Pennant International Final Results: Reset Year with Strengthened Order Book and ARR Growth

Pennant International 2025 results: revenue down, order book up, software ARR hits a record

Pennant International Group has called 2025 a reset year. Revenue fell sharply as defence contract awards slipped to the right, but the company exits the year with a beefed-up order book, rising recurring software income, and a cleaner operating model after restructuring its Training Systems arm.

Here’s what stood out, why it matters, and what to watch in 2026.

Key numbers investors should know

Metric	FY25	FY24	Comment
Revenue	£9.662 million	£13.775 million	Lower Training Systems activity after large projects rolled off
Gross margin	49%	50%	Margin resilience despite lower volume
Adjusted EBITDA	£(0.4) million	£1.7 million	Volume-led swing to small loss
Adjusted loss before tax	£(1.9) million	£(0.3) million	In line with expectations per the Board
Statutory loss before tax	£(2.564) million	£(3.041) million	Improved year-on-year
Software ARR (annual recurring revenue)	£2.4 million	£1.9 million	Record level, +26% year on year
Three-year contracted order book	£23.3 million	£15.9 million	Includes £9.7 million scheduled for delivery in 2026
Net debt (excl. leases, incl. shareholder loan)	£0.536 million	£2.285 million	Improved via disposals and equity/loan funding

What drove the results: a tale of two segments

Software and Services holding up, with ARR building

Software and Services delivered £7.645 million of revenue (2024: £9.566 million). Within that, software licences and products totalled £2.544 million including maintenance. Notably, standalone software product sales more than doubled to £1.1 million as Pennant added 15 new customers across defence, maritime and space, lifting the user base by 8%.

ARR – the annualised value of subscriptions and maintenance – climbed to £2.4 million, a record for the Group. Management expects ARR to exceed £3.0 million by the end of FY26. Recurring revenue is now 60% of Group revenue, a healthier, more predictable mix that should support margins and cash generation over time.

Training Systems reset largely complete

Training Systems revenue fell to £2.017 million (2024: £4.209 million) after the completion of larger engineered projects in 2024. The restructure and property sales are done, and the order book here has rebuilt to £10.3 million at the time of writing (2024: nil), with contract wins totalling up to £9.5 million across the next three years and a post-period signing in the nuclear sector. That points to a rebound in activity through 2026.

Strategy check: Auxilium front and centre

Pennant is leaning into higher-margin software and services, centred on its Auxilium suite. In FY25 the company:

• Integrated GenS and Analyzer (released in H1 2025) and is now combining GenS, Analyzer and R4i into one fully integrated IPS solution for launch in April 2026.
• Invested £1.5 million in software development, with ongoing spend expected at £1.2 million to £1.4 million per annum.
• Signed a global OEM partnership with Siemens Digital Industries Software and appointed reps in South Korea, Japan and India.
• Opened new customer logos in the Czech Republic, Denmark, Germany and Finland, and expanded into adjacent markets like shipping, robotics and space.

IPS/ILS software helps operators manage complex asset data, ensure compliance with standards, and optimise availability and through-life cost. If Auxilium’s April 2026 integrated release lands well, it should reinforce the ARR trajectory and the transition to scalable, higher-margin revenue.

Cash, funding and balance sheet: tighter, but improved

Operating cash flow was positive, helped by working capital discipline. Net debt improved to £0.536 million, aided by £3.2 million gross proceeds from UK property disposals, an equity raise of circa £0.9 million after fees, and a £0.320 million shareholder loan at 9.75% interest due for repayment in April 2026. The HSBC overdraft facility stands at £1.0 million and has been renewed post period-end for a further 12 months.

There’s a clear emphasis on self-funding Auxilium development from operations, but investors should note the near-term loan repayment and reliance on the overdraft while order conversion ramps in 2026.

Positives, negatives and my take

What I like

• Order book momentum: £23.3 million contracted over three years with £9.7 million slated for 2026 gives better revenue visibility than a year ago.
• Quality of revenue mix: 60% recurring, ARR at £2.4 million and expected to pass £3.0 million in FY26.
• Margin resilience: 49% gross margin despite lower volumes signals the shift toward software and services is working.
• Net debt reduction: down to £0.5 million, improving financial flexibility.
• Strategic partnerships and new geographies: Siemens tie-up plus reps in Asia should extend reach without heavy fixed cost.

What gives me pause

• Top-line drop and losses: revenue down 30% and an adjusted EBITDA loss of £0.4 million underline execution risk if contract timing slips again.
• Going concern flagged with material uncertainty: the plan depends on converting pipeline orders on time; delays could strain liquidity.
• Near-term funding tasks: shareholder loan at 9.75% is due in April 2026; the overdraft is repayable on demand.
• Technical Services churn: two contracts ended in 2025; management aims to rebuild to 2024 levels by 2028, but wins are not disclosed yet.
• No dividend: cash retained for working capital and growth, sensible but income investors will look elsewhere.

Outlook for 2026: milestones that matter

Management guides to break-even adjusted PBT in FY26, supported by cost savings from the completed restructuring and stronger order cover. The following will be key markers through the year:

• Auxilium integrated suite launch in April 2026 and evidence of upsell/cross-sell into existing defence customers.
• ARR progression toward the >£3.0 million target by year-end.
• Conversion and delivery against the £9.7 million scheduled for 2026 within the £23.3 million order book.
• New Technical Services wins to offset 2025 churn and underpin repeatable revenue.
• Cash discipline: repayment of the £0.323 million shareholder loan, stable overdraft usage, and continued positive operating cash flow.

Bottom line: a cleaner platform with software-led upside, but timing risk remains

2025 hurt on revenue and profit, but Pennant exits the year looking more like the business it wants to be: software-led, higher-margin, and increasingly recurring. The order book and ARR growth are tangible positives, and gross margin strength is encouraging.

The caveat is timing. The auditors highlight a material uncertainty around going concern tied to order conversion. If the April 2026 Auxilium launch lands and the 2026 delivery schedule holds, the path to break-even adjusted PBT looks realistic. Miss those beats, and funding could tighten again.

In short: improved foundations, better visibility, and real software momentum – but 2026 execution will need to be crisp.

Quick glossary

• ARR (Annual Recurring Revenue): the annualised value of contracted software subscription and maintenance income.
• EBITDA: earnings before interest, tax, depreciation and amortisation – a proxy for operating cash earnings.
• IPS/ILS: Integrated Product/Logistic Support – processes and tools that manage complex asset data, compliance and through-life cost.
• OEM: original equipment manufacturer – a technology or equipment supplier that partners to distribute solutions.