REG - Pennant Int. Group - Final Results, Analyst Briefing & Investor Pres
24/04/2025 07:02
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RNS Number : 9453F Pennant International Group PLC 24 April 2025
FOR IMMEDIATE RELEASE
24 April 2025
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.
PENNANT INTERNATIONAL GROUP PLC
("Pennant", the "Company", or the "Group")
2024 Final Results
Analyst Briefing & Investor Presentation
Pennant repositioned for growth through Auxilium Software
Pennant International Group plc (AIM: PEN), the systems support software and
training solutions company, announces its final results for the year ended 31
December 2024 ("FY24" or the "Period").
Commenting on the Period, Chairman, Ian Dighé, said:
"It is no understatement to say this has been a truly transformational year
for Pennant; one that positions the Company strongly for years to come. The
Board has made several difficult but important decisions that have left
Pennant a leaner, stronger and more focused Group - ready to meet the needs of
its global customer base.
"Investment into Auxilium has delivered a powerful, standards-aligned software
solution to meet fast growing data and complexity challenges in defence,
aviation, and rail, while Pennant's established expertise and strong industry
ties gives blue chip customers the confidence to trust in its products and
services."
Financial:
· Group revenues of £13.8 million (2023: £15.5 million) with
stable software & services contributions;
· Gross profit margin of 50% (2023: 50%);
· Adjusted((1)) EBITA of £1.2 million (2023: £1.8 million);
· Adjusted((1)) loss before tax of £0.3 million (2023: profit
£0.6 million);
· Unrelieved tax losses carried forward of £7.0 million (2023:
£6.8 million);
· Group net assets at year-end of £8.3 million (2023: £9.8
million);
· Net debt at year-end of £2.3 million (2023: £1.9 million)
reflecting further investment in Auxilium;
· No final dividend recommended (2023: £NIL).
((1))Adjusted to exclude exceptional costs of £2.3 million (restructuring and
aborted acquisition costs), £0.1 million of shared based payment expense,
£0.2 million gain on disposal of land & buildings, and £0.5m of acquired
intangible asset amortisation.
Operational:
· Pennant repositioned to grow its Software and Technical Services
segments, providing more predictable revenue streams, higher margins, and
greater scalability with shorter working capital cycles;
· Training Systems business streamlined;
· Continued investment in Pennant's proven IPS software suite;
· Significant strengthening of the Board;
· Successful completion of UK Apache contract with total contract
value reaching £9.2 million.
Post Period end:
· Solid start to 2025 with trading on track to meet market
expectations;
· Release of Auxilium version 3.0 which advances the integration of
GenS, Analyzer and R4i into one holistic solution - Q1 license sales on
target;
· Property disposal programme - £2.0 million, net of fees, raised
through sale (subject to completion) of commercial units used by the Group's
Training Division, and continued marketing of two further freehold sites.
Proceeds will reduce the Group's borrowings;
· Formal negotiation commenced for award of GenFly technology
upgrade contract, expected to be worth c.£4.9m.
Commenting on the results and outlook, Chief Executive Officer, Phil Walker,
added:
"We are pleased to have delivered these results while having successfully
reshaped the business, in line with our revised strategy. The UK strategic
defence review created unpredictability within our training systems pipeline,
which was already impacted by an elongation of customer procurement
timeframes. This ultimately accelerated our restructuring plan which is
reflected in the results for the Period. We began FY25 with a focused
strategy, realigned structure, and strengthened balance sheet, providing an
excellent platform for growth.
"With the latest release of Auxilium on 31st March 2025 providing additional
integrated capability, our focus turns to delivery of both our go-to-market
strategy and excellent customer experience. We are currently presented with a
favourable geopolitical backdrop and expect to deliver growth in margin and
recurring software revenues as we progress."
Analyst Briefing: 9.30am on Thursday 24 April 2025
An online briefing for Analysts will be hosted by Phil Walker, Chief Executive
Officer, and Darren Wiggins, Chief Financial Officer, at 9.30am on Thursday 24
April 2025 to review the results and give a business update. Analysts wishing
to attend should contact Walbrook PR on Pennant@walbrookpr.com
(mailto:Pennant@walbrookpr.com) or 020 7933 8780.
Investor Presentation: 11.00am on Friday 25 April 2025
Management will also hold an investor presentation to cover the results and
business update at 11.00am on Friday 25 April 2025.
The presentation will be hosted through the digital platform Investor Meet
Company. Investors can sign up to Investor Meet Company and add to meet
Pennant via the following
link https://www.investormeetcompany.com/pennant-international-group-plc/register-investor
(https://www.investormeetcompany.com/pennant-international-group-plc/register-investor)
. For those investors who have already registered and added to meet the
Company, they will automatically be invited.
Questions can be submitted pre-event to Pennant@walbrookpr.com
(mailto:Pennant@walbrookpr.com) or in real time during the presentation via
the "Ask a Question" function.
Enquiries:
Pennant International Group plc www.pennantplc.com (http://www.pennantplc.com/)
David Clements, Company Secretary +44 (0) 1452 714 914
Zeus (Nomad) www.zeuscapital.co.uk (http://www.zeuscapital.co.uk/)
Mike Coe / Darshan Patel (Investment Banking) +44 (0) 203 829 5000 (tel:+44%20203%20829%205000)
Cavendish (Broker) www.cavendish.com (http://www.cavendish.com/)
Ben Jeynes / Callum Davidson / George Lawson (Corporate Finance) +44 (0) 207 220 0500
Michael Johnson / Dale Bellis / Sunila de Silva (Sales and Corporate
Broking)
Walbrook PR (Financial PR) pennant@walbrookpr.com (mailto:Pennant@walbrookpr.com)
Tom Cooper +44 (0)20 7933 8780
Joe Walker Mob: +44 (0)7407 020 470
Notes to editors:
Pennant International Group plc (AIM: PEN) is a technology driven, leading
global provider of system support software and services, technical services,
and training solutions. It supports its global customer base in the design,
development, operation, maintenance, and training of complex assets, to
maximise operational and maintenance efficiency.
Its key markets include Aerospace, Defence and Rail, and adjacent
safety-critical markets such as Shipping, Nuclear and Space.
The Group addresses the market through three key divisions:
• Systems Support Software((1)): a key generator of recurring revenues
through the provision of a suite of software tools designed to help clients:
manage and use complex data; ensure equipment availability at optimal cost;
and comply with industry standards. Its Integrated Product Support (IPS) and
Integrated Logistics Support (ILS) software and services equips customers with
powerful market-leading toolsets to manage, model and utilise complex
equipment data.
• Technical Services((1)): drives repeatable revenues through expert
support for users of Pennant and third-party solutions including consultancy,
support and maintenance, training and bespoke development.
• Training Systems: project-based revenues relating to the design and
build of hardware, software and virtual training solutions for maintainers and
operators of aircraft, ships and land systems. Focused on modifications,
upgrades and retrofits following the restructuring undertaken in 2024.
(1) As detailed in the Chief Finance Officer's review, Systems Support
Software and Technical Services comprise one cash generating unit ("CGU")
Pennant is strategically focused on sustainable recurring and repeatable
revenues and profitability growth, shifting its model towards high margin
software and services. Against a climate of rising defence budgets and the
burgeoning technological complexity of military, aviation and rail platforms,
the demand for these solutions is expected to grow substantially.
Headquartered in Cheltenham, UK, the Group operates worldwide, with offices in
Europe, North America and Asia-Pacific, serving markets with high barriers to
entry often in regulated industries.
CHAIR'S STATEMENT
Ready to seize the Global opportunity
I'm pleased to present my first full year annual report and accounts since
being appointed Chair of Pennant International Group plc. During the Period,
Pennant has continued its transformation into an increasingly software driven,
scalable business with an improved financial and operating structure. This
successful change positions Pennant with market leading products in a global
market, a streamlined structure, and a focused go-to-market strategy.
Strategy
Pennant is focused on generating sustainable recurring revenues and
profitability growth, shifting its model towards high-margin software and
services with greater visibility. First and foremost, it is expanding its
market coverage through the development of the Group's market-leading
proprietary software suite - Auxilium - and higher value technical services.
The Group continues to seek other strategic opportunities to partner with or
acquire complementary businesses which could accelerate the growth strategy.
Key Financials
For the year ended 31 December 2024, the Group recorded consolidated revenues
of £13.8 million (2023: £15.5 million), again underpinned by the Group's
contracted revenue base.
The Group has maintained its gross margin for 2024 at 50% (2023: 50%)
supporting the continuing strategic shift towards software and higher value
services. As a result, the Group posted a consolidated adjusted EBITA profit
of £1.2 million (2023: £1.8 million), which is in line with market
expectations.
The Group's net debt at the year-end was £2.3 million (2023: net debt of
£1.9 million) which reflects, amongst other things, the continued investment
in the integrated software suite, acquisition related expenses, and expenses
related to aborted corporate activity. Post Period end, the Company realized,
subject to contract, a total of £2.0 million in cash proceeds, net of fees,
through property disposals pursuant to the restructuring, strengthening the
balance sheet.
These results reflect the costs and operational challenges of the
restructuring. The restructuring is expected to enable greater returns going
forward through improved working capital cycles and the inherent operational
gearing within the business.
With structural foundations successfully laid by the new Board, we expect to
fundamentally strengthen the Group's balance sheet in the coming Periods.
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 concentrate resources on execution of the current growth opportunities.
The Board will therefore not be recommending the payment of a final dividend
for the year ended 31 December 2024.
Our People
It has been a year of progress and change for the Company, and I would like to
thank all employees for their efforts in engineering that success. The
resilience, flexibility and ability they have shown has underpinned the
transformation I've detailed, and leaves Pennant in a strong position, ready
to meet the needs of its markets. Supporting and motivating our workforce
through appropriate incentives to ensure they continue to deliver for
Pennant's customers remains a priority for the Board.
Our Culture
The Board is dedicated to making sure that every employee across the Group
understands and lives by Pennant's 'Core Values'. These values are at the
heart of everything the Group does. They are also essential in shaping how we
approach our policies, whether driven by legal requirements (such as
anti-bribery or anti-counterfeiting laws) or by our ethical principles (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 upholding its track record of robust corporate
governance. Working closely with its advisors, it monitors 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 there were a number of Board changes.
I joined the Group as a Non-Executive Director and Chair designate with effect
from 7 February 2024.
I assumed the role of Chair on 14 May 2024 on Phil Cotton announcing his
intention to relinquish the Chair and to retire as Non-Executive Director
following the Company's Annual General Meeting on July 17(th) 2024.
In July 2024, the Group announced the appointment of Jon Kempster as
Non-Executive Director and Chair of the Audit & Risk Committee with effect
from 18 July 2024.
Also, in September 2024, the Group announced the appointment of Klaas Van Der
Leest as Non-Executive Director with effect from 3 September 2024.
On 13 August 2024, Michael Brinson, Chief Financial Officer, resigned to
pursue other opportunities and stepped down as Director with immediate effect.
We were delighted to appoint Darren Wiggins to the Board as Group Chief
Financial Officer with effect from 9 November 2024 following a period as
Interim from September 2024.
Finally, Deborah Wilkinson has confirmed that she does not intend to stand for
re-election at the 2025 AGM and will retire as a director on that date. I am
particularly grateful for her support when, on joining the board in February
2024, I was asked to take the Chair at short notice. Deborah's support and
contribution in the transition phase of Pennant has been appreciated by both
the board and executive and we all wish her well in her future endeavours.
Following this period of changes, I am highly confident that both the Board
structure and wider staff resourcing are ideally positioned for the next stage
of Pennant's growth.
Further details on the Board members can be found in the Governance &
Risks section of the Annual Report and Accounts.
Current Trading and Outlook
The strategic investment in the Auxilium software suite 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, whilst ensuring alignment to international standards and specifications,
and enabling intelligent data-driven decisions.
Against a climate of rising defence budgets, evolving governance requirements
and the burgeoning technological complexity of military, aviation and rail
platforms, Pennant's unique integrated software capability offers defence
forces, organisations and OEMs the solutions needed to address these
challenges; and demand for these solutions is expected to grow substantially.
The Board believes that the launch of the Auxilium 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 significant opportunities that we
are well positioned to pursue.
We have made a solid start to 2025 and the Board is pleased with the buoyant
bid activity to date which should set us up for success in the current year
and beyond. The board is confident that the trading remains on track with
market expectations.
Ian Dighé
Chair
CHIEF EXECUTIVE'S REVIEW
Pennant has repositioned
In 2024 we have successfully implemented the first stages of the Group's
strategic plan to shift towards a highly scalable software and technical
services model.
Pennant has continued to invest in its integrated software suite and has taken
decisive action to reposition the Group and accelerate the implementation of
our growth strategy. The impact of these changes is already visible in our
financial performance, with the Group meeting the market's expectations for
the full year.
Restructuring of Training Systems
Significant steps have been taken to streamline Pennant's legacy Training
Systems business segment and focus investment and resources on the growth of
its Software and Technical Services segments which provide more predictable
revenue streams, higher margins, greater scalability, and have a shorter
working capital cycle.
The workforce restructuring programme, as announced on 23 September 2024, has
been completed, with a headcount reduction of 29 roles achieved. Four
commercial units at the Staverton site have also been sold subject to legal
completion for consideration totaling £2.0 million net of disposal fees, with
marketing of the remainder of the site ongoing.
The Training Systems business is now focused on delivering modifications,
retrofits and overhauls to its installed base, and has an active pipeline of
such opportunities.
The Group, from 2025, has three business segments - Systems Support Software;
Technical Services; and, Training Systems - delivered through its three core
regions - EMEA, Americas and Asia Pacific and for financial reporting purposes
presented as two cash generating units ("CGUs") - Software & Services and
Training Systems.
Auxilium Software
In line with the Group's strategic objectives, Pennant has sought to grow its
software capability, and has invested c. £1.4m during the Period to
significantly improve the overall customer proposition and expand its
offering.
The programme has now moved to its next phase which will see all three of the
Group's software applications - GenS, Analyzer and R4i - integrated into one,
holistic solution - Auxilium.
Auxilium is designed to provide customers with a powerful market-leading
toolset that allows users to manage, model and utilise vast amounts of complex
systems data.
The investment into the Auxilium suite underpins Pennant's efforts to increase
revenue from software, higher value technical services and secure recurring
contracts.
We believe Auxilium is the only fully integrated product support tool
available that combines the breadth of capability on offer with the level of
security that is expected and required in the Group's end markets.
Moreover, Pennant has a 25-year track record of developing and supporting
trusted software products for blue chip customers in the defence sector. With
high barriers to entry in these markets, Pennant can cite an exemplary record
of delivering and updating applications for existing and new customers on a
flexible, subscription basis.
Having reached version 3.0 of Auxilium in April 2024, a further integrated
release went live on 31 March 2025 ahead of a fully integrated release
scheduled for later in 2025.
Regional Operational Model
During the Period, the Group implemented a new regional operational structure
with roles redesigned to better align with its strategy and ensuring that a
single person has responsibility, authority and accountability for key
business functions.
The three segments provide a number of strategic benefits, including the
ability to provide enhanced customer experience with operational support teams
deployed in each region.
The table below highlights Pennant's regional revenue for 2023 and 2024.
Regional revenue
2024 2023
£000s £000s
EMEA 7,351 8,821
Americas 2,743 4,051
Asia Pacific 3,681 2,663
Total 13,775 15,535
Europe, Middle East & Africa (EMEA)
Revenue generated in the EMEA region declined to £7.4 million (2023: £8.8
million). The revenue was underpinned by existing UK training systems
contracts with Boeing Defence, and UK technical services contracts with HMRC
and rail operators.
As detailed in the Interim results on 23 September 2024, the Group had been
engaged in significant bid activity during H1 2024, although increasingly
protracted procurement timeframes were identified as a risk.
This challenge and the announcement of the Strategic Defence Review in the UK
resulted in contract awards being deferred pending the outcome of the review
(expected mid-2025), and this includes prospective programmes for which
Pennant is a potential supplier.
In light of this situation, management undertook a comprehensive review of the
UK training systems business (as outlined above) and determined a decisive
plan to reshape it to reflect the much-reduced workflow while retaining the
skills, intellectual property and know-how to enable the delivery of future
programmes, training software and associated services contracts in the UK and
overseas.
Americas
The North America business saw revenues decline to £2.7 million from £4.1
million in 2023. This was driven by Government mandated procurement changes
in respect of Pennant's long-term contract with the Canadian Department of
National Defence. 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.
During 2024, Pennant has successfully tendered and secured all tasks for which
we have recompeted which account for approximately 60% of historic annual
recurring revenues. Pennant will continue to tender for further opportunities
as they are released to market as the region looks to restore the level and
long-term visibility of revenues that the legacy contract provided.
Asia-Pacific
The Asia-Pacific business enjoyed a good year with resultant revenues
increasing from £2.7 million to £3.7 million having secured Technical
Services contracts to support the utilisation of Pennants technical
publication and authoring software which continued to perform well and were
extended for a further year.
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).
Strategic Priorities
With the launch of Auxilium on 31 March 2025, the focus of our investment
programme will move to development and delivery of the go to market strategy
by expanding reseller, agent and partnership relationships globally to extend
market channels into new territories.
This also includes enhancing support software functionality, including
upgrades to the support portal and customer tools to ensure an excellent
customer experience.
This investment continues the strategy to drive higher margin, recurring
software revenues and higher value technical services, which when aligned with
a favourable market backdrop provide a firm platform for continued progress in
the current year.
P H Walker
Director
CHIEF FINANCIAL OFFICER'S REVIEW
The Pennant Group consists of two CGUs:
- Software & Services which comprises of our Systems Support
Software and Technical Services operations and,
- Training Systems comprising of our highly engineered Training
hardware operations.
During 2024 a restructuring exercise was undertaken to better align the
Training Systems segment with current market conditions as a response to a
hiatus in demand from the UK MoD and to focus on winning and delivering
aftermarket service contracts - i.e. modifying, retrofitting and upgrading
existing Pennant original equipment. The statutory financial performance of
the Group has been materially impacted by the restructuring including the
classification of certain UK properties as 'held for sale' current assets in
accordance with IFRS 5. Where appropriate, reconciliations of statutory to
'adjusted' income statement performance have been provided to aid
understanding of our recurring trade and operations.
The Training Systems restructuring exercise led to the reduction in global
workforce from 140 at the end of 2023 to 121 at the end of 2024, with a cash
cost of the reduction exercise of £0.4 million. The total restructuring
expense recognised in the Group income statement of £2.1 million includes
£1.6 million of non-cash costs which are outlined later in my review. The
estimated annualised cost savings resulting from the restructuring exercise
are £2.0 million, comprising staff costs, facility costs, and depreciation
and amortisation.
As part of the restructuring exercise, certain UK based facilities within
Training System were marketed for sale in the second half of 2024 at a total
fair value of £2.9m after estimated selling costs. At the time of releasing
these financial statements, £2 million of net sales proceeds had been
contracted the details of which are recorded as a post balance sheet event in
the notes to the Group accounts. This will be used to reduce the Group's
borrowings.
The difficult decisions taken by the Board of Directors have strengthened the
balance sheet and improved cost efficiencies thus setting the Group up for
success in the future.
Financial review
The results and a review of the key financial performance indicators of
revenue and profitability are set out below.
Performance
Group revenue of £13.8m represents an 11% year over year reduction (2023:
£15.5m).
During the year, we successfully completed the delivery to program milestones
under a 3-year contract with Boeing Defence UK for updates to AH Mk1 Apache
training equipment ("Apache"). Revenue recognised, in the Training Systems
segment, from the Apache contract in the year was £3.5m (2023: £5.2m).
The gross profit margin for the year of 50% (2023: 50%), representing another
record margin year for the Group which benefitted from the profitable
completion of the Apache program as well as the continued strategic shift of
the Group towards software-related products and higher value services.
Administrative costs were held flat at £7.0 million (2023: £6.9 million)
after adjusting items of £2.2 million comprising exceptional costs (£2.3
million), share based payment expense (£0.1 million) and gains on disposal of
assets (£0.2 million) - see the reconciliation of statutory results to
adjusted results below.
The improved margins coupled with the controlled cost base, resulted in an
adjusted EBITA of £1.2 million (2023: £1.8 million) and an adjusted loss
before tax of £0.3 million (2023: profit £0.6 million).
The statutory loss before tax for the year of £3.0 million (2023: loss £0.4
million) includes £2.3 million of exceptional costs (2023: £0.3 million) and
£1.6 million of intangible asset amortisation (£1.3 million). The 'adjusted'
income statement performance excludes exceptional items (including share based
payment charges and gains on disposal of land & buildings), as well as
acquired intangible amortisation, and has been presented to aid understanding
of our recurring trade and operations.
Adjusted numbers
£m 2024 Statutory Acquired Intangible Amortisation Adjusted Items ((1)) 2024 Adjusted 2023
Revenue 13.8 - 13.8 15.5
Gross profit 6.9 - 6.9 7.7
Gross profit % 50% 50% 50%
Other income 0.2 - 0.2 0.2
Admin costs (9.7) 0.5 2.2 (7.0) (6.9)
Operating profit / (loss) (2.6) 0.5 2.2 0.1 1.0
Amortisation (excluding acquired intangibles) 1.6 (0.5) - 1.1 0.8
EBITA (1.0) - 2.2 1.2 1.8
Depreciation 0.5 - 0.5 0.5
EBITDA (0.5) - 2.2 1.7 2.3
(1) Adjusted Items comprise exceptional costs £2.3 million, £0.1 million
of shared based payment expense, and a £0.2 million gain on disposal of land
& buildings (all recognised within administrative expenses).
Reconciliation of statutory results to adjusted results
A reconciliation of statutory EBITA to adjusted EBITA is as follows:
£000s
EBITA (reported loss) (958)
Restructuring expense 2,105
Aborted transaction costs 218
Share based payments 70
Profit on sale of land & buildings (231)
Adjusted EBITA (at 31 December 2024) 1,204
Adjusting items to statutory operating loss in the year are consistent with
prior years and include:
· Costs associated with the restructuring of the Training Systems
division in the year totaling £2.1 million (2023: £nil). These are shown as
adjusting items due to their size and non-trading nature and included:
o The impairment of capitalised development costs (classified as intangible
fixed assets) totaling £0.8 million relating to legacy Training Systems
programs
o Cash costs of staff redundancies totaling £0.4 million due to the
downsizing of the Training Systems workforce
o Impairment of fixtures, fittings and equipment totaling £0.3 million
related to the downsizing and disposal of the Training Systems operating
facilities in Cheltenham, UK
o Write down of inventory to the lower of cost and NRV totaling £0.4m
relating to assets specific to legacy Training Systems programs
o Professional fees relating to the restructuring exercise totaling £0.1
million
· Gains on sale of land & buildings (unrelated to the
restructuring exercise) totaling £0.2 million
· Transaction costs from an aborted corporate acquisition exercise
undertaken in H1 totaling £0.2 million
· An expense of £0.1 million in accordance with IFRS 2 and
associated with outstanding employee share option awards
Revenue analysis
An analysis of the Group's revenue by operating segment and CGU is as follows:
2024 2023
£000s £000s
Software licences and products 397 1,111
Software maintenance 1,893 1,589
Technical services 7,276 6,873
Sub-total Software and Services 9,566 9,573
Engineered solutions 3,554 5,229
Generic products 655 733
Sub-total Training Solutions 4,209 5,962
Total Group Revenue 13,775 15,535
Revenues contributed by the Software and Services CGU remained flat at £9.6
million year over year and represented 69% of the total revenue for the period
(2023: 62%). The stability from repeatable contract work within the Technical
Services segment drives the opportunity to benefit from inflationary increases
while in the Software segment the pleasing increase in recurring maintenance
revenues is tempered by the lower sales of software product licenses which we
attribute to a delay in the purchasing decisions of our customers until the
launch of the integrated Auxilium suite in 2025.
The reduction in Training Solutions revenue is explained by the successful
completion of the Apache program discussed above.
Software and Services
Software licences & products
The software product sales in 2024 continued to be predominantly driven by R4i
software sales, with the associated recurring maintenance revenues to follow
on a recurring basis. Revenues, where perpetual licenses are sold, are
recognised upon installation of the software and tend to be non-recurring in
nature. Where products are sold on a subscription basis revenues are
recognised over the duration of the subscription period for each customer.
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.
Technical services
The largely repeatable technical services revenue stream has increased from
44% of the Group's revenues in 2023 to 53% in 2024 as contracts and
relationships mature. The revenues are typically
recognised on a consumption of benefit basis over time.
Training Solutions
Engineered solutions
In line with management expectations, revenues associated with engineered
solutions have decreased from £5.2 million in 2023 to £3.6 million in 2024.
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. During the year, there was less work performed under
contractual milestones within the Apache contract, for which the delivery
across a 3-year period was largely completed.
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 2024 was £0.7
million (2023: £0.7 million).
Cashflow / Net debt
The movement in net debt (as defined in the glossary to the annual report) is
summarised as follows:
£000s
Net Debt at 31 December 2023 (1,879)
Net cash generated from operations 176
Net cash used in investing activities (1,616)
Net cash generated from financing activities 1,141
Effect of foreign exchange rates (107)
Net Debt at 31 December 2024 (2,285)
During the first half of the year and to support the
required strategic investment in our integrated software suite the Group
utilised its 15% placing authority to raise circa £1.2 million after fees.
The Board also confirmed an intention to subscribe for a further £0.2
million of shares in aggregate, subject to a further placing authority being
approved at the 2024 AGM. The total proceeds after fees were £1.4 million.
These funds were deployed to support the continued capital investment in the
integrated software suite.
Also included within investing activities was the penultimate payment (£0.3
million) relating to the 2020 acquisition of ADG, a critical component of our
integrated software offering. Consideration was structured to include five
'earn out' payments attached to qualifying trading performance.
The Group had net borrowings at the year-end of £2.3 million (2023: net
borrowings of £1.9 million) excluding lease liabilities.
Post Period-end, the Group has taken actions to strengthen the balance sheet
and ensure that ongoing operations are appropriately funded via:
- Exchange of contracts for the sale of certain properties at
Staverton, Cheltenham, UK for a total of £2.0 million in cash proceeds net of
selling costs and realising a profit on disposal of £0.1 million
- Renewal of the existing HSBC overdraft facility up to an available
limit of £2.0 million of which £1.0 million is secured by a charge on the
Group's remaining owned properties at Staverton
Furthermore, the Group has an active pipeline of opportunities spanning the
entire spectrum of products 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 (for
cash) in the UK for the Period amount to £0.2 million (2023: £0.3 million)
on qualifying expenditure of £1.4 million (2023: £1.7 million). The claims
relate to the development of innovative new hardware products within the
Training Systems segment as well as software products for which IP is held in
the UK within the Software & Services segment.
Assets and liabilities and impairment review
The Group's goodwill has been tested for impairment, and in accordance with
IAS 36 "Impairment of assets" the recoverable amount has been assessed as
being the higher of the fair value less costs to sell and the value in use.
Taxation
The Group's tax position shows a tax credit of £0.5 million (2023: charge of
£0.6 million) consisting of a current tax credit of £0.3 million (2023:
£0.4 million) and a deferred tax credit of £0.2 million (2023: charge of
£1.0 million). The current tax credit arises from R&D claims submitted
with HMRC under UK government incentive plans and an in-year tax credit from
losses in Canada. The deferred tax credit is due to a) the release of deferred
tax liabilities relating to the change in use of land & buildings disposed
post year end and classified as held for sale at year end, and b) a deferred
tax credit in Pennant America Inc. due to temporary timing differences net of
partial derecognition of a deferred tax asset relating to unused UK losses
carried forward.
The Group has total unrelieved UK tax losses carried forward of £7.0 million
(2023: £6.8 million).
Going concern
As part of their consideration of going concern, the Directors have reviewed
the Group's future cash forecasts and projections, which are based on both
market and internal data and recent experience.
The Directors have concluded that there are scenarios whereby the levels of
forecast new business converted, or the timings of conversion are delayed
which represents a material uncertainty that may cast significant doubt upon
the company's ability to continue as a going concern.
Considering the Group's current committed bank facility headroom, its access
to liquidity from the post year end sale of surplus land & buildings, and
the strength of its pipeline, the Directors consider it appropriate that the
Group can manage its business risks successfully and adopt a going concern
basis in preparing these Consolidated Financial Statements.
Darren Wiggins
Director
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2024
Notes 2024 2023
Continuing operations £000s £000s
Revenue 2 13,775 15,535
Cost of sales (6,875) (7,808)
Gross profit 6,900 7,727
Land and buildings revaluation on previously impaired asset - 39
Exceptional Costs
3 (2,322) (325)
Profit on sale of land and buildings 231 -
Other administration expenses (7,596) (7,555)
Administrative expenses (9,687) (7,841)
Other income 185 209
Operating (loss)/profit (2,602) 95
Finance costs (444) (463)
Finance income 5 1
Loss before taxation 2 (3,041) (367)
Taxation 466 (566)
Loss for the year attributable to the equity (2,575) (933)
holders of the
parent
Loss per share
Basic (6.37p) (2.53p)
Diluted (6.37p) (2.53p)
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2024
2024 2023
£000s £000s
Loss for the year attributable to the equity holders of the parent
(2,575) (933)
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
(300) (120)
Items that will not be reclassified to profit or loss:
Net revaluation gain
Impairment on property, plant and equipment - 113
(80) -
Deferred tax credit / (charge) - property, plant and equipment
20 (28)
Total comprehensive loss for the period attributable to the equity holders of (2,935) (968)
the parent
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2024
Notes 2024 2023
£000s £000s
Non-current assets
Goodwill 4 2,530 2,595
Other intangible assets 5 4,218 5,335
Property, plant and equipment 470 4,155
Right-of-use assets 543 860
Deferred tax assets 591 399
Total non-current assets 8,352 13,344
Current assets
Inventories 617 980
Trade and other receivables 2,355 2,647
Corporation tax recoverable 593 641
Assets held for sale 2,974 -
Cash and cash equivalents 1,045 1,099
Total current assets 7,584 5,367
Total assets 15,936 18,711
Current liabilities
Trade and other payables 3,251 4,099
Bank overdraft 6 3,330 2,978
Current tax liabilities 3 1
Lease liabilities 137 420
Deferred consideration on 311 468
acquisition
Total current liabilities 7,032 7,966
Net current assets/(liabilities) 552 (2,599)
Non-current liabilities
Lease liabilities 468 501
Warranty provisions 92 144
Contingent consideration on acquisition - 283
Total non-current liabilities 560 928
Total liabilities 7,592 8,894
Net assets 8,344 9,817
Equity
Share capital 2,162 1,844
Share premium account 6,457 5,383
Capital redemption reserve 200 200
Retained earnings (495) 1,990
Translation reserve (85) 215
Revaluation reserve 105 185
Total equity 8,344 9,817
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2024
Capital redemption reserve
Share Share Retained earnings Translation reserve Revaluation Total equity
capital premium reserve
£000s £000s £000s £000s £000s £000s £000s
At 1 January 2023 1,840 5,366 200 2,844 335 110 10,695
(Loss) for the year - - - (933) - - (933)
Other comprehensive income / (loss) - - - - (120) 85 (35)
1,840 5,366 200 1,911 215 195 9,727
Issue of new ordinary shares 4 17 - - - - 21
Recognition of share based payment - - - 69 - - 69
Transfer from revaluation reserve - - - 10 - (10) -
At 31 December 2023 1,844 5,383 200 1,990 215 185 9,817
(Loss) for the year - - - (2,575) - - (2,575)
Other comprehensive income loss - - - - (300) (60) (360)
1,844 5,383 200 (585) (85) 125 6,882
Issue of new ordinary shares 318 1,252 - - - - 1,570
Issue Costs - (178) - - - - (178)
Recognition of share based payment - - - 70 - - 70
Transfer from revaluation reserve - - - 20 - (20) -
At 31 December 2024 2,162 6,457 200 (495) (85) 105 8,344
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2024
Notes 2024 2023
£000s £000s
Net cash from operations 176 1,294
Investing activities
Interest received 5 1
Payment for acquisition of subsidiaries, net of cash acquired
- (214)
Deferred consideration paid in respect of prior year acquisition
(511) (352)
Investment in intangible assets (1,371) (1,453)
Purchase of property, plant and equipment (223) (305)
Proceeds from disposal of property, plant and equipment
484 -
Net cash used in from investing activities
(1,616) (2,323)
Financing activities
Proceeds from issue of ordinary shares 1,392 21
Repayment of lease liabilities (251) (195)
Net cash from/(used in) financing activities 1,141 (174)
Net decrease in cash and cash equivalents
(299) (1,203)
Cash and cash equivalents at beginning of year (1,879) (426)
Effect of foreign exchange rates (107) (250)
Cash and cash equivalents at end of year (2,285) (1,879)
Abbreviated notes to the consolidated financial statements FOR THE YEAR ENDED
31 DECEMBER 2024
1. Basis of Preparation
Pennant International Group plc is a public company incorporated in England
and Wales under the Companies Act 2006. The company is listed on the
alternative investment market ("AIM"). 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.
The financial information set out in this preliminary results announcement
does not constitute the Group's statutory financial statements, as defined in
section 435 of the Companies Act 2006, but is derived from those financial
statements. Statutory financial statements for 2023 have been delivered to
the Registrar of Companies. The audit report was unqualified, did not contain
a statement under section 498 (2) or 498 (3) of the Companies Act 2006 and
drew attention by way of emphasis to a material uncertainty relating to going
concern. Those for 2024 have not yet been delivered to the Registrar of
Companies. The audit report is unqualified, does not contain a statement under
section 498 (2) or 498 (3) of the Companies Act 2006 and draws attention by
way of emphasis to a material uncertainty relating to going concern. The 2024
accounts will be delivered to the Registrar of Companies shortly.
Accounting policies have been applied consistently with those set out in the
2023 financial statements, as amended when relevant to reflect the adoption of
new standards, amendments and interpretations which became effective in the
year. During 2024 no new standards, amendments or interpretations had a
significant impact on the financial statements.
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
UK-adopted international Accounting Standards, this announcement does not
itself contain sufficient financial information to comply with UK-adopted
international Accounting Standards. The Group will be publishing full
financial statements that comply with UK-adopted international Accounting
Standards in April 2025.
2. 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 & Services CGUs and the three regions, UK
& Europe, North America and Asia-Pacific as these represent the way the
Group reports financial performance and position internally.
2.1 Segment revenues and results
Segment revenue Segment profit/(loss)
2024 2023((1)) 2024 2023((1))
£000s £000s £000s £000s
Training
UK & Europe 4,209 5,962 (879) 2,299
North America - - - -
Asia-Pacific - - - -
Sub-total Training 4,209 5,962 (879) 2,299
Software & Services
UK & Europe 3,142 2,859 1,042 746
North America 2,743 4,051 (483) (263)
Asia-Pacific 3,681 2,663 727 472
Sub-total Software & Services 9,566 9,573 1,286 955
Total 13,775 15,535 407 3,254
Management charges and licence fees (3,009) (3,159)
Net finance costs (439) (462)
Loss before tax (3,041) (367)
((1) ) Restated to show only Generic products and Engineered product solutions within Training CGU, all other trading activity presented within Software & Services CGU (training services were previously included within the Training CGU) in line with the presentation of results to the executive management team.
2.2 Segment assets and liabilities
Training
2024 2023((1))
Segment assets: £000s £000s
UK & Europe 7,036 9,876
North America - -
Asia-Pacific - -
Consolidated assets 7,036 9,876
Segment liabilities:
UK & Europe 4,143 5,540
North America - -
Asia-Pacific - -
Consolidated liabilities 4,143 5,540
Software & Services
Segment assets: £000s £000s
UK & Europe 4,635 4,113
North America 3,021 3,041
Asia-Pacific 1,244 1,679
Consolidated assets 8,900 8,833
Segment liabilities:
UK & Europe 1,099 501
North America 933 702
Asia-Pacific 1,417 2,242
Consolidated liabilities 3,449 3,445
((1) ) Restated to show only Generic products and Engineered product solutions within Training CGU, all other trading activity presented within Software & Services CGU (training services were previously included within the Training CGU) in line with the presentation of results to the executive management team.
2.3 Other segment information
Training
Depreciation and amortisation ((2)) Additions to non-current assets ((2))
2024 2023((1)) 2024 2023((1))
£000s £000s £000s £000s
UK & Europe 743 765 401 393
North America - - - -
Asia-Pacific - - - -
743 765 401 393
Software & Services
Depreciation and amortisation ((2)) Additions to non-current assets ((2))
2024 2023((1)) 2024 2023((1))
£000s £000s £000s £000s
UK & Europe 1,200 913 1,328 1,797
North America 23 23 3 83
Asia-Pacific 175 135 16 578
1,398 1,071 1,347 2,458
((1) ) Restated to show only Generic products and Engineered product solutions within Training CGU, all other trading activity presented within Software & Services CGU (training services were previously included within the Training CGU) in line with the presentation of results to the executive management team.
((2) ) Other intangible assets, property, plant and equipment and right-of-use assets.
2.4 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.
2024 2023
£000s £000s
UK
Customer 1 3,513 5,220
Canada
Customer 2 265 2,370
3 Exceptional items
The following expenses have been recognised as exceptional items on the face
of the Group income statement due to them being considered non-recurring
transactions or one-off in nature
2024 2023
Restated((1))
£000s £000s
Included in Administrative Expenses
Inventory Impairment 407 -
Restructuring costs 1,697 -
Aborted acquisition costs 218 190
M&A integration costs - 135
2,322 325
((1) ) Following a review by management, £325k of costs previously
presented in other administrative expenses have been represented as
exceptional items on the face of the consolidated income statement.
4 Goodwill
£000s
Carrying amount:
At 1 January 2023 2,507
Currency translation (62)
Acquisition of Track Access Productions Ltd 150
At 1 January 2024 2,595
Currency translation (65)
At 31 December 2024 2,530
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. The Group
sells or offers for sale the same range of all its products in each of three
distinct geographical regions, as shown in the segmental analysis at note 2.
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 & Services (sale of Software Product Licences, Software Product
Maintenance and Technical 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:
2024 2023
Cash generating unit: £000s £000s
Training 734 734
Software 1,796 1,861
2,530 2,595
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 derive from the board approved 3 year financial plan (inclusive of
12 month annual budget) and are extrapolated for a further two years at a
growth rate of 3% (2023: 5%). The forecast includes a terminal value at a
terminal growth rate of 3%.
Training CGU:
Cashflows derive from the board approved 3 year financial plan (inclusive of
12 month annual budget) and are extrapolated for an additional two years at a
growth rate of 3% per annum (2023: 3%). The forecast includes a terminal value
based off an average income from the 5 year period forecast - this is done to
factor in the cyclicality experienced in the Training CGU due to long order to
delivery gestation periods.
The forecast cash flows of each CGU are discounted at the following pre-tax
rates to provide the value in use for each CGU:
Training CGU: 13.47% (2023: 11.74%)
Software CGU: 13.12% (2023: 12.87%)
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 £2 million and Software headroom of £12 million both after
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
2024 or 31 December 2023. 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. For example, in the Training CGU, new
business revenues would need to decrease by 15% over the forecast period
before an impairment charge is required for the carrying value of the
intangibles asset (in the absence of any cost cutting measures).
5 Other intangible assets
Software Development costs Customer lists and contracts Total
£000s £000s £000s £000s
Cost
At 1 January 2023 549 9,911 - 10,460
Currency translation - (21) - (21)
Acquisition of TAP - - 536 536
Additions 28 1,425 - 1,453
Disposals (40) - - (40)
At 1 January 2024 537 11,315 536 12,388
Currency translation - (29) - (29)
Additions 22 1,349 - 1,371
At 31 December 2024 559 12,635 536 13,730
Amortisation
At 1 January 2023 531 5,239 - 5,770
Currency translation - (7) - (7)
Charge for the year 10 1,240 80 1,330
Disposals (40) - - (40)
At 1 January 2024 501 6,472 80 7,053
Currency translation - (16) - (16)
Charge for the year 19 1,517 108 1,644
Impairment - 831 - 831
At 31 December 2024 520 8,804 188 9,512
Carrying amount
At 31 December 2024 39 3,831 348 4,218
At 31 December 2023 36 4,843 456 5,335
During 2024 the Group capitalised £1,349k (2023: £1,425k) of costs in
relation to the ongoing development of the Auxilium software suite of
solutions including enhancements to existing software related assets. More
information can be found in the CEO's report.
£831k of impairment was identified (2023: £NIL) in relation to Training
Systems hardware development costs relating to specific projects no longer
viable as a result of the training division restructure. An impairment review
was performed as at 31 December 2024 and following sensitivity analysis
performed on the key assumptions, as disclosed in note 16 of the notes to the
financial statements as contained the 2024 Annual Report and Accounts, no
further impairment to other intangible assets was deemed necessary.
6 Borrowings
On 31 December 2024 the Group had available bank overdraft facilities, for use
by its UK trading entities and provided by HSBC UK, of £3.5 million (2023:
£4 million). During April 2025 the facility was extended for a further 12
months at a lower facility limit of £2 million which reflects the reduction
in secured assets (sale of Land & Buildings).
Any overdraft arising from the facility is repayable on demand and carries
interest at 2.50% (2023: 2.50%) 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.
7 Post balance sheet events
On 24(th) February 2025 the company announced the disposal of unit D at the
Group's Staverton site for a cash consideration of £0.83 million as part of
the previously announced streamlining of the Group's Training Division.
On 7(th) April 2025 the company announced the exchange of contracts on three
more commercial properties at the Group's Staverton site (units D3, D4 and car
park). The aggregate consideration is £1.2 million and completion on each of
the transactions is set for 25 April 2025.
During April 2025 the Group renewed its overdraft facility with its bankers,
HSBC, at a limit of £2 million, for 12 months, secured by charges on the
remaining owned land & buildings at Cheltenham, UK.
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