PENNANT
INTERNATIONAL
GROUP PLC
ANNUAL REPORT
& ACCOUNTS 2023
PENNANTPLC.COM
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 &
AMORTISATION
EMAR
EUROPEAN MILITARY AVIATION REQUIREMENTS
H1
H2
IBP
IPS
ILS
THE SIX MONTHS ENDED 30 JUNE 2023
THE SIX MONTHS ENDED 31 DECEMBER 2023
INTEGRATED BUSINESS PLAN
INTEGRATED PRODUCT SUPPORT
INTEGRATED LOGISTICS SUPPORT
OEM
ORIGINAL EQUIPMENT MANUFACTURER
Q1
Q2
Q3
Q4
22
THE THREE MONTHS ENDED 31 MARCH 2023
THE THREE MONTHS ENDED 30 JUNE 2023
THE THREE MONTHS ENDED 30 SEPTEMBER 2023
THE THREE MONTHS ENDED 31 DECEMBER 2023
CONTENTS
GLOSSARY
STRATEGIC REPORT
Group key financials
Chair’s statement
Chief Executive’s review
Chief Financial Officer’s review
Group strategic framework
Principal risks and uncertainties
About Pennant
GOVERNANCE
Board of Directors
Audit & Risk committee
Remuneration committee
Attendance
Operational governance
Financial control
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 financial position
Company statement of changes in equity
Company statement of cash flows
2
4
5
6-7
8-9
10-13
14
15-23
24-29
30
31-33
33
33
34
34
35
36-39
40
42-45
46
48
49-57
58
59
60
61-62
63
64-101
102
103
104
105
Notes to the company financial statements
106-115
Shareholder information & financial calendar
Officers & professional advisers
116
117
33
STRATEGIC
REPORT
MAXIMISING OPERATIONAL &
MAINTENANCE EFFICIENCY
OUR VISION
To be the leading systems support and training solutions company.
OUR MISSION
To ensure our customers' assets are available where they are needed,
when they are needed and that they work.
OUR STRATEGY
• Expand, to be first to market, with our end-to-end IPS software suite
• Grow our IPS services offering, through organic growth and
acquisition
• Optimise the Training Technology business
• Develop, expand and export the Pennant Rail offering
4
4
GROUP KEY FINANCIALS
OTHER HIGHLIGHTS
• Loss before tax £0.4 million (2022: loss before tax £1.4 million)
• Net assets £9.8 million (2022: £10.7 million)
• Basic loss per share of 2.53p (2022: basic loss per share of 2.45p)
• Unrelieved tax losses carried forward of £6.8 million (2022: £7.1 million)
• No final dividend recommended (2022: £NIL).
5
5
CHAIR'S
STATEMENT
FULL YEAR EXPECTATIONS MET,
RETURN TO OPERATING PROFIT,
RECORD GROSS MARGIN
I’m pleased to present my first annual report and accounts
since being appointed Chair of Pennant International
Group plc post Period-end, and excited by the opportunity
before us.
The Group has made significant progress in the year
ended 31 December 2023 (the “Period”), meeting market
expectations and achieving a return to operating profit,
with an adjusted EBIT profit of £0.4 million for the year
(2022: EBIT loss of £1.0 million) and an adjusted EBITDA
profit of £2.2 million (2022: EBITDA of £1.0 million).
The Group’s performance continues to benefit from,
and is primarily the result of, Pennant’s technology and
software strategy shifting the Group’s focus to delivery
of higher value services. The Group’s ongoing focus on
higher margin revenues from software and technical
services continues to be reflected in the results. Therefore,
despite relatively consistent revenues, totalling £9.6
million in 2023 (2022: £10.2 million), the strengthened
revenue mix and improved margin has delivered notable
improvements already.
STRATEGY
Pennant’s strategy 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, by expanding the market coverage
through the development of the Group’s market-leading
proprietary software suite and associated services.
The Group also continues to seek other strategic
opportunities to partner with or acquire complementary
businesses which will accelerate the Group’s strategy.
During the Period the Group announced the completion
of the acquisition of Track Access Productions and
its strategic partnership with Aquila Learning Ltd. The
acquisition of Track Access Productions - (see pages 26 &
27) - is aligned with the Group’s software and technical
services strategy and has enhanced the Group’s rail
capability, diversifying into non-defence growth markets.
Our partnership with Aquila Learning Ltd is designed to
offer our customers an end-to-end integrated software
platform to maximise operational efficiency.
KEY FINANCIALS
For the year ended 31 December 2023, the Group recorded
consolidated revenues of £15.5 million (2022: £13.7
million) again underpinned by the Group’s contracted
revenue base. For a comprehensive breakdown of
the Group’s programme deliveries please refer to the
operational review on page 9.
The Group’s gross margin for the year
increased
significantly to 50% (2022: 42%) due to the strategic shift
towards software and higher value services. As a result,
the Group posted a consolidated adjusted EBITA profit of
£1.7 million (2022: EBITA £0.5 million) which is in line with
market expectations.
The Group’s net debt at the Period-end was £1.9 million
(2022: net debt of £0.4 million) which reflects, amongst
other things, the continued investment in the integrated
software suite, acquisition related expenses and expenses
related to aborted corporate activity.
DIVIDEND
The Directors believe that it continues to be both prudent
and in the Company’s and shareholders’ best interests
to retain cash for working capital and focus on delivering
growth.
The Board will therefore not be recommending the
payment of a final dividend for the year ended 31
December 2023.
666
OUR PEOPLE
To deliver a successful performance in 2024, the Group
must have a committed workforce, appropriately
incentivised and motivated. I would like to 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.
The Group is constantly seeking ways to attract, retain
and reward the specialist skills that we need in order to
deliver. It is our people we rely on to deliver our strategy
and 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’ (further detailed on page 43). 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 is also committed to maintaining robust
corporate governance. It has worked closely with its
advisors and in 2023 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 Principal Risks and Uncertainties section
of the Annual Report.
BOARD CHANGES
During the Period and post Period-end there were a
number of Board changes.
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.
CHAIR’S STATEMENT
in January 2023, the Group announced the
Also
appointment of Deborah Wilkinson as Non-Executive
Director with effect from 1 February 2023.
Post Period-end, I joined the Group as a Non-Executive
Director and Chair designate with effect from 7 February
2024.
On 14 May 2024, Phil Cotton stepped down as Chair
and announced his intention to retire as Non-Executive
Director following the Company’s next Annual General
Meeting. I assumed the role of Chair on 14 May 2024
upon Phil stepping down. On behalf of the Board, I would
like to thank Phil Cotton for his five years of service and
we wish him all the best for the future.
Further details on the Board members can be found in the
Governance & Risks section of this document.
CURRENT TRADING AND OUTLOOK
I join the Group at a time when global economic and
geo-political trends provide a supportive backdrop for
Pennant’s capabilities. Pennant has few competitors
that can offer the end-to-end solution that we provide,
and defence forces, organisations and OEMs continue to
prefer to outsource these services. Additionally, examples
of key drivers currently include growing global defence
budgets, increasing complexity of programmes, and an
increasing need for sovereign capabilities, all of which
stands to our benefit.
Post Period-end, the Group started the year well. Despite
delayed order conversion, as previously announced, we
have observed a material increase in activity in our key
markets and are well placed to capitalise.
The strategic investment in our integrated software suite
and post Period end release of GenS Version 3.0, brings to
market a leading software solution aligned to addressing
the challenges that operators face in managing, modelling
and utilising vast amounts of complex systems data.
The Board believes that this integrated product suite,
coupled with 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 provide opportunities for long-
term success.
Approved by the Board on 20 June 2024
and signed on its behalf
I Dighé
Chair
77
7
CHIEF
EXECUTIVE’S
REVIEW
STRATEGY DELIVERING;
IMPROVED PERFORMANCE
In 2023 we continued the implementation of the Group’s
strategic plan: a programme of investment in the Group’s
proprietary software suite designed to provide our
customers with a powerful market-leading toolset that
allows users to manage, model and utilise vast amounts
of complex systems data, with the objective of increasing
revenue from software and higher value technical services
and recurring contracts.
The impact of this strategy is now visible in our financial
performance with the Group achieving an operating profit
and meeting the market’s expectations for the full year.
Pennant has continued to invest in its integrated software
suite, acquired a complementary business and agreed
beneficial strategic partnerships. The implementation of
our growth strategy is already delivering improved order
lead times, revenue recognition and margins.
STRATEGIC SOFTWARE INVESTMENT
In
line with the Group’s core strategic objectives,
investment in our proprietary software suite has continued
during the year targeting growth in capability and with
the aim of expanding the Group’s market offering.
During the Period the Group invested circa £1.4 million
in the development of its new and enhanced suite of
software solutions with the aim of improving the overall
customer proposition. The continued development of the
new GenS software solution (OmegaPS successor product)
was accelerated with release of version 3.0 achieved in
April 2024.
The investment programme now moves into the next
phase, which will see all three of the Group’s software
applications – GenS, Analyzer and R4i – being integrated
into one, holistic solution with release scheduled for Q4
2024.
Pennant anticipates that it will continue to invest in its
integrated software suite during 2024 and expects the
level of investment to be in line with 2023.
RAIL ACQUISITION
During the Period, 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 Group’s strategy,
in
particular by enhancing recurring revenues and further
diversifying into civilian markets, while also enhancing
the Group’s existing rail capabilities and complementing
Pennant’s Track Access Services business. In the Period,
it delivered revenues of £342k and profits before tax of
£155k (excluding management charges of £68k) over
approximately 9 months. More information can be found
on pages 26 & 27.
STRATEGIC PARTNERSHIP
In September 2023, the Group announced a strategic
partnership with Aquila Learning Ltd to collaborate on
a number of projects, including the integration of the
ALaRMS – Aquila Learning (and Requirements /Resource/
Record) Management System into the market leading
Pennant IPS software suite (GenS, Analyzer and R4i).
The partnership is looking to provide users with additional
capabilities to our shared customers, including an end-to-
end S-Series software toolkit.
88
REGIONAL OPERATIONAL REVIEW
The table below highlights Pennant’s regional revenue for
2022 and 2023.
REGIONAL REVENUE
2023
£'000
8,821
4,051
2,663
15,535
2022
£'000
5,557
4,985
3,144
13,686
UK & EUROPE
NORTH AMERICA
INDO-PACIFIC
TOTAL
UK & EUROPE
Revenue generated in the UK & Europe region showed
strong growth during 2023 at £8.8 million (2022: £5.6
million). The current geopolitical backdrop and recent
events have highlighted the importance of national
security and strategic
in capability, and
current deficits in preparedness. Therefore, the outlook
for Pennant’s key markets appears to be improving.
investment
The revenue in the region was underpinned by contracts
with Boeing Defence UK, HMRC and with rail operators,
which grew as result of the enhanced rail capability from
the acquisition.
In terms of operational delivery, the region had a
successful Period with notable highlights including the
on-time achievement of several engineering milestones
on the Boeing Defence UK contract which continues to
progress well in 2024 and the successful release of the
annual update to the HMRC Basic PAYE software tool
where Pennant is responsible for the development and
support of the tool.
With the Group’s increasing software and higher value
services focus bringing reduced reliance on resource-
intensive hardware engineering activities the Board
decided to market for sale one of the Group’s previously
leased Cheltenham properties with the sale completed
post Period-end for £0.5 million. The profit generated on
this disposal was £231k and further details are provided
at note 36 to the Financial Statements.
NORTH AMERICA
CHIEF EXECUTIVE'S REVIEW
respect of Pennant’s long-term contract with the Canadian
Department of National Defence.
In October 2023, after 23 years of single-source
procurement, the contracting mechanism for the various
tasks under the framework contract was changed to a
competitive tender process per each individual task. To
date, Pennant has successfully tendered and secured 100%
of the 8 tasks competed which account for approximately
50% of historic annual recurring revenues. Pennant will
continue to tender for further opportunities as they are
competed as the region looks to restore the level and
long-term visibility of revenues that the legacy contract
provided.
INDO-PACIFIC
The Indo-Pacific business enjoyed a solid year but was
impacted by customer budget phasing which resulted
in revenue delays in the Period with resultant revenues
reducing from £3.1 million to £2.7 million. It is expected
that this temporary timing-related issue will unwind
throughout 2024.
Operationally, Pennant’s existing long term technical
services contract in Wagga Wagga continued to perform
well and was extended into 2027 (year 14 of a 20 year
framework). The contract was expanded in the Period
with the establishment of a Composites Training Facility in
the region which is expected to deliver recurring revenues
for at least 5 years
DELIVERING ON OUR STRATEGY
The software investment programme now moves into
the next phase, which will see all three of Pennant’s core
applications – GenS, Analyzer and R4i – being integrated
into one, holistic solution which will provide customers
with a powerful, market leading toolset.
This investment continues the strategy to drive higher
margin, recurring software revenues and higher value
technical services, which when aligned with a favourable
strategic backdrop provide a firm platform for continued
progress in the current year.
Approved by the Board on 20 June 2024
and signed on its behalf
The North America business saw revenues decline to £4.1
million from £5.0 million in 2022. This was driven by two
factors; 1) 2022 included a significant perpetual software
sale and 2) a Government-driven procurement change in
P H Walker
Director
99
99
CHIEF
FINANCIAL
OFFICER'S REVIEW
RECORD GROSS MARGINS & COST CONTROL;
RETURN TO OPERATING PROFIT
FINANCIAL REVIEW
The results and a review of the key financial performance
indicators of revenue and profitability are set out below.
PERFORMANCE
Group revenue for the year increased by 14% and was
delivered in line with expectations at £15.5 million (2022:
£13.7 million) with a marginal weighting towards the
second half.
There was further growth in the gross profit margin for
the Period to 50% (2022: 42%), a record for the Group.
This reflects the change in the sales mix in the Period
and shift in the strategic direction of the Group towards
software-related products and higher value services.
Despite inflationary cost pressures, administrative costs
were held broadly in line with 2022 with a 3.8% increase
at £7.6 million (adjusted for £325k of exceptional costs)
(2022: £7.3 million).
The improved margins coupled with the controlled cost
base, resulted in a return to profit at an operating margin
level of £0.1 million (2022: operating loss £1.0 million)
and an adjusted EBITA profit of £1.7 million (2022: EBITA
profit £0.5 million).
£M
REVENUE
GROSS PROFIT
GROSS PROFIT %
OTHER INCOME
ADMIN COSTS
OPERATING PROFIT / (LOSS)
AMORTISATION
EBITA
DEPRECIATION
EBITDA
1010
H1
7.1
3.3
47%
0.1
(3.6)
(0.2)
0.7
0.5
0.2
0.7
H2
8.4
4.4
52%
0.2
(4.3)
0.3
0.6
0.9
0.3
1.2
2023
15.5
7.7
50%
0.3
(7.9)
0.1
1.3
1.4
0.5
1.9
2022
13.7
5.8
42%
0.5
(7.3)
(1.0)
1.5
0.5
0.6
1.1
A summary of the income statement adjusted for exceptional costs is as follows:
CHIEF FINANCIAL OFFICER’S REVIEW
£M
REVENUE
GROSS PROFIT
GROSS PROFIT %
OTHER INCOME
ADMIN COSTS
OPERATING PROFIT / (LOSS)
AMORTISATION
EBITA
DEPRECIATION
EBITDA
2023
15.5
7.7
50%
0.3
(7.9)
0.1
1.3
1.4
0.5
1.9
EXCEPTIONAL COSTS
ADJUSTED
-
-
-
-
0.3
0.3
-
0.3
-
0.3
15.5
7.7
50%
0.3
(7.6)
0.4
1.3
1.7
0.5
2.2
Exceptional costs are non-recurring, and include transaction and integration costs associated with the acquisition of
Track Access Productions Limited in April 2023, and professional costs and expenses associated with another, aborted
transaction.
REVENUE ANALYSIS
An analysis of the Group’s revenue by product group is as
follows:
SOFTWARE LICENCES &
PRODUCTS
2023
£'000
1,111
2022
£'000
1,377
SOFTWARE MAINTENANCE
1,589
1,458
SOFTWARE AND TECHNICAL
SERVICES
6,873
7,410
SUB-TOTAL SOFTWARE AND
SERVICES
9,573
10,245
ENGINEERED SOLUTIONS
5,229
2,410
Revenues contributed by Software and Services have
reduced to £9.6 million in 2023 (2022: £10.2 million)
representing 62% of the total revenue in the Period (2022:
75%). The reduction is predominantly due to the change in
procurement methodology in North America (as outlined
in the Chief Executive’s Review on page 9). The ongoing
software product sales from this and prior periods have
resulted in increased maintenance revenues in the Period
which will be recurring in nature.
Recurring revenues remained broadly in line with the
prior year at £7.3 million (2022: £7.7 million) in 2023.
The recurring revenues associated with technical services
increased by 10% year-on-year, partly mitigating the
software services reduction in North America. Recurring
revenues represented 47% (2022: 56%) of the total
revenue for the Period due to the increased revenues on
non-recurring engineered solutions in FY2023.
GENERIC PRODUCTS
733
1,031
SOFTWARE AND SERVICES
SUB-TOTAL TRAINING
SOLUTIONS
5,962
3,441
TOTAL GROUP REVENUE
15,535
13,686
SOFTWARE LICENCES & PRODUCTS
The software product sales in 2023 continued to be
predominantly 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.
1111
1111
CHIEF FINANCIAL OFFICER’S REVIEW
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
software is used to support the lifecycle of complex assets
which can span decades.
SOFTWARE AND TECHNICAL SERVICES
The predominantly recurring software and technical
services revenue stream has reduced from 75% of the
Group’s revenues in 2022 to 62% in 2023 for the reasons
outlined above. The revenues are typically recognised on
a consumption of benefit basis over time.
TRAINING SOLUTIONS
ENGINEERED SOLUTIONS
As per the expectation stated in the Annual Report
and Accounts for FY2022, revenues associated with
engineered solutions have increased significantly from
£2.4 million in 2022 to £5.2 million in 2023. This is
reflective of the operational stage of completion on the
programmes which form the basis of this revenue stream
which is recognised over time under IFRS 15.
GENERIC PRODUCTS
The revenue recognition for generic products is at a point
in time (typically on delivery) under IFRS 15. Revenues for
these products in 2023 was £0.7 million compared to £1.0
million in 2022.
CASHFLOW
Cash generated from operations amounted to £1.3 million
(2022: £2.6 million). This reflects milestone achievements
on major programmes in 2023 and associated cash
in
payments being received. The cash generation
operations has been deployed to support the Group’s
ongoing strategic investment in the integrated software
suite and the in Period acquisition of Track Access
Productions.
The Group had net borrowings at the year-end of £1.9
million (2022: net borrowings of £0.4 million) excluding
lease liabilities.
1212
Post Period-end, the Group has renewed its overdraft
facility with its bankers, HSBC, at £3 million. Furthermore,
in order to support the required strategic investment in
our integrated software suite, in May 2024 the Group
utilised its 15% placing authority to raise circa £1.15
million after fees. The Board also confirmed an intention
to subscribe for a further £200k of shares in aggregate,
subject to a further placing authority being approved
at the 2024 AGM. Assuming the Board’s subscription
proceeds as expected, the total proceeds after fees will
be £1.35 million. These funds will support the planned
capital investment in the integrated software suite.
The Group has an active pipeline of opportunities spanning
the entire spectrum of product and services. Securing
these pipeline orders will underpin the cashflows of the
Group in 2025 and beyond.
RESEARCH & DEVELOPMENT
Research and development repayable tax credits expected
to be claimed in the UK for the Period amount to £0.3
million (2022: £0.3 million) on qualifying expenditure of
£1.7 million (2022: £1.4 million). The claims mostly relate
to the development of innovative new software products.
TAXATION
The Group’s tax position shows a tax charge of £566k (2022:
tax credit of £464k). The tax charge in 2023 is primarily
due to deferred tax being partially derecognised based on
the amount of taxable profits in the profit forecasts. This is
a non-cash adjustment. Deferred tax has been recognised
to the extent that future forecasts (excluding a selection
of pipeline opportunities totalling £18 million aligned to
timing uncertainties in the extreme but plausible scenario
in the Going Concern scenario analysis in note 3) support
the carrying value. As a result, UK trading losses with a
gross value of £1.3 million have not been recognised
within the deferred tax asset disclosed in note 26. After
the approval of the Financial Statements, if the expected
conversion of the pipeline occurs, a deferred tax asset
in relation to these losses may be recognised or there
may be a reduction in any taxable profits made in the UK
entities in 2025. The unrecognised deferred tax asset in
relation to the above losses amounts to £324k.
CHIEF FINANCIAL OFFICER’S REVIEW
A deferred tax asset in relation to temporary timing
differences within Pennant America Inc. has been
recognised on the basis of taxable profit over the three
years to 2026. As a result, temporary timing differences
of £812k have not been recognised as part of the
deferred tax asset. If future profits exceed the current
forecast an additional deferred tax asset of £226k may
be recognised.
The Group has total unrelieved UK tax losses carried
forward of £6.8 million (2022: £7.1 million).
LOOKING FORWARD
With the development of the integrated software suite
nearing its conclusion, the Group is looking forward
to realising the returns on this investment, and the
associated profit and generation of free cashflows which
strengthen the balance sheet. As ever, this will depend
on winning new orders and retaining existing customers
(and note 3 to the financial statements explains more)
but with an active pipeline and favourable market
conditions, the Group has confidence as to the way
ahead..
M J Brinson
Director
131313
GROUP STRATEGIC
FRAMEWORK
MAXIMISING OPERATIONAL &
MAINTENANCE EFFICIENCY
OUR STRATEGIC FRAMEWORK
Our strategy is comprised of four key areas of focus that will help us achieve
our vision and mission. It is centred on maintaining and growing our core
capabilities and securing growth opportunities through advancing our
strategic directives.
STRATEGIC DIRECTIVES
• Expand, to be first to market, with our end-to-end IPS software suite
• Grow our IPS services offering, through organic growth and acquisition
• Optimise the Training Technology business
• Develop, expand and export the Pennant Rail offering
OUR STRATEGY IN ACTION
• Development of GenS (successor product of OmegaPS)
• Integration and acceleration of Pennant core software applications into
one, holistic software suite to create the next generation of IPS software
solutions
• Acquisition of Track Access Productions to develop and expand the Rail
offering
1414
PRINCIPAL RISKS AND UNCERTAINTIES
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.
1515
RISK MANAGEMENT REVIEW
DESCRIPTION OF RISK
POTENTIAL IMPACT
MITIGATION AND CONTROL
DEFENCE FOCUS
reliant
heavily
The Group has historically
been
on
Government defence spending
by the UK and other states
(particularly aviation related),
with circa 80% of its revenues
for 2023 deriving from defence
contracts.
reduction
A
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.
Indeed, the UK’s annual defence budget
is
expected to increase to 2.5% of GDP by 2030.
1616
DESCRIPTION OF RISK
POTENTIAL IMPACT
MITIGATION AND CONTROL
RISK MANAGEMENT REVIEW
PRIME DEPENDENCE
The Group currently depends
to a large extent on prime
contractors awarding it sub-
the
contracts
training solution on
larger
programmes.
to deliver
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.
Relationships are developed and maintained with
primes at all organisational levels, from technical
leads to programme managers to executives.
Just as
importantly, direct sales, particularly
of software products (and related consultancy
services) are pursued wherever possible with
direct sales regularly being secured in relation to
integrated product support software and services.
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.
1717
RISK MANAGEMENT REVIEW
DESCRIPTION OF RISK
POTENTIAL IMPACT
MITIGATION AND CONTROL
ORDER INTAKE CYCLE
With such long timelines to
win major contracts (and
related risks of delays within
it can be
that timeline),
difficult to win sufficient work
within a particular period,
on
meaning
revenue expectations and the
management of resources.
challenges
to
comply with
Failure
and
relevant
regulation
the
Group being unable to sell its
products.
legislation
results
in
The Group and its officers
liable
are found criminally
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.
The Group follows diligently the prescribed
processes in order to win contracts, and engages
at all relevant levels to understand, shape and
secure the work.
However, there is a limit to Pennant’s ability to
accelerate awards, given the OEM and defence
department constraints which inevitably apply to
such processes.
The most important mitigant is the Group’s efforts
(over a number of years, and which continue)
to build up a solid base of recurring software
and services revenues with a view to these
revenues forming an increasing proportion of the
Group’s overall turnover and thereby mitigating
reliance on, and exposure to, the timelines of the
procurement process on larger defence projects.
The Group has an experienced Commercial
team with considerable export expertise. The
Commercial & Risk Director is a qualified lawyer
legal advice to the Group as
and provides
appropriate.
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.
larger
‘Defence
focus’
Related to
and
is
‘Prime dependence’,
the length of time that it can
take for Pennant to convert an
opportunity into a contract.
On
‘engineered-to-
order’ programmes, it can take
years from the initial customer
request for a proposal to the
award of a contract to Pennant.
Such lengthy timelines can be
a product of the prescribed
procurement process
itself
and/or delays ‘up stream’ on
vehicle/platform
the main
contract.
LEGAL & COMPLIANCE
BURDEN
in which
In the sectors
it
operates, the Group is subject
to considerable legislation and
regulation.
laws;
in selling
For example:
its
training equipment overseas,
the Group must comply with
UK export control
in
receiving and using certain
it must comply with
data,
regulations;
the US
in designing
its hardware
trainers, it must comply with
various EU and UK safety laws.
ITAR
the Group
Of course,
in
operating overseas is subject
to the laws of relevant foreign
jurisdictions, whether
is
aware of them or not.
it
1818
DESCRIPTION OF RISK
POTENTIAL IMPACT
MITIGATION AND CONTROL
RISK MANAGEMENT REVIEW
CONTRACT PRICING AND
DELIVERY
The Group’s key contracts
are often on a fixed price
with a fixed delivery timeline.
Performance
those
contracts may be reliant on
external dependencies.
of
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
(e.g. a
factors
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
claim
compensation (including, on
some contracts,
liquidated
damages).
customer
to
delivered
mispriced
contract,
A
in
although
its terms
compliance with
and timeline, results in the
Group failing to realise the
desired profit on carrying out
such work, with an associated
negative
the
Group’s
financial
performance.
impact on
overall
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.
1919
RISK MANAGEMENT REVIEW
DESCRIPTION OF RISK
POTENTIAL IMPACT
MITIGATION AND CONTROL
CUSTOMER
DEPENDENCIES
In delivering its ‘engineered-
the
to-order’ programmes,
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.
CONTRACT PROFILES
The Group’s turnover, profits
and cashflows, particularly in
the Training Solutions business
line, can become significantly
the timely
dependent on
delivery of a small number of
high-value contracts.
If delivery of such contracts
it can cause
is delayed,
significant financial effects on
the Group (particularly when
judged by annual reporting).
Delays on delivery lead to a
negative perception amongst
stakeholders that the Group’s
business is inconsistent and
prone to ‘lumpy’ revenues.
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.
contracts
generate
Large
significant working capital
demands which,
they
cannot be met, jeopardise
delivery of the contract (and
continuance of the business
generally).
if
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.
2020
DESCRIPTION OF RISK
POTENTIAL IMPACT
MITIGATION AND CONTROL
RISK MANAGEMENT REVIEW
LIQUIDITY RISK
Liquidity risk is the risk that
the Group does not have
its
sufficient cash to meet
financial obligations as they
fall due, particularly due to the
risks described in the Contract
profiles risk above.
The Group may not be able
to meet
contractual
its
obligations to customers or
make payments when due
to
employees,
tax authorities and other
stakeholders.
suppliers,
The Directors regularly review the Group’s forecast
working capital requirements, cash flow, current
borrowing facilities and other funding options
available to the Group. This analysis includes
scenario testing of adverse factors and ‘reverse
stress testing’ of the Group’s cash flows. The
Directors assess the sensitivities of the cashflow
forecasts and consider whether there are any
uncertainties that could lead to the cashflow
forecasts becoming more adverse than in each
modelled scenario. The Directors also consider the
availability and likelihood of potential mitigants
(overdraft facility extensions and equity placings)
should the need arise.
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
is
of customer contracts
delayed or prevented, with
consequent potential adverse
effects on revenue.
‘hacking’ of, or a
The
cyber-attack
successful
the
Company’s
against,
to serious
leads
systems
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.
2121
RISK MANAGEMENT REVIEW
DESCRIPTION OF RISK
POTENTIAL IMPACT
MITIGATION AND CONTROL
MANAGING RESOURCES
The Group does not have the
appropriate facilities in which
to build its goods and delivery
is delayed
of
contracts
or prevented,
to
leading
negative impacts on revenue
and reputation.
is unable
The Group
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).
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.
face challenges
As the Group looks to further
recover and grow its business,
in
it may
‘ramping up’ to meet demand,
or ‘scaling back’ while orders
are awaited. Equally, as the
business mix of the Group
evolves,
appropriate
resource profile will also likely
continue to evolve.
the
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
including engineering
skills,
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.
2222
DESCRIPTION OF RISK
POTENTIAL IMPACT
MITIGATION AND CONTROL
RISK MANAGEMENT REVIEW
COMMERCIALISING THE
INTEGRATED SUITE
through
With the significant investment
made by the Group in GenS and
the integrated software suite,
it is critical to ensure that,
investment
over time, this
the
realised
is
successful commercialisation
of the suite.
This
commercialisation
sub-optimally
could
executed due to one or more
of the following (or other)
factors:
inadequate product
functionality; misjudging the
market need; ineffective sales
and marketing; under or over
pricing.
be
Disappointing sales lead to
an impairment of the related
causing
asset,
intangible
financial losses to the Group.
The Group’s credibility in the
integrated product support
field is damaged as a result,
leading to the loss of ancillary
professional services work.
The Integrated Suite conforms to various industry
standards and comprises products with a long
history in their respective niches, so it is unlikely
that the underlying customer need has been
seriously misjudged.
Early customer engagement has been ongoing
since 2022 regarding GenS and, since 2023,
regarding the Integrated Suite. Feedback from
customers has been positive and indicates that the
market for a holistic, end-to-end solution is real.
The development of GenS and the Integrated Suite
has been performed by skilled software architects
and engineers
industry-
recognised development processes, including in
relation to progressive testing.
in accordance with
New resource is being hired to support the existing
Sales and Marketing personnel to ensure that
these efforts are optimised, building on the early
customer engagement.
Detailed financial and pricing models have been
prepared, substantiating the proposed pricing
structure (and forecast revenues relative to the
quantum of the intangible asset) which has also
been carefully sense-checked against detailed
multi-year records and knowledge of
legacy
pricing.
2323
ABOUT PENNANT
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 for 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 movement to performance based contract has pushed the responsibility of operational availability
modelling and costing onto the OEM’s;
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 (Boston).
The Company was admitted to trading on the AIM market in 1998 and has traded as a public company ever since.
2424
ABOUT PENNANT
PRODUCTS AND SERVICES
Pennant is a market leading provider of systems support and training solutions to defence departments and major
OEMs worldwide to maximise operational and maintenance efficiency.
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 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.
• Analyzer 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 Pennant’s
three core applications - GenS, Analyzer and R4i – being integrated, into one holistic solution which will
provide users with a powerful market-leading toolset to manage, model and utilise vast amounts of
systems data in 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.
2525
ABOUT PENNANT
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
Preventative and corrective maintenance
Instruction and training delivery
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
In 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 period from the date of acquisition to 31 December 2023 the acquisition delivered revenues of £342k and
profits before tax of £155k, excluding management charges from the Company of £68k.
SUMMARY OF THE KEY TERMS OF THE ACQUISITION
•
The consideration payable in respect of the Acquisition comprised 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”).
2626
ABOUT PENNANT
•
The initial consideration payable was 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 was settled, based on verified estimates of the Cash Free, Debt Free
Adjustment, along with the balancing payment of circa £160,000.
• The balance of the overall consideration, comprising a deferred payment of £175,500 (being the remaining 30%
of the enterprise value) was settled in April 2024.
• The Acquisition was 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 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
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.
2727
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 29 (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 Chair 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 together
on a 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 43 of this report. With global economic challenges, and in particular
inflationary pressures, employee welfare was very much at the forefront of Directors’ minds during 2023
and the details on page 43 explain how the Company has sought to engage with, and properly take account
of, its valued employees. 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 a comprehensive employee opinion
survey which encompassed all regions and business units, with the results fed back to the Board and
changes enacted in response.
2828
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
monitoring 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 20 June 2024
and signed on its behalf
P H Walker
Director
2929
GOVERNANCE
THE GROUP IS COMMITTED TO GOOD
CORPORATE GOVERNANCE AND THIS SECTION
OF THE ANNUAL REPORT DETAILS THE GROUP’S
CURRENT GOVERNANCE ARRANGEMENTS.
3030
CORPORATE GOVERNANCE REVIEW
The Board has three 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: expand
and be first to market with our end to end software
suite, grow our IPS service offering; optimise the training
technology business; and develop, expand and export the
Pennant Rail offering. See page 14 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 15 to 23.
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/investors/
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 Chair, 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 Chair, 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 Chair). The Chair 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 Chair having regard to the current composition of
the Board and taking into account corporate governance
guidelines and business requirements. In matters relating
to the Chair’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/
investors) 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 23
February 2024.
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).
3131
CORPORATE GOVERNANCE REVIEW
THE DIRECTORS
IAN DIGHÉ
Mr Dighé (68) is an independent Non-Executive Director
and the Company’s Chair. He was appointed to the Board
on 7th February 2024 and became Chair on 14th May 2024.
He is a member of the Audit & Risk Committee and the
Remuneration Committee.
Mr Dighé has significant
listed company and City
experience, gained throughout his executive career with
a particular focus on the investment banking, corporate
broking, asset management and closed-end funds sectors.
In addition, he is experienced in developing boards and
senior management teams.
Mr Dighé was a co-founder of Bridgewell Group plc and
Chair of Miton Group plc from February 2011, overseeing
the successful refinancing and subsequent growth of
the group, before he retired from the Miton board in
December 2017.
Mr Dighé is currently Chair of The Investment Company
plc and an independent director of Seneca Growth Capital
VCT plc. He is also a director of a number of private
companies and charities.
PHILIP COTTON
Mr Cotton (65) is an independent Non-Executive Director.
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 Chair.
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 chairs the Audit Committee of World Sailing,
which is the global governing body for the sport of sailing.
Mr Cotton retires as a Director at the upcoming AGM.
DEBORAH WILKINSON
Ms Wilkinson (49) 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 (44) 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 (44) 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.
3232
CORPORATE GOVERNANCE REVIEW
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, Chair, the Executive Directors,
the Company Secretary and such other members of the
Group’s Executive management as it is designated to
consider.
The Committee also reviews and approves the Executive
Directors’ proposals (if any) following annual review of
employee pay and benefits.
Mr Clements also acts as Company Secretary to all Group
companies, advising the Chair 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 (37) 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.
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.
3333
CORPORATE GOVERNANCE REVIEW
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 2023 were as follows:
PHILIP COTTON
PHILIP WALKER
DAVID CLEMENTS
MICHAEL BRINSON
DEBBIE WILKINSON
BOARD
7/7
7/7
7/7
7/7
7/7
AUDIT & RISK
COMMITTEE
3/3
REMUNERATION
COMMITTEE
1/1
-
-
-
3/3
-
-
-
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/investors.
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, the Director of
Technology & Innovation and the Head of IPS and Strategic Development.
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.
3434
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.
3535
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 in respect of the 2023 financial year (the scheme is
a cash bonus scheme which pays out upon the Group meeting or exceeding its financial targets for the year). Directors’
emoluments in respect of 2023 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
20 June 2024
3636
REMUNERATION REPORT
DIRECTORS’ REMUNERATION (AUDITED)
SALARY
BONUS
BENEFITS
AND CAR
ALLOWANCE
PENSION
TOTAL
2023
2022
£'000
£'000
£'000
£'000
£'000
£'000
P H WALKER
D J CLEMENTS
P COTTON
M J BRINSON
(APPOINTED 1 JANUARY 2023)
D WILKINSON
(APPOINTED 1 FEBRUARY 2023)
J PONSONBY
(UNTIL 22 OCTOBER 2022)
M SKATES
(UNTIL 30 JUNE 2022)
226
162
54
140
40
-
-
41
29
-
25
-
-
-
18
14
-
11
-
-
-
23
16
-
14
-
-
-
308
221
54
190
40
-
-
622
95
43
53
813
305
218
50
-
-
60
123
756
Pension contributions shown above are pension payments into the Pennant International Group Plc Pension Scheme,
a defined contribution scheme.
There were 850,000 share options held by the Directors in office at the end of 2023 (2022: 850,000) as further
particularised on the following tables. There were no share options granted to Directors during the period.
SERVICE CONTRACTS
There are no Directors’ service contracts (or contracts for services) with notice periods in excess of one year.
3737
REMUNERATION REPORT
DIRECTORS AND THEIR INTERESTS (AUDITED)
The following Directors have held office since 1 January 2023 except where indicated otherwise and their beneficial
interests in the ordinary shares of the Company were as stated below:
31 DECEMBER 2023
5P ORDINARY
SHARES
31 DECEMBER 2022
5P ORDINARY SHARES
NUMBER
NUMBER
P H WALKER
D J CLEMENTS
P COTTON
M J BRINSON
D WILKINSON (APPOINTED 01 FEBRUARY 2023)
73,145
84,508
18,633
44,624
-
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
D WILKINSON (APPOINTED 01 FEBRUARY 2023)
TOTAL
2023
NUMBER
500,000
300,000
-
50,000
-
850,000
65,645
77,008
18,633
37,124
-
2022
NUMBER
500,000
300,000
-
50,000
-
850,000
3838
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
No unapproved options were held by Directors at 31 December 2023.
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.
3939
AUDIT & RISK COMMITTEE REPORT
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 2023 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 2023 financial statements
Following a competitive tender process led by the Committee, Evelyn Partners LLP have been selected as the Group’s
new auditor and a resolution to appoint them as auditor to the Group will be proposed at the AGM. Accordingly, Forvis
Mazars LLP will retire from office at the AGM and the Group would like to express our gratitude for their service over
the last 17 years.
Deborah Wilkinson
Chair
Audit & Risk Committee
20 June 2024
4040
REMUNERATION REPORT
4141
DIRECTORS’
REPORT
THE DIRECTORS PRESENT THEIR REPORT AND THE
AUDITED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 31 DECEMBER 2023.
GENERAL INFORMATION
DIVIDENDS
The parent and ultimate parent company of the Group
is Pennant International Group plc (the “Company”)
which is a public company limited by shares, domiciled in
the United Kingdom and incorporated under the law of
England and Wales.
The Company’s registered office address
is Unit
D1, Staverton Connection, Staverton, Cheltenham,
Gloucestershire GL51 0TF.
DIRECTORS
The following Directors held office during the Period:
Philip Cotton (Chair & Non- Executive Director)
Philip Walker (CEO)
David Clements (Commercial and Risk Director)
Michael Brinson (CFO) – appointed 01 January 2023
Deborah Wilkinson (Non-Executive Director) – appointed
01 February 2023
The following Director has been appointed post Period-
end:
Ian Dighé (Chair designate and Non-Executive Director) –
appointed 07 February 2024
PRINCIPAL ACTIVITIES
The principal activity of the Company is the provision of
management services to the Group.
The principal activities of Group companies during the
year were the supply of integrated training and support
software and solutions, products and services, principally
to the defence, rail, aerospace and naval sectors and to
Government Departments.
No dividends were paid during the year (2022: £NIL). As
highlighted in the Chair’s Statement, the Board is not
recommending the payment of a final dividend in respect
of the year ended 31 December 2023.
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, however
have noted the following uncertainties in relation to Going
Concern:
•
•
•
the timing of contractual delivery,
the timing of pipeline conversion currently
forecasted at the end of 2024; and
the availability of adequate borrowing facilities for
the duration of the review period
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 24 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 including the uncertainties are provided in Note 3
on pages 64 to 67.
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 £1.7 million (2022: £1.4 million).
4242
DIRECTORS' REPORT
POST BALANCE SHEET EVENTS
EMPLOYEE ENGAGEMENT
On 27 March 2024 the Parent Company exercised its
option to purchase an industrial / office unit which it had
leased and occupied since January 2019 (Unit C1, Herrick
Way, Staverton Technology Park, Staverton, Cheltenham
GL51 6TQ). The purchase price was £210,000 and the
property was immediately sold on the same date for
£465,000. After agent and legal fees, the Group realised
a profit of £231,000.
In May 2024, the Group utilised its preapproved authority
from the 2023 AGM to place 15% of its share capital (circa
5.5 million shares) in order to raise £1.15 million after
fees. The primary use of these funds will be to integrate
the Pennant software suite with the release due in Q4
2024.
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 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 a comprehensive employee opinion
survey which encompassed all regions and business
units, with the results fed back to the Board and changes
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.
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.
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.
The Group does not typically enter into derivative
contracts, such as agreements to buy or sell foreign
currency at a future date. Any such contract requires the
approval of the Executive Directors.
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 15 to 23.
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.
Deborah Wilkinson is designated as the Non-Executive
Director to whom employees can raise any concerns
regarding wrong-doing.
EMPLOYEE POLICIES
The Group has established employment policies to ensure
compliance with current legislation and codes of practice,
including equal opportunities.
The Group is an equal opportunities employer and is
committed 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.
4343
4343
DIRECTORS' REPORT
POLICY ON PAYMENT OF SUPPLIERS
The Group’s policy during the year and for 2024 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 7 June 2023, the Company (acting by its Directors) was granted authority to
purchase through the market up to 5,518,567 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 7 June 2023, 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 2024.
THE BOARD
The Board comprises the Chair, the Chief Executive Officer, the Commercial & Risk Director, the Chief Financial Officer
and two additional Non-Executive Directors.
The Directors in office as at the date of this report are named on pages 32 to 33.
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. Philip Walker and Philip Cotton retire at the AGM and Philip Walker, being eligible,
offers himself for re-election. Having been appointed since the last AGM, Ian Dighé also retires at the AGM and stands
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 2023 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 following table.
4444
DIRECTORS' REPORT
NUMBER OF
SHARES HELD
% INTEREST IN THE TOTAL VOTING
RIGHTS OF PENNANT
6,278,253
4,724,151
3,325,000
2,750,000
1,797,555
1,681,281
1,236,791
17.02
12.81
9.02
7.46
4.87
4.56
3.35
INVESTOR
POWELL C C ESQ
PREMIER MITON GROUP
BRETT GORDON
ROCKWOOD STRATEGIC PLC
KILLIK & CO LLP
CANACCORD GENUITY GROUP
DOWGATE WEALTH
POLITICAL DONATIONS
The Group did not make any political donations during 2023 (2022: £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 Chair’s Statement on pages 6 to 7 and the Chief Executive’s review on pages 8 to 9).
ANNUAL GENERAL MEETING
The Company’s Annual General Meeting will be held at its offices located at Unit D1, Staverton Connection, Staverton,
Cheltenham, GL51 0TF on 17 July 2024. 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.com 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
Fovis Mazars LLP will retire from office at the AGM. Following a competitive tender process, Evelyn Partners LLP have
been selected as the Group’s new auditor and a resolution to appoint them as auditor to the Group will be proposed at
the AGM.
Approved by the Board on 20 June 2024
and signed on its behalf
D J Clements
Director
4545
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 Standards
(“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;
•
state whether applicable UK-adopted international accounting standards have been followed, subject to any
material departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for 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 of the ultimate parent company are responsible for the maintenance and integrity of the ultimate parent
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 20 June 2024
and signed on its behalf
D J Clements
Director
4646
4747
FINANCIAL
STATEMENTS
THE FOLLOWING SECTION OUTLINES
THE RESULTS FOR THE PERIOD
ENDED 31 DECEMBER 2023.
4848
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 2023 which comprise the Consolidated Income Statement, the Consolidated
Statement of Other Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement
of Changes in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Comprehensive Income, the
Company Statement of Financial Position, the Company Statement of Changes in Equity, the Company Statement of Cash
Flows and notes to the financial statements, including material accounting policy information.
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 2023
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 there is a material uncertainty in relation
to the timing of achievement of the major engineered solutions programme milestone which is due to be completed
in July 2024 with the cash being expected to be received in August 2024. Should completion of the milestone and the
subsequent cash receipt be delayed beyond October 2024, the Group may require a further temporary extension to the
overdraft facility which is not contractually guaranteed.
The current major engineered solutions programme is expected to be completed in October 2024. The Group will then
be required to secure new contracts. While the Group has an active pipeline with £32m of bids submitted in the 6 months
to May 2024, a material uncertainty also exists in relation to the timing of the conversion of these pipeline opportunities
and the ability of the Group to generate sufficient cash flows from these new contracts to enable the Group to continue
to operate within its overdraft limit. Contracts have not yet been signed in support of these opportunities. As stated in
note 3 should new contracts providing at least £2.9m of cash inflows not be secured management will be required either
to seek an extension to the overdraft which is not contractually agreed and/or carry out a further equity placement for
which authority will be sought at the AGM.
We note that based on management’s models that this request for an extension is expected to occur around the time
of the renewal of the overdraft facility in April 2025. The current facility of £3m is fully secured on the Group’s property
portfolio, and it is not guaranteed that the Group will be able to extend the facility. Renewal is also not guaranteed and
therefore there is a material uncertainty in relation to the ability of the Group to secure adequate borrowing facilities to
enable the Group to meet its liabilities as they fall due for the duration of the review period.
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.
4949
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP
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 evaluation of 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 was not limited to:
• Undertaking an initial assessment at the planning stage of the audit to identify events or conditions that may cast
significant doubt on the group’s and the parent company’s ability to continue as a going concern;
• Obtaining an understanding of the relevant controls relating to the directors’ going concern assessment;
• Evaluating the directors’ method to assess the group’s and the parent company’s ability to continue as a going
concern;
• We obtained the group’s going concern assessment, including reverse stress tests, and evaluated assumptions
made including reviewing for areas of possible bias and assessed the appropriateness of potential mitigation
disclosed in note 3 open to the directors to access further funding if required, namely increasing the overdraft
limit or further funding raising via an issue of new share capital.
• We compared the assessment with current banking facilities, obtaining evidence for the period in which the
overdraft facility has been renewed for in the going concern assessment period.
• We confirmed the mathematical accuracy of any models given to support the assessment and how sensitive the
assessment is to changes in underlying assumptions, namely the achievement of key contractual milestones and
the timing of pipeline opportunity conversions.
• We have agreed contractual cash flow payments back to underlying contracts and challenged management on
the phasing of cash flows, including consistency with the results of our work on the major engineered solutions
contracts. This included a consideration of the potential impact on the going concern assessment if completion
and/or payment from customers is delayed,
• We engaged directly with Pennant’s bankers, HSBC,
• We consulted internally in accordance with our risk management policies to ascertain the firm’s view on the
appropriateness of the use of the going concern basis of preparation and the disclosures made in relation to
going concern within the accounts and
• Reviewing the appropriateness and completeness of the directors’ disclosures in the financial statements
including the disclosure of the events which individually or collectively 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
strategy; 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.
5050
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP
KEY AUDIT MATTER
HOW OUR SCOPE ADDRESSED THIS MATTER
REVENUE RECOGNITION (GROUP)
OUR RESPONSE
We see the risk of fraud in relation to
revenue recognition principally relating to
the accuracy of revenue recognised under
engineered solution contracts. In particular
around the judgements and estimates in
respect of costs to complete for contracts that
were in progress at year end and accounting
for variable consideration and initial set up
of contracts per the requirements of IFRS15.
The Boeing contract and the close out of the
General Dynamics contracts are the major
contracts at the year end. The risk here is
focused on the accuracy of the revenue
recognition.
Revenue recognised in respect of engineered
solutions was £5,229,000 in the year ended
31 December 2023. (see note 5 to the
consolidated financial statements).
Our audit procedures included, but were not limited to:
• Obtaining an understanding of the processes and
controls over the recognition of revenue and performing
walkthrough procedures to validate that those controls
were appropriately designed and implemented.
• Obtaining management’s revenue recognition assessment
and assessing whether revenue is recognised in line with
the principles of IFRS 15, including the initial set up of
contracts, the treatment of contract modifications and
variable consideration such as liquidated damages.
• 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 identified any material issues
regarding the revenue recognition on the major engineered
solution contracts.
5151
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP
KEY AUDIT MATTER
HOW OUR SCOPE ADDRESSED THIS MATTER
IMPAIRMENT OF GOODWILL AND
INTANGIBLE ASSET (GROUP AND
COMPANY)
The Group held goodwill of £2,595,000 (see
note 15) and other intangible assets with a
net book value of £5,335,000 (see note 16)
at year end.
The net book value of intangible assets held
by the parent company at year end was
£5,608,000. (see note 8 of the Company
financial statements).
All cash generating units (CGUs) containing
goodwill must be tested for impairment
annually and when there is an indication
impairment. Impairment exists when
of
the carrying amount of an asset or
cash generating unit (CGU) exceeds the
recoverable amount which is the higher of
its fair value less costs of disposal and its
value in use.
The calculation of the recoverable amount
requires the exercise of
judgement by
management
in valuing CGUs through
valuation models utilising discounted
cash flow forecast calculations. There are
involved
judgements and estimates
in
managements
assessment
impairment
including the forecast of cash flows, discount
rates and long-term growth rates.
The material uncertainty disclosed
in
relation to the timing of conversion of the
pipeline of opportunities increases the risk
that the carrying value of goodwill and other
intangible assets may not be recoverable.
5252
OUR RESPONSE
We examined management's assessment of impairment and
focused our audit effort on the challenge of key estimates and
judgements. Our audit procedures included but were not limited
to:
• Obtaining and evaluated management’s assessment of
•
•
•
the identification of CGU’s
Engaging our impairment specialists and valuation experts
in this process, to complete an assessment of whether the
calculations have been prepared in line with IAS36 and
challenge the discount rate used by management;
Verifying the mathematical accuracy of the underlying
calculations in the model.
Evaluating the appropriateness of forecast cash flows by
understanding management’s process for forecasting,
examining support for forecast cash flows and assessing
CGU specific cash flow assumptions.
• Assessed the appropriateness of the key underlying
assumptions such as sales growth, sales pipeline and
profitability. We agreed pipeline orders to supporting
documentation and challenged the likelihood of whether
these will be secured;
Evaluating management’s sensitivity analysis to ascertain
in key
the
assumptions including the impact of a 12 month delay in
converting pipeline opportunities.
impact of reasonably probable changes
•
• Assessing the impact of the disclosed material uncertainty
in relation to the assessment of going concern on the
assessment of impairment,
• Assessing the appropriateness of the disclosures made
within the financial statements.
OUR OBSERVATION
We evaluated 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 are satisfied that even if the conversion
of pipeline opportunities is delayed by 12 months that it is
appropriate that no impairment is recognised at the year end.
While we are satisfied that the sensitivities and judgements have
been disclosed appropriately within the accounts we draw your
attention to the fact that the going concern basis of accounting
has continued to be adopted in preparing the financial statements,
although material uncertainties have been
identified. The
consolidated financial statements therefore do not include the
adjustments to the carrying values of the goodwill and intangible
assets that would result if the Group was unable to continue as a
going concern.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP
KEY AUDIT MATTER
HOW OUR SCOPE ADDRESSED THIS MATTER
RECOVERABILITY OF DEFERRED TAX
ASSETS (GROUP AND COMPANY)
OUR RESPONSE
The Group has recognised net deferred tax
assets of £0.4m (2022: £1.5m) at 31 December
2023. The recognition of deferred tax assets
is based on future levels of profitability in
the relevant tax jurisdiction. The magnitude
of the assets recognised necessitates the
need for significant judgement in assessing
the future levels of profitability. The material
uncertainties disclosed in note 3 in relation
to going concern present a heightened risk
that deferred tax assets are recognised
inappropriately given the recoverability of
them could be dependent on the conversion
of the current pipeline opportunities.
Our audit work in response to this risk included, but was not
limited to:
•
Evaluating management’s assessment as to the availability
of sufficient taxable profits in future periods to support
the recognition of deferred tax assets, taking into account
both the business model and the tax jurisdiction which the
deferred tax assets relate to.
• Assessing the future taxable profit forecasts and the
underpinning assumptions.
• Where applicable, reconciling the forecasts used to
justify the recognition of deferred tax assets to those
used elsewhere in the business including for impairment
assessments, or for the Directors assessment of going
concern.
• Assessing the impact of the material uncertainties in
relation to the assessment of going concern disclosed in
note 3 on the ability of the Group to recover the deferred
tax assets.
• Assessing the appropriateness of the disclosures made
within the financial statements.
OUR OBSERVATIONS
We evaluated management’s assessment of the recoverability
of the deferred tax asset in each tax jurisdiction and concluded
that the deferred tax asset is recoverable and therefore has been
appropriately recognised. We are satisfied that the disclosures
within the accounts are appropriate
5353
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP
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:
GROUP MATERIALITY
OVERALL MATERIALITY
£194,186
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 performance of the group given the volatility of the
profit/(loss) before tax in recent years.
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.
PERFORMANCE
MATERIALITY
We set performance materiality at £145,640, which represents 75% of overall
materiality.
REPORTING THRESHOLD
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
overall materiality.
We agreed with the directors that we would report to them misstatements identified
during our audit above £5,826 as well as misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
PARENT COMPANY MATERIALITY
OVERALL MATERIALITY
£85,069
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 due to it being an
investment holding 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 £63,801 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
overall materiality.
We agreed with the directors that we would report to them misstatements identified
during our audit above £2,552 as well as misstatements below that amount that, in our
view, warranted reporting for qualitative reasons
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.
5454
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP
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 performed by the group
audit team. Pennant America Inc was subject to specific procedures, which was 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 and accounts 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 materially
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 its 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:
• 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.
5555
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP PLC
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement set out on page 46, 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 the 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, compliance
with AIM rules for companies, employment regulation, 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:
•
•
Inquiring of 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, if any, with relevant licensing or regulatory authorities;
• Communicating identified laws and regulations to the engagement team and remaining alert to any indications
of non-compliance throughout our audit; and
• Considering the risk of acts by the group and the parent company which were contrary to applicable laws and
regulations, including fraud.
We also considered those laws and regulations that have a direct effect on the preparation of the financial statements,
such as tax legislation, pension legislation, the Companies Act 2006.
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 engineered solutions and the cut-off assertion in relation
to software revenue), going concern, impairment of goodwill and other intangible assets and significant one-off or
unusual transactions.
5656
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PENNANT INTERNATIONAL GROUP PLC
Our audit 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; and
• 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
20 June 2024
5757
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2023
CONTINUING OPERATIONS
REVENUE
COST OF SALES
GROSS PROFIT
LAND AND BUILDINGS REVALUATION ON
PREVIOUSLY IMPAIRED ASSET
PROFIT ON SALE OF LAND AND BUILDINGS
OTHER ADMINISTRATION EXPENSES
ADMINISTRATIVE EXPENSES
OTHER INCOME
OPERATING PROFIT/(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
5
17
17
8
8
10
11
12
14
2023
£'000
15,535
(7,808)
7,727
39
-
(7,880)
(7,841)
209
95
(463)
1
(367)
(566)
(933)
2022
£'000
13,686
(7,897)
5,789
-
374
(7,276)
(6,902)
123
(990)
(377)
2
(1,365)
464
(901)
(2.53P)
(2.45P)
(2.53P)
(2.45P)
The accompanying notes on pages 64 to 101 are an integral part of these financial statements.
5858
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023
NOTES
2023
£'000
(933)
2022
£'000
(901)
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 (CHARGE) / CREDIT – PROPERTY, PLANT AND
EQUIPMENT
17
26
(120)
-
113
(28)
109
39
-
248
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD ATTRIBUTABLE
TO THE EQUITY HOLDERS OF THE PARENT
(968)
(505)
5959
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023
NOTES
15
16
17
18
26
19
20
22
21
22
23
24
23
27
24
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
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
2023
£'000
2,595
5,335
4,155
860
399
13,344
980
2,647
641
1,099
5,367
18,711
4,099
2,978
1
420
468
7,966
2022
£'000
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
(2,599)
(1,460)
501
144
283
928
8,894
9,817
1,844
5,383
200
1,990
215
185
9,817
385
107
552
1,044
9,095
10,695
1,840
5,366
200
2,844
335
110
10,695
Approved by the Board and authorised for issue on 20 June 2024
M J Brinson - Director
6060
The accompanying notes on pages 64 to 101 are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023
SHARE
CAPITAL
(SEE
PAGE 62)
SHARE
PREMIUM
(SEE
PAGE 62)
CAPITAL
REDEMPTION
RESERVE
(SEE PAGE 62)
RETAINED
EARNINGS
(SEE
PAGE 62)
TRANSLATION
RESERVE
(SEE
PAGE 62)
REVALUATION
RESERVE
(SEE PAGE 62)
TOTAL
EQUITY
£'000
£'000
£'000
£'000
£'000
£'000
£'000
AT 1 JANUARY 2022
1,832
5,345
200
2,687
(LOSS) FOR THE YEAR
OTHER COMPREHENSIVE
INCOME / (LOSS)
-
-
-
-
-
-
(901)
1,031
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
-
226
-
109
335
-
-
-
854
11,144
-
(901)
(744)
396
110
10,639
-
-
-
27
29
-
AT 31 DECEMBER 2022
1,840
5,366
200
2,844
335
110
10,695
(LOSS) FOR THE YEAR
OTHER COMPREHENSIVE
INCOME / (LOSS)
-
-
-
-
-
-
(933)
-
1,840
5,366
200
1,911
ISSUE OF NEW ORDINARY
SHARES
RECOGNITION OF SHARE
BASED PAYMENT
TRANSFER FROM
REVALUATION RESERVE
4
-
-
17
-
-
-
-
-
-
69
10
-
(120)
215
-
-
-
AT 31 DECEMBER 2023
1,844
5,383
200
1,990
215
-
85
(993)
(35)
195
9,727
-
-
(10)
185
21
69
-
9,817
6161
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023
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.
6262
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2022
NET CASH FROM OPERATIONS
INVESTING ACTIVITIES
INTEREST RECEIVED
PAYMENT FOR ACQUISITION OF SUBSIDIARIES, NET OF
CASH ACQUIRED
DEFERRED CONSIDERATION PAID IN RESPECT OF PRIOR
YEAR ACQUISITION
PURCHASE OF INTANGIBLE ASSETS
PURCHASE OF PROPERTY, PLANT AND EQUIPMENT
PROCEEDS FROM DISPOSAL OF PROPERTY, PLANT AND
EQUIPMENT
NET CASH (USED IN)/GENERATED FROM INVESTING
ACTIVITIES
FINANCING ACTIVITIES
PROCEEDS FROM ISSUE OF ORDINARY SHARES
REPAYMENT OF LEASE LIABILITIES
NET CASH FROM FINANCING ACTIVITIES
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
EFFECT OF FOREIGN EXCHANGE RATES
CASH AND CASH EQUIVALENTS AT END OF YEAR
NOTES
29
11
34
24
16
17
17
28
23
22
22
2023
£'000
1,294
1
(214)
(352)
2022
£'000
2,572
2
-
(547)
(1,453)
(1,150)
(305)
-
(2,323)
21
(195)
(174)
(63)
2,117
359
24
(207)
(183)
(1,203)
2,748
(426)
(3,540)
(250)
(1,879)
366
(426)
6363
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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, Staverton, 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 2023
The Group has applied the following new accounting
standards and amendments for the first time in the
annual reporting period commencing 1 January 2023.
The amendments listed did not have a material impact on
the Group’s financial statements for the current or prior
Period.
•
•
IFRS 17 Insurance Contracts;
IFRS 17 Insurance Contracts (Amendment): Initial
Application of IFRS 17 and IFRS 9 – Comparative
Information;
• Definition of Accounting Estimates – amendments
•
to IAS 8;
International Tax Reform – Pillar Two Model Rules
– amendments to IAS 12;
• Deferred Tax related to Assets and Liabilities
arising from a Single Transaction – amendments
to IAS 12; and
• Disclosure of Accounting Policies – Amendments
to IAS 1 and IFRS Practice Statement 2.
The following amendments to accounting standards have
been published but are not mandatory for 31 December
2023 reporting periods and have not been adopted early
by the Group. These amendments are not expected to
have a material impact on the entity in future reporting
periods or on foreseeable future transactions.
•
•
•
•
IFRS 16 Leases (Amendment): Lease Liability in a
Sale and Leaseback;
IAS 1 Presentation of Financial Statements
(Amendment): Classification of Liabilities as
Current or Non-current and Classification of Non-
current Liabilities with Covenants;
IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments Disclosures (Amendment): Supplier
Finance Arrangements; and
IAS 21 The Effects of Changes in Foreign Exchange
Rates (Amendment): Lack of exchangeability.
3. ACCOUNTING POLICIES
The financial statements have been prepared
in
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 eighteen-month period (‘review
period’) following approval of these financial statements.
The risk scenarios tested are detailed in the ‘summary of
assessment methodology’ on page 65.
During the Covid-19 pandemic, 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 2023 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.
6464
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
The Group has a £3 million annually renewing overdraft
facility in place with its bankers, HSBC. This reduced from
£4 million due to the sale of surplus property in 2022
for £2.1 million following the strategic redirection of the
company. The terms of this facility have not been modified
following the bank’s annual review of the facility carried
out in April 2024. Furthermore, in order to support the
strategic investment in our integrated software suite, in
May 2024 the Group utilised its 15% placing authority to
raise circa £1.2 million net of fees (see Post Balance Sheet
Events note on page 101). The Board also confirmed an
intention to subscribe for a further £200k of shares in
aggregate, subject to a further placing authority being
approved at the 2024 AGM. Assuming the Board’s
subscription proceeds as expected, the total proceeds
after fees will be £1.4 million.
The cash outflows related to the deferred payment for
the acquisitions of ADG (£417k including interest) and TAP
(£176k) were settled in March and April 2024 respectively.
A final payment of £342k plus interest in respect of the
ADG acquisition is payable in March 2025.
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 severe but plausible scenarios.
The cashflow scenarios tested were as follows:
• Test 1: During the review period, the Group
discharges work in line with a ‘management
case’ scenario including the final two milestones
on the major programme and secures certain
pipeline wins in 2024 to align to this budget.
Further selected pipeline wins are secured in
2025, aligned to the discounted cashflow models
prepared for impairment testing (see note 15)
with any known or likely delays to contract wins
factored into the cashflows. Cash inflows from
three pipeline opportunities have been included
in the scenario which represents approximately
25% of the Group’s pipeline as at 31 December
2023. Under this test, the Group remained within
its currently available facilities of £3 million within
the period 18 months from the signing of these
financial statements.
• Test 2: As a stress test to ‘Test 1’, delays to
contracted receipts are experienced on certain
programmes for between 1 and 3 months.
There are no cashflow delays modelled for cash
receipts on the major programme. In addition the
conversion of the three pipeline opportunities is
delayed by 3 months. Under this test, the forecast
indicates that the facility will also be sufficient
with the lowest point for cash being at the end
of July 2024 at a net debt figure of £2.55 million
with headroom of £0.45 million with the available
facilities.
• Test 3: As a further stress test to ‘Test 2’, selected
pipeline opportunities are removed entirely
from the forecast period to model the impact of
extremely significant delays or not securing the
contract. The cost of bought out materials related
to the contractual execution of the excluded
opportunity are also removed from the model
for the forecast period. The average cash inflows
removed from the models in this test was £370k in
2024 and £2.5 million in 2025. This test indicates
that the facility will be sufficient if any one of the
three principal opportunities is removed entirely
from the forecast period. However, in the most
severe of these cases the Group cashflow would
consistently be close to breaching the facility of £3
million throughout the forecast period.
The Directors have assessed the sensitivities of the
cashflow forecasts and have considered whether there
are any uncertainties that could lead to the cashflow
forecasts becoming more adverse than in each of the
scenarios detailed above. The aforementioned low point
for cash is July 2024 where the Group is forecast to have
£450k of headroom, and which recovers when a cash
receipt from a major programme milestone is invoiced
and received. The milestone is related to a programme
that the Group has been executing since H1 2022 with
each of the previous milestones met on, or ahead of,
schedule. The programme milestones in 2024 have also
been reprofiled in agreement with the customer in order
to reduce schedule and technical risk and serve to bring
cash receipts forward. In addition, the milestone consists
of 4 events, one of which has been successfully achieved
6565
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
in early June 2024 with the other three events scheduled
to follow in June and early July 2024. It is therefore the
view of the Directors that the risk of any delay to this
milestone receipt is unlikely. The cash receipts in relation
to this milestone are forecast in mid-August on 30-day
terms with a contractual milestone date of mid-July.
The model indicates that delaying the completion of the
milestone to September, which would still allow for cash
to be received in October would not cause the Group to
breach its overdraft limit However, should an unforeseen
delay occur and the cash receipt be delayed beyond the
end of October then it could cause a material uncertainty
as the Group would be forecast to breach the £3 million
facility at that point. In order to mitigate this extreme
scenario, the Board would seek to extend its overdraft
facility on a temporary basis. The Group’s bankers, HSBC,
have demonstrated their support for Pennant through
the provision of a number of temporary extensions to the
overdraft facility, most recently from April 2024 through
to the end of June 2024 in order to provide cashflow
cover ahead of the equity placing. Given the support that
HSBC have historically provided to Pennant, the Directors
have an expectation that a facility extension would be
considered by HSBC on a temporary basis should the
need arise. It should be noted however, that this mitigant
is not contractually guaranteed at the time of signing the
accounts.
Once the major programme is completed in September
2024, the cashflow forecasts are underpinned by the
receipt of new orders in 2025. The models incorporate
cashflows from securing approximately 25% of the
pipeline by value. In test 2 the timing of the conversion
of the pipeline has been subjected to a 3-month delay
and in test 3 the Directors also modelled the removal of
certain opportunities entirely. The cash forecasts only
include a limited number of opportunities (approximately
25% by value of the total pipeline as at 31 December
2023), selected based on their characteristics – i.e. where
Pennant are sole-source, the incumbent supplier and/
or the maturity of the funding of budgets etc. It should
be noted that there are a number of further pipeline
opportunities not reflected in the cashflow scenarios
which could deliver cashflows of a similar quantum and
in the same timescales should there be any delays or
contracts not secured beyond that already tested.
As per the stock exchange announcement dated 14 May
2024, the Group has witnessed a significant increase in
requests for quotations with £32 million of proposals
submitted in the previous six months. It is this level of
activity, spanning the Group’s product range and regions
that provides confidence to the Directors that the cashflows
into 2025 will be supported by pipeline wins. That said, the
announcement also highlighted the uncertainty regarding
timing in relation to the securing of new contracts which
is outside of the control of the Directors. That gives rise
to a material uncertainty in relation to the timing of
conversion of pipeline opportunities and the related cash
flows.
Where opportunities to the value of circa £2.9 million are
not secured (per Test 3), then the Group may not have
adequate cash inflows to allow it to continue to operate
within its agreed overdraft limit. Should this occur, the
Directors would need to explore mitigants. The Group
will seek to renew a cash placing authority at the 2024
AGM which will firstly be utilised to enact the Directors’
intended subscriptions following the AGM and could
be further utilised to raise funds at the prevailing share
price at the time of need. Having successfully utilised the
authority in May 2024, the Directors have confidence that
a further placing would be successful. A further mitigant
would be an extension to the facility from HSBC although
it should be noted that an extension is not contractually
guaranteed. The secondary mitigant could potentially
coincide with the annual review of the facility and any
request to increase the facility above £3m (currently
secured against the freehold property portfolio valued
at £3.1m as at 31 December 2023) may not be granted
by HSBC. This would create a material uncertainty as
the Group may not have access to sufficient borrowing
facilities for the full period of the review .
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.
GOING CONCERN CONCLUSION
In summary, the Directors have, at the time of approving
the financial statements, a reasonable expectation
that the Group has adequate resources to continue in
operational existence for the foreseeable future, however
have noted the following uncertainties
•
•
•
the timing of contractual delivery,
the timing of pipeline conversion currently forecasted
at the end of 2024; and
the availability of adequate borrowing facilities for
the duration of the review period
If these uncertainties were to arise there would be a
material uncertainty as to the ability of the Group to
continue to be a going concern without appropriate
6666
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
mitigation being implemented. The mitigations above
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 contracted programmes and the impact and
likelihood of delays to contract wins as mentioned above
and available borrowing facilities. The Board has also
not included in its forecasts certain unbudgeted pipeline
opportunities which may be secured in the coming
months, particularly software sales which tend to have
shortened sales cycles.
The going concern basis of accounting has therefore
continued to be adopted in preparing the financial
statements. The consolidated financial statements do
not include the adjustments to the carrying values of the
goodwill and intangible assets that would result if the
Group was unable to continue as a going concern.
BASIS OF CONSOLIDATION
The financial statements incorporate the results of the
Company and entities controlled by the Company (its
subsidiaries). Control is achieved where the Company has
power to 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 transactions,
income and expenses are eliminated on
balances,
consolidation.
BUSINESS COMBINATIONS AND GOODWILL
Acquisitions of subsidiaries and businesses are accounted
for using the acquisition method. The assets and liabilities
(including any contingent liabilities) of the subsidiaries are
measured at their fair value at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill.
Any deficiency in the cost of acquisition below the fair
value of the identified net assets acquired (i.e. a discount
on acquisition) is credited to the income statement 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.
Temporary differences (differences between the carrying
amount of an asset or liability in the statement of
financial position and its tax base) that arise due to the
measurement of identifiable assets and liabilities at their
fair values at acquisition are treated as deferred tax assets
or liabilities, as the case may be.
REVENUE RECOGNITION
ENGINEERED SOLUTIONS
Revenue on engineered solutions contracts is recognised
over time, based on the stage of completion for the
identified performance obligation(s) 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. The stage of completion for each performance
obligation is measured using costs incurred to date as
a proportion of 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.
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 & LICENCES
Revenues arising from the sale of off-the-shelf software
products and licences 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.
6767
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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 or software hosting contracts are 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 business premises and vehicles.
Lease contracts typically range from six months to in
excess of five years. Extension and termination options
are included in certain 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.
lease and non-lease
Contracts may contain both
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
premises 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.
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
where applicable:
• 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.
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
commencement date less any lease incentives
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 elected not to do
so for the right-of-use land and buildings leased by the
Group.
6868
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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.
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
taxable profits will be available in future periods against
which deductible temporary differences can be utilised.
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
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
the asset is 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.
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 PAYMENTS
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
6969
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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
buildings) are stated at cost less accumulated depreciation
and any recognised impairment loss. Depreciation is
charged to write off the cost of assets over their estimated
useful lives on the following bases:
Freehold land:
Nil
Freehold
buildings:
Fixtures and
Equipment:
Net book value at 1 January 2022*
being written off over 35 years on a
straight-line basis
10% to 33.33% of cost per annum
Motor vehicles: 20% of cost per annum
*The net book value subsequent to the revaluation
as at 31st December 2021 with no further revaluation
adjustments made as at 31 December 2022. The
revaluation as at 31 December 2023 has reversed the
depreciation charge in the year.
Land and buildings held for use in the production or supply
of goods or services, or for administrative purposes, are
stated in the balance sheet at their revalued amounts,
being the fair value at the date of revaluation, less any
subsequent accumulated depreciation and subsequent
accumulated
losses. Revaluations are
performed with sufficient regularity such that the carrying
amount does not differ materially from that which would
be determined using fair values at the balance sheet date.
impairment
Any revaluation increase arising on the revaluation of such
land and buildings is credited to each asset’s 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 arising on the
revaluation of such land and buildings is charged as an
expense to the extent that it exceeds any balance 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.
INTANGIBLE ASSETS
Intangible assets are stated at cost less accumulated
amortisation and any recognised
loss.
Amortisation is charged to write off intangible assets on a
straight-line basis over their estimated useful lives on the
following basis:
impairment
DEVELOPMENT COSTS:
Hardware development costs
10% of cost per annum
Courseware development
costs
20% of cost per annum
Software development costs
20% of cost per annum
Virtual Reality development
costs
50% of cost per annum
Software
33% of cost per annum
The amortisation of intangible assets is included in ‘Other
administration expenses’ in the Consolidated Income
Statement as disclosed in note 8.
7070
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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. Inventory cost is
calculated using the first in, first out methodology. 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.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are recognised as financial
assets. They comprise cash held by the Group and short-
term bank deposits with an original maturity date of three
months or less.
TRADE PAYABLES
Trade payables are
initially recognised as financial
liabilities measured at fair value, and subsequent to initial
recognition measured at amortised cost.
BANK BORROWINGS
Interest bearing bank loans, overdrafts and other loans
are recognised as financial liabilities and recorded at
fair value, net of direct issue costs. Finance costs are
accounted for on an amortised cost basis in the income
statement using the effective interest rate.
RESEARCH AND DEVELOPMENT TAX
INCENTIVES
The Group recognises expected tax credits for conducting
qualifying research and development activities in the
Income Statement when it is probable that the credit
will be received and the amount can be measured
reliably. Where the expected credit is taxable (such as
credits arising from claims under the UK Research and
Development Expenditure Credits (RDEC) scheme) the
credit is shown in the Income Statement above the tax
line. This has the effect of increasing the profit before
tax but also increasing the total tax expense. Where the
credit is not taxable it is included directly in the Taxation
line of the Income Statement. In either case the tax credit
is calculated at the current legislated rate on qualifying
R&D expenditure for the jurisdiction concerned.
4. CRITICAL ACCOUNTING JUDGEMENTS AND
KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’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 Group’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.
7171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
CAPITALISATION OF DEVELOPMENT COSTS
The capitalisation of development costs includes judgements over whether 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 26) 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 has been made to the latest available profit forecasts and
the material uncertainty disclosed within the going concern assessment section of note 3.
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. Deferred tax has been recognised based on the amount of
taxable profits in the profit forecasts. Deferred tax has been recognised to the extent that future forecasts (excluding
a selection of pipeline opportunities totalling £18 million aligned to the extreme but plausible scenario in the Going
Concern scenario analysis in note 3) support the carrying value. As a result, UK trading losses with a gross value of £1.3
million have not been recognised within the deferred tax asset disclosed in note 26. After the approval of the Financial
Statements, if the expected conversion of the pipeline occurs, a deferred tax asset in relation to these losses may
be recognised or there may be a reduction in any taxable profits made in the UK entities in 2025. The unrecognised
deferred tax asset in relation to the above losses amounts to £324k.
A deferred tax asset in relation to temporary timing differences within Pennant America Inc. has been recognised on
the basis of taxable profit over the three years to 2026. As a result, temporary timing differences of £812k have not
been recognised as part of the deferred tax asset. If future profits exceed the current forecast an additional deferred
tax asset of £226k may be recognised.
KEY SOURCE OF ESTIMATION UNCERTAINTY
IMPAIRMENT OF GOODWILL
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to
which goodwill has been allocated. The value in use calculation, as described in note 15, requires estimates of the
future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the
present value. A 12-month delay in the conversion of three pipeline opportunities was modelled and the Directors are
satisfied that this would not result in an impairment of the CGUs. The sensitivity relating to the estimates of future
cashflows is further detailed in the Going Concern disclosures in note 3 and also in note 15. Management estimates
a 2.5% increase in the discount rate would not result in the impairment of Goodwill in either of the Cash Generating
Units (see note 15). The carrying amount of goodwill at the balance sheet date was £2,595k (2022: £2,507k) and the
review has been carried out by the Directors.
REVENUE RECOGNITION – ESTIMATION OF COST TO COMPLETE
For long-term engineered solutions contracts (see note 5), 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. This estimate of
costs to complete typically comprises both labour hours and bought out materials. The estimate is informed through
regular contract reviews and amended for any applicable variations. As at 31 December 2023, the contract with the
largest estimated cost to complete is the Boeing Defence UK contract. The sensitivity of the estimate is mitigated by
the relatively short forecast period with the contract scheduled to complete in Q3 2024.
7272
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
In addition, the majority of the bought out materials have been procured as at 31 December 2023 therefore mitigating
sensitivities of inflationary pressures on the materials estimate. The Directors have assessed that a 5% increase
or decrease in the estimated cost to complete would result in an immaterial impact to the financial statements.
The Directors estimate the standalone selling price at contract conception based on products supplied in similar
circumstances to similar customers. Estimation regarding variable considerations on contractual obligations is also
reflected within the revenue recognition.
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
2023
£'000
1,111
1,589
6,873
5,229
733
2022
£'000
1,377
1,458
7,410
2,410
1,031
15,535
13,686
The payment terms associated with the revenue groups are typically as follows:
Software licences & products: – payment at or before installation of software
Software maintenance: – payment in advance of the maintenance period
Software and technical services: – time-based or milestone-based payments
Engineered solutions & Generic products: – milestone-based payments
Revenue which was deferred as at 31 December 2022 now recognised in this year amounts to £2,552k (2022: £694k).
As at 31 December 2023 the transaction price of performance obligations unsatisfied at the period end was as follows:
WITHIN 1 YEAR
IN 2-5 YEARS
AFTER 5 YEARS
2023
£'000
7,835
2,587
770
11,192
2022
£'000
6,769
4,285
-
11,054
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 aligned to the Training and Software CGUs and the three regions, UK &
Europe, North America and Indo-Pacific (as detailed on page 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.
7373
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
6.1 SEGMENT REVENUES AND RESULTS
SEGMENT REVENUE
2022
2023
SEGMENT PROFIT/(LOSS)
2022
2023
£'000
7,872
-
1,288
9,160
949
4,051
1,375
6,375
£'000
4,895
-
1,462
6,357
662
4,985
1,682
7,329
15,535
13,686
£'000
2,309
-
247
2,556
736
(263)
225
698
3,254
(3,159)
(462)
(367)
2023
£'000
9,876
-
330
10,206
5,449
-
457
5,906
£'000
(697)
-
109
(588)
539
1,435
257
2,231
1,643
(2,633)
(375)
(1,365)
2022
£'000
9,503
-
118
9,621
5,319
-
457
5,497
TRAINING
UK & EUROPE
NORTH AMERICA
INDO-PACIFIC
SUB-TOTAL TRAINING
SOFTWARE
UK & EUROPE
NORTH AMERICA
INDO-PACIFIC
SUB-TOTAL SOFTWARE
TOTAL EXTERNAL SALES
MANAGEMENT CHARGES & LICENCE FEES
NET FINANCE COSTS
LOSS BEFORE TAX
6.2 SEGMENT ASSETS AND LIABILITIES
TRAINING
SEGMENT ASSETS:
UK & EUROPE
NORTH AMERICA
INDO-PACIFIC
CONSOLIDATED ASSETS
SEGMENT LIABILITIES:
UK & EUROPE
NORTH AMERICA
INDO-PACIFIC
CONSOLIDATED LIABILITIES
7474
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
SOFTWARE
SEGMENT ASSETS:
UK & EUROPE
NORTH AMERICA
INDO-PACIFIC
CONSOLIDATED ASSETS
SEGMENT LIABILITIES:
UK & EUROPE
NORTH AMERICA
INDO-PACIFIC
CONSOLIDATED LIABILITIES
6.3 OTHER SEGMENT INFORMATION
TRAINING
UK & EUROPE
NORTH AMERICA
INDO-PACIFIC
SOFTWARE
UK & EUROPE
NORTH AMERICA
INDO-PACIFIC
2023
£'000
4,113
3,041
1,350
8,505
501
701
1,786
2,988
2022
£'000
3,813
4,770
1,586
10,169
550
770
2,278
3,598
DEPRECIATION AND
AMORTISATION*
ADDITIONS TO
NON-CURRENT ASSETS*
2023
£'000
765
-
32
796
2022
£'000
1,199
-
95
2023
£'000
933
-
346
1,294
1,278
2022
£'000
221
-
6
227
DEPRECIATION AND
AMORTISATION*
ADDITIONS TO
NON-CURRENT ASSETS*
2023
£'000
913
23
103
1,039
2022
£'000
654
22
105
781
2023
£'000
1,261
83
232
1,576
2022
£'000
1,032
4
7
1,043
* Other intangible assets, property, plant and equipment and right-of-use assets.
7575
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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
CANADA
CUSTOMER 2
7. STAFF COSTS
THE AGGREGATE REMUNERATION COMPRISED:
WAGES AND SALARIES
SOCIAL SECURITY COSTS
OTHER PENSION COSTS (NOTE 31)
2023
£'000
2022
£'000
5,220
451
2,370
2,795
2023
£'000
8,020
890
341
9,251
2022
£'000
7,602
837
309
8,748
The highest paid Director remuneration is detailed in the ‘Remuneration Report’ on pages 36 to 39.
The average number of persons, including Executive Directors employed by the Group during the year was:
OFFICE AND MANAGEMENT
PRODUCTION
SELLING
2023
NUMBER
2022
NUMBER
32
103
5
140
28
107
5
140
7676
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
8. OPERATING PROFIT/(LOSS) FOR THE YEAR
THE OPERATING PROFIT/(LOSS) FOR THE YEAR IS STATED
AFTER CHARGING /(CREDITING):
NET FOREIGN EXCHANGE (PROFIT)/LOSS
RESEARCH AND DEVELOPMENT COSTS*
OTHER INCOME ARISING FROM RDEC CLAIM (R&D)
PROPERTY RENTAL AND SUNDRY OTHER INCOME
AMORTISATION OF INTANGIBLE ASSETS
REVERSAL OF PREVIOUSLY RECOGNISED IMPAIRMENT LOSS AS A RESULT OF
LAND AND BUILDINGS REVALUATION (NOTE 17)
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)
2023
£'000
(73)
1,033
(205)
(4)
1,330
(39)
305
200
69
-
-
* In addition, in 2023 research and development costs of £1,425k were capitalised (2022: £1,139k)
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
2023
£'000
76
40
116
2022
£'000
119
818
(113)
(10)
1,585
-
373
183
29
(374)
(6)
2022
£'000
70
37
107
7777
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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
11. FINANCE INCOME
OTHER INTEREST RECEIVABLE
2023
£'000
180
79
49
109
46
463
2022
£'000
142
55
56
97
27
377
2023
£'000
1
1
2022
£'000
2
2
7878
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
12. TAXATION
RECOGNISED IN THE INCOME STATEMENT
CURRENT UK TAX CREDIT
FOREIGN TAX CREDIT / (CHARGE)
IN RESPECT OF PRIOR YEARS
SUB-TOTAL CURRENT TAX
DEFERRED TAX (CHARGE) / CREDIT RELATING TO ORIGINATION AND
REVERSAL OF TEMPORARY DIFFERENCES
IN RELATION TO PRIOR YEARS
EXCHANGE RATE DIFFERENCE
SUBTOTAL DEFERRED TAX
TOTAL INCOME STATEMENT TAX CREDIT
OTHER COMPREHENSIVE INCOME CHARGE FOR THE PERIOD
DEFERRED TAX
RECONCILIATION OF EFFECTIVE TAX RATE
LOSS BEFORE TAX
TAX AT THE RATE APPLICABLE IN THE UNITED KINGDOM OF 23.52%
(2022: 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 (HIGHER) / LOWER RATE OF DEFERRED TAX
EFFECT OF CHANGE IN RECOGNITION OF DEFERRED TAX ASSET
EFFECT OF ADJUSTMENTS FOR PRIOR YEARS (CURRENT TAX)
EFFECT OF ADJUSTMENTS FOR PRIOR YEARS (DEFERRED TAX)
OTHER DIFFERENCES
TOTAL TAX CHARGE/CREDIT
2023
£'000
2022
£'000
137 178
110
150
397
(990)
44
(17)
(963)
(566)
(28)
(323)
191
46
485
(88)
21
418
464
248
(367)
(1,365)
86
(198)
9
57
(8)
45
(28)
(601)
150
44
(122)
(566)
259
30
233
77
-
(53)
175
-
191
(88)
(360)
464
7979
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
13. DIVIDENDS
No dividends were paid during the year (2022: £NIL). No final dividend will be proposed at the Annual General Meeting
(2022: £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 WEIGHTED AVERAGE SHARE OPTIONS IN ISSUE
DURING THE YEAR*
2023
£'000
(933)
2022
£'000
(901)
NUMBER
NUMBER
36,836,443
36,725,879
1,610,000
1,414,228
DILUTED AVERAGE NUMBER OF ORDINARY SHARES
38,446,443
38,140,107
EARNINGS PER SHARE (BASIC)
EARNINGS PER SHARE (DILUTED)*
(2.53P)
(2.53P)
(2.45P)
(2.45P)
*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.
As described in detail at note 26, the Company issued 5,431,767 ordinary shares at 25p each through a placing and
subscription for shares.
15. GOODWILL
CARRYING AMOUNT:
AT 1 JANUARY 2022
CURRENCY TRANSLATION
AT 1 JANUARY 2023
CURRENCY TRANSLATION
ACQUISITION OF TRACK ACCESS PRODUCTIONS LTD
AT 31 DECEMBER 2023
£'000
2,403
104
2,507
(62)
150
2,595
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.
8080
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
The Group sells or offers for sale the same range of all of its products in each of three distinct geographical regions, as
shown in the segmental analysis at note 6. However, the Group’s intellectual property is owned by the Company and is
licenced to its subsidiaries. As the regional entities do not have significant revenue-generating assets, the geographic
regions are not considered to be CGUs.
The Group has instead chosen its CGUs to reflect its two different product streams, which are Training (sale of Engineered
and Generic products) and Software (sale of Licences, Maintenance and Services). This choice is justified because the
intellectual property, know-how and mode of operation is different for each CGU.
The carrying amount of goodwill has been allocated as follows:
CASH GENERATING UNIT:
TRAINING
SOFTWARE
2023
£'000
734
1,861
2,595
2022
£'000
584
1,923
2,507
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% (2022: 5%). The forecast includes a terminal value at a terminal growth rate of 2%.
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 2023 the Training CGU had an active pipeline of circa £70 million (2022: £60 million) and in testing the
goodwill for impairment the Directors have assumed a prudent conversion rate of circa 30%. For years four and five, a
growth rate of 3% per annum (2022: 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: 11.74% per annum (2022: 13.78% per annum); post-tax rate 10.85% (2022: 12.02%)
Software CGU: 12.87% per annum (2022: 16.51% per annum); post-tax rate 10.85% (2022: 12.02%)
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 £0.6 million without considering terminal values and Software
headroom of £2.9 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 2023 or 31 December 2022. 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. The Directors have conducted their review using
best estimates, including the quantum and timing of pipeline conversion. For further detail regarding the sensitivities
of these estimates please refer to the Going Concern note on pages 64 to 67.
8181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
16. OTHER INTANGIBLE ASSETS
SOFTWARE DEVELOPMENT
COSTS
CUSTOMER
LISTS AND
CONTRACTS
TOTAL
£'000
£'000
£'000
£'000
COST
AT 1 JANUARY 2022
CURRENCY TRANSLATION
RECLASSIFICATIONS
ADDITIONS
DISPOSALS
AT 1 JANUARY 2023
CURRENCY TRANSLATION
ACQUISITION OF TAP (NOTE 34)
ADDITIONS
DISPOSALS
AT 31 DECEMBER 2023
AMORTISATION
AT 1 JANUARY 2022
CURRENCY TRANSLATION
RECLASSIFICATIONS
CHARGE FOR THE YEAR
DISPOSALS
AT 1 JANUARY 2023
CURRENCY TRANSLATION
CHARGE FOR THE YEAR
DISPOSALS
AT 31 DECEMBER 2023
CARRYING AMOUNT
AT 31 DECEMBER 2023
AT 31 DECEMBER 2022
8282
348
-
240
11
(50)
549
-
-
28
(40)
537
317
2
240
22
(50)
531
-
10
(40)
501
36
18
8,992
20
(240)
1,139
-
9,911
(21)
-
1,425
-
-
-
-
-
-
-
-
536
-
-
9,340
20
-
1,150
(50)
10,460
(21)
536
1,453
(40)
11,315
536
12,388
3,942
1
(240)
1,536
-
5,239
(7)
1,240
-
6,472
4,843
4,672
-
-
-
-
-
-
-
80
-
80
456
-
4,259
3
-
1,588
(50)
5770
(7)
1,330
(40)
7,053
5,335
4,690
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
During 2023 the Group capitalised £1,425k (2022: £1,139k) of costs in relation to the ongoing development of the
GenS software solution along with enhancements to existing software related assets.
An impairment review was performed and as at the 31 December 2023 no indicators of impairment were identified.
17. PROPERTY, PLANT AND EQUIPMENT
LAND AND
BUILDINGS
FIXTURES AND
EQUIPMENT
MOTOR
VEHICLES
TOTAL
£'000
£'000
£'000
£'000
COST / VALUATION
AT 1 JANUARY 2022
CURRENCY TRANSLATION
ADDITIONS
DISPOSALS
AT 1 JANUARY 2023
CURRENCY TRANSLATION
ADDITIONS
ACQUISITION OF TAP (NOTE 34)
REVALUATION
DISPOSALS
AT 31 DECEMBER 2023
DEPRECIATION
AT 1 JANUARY 2022
CURRENCY TRANSLATION
REVALUATION
DISPOSALS
CHARGE FOR YEAR
AT 1 JANUARY 2023
CURRENCY TRANSLATION
REVALUATION
DISPOSALS
CHARGE FOR THE YEAR
AT 31 DECEMBER 2023
CARRYING AMOUNT
AT 31 DECEMBER 2023
AT 31 DECEMBER 2022
4,778
-
-
(1,683)
3,095
-
-
-
5
-
3,100
-
-
-
(24)
97
73
-
(146)
-
73
-
3,100
3,022
4,248
7
63
(810)
3,508
(11)
276
2
-
(105)
3,670
3,030
7
-
(779)
270
2,528
(11)
-
(105)
228
2,640
1,030
980
39
1
-
9,065
8
63
(26)
(2,519)
14
(0)
29
-
-
(7)
36
26
-
-
(18)
6
14
(0)
-
(7)
4
11
25
-
6,617
(11)
305
2
5
(112)
6,806
3,056
7
-
(821)
373
2,615
(11)
(146)
(112)
305
2,651
4,155
4,002
8383
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
Land and buildings were formally valued in November 2023 at £3.1 million by Eddisons (incorporating Andrew Forbes
Limited) who are independent valuers not connected with the Group, on the basis of market value. The revaluation
resulted in a total gain of £152k with no assets requiring impairment.
The revaluation has resulted in the partial reversal of an impairment charge made in 2019, resulting in a credit to the
income statement of £39k. The balance of the revaluation gain of £113k has been credited to the revaluation reserve
as shown in the consolidated income statement on page 58. Deferred tax of £28k has also been provided in respect of
the gain taken to the revaluation reserve.
In 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 58. As result of the sale the revaluation reserve
balance of £744k relating to the disposed property and its associated deferred tax liability of £248k were transferred
to retained earnings.
Following the sale of Pennant Court as described in the paragraph above, an independent valuation of the remaining
land and buildings was carried out in 2022. This supported the carrying values within the 2022 financial statements and
no revaluation gain or loss was recognised during the 2022 period.
The valuations carried out in the current and in prior years conform to International Valuation Standards and were based
on recent market transactions on arm’s lengths terms and rental yields for similar properties. The property valuation
has been reviewed by the Directors and adopted into the Financial Statements but carries estimation uncertainty
due to the potential volatility of the property market from time to time. However, a 2.5% increase or decrease in the
property valuation would be immaterial to the financial statements.
At 31 December 2023, 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 £3.0 million (2022: £3.1 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 25 regarding the
securities associated with these assets.
8484
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
18. RIGHT-OF-USE ASSETS
VALUATION
AT 1 JANUARY 2022
CURRENCY TRANSLATION
ADDITIONS
TERMINATION OF LEASE
DEPRECIATION
AT 1 JANUARY 2023
CURRENCY TRANSLATION
ADDITIONS
DEPRECIATION
AT 31 DECEMBER 2023
19. INVENTORIES
RAW MATERIALS AND CONSUMABLES
WORK IN PROGRESS
PROPERTY
MOTOR VEHICLES
TOTAL
£'000
£'000
£'000
573
(2)
-
(24)
(137)
410
(1)
410
(149)
670
88
-
57
(6)
(46)
93
-
148
(51)
190
2023
£'000
936
44
980
661
(2)
57
(30)
(183)
503
(1)
558
(200)
860
2022
£'000
905
96
1,001
£1,085k (2022: £905k) of inventories have been recognised as an expense in the consolidated income statement.
20. TRADE AND OTHER RECEIVABLES
TRADE RECEIVABLES
CONTRACT ASSETS
OTHER RECEIVABLES
PREPAYMENTS
2023
£'000
1,476
714
17
440
2,647
2022
£'000
2,036
1,333
26
734
4,129
8585
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
No receivables have been written off as uncollectible during the year (2022: £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.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
21. TRADE AND OTHER PAYABLES
CONTRACT LIABILITIES
TRADE PAYABLES
TAXES AND SOCIAL SECURITY COSTS*
OTHER CREDITORS AND ACCRUALS
2023
£'000
1,687
621
611
1,180
4,099
2022
£'000
2,949
771
1,161
981
5,862
*Included in Taxes and Social security costs in 2022 was £327k relating to deferred 2021 and 2022 PAYE payments due
to HMRC. These outstanding amounts were settled by April 2023 in accordance with agreed terms with HMRC.
Contract liabilities have decreased 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.
22. CASH AND CASH EQUIVALENTS
CASH AT BANK
PETTY CASH
BANK OVERDRAFT
BALANCE AS PER STATEMENT OF CASH FLOWS
2023
£'000
1,086
13
1,099
(2,978)
(1,879)
2022
£'000
1,093
14
1,107
(1,533)
(426)
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.
The bank overdraft is secured by fixed and floating charges over the assets of Pennant International Group plc, Pennant
International Limited and by cross-guarantees between those companies.
8686
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
23. LEASE LIABILITIES
VALUATION
AT 1 JANUARY 2022
CURRENCY TRANSLATION
ADDITIONS
TERMINATION OF LEASE
INTEREST EXPENSE (PRESENTED AS
OPERATING CASH FLOW)
REPAYMENTS (PRINCIPAL AND INTEREST)
AT 1 JANUARY 2023
CURRENCY TRANSLATION
ADDITIONS
INTEREST EXPENSE (PRESENTED AS
OPERATING CASH FLOW)
REPAYMENTS (PRINCIPAL AND INTEREST)
AT 31 DECEMBER 2023
CURRENT
NON-CURRENT
PROPERTY MOTOR VEHICLES
TOTAL
£'000
£'000
£'000
644
3
-
(26)
50
(204)
467
(1)
410
68
(205)
739
363
376
94
-
57
(6)
6
(59)
92
-
148
11
(69)
182
57
125
738
3
57
(32)
56
(263)
559
(1)
558
79
(274)
921
420
501
Included in the movement in lease liabilities are repayments of lease liabilities totalling £274k (2022: £263k). The prin-
cipal element of the repayments has been classified as financing activities in the Statement of Cash Flows whereas the
interest payment is included in operating cash flows at note 29. All other movements are considered to be non-cash
changes.
In 2023 short-term lease rentals expensed amounted to £16k (2022: £13k). The total cash outflow in respect of leases
(right-of-use and short-term expensed rentals) was £290k (2022: £276k).
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 PAYMENTS DUE:
WITHIN 1 YEAR
IN 2-5 YEARS
AFTER 5 YEARS
FINANCE CHARGES
NET PRESENT VALUE
2023
£'000
448
555
159
1,162
(241)
921
2022
£'000
219
557
-
776
(217)
559
8787
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
24. DEFERRED AND CONTINGENT CONSIDERATION
CARRYING AMOUNT:
AT 1 JANUARY 2022
CURRENCY TRANSLATION
REPAYMENT
MOVEMENT IN DISCOUNT APPLIED TO FUTURE REPAYMENTS
AT 1 JANUARY 2023
CURRENCY TRANSLATION
ACQUISITION OF TRACK ACCESS PRODUCTIONS LTD
REPAYMENT
MOVEMENT IN DISCOUNT APPLIED TO FUTURE REPAYMENTS
AT 31 DECEMBER 2023
DEFERRED CONSIDERATION (CURRENT)
CONTINGENT CONSIDERATION (NON-CURRENT)
£'000
1,221
58
(497)
97
879
(40)
155
(352)
109
751
468
283
751
The deferred and contingent consideration comprise the remaining amounts expected to be paid in the financial years
2024 and 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.
As described at note 34, Pennant acquired the entire issued share capital of Track Access Productions Limited (“TAP”)
on 12 April 2023. The total consideration for the purchase was £971k which included a payment of £176k deferred until
April 2024. After discounting, the TAP deferred consideration has been included in the table above at a value of £155k.
25. BORROWINGS
The Group has available bank overdraft facilities of £3 million that renew annually (2022: £3 million). In order to
support working capital requirements due to the net contract asset position on software services contracts at the year
end, the bank overdraft has been temporarily increased as at 31 December 2023 to £4 million. The extension expired
on 02 January 2024 at which point the facility reverted to £3 million. The facility has also been extended to £4 million
from April 2024 until the end of June 2024 at which point it will revert to £3 million.
Any overdraft arising from the facility is repayable on demand and carries interest at 2.50% (2022: 2.75%) plus the
bank’s base rate. Any facilities used are secured by fixed and floating charges over the assets of Pennant International
Group plc, Pennant International Limited and by cross-guarantees between those companies.
8888
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
26. DEFERRED TAX
ACCELERATED
TAX
DEPRECIATION
OTHER
TEMPORARY
DIFFERENCES
INTANGIBLE
ASSETS
TAX
LOSSES
TOTAL
AT 1 JANUARY 2022
(CHARGE)/CREDIT TO INCOME
CREDIT TO OCI
EXCHANGE DIFFERENCES
AT 1 JANUARY 2023
(CHARGE)/CREDIT TO INCOME
(CHARGE)/CREDIT TO OCI
EXCHANGE DIFFERENCES
ACQUISITION ENTRY
£'000
(1,554)
(7)
248
1
(1,312)
(49)
(28)
-
-
AT 31 DECEMBER 2023
(1,389)
£'000
£'000
734
(35)
-
21
720
(155)
-
(17)
-
548
-
-
-
-
-
-
-
-
(134)
(134)
£'000
1,670
419
-
-
2,089
(715)
-
-
-
1,374
£'000
850
377
248
22
1,497
(919)
(28)
(17)
(134)
399
The main rate of United Kingdom (UK) corporation tax increased from 19% to 25% with effect from 1 April 2023. The
25% rate has been applied in the calculation of deferred taxation balances for the UK-based entities. In each foreign
subsidiary, deferred tax has been recognised at the prevailing income tax rate in the respective country.
At the reporting date the Group had unused tax losses of approximately £6.8 million (2022: £7.1 million) which are
expected to be available for set-off against future profits arising in the UK. Unused tax losses of £1.3m have not been
recognised within the deferred tax asset above, as further described at note 4 on page 72.
27. WARRANTY PROVISIONS
WARRANTY PROVISIONS AS AT 1 JANUARY
ADDITIONAL WARRANTIES ACCRUED
WARRANTY PROVISIONS RELEASED
WARRANTY PROVISIONS AS AT 31 DECEMBER
2023
£'000
107
42
(5)
144
2022
£'000
122
26
(41)
107
During 2023, the warranty provisions balance has increased due to the recognition over time of a warranty obligation
on a programme which is to be delivered in 2024.
8989
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
28. SHARE CAPITAL
AUTHORISED, ISSUED AND FULLY PAID
36,882,438 ORDINARY SHARES OF 5P EACH (2022: 36,790,447)
2023
£'000
1,844
1,844
2022
£'000
1,840
1,840
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 July 2023 91,991 5p ordinary shares were issued at an average value of 23p per share for a total consideration of
£21k in connection with the Group’s employee SIP scheme.
9090
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2022
29. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
CASH GENERATED FROM OPERATIONS
LOSS FOR THE YEAR
FINANCE COSTS
FINANCE INCOME
INCOME TAX CHARGE/(CREDIT)
WITHHOLDING TAX
DEPRECIATION OF PROPERTY, PLANT & EQUIPMENT
DEPRECIATION OF RIGHT-OF-USE ASSETS
PROFIT ON DISPOSAL OF PROPERTY
AMORTISATION OF OTHER INTANGIBLE ASSETS
REVERSAL OF IMPAIRMENT ON LAND AND BUILDINGS VALUATION
OTHER INCOME – RDEC (R&D)
SHARE-BASED PAYMENT
OPERATING CASH FLOWS BEFORE MOVEMENT IN WORKING CAPITAL
DECREASE IN RECEIVABLES
DECREASE/(INCREASE) IN INVENTORIES
NOTES
10
11
12
17
18
17
16
17
19
20
2023
£'000
(933)
463
(1)
566
-
305
200
-
1,330
(39)
(205)
69
1,755
2022
£'000
(901)
377
(2)
(464)
(2)
373
183
(374)
1,519
-
(113)
29
625
1,482
398
21
(DECREASE)/INCREASE IN PAYABLES AND PROVISIONS
21 / 27
(1,726)
CASH GENERATED FROM OPERATIONS
TAX RECEIVED/(PAID)
INTEREST PAID
NET CASH GENERATED FROM OPERATIONS
1,532
117
(355)
1,294
(136)
2,252
3,139
(306)
(261)
2,572
9191
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
CHANGES IN FINANCING LIABILITIES:
AT 1 JANUARY 2022
CASH MOVEMENTS:
CHANGE IN CASH AND CASH EQUIVALENTS PER CASH
FLOW STATEMENT
LEASE REPAYMENTS (PRINCIPAL AND INTEREST)
NON-CASH MOVEMENTS:
EFFECT OF FOREIGN EXCHANGE RATES
LEASE ADDITIONS
LEASE TERMINATIONS
INTEREST ADDED TO LIABILITY
AT 1 JANUARY 2023
CASH MOVEMENTS:
CHANGE IN CASH AND CASH EQUIVALENTS PER CASH
FLOW STATEMENT
LEASE REPAYMENTS (PRINCIPAL AND INTEREST)
NON-CASH MOVEMENTS:
EFFECT OF FOREIGN EXCHANGE RATES
LEASE ADDITIONS
INTEREST ADDED TO LIABILITY
AT 31 DECEMBER 2023
BANK
OVERDRAFT
LEASE
LIABILITIES
(NOTE 23)
TOTAL
FINANCING
LIABILITIES
£'000
(3,540)
£'000
(738)
£'000
(4,278)
2,748
-
366
-
-
-
-
263
(3)
(57)
32
(56)
2,748
263
363
(57)
32
(56)
(426)
(559)
(985)
(1,203)
-
(250)
-
-
(1,879)
-
274
1
(558)
(79)
(921)
(1,203)
274
(249)
(558)
(79)
(2,800)
9292
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
30. SHARE-BASED PAYMENTS
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. The options granted to the Executive Directors in 2022 are subject to market
conditions as outlined in the remuneration report on pages 34 to 37. Details of the share options outstanding during
the year are as follows:
OPTIONS GRANTED UNDER THE SCHEME
2023
2022
NUMBER OF
SHARE
OPTIONS
1,530,000
130,000
WEIGHTED
AVERAGE
EXERCISE
PRICE
48.16P
NUMBER OF
SHARE OP-
TIONS
1,173,074
WEIGHTED
AVERAGE
EXERCISE
PRICE
78.56P
31.50P
1,040,000
33.15P
OUTSTANDING AT 1 JANUARY
GRANTED DURING THE YEAR
EXERCISED DURING THE YEAR
-
-
-
LAPSED DURING THE YEAR
(80,000)
35.30P
(80,000)
SURRENDERED DURING THE YEAR
-
-
(603,074)
OUTSTANDING AT 31 DECEMBER
1,580,000
EXERCISABLE AT 31 DECEMBER
420,000
47.42P
87.53P
1,530,000
340,000
-
36.88P
82.91P
48.16P
99.21P
The 130,000 options granted in the period were all granted to employees of the Group. Of the 1,040,000 share options
granted in 2022, 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 2022. The options held by Executive
Directors are detailed in the remuneration report on pages 34 to 37.
The option prices for the outstanding share options are:
30 – 50P
51 – 80P
81 – 100P
101 – 135P
2023
2022
1,240,000
1,190,000
70,000
140,000
130,000
70,000
140,000
130,000
The fair value of the options granted during the year under the Scheme is £23k. The weighted average fair value is 18p.
The options outstanding at 31 December 2023 had a weighted average remaining contractual life of 3.89 years (2022:
4.64 years).
9393
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
UNAPPROVED OPTIONS
2023
NUMBER OF
SHARE
OPTIONS
OUTSTANDING AT 1 JANUARY
EXERCISED DURING THE YEAR
SURRENDERED DURING THE YEAR
OUTSTANDING AT 31 DECEMBER
EXERCISABLE AT 31 DECEMBER
-
-
-
-
-
WEIGHTED
AVERAGE
EXERCISE
PRICE
-
-
-
-
-
2022
NUMBER OF
SHARE
OPTIONS
525,969
-
WEIGHTED
AVERAGE
EXERCISE
PRICE
55.00P
-
(525,969)
55.00P
-
-
-
-
As part of the surrender and regrant of options to Executive Directors in 2022, Mr Walker surrendered 525,969
unapproved options. There are no unapproved options held at 31 December 2023.
The Group recognised total expenses related to equity-settled share-based payment transactions of £69k (2022: £29k).
This is for the options granted to the staff and Executive Directors.
The Black-Scholes model was used to calculate the fair value of options granted to staff in 2023 with the following
inputs:
• Share price at date of grant: 31.50p (2022: 32.00p)
• Exercise price: 31.50p (2022: 32.00p)
• Expected volatility (based on historic volatility): 39.40% (2022: 40.45%)
• Risk free rate: 3.420% (2022: 1.088%)
• Expected dividend yield: 0.0% (2022: 0.0%)
• Option life: 10 years (2022: 10 years)
• Vesting period: 3 years (2022: 3 years)
The options granted to the Executive Directors in November 2022 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.
9494
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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 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
2023
£'000
341
2022
£'000
309
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.
9595
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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
OTHER CREDITORS
BANK OVERDRAFT
LEASE LIABILITIES
DEFERRED CONSIDERATION ON ACQUISITION
2023
£'000
1,476
714
17
1,099
3,306
1,687
621
146
2,978
1,162
468
7,062
2022
£'000
2,036
1,333
26
1,107
4,502
2,949
771
107
1,533
776
327
6,463
32.3 CONTRACTUAL MATURITIES OF FINANCIAL LIABILITIES
All of the financial liabilities in the table above are non-derivative financial liabilities and have contractual maturities
as follows:
CONTRACT LIABILITIES
TRADE PAYABLES
OTHER CREDITORS
BANK OVERDRAFT*
LEASE LIABILITIES
DEFERRED CONSIDERATION
ON ACQUISITION
WITHIN 1
YEAR
£000
1,687
621
146
2,978
263
468
6,163
WITHIN 2-5
YEARS
£000
-
-
-
AFTER 5
YEARS
£000
-
-
-
-
374
-
374
-
525
-
525
TOTAL
£000
1,687
621
146
2,978
1,162
468
7,062
* The bank overdraft is ordinarily renewed in April of each financial year and therefore deemed to have a contract
maturity of less than one year.
9696
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
32.4 FINANCIAL RISK MANAGEMENT
Financial risks include market risk (principally foreign currency risk), credit risk, liquidity risk and interest risk. The
Group seeks to minimise the effect of these risks by developing and applying policies and procedures which are
regularly reviewed for appropriateness and effectiveness. The Group’s principal financial instruments comprise cash
held in current accounts, trade receivables, trade payables, other payables and borrowings that arise directly from its
operations.
32.5 FOREIGN CURRENCY RISK
The Group operates internationally, which gives rise to financial exposure from changes in foreign exchange rates. At 31
December 2023 and 31 December 2022, 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:
CANADIAN $
AMERICAN $
AUSTRALIAN $
TOTAL
LIABILITIES
ASSETS
2023
£'000
189
35
1,122
1,346
2022
£'000
176
31
1,197
1,404
2023
£'000
886
154
628
2022
£'000
774
395
758
1,668
1,927
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 $
IMPACT ON PROFIT
2023
£'000
(33)
(6)
24
2022
£'000
(28)
(17)
21
9797
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
32.6 CREDIT RISK
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 2023
and 31 December 2022 there were no significant concentrations of credit risk outside of the two 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.
32.7 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 manages its liquidity needs primarily through its cash flow forecasting process whereby an updated
consolidated and entity-level forecast is produced for review by the Chief Financial Officer on a fortnightly basis. The
forecast typically forecasts eighteen months ahead using weekly timebands for the current financial year and monthly
timebands for the following financial year.
Cash forecasts are compiled on a prudent basis using accurate financial accounting system and bank data and are
periodically stress-tested to check that the Group has adequate headroom in the event of delayed customer receipts
or orders. The regularity of cash forecasting ensures that proposed payments can easily be checked against the forecast
and that sufficient cash is maintained in the Group’s overseas subsidiaries. Longer-term cash forecasts are developed
as required by particular business scenarios determined by the Board of Directors, such as planning for an acquisition.
The forecasting process as outlined above ensures that the Group can plan ahead to ensure that sufficient cash and
undrawn facilities are available for the Group to fund its ongoing operations and to meet its medium-term capital and
funding obligations.
At the year end the Group had a net overdraft of £1,879k (2022: £426k) and net undrawn facilities of £2,121k (2022:
£3,574k) against the temporarily increased overdraft facility of £4.0 million (2022: £4.0 million). The level of the Group’s
overdraft facility is reviewed annually and has been renewed at £3 million as of April 2024.
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.
32.8 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 2.50%
(2022: 2.75%) over base rate. A 1% rise/fall in interest rates would have decreased/increased profit for the year by an
immaterial amount (2022: immaterial).
9898
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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 (2022: £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 2023
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.
The consideration payable for the acquisition comprised an enterprise value of £585k, plus an amount of circa £385k
in respect of TAP’s ‘free cash’ after allowing for normalised working capital and repayment of debt (“Cash Free, Debt
Free Adjustment”). The acquisition has been funded from the Group’s existing cash resources.
PURCHASE CONSIDERATION TRACK ACCESS PRODUCTIONS LTD
£'000
CASH PAID
DEFERRED CASH CONSIDERATION
TOTAL CONSIDERATION BEFORE DISCOUNTING OF DEFERRED CONSIDERATION
LESS DISCOUNTING APPLIED TO DEFERRED CONSIDERATION
TOTAL CONSIDERATION AFTER DISCOUNTING OF DEFERRED CONSIDERATION
795
176
971
(21)
950
9999
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
The accounting treatment for the business combination is summarised below:
ASSETS AND LIABILITIES RECOGNISED AS A RESULT OF THE ACQUISITION:
INTANGIBLE ASSETS*
PLANT AND EQUIPMENT
INVENTORIES
TRADE AND OTHER RECEIVABLES
CASH AT BANK
TRADE AND OTHER PAYABLES
CORPORATION TAX RECOVERABLE
DEFERRED TAX
ASSETS
LIABILITIES
FAIR VALUE TOTAL
£'000
-
£'000
-
£'000
536
£'000
536
2
3
158
581
-
4
-
-
-
-
-
(350)
-
-
-
-
-
-
-
-
(134)
402
2
3
158
581
(350)
4
(134)
800
150
950
NET IDENTIFIABLE ASSETS ACQUIRED
748
(350)
GOODWILL RECOGNISED ON ACQUISITION
PURCHASE CONSIDERATION
*comprising customer contracts and ongoing relationships. To be amortised on a straight-line basis over 5 years.
Factors that lead to the recognition of goodwill include the non-recognition of certain software intangible assets
(internally-generated or otherwise) and synergies to be gained from the planned merger of TAP and the Group’s existing
rail business Track Access Services (TAS, a division of Pennant International Limited) into a single operating rail entity.
The goodwill recognized will not be tax deductible.
PURCHASE CONSIDERATION NET CASH OUTFLOW
CASH PAID
LESS CASH ACQUIRED
£'000
795
(581)
214
The acquisition was in the Group’s best interests because TAP’s business aligns closely with Pennant’s existing Track
Access Services (TAS) business unit and the acquisition will enhance the Group’s presence in the UK rail market. The
combined TAS and TAP rail unit generated revenues in 2023 of £809k. At the acquisition date all trade receivables were
expected to be collected and so the fair value is considered to be the book value of the debts acquired.
For the period from the date of acquisition on 12 April 2023 to 31 December 2023 the acquisition delivered revenues
of £342k and profits before tax of £155k, excluding management charges from the Company of £68k. For the full 2023
calendar year it is estimated that on a time-apportioned basis TAP’s revenue for the year to 31 December 2023 was
£472k and its profit before tax was £214k, excluding management charges from the Company of £94k.
BUSINESS COMBINATIONS 2022
The Group did not enter into any business combinations in 2022.
100100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
35. AUDIT EXEMPTIONS FOR GROUP COMPANIES
The following companies have exercised exemption from audit under s479A, S480A of the Companies Act 2006 and
s394A of the Companies Act 2006:
• Aviation Skills Foundation Limited (s480)
• Pennant SIP Trustee Limited (s479A)
• Pennant Rail Holdings Limited (previously Pennant Support and Development Services Limited) (s479A)
• Track Access Productions Limited (S479A)
36. POST BALANCE SHEET EVENTS
1. On 27 March 2024 the Parent Company exercised its option to purchase an industrial / office unit which it had
leased and occupied since January 2019 (Unit C1, Herrick Way, Staverton Technology Park, Staverton, Cheltenham
GL51 6TQ). The purchase price was £210k and the property was immediately sold on the same date for £465k.
After agent and legal fees, the group realised a profit of £231k.
2. As announced to the London Stock Exchange on 24 May 2024, the Company utilised its preapproved authority
from the 2023 AGM to raise funds equivalent to a maximum of 15% of its share capital. The primary use of the
funds raised will be to integrate the existing Pennant software suite with the release due in the fourth quarter of
2024.
The composition of the fund raising is shown in the table below:
PLACING SHARES
SUBSCRIPTION SHARES
TOTAL
LESS FEES
NET AMOUNT RAISED
NUMBER
3,831,767
1,600,600
5,431,767
ISSUE PRICE
25P
FUNDS RAISED (£)
957,942
25P
400,000
1,357,942
(161,442)
(1,196,500)
In addition the Directors have confirmed their intention to subscribe for a further £200,000 of ordinary shares following
the publication of these financial statements.
Following the admission of the placing and subscription shares, the Company expects to have 42,314,205 ordinary
shares in issue. The new ordinary shares are fully paid and rank pari passu in all respects with the existing ordinary
shares, including the right to receive all dividends and other distributions declared, made or paid after the date of issue.
101101
COMPANY NUMBER: 03187528
COMPANY STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023
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
2023
£'000
3,171
(3,967)
(796)
63)
-
(859)
242
(617)
-
(617)
2022
£'000
2,626
(3,820)
(1,194)
(52)
70
(1,176)
240
(936)
-
(936)
102102
COMPANY STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2023
NOTES
7
8
9
10
11
12
13
13
14
15
2023
£'000
6,763
5,608
47
12,418
43
3,365
137
3,545
15,963
369
562
6,729
-
17
7,677
2022
£'000
6,763
5,420
25
12,208
196
2,373
49
2,618
14,826
416
1,237
4,387
-
18
6,058
(4,132)
(3,440)
28
616
8,321
7,642
1,844
5,383
200
215
7,642
9
590
6,657
8,169
1,840
5,366
200
763
8,169
NON-CURRENT ASSETS
INVESTMENT IN SUBSIDIARIES
OTHER INTANGIBLE ASSETS
RIGHT OF USE ASSETS
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
Approved by the Board and authorised for issue on 20 June 2024.
M J Brinson, Director
The accompanying notes on pages 106 to 115 are an integral part of these financial statements.
103103
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023
SHARE
CAPITAL
SHARE
PREMIUM
CAPITAL
REDEMPTION
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
AT 1 JANUARY 2022
£'000
1,832
£'000
5,345
£'000
200
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
ISSUE OF NEW ORDINARY SHARES
RECOGNITION OF SHARE-BASED PAYMENT
-
8
-
-
21
-
-
-
-
AT 1 JANUARY 2023
1,840
5,366
200
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
ISSUE OF NEW ORDINARY SHARES
RECOGNITION OF SHARE-BASED PAYMENT
-
4
-
-
17
-
-
-
-
£'000
1,672
(936)
(2)
29
763
(617)
-
69
£'000
9,049
(936)
27
29
8,169
(617)
21
69
AT 31 DECEMBER 2023
1,844
5,383
200
215
7,642
Note: see page 62 for a description of the reserves appearing in the column headings of the table above.
104104
COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023
NET CASH FROM OPERATIONS
FINANCING ACTIVITIES
PROCEEDS FROM ISSUE OF ORDINARY SHARES
LEASE REPAYMENTS
NET CASH GENERATED FROM FINANCING ACTIVITIES
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS
NOTES
16
15
13
2023
£
679
21
(25)
(4)
2022
£
(781)
27
(27)
-
675
(781)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
(1,237)
(456)
CASH AND CASH EQUIVALENTS AT END OF YEAR
(562)
(1,237)
105105
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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 £1,362k (2022: £1,395k)
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
2023
£'000
1,416
164
92
1,672
2022
£'000
1,259
133
79
1,471
The average number of persons, including Executive Directors employed by the Company during the year was 5 (2022:
5).
4. FINANCE COSTS
INTEREST EXPENSE
5. FINANCE INCOME
OTHER INTEREST RECEIVABLE
106106
2023
£'000
63
2023
£'000
-
2022
£'000
52
2022
£'000
70
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
6. TAXATION
CURRENT TAX CREDIT
DEFERRED TAX (CHARGE) / CREDIT
TAX CREDIT FOR THE YEAR
RECONCILIATION OF EFFECTIVE TAX RATE
LOSS BEFORE TAX
TAX AT APPLICABLE RATE 23.52% (2022: 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
2023
£'000
268
(26)
242
2022
£'000
178
62
240
(859)
(1,176)
202
(61)
(30)
131
242
223
-
114
(97)
240
107107
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
7. SUBSIDIARIES
Details of the Company’s subsidiaries at 31 December 2023 are as follows:
SUBSIDIARY NAME
REGISTERED OFFICE
PROPORTION OF
OWNERSHIP
PENNANT INTERNATIONAL LIMITED
UNIT D1 STAVERTON CONNECTION,
STAVERTON, CHELTENHAM, GL51 0TF
PENNANT RAIL HOLDINGS LIMITED*
UNIT D1, AS ABOVE
TRACK ACCESS PRODUCTIONS 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 2, BUILDING 25, 270 FERNTREE
GULLY ROAD, NOTTING HILL, VICTORIA
3168, 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.
399 BOYLSTON ST. 6TH FLOOR
BOSTON
MA 02116, USA
* Previously Pennant Support & Development Services Limited
** Subsidiary of Pennant Rail Holdings Limited
*** Struck off 21 May 2024
**** Subsidiary of Pennant Australasia Pty Limited
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
108108
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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 2023
ADDITIONS
AT 31 DECEMBER 2023
AMORTISATION
AT 1 JANUARY 2023
CHARGE FOR THE YEAR
AT 31 DECEMBER 2023
CARRYING AMOUNT
AT 31 DECEMBER 2023
AT 31 DECEMBER 2022
£'000
6,763
-
-
6,763
-
-
-
6,763
6,763
DEVELOPMENT COSTS
£'000
7,595
1,550
9,145
2,175
1,362
3,537
5,608
5,420
Additions in the year relate to product development services carried out on behalf of the company by its operating
subsidiaries. An impairment review was performed and as at the 31 December 2023 no indicators of impairment were
identified.
109109
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
9. RIGHT-OF-USE ASSETS
VALUATION
AT 1 JANUARY 2022
ADDITIONS
TERMINATION OF LEASE
DEPRECIATION
AT 1 JANUARY 2023
ADDITIONS
TERMINATION OF LEASE
DEPRECIATION
AT 31 DECEMBER 2023
MOTOR VEHICLES
£'000
56
-
(6)
(25)
25
41
-
(19)
47
10. TRADE AND OTHER RECEIVABLES
Trade and other receivables principally comprise prepaid overhead costs and recoverable VAT. The carrying amount
approximates to 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 to their fair value.
12. BORROWINGS
Details of the Group overdraft arrangements are set out in note 25 to the consolidated financial statements.
110110
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
13. LEASE LIABILITIES
VALUATION
AT 1 JANUARY 2022
TERMINATION OF LEASE
INTEREST EXPENSE (PRESENTED AS OPERATING CASH FLOW)
REPAYMENTS (PRINCIPAL AND INTEREST)
AT 1 JANUARY 2023
ADDITIONS
INTEREST EXPENSE (PRESENTED AS OPERATING CASH FLOW)
REPAYMENTS (PRINCIPAL AND INTEREST)
AT 31 DECEMBER 2023
CURRENT
NON-CURRENT
MOTOR VEHICLES
£'000
56
(6)
4
(27)
27
41
2
(25)
45
17
28
In 2023 short-term lease rentals expensed amounted to £Nil (2021: £Nil). The total cash outflow in respect of leases
(right-of-use and short-term expensed rentals) was £25k.
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.
LEASE PAYMENTS DUE
WITHIN 1 YEAR
IN 2-5 YEARS
FINANCE CHARGES
NET PRESENT VALUE
2023
£'000
21
33
54
(9)
45
2022
£'000
20
9
29
(2)
27
111111
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
14. DEFERRED TAX
AT 1 JANUARY 2022
CREDIT/(CHARGE) TO INCOME
AT 1 JANUARY 2023
(CHARGE)/CREDIT TO INCOME
AT 31 DECEMBER 2023
15. SHARE CAPITAL
ACCELERATED TAX
DEPRECIATION
TAX LOSSES
TOTAL
£'000
(664)
(55)
(719)
(50)
(769)
£'000
12
117
129
24
153
£'000
(652)
62
(590)
(26)
(616)
Details are set out in note 28 to the consolidated financial statements.
16. NOTE TO STATEMENT OF CASH FLOWS
CASH GENERATED FROM OPERATIONS:
LOSS FOR THE YEAR
NET FINANCE COSTS / (INCOME)
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
(INCREASE)/DECREASE IN RECEIVABLES
DECREASE/(INCREASE) IN PAYABLES
CASH GENERATED FROM/(USED IN) OPERATIONS
TAX PAID / (RECEIVED)
INTEREST PAID
NET CASH GENERATED FROM OPERATIONS
2023
£'000
(617)
63
1,362
19
-
(242)
69
654
(1,725)
1,633
562
180
(63)
679
2022
£'000
(936)
(18)
1,395
24
6
(240)
29
260
(189)
(999)
(928)
129
18
(781)
112112
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
CHANGES IN FINANCING LIABILITIES:
BANK
OVERDRAFT
LEASE
LIABILITIES
(NOTE 13)
TOTAL
FINANCING
LIABILITIES
£'000
(456)
(781)
-
-
-
(1,237)
675
-
-
-
(562)
£'000
(56)
£'000
(512)
-
27
6
(4)
(27)
-
25
(41)
(2)
(45)
(781)
27
6
(4)
(1,264)
675
25
(41)
(2)
(607)
AT 1 JANUARY 2022
CASH MOVEMENTS:
CHANGE IN CASH AND CASH EQUIVALENTS PER
CASH FLOW STATEMENT
LEASE REPAYMENTS (PRINCIPAL AND INTEREST)
NON-CASH MOVEMENTS:
LEASE TERMINATIONS
INTEREST ADDED TO LIABILITY
AT 1 JANUARY 2023
CASH MOVEMENTS:
CHANGE IN CASH AND CASH EQUIVALENTS PER
CASH FLOW STATEMENT
LEASE REPAYMENTS (PRINCIPAL AND INTEREST)
NON-CASH MOVEMENTS:
LEASE ADDITIONS
INTEREST ADDED TO LIABILITY
AT 31 JANUARY 2023
17. FINANCIAL INSTRUMENTS
The Company’s approach to the management of capital and market risks is set out in note 32 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
2.50% (2022: 2.75%) over base rate. A 1% rise/fall in interest rates would have decreased/ increased profit for the year
by an immaterial amount (2022: immaterial). The Company is not exposed to foreign currency risks.
113113
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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
2023
£'000
14
3,365
-
3,379
562
113
6,729
7,404
2022
£'000
196
2,373
-
2,569
1,237
81
4,387
5,705
18. CONTINGENT LIABILITIES
The Company is party to a group registration for the purposes of Value Added Tax (VAT). Members of the group are
jointly and severally liable for the total tax due. The total amount of VAT payable by the group registration and not
accrued in the statement of financial position was £Nil (2022: £Nil).
19. RELATED PARTY TRANSACTIONS
Transactions with related parties consist of:
SALES TO SUBSIDIARY COMPANIES
MANAGEMENT AND LICENCE CHARGES
PENNANT INTERNATIONAL LIMITED
TRACK ACCESS PRODUCTIONS LIMITED
PENNANT CANADA LIMITED
PENNANT AUSTRALASIA PTY LIMITED
PENNANT AMERICA INC.
114114
2023
£'000
1,612
68
739
658
97
2022
£'000
1,333
-
718
488
87
3,174
2,626
NOTES TO THE COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
PURCHASES FROM SUBSIDIARY COMPANIES
PRODUCT DEVELOPMENT SERVICES*
PENNANT INTERNATIONAL LIMITED
PENNANT CANADA LIMITED
PENNANT AUSTRALASIA PTY LIMITED
PENNANT AMERICA INC.
*capitalised as other intangible assets
2023
£'000
662
272
515
99
2022
£'000
549
233
413
57
1,548
1,252
SALARIES AND OTHER EXPENSES SETTLED ON BEHALF OF THE COMPANY
PENNANT INTERNATIONAL LIMITED
1,580
1,265
Intercompany balances between the Company and its subsidiaries at the year end were as follows:
AMOUNTS DUE FROM SUBSIDIARIES
PENNANT RAIL HOLDINGS LIMITED
PENNANT CANADA LIMITED
PENNANT AUSTRALASIA PTY LIMITED
PENNANT AMERICA INC.
AMOUNTS DUE TO SUBSIDIARIES
PENNANT INTERNATIONAL LIMITED
TRACK ACCESS PRODUCTIONS LIMITED
PENNANT INFORMATION SERVICES INC.
ABSOLUTE DATA GROUP PTY LIMITED
2023
£'000
1,789
390
1,011
175
3,365
3,725
74
551
2,379
6,729
2022
£'000
1,385
57
743
188
2,373
1,417
-
579
2,391
4,387
115115
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 – 17 July 2024
Expected announcement of results for the year ending 31 December 2024:
Half-year announcement - September 2024
Full-year preliminary announcement - April 2025
DAILY SHARE PRICE LISTINGS
The Financial Times - AIM
116116
DIRECTORS
OFFICERS AND PROFESSIONAL ADVISERS
I Dighé (Chair) (appointed 7 February 2024)
P H Walker FCA (Chief Executive Officer)
D J Clements
M J Brinson (appointed 1 January 2023)
P Cotton
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
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
Cavendish Capital Markets Limited
One Bartholomew Close
London
EC1A 7BL
117117
ANNUAL REPORT & ACCOUNTS 2023