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Gloucestershire Business News

BREAKING: Pennant powers up its rail business

Pennant International Group, a leading global presence in training tech and integrated product support solutions, has bought Track Access Productions Ltd. 

Against a backdrop of robust orders and profit, the move promises a projected 2023 revenue boost of £850,000.

Headquartered for the UK from Staverton and already a global presence in supporting defence, aerospace and safety-critical industries, Pennant's move will reinforce its work in the UK's rail industry.

Based in Bedfordshire, TAP was established in 2001 and provides driver training, route mapping and route familiarisation services, with a client list that includes train and freight operating companies, engineering prime contractors and infrastructure providers.

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

TAP's current revenue system, said Pennant, is generated through a subscription-based web portal and through project-specific route mapping services.

For the financial year ended 31 March 2023, TAP's management accounts indicate revenues of circa £600,000 (FY22: £481,000) of which 50% is recurring, relating to portal subscriptions, and a profit before tax of circa £200,000 (FY22: PBT of £180,821).

The vendors, Ian and Jill Heys, who are the founders and owner/managers of TAP, will work "a short transitional period to ensure a smooth handover," says Pennant.

The rest of TAP's employees and consultants are expected to remain with the business.

Pennant has also issued a summary of the key terms of the acquisition which shows that the consideration payable comprises an enterprise value of £585,000, plus around £389,000 in respect of TAP's 'free cash' after allowing for normalised working capital and repayment of cash-free, debt-free adjustment (CDA).

The initial consideration payable is circa £798,500 (being 70% of the enterprise value, i.e. £409,500, plus CDA.

"A completion payment of £638,610 has also been settled, based on verified estimates of (the CDA), with a balancing payment of circa £160,000 within the next two months following the production of completion accounts (to allow for any correction of estimates)," Pennant added.

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

The acquisition is funded entirely from Pennant's existing cash resources and will align with the company's strategy: "In particular, it enhances the Group's recurring revenues, further diversifying into civilian markets, whilst bolstering the Group's 'third pillar' of rail products and services, complementing the Group's traditional core of IPS software and training technology."

A preliminary unaudited assessment of the Group's trading for FY22 showed revenues of circa £13.7m against 2021's figure of £16.0m, plus a record gross margin of 42%, 2021's being 27%. Pennant's three-year order book at year-end 2022 stood at £25 million, up £3m on 2021 of which £13 million is scheduled for delivery in 2023.

Mr Walker added: "The Group has entered 2023 with a real sense of momentum."

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