TIDMPEN
RNS Number : 5095X
Pennant International Group PLC
26 April 2023
FOR IMMEDIATE RELEASE
26 April 2023
PENNANT INTERNATIONAL GROUP PLC
Final Results for the Year Ended 31 December 2022
Continued Positive Trading Momentum;
Full-Year EBITA Profit of GBP0.5m
Transformation of business mix produces significantly increased
gross margin;
Further growth in recurring revenues; Robust order book
Pennant International Group plc (AIM:PEN)("Pennant", the
"Group", the "Company"), a leading global provider of training
technology and integrated product support solutions, announces its
Final Results for the Financial Year ended 31 December 2022.
Commenting on the Group's performance, Phil Cotton, Chair, said
:
" I am pleased to report that the Group has delivered a
much-improved performance in the year ended 31 December 2022, with
profitability in-line with market expectations despite reduced
revenues, achieving an EBITA profit of GBP0.5 million for the year
(2021: EBITA loss of GBP0.8 million) and an EBITDA profit of GBP1.0
million (2021: EBITDA loss of GBP0.1 million).
The improved performance was primarily the result of the
progress made towards our technology and software transformation,
coupled with the completion of the legacy engineered solution
contract. The Group's ongoing focus on increasing revenues from
software and technical services is reflected in these results, and
generated revenues totalling GBP10.2 million in 2022 (2021: GBP9.1
million)."
Financial Summary
-- Group revenues of GBP13.7 million (2021: GBP16.0 million);
-- Gross profit margin of 42% (2021: 27%);
-- EBITA profit of GBP0.5 million (2021: EBITA loss of GBP0.8 million);
-- Loss before tax of GBP1.4 million (2021: loss before tax of GBP2.5 million);
-- Loss for the year attributable to shareholders of GBP0.9
million (2021: loss of GBP1.6 million);
-- Basic loss per share of 2.89p (2021: loss of 4.41p)
-- Group net assets at year-end of GBP10.5 million (2021: GBP11.1 million);
-- Net debt at year-end of GBP0.4 million (2021: net debt of GBP3.5 million);
-- No final dividend recommended (2021: GBPNIL);
-- Three-year order book at year-end stood at GBP25 million (2021: GBP22 million).
Post Period-End
-- Acquisition of Track Access Productions Limited.
-- Board strengthened with new appointments.
-- Positive net cash position achieved in Q2 2023.
Operational Summary
A summary of new contract awards, amendments and operational
achievements during the year is set out below:
-- Contract secured from Boeing Defence UK Limited for the
upgrade of UK Apache training equipment, worth GBP8.8 million over
three years, with the initial engineering milestone event
successfully passed.
.
-- Delivery and full device acceptance achieved on the GBP3.5 million UK Helicopter programme.
-- 'Launch partner' programme for the new GenS software product
initiated with key customers signed up.
-- Surplus freehold site (Pennant Court) sold in August for
GBP2.1 million with proceeds used to paydown borrowings.
On current trading and prospects, Mr Cotton concluded:
"Over the last financial year, the business has become more
resilient as we continue to deliver on the critical objective of
increasing visibility and recurrence of earnings, especially those
derived from software and technical services.
The global economic and geo-political environment and supportive
strategic backdrop for Pennant's capabilities means that the Board
believes that the Group's underlying strengths - our long-term
customer relationships with governments and major OEMs, our
specialist services together with our quality-assured reputation -
provide solid foundations for continued recovery and long-term
success."
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 www.pennantplc.co.uk
plc
Philip Walker, CEO
David Clements, Commercial &
Risk Director
Michael Brinson, CFO +44 (0) 1452 714 914
WH Ireland Limited (Nomad and https://www.whirelandplc.com/capital-markets
Broker)
Mike Coe / Sarah Mather (Corporate
Finance) +44 (0) 20 7220 1666
Fraser Marshall / George Krokos
(Sales)
Walbrook PR (Financial PR) paul.vann@walbrookpr.com
Paul Vann +44 (0)20 7933 8780
Joe Walker Mob: +44 (0)7768 807631
CHAIRMAN'S STATEMENT
Results in-line, software & technical services focus, strong
order book
The Group has delivered a much-improved performance in the year
ended 31 December 2022 (the "Period") with profitability in-line
with market expectations despite an expected decrease in revenues,
achieving an EBITA profit of GBP0.5 million for the year (2021:
EBITA loss of GBP0.8 million) and an EBITDA profit of GBP1.0
million (2021: EBITDA loss of GBP0.1 million).
The improved performance was primarily the result of the
progress made towards our technology and software transformation,
coupled with the completion of the legacy engineered solution
contract. The Group's focus on increasing higher margin revenues
from software and technical services is being reflected in the
results, with such revenues totalling GBP10.2 million in 2022
(2021: GBP9.1 million).
Following a strong order intake in 2022, including securing an
GBP8.8 million contract with Boeing Defence UK for the upgrade of
Apache training devices, the Group has a contracted year end order
book of GBP25 million (2021: GBP22 million), underpinning forecasts
and providing good visibility for 2023 and beyond.
Strategy
Our focus remains firmly on increasing the proportion of the
Group's revenues which derive from the sale of software and
technical services, particularly those of a recurring nature, while
expanding the Group's market coverage and addressing gaps in the
product range through the Group's 'Innovation' programmes.
In addition, the Group continues to seek other strategic
opportunities to partner with or acquire complementary
businesses.
Post Period-end, the Group announced the completion of the
acquisition of Track Access Productions, a provider of driver
training, route mapping and route familiarisation services to the
UK rail industry, which aligns with the Group's software and
technical services strategy and is designed to enhance the Group's
rail capability.
Key Financials
For the year ended 31 December 2022, the Group recorded
consolidated revenues of GBP13.7 million (2021: GBP16.0 million).
Turnover was underpinned by the Group's contracted revenue base, in
particular the continued delivery of the Group's overseas services
contracts and the successful achievement of programme deliveries
.
The Group's gross margin for the year increased significantly to
42% (2021: 27%) due to the change in sales mix, and as a result the
Group posted a consolidated EBITA profit of GBP0.5 million (2021:
EBITA loss GBP0.8 million) in line with market expectations.
The Group's net debt significantly reduced during the Period
from GBP3.5 million to GBP0.4 million as a result of improved
trading performance, delivering against contract milestones and the
rationalisation of the property portfolio.
Dividend
Taking account of the Group's 2022 financial performance, the
trading outlook and the Group's cash position, the Directors
believe that it is both prudent and, in the Company's, and
shareholders' current best interests to retain cash for working
capital.
The Board will therefore not be recommending the payment of a
final dividend for the year ended 31 December 2022.
Our People
To deliver a successful performance in 2023, the Group must have
a committed workforce, appropriately incentivised and motivated. I
would like to publicly thank all our employees for their commitment
to supporting the Group and for the resilience and flexibility they
have demonstrated in meeting our customer's needs.
The Group is constantly seeking ways to attract, retain and
reward the specialist skills that we need in order to deliver.
During the Period the business undertook a detailed review of
Pennant's Employee Value Proposition, which resulted in the
implementation of an enhanced set of employee benefits across the
Group coupled with an unbudgeted interim pay award.
It is our people we rely on to deliver our strategy and in order
to deliver successful results in the current year and beyond, we
must continue to pay particular attention to their needs and as a
Board we remained focused on supporting them.
Our Culture
The Board remains committed to ensuring that all Group employees
understand and embody the Group's 'Core Values'. These underpin the
approach to all activities whether they be in an operational or
customer facing environment. These values are also critical in
terms of the approach taken to all our policies whether they are
mandated by law (such as anti-bribery or anti-counterfeiting laws)
or mandated by behavioural ethics (such as fair treatment and
equality of opportunity), treating all individuals with the respect
they deserve regardless of their position. This requires strong
leadership at all levels.
Governance
The Board is committed to maintaining robust corporate
governance. It has worked closely with its advisors and in 2022
monitored governance frameworks to ensure strong, proportionate
governance throughout the Group; this is important given the number
of geographies in which we are present. The Board has established
appropriate risk management procedures and keeps key risks to the
Group under regular review.
Board Changes
During the Period and post Period-end, there were a number of
Board changes.
Sadly, in the Autumn of 2022 our Chairman, John Ponsonby OBE,
died following a short period of illness. On behalf of the Board, I
would like to take this opportunity to recognise the significant
contribution John made to Pennant during his tenure - he was an
inspirational leader and is sadly missed by everyone at
Pennant.
On 24 February 2023 it was announced that I would be succeeding
John as Chair. It is an honour and a privilege to be appointed and
to have the opportunity to continue John's work.
We were delighted to appoint Michael Brinson to the Board as
Chief Financial Officer with effect from 1 January 2023. Michael
joined the Group as Head of Finance in February 2020. Also in
January 2023, the Group announced the appointment of Deborah
Wilkinson as Non-Executive Director with effect from 1 February
2023.
Encouraging outlook
Over the past Period the business has become more resilient as
we continue to deliver on the critical objective of increasing
visibility and recurrence of earnings, especially those derived
from software and technical services.
The global economic and geo-political environment and supportive
strategic backdrop for Pennant's capabilities means that the Board
believes that the Group's underlying strengths - our long-term
customer relationships with governments and major OEMs, our
specialist services together with our quality-assured reputation -
provide solid foundations for continued recovery and long-term
success.
With our contracted three-year order book, valued at over GBP25
million (with GBP13 million scheduled for delivery in 2023)
underpinning forecasts, further enhanced by the post Period end
acquisition, the Board is confident about prospects for 2023 and
beyond.
P Cotton
Chairman
CHIEF EXECUTIVE'S REVIEW
Software & services transformation, momentum building
2022 saw the acceleration of the Group's strategy with the focus
on software and higher margin software-linked activities, the
impact of which is now starting to come through in our financial
performance.
As a result, Group profit for the year was in line with
expectations and represents the third consecutive six-month trading
period where we have reported a positive EBITA.
Pennant's return to EBITA profitability coupled with expanding
gross margins and strong order intake, indicates momentum is
building.
Operational Highlights
During the Period, Pennant realigned its operations to enable
effective and efficient global delivery, by organising the Group
into three key regions (UK & Europe, North America, and
Australasia).
This was designed to allow the 'full spectrum' of Pennant
products and services to be offered and delivered in across all
three geographical regions.
Over this Period the strategic backdrop for our products and
services has shifted. The Russian invasion of Ukraine has seen a
heightened focus amongst governments, particularly European and
NATO members on their spending plans on defence.
It is difficult to predict the duration of the conflict and
impact on the Group's trading but it is clear that Pennant is well
positioned, in particular the integrated product support process
and the management of data is becoming evermore critical and the
cost and complexity of programs is directly impacting the training
requirements.
The table below highlights Pennant's regional revenue for 2021
and 2022.
Regional revenue
-------------------
2022 2021
GBP000s GBP000s
UK & Europe 5,557 8,161
North America 4,985 4,451
Australasia 3,144 3,353
--------- --------
Total 13,686 15,965
========= ========
UK & Europe
Revenue generated in the UK & Europe region during 2022 was
low by historic levels, at GBP5.6 million (2021: GBP8.2
million).
Order intake improved with the Group securing an GBP8.8 million
contract, over three years, with Boeing Defence UK, and with recent
events highlighting the importance of national security and
strategic investment in capability the outlook appears to be
improving.
In terms of operational delivery, the region had a successful
Period with notable highlights including site acceptance and final
delivery of a UK Helicopter trainer programme, achieved on time and
on budget. Following the contract award, the business successfully
passed the initial engineering milestone event on the Apache
upgrade programme and successfully completed delivery of all four
MTE training devices to General Dynamics UK.
With the Group's increasing software focus and reduced reliance
on resource-intensive hardware engineering activities, the Board
commissioned a comprehensive review of the Group's UK facilities
during 2022. Recognising a reduced requirement for space at its
Cheltenham operating sites, the Board decided to market for sale
the Group's former Cheltenham head office, Pennant Court which was
sold in August 2022 for GBP2.1 million with proceeds used to
paydown borrowings. The profit generated on this disposal was
GBP0.37 million.
As a result of this facilities review, the Group also terminated
its office lease in Stevenage. The Group continues to have
sufficient UK facilities to service its order book and pipeline
opportunities with 30,000 square feet of retained facilities in
Cheltenham alone.
North America
Our North American business performed well in 2022 reporting 12%
growth in revenue, with approximately 75% of its annual revenue
recurring.
Pennant's long-term contract with the Canadian Department of
National Defence was successfully extended to the end of 2023 and
the business secured a second software and services order in the
commercial aerospace sector (overall order value: USD$1.7 million),
for a new strategic customer which underpinned the growth.
Australasia
Our Australasia business enjoyed a solid year and delivered
results broadly in line with the prior year.
Pennant's existing long term technical services contract in
Wagga Wagga continued to perform well and was extended into 2025
(year 12 out of 20 year framework).
The transformation to longer term software and technical
services has been accelerated with new contracts secured with the
Australian Defence Force for technical publications and data
conversion.
The Group also secured its first 'Launch Partner' to participate
in a programme of testing and product promotion for the new GenS
product signed in Australasia.
Investing in the future
In line with the Group's core strategic objectives, investment
in innovation has been targeted to drive growth and expand the
Group's market coverage.
During the Period the Group invested circa GBP1.1 million in the
development of new and enhanced solutions with the aim of improving
the overall customer proposition.
The following new products are under development:
-- Continued development of the new GenS software solution
(OmegaPS successor product) with release of version 2.0 scheduled
for May 2023
-- Development of next generation of training aids - modular, software / technology led.
Pennant anticipates that it will continue to invest in its
software products and technology-led software solutions during 2023
and expects the level of investment to be at a higher level than
2022.
The Group also has an active pipeline of potential product
innovations and improvements that are undergoing a detailed
assessment process with a view to obtaining Board funding approval
if a business case can be established.
Year-end order book & pipeline
At 31 December 2022, the Group's three-year contracted order
book stood at GBP25 million (2021: GBP22 million), of which GBP13
million of revenue (2021: GBP10 million) is scheduled for
recognition in 2023 based on anticipated completion of generic
products, execution of software & services projects and
progress made on engineered-to-order contracts.
Of the total order book, 50% (2021: 42%) is denominated in
sterling, 12% (2021: 31%) is denominated in Canadian dollars, 15%
is denominated in US dollars (2021: 5%) and 23% (2021: 22%) is
denominated in Australian dollars.
The overall value of the Group's active pipeline at Period-end
was in excess of GBP70 million.
Post Period-end - acquisition
Post Period-end, the Group completed the acquisition of Track
Access Productions. Track Access provides driver training, route
mapping and route familiarisation services to the rail industry.
Its acquisition aligns with the Company's strategy, in particular
by enhancing recurring revenues and further diversifying into
civilian markets while also enhancing the Group's existing rail
capabilities and complementing Pennant's Track Access Services
business.
Implementing our strategy
The mix shift towards higher margin software and technical
services, diversified global revenues and order intake momentum
together with the evolving strategic backdrop provide a firm
platform for continued progress in the current year.
P H Walker
Director
CHIEF FINANCIAL OFFICER'S REVIEW
Record gross margins, and strengthened balance sheet
Financial review
The results and the key financial performance indicators are set
out below.
Performance
Revenue for the year was delivered broadly in line with
expectations at GBP13.7 million (2021: GBP16.0 million) with equal
contributions to revenue in the first and second half of the
year.
There was significant growth in the gross profit margin for the
Period to 42% (2021: 27%) which is at record levels for the Group.
This reflects the change in the sales mix in the Period and shift
in the strategic direction of the Group towards higher margin,
software-related products.
Despite inflation-linked remuneration reviews in the Period to
support the workforce with increasing costs of living, overall
staff costs were held in line with 2021 at GBP8.7 million (2021:
GBP8.7 million).
The improved margins coupled with the controlled cost base,
resulted in the operating margin recovering to a loss of GBP1.0
million (2021: operating loss GBP2.2 million) and an EBITA profit
of GBP0.5 million (2021: EBITA loss GBP0.8 million). The Group has
now reported an EBITA profit in both the first and second half of
2022 per the table below. H2 2021 also delivered a profit at an
EBITA level, meaning the Group has reported an EBITA profit in the
last three six-month periods.
GBPm H1 H2 2022 2021
----------------------------------- ------- ------- ------- -----
Revenue 6.9 6.8 13.7 16.0
Gross profit 2.8 3.0 5.8 4.3
Gross profit % 41 % 44 % 42 % 27%
Admin costs (net of other Income) (3.6) (3.2) (6.8) (6.5)
Operating loss (0.8) (0.2) (1.0) (2.2)
EBITA 0.1 0.4 0.5 (0.8)
Growth in Software and Services
An analysis of the Group's revenue by product group is as
follows:
2022 2021
GBP000s GBP000s
--------- ---------
Software licences & products 1,377 1,080
Software maintenance 1,458 1,056
Software and technical services 7,410 6,994
--------- ---------
Sub-total Software and Services 10,245 9,130
--------- ---------
Engineered solutions 2,410 4,211
Generic products 1,031 2,624
--------- ---------
Sub-total Training Solutions 3,441 6,835
--------- ---------
Total Group Revenue 13,686 15,965
========= =========
Revenues contributed by Software and Services have increased to
GBP10.2 million in 2022 (2021: GBP9.1 million) representing 75% of
the total revenue in the Period (2021: 57%). The upturn in software
product sales has resulted in increased maintenance revenues in the
Period which will be recurring in nature.
Recurring revenues, a key performance indicator, increased to
GBP 7.7 million (2021: GBP7.4 million) in 2022 representing 56%
(2021: 46%) of the total revenue for the Period.
Software and Services
Software licences & products
The circa 30% increase in software product sales between 2021
and 2022 was primarily driven by R4i software sales, with the
associated recurring maintenance revenues (circa 20% per annum) to
follow on a recurring basis. Revenues are recognised upon
installation of the software and tend to be non-recurring in
nature.
Software maintenance
Software maintenance revenues are recurring by nature and are
growing year on year driven by the growth in the global customer
base for the Group's software solutions. The revenue is recognised
over the duration of the maintenance period for each customer which
can range from annual renewals to multi-year agreements. The
average longevity of the customer relationship is in excess of 10
years.
Software and technical services
The predominantly recurring, software and technical services
revenue stream has grown from 57% of the Group's revenues in 2021
to 75% in 2022. In addition to the long-standing, recurring revenue
streams there are a number of consultancy related tasks across the
Group. The revenues are typically recognised on a consumption of
benefit basis over time .
Training Solutions
Engineered solutions
Revenues associated with engineered solutions reduced from
GBP4.2 million in 2021 to GBP2.4 million in 2022. This is
reflective of the stages of the major programmes which form the
basis of this revenue which is recognised over time under IFRS 15.
Revenue on engineered solutions is expected to increase in 2023 as
progress is made on engineered solutions workstreams.
Generic products
The revenue recognition for generic products is at a point in
time (typically on delivery) under IFRS 15. The reason for the
reduced revenues for these products in 2022 (GBP1.0 million)
compared to 2021 (GBP2.6 million) is due to timing of delivery of
the various generic products to customers with the final Qatar
installations occurring in 2021.
Cashflow
Cash generated in operations amounted to GBP2.6 million (2021:
cash used in operations of GBP0.1 million). This reflects milestone
achievements on major programmes in 2022 and associated cash
payments being received.
The Group had net borrowings at the year-end of GBP0.4 million
(2021: net borrowings of GBP3.5 million) excluding lease
liabilities. The net borrowings have significantly reduced through
the cash generated in operations and the sale of the Group's
Headquarters, Pennant Court, for GBP2.1 million.
Research & development
Research and development tax credits claimed in the UK during
the year amounted to GBP1.9 million (2021: GBP1.8 million) with
further claims on current projects expected to be made during 2023.
These claims mostly relate to the development of innovative new
software products.
Taxation
The Group's tax position shows a tax credit of GBP0.3 million
(2021: tax credit of GBP0.9 million). The Group has unrelieved UK
tax losses carried forward of GBP7.1 million (2021: GBP6.7
million), all of which have been recognised in the deferred tax
balance as at 31 December 2022.
Looking forward
With the shift towards software and services driving improved
gross margins, and a strengthened balance sheet, the course is set
for the Group's continued financial progress.
M J Brinson
Director
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2022
Notes 2022 2021
Continuing operations GBP000s GBP000s
--------- ---------
Revenue 13,686 15,965
Cost of sales (7,897) (11,609)
--------- ---------
Gross profit 5,789 4,356
Land and buildings revaluation - 117
Profit on sale of land and buildings 374 -
Other administration expenses (7,276) (6,826)
--------- ---------
Administrative expenses (6,902) (6,709)
Other income 123 203
--------- ---------
Operating loss 3 (990) (2,150)
Finance costs (377) (329)
Finance income 2 -
Loss before taxation (1,365) (2,479)
Taxation 464 865
--------- ---------
Loss for the year attributable to
the equity
holders of the parent (901) (1,614)
========= =========
Earnings per share
Basic (2.45p) (4.41p)
Diluted (2.45p) (4.41p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2022
Notes 2022 2021
GBP000s GBP000s
------------------------------------------------- -------------- ----------
Loss for the year attributable
to the equity holders of the
parent (901) (1,614)
Items that may be reclassified
to profit or loss
Exchange differences on translation 109 (64)
of foreign operations
Prior year amortisation adjustment 39 -
Items that will not be reclassified
to profit or loss
Net revaluation gain - 353
Deferred tax charge - property,
plant and equipment 248 (156)
Total comprehensive loss for
the period attributable to the
equity holders of the parent (505) (1,481)
======== ==========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER
2022
Notes 2022 2021
GBP000s GBP000s
------ -------- --------
Non-current assets
Goodwill 4 2,507 2,403
Other intangible assets 5 4,690 5,081
Property, plant and equipment 4,002 6,009
Right-of-use assets 503 661
Deferred tax assets 1,497 850
Total non-current assets 13,199 15,004
--------
Current assets
Inventories 1,001 865
Trade and other receivables 4,129 4,528
Corporation tax recoverable 354 330
Cash and cash equivalents 1,107 901
Total current assets 6,591 6,624
--------
Total assets 19,790 21,628
Current liabilities
Trade and other payables 5,862 3,595
Bank overdraft 1,533 4,441
Current tax liabilities 155 367
Lease liabilities 174 209
Deferred consideration on acquisition 327 432
Total current liabilities 8,051 9,044
--------
Net current assets / (liabilities) (1,460) (2,420)
Non-current liabilities
Lease Liabilities 385 529
Deferred tax liabilities - -
Warranty provisions 107 122
Contingent consideration on acquisition 552 789
Total non-current liabilities 1,044 1,440
--------
Total liabilities 9,095 10,484
Net assets 10,695 11,144
======== ========
Equity
Share capital 1,840 1,832
Share premium account 5,366 5,345
Capital redemption reserve 200 200
Retained earnings 2,844 2,687
Translation reserve 335 226
Revaluation reserve 110 854
Total equity 10,695 11,144
======== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
Capital
Share Share redemption Retained Translation Revaluation Total
capital Premium reserve earnings reserve reserve equity
---------- ---------- ------------ ----------- -------------- -------------- ---------
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 1 January 2021 1,822 5,295 200 2,243 290 683 12,533
(Loss) for the
year - - - (1,614) - - (1,614)
Other comprehensive
income - - - - (64) 197 133
----------------------- ---------- ---------- ------------ ----------- -------------- -------------- ---------
Total comprehensive
income 1,822 5,295 200 2,629 226 880 11,052
Issue of new ordinary
shares 10 50 - - - - 60
Recognition of
share based payment - - - 32 - - 32
Transfer from
revaluation reserve - - - 26 - (26) -
----------------------- ---------- ---------- ------------ ----------- -------------- -------------- ---------
At 31 December
2021 1,832 5,345 200 2,687 226 854 11,144
----------------------- ---------- ---------- ------------ ----------- -------------- -------------- ---------
(Loss) for the
year - - - (901) - - (901)
Other comprehensive
income / (loss) - - - 1,031 109 (744) 396
----------------------- ---------- ---------- ------------ ----------- -------------- -------------- ---------
Total comprehensive
income 1,832 5,345 200 2,817 335 110 10,639
Issue of new ordinary
shares 8 21 - (2) - - 27
Recognition of
share based payment - - - 29 - - 29
Transfer from - - - - - - -
revaluation reserve
----------------------- ---------- ---------- ------------ ----------- -------------- -------------- ---------
At 31 December
2022 1,840 5,366 200 2,844 335 110 10,695
======================= ========== ========== ============ =========== ============== ============== =========
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
Notes 2022 2021
GBP000s GBP000s
------- -------- --------
Net cash from operations 2,572 (127)
-------- --------
Investing activities
Interest received 2 -
Earn-out payment for acquisition of
subsidiary (547) (549)
Purchase of intangible assets (1,150) (966)
Purchase of property, plant and equipment (63) (134)
Proceeds from disposal of property,
plant and equipment 2,117 22
-------- --------
Net cash used in investing activities 359 (1,627)
-------- --------
Financing activities
Proceeds from issue of ordinary shares 24 60
Repayment of lease liabilities (263) (309)
Net cash from financing activities (239) (249)
--------
Net (decrease )/increase in cash and
cash equivalents 2,692 (2,003)
Cash and cash equivalents at beginning
of year (3,540) (1,453)
Effect of foreign exchange rates 422 (84)
Cash and cash equivalents at end of
year (426) (3,540)
======== ========
Abbreviated notes to the consolidated financial statements FOR
THE YEARED 31 DECEMBER 2022
1. Basis of Preparation
The financial information set out in this preliminary
announcement does not constitute statutory accounts for the
purposes of the Companies Act 2006.
The statement of financial position at 31 December 2022 and
income statement, statement of changes in equity, statement of cash
flows and associated notes for the year ended 31 December 2022 have
been extracted from the Group's 2022 financial statements upon
which the auditor opinion is unqualified. The audit report includes
a material uncertainty in respect of going concern arising from the
potential impact of missing a major programme milestone due in
October 2023. The directors' assessment of the uncertainty is set
out in note 3 of the notes to the financial statements as contained
the 2022 Annual Report and Accounts. Following such assessment, the
Directors concluded that it was appropriate to prepare the
financial statements using the 'going concern' basis.
The financial information in this preliminary statement has been
prepared in accordance with the accounting policies, and on the
basis set out, in the Group's 2022 financial statements.
The 2022 Annual Report and Accounts will be available on the
Company's website: www.pennantplc.co.uk Copies may be obtained by
contacting the Company Secretary at Unit D1, Staverton Connection,
Old Gloucester Road, Cheltenham GL51 0TF.
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 the three regions; UK & Europe, North America
and Australasia as these represent the way the Group reports
financial performance and position internally.
2.1 Segment revenues and results
Segment revenue Segment profit/(loss)
------------------ ------------------------
2022 2021 2022 2021
GBP000s GBP000s GBP000s GBP000s
UK & Europe 5,557 8,161 (158) (1,801)
North America 4,985 4,451 1,435 1,050
Australasia 3,144 3,353 366 978
-------- --------
External Sales 13,686 15,965 1, 643 227
======== ========
Management charges and licence
fees (2,633) (2,377)
Net finance costs (375) (329)
------------ ----------
Loss before tax (1,365) (2,479)
============ ==========
The segment profit or loss for the period is stated after
amortisation of intangible assets. Recharges are made the parent
company for central management and group services. Licence fees are
recharged to the segments for the use of intellectual property
rights owned by the parent.
2022 2021
3 . Operating loss for the year
GBP000s GBP000s
-------- --------
The operating loss for the year is stated after
charging /(crediting):
Net foreign exchange loss 119 -
Research and development costs* 818 1,309
Other income arising from RDEC claim (R&D) (113) (157)
Other income arising from Coronavirus Job Retention
Scheme - (29)
Property rental and sundry other income (10) (17)
Amortisation of intangible assets 1,519 1,366
Effect of land and buildings revaluation - (117)
Depreciation of property, plant and equipment 373 460
Depreciation of right-of-use assets 183 243
Share-based payment (note 29) 29 32
Profit/Loss on disposal of land and buildings (note (374) -
17)
Profit/Loss on disposal of other property, plant (6) -
and equipment (note 17)
* In 2022 research and development costs of GBP1,139k were
capitalised (2021: GBP966k)
4. Goodwill
GBP000s
Carrying amount:
At 1 January 2021 2,428
Currency translation (25)
--------
At 1 January 2022 2,403
Currency translation 104
--------
At 31 December 2022 2,507
--------
Goodwill acquired in a business combination is allocated, at
acquisition, to cash generating units ("CGUs") that are expected to
benefit from that business combination. The goodwill will not be
deductible for tax purposes. Although the Group operates as a
single operation selling and delivering all revenue streams
globally, for the purposes of impairment testing, it has been
determined that the Group has two CGUs (Training and Software). The
carrying amount of goodwill has been allocated as follows:
2022 2021
Cash generating unit: GBP000s GBP000s
-------- --------
Training 584 584
Software 1,923 1,819
2,507 2,403
======== ========
The Group tests goodwill annually for impairment. The
recoverable amounts of the CGU's are determined from value in use
calculations. The Group prepares cash flow forecasts for the
following twelve months derived from the most recent annual
financial budgets approved by the Board of Directors and
extrapolates cash flows as follows:
Software CGU:
Cashflows are extrapolated for a further four years beyond the
twelve-month annual budget period at a growth rate of 5% (2021:
3%). The forecast includes a terminal value.
Training CGU:
Cashflows are forecast for an additional two years beyond the
twelve-month approved financial budget period based on a contract
level review with the addition of expected cash flows generated
from 'pipeline' opportunities. As at 31 December 2022 the Training
CGU had an active pipeline of over GBP60 million (2021: GBP50
million) and in testing the goodwill for impairment the Directors
have assumed a prudent conversion rate of circa 40%. For years four
and five, a growth rate of 3% per annum (2021: 3%) is assumed. The
forecast does not include a terminal value.
The forecast cash flows of each CGU are discounted at the
following pre-tax rates to provide the value in use for each
CGU:
Training CGU: 13.78% per annum (2021: 10.93% per annum);
post-tax rate 12.02% (2021: 7.21%)
Software CGU: 16.51% per annum (2021: 17.76% per annum);
post-tax rate 12.02% (2021: 9.28%)
The rates have been calculated to reflect the working capital
structure of the Group as each CGU utilises the optimal capital
structure, being both debt and equity.
The discounted cash flows provide headroom for the goodwill
carrying values in excess of their respective assets in the case of
each CGU with the Training headroom being GBP0.4 million without
considering terminal values and Software headroom of GBP8.2 million
when considering terminal values.
Key assumptions are based on past experience and external
sources. No impairment of goodwill has been recorded in either the
year ending 31 December 2022 or 31 December 2021. The Directors
have assessed the sensitivity of the assumptions detailed above and
consider that it would require significant adverse variance in any
of the assumptions to reduce fair value to a level where it matched
the carrying value.
5. Other intangible assets
Software Development costs Total
----------- -------------------- --------
GBP000s GBP000s GBP000s
Cost
At 1 January 2021 535 7,982 8,517
Currency translation - (113) (113)
Reclassifications (157) 157 -
Additions - 966 966
Disposals (30) - (30)
At 1 January 2022 348 8,992 9,340
Currency translation - 20 20
Reclassifications 240 (240) -
Additions 11 1,139 1,150
Disposals (50) - (50)
At 31 December 2022 549 9,911 10,460
=========== ==================== ========
Amortisation
At 1 January 2021 331 2,616 2,947
Currency translation - (29) (29)
Reclassifications (73) 73 -
Charge for the year 84 1,282 1,366
Disposals (25) - (25)
At 1 January 2022 317 3,942 4,259
Currency translation 2 1 3
Reclassifications 240 (240) -
Charge for the year* 22 1,536 1,558
Disposals (50) - (50)
At 31 December 2022 531 5,239 5,770
=========== ==================== ========
Carrying amount
At 31 December 2022 18 4,672 4,690
=========== ==================== ========
At 31 December 2021 31 5,050 5,081
=========== ==================== ========
*Includes GBP39k charged to retained earnings (prior year
adjustment).
During 2022 the Group capitalised GBP1,139k (2021: GBP966k) of
costs in relation to the ongoing development of the GenS software
solution along with enhancements to existing software related
assets. The Group also capitalised costs related to the development
of three (2021: five) new products. These costs will be amortised
over the estimated useful life of the asset.
In 2021, the useful economic life of one intangible asset was
reviewed by management and, as a result, the economic life for
straight line amortisation was reduced from five to two years. In
the current year, under the revised useful economic life,
amortisation of GBP397k (2021: GBP397k) was charged in the period
with the asset having a net book value of GBPnil as at December
2022 (2021: GBP397k). If the useful economic life had remained at
five years, the amortisation charge would have been GBP159k (2021:
GBP159k) with a net book value at the year-end of GBP476k (2021:
GBP635k).
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END
FR GSGDSRUDDGXL
(END) Dow Jones Newswires
April 26, 2023 02:00 ET (06:00 GMT)
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