6
6/6
1/1
2/2
2/2
-
-
-
-
1/1
-
-
-
Compliance with Corporate Governance Codes
The Company has adopted the QCA Corporate Governance Code and a detailed statement of the Company’s
compliance against the code (together with references to supporting material) is provided on the Group’s website:
www.pennantplc.com/corporate-governance
Operational Governance
Day-to-day running of the Group’s business is delegated by the Board to the Executive Directors led by the Chief
Executive Officer.
The Executive Directors have established a management and reporting framework across the Group, supported by
an Executive Committee comprising the Executive Directors together with the regional General Managers and the
Director of Technology & Innovation.
Following annual review and approval by the Board, the Group’s Integrated Business Plan is promulgated by the
Executive Committee through the various operating units of the Group. Clear channels are in place, with a structured
meeting cycle, for the exchange of information from the Group’s operating units to the Executive Directors and the
Board and for the reciprocal provision of direction.
Key performance indicators (at both a contract and functional level) are reported monthly, providing visibility and
accountability across the business leading to better products and services for customers, allowing effective risk
management, and ensuring the Group retains its quality accreditations.
24
Corporate Governance Review
Financial Control
The Board has overall responsibility for the Group’s system of internal financial control and for reviewing its effectiveness.
The purpose of the system of control is to manage rather than eliminate the risk of failure to achieve business objectives
and it can only provide reasonable, but not absolute, assurance against misstatement or loss.
The Executive Director within the Group responsible for day-to-day financial management of the Group’s affairs is the
Group’s CFO, Michael Brinson, under the supervision of the Audit & Risk Committee.
The Executive Directors participate in and provide information and support to the Audit & Risk Committee as and when
the Committee so requests.
25
Risk Management Review
Risk Management Review
Group-wide risk management is ultimately the responsibility of the Board (supported by the Audit & Risk Committee)
and is overseen operationally by the Commercial & Risk Director.
Operational risk management is embedded in the Group’s business processes, which are set down in writing and
compliance with which is monitored and audited by the Group’s internal Quality function (and periodically reviewed
by external quality compliance auditors).
Each live programme has a risk and opportunities register which is maintained by the relevant Programme Manager
and reviewed regularly, in particular at standing monthly programme review meetings.
The Group’s key risks (operational and otherwise) are recorded in a Group Risk Register and those risks together with
their respective mitigants, controls and corrective actions are reviewed by the Audit & Risk Committee (and the Board
as appropriate).
Key risks
Key risks to the Group (and the relevant mitigants and controls employed by the Group) are explained below.
These are the risks which the Board considers, as at the date of this report, the most critical to the continued operation
of the Group and the achievement of its strategic objectives. The risks described do not represent the totality of
the risks facing the Group and should not be relied on as such by any person considering any investment decision in
relation to the Company’s ordinary shares.
26
Risk Management Review
Description of risk
Potential impact
Mitigation and control
Defence focus
The Group has historically
been heavily reliant on
Government defence
spending by the UK and other
states (particularly aviation
related), with over 65% of its
revenues for 2022 deriving
from defence contracts.
A reduction in defence
spending leads to reduced
orders, adversely affecting the
Group’s revenue and profit.
Exposure to reputational risks
arising from sub-contracting
to defence primes supplying
into geo-politically sensitive
regions.
It is a key strategic focus of the Group to expand
into civilian sectors in order to reduce reliance on
defence spending generally.
The rail sector is historically the Group’s most
active area of civil diversification and the R4i
product suite is gaining increasing traction in the
civilian aerospace sector.
Any new defence export opportunities are
assessed for potential reputational risk
to Pennant and due regard is given to UK
government policy and guidance.
The expansion of the Group’s software and
services offerings is a natural mitigant to the
reliance on, and risks of, high-value engineering
programmes.
It should be noted that long-term defence
contracts are, however, a foundation of the
Group’s resilience during periods of economic
disruption such as that caused by Covid-19. It
is also expected that national defence budgets
will increase in light of Russia’s invasion
of Ukraine and that training, logistics and
maintenance aspects may feature within any
new requirements.
27
Risk Management Review
Description of risk
Potential impact
Mitigation and control
Prime dependence
The Group currently depends
to a large extent on prime
contractors awarding it
sub-contracts to deliver the
training solution on larger
programmes.
Loss or deterioration of
relationships with prime
contractors leads to reduced
orders, adversely affecting the
Group’s revenue and profit.
Work for prime contractors is carried out under
written contracts spanning a number of years,
mitigating the risk of immediate loss of business.
The Group contracts with and maintains
(and continues to cultivate) long-term good
relationships with several primes (BAE, General
Dynamics, Leonardo Helicopters, Lockheed
Martin and Boeing), meaning that it is not overly-
reliant on any one of them. Furthermore, the
Group is always seeking to add to its customer
roster (as it did with Boeing Defence UK, during
the period).
Relationships are developed and maintained with
primes at all organisational levels, from technical
leads to programme managers to Executives.
Direct sales, particularly of software products
(and related consultancy services) are pursued
wherever possible with direct sales regularly
being secured in the IPS software business.
It should be noted that long-term contracts with
OEMs are, however, a foundation of the Group’s
resilience during periods of economic disruption
such as that caused by Covid-19.
28
Description of risk
Potential impact
Mitigation and control
Risk Management Review
Failure to comply with
relevant legislation and
regulation results in the
Group being unable to sell its
products.
The Group has an experienced Commercial
team with considerable export expertise. The
Commercial & Risk Director is a qualified lawyer
and provides legal advice to the Group as
appropriate.
The Group and its officers
are found criminally liable for
breaches of foreign legislation
and/or face civil penalties.
Serious breaches of health
and safety law result in the
Group’s operations being
suspended.
External legal counsel (both UK and overseas)
and safety and compliance advisers are retained
and consulted as necessary.
The Group has a dedicated Health & Safety
manager and several employees with relevant
qualifications and experience.
Legal and compliance burden
In the sectors in which it
operates, the Group is subject
to considerable legislation
and regulation.
For example: in selling its
training equipment overseas,
the Group must comply with
UK export control laws; in
receiving and using certain
data, it must comply with
the US ITAR regulations;
in designing its hardware
trainers, it must comply with
various EU and UK safety
laws.
Of course, the Group in
operating overseas is subject
to the laws of relevant foreign
jurisdictions, whether it is
aware of them or not.
29
Risk Management Review
Description of risk
Potential impact
Mitigation and control
Contract pricing and delivery
The Group’s key contracts
are often on a fixed price
with a fixed delivery timeline.
Performance of those
contracts may be reliant on
external dependencies.
The Group will contract on
fixed prices on ‘engineered-
to-order’ projects (e.g. for a
platform-specific training aid),
where it has never designed
and delivered the required
product before. This creates a
risk of mispricing a contract.
Where a project has been
keenly priced, any delays may
cause budgets to become
very strained.
External factors (e.g. a
supplier delay on delivering a
part) cause the delay or failure
to deliver a contract resulting
in reputational damage to
the Group and entitling
the customer to claim
compensation (including, on
some contracts, liquidated
damages).
A mispriced contract, although
delivered in compliance with
its terms and timeline, results
in the Group failing to realise
the desired profit on carrying
out such work, with an
associated negative impact on
the Group’s overall financial
performance.
Considerable analysis and effort is applied in
pricing each ‘engineered-to-order’ contract to
ensure that all likely work and costs required to
deliver that contract are reflected in the price.
High-value contract bids are only released once
approved through a ‘gated’ bid management
process in accordance with written delegated
authority framework.
The Group employs qualified and experienced
programme managers to manage delivery
(including cost and risk) on all projects. The
programme managers, in turn, regularly report
to the Group’s senior management.
The Group’s experienced Commercial team, in
conjunction with the programme managers,
monitor for contractual ‘scope creep’ and
manage change control requests accordingly.
The Group’s dedicated Purchasing team controls
the ordering of items in time for production and
manages the Group’s supply chain with support
from the Commercial team.
The Group is careful to deal with trusted
suppliers with a track record of performance,
wherever possible.
30
Description of risk
Potential impact
Mitigation and control
Risk Management Review
Risk Management Review
Customer dependencies
In delivering its ‘engineered-
to-order’ programmes, the
Group is often dependent on
the provision of data from
its customers and, in some
cases, third parties.
The required data may not be
available (because it has not
yet been created or distilled
into writing) or a third-party
data owner may be unwilling
to release the data.
Material amounts of data are
not received when required,
and a programme is delayed,
impacting the Group’s ability
to progress the programme,
recognise revenue and render
invoices. Data delays may
lead to inefficient working
and unbudgeted costs. In very
serious cases, the delivery of
the programme itself may be
jeopardised.
This can be a difficult risk to manage.
The importance of timely data flow to the Group
is advised to customers at an early stage. The risk
is always flagged to the customer in pre-contract
negotiations, with a contractual dependency
then placed on the customer to ensure the
provision of the necessary data.
The Group monitors the provision of data
during the programme and is always alive to
the risk of data flows drying up. The Group will
negotiate the right to extensions of time and/
or compensation where its contract delivery is
impacted by data delays.
If a programme ultimately terminates due to this
risk eventuating, the Group will have a right to
payment for work done until termination.
31
Risk Management Review
Description of risk
Potential impact
Mitigation and control
Contract profiles
The Group’s turnover, profits
and cashflows, particularly
in the Technical Training
business line, are reliant on
the award and timely delivery
of a small number of high-
value contracts.
Award or delivery of such
contracts is delayed, causing
significant financial effects on
the Group (particularly when
judged by annual reporting).
Delays on award or delivery
lead to a negative perception
amongst stakeholders that
the Group’s business is
inconsistent and prone to
‘lumpy’ revenues.
Large contracts generate
significant working capital
demands which, if they
cannot be met, jeopardise
delivery of the contract (and
continuance of the business
generally).
The Group always seeks to negotiate cash-
neutral or cash-positive payment milestones
such that contractual programmes of work are
largely self-funding.
Where this is not possible, the Group has access
to overdraft facilities with its bankers to fund
working capital requirements. The Company can
(and has evidenced an ability to) utilise its status
as a public company to raise funding on the
equity capital markets.
The Group is constantly seeking ways to enhance
its recurring revenues (to increase profitable
turnover generally and to mitigate the effects of
‘lumpy’ contracts).
The current expansion of the Group’s software
and services offerings is a natural mitigant to the
reliance on, and risks of, high-value engineering
programmes.
In respect of both these mitigants, the Group has
been successful in recent periods, as evidenced
by the increasing level of such revenues (both in
absolute and relative terms).
32
Risk Management Review
Description of risk
Potential impact
Mitigation and control
Information systems and
security
The Group’s operations are
heavily dependent on the
availability and security of its
IT systems. A diverse range
of software platforms and
applications are needed to
deliver the Group’s contracts.
Key systems are unavailable
for a meaningful length of
time and the Group’s delivery
of customer contracts is
delayed or prevented, with
consequent potential adverse
effects on revenue.
The ‘hacking’ of, or a
successful cyber-attack
against, the Company’s
systems leads to serious
negative reputational and
contractual consequences, as
well as regulatory breaches.
The Group has dedicated IT personnel tasked
with ensuring the security and availability of the
systems.
The Group follows best practice as regards
IT security and has industry standard
accreditations. The Group assigns considerable
budgets and internal effort to solutions for
protecting its IT environments.
All data is backed up regularly to secure servers.
The Group’s multi-site operations allow the
recovery and restoration of systems from one
site to another.
Description of risk
Potential impact
Mitigation and control
Managing recovery and
growth
As the Group looks to
further recover and grow
its business, it may face
challenges in ‘ramping up’ to
meet demand. Planning for
and securing resources as a
business which operates with
a relatively small number
of high-value contracts,
prone to delays in award, is a
challenge.
The Group needs staff with
a wide range of technical
skills, including engineering
and software design and
programming. Subject matter
expertise is required in
various areas and the pool of
people with the appropriate
skills is inherently limited.
The Group does not have the
appropriate facilities in which
to build its goods and delivery
of contracts is delayed or
prevented, leading to negative
impacts on revenue and
reputation.
The Group is unable to
secure the necessary human
resources and the timely
delivery of its contracts is
jeopardised, with potentially
negative effects to revenue
and profit.
Conversely, resources may be
over-provisioned or secured
at the wrong time, incurring
unnecessary costs/allocating
capital which might be used
elsewhere.
The Group has developed a comprehensive
facilities plan and carefully monitors its needs
for future space, both for secured and potential
orders and has already acquired additional space
for expansion. Where space is no longer required
for a period, the Group looks to either let out
or dispose of it, or return to the landlord (in
the case of tenancies), as evidenced during the
period by the disposal of Pennant Court.
The Group has a formalised resource planning
process.
The Group retains a managing recruitment agent
with a track-record of finding suitable people,
enabling the Group to ‘flex’ resource to meet
demands of programmes.
Employee training and development is prioritised
in technical areas so that skills gaps can be filled
internally.
Good links to former employers are maintained
by those staff with military backgrounds,
enabling the recruitment of additional subject
matter experts.
33
Risk Management Review
Description of risk
Potential impact
Mitigation and control
Changes in training
standards and technology
Much of the Group’s business
is driven by the training
requirements of its customers
which are in turn driven by
training standards set down
by various authorities (such
as the European Union
Aviation Safety Agency). Any
regulatory divergence flowing
from Brexit may create
further complexity in the
regulatory environment.
The rapid development
in virtual and augmented
reality technology and
other innovative solutions
present challenges (and
opportunities) to the Group’s
traditional hardware focused
approach to training aids.
The Group employs specialists with training
delivery experience to ensure it keeps pace with,
and anticipates changes to, regulation (including
changes flowing from Brexit and any related
regulatory divergences from currently applicable
regulations).
The Group proactively considers and implements
product improvements (to enhance training
value) including through the use of virtual
technology to deliver innovative training.
Failure to ensure its products
comply with changing
standards means decreased
saleability (and a lesser end-
user experience), adversely
affecting the Group’s revenue
and profit.
Similarly, being left behind
as technology progresses
reduces the attractiveness
of the Group’s products,
ultimately resulting in fewer
sales and lower revenue and
profit.
34
Remuneration Report
The Remuneration Committee plays an important role in the good governance of the Group. As set out in its Terms of
Reference, the Committee determines the remuneration packages for Executive Directors and other senior employees
and keeps the Group’s policy on pay and benefits under review generally.
The Committee’s general ‘philosophy’ as regards Executive remuneration is to pay in line with market averages for a
public company of the Company’s size and market sectors, with an ability to award bonuses for meeting and exceeding
Committee-approved targets (which are aligned to successful business performance of the Group as measured against
the Group’s written Strategy Statement and its Integrated Business Plan). The Committee retains discretion to reduce
or withhold awards as appropriate.
Under the Executive Directors’ bonus scheme, bonuses are payable to Mr Walker and Mr Clements in respect of the
2022 financial year (the scheme is a cash bonus scheme which pays out upon the Group meeting or exceeding its finan-
cial targets for the year). Directors’ emoluments in respect of 2022 are shown in the table below.
For the current year, the Committee will keep under review the long-term incentivisation of Executive Directors and
senior employees, having regard to the need to control costs while ensuring that pay and benefits offered by the Group
are appropriate for attracting and retaining the right people.
The Committee will continue to have due regard to remuneration reports from independent sources, to the guidance
of its professional advisers and to good practice generally.
Philip Cotton
Chair
Remuneration Committee
25 April 2023
35
Remuneration Report
Directors’ remuneration
P H Walker
D J Clements
J Ponsonby
M Skates (resigned 30 June 2022) *
P Cotton
Salary
Bonus
Benefits
and car
allowance
Pension
Total
2022
2021
£000s
£000s
£000s
£000s
£000s
£000s
219
156
60
109
50
594
47
34
-
-
-
81
17
12
-
6
-
35
22
16
-
8
-
46
305
218
60
123
50
756
247
177
58
176
48
706
* The salary reported for Mr Skates comprises payment for services rendered during the period together with a lump-
sum payment of £25k in respect of contractual entitlements.
Pension contributions shown above are pension payments into the Pennant International Group Plc Pension Scheme,
a defined contribution scheme.
There were 800,000 share options held by the Directors in office at the end of 2022 (2021: 1,169,043) as further
particularised on the following tables. The details of share options granted to Directors during the period are detailed
below.
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 2022 except where indicated otherwise and their beneficial
interests in the ordinary shares of the Company were as stated below:
P H Walker
D J Clements
P Cotton
M J Brinson (appointed 01 January 2023)
D Wilkinson (appointed 01 February 2023)
31 December 2022
5p ordinary shares
31 December 2021
5p ordinary shares
Number
Number
65,645
77,008
18,633
37,124
-
45,898
59,408
18,633
28,583
-
M Skates ceased to be a Director on 31 March 2022. His shareholding at that date was 41,583 (31 December 2021:
41,583).
J Ponsonby ceased to be a Director on 22 October 2022. His shareholding at that date was 20,288 (31 December 2021:
20,288).
36
The following Directors have interests in share options of the Company as stated below:
EMI options
P H Walker
D J Clements
P Cotton
M J Brinson (appointed 01 January 2023)
D Wilkinson (appointed 01 February 2023)
M Skates (resigned 31 March 2022)
Total
Unapproved options
P H Walker
D J Clements
P Cotton
M J Brinson (appointed 01 January 2023)
D Wilkinson (appointed 01 February 2023)
Total
Remuneration Report
2022
Number
500,000
300,000
-
2021
Number
297,619
305,455
-
50,000
50,000
-
-
850,000
2022
Number
-
-
-
-
-
-
-
40,000
693,074
2021
Number
525,969
-
-
-
-
525,969
37
Remuneration Report
EMI Options
Philip Walker holds 500,000 EMI options exercisable at 33.5p (granted on 8 November 2022) which vest in 20% tranches
linked to growth in the Company’s share price. The first 20% tranche will vest upon the Company’s share price trading
at 57.0p for a period of at least 30 days. The vesting conditions for the subsequent tranches are also tied to achieving
growth in the Company’s share price with 20% vesting for every additional 5.0p achieved in the share price above
57.0p for a period of at least 30 days (20% at 62.0p; 20% at 67.0p; 20% at 72.0p and 20% at 77.0p). The performance
conditions must be met within three years from the date of grant in order for each tranche of the options to vest. The
options lapse upon the occurrence of certain events, including the termination of Mr Walker’s employment. On 7
November 2022, Mr Walker surrendered an EMI option over 297,619 unissued ordinary shares which had vested and
were exercisable at 84.0p (granted on 18 March 2015).
David Clements holds 300,000 EMI options exercisable at 33.5p (granted on 8 November 2022) which vest in 20%
tranches linked to growth in the Company’s share price. The first 20% tranche will vest upon the Company’s share
price trading at 57.0p for a period of at least 30 days. The vesting conditions for the subsequent tranches is also tied
to achieving growth in the Company’s share price with 20% vesting for every additional 5.0p achieved in the share
price above 57.0p for a period of at least 30 days (20% at 62.0p; 20% at 67.0p; 20% at 72.0p and 20% at 77.0p).
The performance conditions must be met within three years from the date of grant in order for each tranche of the
options to vest. The options lapse upon the occurrence of certain events, including the termination of Mr Clements’
employment. On 7 November 2022, Mr Clements surrendered an EMI option over 100,000 unissued ordinary shares
exercisable at 80.5p (granted on 12 September 2017) and over 205,455 unissued ordinary shares exercisable at 82.5p
(granted on 26 March 2018). Of the surrendered shares, 236,970 had vested at the time of surrender.
Michael Brinson holds 50,000 EMI options (granted on 11 October 2021) at 30.0p per share exercisable from 36 months
after the date of grant. The options have a performance condition such that they are not exercisable unless and until
the Company’s share price has been not less than 78.5p for a period of at least 20 consecutive business days. The
options lapse upon the occurrence of certain events, including the termination of Mr Brinson’s employment.
No EMI options were exercised by the Directors during the year.
Unapproved Options
Under the share option restructuring executed on 7 and 8 November 2022, Philip Walker surrendered 525,969
unapproved share options which were granted on 19 April 2017 at 55.0p.
No unapproved options were exercised by the Directors during the year and none are held by Directors at 31 December
2022.
38
Audit & Risk Committee Report
During the year, the Committee operating under its Terms of Reference discharged its responsibilities by (amongst
other things) reviewing and monitoring:
•
the Group’s risk registers, including the effectiveness of controls and mitigations;
•
the consistency of, and any changes to, accounting policies both on a year-on-year basis and across the Group;
•
the methods used to account for significant or unusual transactions;
• whether the Group has followed appropriate accounting standards and made appropriate estimates and
judgments, taking into account the views of the external auditors;
•
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 this corporate governance section (insofar as it relates to audit and risk management).
The Committee has continued its monitoring of the financial reporting process and its integrity, risk management
systems and assurance.
The Committee has reviewed all significant issues concerning the financial statements. The principal matters we
considered concerning the 2022 financial statements were: the appropriateness of the Going Concern assessment;
recognition of revenue and profit; and adequacy of working capital. We have reviewed key estimates and management
judgements prior to publication of the 2022 financial statements.
Deborah Wilkinson
Chair
Audit & Risk Committee
25 April 2023
39
DIRECTORS'
REPORT
The Directors present their report and the audited
financial statements for the year ended 31 December
2022.
Principal activities
Research & Development
Research and development expenditure within the Group
(involving the continued development of hardware
and software products of which a proportion has been
capitalised) amounted to £1.9 million (2021: £1.8 million).
The principal activity of the Company is the provision of
management services to the Group.
Post Balance sheet events
The principal activities of Group companies during
the year were the supply of integrated training and
support solutions, products and services, principally to
the defence, rail, aerospace and naval sectors and to
Government Departments.
Dividends
No dividends were paid during the year (2021: £NIL). 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 2022.
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 (including
cash flows on major programmes), liquidity position and
available debt facilities together with its forecasts and
projections for 20 months from the reporting date that
take into account reasonably possible changes in trading
performance and post year end events. The going concern
basis of accounting has therefore continued to be adopted
in preparing the financial statements. Further details are
provided on pages 61 to 63.
Aside from the acquisition of Track Access Productions –
already described on pages 16 & 17, there are no post
balance sheet events to report.
Treasury operations and financial instruments
The Group operates a centralised treasury function which
is responsible for managing liquidity, interest and foreign
currency risks associated with the Group’s activities.
The Group’s principal financial instruments are cash,
contract assets, trade receivables and payables, the main
purpose of which is to provide finance for the Group’s
operations.
In accordance with the Group’s treasury policy, derivative
instruments are not entered into for any purposes.
Given the Group’s customer base (government bodies and
major OEMs), credit risk is not considered a significant
factor in the Group’s financial risk profile (although is
monitored). Pricing and cash profiling are the key financial
risks arising from the Group’s trading and these are
discussed in detail on pages 27 to 34.
The Group’s exposure and approach to capital and
financial risk, and approach to managing these is set out
in note 32 to the Consolidated Financial Statements.
40
Employee engagement
Employee policies
Directors' Report
The Group engages with its employees regularly through
various media including intranet, newsletters, employee
opinion surveys, team briefings and twice-yearly financial
results presentations to all staff. Details of the Group’s
performance are shared with all employees at appropriate
times using these methods.
The Group’s culture and related behaviours are driven (and
closely monitored) by the Board, with employee feedback
(via staff suggestion schemes and other channels) being
delivered to the Board periodically. During the period, the
Group carried out two comprehensive employee opinion
surveys (one on pay and benefits, the other regarding
general sentiment) which encompassed all regions and
business units, with the results fed back to the Board and
changes to pay and policies enacted in response.
A formal set of Core Values has been established
focusing on Performance, Innovation, Quality, Respect
and Teamwork. These Core Values support the Group’s
strategic objectives, particularly linking into the Innovation
and the Customer Focus themes and relevant aspects
form part of employees’ periodic appraisals.
Employees are key to the Group’s success and the Company
gives significant consideration to ensuring that it offers a
working environment, culture and benefits package which
can attract and retain the talented people it needs.
Philip Cotton is designated as the Non-Executive Director
to whom employees can raise any concerns regarding
wrong-doing.
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 is com-
mitted to treating all employees and applicants fairly.
The Group is a signatory to the UK’s Armed Forces
Covenant and welcomes applications from ex-service
personnel.
Policy on payment of suppliers
The Group’s policy during the year and for 2022 is to pay
suppliers in accordance with the relevant contractual
terms agreed between the Group and the supplier.
Authority for company to purchase its own shares
Under a shareholders’ resolution of 22 June 2022, the
Company (acting by its Directors) was granted authority
to purchase through the market up to 5,506,397 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 Company’s quotation
on the London Stock Exchange for the five business days
immediately preceding the purchase. Since 22 June 2022,
the Company has not purchased any of its own shares
and the authority referred to above remains unutilised.
A proposal to renew the authority will be made at the
Company’s AGM in 2023.
The Board
The Board comprises the Chairman, the Chief Executive
Officer, the Commercial & Risk Director, the Chief Financial
Officer and an additional Non-Executive Director.
The Directors in office as at the date of this report are
named on pages 24 to 25.
A full pack of Board papers (containing various reports
and management information) is distributed to Directors
in advance of each Board and Committee meeting. The
Directors have access to external advice at the expense of
the Company and access to the Company Secretary (who
is a qualified solicitor).
One third of the Directors are subject to retirement
by rotation every year (rounded to the nearest whole
number). In addition, any Directors who will (at the date
of the AGM) have been in office for more than three
years since their last election are also required to retire.
Accordingly, Philip Cotton and David Clements retire at the
41
Directors' Report
AGM having been in office three years since election and, being eligible, offer themselves for re-election. Having been
appointed since the last AGM, Michael Brinson and Deborah Wilkinson will retire at the AGM and stand for election.
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 Directors.
Directors’ conflicts of interest
The Group 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 involving Pennant, they will 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 2022 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
Powell C C Esq
Premier Miton Group
BGF Investment Management Limited
Brett Gordon
Killik & Co LLP
Cannaccord Genuity Group
Political donations
Number of shares held
% interest in the total voting
rights of Pennant
6,278,253
5,114,731
4,090,909
3,020,000
1,797,555
1,681,281
17.06
13.90
11.12
8.21
4.89
4.57
The Group did not make any political donations during 2022 (2021: £NIL).
Matters covered in the Strategic Report
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 (such as review
of the business and future developments) have been omitted as they are included within the Strategic Report section
(in the Chairman’s Statement on pages 6 to 7 and the Chief Executive’s review on pages 8 to 9).
42
Directors' Report
Annual General Meeting
The Company’s Annual General Meeting will be held at its offices located at Unit D1, Staverton Connection, Old
Gloucester Road, Cheltenham, GL51 0TF on 7 June 2023. The Notice convening the Annual General Meeting and an
explanation of the business to be put to the meeting will be contained in a separate circular sent to shareholders
in accordance with communications preferences and will also be available on the website at www.pennantplc.co.uk
under the ‘AGM Documents’ section.
Statement as to disclosure of information to auditor
As far as the Directors are aware, they have each taken all necessary steps to make themselves 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 Group’s auditor is unaware.
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies
Act 2006.
Auditor
Mazars LLP have signified their willingness to continue in office and a resolution to reappoint Mazars LLP as auditor to the
Group will be proposed at the AGM.
Approved by the Board on 25 April 2023
and signed on its behalf
D J Clements
Director
43
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s and the Group’s transactions and disclose
with reasonable accuracy at any time the financial position
of the Company and the Group and enable them to ensure
that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the
assets of the Company and the Group and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
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.
Approved by the Board on 25 April 2023
and signed on its behalf
D J Clements
Director
Directors' Responsibility Statement
The Directors are responsible for preparing the Strategic
Report, 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 UK-adopted International Accounting
Standars (“IFRS”). Under company law the Directors must
not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and the Group and of the profit or
loss of the Company and the Group for that period.
In preparing these financial statements, the Directors are
required to:
•
select suitable accounting policies and then apply
them consistently;
• make judgments and accounting estimates that
are reasonable and prudent;
•
IFRS
state whether
in conformity with the
requirements of the Companies Act 2006 have
been followed subject to any material departures
disclosed and explained
the financial
statements;
in
• provide additional disclosures when compliance
with specific requirements in IFRS is insufficient
impact
to enable users to understand the
of particular transactions, other events and
conditions on the entity’s financial position and
financial performance; and
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
44
Directors' Report
45
Independent Auditor’s Report To The Members Of Pennant International Group Plc
The following section outlines the results for the period ended 31 December 2022.
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
46
Independent Auditor’s Report To The Members Of Pennant International Group plc
Opinion
We have audited the financial statements of Pennant International Group plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31 December 2022 which comprise the Consolidated Income Statement, Consolidated
and Company Statements of Comprehensive Income, Consolidated and Company Statements of Financial Position,
Consolidated and Company Statements of Changes in Equity, Consolidated and Company Statements of Cash Flows
and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted
international accounting standards.
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 2022
and of the group’s and the parent company’s loss for the year then ended;
• have been properly prepared in accordance with UK-adopted international accounting standards; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the “Auditor’s responsibilities for the audit of the
financial statements” section of our report. We are independent of the group and the parent company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to SME listed entities and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 3 in the financial statements, which indicates that if one particular major programme
milestone scheduled for completion in October 2023 is missed by three months the Group’s overdraft facility may be
breached if the directors are not able to action appropriate mitigation, which is not currently at the discretion of the
directors.
As stated in note 3, these events or conditions, along with the other matters as set forth in this note to the financial
statements, indicate that a material uncertainty exists that may cast significant doubt on the group’s and the parent
company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our audit procedures to evaluate the directors’ assessment of the group’s and the parent company's ability to continue
to adopt the going concern basis of accounting included but were not limited to:
• We obtained the group’s going concern assessment, including reverse stress test, and challenged assumptions
made including reviewing for areas of possible bias and assessed the appropriateness of potential mitigations
disclosed in note 3 open to the directors to access further funding, namely increasing the overdraft limit or
exploring a part-payment or reprofiling of the major programme milestones
• We compared the assessment with current banking facilities, obtaining evidence that the overdraft facility has
also been renewed for the duration of the going concern assessment period;
• We have agreed contractual cash flow payments back to underlying contracts and challenged management on
the phasing of cashflows, including consistency with the results of our work on the major engineered solution
contracts. This includes a consideration of the potential impact on the going concern assessment if payment
milestones are missed or payments from customers are delayed.
47
Independent Auditor’s Report To The Members Of Pennant International Group plc
• We confirmed the mathematical accuracy of any models given to support the assessment and how sensitive
the assessment is to changes in underlying assumptions
• We reviewed the appropriateness and completeness of the directors’ disclosures in the financial statements
including the disclosure of the event which individually casts significant doubt in regards the group and
company’s ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strat-
egy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
The matters set out below are in addition to the “Material uncertainty related to going concern” above which, by its
nature, is also a key audit matter.
48
Independent Auditor’s Report To The Members Of Pennant International Group plc
Key Audit Matter
How our scope addressed this matter
Risk of fraud in revenue recognition in respect of major
programme contracts
We see the risk of fraud in relation to revenue recognition
principally relating to the accuracy of revenue recognized
under major engineered solution contracts. In particular
around the judgements in respect of costs to complete,
accounting for variable consideration and initial set up of
contracts per the requirements of IFRS15. The General
Dynamics and Boeing contracts are the major contracts
at the year end. The risk here is focused on the accuracy
of the revenue recognition.
Our audit procedures included, but were not limited to:
• Obtain management’s
and assess whether revenue
recognition
assessment
is
recognised in line with the principles of IFRS 15,
including the treatment of contract modifications
liquidated
and variable consideration such as
damages.
revenue
• Detailed testing of the accuracy and robustness of
estimating costs to complete, including:
• Detailed testing of costs allocated to contracts in the
year;
• Observing contract review meetings;
•
An assessment of potential and actual risks on the
contract and challenging management on how they
have been factored into cost to complete forecasts;
•
•
An assessment of the comparison of actual costs and
forecasted costs post year end and what subsequent
actions are being taken for any variations identified;
and
An assessment of whether post year end
information, such as milestone achievement,
supports management's view in terms of whether
the remaining contract programme schedule is
being followed and therefore judgements regarding
the costs to complete made at the year-end were
appropriate.
Our observations
Based on the work we have performed, including review
of post year end performance, we have not highlighted
any material issues regarding the revenue recognition on
the major engineered solution contracts.
49
Independent Auditor’s Report To The Members Of Pennant International Group plc
Impairment of goodwill and intangible asset
The market capitalisation of the group has fallen during
2022 to £11.2m (2021 £11.7m). As such, this along
with the continued losses, is a potential indicator of
impairment. There is a risk that certain assets held on
the Balance Sheet may be impaired, including goodwill
and other intangible assets. Management is required
to perform an annual impairment review; an exercise
which requires management judgement and carries high
estimation uncertainty.
We obtained copies of the Value in Use calculations
impairment conclusions prepared by management and
undertook the following tests:
•
Assessed the appropriateness of the key underlying
assumptions such as sales growth, sales pipeline
and profitability, as well as considering the
appropriateness of any changes in the impairment
models;
• We engaged our impairment specialists in this
process, including to complete an assessment of
whether the calculations have been prepared in line
with IAS36;
• Obtained and challenged management assessment
of the identification of CGU’s;
•
•
•
•
Engaged our expert to challenge the discount rates
used as part of the impairment exercise;
Agreed pipeline orders to supporting documentation
and challenged the likelihood of whether these will
be secured;
Tested the mechanical accuracy of the calculations
performed and undertook sensitivity analysis; and
Ensured that appropriate disclosures were made
within the financial statements.
Our observation
We challenged management’s assessment of cash
generating units (CGUs) and agreed that two CGU’s,
training and software, was appropriate. Our impairment
specialists have assessed both discounted cashflows
for the training and software CGU’s and noted that the
models are appropriate and have sufficient headroom
over the carrying value of the assets. In addition, our
valuation expert concluded that the discount rates were
within their expected range.
We have concluded that it is appropriate that no
impairment is recognised at the year end.
The sensitivities and judgements have been disclosed
appropriately in the financial statements.
Our application of materiality and an overview of the scope of our audit
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually and on the financial statements as a whole. Based on our
professional judgement, we determined materiality for the financial statements as a whole as follows:
50
Independent Auditor’s Report To The Members Of Pennant International Group plc
Group materiality
Overall materiality
£171,000
How we determined it
Overall materiality has been determined with reference to a benchmark of
revenue, of which it represents 1.25%.
Rationale for benchmark applied
We used revenue to calculate our overall materiality as, in our view, this is the
most relevant measure of the underlying financial performance of the group.
Performance materiality
Reporting threshold
Performance materiality is set to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
in the financial statements exceeds materiality for the financial statements as
a whole.
We set performance materiality at £128,000, which represents 75% of overall
materiality
On the basis of our risk assessments, together with our assessment of the
group’s overall control environment, we set performance materiality at
approximately 75% of our overall materiality, being £128,000.
We agreed with the Audit and Risk Committee that we would report to the
Committee all audit differences in excess of £5,000 as well as differences below
that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit and Risk Committee on disclosure matters that
we identified during the course of assessing the overall presentation of the
financial statements.
Parent company materiality
Overall materiality
£90,000
How we determined it
Overall materiality has been determined with reference to a benchmark of
total assets, of which it represents 1%.
Rationale for benchmark applied
We used total assets to calculate our overall materiality as, in our view, this is
the most relevant measure of the underlying financial position of the company.
Performance materiality
Reporting threshold
Performance materiality is set to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
in the financial statements exceeds materiality for the financial statements as
a whole.
We set performance materiality at £67,000 which represents 75% of overall
materiality.
On the basis of our risk assessments, together with our assessment of the
group’s overall control environment, we set performance materiality at
approximately 75% of our overall materiality, being £67,000.
We agreed with the Audit and Risk Committee that we would report to the
Committee all audit differences in excess of £2,700 as well as differences below
that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit and Risk Committee on disclosure matters that
we identified during the course of assessing the overall presentation of the
financial statements.
51
Independent Auditor’s Report To The Members Of Pennant International Group plc
As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due
to fraud or error, and then designed and performed audit procedures responsive to those risks. In particular, we looked
at where the directors made subjective judgements, such as assumptions on significant accounting estimates.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the
financial statements as a whole. We used the outputs of our risk assessment, our understanding of the group and the
parent company, their environment, controls, and critical business processes, to consider qualitative factors to ensure
that we obtained sufficient coverage across all financial statement line items.
Our group audit scope included an audit of the group and the parent company financial statements of Pennant
International Group plc. Based on our risk assessment, Pennant International Group plc, Pennant International Limited,
Pennant Canada Limited and Pennant Australasia Pty Limited were subject to full scope audit, which was performed by
the group audit team. Pennant America Inc. was subject to specific procedures, which were performed by the group
audit team.
At the parent company level, the group audit team also tested the consolidation process and carried out analytical
procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated
financial information.
Other Information
The other information comprises the information included in the annual report other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materi-
ally inconsistent with the financial statements or our knowledge obtained in the course of audit or otherwise appears
to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Opinions 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 the 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 their environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
52
Independent Auditor’s Report To The Members Of Pennant International Group plc
•
•
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.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on page 44, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
Based on our understanding of the group and the parent company and their industry, we considered that non-compliance
with the following laws and regulations might have a material effect on the financial statements: GDPR, employment
regulation, compliance with AIM rules for companies, health and safety regulation, anti-money laundering regulation
and compliance with International Traffic in Arms Regulations (ITAR).
To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the
risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to:
• Gaining an understanding of the legal and regulatory framework applicable to the group and the parent
company, the industry in which they operate, and the structure of the group, and considering the risk of acts by
the group and the parent company which were contrary to the applicable laws and regulations, including fraud;
•
•
Inquiring of the directors, management and, where appropriate, those charged with governance, as to whether
the group and the parent company is in compliance with laws and regulations, and discussing their policies and
procedures regarding compliance with laws and regulations;
Inspecting correspondence with relevant licensing or regulatory authorities;
• Reviewing minutes of directors’ meetings in the year; and
• Discussing amongst the engagement team the laws and regulations listed above, and remaining alert to any
indications of non-compliance.
We also considered those laws and regulations that have a direct effect on the preparation of the financial statements,
such as tax legislation and the Companies Act 2006.
53
Independent Auditor’s Report To The Members Of Pennant International Group plc
In addition, we evaluated the Directors’ and management’s incentives and opportunities for fraudulent manipulation
of the financial statements, including the risk of management override of controls, and determined that the principal
risks related to posting manual journal entries to manipulate financial performance, management bias through
judgements and assumptions in significant accounting estimates, in particular in relation to revenue recognition (which
we pinpointed to the accuracy assertion in relation to major programme revenue and the cut off assertion in relation
to software revenue), going concern, impairment of goodwill and intangible assets, and significant one-off or unusual
transactions.
Our procedures in relation to fraud included but were not limited to:
• Making enquiries of the directors and management on whether they had knowledge of any actual, suspected
or alleged fraud;
• Gaining an understanding of the internal controls established to mitigate risks related to fraud;
• Discussing amongst the engagement team the risks of fraud;
• Addressing the risks of fraud through management override of controls by performing journal entry testing;
There are inherent limitations in the audit procedures described above and the primary responsibility for the prevention
and detection of irregularities including fraud rests with management. As with any audit, there remained a risk of non-
detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the
override of internal controls.
The risks of material misstatement that had the greatest effect on our audit are discussed in the “Key audit matters”
section of this report.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of the audit report
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.
Jonathan Barnard (Senior Statutory Auditor) for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
90 Victoria Street
Bristol
BS1 6DP
25 April 2023
54
Consolidated Income Statement For The Year Ended 31 December 2022
Continuing operations
Revenue
Cost of sales
Gross profit
Land and buildings revaluation
Profit on sale of land and buildings
Other administration expenses
Administrative expenses
Other income
Operating loss
Finance costs
Finance income
Loss before taxation
Taxation
Loss for the year attributable to the equity holders of the parent
Earnings per share
Basic
Diluted
Notes
2022
£000s
2021
£000s
5
13,686
15,965
(7,897)
(11,609)
5,789
4,356
17
17
8
8
10
11
12
14
-
374
(7,276)
(6,902)
123
(990)
(377)
2
117
-
(6,826)
(6,709)
203
(2,150)
(329)
-
(1,365)
(2,479)
464
865
(901)
(1,614)
(2.45p)
(2.45p)
(4.41p)
(4.41p)
The accompanying notes on pages 61 to 91 are an integral part of these financial statements.
55
Consolidated Statement Of Other Comprehensive Income For The Year Ended 31 December 2022
Loss for the year attributable to the equity holders of the parent
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Prior year amortisation adjustment
Items that will not be reclassified to profit or loss
Net revaluation gain
Deferred tax credit / (charge) – property, plant and equipment
Notes
17
26
2022
£000s
(901)
109
39
-
248
2021
£000s
(1,614)
(64)
-
353
(156)
Total comprehensive loss for the period attributable to the equity
holders of the parent
(505)
(1,481)
56
Consolidated Statement Of Financial Position As At 31 December 2022
Notes
15
16
17
18
26
19
20
21
22
21
23
24
23
26
27
28
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Corporation tax recoverable
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Bank overdraft
Current tax liabilities
Lease liabilities
Deferred consideration on acquisition
Total current liabilities
Net current liabilities
Non-current liabilities
Lease liabilities
Deferred tax liabilities
Warranty provisions
Contingent consideration on acquisition
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Retained earnings
Translation reserve
Revaluation reserve
Total equity
2022
£000s
2,507
4,690
4,002
503
1,497
13,199
1,001
4,129
354
1,107
6,591
19,790
5,862
1,533
155
174
327
8,051
2021
£000s
2,403
5,081
6,009
661
850
15,004
865
4,528
330
901
6,624
21,628
3,595
4,441
367
209
432
9,044
(1,460)
(2,420)
385
-
107
552
1,044
9,095
10,695
1,840
5,366
200
2,844
335
110
10,695
529
-
122
789
1,440
10,484
11,144
1,832
5,345
200
2,687
226
854
11,144
Approved by the Board and authorised for issue on 25 April 2023
M J Brinson - Director
The accompanying notes on pages 61 to 91 are an integral part of these financial statements.
57
Consolidated Statement Of Changes In Equity For The Year Ended 31 December 2022
Share
capital
(see page
65)
Share
Premium
(see
page 65)
Capital
redemption
reserve
(see page
65)
Retained
earnings
(see
page 65)
Translation
reserve
(see page
65)
Revaluation
reserve
(see page
65)
Total
equity
£000s
£000s
£000s
£000s
£000s
£000s
£000s
At 1 January 2021
1,822
5,295
200
4,243
(Loss) for the year
Other comprehensive
income
-
-
-
-
-
-
(1,614)
-
Total comprehensive income
1,822
5,295
200
2,629
Issue of new ordinary shares
10
50
Recognition of share based
payment
Transfer from revaluation
reserve
-
-
-
-
-
-
-
-
32
26
290
-
(64)
226
-
-
-
683
12,533
-
(1,614)
197
133
880
11,052
-
-
(26)
60
32
-
At 31 December 2021
1,832
5,345
200
2,687
226
854
11,144
(Loss) for the year
Other comprehensive
income / (loss)
-
-
-
-
-
-
(901)
1,031
Total comprehensive income
1,832
5,345
200
2,817
Issue of new ordinary shares
Recognition of share based
payment
Transfer from revaluation
reserve
8
-
-
21
-
-
-
-
-
(2)
29
-
-
109
335
-
-
-
-
(901)
(744)
396
110
10,639
-
-
-
27
29
-
At 31 December 2022
1,840
5,366
200
2,844
335
110
10,695
58
Consolidated Statement Of Changes In Equity For The Year Ended 31 December 2022
Share capital
This represents the issued share capital of the Company.
Share premium account
This represents the amount by which shares have been issued at a price greater than nominal value less issue costs.
Capital redemption reserve
The capital redemption reserve is a non-distributable reserve into which amounts are transferred following the
redemption or purchase of the Group’s own shares.
Retained earnings
This represents the accumulated realised earnings from the prior and current periods as reduced by losses and
dividends from time to time.
Translation reserve
Exchange differences relating to the translation of the net assets of the Group’s foreign subsidiaries from their functional
currency to the presentational currency of the Group, being sterling, are recognised directly in the translation reserve.
Revaluation reserve
This represents the increments and decrements on the revaluation of non-current assets net of deferred tax.
59
Consolidated Statement Of Cash Flows For The Year Ended 31 December 2022
Net cash from operations
Investing activities
Interest received
Earn-out payment for acquisition of subsidiary
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Net cash generated from/(used in) investing activities
Financing activities
Proceeds from issue of ordinary shares
Repayment of lease liabilities
Net cash from financing activities
Notes
29
11
16
17
17
28
23
2022
£000s
2,572
2
(547)
(1,150)
(63)
2,117
359
24
(263)
(239)
2021
£000s
(127)
-
(549)
(966)
(134)
22
(1,627)
60
(309)
(249)
Net increase/(decrease) in cash and cash equivalents
2,692
(2,003)
Cash and cash equivalents at beginning of year
21
(3,540)
(1,453)
Effect of foreign exchange rates
422
(84)
Cash and cash equivalents at end of year
21
(426)
(3,540)
60
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
1. General information
Pennant International Group plc is a public company
incorporated in England and Wales under the Companies
Act 2006. The address of the registered office is Unit D1
Staverton Connection, Old Gloucester Road, Cheltenham,
GL51 0TF.
The principal activity of the Group during the year was
the delivery of integrated training and support solutions,
products and services, principally to the defence,
rail, aerospace and naval sectors and to Government
Departments.
These financial statements are presented in pounds
sterling because that is the currency of the primary
economic environment in which the Group operates.
All values are rounded to the nearest thousand pounds
except where otherwise stated. Foreign operations are
included in accordance with the policies set out in note 3.
2. Standards, amendments and interpretations
adopted in the current financial year ended 31
December 2022
The Group has applied the following new accounting
standards and amendments for the first time in the annual
reporting period commencing 1 January 2022, none of
which have had a material impact on the Group’s financial
statements for the year ended 31 December 2022:
•
•
•
IAS 16 Property, Plant and Equipment (Amendment):
Proceeds Before Intended Use
IAS 37 Provisions, Contingent Liabilities and Contingent
Assets: (Amendment): Onerous Contracts – Cost of
Fulfilling a Contract
IFRS 3 Business Combinations (Amendment): Reference to
the Conceptual Framework
• Annual Improvements to IFRSs (2018 – 2020 cycle)
The following new accounting standards, amendments
to accounting standards and interpretations, which are
relevant to the group, have been published but are not
yet effective nor have been adopted early by the group.
These standards, amendments or interpretations are not
expected to have a material impact on the group in the
current or future reporting periods:
• IAS 1 Presentation of Financial Statements
(Amendment): Classification of Liabilities as
Current or Non-current and Classification
of Liabilities as Current or Non-current -
Deferral of Effective Date
• IAS 1 Presentation of Financial Statements
and IFRS Practice Statement 2 Making
Materiality
(Amendment):
Disclosure of Accounting Policies
Judgements
• IAS 8 Accounting Policies, Changes
in Accounting Estimates and Errors
(Amendment): Definition of Accounting
Estimates
• IAS 12 Income Taxes: Deferred Tax related
to Assets and Liabilities arising from a
Single Transaction
1 January
2023
1 January
2023
1 January
2023
1 January
2023
3. Accounting policies
in
The financial statements have been prepared
accordance with UK-adopted International Accounting
Standards (“IFRS”) in conformity with the requirements
of the Companies Act 2006.
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.
Going concern statement
Accounting standards require that the Directors satisfy
themselves that it is reasonable for them to conclude
whether
is appropriate to prepare the financial
statements on a going concern basis.
it
Analysis of current business prospects
The Directors have undertaken an assessment of the
future prospects of the Company and its subsidiary
undertakings (the ‘Group’), taking into account the
Group’s current position and principal risks. This review
considered both the Group’s prospects and also its ability
to continue in operation and to meet its liabilities as they
fall due over the twenty-month period (‘review period’)
following approval of these financial statements. The
risk scenarios tested are detailed in the ‘summary of
assessment methodology’ on page 62.
The Group enjoys a strong contracted order book at 31
December 2022 of £25 million, of which £13 million is
scheduled for recognition as revenue in 2023 with the
remaining balance scheduled across 2024 (£8 million)
and 2025 (£4 million). The cash receipts into the Group
are expected to broadly align to this revenue projection.
This contracted order book is primarily underpinned by
61
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
military expenditure of UK, North American and Australian
Governments. Such Government expenditure has proved
to be resilient in times of economic contraction and is
further supported by increased spend commitments in
this sector. There is, however, a degree of concentration
risk with two contracts representing approximately 63% of
the forecast order book recognition scheduled for 2023.
During 2020, the Group took decisive action to restructure
its cost base, removing circa £0.9 million of annualised
costs from the business, which has continued to be
realised in 2022 despite economic pressures requiring
inflationary linked pay rises for staff. Furthermore, the
Group continues to work closely with its customers and
suppliers to ensure contractual milestones are met and
related payments are received.
The Group has a £3 million annually renewing overdraft
facility in place with its bankers, HSBC. This has reduced
from £4 million due to the sale of the Group’s Headquarters
in 2022 for £2.1 million. The overdraft facility has been
renewed for the next rolling 12 month period from April
2023 at £3 million. The terms of this facility have not been
modified following the bank’s annual review of the facility
carried out in April 2023.
An agreement with HMRC had been reached to defer
PAYE payments from August 2021 until March 2022 with
a repayment schedule agreed and adhered to throughout
2022 with the outstanding balance cleared in full in April
2023.
The cash outflows related to the post-balance sheet
acquisition of TAP have been included within forecast
horizon whilst any positive impact on cashflows is
prudently excluded.
Summary of assessment methodology
The Director’s assessment of the Group’s prospects was
informed by the following processes.
Risk management and annual business planning process
– the Group has a well-developed approach to the
management of risk, and emerging risks identified by
the Board. These risks are reviewed and factored into
the annual business plan which is aligned to the Group’s
strategic objectives.
Cashflow and scenario analysis and ‘reverse stress’ testing
– based on the output from the Board approved budget,
the Directors have reviewed the Group’s forecast working
capital requirements, cash flow, current borrowing
facilities and other funding options available to the Group
over the review period. This analysis included scenario
testing of adverse factors and ‘reverse stress testing’
of the Group’s cash flow under a severe but plausible
scenario. The cashflow scenarios tested were as follows:
• Test 1: During the review period, the Group
discharges work in line with a ‘management case’
approved budget scenario and secures pipeline
wins in 2023 to align to this budget. Further pipeline
wins are secured in 2024, aligned to the discounted
cashflow models prepared for impairment testing
(see note 15) and;
• Test 2: As a stress test to ‘Test 1’, delays to payments
are experienced on contracted work on major
programmes for 3 months.
Under Test 1, the Group remained within its currently
available facilities of £3 million within the period 20
months from the signing of these financial statements.
The stress test (‘Test 2’) indicates that the facility may
be breached by between December 2023 and January
2024, with cashflows recovering in February 2024 due
to one particular major programme milestone scheduled
for completion in October 2023. It is the opinion of the
Directors that the risk of this scenario occurring is highly
unlikely as, to date, the milestone adherence on the
aforementioned major programme has been in line with
or ahead of the contracted schedule, and risks related
to third party dependencies e.g. supply chain have been
largely mitigated. However, this risk can be mitigated by
further actions available to the Directors, see below.
The scenario analysis and forward-looking assessments
described above are inherently subject to risk and
uncertainty; and the greater the period of any projection,
the greater the exposure thereto. There is no guarantee
that actual results will be consistent with any of these
assessments. Events and outcomes may transpire during
the relevant period(s) which have an impact more adverse
than contemplated by the assessments.
Mitigation opportunities available and potential
upside
In the scenarios discussed above the Directors have not
included the following mitigants:
•
In discussions with the Group’s bankers, HSBC, the
Directors have explored the option to secure access
to further funding should this be required. The bank
have already supported the Group through the
provision of temporary facility increases as required
throughout 2022. The Directors have received an
indication from HSBC that the facility would again
be extended on a temporary basis to mitigate short-
62
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
term working capital shortfalls should the need
arise;
Basis of consolidation
• The significant milestone on the major programme
consists of six events, four of which are either
already met or scheduled to be achieved in June
2023 ahead of the overall scheduled completion of
the milestone in October 2023. The Directors, based
on previous experience with OEMs, could explore a
part-payment or reprofiling of the milestone;
• The Board approved budget does not include
certain pipeline opportunities, some of which are
likely to be secured ahead of the potential cashflow
challenges noted in the stress test above; and
• The Group has authority for a cash placing to raise
funds (at present, up to 5% of the Group’s share
capital) which is in place until the AGM on 7 June
2023. The Directors expect this authority to be
renewed at the AGM which could be utilised to
raise funds at the prevailing share price at the time
of need.
Going concern conclusion
In summary, the Directors have, at the time of approving
the financial statements, a reasonable expectation that the
Group have adequate resources to continue in operational
existence for the foreseeable future. If however, the
aforementioned major programme milestone is delayed
by a period of 3 months, the impact on the current
overdraft facility gives rise to a material uncertainty if the
Group is unable to action the mitigations above which
are not fully at the discretion of the Directors at the
time of signing. In reaching this conclusion the Directors
have considered the financial position of the Group, cash
flows on major programmes including the impact and
likelihood of delays to the major programme milestone
due in October 2023 as mentioned above and available
borrowing facilities taking into account discussions with
the Group’s bankers noted in the available mitigations.
The Board has also not included in its forecasts certain
unbudgeted pipeline opportunities which may be secured
in the coming months.
The going concern basis of accounting has therefore
continued to be adopted in preparing the financial
statements.
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 direct the activities of the investee, the right to
the variable returns of the investee, and the ability to use
power to affect the returns of the investee.
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 transac-
tions, 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 the profit or loss
account and is not subsequently reversed. Acquisition
related costs are recognised in the income statement as
incurred.
Revenue recognition
Engineered Solutions
Revenue on engineered solutions contracts is measured
over time, based on the stage of completion of each of
the identified performance obligations at the reporting
date. Revenue is recognised over time due to the goods
having no alternative use and the Group being entitled to
compensation from the customer for work completed to
date. Stage of completion for each performance obligation
is measured as costs incurred to date over total expected
costs to complete the identified performance obligation.
Generic Products
Revenue is recognised on a point in time basis upon
contractual acceptance of the manufactured product by
the customer. Revenue is recognised at a point in time
due to the products having alternative uses to the Group
in that they could be sold to other prospective customers.
63
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
Additionally there is not normally any entitlement to
payment for work completed to date. Until the contractual
acceptance of the product, costs are recognised as work
in progress in inventories. Development of a new or
upgraded generic product, where there is an entitlement
to payment for work completed to date and either no
alternative use to the Group or the upgrade is to an asset
controlled by the customer, is recognised over time.
Software Products
Revenues arising from the sale of software licences which
are sold outright are recognised at the point of sale.
Software Maintenance
Software maintenance revenue is recognised over the
period to which the maintenance support agreement
relates. Amounts invoiced but not taken to revenue at
a period end are shown in the statement of financial
position as contract liabilities.
Software and Technical Services
Revenue from software services is recognised over time
or on a point in time basis as determined by the terms
of the customer contract. Revenues arising from technical
support contracts is recognised over the period to which
the support agreements relate. Amounts not taken to
revenue at a period end are shown in the statement of
financial position as a contract liability.
Leases and Right-of-use assets
The Group leases various offices and vehicles. Lease
contracts can typically range from six months to in excess
of five years. Extension and termination options are
included in a number of property leases across the Group.
These are used to maximise operational flexibility in terms
of managing the assets used in the group’s operations. The
majority of extension and termination options held are
exercisable only by the Group and not by the respective
lessor.
Contracts may contain both
lease and non-lease
components. The group allocates the consideration in the
contract to the lease and non-lease components based on
their relative stand-alone prices. However, for leases of
offices for which the group is a lessee, it has elected not
to separate lease and non-lease components and instead
accounts for these as a single lease component. Lease
terms are negotiated on an individual basis and contain
a wide range of different terms and conditions. The lease
agreements do not impose any covenants other than the
security interests in the leased assets that are held by the
lessor.
64
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
• fixed payments
(including
in-substance fixed
payments), less any lease incentives receivable;
• variable lease payments that are based on an index
or a rate, initially measured using the index or rate as
at the commencement date;
• amounts expected to be payable by the group under
residual value guarantees;
•
the exercise price of a purchase option if the group is
reasonably certain to exercise that option; and
• payments of penalties for terminating the lease,
if the lease term reflects the group exercising that
option.
Lease payments to be made under reasonably certain
extension options are also included in the measurement
of the liability. The lease payments are discounted using
the interest rate implicit in the lease. If that rate cannot be
readily determined, which is generally the case for leases
in the Group, the lessee’s incremental borrowing rate is
used, being the rate that the individual lessee would have
to pay to borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing
received by the individual lessee as a starting point,
adjusted to reflect changes in financing conditions
since third party financing was received;
• uses a build-up approach that starts with a risk-free
interest rate adjusted for credit risk for leases which
does not have recent third-party financing, and
• makes adjustments specific to the lease, e.g. term,
country, currency and security.
Where the Group is exposed to potential future increases
in variable lease payments based on an index or rate,
these are not included in the lease liability until they take
effect. When adjustments to lease payments based on an
index or rate take effect, the lease liability is reassessed
and adjusted against the right-of-use asset.
Lease payments are allocated between principal and
finance cost. The finance cost is charged to profit or loss
over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability
for each period.
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
Right-of-use assets are measured at cost comprising the
following:
•
the amount of the initial measurement of lease
liability;
• any
lease payments made at or before the
incentives
less any
lease
commencement date
received;
• any initial direct costs; and
•
restoration costs.
Right-of-use assets are generally depreciated over the
shorter of the asset’s useful life and the lease term on
a straight-line basis. If the Group is reasonably certain
to exercise a purchase option, the right-of-use asset is
depreciated over the useful life to include the period
covered by the option. While the Group has revalued
the land and buildings it owns and which are included in
property, plant and equipment, it has chosen not to do so
for the right-of-use buildings leased by the Group.
Payments associated with short-term leases of equipment
and vehicles and all leases of low-value assets are
recognised on a straight-line basis as an expense in
profit or loss. Short-term leases are leases with a lease
term of 12 months or less. Low-value assets comprise IT
equipment and small items of office furniture.
Foreign currency
Transactions in currencies other than each Group entity’s
functional currency 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 are not retranslated.
Exchange differences arising on the settlement of
monetary items, and on the retranslation of monetary
items, are included in profit or loss for the period.
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 into sterling 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 current tax
charge and deferred tax charge. Current tax payable,
where applicable, 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.
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 charged or
credited to 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.
65
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
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 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 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.
Warranty provisions
Warranty 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. Warranty provisions
are recognised over time from the point of contract
award. All warranty provisions currently provided for by
the Group are considered to be assurance-based only.
Share-based payment
The Group issues equity-settled share-based payments to
certain employees. Equity-settled share-based payments
are measured at fair value (excluding the effect of non-
market-based vesting conditions) at the date of grant. The
fair value determined at the date of grant is expensed
on a straight-line basis over the vesting period, based on
the Group’s estimate of shares that will eventually vest
and adjusted for the effect of non-market based vesting
conditions.
Fair value is measured by use of an option pricing model.
The model has been adjusted, based on management’s
best estimate, for the effects of non-transferability,
exercise restrictions and behavioural conditions.
Property, plant and equipment
Property, plant and equipment (except for land and build-
ings) are stated at cost less accumulated depreciation and
any recognised impairment loss. Depreciation is charged
to write off the cost of assets over their estimated useful
lives on the following bases:
Freehold land:
Freehold build-
ings:
Fixtures and
Equipment:
Motor vehicle:
Nil
Net book value at 1 January 2020
being written off over 35 years on a
straight-line basis
10% to 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
losses. Revaluations are
accumulated
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.
impairment
66
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
Intangible assets
Cash and cash equivalents
Intangible assets are stated at cost less accumulated
amortisation and any recognised impairment loss. Am-
ortisation is charged to write off intangible assets on a
straight-line basis over their estimated useful lives on the
following basis:
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.
Trade payables
Development Costs:
Hardware development
costs
Courseware development
costs
Software development costs
Virtual Reality development
costs
Software
10% of cost per annum
initially recognised as financial
Trade payables are
liabilities measured at fair value, and subsequent to initial
recognition measured at amortised cost.
20% of cost per annum
Bank borrowings
20% of cost per annum
50% of cost per annum
33% of cost per annum
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.
The amortisation of intangible assets is included in ‘Other
administration expenses’ in the Consolidated Income
Statement and further disclosed in note 8.
Inventories
Inventories are stated at the lower of cost and net
realisable value. Costs comprise direct materials and,
where applicable, direct labour costs and overheads
that have been incurred in bringing the inventories to
their present location and condition. Net realisable value
represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing,
selling and distribution.
Financial instruments
The Group classifies financial
instruments, or their
component parts, on initial recognition as a financial asset
or a financial liability.
Trade and other receivables
Trade and other receivables are measured at initial
recognition at fair value, and subsequently measured at
amortised cost.
The Group assesses possible increase in credit risk for
financial assets measured at amortised cost at the end of
each reporting period. For trade receivables the simplified
approach is used, and the loss allowance is measured at
the estimate of the lifetime expected credit losses. The
amount of any loss allowance is recognised in profit or
loss.
4. Critical accounting judgements and key sources of
estimation uncertainty
In the application of the Company’s accounting policies,
which are described in note 3, the Directors are required
to make judgements, estimates and assumptions about
the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and
associated assumptions are based on historical experience
and other factors considered to be relevant. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
if the revision affects only that period, or in the period of
the revision and future periods if the revision affects both
current and future periods.
The following are the critical judgements and estimations
that the Directors have made in the process of applying
the Company’s accounting policies and that have the
most significant effect on the amounts recognised in the
financial statements.
Key source of judgement
Revenue recognition – IFRS 15 considerations
A proportion of the Group’s revenue derives from long-
term engineered solutions contracts. Judgement is used
to identify the individual performance obligations within
each contract and allocate costs and revenue across them.
Each identified performance obligation is then assessed
as to whether the IFRS 15 criteria for revenue recognition
over time is met.
67
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
Capitalisation of development costs
Valuation of property portfolio
In November 2022, the Group’s remaining property
portfolio (post the sale of Pennant Court) was revalued
by an independent valuer. The freehold property held by
the Group has been valued in line with the carrying values
in these financial statements. The property valuation was
reviewed by the Directors and adopted into the report
but carries estimation uncertainty due to the potential
volatility of the property market from time to time.
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 £2,507k (2021:
£2,403k) and the review has been carried out by the
Directors.
Revenue recognition – estimation of cost to
complete
For
long-term engineered solutions 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. This requires
the estimation of the total costs of each contract based
on the contractual requirements and the estimate cost to
complete. The Directors estimate the standalone selling
price at contract conception based on products supplied
in similar circumstances to similar customers. Estimation
regarding
contractual
obligations is also reflected within the revenue recognition.
considerations on
variable
The capitalisation of development costs
includes
judgements over when the requirements of IAS 38
intangible assets are met. This includes confirmation that
the asset is technically and commercially feasible and
the Group can demonstrate a market for the product,
which supports its future economic benefits. Technical
feasibility is confirmed through the Technology and
Innovation teams whilst commercial viability is confirmed
by information received through the Sales team from
existing and potentially new customers.
Deferred tax asset recognition
The recognition of deferred tax assets (see note 25)
is based upon whether it is more likely than not that
sufficient and suitable taxable profits will be available
in the future against which the reversal of temporary
differences can be deducted. To determine the future
taxable profits, reference is made to the latest available
profit forecasts.
Significant items on which the Group has exercised
accounting judgement include recognition of deferred
tax assets in respect of tax losses in Pennant International
Limited at both the current and prior year end. Deferred
tax has therefore been recognised at both dates based on
the amount of taxable profits in the profit forecasts.
Key source of estimation uncertainty
Recoverability of internally-generated intangible
assets
reconsidered
the year, management
the
During
recoverability of its internally-generated intangible assets
which are included in its consolidated statement of
financial position at £4,672k (2021: £5,050k). During the
review of internally-generated intangible assets in 2021,
the useful economic life of one internally generated asset
was reduced from five years to two years (see note 16).
This asset has therefore been written down to a net book
value of nil as at 31 December 2022. For all other assets,
the products continue to progress in a very satisfactory
manner, and customer
reconfirmed
management’s previous estimates of anticipated revenues
from the assets held on the balance sheet. Key judgements
made in estimating the recoverability of intangible assets
are revenue growth and useful life of individual assets.
reaction has
68
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
5. Revenue
An analysis of the Group’s revenue by product group is as follows:
Software licences & products
Software maintenance
Software and technical services
Engineered solutions
Generic products
Total Group Revenue
2022
£000s
1,377
1,458
7,410
2,410
1,031
2021
£000s
1,080
1,056
6,994
4,211
2,624
13,686
15,965
Revenue which was deferred as at 31 December 2021 now recognised in this year amounts to £694k (2021: £469k).
As at 31 December 2022 the transaction price of performance obligations which are unsatisfied at the period end
amounts to £11,054k (2021: £3,527k).
6. Segment information
The operating segments that are regularly reviewed by Executive Management in order to allocate resources to
segments and to assess performance are the three regions; UK & Europe, North America and Australasia (as detailed
in pages 8 to 9 in the ‘Chief Executive’s Review’ section) as these represent the way the Group reports financial
performance and position internally. 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
UK & Europe
North America
Australasia
External Sales
Management charges and licence fees
Net finance costs
Loss before tax
Segment revenue
Segment profit/(loss)
2022
£000s
5,557
4,985
3,144
2021
£000s
8,161
4,451
3,353
13,686
15,965
2022
£000s
(158)
1,435
366
1,643
(2,633)
(375)
2021
£000s
(1,801)
1,050
978
227
(2,377)
(329)
(1,365)
(2,479)
The segment profit or loss for the period is stated after amortisation of intangible assets. Recharges are made the
parent company for central management and group services. Licence fees are recharged to the segments for the use
of intellectual property rights owned by the parent.
69
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
6.2 Segment assets and liabilities
Segment assets
UK & Europe
North America
Australasia
Unallocated*
Consolidated assets
Segment liabilities
UK & Europe
North America
Australasia
Unallocated*
Consolidated liabilities
6.3 Other segment information
UK & Europe
North America
Australasia
Unallocated*
2022
£000s
11,140
5,555
6,351
23,046
(3,256)
19,790
7,049
2,279
2,724
12,052
(2,957)
9,095
2021
£000s
13,316
3,884
3,727
20,927
701
21,628
3,498
1,297
3,231
8,026
2,458
10,484
Depreciation and amortisation**
Additions to non-current assets**
2022
£000s
599
22
200
821
1,254
2,075
2021
£000s
1,111
21
243
1,375
694
2,069
2022
£000s
114
4
13
131
1,138
1,269
2021
£000s
40
1
120
161
1,038
1,199
*Unallocated items include the costs, assets and liabilities of the parent company and consolidation adjustments.
**Other intangible assets, Property, plant and equipment and Right-of-use assets.
70
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
6.4 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.
UK
Customer 1
Customer 2
Canada
Customer 3
7. Staff Costs
The aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs (note 30)
2022
£000s
1,158
735
2021
£000s
2,160
2,211
2,795
2,795
2022
£000s
7,602
837
309
8,748
2021
£000s
7,568
777
344
8,689
The highest paid Director remuneration is detailed in the ‘Remuneration Report’ on pages 35 to 38.
The average number of persons, including Executive Directors employed by the Group during the year was:
Office and management
Production
Selling
2022
Number
2021
Number
28
107
5
140
37
109
7
153
71
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
8. Operating loss for the year
The operating loss for the year is stated after charging /(crediting):
Net foreign exchange loss
Research and development costs*
Other income arising from RDEC claim (R&D)
Other income arising from Coronavirus Job Retention Scheme
Property rental and sundry other income
Amortisation of intangible assets
Effect of land and buildings revaluation
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Share-based payment (note 29)
Profit/Loss on disposal of land and buildings (note 17)
Profit/Loss on disposal of other property, plant and equipment (note 17)
* In 2022 research and development costs of £1,139k were capitalised (2021: £966k)
9. Auditor remuneration
Fees payable to the company’s auditor for:
The audit of the annual financial statements
The audit of the company’s group undertaking
10. Finance costs
Interest expense for bank overdraft
Lease interest
Interest payable on deferred consideration on acquisition
Movement in discounting applied to deferred consideration
Other interest expense
72
2022
£000s
119
818
(113)
-
(10)
1,519
-
373
183
29
(374)
(6)
2021
£000s
-
1,309
(157)
(29)
(17)
1,366
(117)
460
243
32
-
-
2022
£000s
2021
£000s
70
37
107
2022
£000s
142
55
56
97
27
377
83
45
128
2021
£000s
56
74
164
29
6
329
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
11. Finance income
Other interest receivable
12. Taxation
Recognised in the income statement
Current UK tax credit
Foreign tax expense
In respect of prior years
Sub-total current tax
Deferred tax credit relating to origination and reversal of temporary differences
In relation to prior years
Effect of tax rate change
Exchange rate difference
Subtotal deferred tax
Total P&L tax credit
Other Comprehensive Income charge for the period
Deferred tax
Reconciliation of effective tax rate
Loss before tax
Tax at the applicable rate of 19.00% (2020: 19.00%)
Tax effect of expenses not deductible in determining taxable profit
Tax effect of income excluded from taxable profits
Impact of R&D tax credits
Foreign tax expensed
Effect of different tax rates of subsidiaries operating in other jurisdictions
Effect of lower / (higher) rate of deferred tax
Deferred tax not recognised
Effect of adjustments for prior years (current tax)
Effect of adjustments for prior years (deferred tax)
Other differences
Total tax credit
2022
£000s
2
2
2021
£000s
-
-
2022
£000s
2021
£000s
178
80
(323)
191
46
485
(88)
-
21
418
464
248
(365)
62
(223)
1,205
150
(272)
5
1,088
865
(156)
(1,365)
(2,479)
259
30
233
77
-
(53)
175
-
191
(88)
(360)
464
471
(18)
181
34
(38)
(93)
220
12
62
150
(116)
865
73
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
Factors that may affect future tax charges
On 24 May 2021 the Finance Bill 2021 was substantively enacted with the consequence that the main rate of corporation
tax will increase from 19% to 25% with effect from 1 April 2023, with a corresponding effect on deferred tax balances
arising after that date.
13. Dividends
No dividends were paid during the year (2021: £NIL). No final dividend will be proposed at the Annual General Meeting
(2021: £NIL).
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:
Loss after tax attributable to equity holders
Weighted average number of ordinary shares in issue during the year
Diluting effect of share options*
Diluted average number of ordinary shares
Earnings per share (basic)
Earnings per share (diluted)*
2022
£000s
(901)
Number
36,725,879
1,414,228
38,140,107
(2.45p)
(2.45p)
2021
£000s
(1,614)
Number
36,591,864
1,746,543
38,338,407
(4.41p)
(4.41p)
*Share options are excluded from the earnings per share calculation in the consolidated income statement due to
their antidilutive effect on the loss after tax attributable to equity holders.
15. Goodwill
Carrying amount:
At 1 January 2021
Currency translation
At 1 January 2022
Currency translation
At 31 December 2022
74
£000s
2,428
(25)
2,403
104
2,507
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
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 goodwill will not be deductible for tax purposes. Although the
Group operates as a single operation selling and delivering all revenue streams globally, for the purposes of impairment
testing, it has been determined that the Group has two CGUs (Training and Software). The carrying amount of goodwill
has been allocated as follows:
Cash generating unit:
Training
Software
2022
£000s
584
1,923
2,507
2021
£000s
584
1,819
2,403
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 twelve months derived from the most recent
annual financial budgets approved by the Board of Directors and extrapolates cash flows as follows:
Software CGU:
Cashflows are extrapolated for a further four years beyond the twelve-month annual budget period at a growth rate of
5% (2021: 3%). The forecast includes a terminal value.
Training CGU:
Cashflows are forecast for an additional two years beyond the twelve-month approved financial budget period based
on a contract level review with the addition of expected cash flows generated from ‘pipeline’ opportunities. As at
31 December 2022 the Training CGU had an active pipeline of over £60 million (2021: £50 million) and in testing the
goodwill for impairment the Directors have assumed a prudent conversion rate of circa 40%. For years four and five, a
growth rate of 3% per annum (2021: 3%) is assumed. The forecast does not include a terminal value.
The forecast cash flows of each CGU are discounted at the following pre-tax rates to provide the value in use for each
CGU:
Training CGU: 13.78% per annum (2021: 10.93% per annum); post-tax rate 12.02% (2021: 7.21%)
Software CGU: 16.51% per annum (2021: 17.76% per annum); post-tax rate 12.02% (2021: 9.28%)
The rates have been calculated to reflect the working capital structure of the Group as each CGU utilises the optimal
capital structure, being both debt and equity.
The discounted cash flows provide headroom for the goodwill carrying values in excess of their respective assets in
the case of each CGU with the Training headroom being £0.4 million without considering terminal values and Software
headroom of £8.2 million when considering terminal values.
Key assumptions are based on past experience and external sources. No impairment of goodwill has been recorded
in either the year ending 31 December 2022 or 31 December 2021. 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.
75
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
16. Other intangible assets
Software
Development costs
£000s
£000s
Cost
At 1 January 2021
Currency translation
Reclassifications
Additions
Disposals
At 1 January 2022
Currency translation
Reclassifications
Additions
Disposals
At 31 December 2022
Amortisation
At 1 January 2021
Currency translation
Reclassifications
Charge for the year
Disposals
At 1 January 2022
Currency translation
Reclassifications
Charge for the year*
Disposals
At 31 December 2022
Carrying amount
At 31 December 2022
At 31 December 2021
535
-
(157)
-
(30)
348
-
240
11
(50)
549
331
-
(73)
84
(25)
317
2
240
22
(50)
531
18
31
7,982
(113)
157
966
-
8,992
20
(240)
1,139
-
9,911
2,616
(29)
73
1,282
-
3,942
1
(240)
1,536
-
5,239
4,672
5,050
Total
£000s
8,517
(113)
-
966
(30)
9,340
20
-
1,150
(50)
10,460
2,947
(29)
-
1,366
(25)
4,259
3
-
1,558
(50)
5,770
4,690
5,081
*Includes £39k charged to retained earnings (prior year adjustment).
76
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
During 2022 the Group capitalised £1,139k (2021: £966k) of costs in relation to the ongoing development of the
GenS software solution along with enhancements to existing software related assets. The Group also capitalised costs
related to the development of three (2021: five) new products. These costs will be amortised over the estimated
useful life of the asset as described at note 3.
In 2021, the useful economic life of one intangible asset was reviewed by management and, as a result, the economic
life for straight line amortisation was reduced from five to two years. In the current year, under the revised useful
economic life, amortisation of £397k (2021: £397k) was charged in the period with the asset having a net book value of
£nil as at December 2022 (2021: £397k). If the useful economic life had remained at five years, the amortisation charge
would have been £159k (2021: £159k) with a net book value at the year-end of £476k (2021: £635k).
17. Property, plant and equipment
Land and buildings
Cost / Valuation
At 1 January 2021
Currency translation
Additions
Revaluation
Disposals
At 1 January 2022
Currency translation
Additions
Disposals
At 31 December 2022
Depreciation
At 1 January 2021
Currency translation
Revaluation
Disposals
Charge for year
At 1 January 2022
Currency translation
Disposals
Charge for the year
At 31 December 2022
Carrying amount
At 31 December 2022
At 31 December 2021
£000s
5,393
-
-
(615)
-
4,778
-
-
(1,683)
3,095
965
-
(1,085)
-
120
-
-
(24)
97
73
3,022
4,778
Fixtures and
equipment
£000s
Motor
vehicles
£000s
Total
£000s
4,131
15
102
-
-
4,248
7
63
(810)
3,508
2,696
10
-
-
324
3,030
7
(779)
270
2,528
980
1,218
61
5
32
-
(59)
39
1
-
(26)
14
20
6
-
(16)
16
26
-
(18)
6
14
-
13
9,585
20
134
(615)
(59)
9,065
8
63
(2,519)
6,617
3,681
16
(1,085)
(16)
460
3,056
7
(821)
373
2,615
4,002
6,009
77
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
On 19 August 2022 the Group sold its freehold property at Pennant Court, Staverton Technology Park, Cheltenham
which was surplus to requirements. The sale proceeds were £2.1 million which resulted in a profit on disposal after
selling costs of £374k as shown in the consolidated income statement on page 60. As result of the sale the revaluation
reserve balance of £744k related to the disposed property and an associated deferred tax liability of £248k have been
transferred to retained earnings.
The remaining land and buildings were formally valued at 24 November 2022 by Andrew Forbes Limited, 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.
The valuation supported the carrying values within these financial statements with no revaluation gain or loss
recognised as a result.
A revaluation of the building assets in 2021 resulted in a gain in other comprehensive income of £353k in the prior year
and a partial reversal of a previously recognised impairment which led to a credit in the income statement of £117k,
also in the prior year.
At 31 December 2022, had the remaining land and buildings of the Group been carried at historical cost less accumulated
depreciation and impairment losses their carrying amount would have been £3.1 million (2021: £3.2 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 3 in the fair value hierarchy as defined by IFRS 13 Fair Value
Management. For the valuation of the property, the independent valuers used a Market Approach (Comparable
Method) and an assumption of vacant possession which is standard industry practice. See note 24 regarding the
securities associated with these assets.
18. Right-of-use assets
Valuation
At 1 January 2021
Currency translation
Additions
Termination of lease
Depreciation
At 1 January 2022
Currency translation
Additions
Termination of lease
Depreciation
At 31 December 2022
78
Property
Motor vehicles
£000s
£000s
Total
£000s
701
(2)
44
(14)
(156)
573
(2)
-
(24)
(137)
410
129
(5)
56
(5)
(87)
88
-
57
(6)
(46)
93
830
(7)
100
(19)
(243)
661
(2)
57
(30)
(183)
503
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
19. Inventories
Raw materials and consumables
Work in Progress
2022
£000s
905
96
1,001
2021
£000s
774
91
865
In 2022, a total of £905k (2021: £3,847k) of inventories was recognised as an expense in the year within the consolidated
income statement.
20. Trade and other receivables
Trade receivables
Contract Assets
Other receivables
Prepayments
2022
£000s
2,036
1,333
26
734
4,129
2021
£000s
1,895
2,110
38
485
4,528
No receivables have been written off as uncollectible during the year (2021: £Nil) and it has not been necessary to
recognise any impairment loss under the expected lifetime loss model as there is no history of trade receivables being
uncollected and therefore it is believed any credit risk is minimal and any expected credit losses (ECL) charge would be
immaterial.
The contract assets have decreased as a result of the stage of completion of engineered solutions contracts relative to
the billing milestones which become due in the following period.
21. Cash and cash equivalents
Bank
Petty cash
Bank overdraft
Balance as per statement of cash flows
2022
£000s
1,093
14
1,107
(1,533)
(426)
2021
£000s
887
14
901
(4,441)
(3,540)
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.
79
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
22. Trade and other payables
Contract Liabilities
Trade payables
Taxes and social security costs*
Other creditors and Accruals
2022
£000s
2,949
771
1,161
981
5,862
2021
£000s
909
841
1,030
815
3,595
*Included in Taxes and Social security costs, £327k (2021: £857k) is related to deferred 2021 and 2022 PAYE payments
due to HMRC. These outstanding amounts are expected to be settled by April 2023 in accordance with agreed terms
with HMRC.
Contract liabilities have increased as a result of stage of completion on engineered solutions contracts.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
23. Lease liabilities
Valuation
At 1 January 2021
Currency translation
Additions
Termination of lease
Interest expense
Repayments
At 1 January 2022
Currency translation
Additions
Termination of lease
Interest expense
Repayments
At 31 December 2022
Current
Non-current
80
Property
Motor vehicles
£000s
£000s
Total
£000s
790
(2)
44
(33)
65
(220)
644
3
-
(26)
50
(204)
467
136
331
123
(3)
54
-
9
(89)
94
-
57
(6)
6
(59)
92
38
54
913
(5)
98
(33)
74
(309)
738
3
57
(32)
56
(263)
559
174
385
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
In 2022 short term lease rentals expensed amounted to £13k (2021: £12k). There were no low value leases or variable
lease payments in the year. This is not likely to significantly change in the year ahead.
Lease liability maturity analysis:
Within 1 year
In 2-5 years
24. Deferred consideration
Carrying amount:
At January 2021
Currency translation
Repayment
Movement in discount applied to future repayments
At 1 January 2022
Currency translation
Repayment
Movement in discount applied to future repayments
At 31 December 2022
Deferred consideration (Current)
Contingent consideration (Non-current)
2022
£000s
219
557
776
2021
£000s
255
546
801
£000s
1,788
(47)
(549)
29
1,221
58
(497)
97
879
327
552
879
The deferred and contingent consideration balances comprise the remaining amounts expected to be paid in the
financial years 2023 to 2025 following the acquisition of Halter Holdings Pty Ltd, the parent Company of Absolute Data
Group Pty Ltd and Onestrand Inc, in March 2020. Further details of the acquisition can be found in the annual report
and accounts for the financial years 31 December 2020 and 31 December 2021.
25. Borrowings
The Group has available bank overdraft facilities of £3 million that renew annually (2021: £4 million) which have
reduced upon the sale of the freehold property; Pennant Court. In order to support working capital requirements
due to the net contract asset position on engineered solutions contracts at the year end, the bank overdraft has been
temporarily increased as at 31 December 2022 to £3.5 million. The extension expired in January 2022 at which point
the facility reverted to £3 million.
Any overdraft arising from the facility is repayable on demand and carries interest at 2.75% (2021: 2.30%) 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 International Limited and by cross-guarantees between those companies.
81
Tax losses
Total
£000s
£000s
850
850
-
-
-
(30)
1,670
383
-
-
-
36
2,089
(101)
1,205
(156)
(272)
24
150
850
466
248
-
22
(89)
1,497
2021
£000s
850
-
850
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
26. Deferred tax
At 1 January 2021
Credit/(charge) to income
Credit/(charge) to OCI
Change in tax rate
Exchange differences
Prior year adjustment
At 1 January 2022
Credit/(charge) to income
Credit/(charge) to OCI
Change in tax rate
Exchange differences
Prior year adjustment
At 31 December 2022
Accelerated tax
depreciation
Other temporary
differences
Intangible
Assets
£000s
(876)
(233)
(156)
(275)
22
(36)
(1,554)
78
248
-
1
(85)
(1,312)
£000s
217
562
-
3
(8)
(40)
734
5
-
-
21
(40)
720
£000s
(292)
26
-
-
10
256
-
-
-
-
-
-
-
In the statement of financial position deferred assets and liabilities are shown without any set off as follows:
Deferred tax assets
Deferred tax liabilities
2022
£000s
1,497
-
1,497
On 24 May 2021 the Finance Bill 2021 was substantively enacted with the consequence that the main rate of corporation
tax will increase from 19% to 25% with effect from 1 April 2023, with a corresponding effect on deferred tax balances
arising after that date. In each foreign subsidiary, deferred tax is recognised at the prevailing tax rate in the respective
Country.
At the reporting date the Group had unused tax losses of approximately £7.0 million (2021: £6.7 million) available for
set-off against future profits. The tax losses are available indefinitely for offsetting against future taxable profits.
82
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
27. Warranty provisions
Warranty provisions as at 1 January
Additional warranties accrued
Warranties provisions released
Warranty provisions as at 31 December
2022
£000s
122
26
(41)
107
2021
£000s
122
-
-
122
During 2022 the warranty provisions balance has reduced as a result of the removal of a warranty obligation on a
delivered programme now covered by a Technical Support agreement. This has been partially offset by the recognition
over time of a new warranty obligation on a programme which is to be delivered in 2024.
28. Share capital
Authorised, issued and fully paid
36,790,447 ordinary shares of 5p each (2021: 36,640,357)
2022
£000s
1,840
1,840
2021
£000s
1,832
1,832
The Company’s ordinary shares carry one vote per share, have equal rights to participate in dividends, are freely
transferable and are not redeemable.
In April 2022 68,954 5p ordinary shares were issued at 35p per share for a total consideration of £24k in connection
with the Group’s employee SIP scheme. Additionally, 81,136 5p ordinary shares were issued at 29.5p per share as ‘free
shares’ to relevant employees in accordance with the terms of the Group’s SIP scheme.
83
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
29. Note to consolidated statement of cash flows
Cash generated from/(used) in operations
Loss for the year
Finance income
Finance costs
Income Tax credit
Withholding tax
Depreciation of property, plant & equipment
Depreciation of right-of-use assets
Profit on disposal of property (note 17)
Amortisation of other intangible assets
Effect of land and buildings revaluation
Other income – RDEC (R&D)
Share-based payment
Operating cash flows before movement in working capital
Decrease in receivables
(Increase)/Decrease in inventories
Increase/(Decrease) in payables and provisions (notes 22 and 26)
Cash generated from/(used in) operations
Tax (paid)/received
Interest paid
Net cash generated from/(used in) operations
30. Share-based payments
2022
£000s
(901)
(2)
377
(464)
(2)
373
183
374
1,519
-
(113)
29
625
398
(136)
2,252
3,139
(306)
(261)
2,572
2021
£000s
(1,614)
-
329
(865)
38
460
243
-
1,366
(117)
(157)
32
(285)
356
216
(525)
(238)
440
(329)
(127)
The Company operates an EMI share option scheme for certain employees of the Group (the “Scheme”). Options
granted under the Scheme are exercisable at the price equal to the quoted mid-market price at the close of business
on the date of grant. Exercise in all cases is subject to non-market conditions as options are forfeited if the employee
leaves the Group before the options vest. Additionally the options granted to the Executive Directors during the period
are subject to market conditions as outlined in the remuneration report on pages 36 to 38. Details of the share options
outstanding during the year are as follows:
84
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
Options granted under the Scheme
Outstanding at 1 January 2022
Granted during the year
Exercised during the year
Lapsed during the year
Surrendered during the year
Outstanding at 31 December 2022
Exercisable at 31 December 2022
2022
2021
Number of
share options
Weighted
average
exercise price
Number of share
options
Weighted
average
exercise price
1,173,074
1,040,000
-
(80,000)
(603,074)
1,530,000
340,000
78.56p
33.15p
1,513,074
50,000
-
(130,000)
36.88p
82.91p
48.16p
99.21p
(260,000)
-
1,173,074
746,104
77.16p
30.00p
26.75p
80.88p
-
78.56p
91.77p
Of the 1,040,000 share options granted in the period, 240,000 were granted to employees of the Group and 800,000
were granted to Executive Directors. The Executive Directors also surrendered 603,074 approved options during the
period. The options granted to Executive Directors are detailed in the remuneration report on pages 36 to 38.
The option prices for the outstanding share options are:
30 – 50p
51 – 80p
81 – 100p
101 – 135p
2022
2021
1,190,000
230,000
70,000
70,000
140,000
743,074
130,000
130,000
The fair value of the options granted during the year under the Scheme is £134k. The weighted average fair value is
13p.
The options outstanding at 31 December 2022 had a weighted average remaining contractual life of 4.64 years (2021:
5.55 years).
85
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
Unapproved Options
Outstanding at 1 January
Exercised during the year
2022
2021
Number of
share options
Weighted
average
exercise price
Number of
share options
Weighted
average
exercise price
525,969
55.00p
525,969
55.00p
-
-
-
-
525,969
525,969
-
-
55.00p
55.00p
Surrendered during the year
(525,969)
55.00p
Outstanding at 31 December
Exercisable at 31 December
-
-
-
-
As part of the surrender and regrant of options to Executive Directors, Mr Walker surrendered 525,969 unapproved
options.
The Group recognised total expenses related to equity-settled share-based payment transactions of £29k (2021: £32k).
This is for the options granted to the staff and Executive Directors.
Share price at date of grant: 32.00p (2021: 30.00p)
Exercise price: 32.00p (2021: 30.00p)
Expected volatility (based on historic volatility): 40.45% (2021: 20.00%)
The Black-Scholes model was used to calculate the fair value of options granted to staff in 2022 with the following
inputs:
•
•
•
• Risk free rate: 1.088% (2021: 0.97%)
•
• Option life: 10 years (2021: 10 years)
• Vesting period: 3 years (2021: 3 years)
Expected dividend yield: 0.0% (2021: 0.0%)
86
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
The options granted to the Executive Directors in the period are subject to market based vesting conditions. Mr Walker
holds 500,000 EMI options and Mr Clements holds 300,000 EMI options all exercisable at 33.5p (granted on 8 November
2022) which vest in 20% tranches linked to Growth in the Company’s share price. The first 20% tranche will vest upon
the Company’s share price trading at 57.0p for a period of at least 30 days. The vesting conditions for the subsequent
tranches are also tied to achieving growth in the Company’s share price with 20% vesting for every additional 5.0p
achieved in the share price above 57.0p for a period of at least 30 days (20% at 62.0p; 20% at 67.0p; 20% at 72.0p and
20% at 77.0p). The performance conditions must be met within three years from the date of grant in order for each
tranche of the options to vest. The options lapse upon the occurrence of certain events, including the termination of
employment.
In order to calculate the fair value of these options, a Monte Carlo model was used with the following inputs:
Share price at date of grant: 33.50p
Exercise price: 33.50p
Expected volatility (based on historic volatility): 40.45%
Risk free rate: 3.448%
Expected dividend yield: 0.0%
•
•
•
•
•
• Option life: 3 years
•
Vesting period: 2 years
SIP Scheme
The SIP scheme is open to UK employees and is governed by UK legislation. It is designed to promote employee share
ownership and provides tax advantages to participants. The participating employees have monthly deductions taken
from their salaries from April to March each year under a salary sacrifice arrangement which are then held by the
trustees of the SIP and used to purchase shares at the end of the period.
31. 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
32. Financial instruments
32.1 Capital risk management
2022
£000s
309
2021
£000s
344
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.
87
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
32.2 Categories of financial instruments
Financial assets
Measured at amortised cost
Trade receivables
Contract assets
Other receivables
Cash and cash equivalents
Financial liabilities
Measured at amortised cost
Contract liabilities
Trade payables
Taxes and social security costs
Other creditors
Cash and cash equivalents
32.3 Financial risk management
2022
£000s
2021
£000s
2,036
1,333
26
1,107
4,502
2,949
771
1,161
107
1,533
6,521
1,895
2,110
38
901
4,944
909
841
1,030
156
4,441
7,377
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, trade payables, other payables and borrowings that arise directly from its
operations.
32.4 Foreign currency risk
The Group operates internationally, which gives rise to financial 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. At 31
December 2022 and 31 December 2021, the Group had no commitments under forward exchange contracts.
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:
88
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
Canadian $
American $
Australian $
Total
Liabilities
Assets
2022
£000s
176
31
156
363
2021
£000s
289
169
787
1,245
2022
£000s
774
395
758
2021
£000s
853
405
842
1,927
2,100
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 $
32.5 Credit risk
Impact on profit
2022
£000s
30
18
30
2021
£000s
28
12
3
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 impairments for bad or doubtful debts have been made. At the end of the financial year there are no
material debts that are deemed to be past due.
At 31 December 2022 and 31 December 2021 there were no significant concentrations of credit risk outside of the
three customers disclosed in note 6.4. The maximum exposure to credit risk is represented by the carrying amount of
each financial asset in the statement of financial position.
32.6 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 a net overdraft of £425k (2021: £3,540k) and net undrawn facilities of £3,075k (2021:
£960k) against the temporarily increased overdraft facility of £3.5 million. The level of the Group’s overdraft facility is
reviewed annually and has been renewed at the current level of £3 million as of April 2023.
89
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
The Group’s financial obligations consist of trade and other payables and obligations under leases which are set out in
notes 22 and 23 respectively.
Trade and other payables are all payable within three months.
32.7 Interest risk
The Group is from time to time exposed to interest rate risk on the bank overdraft when the Group is overdrawn. This
is the only liability subject to interest rate risk at the balance sheet date. Interest is paid on bank overdraft at 2.75%
(2021: 2.30%) over base rate. A 1% rise/fall in interest rates would have decreased/increased profit for the year by an
immaterial amount (2021: immaterial).
33. Related party transactions
Transactions with related parties
For the Group there were no sales to, purchases from or, at the year end, balances with any related party.
Intra-group transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
Remuneration of key management personnel
Amounts paid to Group Directors who are the only key management personnel of the Group are set out in the
Remuneration Report.
Dividends paid to Directors
Dividends totalling £Nil (2021: £Nil) were paid in the year in respect of ordinary shares in which the Company’s Directors
had a beneficial interest.
34. Business combinations
Business Combinations 2022
The Group has not entered into any business combinations in the period nor in 2021.
35. Audit exemptions for group companies
The following companies have exercised exemption from audit under s479A of the Companies Act 2006 and s394A of
the Companies Act 2006:
- Aviation Skills Foundation Limited (s479A)
- Pennant SIP Trustee Limited (s479A)
- Pennant Rail Holdings Limited (previously Pennant Support and Development Services Limited) (s394A)
90
Notes To The Consolidated Financial Statements for The Year Ended 31 December 2022
36. Post balance sheet events
Acquisition of Track Access Productions
On 12 April 2023, Pennant acquired the entire issued share capital of Track Access Productions Limited (“TAP”).
TAP is a UK business, incorporated in 2001 and based in Bedfordshire, which provides driver training, route mapping
and route familiarisation services to the UK rail industry. Its clients comprise train operating companies, freight
operating companies, engineering prime contractors and infrastructure providers. TAP has two key revenue streams: a
subscription-based web portal through which its clients can access training content, and project-specific route mapping
work.
For the financial year ended 31 March 2023, TAP’s management accounts indicate revenues of circa £600k of which
50% is recurring, relating to portal subscriptions. TAP’s profit before tax for the period is expected to be circa £200k (for
the year ended 31 March 2022, profit before tax was £181k).
The vendors, Ian and Jill Heys, the founders and owner/managers of TAP, will work a short transitional period to
ensure a smooth handover of customers and contacts before retiring. The rest of TAP’s employees and consultants are
expected to remain with the business.
Given the date of acquisition not all IFRS 3 disclosures are available however a summary of the key terms of the
acquisition is as follows:
•
•
•
•
•
•
The consideration payable in respect of the Acquisition comprises an enterprise value of £585,000, plus an
amount of circa £389,000 in respect of TAP’s ‘free cash’ after allowing for normalised working capital and
repayment of debt (“Cash Free, Debt Free Adjustment”).
The initial consideration payable is circa £798,500 (being 70% of the enterprise value, i.e. £409,500, plus the
Cash Free, Debt Free Adjustment).
A completion payment of £638,610 has been settled, based on verified estimates of the Cash Free, Debt Free
Adjustment, with a balancing payment of circa £160,000 within the next two months following the production
of completion accounts (to allow for any correction of estimates).
The balance of the overall consideration, comprising a deferred payment of £175,500 (being the remaining 30%
of the enterprise value) is due 12 months after completion.
The acquisition agreement contains customary warranties and indemnities in respect of title, tax and various
commercial matters as well as buyer protections in the form of restrictions on the future activities of the
vendors and rights of setoff.
The Acquisition is being funded from the Group’s existing cash resources.
Benefits of the Acquisition
The Board believes that the TAP business is highly complementary to the Group’s existing business and that the
Acquisition was in the Company’s best interests for the following reasons inter alia:
•
•
TAP’s business aligns closely with Pennant’s existing Track Access business unit and the Acquisition will
consolidate the Group’s presence in this market. The combined unit is expected to generate revenues for 2023
in the region of £850,000 and will be able to provide an enhanced offering to a broader customer base.
The Acquisition also aligns with the Company’s strategy, in particular it enhances the Group’s recurring revenues,
further diversifying into civilian markets, whilst bolstering the Group’s ‘third pillar’ of rail products and services,
complementing the Group’s traditional core of IPS software and training technology.
91
Company Number: 03187528
Company Statement Of Comprehensive Income For The Year Ended 31 December 2022
Continuing operations
Management charges and licence fees receivable
Administrative expenses
Operating loss
Finance costs
Finance income
Loss before tax
Taxation
Loss after tax
Other comprehensive income
Total comprehensive loss attributable to equity holders
Notes
4
5
6
2022
£000s
2,626
(3,820)
(1,194)
(52)
70
(1,176)
240
(936)
-
(936)
2021
£000s
2,377
(2,797)
(420)
(15)
-
(435)
99
(336)
-
(336)
92
Company Statement Of Changes In Equity For The Year Ended 31 December 2022
Share capital
Share
Premium
Capital
redemption
reserve
Retained
earnings
Total
equity
£000s
£000s
£000s
£000s
£000s
At 1 January 2021
1,822
5,295
200
1,976
9,293
Total comprehensive income for
the year
Issue of new ordinary shares
Recognition of share-based
payment
-
10
-
-
50
-
-
-
-
(336)
(336)
-
32
60
32
At 1 January 2022
1,832
5,345
200
1,672
9,049
Total comprehensive income for
the year
Issue of new ordinary shares
Recognition of share-based
payment
At 31 December 2022
-
8
-
-
21
-
-
-
-
(936)
(936)
(2)
29
27
29
1,840
5,366
200
763
8,169
Note: see page 59 for a description of the reserves appearing in the column headings of the table above.
93
Company Statement Of Financial Position At 31 December 2022
Non-current assets
Investment in subsidiaries
Other intangible assets
Right of Use Assets
Deferred Tax Asset
Total non-current assets
Current assets
Trade and other receivables
Amounts due from subsidiaries
Corporation tax recoverable
Total current assets
Total assets
Current liabilities
Trade and other payables
Bank overdraft
Amounts due to subsidiaries
Current tax liabilities
Lease liabilities
Total current liabilities
Net current liabilities
Non-current liabilities
Lease liabilities
Deferred tax liability
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Retained earnings
Total equity
Notes
7
8
9
14
10
11
12
13
13
14
15
2022
£000s
6,763
5,420
25
-
12,208
196
2,373
49
2,618
14,826
416
1,237
4,387
-
18
6,058
(3,440)
9
590
6,657
8,169
1,840
5,366
200
763
8,169
2021
£000s
6,763
5,563
56
12
12,394
165
2,150
-
2,315
14,709
323
456
4,161
-
28
4,968
(2,653)
28
664
5,660
9,049
1,832
5,345
200
1,672
9,049
Approved by the Board and authorised for issue on 25 April 2023.
M J Brinson
Director
94
The accompanying notes on pages 96 to 105 are an integral part of these financial statements.
Company Statement Of Cash Flows For The Year Ended 31 December 2022
Net cash from operations
Financing activities
Proceeds from issue of ordinary shares
Lease repayments
Net cash generated from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
16
15
13
12
2022
£
(781)
27
(27)
-
(781)
(456)
(1,237)
2021
£
(104)
60
(30)
30
(74)
(382)
(456)
95
Notes To The Company Financial Statements For The Year Ended 31 December 2022
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 UK-adopted International
Accounting Standards (“IFRS”). 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 loss
The operating loss is stated after amortisation of other intangible assets acquired in the year of £1,395k (2021: £780k)
which is included in Administrative expenses in the Statement of Comprehensive Income. The auditor’s remuneration
for audit and other services is disclosed in note 9 to the consolidated financial statements.
3. Staff costs
The aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
2022
£000s
1,259
133
79
1,471
2021
£000s
1,048
111
71
1,230
The average number of persons, including Executive Directors employed by the Company during the year was 5 (2021:
6).
4. Finance costs
Interest expense
5. Finance income
Other interest receivable
96
2022
£000s
(52)
2022
£000s
70
2021
£000s
(15)
2021
£000s
-
Notes To The Company Financial Statements For The Year Ended 31 December 2022
6. Taxation
Current tax credit
Deferred tax credit
Tax credit for the year
Reconciliation of effective tax rate
Loss before tax
Tax at applicable rate 19.00% (2019: 19.00%)
Effect of expenses that are not deductible for tax
Effect of other transfers and adjustments
Effect of adjustments for prior years
Total tax charge
7. Subsidiaries
Details of the Company’s subsidiaries at 31 December 2022 are as follows:
Subsidiary name
Registered office
Pennant International Limited
Unit D1 Staverton Connection, Old Gloucester Road,
Cheltenham, GL51 0TF
2022
£000s
178
62
240
(1,176)
223
-
114
(97)
240
2021
£000s
5
94
99
(435)
83
(14)
25
5
99
Proportion of
ownership
Pennant Rail Holdings Limited***
Unit D1, as above
Aviation Skills Foundation Limited
Unit D1, as above
Pennant SIP Trustee Limited
Unit D1, as above
Pennant Canada Limited
Pennant Australasia Pty Limited
1400 Blair Place, Suite 100, Ottawa, Ontario K1J 9B8,
Canada
Suite 6, 334 Highbury Road, Mt. Waverley Victoria, 3149,
Australia
Pennant Information Services Inc.
1400 Blair Place, as above
Halter Holdings Pty Ltd*
GPO Box 2890
Brisbane, Queensland, 4001
Australia
Absolute Data Group Pty Ltd*
GPO Box 2890, as above
Pennant America Inc.**
2 W Market St
West Chester
PA 19382
USA
* Subsidiary of Pennant Australasia Pty Limited
** Previously Onestrand Inc.
*** Previously Pennant Support & Development Services Limited
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
97
Notes To The Company Financial Statements For The Year Ended 31 December 2022
The investments in subsidiaries are all stated at cost as follows in the table below.
Cost of investment
Cost of investment – beginning of year
Additions
Disposals
Cost of investment – end of year
Impairment – beginning of the year
Disposals
Impairment – end of year
Net cost of investment – end of year
Net cost of investment – beginning of year
8. Other intangible assets
Cost
At 1 January 2022
Additions
At 31 December 2022
Amortisation
At 1 January 2022
Charge for the year
At 31 December 2022
Carrying amount
At 31 December 2022
At 31 December 2021
£000s
6,763
-
-
6,763
-
-
-
6,763
6,763
Development
costs
£000s
6,343
1,252
7,595
780
1,395
2,175
5,420
5,563
The additions in the year relate to product development services carried out on behalf of the company by its operating
subsidiaries.
98
Notes To The Company Financial Statements For The Year Ended 31 December 2022
9. Right-of-use assets
Valuation
At 1 January 2021
Additions
Termination of lease
Depreciation
At 1 January 2022
Additions
Termination of lease
Depreciation
At 31 December 2022
Motor vehicles
£000s
Total
£000s
56
31
(4)
(27)
56
-
(6)
(25)
25
56
31
(4)
(27)
56
-
(6)
(25)
25
10. Trade and other receivables
Trade and other receivables principally comprise prepaid overhead costs. The carrying amount approximates their fair
value.
11. Trade and other payables
Trade and other payables principally comprise amounts outstanding or accrued for services and ongoing costs. The
carrying amount approximates their fair value.
12. Borrowings
Details of the Group overdraft arrangements are set out in note 25 to the consolidated financial statements.
99
Notes To The Company Financial Statements For The Year Ended 31 December 2022
13. Lease liabilities
Valuation
At 1 January 2021
Additions
Interest expense
Repayments
At 1 January 2022
Termination of lease
Interest of expense
Repayments
At 31 December 2022
Current
Non-current
Motor vehicles
£000s
Total
£000s
53
29
4
(30)
56
(6)
4
(27)
27
18
9
53
29
4
(30)
56
(6)
4
(27)
27
18
9
In 2022 short term lease rentals expensed amounted to £Nil (2021: £Nil). There were no low value leases or variable
lease payments excluded from lease liabilities. This is not likely to significantly change in the year ahead.
100
Notes To The Company Financial Statements For The Year Ended 31 December 2022
Lease maturity
Within 1 year
In 2-5 years
14. Deferred tax
At 1 January 2021
Credit/(charge) to income
Other transfers
Prior year adjustment
At 1 January 2022
Credit/(charge) to income
Prior year adjustment
At 31 December 2022
15. Share capital
2022
£000s
20
9
29
2021
£000s
32
30
62
Accelerated tax
depreciation
£000s
-
82
(746)
-
(664)
30
(85)
(719)
Tax losses
Total
£000s
-
9
-
3
12
129
(12)
129
£000s
-
91
(746)
3
(652)
159
(97)
590
Details are set out in note 28 to the consolidated financial statements.
101
Notes To The Company Financial Statements For The Year Ended 31 December 2022
16. Note to statement of cash flows
Cash generated from/(used in) operations
Loss for the year
Net finance (income) / costs
Amortisation
Depreciation charge – right-of-use asset
Loss on disposal of right-of-use asset
Income Tax Credit
Share-based payment
Operating cash flows before movement in working capital
Decrease/(Increase) in receivables
Decrease in payables
Cash generated from operations
Tax paid / (received)
Interest paid
Net cash generated from operations
17. Financial instruments
2022
£000s
(936)
(18)
1,395
24
6
(240)
29
260
189
(999)
(928)
129
18
(781)
2021
£000s
(336)
15
780
27
6
(99)
32
425
(103)
(411)
(89)
-
(15)
(104)
The Company’s approach to the management of capital and market risks is set out in note 31 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 its bank overdraft facility. Interest is paid on its bank overdraft at
2.75% (2021: 2.30%) over base rate. A 1% rise/fall in interest rates would have decreased/ increased profit for the year
by an immaterial amount (2021: immaterial). The Company is not exposed to foreign currency risks.
102
Notes To The Company Financial Statements For The Year Ended 31 December 2022
Categories of financial instruments
Financial assets
Measured at amortised cost
Trade and other receivables
Amounts due from subsidiaries
Cash and cash equivalents
Financial liabilities
Measured at amortised cost
Bank overdraft
Trade and other payables
Amounts due to subsidiaries
18. Contingent liabilities
2022
£000s
196
2,373
-
2,569
1,237
81
4,387
5,705
2021
£000s
165
2,150
-
2,315
456
323
4,161
4,940
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 (2021: £Nil).
19. Related party transactions
Transactions with related parties consist of:
Sales to subsidiary companies
Management and licence charges
Pennant International Limited
Pennant Canada Limited
Pennant Australasia Pty Limited
Absolute Data Group Pty Limited
Pennant America Inc.
2022
£000s
1,333
718
488
-
87
2021
£000s
1,304
610
311
14
138
2,626
2,377
103
Notes To The Company Financial Statements For The Year Ended 31 December 2022
Purchases from subsidiary companies
Product development services*
Pennant International Limited
Pennant Canada Limited
Pennant Australasia Pty Limited
Pennant America Inc.
2022
£000s
549
233
413
57
1,252
2021
£000s
448
201
243
0
892
*capitalised as other intangible assets
Salaries and other expenses settled on behalf of the Company
Pennant International Limited
1,265
953
Acquisition of Intellectual Property Rights (included in Other Intangible Assets)
Pennant International Limited
Absolute Data Group Pty Limited
Purchase of 100% of share capital of Pennant America Inc.
Absolute Data Group Pty Limited
-
-
-
-
3,380
2,071
5,451
233
Intercompany balances between the Company and its subsidiaries at the year end were as follows:
104
Notes To The Company Financial Statements For The Year Ended 31 December 2022
Amounts due from subsidiaries
Pennant Rail Holdings Limited**
Pennant Canada Limited
Pennant Australasia Pty Limited
Pennant America Inc.
** previously Pennant Support & Development Services Limited
Amounts due to subsidiaries
Pennant International Limited
Pennant Canada Limited
Pennant Information Services Inc.***
Absolute Data Group Pty Limited
2022
£000s
1,385
57
743
188
2,373
1,417
-
579
2,391
4,387
2021
£000s
1,385
-
625
140
2,150
936
425
519
2,281
4,161
*** Balance denominated in USD and movement in 2022 represents movement in year on year closing exchange rate
only.
105
Shareholder Information & Financial Calendar
Shareholder enquiries
If you have an enquiry about the Company’s business, or about something affecting you as a shareholder (other than
queries that are dealt with by the Neville Registrars as registrar), you should contact the Company Secretary by letter
to the Company’s registered office or by email to cosec@pennantplc.co.uk
Share register
Neville Registrars maintain the register of members of the Company.
If you have any questions about your personal holding of the Company’s shares, please contact Neville Registrars using
the following details:
Neville House
Steelpark Road
Halesowen
B62 8HD
Telephone: 0121 585 1131
If you change your name or address (or we write to you and have mis-addressed the correspondence), please notify
the registrars in writing or contact them using the details above.
Financial calendar
Annual General Meeting – 7 June 2023
Expected announcement of results for the year ending 31 December 2023:
Half-year announcement - September 2023
Full-year preliminary announcement - April 2024
Daily share price listings
The Financial Times - AIM
106
Officers And Professional Advisors
Directors
P Cotton (Chairman)
P H Walker FCA (Chief Executive Officer)
D J Clements
M J Brinson (appointed 1 January 2023)
D Wilkinson (appointed 1 February 2023)
Secretary
D J Clements
Registered office
Unit D1
Staverton Connection
Old Gloucester Road
Cheltenham
Gloucestershire
GL51 0TF
Company number
03187528
Auditor
Bankers
Nominated Adviser and Broker
Mazars LLP
90 Victoria Street
Bristol
BS1 6DP
Barclays Bank Plc
Bridgewater House
Finzels Reach
Counterslip
Bristol
BS1 6BX
HSBC UK Bank Plc
2 The Promenade
Cheltenham
GL50 1LR
W H Ireland Ltd
24 Martin Lane
London
EC4R 0DR
107
ANNUAL REPORT & ACCOUNTS 2022