Final Results
Pennant International Group PLC
03 April 2007
3 April 2007
Pennant International Group Plc
Final Results
Preliminary Results for the year ended 31 December 2006
Chairman's Statement and Business Review
I am pleased to announce another year of increased profits and dividend and a
further strengthened balance sheet. Group turnover has increased by 7% and group
operating profit by 38% compared to 2005. The profits are reflected in a further
improved cash position and a strong balance sheet.
The forward order book at the year end grew by 25% on a comparable basis with
the preceding year and there have also been major contract wins since the year
end.
Results and Dividend
Group operating profit increased to £689,123 (2005 as restated: £496,851), an
operating margin of 6.1% of turnover compared to 4.7% for 2005. Earnings were
£509,691 (2005 as restated: £388,398) giving basic earnings per share of 1.61p
(2005 as restated: 1.21p) an increase of 33%
The taxation charge is 7.8% of pre-tax profits reflecting the benefit of
substantial tax losses.
The Group's cash position has strengthened with net cash standing at £1,520
compared to net debt of £261,795 at the end of 2005. £753,457 was generated from
operations.
Your Board is recommending a final cash dividend of 0.4p per share (2005: 0.31p)
which, together with the interim dividend of 0.2p, gives a total dividend for
the year of 0.6p (2005: 0.44p) an increase of 36%. The total dividend is 2.7
times covered by earnings. The final dividend will be paid on 1 June 2007 to
shareholders on the Register at close of business on 4 May 2007. The shares are
expected to go ex dividend on 2 May 2007.
Strategy
Your Board has continued its strategy to improve profitability and shareholder
value. The major elements of the strategy are:
• To concentrate on the core strengths of each of the Group's businesses.
• To identify new customers and markets appropriate to those core strengths
• To build on the established good relationships with existing
customers, to extend the Group's reach within those customers and to
become their supplier of choice.
• To reduce risk by developing robust revenue streams in the form of
equipment support contracts, framework service contracts and software
maintenance contracts to provide a sustainable platform for the
performance of major equipment and service contracts as they arise.
Our Business
The Group operates as three trading divisions which have complementary
capabilities and customer overlap
Training Systems Provides and supports specialist training systems based on software emulation,
hardware simulation and computer based training for engineer training.
Information Services Supplies electronic documentation, e-learning products, electronic data,
publicity and newsletters, parts catalogues and authoring in support of
technical products and skills.
Software Services Provides and supports software tools used to support complex long-life assets.
Owns the rights to the market leading OmegaPS suite of software.
The Group wins new business from:
• The introduction, by its customers, of new technology, new
equipment or services that require training, documentation and maintenance
services to be in place at the point of sale and to be maintained thereafter.
• Updates and changes to existing equipment or software,
driven by new technology and the replacement of obsolete hardware or software.
These changes drive amendments to documentation, training and maintenance
regimes.
• Expansion of the 'footprint' across customer organisations
and market sectors. For instance the Group has recently significantly increased
its presence with BAE Systems and in the naval sector with work relating the
Type 45 Destroyer.
• Extended support and maintenance contracts.
The complexity of the technologies which customers produce means that it is
necessary to work closely with them to achieve their goals. The Group employs
domain and platform expertise to complement their skills and has a structured
and flexible approach to project risk management. Tools and processes are
developed that bring mutual benefit from productivity gains.
Training Systems
Training Systems major customers are BAE Systems, Augusta Westland, and the UK
MOD. During 2006 external turnover increase by 19% to £5.3million and the order
backlog increased by 30% securing work load through 2007 and beyond.
The senior management of the division has been strengthened in the project
management and commercial areas by external recruitment of industry
professionals to improve risk management and profitability.
Major contracts running through the year included:
• A support contract for equipment previously supplied to
the MOD. This contract has been running for many years and the current extension
runs until 2011 with an option to extend for a further 2 years. This contract
has a significant basic value and generates further revenues as additional tasks
are identified.
• A support contract for training equipment supplied to the
Royal Australian Air Force, through BAE Systems. This contract has just been
renewed to run to 2011with a basic value in excess of £1 million and includes
options to extend to a total term of 20 years. The contract also has potential
to generate significant additional revenues.
• Continued production of computer based training for the
MOD under a contract running into 2009 with options to extend for a further 2
years.
• Two multi-million pound contracts to supply BAE Systems
with training equipment associated with their delivery of aircraft. These
contracts run into 2008.
Information Services
Information Services operates in a number of different markets including, rail,
power, defence, government, telecommunications and retail. Turnover in 2006
increased by 11% to £3.4 million and the order book by 24 % underpinning
performance through 2007 into 2008.
Major areas of work during the period include:
• Graphic design and multimedia Services for the MOD under a
framework agreement that has been extended to run through into 2009.
• Documentation and training for Kawasaki for rail projects
in China and USA.
• Continued and growing involvement, through BAE Systems, in
the provision of electronic technical data services for the Type 45 Destroyer.
• E learning packages supplied to the Department of Work and
Pensions including high-fidelity emulation exercises on the customer's main
processing systems and on-the-job knowledge refreshment.
Two orders have recently been won with Siemens in Germany, a new customer, for
technical documentation in respect of two rail projects in the USA.
Software Services
The market-leading OmegaPS suite of software is sold worldwide and is used by
many major defence contractors including, Boeing, Lockheed Martin, Northrop
Grumman, BAE Systems, Thales, Australian Aerospace, Honeywell Aerospace and VT
Group. It is also used by the Defence Authorities in both Canada and Australia.
The turnover of the division was £2.6 million and the order book increased by
10% during the year. The turnover arises from:
• Annual maintenance contracts in respect of installations
supplied.
• Consultancy associated with the implementation of the
OmegaPS product. Such work is carried out for both the Canadian and the
Australian Defence Authorities.
• Sales of new licences to new customers and for the
expanding requirements of existing customers. Sales during the year have been
made to a number of new customers including Eurocopter in Germany, Aselsan in
Turkey and Aermacchi in Italy.
Joint Venture
The Joint Venture with Sonovision - ITEP SAS, was set up to provide technical
documentation and engineering services to Airbus UK. The well publicised delays
to the A380 programme have adversely affected financial performance resulting in
a loss for the year. Pennant's share of the loss was £63,410 (2005: profit of
£4,836).
Sale of Property in Southampton
The conditional sale of the property in Southampton has been delayed pending the
outcome of a planning appeal. The matter is being actively pursued by the
purchaser and is expected to be resolved during 2007. The sale of the property
for approximately £700,000 is conditional upon the purchaser obtaining planning
permission.
Cancellation of Deferred Shares
As previously reported the special resolution, passed at the AGM held on 4 May
2006, to cancel the deferred shares was confirmed by the High Court. The
conditions attaching to that confirmation have been met and as a result the
distributable reserves of the Company have been increased by £1,445,400.
People
The Group employs 160 people supplemented significantly by contractors. In
large measure their efforts have been responsible for the excellent progress
made, and I am delighted to pass on the Board's sincere thanks.
Outlook
With the benefit of a good track record, your Board's strategy is developing
strong positions that have the potential to create significant opportunities.
With a stronger forward order book and consequent improved earnings visibility
the Group has entered its current financial year with confidence.
C C Powell
Chairman
3 April 2007
Group Profit and Loss Account
For the year ended 31 December 2006
Notes 2006 2005
(Restated)
£ £
Turnover: Group and Share of Joint Venture. 11,451,977 10,784,644
Less: Share of Joint Venture turnover (189,655) (222,896)
Group Turnover 2 11,262,322 10,561,748
Cost of sales (7,204,381) (6,372,538)
Gross profit 4,057,941 4,189,210
Administration expenses (3,368,818) (3,692,359)
Group Operating Profit 3 689,123 496,851
Share of operating profit in joint venture ( 63,410) 4,836
625,713 501,687
Interest receivable and similar income (Group) 7,258 1,137
Interest payable - Group 5 (75,237) (86,799)
-Joint Venture (4,875) (1,524)
Profit on ordinary activities before taxation 552,859 414,501
Tax on profit on ordinary activities- Group 6 (44,334) (24,937)
-Joint Venture 1,166 1,166
Profit on ordinary activities after taxation for Group 509,691 388,398
and its share of joint venture attributable to members
of the parent undertaking
The profit for the year has been calculated on the historical cost basis.
The company's turnover and expenses all relate to continuing activities.
Earnings per share 8
Basic 1.61p 1.21p
Diluted 1.51p 1.12p
Group Statement of Total Recognised Gains and Losses
For the year ended 31 December 2006
Notes 2006 2005
£ (Restated)
£
Profit for the financial year 509,691 388,398
Currency translation differences on foreign currency net (37,235) 34,609
investments
Total gains and losses recognised since last annual 472,456 423,007
report
Group Balance Sheet
As at 31 December 200
Notes 2006 2005
(Restated)
£ £
Fixed assets
Intangible assets 9 837,254 857,604
Tangible assets 10 2,600,189 2,561,663
Investments 11 6,135 6,135
Investment in joint venture - share of gross assets - 155,346
Investment in joint venture - share of gross - (148,200)
liabilities
3,443,578 3,432,548
Current assets
Stocks 12 518,034 750,884
Debtors 13 2,410,975 2,344,685
Cash at bank and in hand 909,608 939,798
3,838,617 4,035,367
Creditors: amounts falling due within one year 14 (2,120,463) (2,521,168)
Net current assets 1,718,154 1,514,199
Total assets less current liabilities 5,161,732 4,946,747
Creditors: amounts falling due after more than one year 15 ( 766,338) (919,918)
11b
Interest in liabilities of joint venture
Share of gross assets 124,345 -
Share of gross liabilities (184,318) -
( 59,973)
Provisions for liabilities 16 - (16,000)
4,335,421 4,010,829
Capital and reserves
Called up share capital 17 1,600,000 3,045,400
Share premium 19 3,582,329 3,563,504
Profit and loss account 19 (846,908) (2,598,075)
Shareholders' funds 20 4,335,421 4,010,829
Company Balance Sheet at 31 December 2006
Notes 2006 2005
£ (Restated)
£
Fixed assets
Tangible assets - Land and buildings 368,796 -
Investments 11 7,920,172 7,920,172
8,288,968 7,920,172
Current assets
Debtors (including £1,595,803 (2005 £1,556,663)
(due after more than one year) 13 2,000,541 1,982,819
Cash at bank 165 165
2,000,706 1,982,984
Creditors amounts falling due within one year 14 (2,337,481) (1,615,990)
Net current (liabilities)/assets (336,775) 366,994
Total assets less current liabilities 7,952,193 8,287,166
Creditors amounts falling due after more than one year 15 (763,952) (909,657)
7,188,241 7,377,509
Capital and reserves
Called up share capital 17 1,600,000 3,045,400
Share premium account 19 3,582,329 3,563,504
Profit and loss account 19 2,005,912 768,605
Shareholders' funds 7,188,241 7,377,509
Group Cashflow Statement
For the year ended 31 December 2006
Notes 2006 2005
£ £
Net cash inflow from operating activities 27 753,457 484,238
Returns on investments and servicing of finance 28 (67,979) (85,662)
Taxation (22,251) (32,257)
Capital expenditure 28 (234,083) (71,407)
Acquisitions and disposals 28 - (5,000)
Equity dividends (161,490) (128,000)
Cash inflow before financing 267,654 161,912
Financing 28 (155,722) (179,320)
Increase/ (decrease) in cash 30 111,932 (17,408)
C Snook J M Waller
Director Director
Notes to the Financial Statements
For the year ended 31 December 2006
1 ACCOUNTING POLICIES
Basis of accounting
The financial statements are prepared under the historical cost convention
modified to include the revaluation of freehold land and buildings.
The analysis of certain comparatives has been adjusted to conform with the
currents years presentation.
Change in accounting policy
The Group has adopted FRS 20 'Share-based payment'. This change in accounting
policy has resulted in a charge to profit and loss account for the year of
£17,965. The profit and loss account for 2005 has been restated to reflect a
charge of £36,060 for that year.
Compliance with accounting standards
The financial statements are prepared in accordance with UK applicable
accounting standards.
Basis of consolidation
The Group accounts consolidate the accounts of Pennant International Group plc
and all of its subsidiaries and joint ventures made up to 31 December 2006 and
to the extent of Group ownership after eliminating inter-group transactions.
Joint ventures are consolidated using the gross equity method.
No profit and loss account is presented for Pennant International Group plc as
provided by S230 of the Companies Act 1985.
Turnover
Turnover represents amounts receivable for goods and services net of VAT.
Profit is recognised on long-term contracts, if the final outcome can be
assessed with reasonable certainty, by including in the profit and loss account
turnover and related costs as contract activity progresses. Turnover is
recognised when, and to the extent that, ,the right consideration is obtained
and is calculated as the fair value of goods and services provided as a
proportion of the total value of the contract.
Maintenance contracts
Software maintenance income, which is received in advance, is deferred and
released to profit and loss account over the life of the contract. Turnover
includes the proportion of income released during the period and it is
considered that this adequately reflects the relationship of income to the
related costs incurred.
Goodwill
The variance of the purchase consideration over the fair value of net assets at
the date of acquisition of subsidiary undertakings is capitalised in the year of
acquisition and amortised over its useful economic life.
Purchased goodwill is capitalised at its fair value and amortised over its
estimated useful economic life which is currently consider to be 20 years.
The estimated useful life is reviewed annually and amended if necessary.
Investments
Investments are stated in the Group balance sheet at cost less amounts written
off for permanent diminution in value.
Investments in subsidiary undertakings are stated in the Company balance sheet
at cost less amounts written off for permanent diminution in value.
Research and development
Research expenditure is written off to the profit and loss account in the year
in which it is incurred. Development expenditure is written off in the same way
unless the directors are satisfied as to the technical, commercial and financial
viability of individual projects. In this situation, the expenditure is
deferred and amortised over the period during which the Company is expected to
benefit.
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated
into sterling to at the appropriate rates of exchange prevailing at the balance
sheet date and exchange differences arising are dealt with in the profit and
loss account.
In the Group financial statements, the results of overseas subsidiaries are
translated using the closing rate. Exchange differences arising on the
retranslation of the opening net investment in the subsidiaries at the closing
rate are taken directly to reserves.
Tangible fixed assets, depreciation and impairment
Tangible fixed assets other than freehold land are stated at cost or valuation
less depreciation. Depreciation is provided at rates calculated to write off
the cost or valuation less estimated residual value of each asset over its
expected useful life, as follows:
Freehold land Nil
Freehold buildings 1% of valuation or cost
Short leasehold land and buildings Over the period of the lease
Long leasehold and buildings Over the period of the lease
Fixtures, fittings, plant and equipment 10% or 25% of written down value
Computers 33 1/3 of cost
Motor vehicles 25% of cost
The estimated useful lives of assets are reviewed annually and amended if
necessary.
The Group's policy is not to revalue fixed assets. Following the adoption of
FRS 15 previous valuations have been retained, but have not been updated. The
last valuation was carried out in 1988.
Impairment reviews have been carried out on the freehold properties comparing
the carrying value to the net realisable value.
Leasing and hire purchase commitments
Assets obtained under hire purchase contracts and finance leases are capitalised
as tangible assets and depreciated over the shorter of the lease term and their
useful lives. Obligations under such agreements are included in creditors net
of the finance charge allocated to future periods. The finance element of the
rental payment is charged to the profit and loss account so as to produce a
constant periodic rate of charge on the net obligation outstanding in each
period.
Rentals payable under operating leases are charged against income on a straight
line basis over the lease term.
Stock and work in progress
Stock and work in progress, other than long term contracts, is valued at the
lower of cost and net realisable value. Cost is represented by raw materials
and direct labour together with a relevant proportion of fixed and variable
overheads. Net realisable value is estimated selling price less cost to
completion.
Long term contracts
Amounts recoverable on long term contracts, which are included in debtors, are
stated at the fair value of goods and services provided as a proportion of the
total value of each contract, after assessing each stage of completion of the
contractual obligations. Progress received on account are included in creditors.
Pensions
The pension costs charged in the financial statements represent the
contributions payable by the Group during the year in accordance with FRS17.
Share-based payments
In accordance with FRS 20 the Group reflects the economic cost of awarding
shares and share options to employees by recording an expense in the profit and
loss account equal to the fair value of the benefit awarded, fair value being
estimated by an independent third party using a proprietary binomial probability
model. The expense is recognised in the profit and loss account over the vesting
period of the award.
Deferred taxation
Deferred tax is provided in respect of the tax effect of all timing differences
that have originated but not reversed at the balance sheet date.
A deferred tax asset is regarded as recoverable and therefore recognised only
when, on the basis of all evidence, it can be regarded as more likely than not
that there will be suitable taxable profits from which the future reversal of
the underlying timing differences can be deducted.
Deferred tax is measured on a basis at the average tax rates that are expected
to apply in the periods in which the timing differences are expected to reverse,
based on tax rates and laws that have been enacted or substantively enacted by
the balance sheet date.
2. Turnover
The Group's turnover is attributable to its one principal activity.
The geographical analysis of turnover by destination is as follows:
2006 2005
(Restated)
£ £
United Kingdom 8,203,409 7,133,380
Europe 482,814 255,245
USA and Canada 1,597,598 2,154,638
Australasia 645,063 741,899
Africa 9,600 34,599
Far East 323,838 25,125
Middle East - 216,862
11,262,322 10,561,748
The geographical analysis of turnover by 2006 2005
origin is as follows:
£ (restated)
£
United Kingdom 8,987,245 8,047,007
USA and Canada 1,857,239 2,089,517
Australasia 417,838 425,224
11,262,322 10,561,748
Additional segmental information has not been provided as, in the opinion of the
directors, it would be seriously prejudicial to the Group.
3. Operating profit
The operating profit is stated after charging/ 2006 2005
(crediting):
£ (restated)
£
Depreciation of tangible fixed assets 191,935 202,236
Loss/profit on sale of tangible fixed assets 2,092 (3,433)
Amortisation of intangible fixed assets 20,234 203,439
(Profit)/loss on foreign exchange transactions (13,370) 48,734
Operating leases - property 136,861 128,502
- plant and 77,277 71,732
machinery
Restructuring costs - 128,861
Share-based payment 17,965 36,060
4. Auditors' remuneration, including non-cash benefits
2006 2005
£ £
Audit services 35,125 36,500
Taxation services 2,200 1,835
Other services 3,945 800
41,270 39,135
Audit services include fees in respect of the Group audit and fees for other
services required by statute or regulation. Taxation services consist of tax
compliance services and tax advice. Other services consist of advice in
connection with International Accounting Standards.
5. Interest payable
2006 2005
£ £
On bank loans and overdrafts 9,688 11,646
On loans repayable after five years 63,640 73,634
On overdue tax 65 283
On hire purchase 1,844 1,236
75,237 86,799
6. Taxation
2006 2005
(Restated)
£ £
UK corporation tax
Current - 733
Prior year adjustment (1,276) -
(1,276) 733
Foreign tax
Current 75,042 22,128
Prior year adjustment (26,336) (8,137)
48,706 13,991
Current tax charge/(credit) 47,430 14,724
Deferred tax
Deferred tax charge (4,262) 11,379
Tax on profit on ordinary activities 43,168 26,103
Tax charge relates to the following
Pennant International Group plc 44,334 24,937
Joint venture (1,166) 1,166
43,168 26,103
Factors affecting the tax charge for the year
Profit on ordinary activities before taxation 552,859 414,501
Profit on ordinary activities before taxation 165,858 124,350
multiplied by standard rate of UK corporation
tax of 30% (2005:30%)
Effects of:
Non deductible expenses 27,347 16,123
Depreciation 53,677 62,810
Capital allowances (55,590) (46,203)
Tax losses (160,450) (142,066)
Other tax adjustments 43,683 (290)
Adjustment to tax charge in respect of (27,095) -
previous periods
(118,428) (109,626)
Current tax charge 47,430 14,724
The Group has estimated UK tax losses of £1,990,000 (2005: £2,022,000) available
for carry forward against future trading profits.
7. Dividends
Amounts recognised as distributions to equity 2006 2005
holders in the year:
£ £
Ordinary shares of 5p each:
2005 final dividend paid of 0.31p (2004: 97,855 86,400
0.27p)
2006 interim dividend paid of 0.20p (2005: 63,635 41,600
0.13p)
161,490 128,000
The directors have also proposed a final dividend for 2006 of 0.40p per share.
This dividend is subject to approval by the shareholders at the Annual General
Meeting on 10 May 2007 and, in accordance with FRS 21 has not been included as a
liability in these financial statements.
8. Earnings per share
Earnings per share has been calculated by dividing the profit attributable to
shareholders by the weighted average number of ordinary shares in issue during
the year as follows:
2006 2005
(Restated)
£ £
Profit after tax attributable to shareholders 509,691 388,398
Number Number
£ £
Weighted average number of ordinary shares in 31,611,500 31,971,463
issue during the year
Diluting effect of share options 2,207,500 2,777,500
Diluted average number of ordinary shares 33,819,000 34,748,963
Earnings per share p p
Basic 1.61 1.21
Diluted 1.51 1.12
9. Intangible fixed assets
Group Positive Negative Development costs
goodwill goodwill Total
£ £ £ £
Cost
At 1 January 2006 and 31 1,243,731 (69,234) 922,045 2,096,542
December 2006
Amortisation
At 1 January 2006 337,665 (20,772) 922,045 1,238,938
Exchange difference on opening 116 - - 116
balance
Charge/(credit) for the year 68,696 (48,462) - 20,234
At 31 December 2006 406,477 (69,234) 922,045 1,259,288
Net book value
At 31 December 2006 837,254 - - 837,254
At 31 December 2005 906,066 (48,462) - 857,604
10. Tangible fixed assets
Group Long Short Freehold Plant Motor Total
leasehold leasehold land and equipment & vehicles
land and land and buildings fittings
buildings buildings
£ £ £ £ £ £
Cost or valuation
At 1 January 2006 623,582 70,737 1,587,858 3,129,757 51,964 5,463,898
Exchange difference - - - (19,308) (591) (19,899)
on opening balance
Additions 48,242 - - 190,348 - 238,590
Disposals - - - (1,578,842) (34,504) (1,613,346)
At 31 December 2006 671,824 70,737 1,587,858 1,721,955 16,869 4,069,243
Depreciation
At 1 January 2006 36,526 5,096 214,003 2,603,071 43,539 2,902,235
Exchange difference - (18,254) (115) (18,369)
on opening balance
Charge for the year 191,935 6,353 656 13,739 169,837 1,350
Disposals - (1,578,842) (27,905) (1,606,747)
At 31 December 2006 42,879 5,752 227,742 1,175,812 16,869 1,469,054
Net book value
At 31 December 2006 628,945 64,985 1,360,116 546,143 - 2,600,189
At 31 December 2005 587,056 65,641 1,373,855 526,686 8,425 2,561,663
The freehold land and buildings include a revalued asset owned by a subsidiary which was valued on an
open market basis in 1988 by a firm of independent Chartered Surveyors.
Comparable historical cost for the land and buildings included at valuation:
Cost £
At 1 January 2006 and at 31 December 2006 510,894
Depreciation based on cost
At 1 January 2006 90,689
Charge for the year 4,091
At 31 December 2006 94,780
Net book value
At 31 December 2006 416,114
At 31 December 2005 420,205
Included in freehold land and buildings is a non-depreciable asset of £101,789
(2005: £101,789.
Included above are assets held under finance leases or hire purchase contracts
as follows:
Motor vehicles
£
Net book value
At 31 December 2006 -
At 31 December 2005 11,739
Depreciation charge for the year
At 31 December 2006 -
At 31 December 2005 1,944
Company
Tangible assets are freehold land and buildings transferred from another Group
company during the year. The net book value is £368,796 and the depreciation
charged for the period from transfer in September 2007 to 31 December 2007 is
£621.
11. Investments
2006 2005
Group £ £
Quoted (note 11a) 6,135 6,135
Company
Quoted (note 11a) 6,135 6,135
Unquoted - Group undertakings (note 11c) 7,909,037 7,909,037
Joint Venture (11b) 5,000 5,000
7,920,172 7,920,172
11a. Market values
Quoted 7,250 5,625
11b. Joint venture
Pennant International Group plc has a 50% interest, consisting of 5,000 Ordinary Shares in Pennant
Sonovision ITEP Limited, a joint venture with Sonovision ITEP SAS of France. The company is based in
Bristol, England and is headed by a board of directors with equal representation from both shareholders.
11c. Subsidiary Undertakings Country of Class of shares Percentage held at
incorporation 31 December 2006
Subsidiary and activity
Pennant Training Systems Ltd England Ordinary 100%
Training systems and simulation
Pennant Software Services Ltd England Ordinary 100%
ILS software
Pennant Information Services Ltd England Ordinary 100%
Technical documentation and data
services
Pennant Information Services Inc. USA Ordinary 100%
ILS software
Pennant Australasia Pty Ltd Australia Ordinary 100%
ILS software
Pennant Canada Ltd Canada Ordinary 100%
ILS software
Old Court Trust Plc England Ordinary 100%
Dormant
*Bettertrain Ltd England Ordinary 100%
Dormant
* Indirect subsidiary
12. Stocks
2006 2005
£ £
Raw materials and consumables 34,720 34,868
Work in progress 483,314 716,016
518,034 750,884
13. Debtors
Group 2006 2005
£ £
Trade debtors 1,433,164 1,208,332
Amounts recoverable on long-term contracts 610,106 838,165
Other debtors 8,287 1,857
Prepayments 217,577 155,433
Deferred tax asset (note 16) 16,966 28,198
Amounts due from joint venture 124,875 83,500
VAT recoverable - 29,200
2,410,975 2,344,685
Company
Amounts owed by subsidiary undertakings 1,865,667 1,906,774
Amounts due from Joint Venture 124,875 75,000
Other debtors 2,867 -
Prepayments 7,132 1,045
2,000,541 1,982,819
Amounts owed to subsidiary undertakings includes £1,475,803 (2005:£1,481,663)
due after more than one year.
Amounts due from the Joint Venture are due after more than one year. They are
repayable in five instalments, with the first instalment becoming due for
repayment on 14 February 2008. Interest is being charged at 2% above the bank
base rate.
14. Creditors: amounts falling due within one year
2006 2005
(Restated)
£ £
Group
Bank loans and overdrafts 141,338 278,817
Trade creditors 751,849 555,636
Corporation tax 52,791 31,184
Social security and other taxes 449,980 505,883
Net obligations under hire purchase contracts 412 2,858
Payments received on account 2,000 114,000
Other creditors 108,857 300,993
Accruals and deferred income 613,071 651,445
Dividends payable 165 165
Amounts due to joint venture - 80,187
2,120,463 2,521,168
Company
Bank loans and overdrafts 424,642 229,610
Amounts owed to subsidiary undertakings 1,876,292 1,338,549
Corporation tax - 1,184
Accruals and deferred income 36,382 20,822
Dividends payable 165 165
Tax and social security - 25,660
2,337,481 1,615,990
15. Creditors: amounts falling due after more than one year
2006 2005
£ £
Group
Bank loans 763,952 909,657
Net obligations under hire purchase contracts 2,386 10,261
766,338 919,918
Company
Bank loans 763,952 909,657
Analysis of loans
Group and Company
Not wholly repayable within five years by instalments 905,290 1,046,352
Included in current liabilities (141,338) (136,695)
763,952 909,657
Instalments not due within five years 92,494 268,059
Loan maturity analysis
Group and Company
In more than one year but not more than two years 151,230 145,580
In more than two years but not more than five years 520,228 496,018
In more than five years 92,494 268,059
Bank loans of £905,290 (2005: £1,046,352) are secured by fixed and floating
charges over the assets of Pennant International Group plc, Pennant Training
Systems Limited, Pennant Software Services Limited and Pennant Information
Services Limited, and are repayable by monthly instalments and interest is
charged at 2% above the bank's base rate.
Net obligations under hire purchase contracts
2006 2005
£ £
Group
Repayable within one year 412 2,858
Repayable between one and two years 412 2,858
Repayable between two and five years 1,974 7,403
2,798 13,119
Included in liabilities falling due within one year (412) (2,858)
2,386 10,261
16. Provisions for liabilities and charges
Group
Deferred taxation provided in the financial statements and the amounts not
provided are as follows:
2006 2005
£ £
At 1 January 2006 (11,125) (22,504)
Exchange translation difference in opening balance (1,579) -
Profit and loss account (4,262) 11,379
At 31 December 2006 (16,966) (11,125)
Deferred tax relates to the following:
Pennant International Group plc - Deferred tax asset (note 13) (16,966) (28,198)
- Deferred tax - 16,000
liability
(16,966) (12,198)
Joint venture - 1,073
(16,966) (11,125)
Not provided Provided
2006 2005 2006 2005
£ £ £ £
Accelerated capital allowances - - 91,812 104,522
Other timing differences - - 5,882 (5,233)
Tax losses available - - (114,660) (110,414)
- - (16,966) (11,125)
Surplus on revaluation of land and 32,000 32,000 - -
buildings
32,000 32,000 (16,966) (11,125)
The deferred taxation liability on the surplus arising on the revaluation of the
freehold property has not been provided because there is little possibility of
the property being sold in the foreseeable future.
17. Share Capital
2006 2005
Authorised £ £
51,092,000 Ordinary shares of 5p each 2,554,600 2,554,600
9,636,000 Deferred shares of 15p each - 1,445,400
2,544,600 4,000,000
Allotted, called up and fully paid
32,000,000 Ordinary shares of 5p each 1,600,000 1,600,000
9,636,000 Deferred shares of 15p each - 1,445,400
1,600,000 3,045,400
At the AGM of the Company held on 4 May 2006, the shareholders agreed by special
resolution to reduce the share capital of the Company by the cancellation of the
Deferred Shares of 15p each in the capital of the Company. The special
resolution was confirmed, subject to conditions by the High Court of Justice
Chancery Division on 14 June 2006 and registered with the Registrar of Companies
on 22 June 2006. The conditions required that a special reserve should be set up
until certain liabilities were satisfied. The Directors considered these
liabilities satisfied on 8 September 2006 and the balance of the special reserve
was transferred to Profit and Loss Account on that date.
18. Share Option Scheme.
The Company operates a Share Option Scheme under which share options have been granted to
employees as described below.
Date granted Options Forfeited Options outstanding Exercisable Exercise
outstanding at 1 at 31 December 2006 price
January 2006
31 October 2000 17,500 17,500 2003-2007 122.5p
15 October 2002 460,000 40,000 420,000 2005-2012 11.5p
27 March 2003 1,800,000 800,000 1,000,000 2006-2013 10p
3 May 2005 500,000 500,000 2008-2015 13p
12 October 2006 270,000 2009-2016 17.5p
The options outstanding at 31 December 2006 had a weighted average remaining
contractual life of 7 years.
The exercise of the options granted on 31 October 2000 and 15 October 2002 and
12 October 2006 is conditional upon the percentage growth in the group's
annualised earnings per share over a prescribed period being 2% over the
movement in the retail price index.
The options granted on 27 March 2003 and 3 May 2005 may be exercised if the
aggregate after tax profit as shown in the audited consolidated profit and loss
accounts for the three years to December 2007 equals or exceeds £2,250,000 or in
the event that the Company is taken over.
Fair value of options
The fair values of awards granted after 7 November 2002 under the Share Option
Scheme have been calculated using a variation of the binomial option pricing
model that takes into account the specific features of the scheme. The following
principal assumptions were used in the valuation:
Granted 27/3/2003 Granted 3/5/2005 Granted 12/10/2006
Share price at date of grant 10p 13p 17.5p
Expected dividend yield 2.0% 2.0% 2.0%
Expected volatility 70% 70% 64%
Risk-free interest rate 4.25% 4.40% 4.61%
Employee turnover None None None
Volatility has been based on share prices from flotation in 1998 to date of
grant.
Using the above assumptions the fair values of the options granted are estimated
as follows:
Grant date Weighted average fair value
27/3/2003 1.87p
3/5/2005 7.30p
12/10/2006 9.67p
Based on the above, the expense arising from share options granted to employees
was £17,965 (2005: £36,060). There were no other share-based payment
transactions.
19. Statement of movements on reserves
Share Profit
Premium and loss
Account account
£ £
Group
Balance at 1 January 2006 . 3,563,504 (2,598,075)
Profit for the year - 509,691
Dividends - (161,490)
Currency translation differences on foreign currency net - (37,235)
investments
Transactions in treasury shares 18,825 (23,164)
Share-based payment - 17,965
Cancellation of Deferred Shares - 1,445,400
Balance at 31 December 2006 3,582,329 (846,908)
Company
Balance at 1 January 2006 3,563,504 768,605
Loss for the year - (41,404)
Dividends - (161,490)
Transactions in treasury shares 18,825 (23,164)
Share-based payment - 17,965
Cancellation of Deferred Shares - 1,445,400
Balance at 31 December 2006 3,582,329 2,005,912
20. Reconciliation of movements in shareholders' funds
2006 2005
£ (Restated)
£
Group
Profit for the financial year 509,691 388,398
Dividends (161,490) (128,000)
Transactions in treasury shares (4,339) (49,910)
Other recognised gains and losses relating to the year (37,235) 34,609
Share-based payment 17,965 36,060
Net addition to shareholders' funds 324,592 281,157
Opening shareholders' funds 4,010,829 3,729,672
Closing shareholders' funds 4,335,421 4,010,829
Company
Loss for the financial year (41,404) (32,514)
Dividends (161,490) (128,000)
Transactions in treasury shares (4,339) (49,910)
Share-based payment 17,965 36,060
Net loss to shareholders' funds (189,268) (174,364)
Opening shareholders' funds 7,377,509 7,551,873
Closing shareholders' funds 7,188,241 7,377,509
21. Capital commitments
Group
There were no capital commitments at 31 December 2006 and 31 December 2005.
Company
There were no capital commitments at 31 December 2006 and 31 December 2005.
22. Financial commitments
Group
At 31 December 2006 the Group had annual commitments under non-cancellable operating leases as
follows:
Land and Buildings Other
2006 2005 2006 2005
Expiry date: £ £
Within one year 7,500 - 13,941 24,840
Between two and five years 126,828 48,015 36,084 52,680
In over five years 6,550 72,356 18,642 -
On 14 February 2005 the Group entered into a commitment with Pennant Sonovision
ITEP Ltd to make £120,000 of loan finance available for a period of three years.
At 31 December 2006 £120,000 had been drawn down.
Company
The Company has guaranteed a lease on behalf of Pennant Software Services
Limited. The annual rent payable under the terms of the lease is £65,806 (2005
:£65,806).
23. Directors' emoluments
2006 2005
£ £
Emoluments for qualifying services 240,931 226,283
Pension contributions to money purchase schemes 13,185 12,350
Amounts paid for directors' services 111,600 111,600
365,716 350,233
The number of directors for whom retirement benefits are accruing
under money purchase pension schemes amounted to 2 (2005: 2)
Emoluments disclosed above include the following amounts paid to
the highest paid director:
Emoluments for qualifying services 116,924 112,607
Contributions to money purchase pension schemes 6,825 6,175
24. Employees
Number of employees 2006 2005
Number Number
The average monthly number of employees (including directors)
during the year was:
Office and management 24 25
Production 130 125
Selling and distribution 8 11
162 161
Employment costs £ £
Wages and salaries 4,613,060 4,665,066
Social security costs 445,116 456,432
Other pension costs 168,624 181,769
5,226,800 5,303,267
25. Pension costs
Defined contribution
The Group operates a defined contribution pension scheme for its employees in the United Kingdom and
Canada. The assets of the schemes are held separately from those of the Group in an independently
administered fund. The pension cost charge represents contributions payable by the Group to the funds.
2006 2005
£ £
Contributions payable by the Group for the year 168,623 181,273
Contributions payable to the fund at the year end and included 27,950 26,342
in creditors
26. Substantial shareholdings
The company is aware of the following substantial shareholdings in its issued ordinary share capital:
Ordinary shares
of 5p each
Name
Rathbone Nominees Limited 3,330,691
Dartington Portfolio Nominees Limited 2,846,839
Capita Trust Co. Limited 1,741,850
HSBC Global Custody Nominee 2,256,929
Pennine Downing AIM VCT 3 PLC 1,111,111
Pennine Downing AIM VCT 5 PLC 1,111,111
27. Reconciliation of Group operating profit to net cash inflow/(outflow) from operating activities
2006 2005
£ £
Operating profit 689,123 496,851
Depreciation 191,935 202,236
Loss/(profit) on sale of tangible fixed assets 2,092 (3,433)
Amortisation of intangible fixed assets 20,234 203,439
(Increase)/decrease in stocks 232,850 (240,024)
(Increase)/decrease in debtors (157,710) (627,055)
Increase/(decrease) in creditors (202,200) 384,903
Other movements (22,867) 67,321
Net cash inflow from operating activities 753,457 484,238
28. Analysis of cash flows for headings netted in the cash flow statement
2006 2005
£ £
Returns on investment and servicing of finance
Interest received 7,258 1,137
Interest paid (75,237) (86,799)
Net cash outflow for returns on investments and servicing of (67,979) (85,662)
finance
Capital expenditure
Payments to acquire tangible fixed assets (238,590) (89,791)
Receipts from sales of tangible fixed assets 4,507 18,384
Net cash outflow from capital expenditure (234,083) (71,407)
Acquisitions and disposals
Purchase of joint venture - 5,000
Financing
Repayment of hire purchase and finance leases (10,321) (2,397)
Repayment of loans (141,062) (127,013)
Transaction in treasury shares (4,339) (49,910)
Net cash inflow for financing (155,722) (179,320)
29. Analysis of net (debt)/funds
Other
1 January 2006 Cash non-cash 31 December
Flow changes 2006
£ £ £ £
Cash in hand and at bank 939,798 (30,190) - 909,608
Bank overdraft (142,122) 142,122 - -
797,676 111,932 - 909,608
Hire purchase due within one year (2,858) 10,321 (7,875) (412)
Hire purchase due after one year (10,261) - 7,875 (2,386)
Loans due within one year (136,695) 141,062 (145,705) (141,338)
Loans due after one year (909,657) - 145,705 (763,952)
(261,795) 263,315 - 1,520
30. Reconciliation of net cash flow to movement in net (debt)/funds
2006 2005
£ £
Increase/(decrease) in cash in the year 111,932 (17,408)
Cash to repurchase debt 151,383 129,410
New hire purchase - (15,516)
Movement in net debt in the year 263,315 96,486
Opening net debt (261,795) (358,281)
Closing net funds/(debt) 1,520 (261,795)
31 . Profit of Parent Company
As permitted by section 230 of the Companies Act 1985, the profit and loss account of the parent
company is not presented as part of these financial statements. The parent company's loss for the
financial year was £41,401 (2005:£32,514).
32. Financial Instruments
The group's activities expose it to a variety of financial risks, including the effects of foreign
currency, exchange rates and interest rates. The Group's overall risk management policy focuses on
monitoring potential adverse effects where considered material.
For foreign currency transactions, the Group normally converts using spot rates. Risk is mitigated by
the holding of foreign currency accounts in US, Canadian and Australian dollars plus Euros. The Group
may use derivative financial instruments, such as forward contracts to hedge against certain future
exposures. There were no contracts in place at the balance sheet date.
All of the Group's borrowing is in sterling and at variable rates, with the exception of it's finance
lease obligations which are at a fixed rate.
The Group's total financial liabilities at 31 December 2006 are repayable as follows:
Within one year 141,338 278,817
In more than one year but not more than two years 151,230 145,580
In more than two years but not more than five years 520,228 496,018
In more than five years 92,494 268,059
905,290 1,188,474
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 10th January 2025
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