Pennant International Eyes Profitability with Strong Order Book and Software Growth

FY25 trading: revenue dips, losses narrow, margins hold

Pennant International says FY25 trading will be in line with market expectations, subject to audit. Revenue is expected to come in at approximately £10.0 million, down from £13.8 million in 2024, reflecting a reset year after restructuring and some delays to contract awards.

Despite the lower top line, gross margins were maintained at circa 50% (2024: 50%), and the statutory loss before tax narrowed to £2.6 million from £3.0 million. Net debt was reduced sharply to £0.2 million (2024: £2.3 million) following property disposals and fresh funding via an equity subscription and a shareholder loan in September and October.

Order book and 2026 revenue visibility look stronger

The three-year contracted order book has grown to £23.3 million (2024: £15.9 million). Of that, £9.7 million is scheduled for delivery in FY26, which the Company says represents approximately 75% of current FY26 revenue expectations of £13.0 million.

Within Training Systems, Pennant notched contract wins totalling up to £9.5 million across the next three years. That helps to stabilise what has historically been a lumpier, project-led division following the restructuring of FY24 and FY25.

Auxilium software momentum: ARR at a record, new markets opened

Annual Recurring Revenue (ARR) from Auxilium – Pennant’s systems support software suite – rose to £2.4 million (2024: £1.9 million), a record for the Group. ARR is the annualised value of software subscriptions and maintenance contracts, and it’s prized because it’s recurring and higher margin.

Product development continued with the integration of GenS and Analyzer, released to market in H1 2025. Pennant expanded geographically into the Czech Republic, Denmark, Germany and Finland, and pushed into adjacent industries including Shipping, Robotics and Space. The Auxilium user base grew by 8% during the period.

To keep the product competitive in Integrated Product Support (IPS) – the discipline that manages data and processes to keep complex assets available and compliant – Pennant expects development spend of £1.2 million to £1.4 million per annum for the foreseeable future. The go-to-market strategy has shifted to partnerships, including a global OEM (original equipment manufacturer) partner agreement with Siemens Digital Industries Software, plus new sales representatives in South Korea, Japan and India.

Three-year plan: aiming for profitable growth by 2028

The strategic focus is clear: grow higher-margin software and services, and keep Training Systems deliverables at a steady, manageable level. Management’s headline targets by 2028 are:

• Grow software ARR organically to exceed £4.0 million.
• Return Technical Services revenues to more than £7.0 million.
• Maintain a deliverable Training Systems order book above £5.0 million.
• Achieve adjusted EBITDA margin of 20% and adjusted PBT margin of 10%.

Adjusted PBT strips out certain non-cash or one-off items to show underlying profitability, while EBITDA is earnings before interest, tax, depreciation and amortisation. The mix shift towards Software and Technical Services, alongside cost savings from the FY24/FY25 restructuring, is intended to do the heavy lifting.

Outlook for FY26: break-even target and cash generation

Software ARR is expected to exceed £3.0 million by the end of FY26. With the stronger order book and the benefit of cost actions, management expects the Group to return to a break-even adjusted PBT in FY26.

The plan is to manage programmes tightly against milestones to deliver a positive operating cash flow, enabling ongoing Auxilium development to be funded internally. That would be a meaningful shift from reliance on external funding.

Key numbers from the update

Metric	FY25	FY24	Comment
Revenue	~£10.0 million	£13.8 million	Lower due to delays and reset in Training Systems
Gross margin	~50%	50%	Margins maintained despite revenue decline
Statutory loss before tax	£2.6 million	£3.0 million	Loss narrowed year-on-year
Net debt	£0.2 million	£2.3 million	Improved after property disposals and funding
Auxilium ARR	£2.4 million	£1.9 million	Record ARR; user base up 8%
Three-year order book	£23.3 million	£15.9 million	£9.7 million scheduled for FY26 (~75% of FY26 revenue expectations)
Training Systems contract wins	Up to £9.5 million	Not disclosed	Spread over the next three years
FY26 revenue market expectations	£13.0 million	-	Order book coverage at c.75%

Why this matters: my take

Positives driving confidence

• Visibility: A £23.3 million contracted order book with £9.7 million earmarked for 2026 provides clear revenue coverage.
• Quality of revenue: ARR of £2.4 million and an expectation to exceed £3.0 million by end-FY26 improves margin mix and predictability.
• Balance sheet progress: Net debt down to £0.2 million gives Pennant more flexibility as it targets self-funded R&D.
• Go-to-market leverage: The Siemens partnership and new sales reps in Asia open doors to bigger pipelines without equivalent cost growth.

Watch-outs to keep in mind

• Revenue recovery: FY25 revenue fell to ~£10.0 million, highlighting dependence on timing of Training Systems awards.
• Execution risk: The plan hinges on hitting contract milestones to convert that order book into cash – slippage would hurt.
• Ongoing investment: £1.2 million to £1.4 million per year in software development is necessary, but it needs the promised cash generation to sustain itself.
• Stretch targets: Hitting 20% adjusted EBITDA and 10% adjusted PBT margins by 2028 requires consistent growth in Software and Technical Services.

Key dates and how to engage

Final Results are expected on Monday 23 March 2026. Management will host an investor presentation at 11.00am on Tuesday 24 March 2026 via Investor Meet Company.

Register to attend here: Investor Meet Company – Pennant. Questions can be submitted in advance to [email protected] or during the session via the platform.

You can also find more about the Company at www.pennantplc.com.

Bottom line: a cleaner base, better visibility, and software-led upside

2025 looks like a reset that has set Pennant up for a steadier 2026. The order book, ARR momentum and reduced net debt underpin management’s target to reach break-even adjusted PBT in FY26.

The strategy is sensible: lean on higher-margin software and services, keep Training Systems deliverables predictable, and use partnerships to scale. If Pennant executes to plan, the earnings profile should improve through 2026 and beyond – but the conversion of that order book to cash will be the proof point to watch.