REG - Pennant Int. Group - Acquisition of UK Rail Services Business

Pennant InternationalAnnouncement

13/04/2023 07:00

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RNS Number : 0428W  Pennant International Group PLC  13 April 2023

 

FOR IMMEDIATE RELEASE
 
 13 April 2023

 

PENNANT INTERNATIONAL GROUP PLC

 Acquisition of UK Rail Services Business

 Significantly enhances existing Rail offering, adds recurring revenues and
further diversifies Group business lines

 

Pennant International Group plc (AIM: PEN) (the "Company", the "Group"), a
leading global provider of training technology and integrated product support
solutions, is pleased to announce that it has acquired the entire issued share
capital of Track Access Productions Limited ("TAP", the "Acquisition").

 

About TAP

 

·    Based in Bedfordshire, TAP was established in 2001 and provides driver
training, route mapping and route familiarisation services to the UK rail
industry. Clients comprise train operating companies, freight operating
companies, engineering prime contractors and infrastructure providers.

 

·    Revenues are generated through a subscription-based web portal and
through project-specific route mapping services.

 

·       For the financial year ended 31 March 2023 ("FY23"), TAP's
management accounts indicate:

 

o revenues of circa £600,000 (FY22: £481,000) of which 50% is recurring,
relating to portal subscriptions; and

 

o  profit before tax ("PBT") of circa £200,000 (FY22: PBT of £180,821).

 

·     The vendors, Ian and Jill Heys, the founders and owner/managers of
TAP, will work a short transitional period to ensure a smooth handover. The
rest of TAP's employees and consultants are expected to remain with the
business.

 

Summary of the key terms of the Acquisition

 

·      The consideration payable in respect of the Acquisition comprises
an enterprise value of £585,000, plus an amount of circa £389,000 in respect
of TAP's 'free cash' after allowing for normalised working capital and
repayment of debt ("Cash Free, Debt Free Adjustment").

 

·      The initial consideration payable is circa £798,500 (being 70% of
the enterprise value, i.e. £409,500, plus the Cash Free, Debt Free
Adjustment).

 

·       A completion payment of £638,610 has been settled, based on
verified estimates of the Cash Free, Debt Free Adjustment, with a balancing
payment of circa £160,000 within the next two months following the production
of completion accounts (to allow for any correction of estimates).

 

·    The balance of the overall consideration, comprising a deferred
payment of £175,500 (being the remaining 30% of the enterprise value) is due
12 months after completion.

 

·     The acquisition agreement contains customary warranties and
indemnities in respect of title, tax and various commercial matters as well as
buyer protections in the form of restrictions on the future activities of the
vendors and rights of setoff.

 

·       The Acquisition is being funded entirely from the Group's
existing cash resources.

 

Benefits of the Acquisition

 

·       TAP's business aligns closely with Pennant's existing Track
Access business unit and the Acquisition will consolidate the Group's presence
in this market. The combined unit is expected to generate revenues for 2023 in
the region of £850,000 and will be able to provide an enhanced offering to a
broader customer base.

 

·       The Acquisition also aligns with the Company's strategy, in
particular it enhances the Group's recurring revenues, further diversifying
into civilian markets, whilst bolstering the Group's 'third pillar' of rail
products and services, complementing the Group's traditional core of IPS
software and training technology.

 

 

Phil Walker, Group CEO, commented: "I am delighted to confirm the acquisition
and to welcome the TAP team into the Pennant Group. TAP is an excellent
business with a long-standing, trusted reputation in the UK rail market and we
look forward to working together to integrate TAP into Pennant's growing rail
offering."

 

 

This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.

 

 

Enquiries:

 

 Pennant International Group plc                    www.pennantplc.co.uk (http://www.pennantplc.co.uk)
 Philip Walker, CEO                                 +44 (0) 1452 714 914

 David Clements, Commercial & Risk Director

 WH Ireland Limited (Nomad and Broker)               https://www.whirelandplc.com/capital-markets
                                                    (https://www.whirelandplc.com/capital-markets)
 Mike Coe                                           +44 (0) 20 7220 1666

 Sarah Mather

 Walbrook PR (Financial PR)                         paul.vann@walbrookpr.com (mailto:paul.vann@walbrookpr.com)
 Paul Vann                                          +44 (0)20 7933 8780

 Joe Walker                                         Mob: +44 (0)7768 807631

 

 

 

 

 

 

 

 

 

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