Pennant International Group (LSE:PEN) — 2026 Interim Results & Prospects

0:02 Good morning, everyone, and thank you for joining the PENNANT INTERNATIONAL GROUP PEREZULT PERSENTATION. And before we begin, we would like to submit the following poll, which you'll see on your screens. Throughout the presentation, investors will be in listen only mode. However, questions are encouraged and can be submitted at any time via the Q and A tab, which is located in the right hand corner of your screen. The company may not be able to answer every question it receives during the presentation. However, the company will review all questions submitted today and publish responses where appropriate. These will be available via your investor meet company dashboard. Finally, we'd like to remind you that this presentation is being recorded. I would now like to hand over to Philip Walker, Chief Executive and Darren Wiggins, Chief Financial Officer. Gentlemen. Thanks, Tom. Good morning, everyone, and thank you for joining us today.

0:54 As Tom said, I'm Phil Walker. I'm the chief financial executive officer, used to be CFO, of PENNANT's actual group. I'm joined today by Darren Wiggins, our CFO. Good morning, everybody. Today, we're gonna cover four four clear sections. We're gonna give you a brief overview of PENNANT. I won't dwell on it a lot because, hopefully, people on this call have heard the story before. I'll give a quick refresher on who we are and what we do. I'm then gonna look forward to providing an update on our progress against our strategic objectives, which we set out earlier this year. I'll then hand over to Darren who will take

1:25 you through the detailed financial performance for the first six months, and then we'll finish up with looking at the outlook, the prospects of the business, and then q and a. So without further ado, let's get cracking on. So so PENNANT, PENNANT today is fundamentally a different business from the one that existed several years ago. We've been on a journey to transform this business away from its legacy engineer hardware biz towards a software and services business, and I'm pleased to say we've made good progress over the last period to deliver that.

1:57 Everything we do at PENNANT now is focused on maximize maximizing operational capability. What does that mean? That means readiness, minimizing downtime, maximizing uptime, all the buzzwords you hear in the press. It's something we've done for some time and has become prevalent in the in the world we operate, particularly in defense sector.

2:15 We operate globally. We are truly an international company with revenues across the world and offices in The USA, Canada, Australia, and The UK. And our mission is very simple. How do we ensure that mission critical assets and systems are available where they're needed, when they're needed, and that they work. If we take away one thing from this today, the key characteristic of PENNANT in our model is now increasing the level of reoccurring and repeatable revenues generated from our software and services in creating a predictable and sustainable business that can scale and grow. But how do we do that? I'm gonna hand it to Darren now who'll take you through how we operate. K. As most of you will already know, we go to market through three operating segments.

3:02 Firstly, on the left hand side of the chart here, we have the sale of our proprietary Orgilium iPS Sulfur products, which we'll talk through in a little more detail later in this presentation. This particular segment is expected to deliver circa 3,000,000 of sales in full year 2026 at gross profit margins in excess of 85%. Looking back in 2024, we introduced a a new subscription pricing model. And since then, the majority of our license sales have been under the subscription model. We ensure that all customer purchases are paid for in advance before or ahead of the access to the licensed product. And I'm gonna jump around a little bit here. Secondly, on the right hand side of the chart is our is our heritage. It's our training systems and solutions segment.

3:47 Over almost seventy years, we've designed and engineered hardware, software, and now virtual solutions to replicate maintenance and operational practices for end users in the defense sector, helping to ensure, as Phil alluded to earlier, that equipment is used effectively in the field.

4:04 Again, looking back to last year, after receiving over 10,000,000 in orders over the previous twelve months, this segment is expected to deliver circa 5,000,000 of sales revenue in FY twenty six at gross profit margins in excess of 50%. Most of the activity in this segment is project based, and as such, we recognize revenue on a competitive percentage of completion basis. Working capital cycles are longer, and we ensure that contracts are agreed such that milestones keep receipts ahead of payments at any given stage of delivery. And then finally, in the center, there's a reason why arrows are pointing inwards here, our technical service operations, because almost all of our service contracts derive from the original sale of auxiliary software or training equipment. We have teams of experts across all three operational footprints in The UK, Canada, and Australia helping our customers to use our products more effectively.

4:55 This segment is expected to deliver at least 5,000,000 of sales revenue in FY twenty six at gross margins in excess of 35%. As we recontract some of our long term services, we're focused on the improvement of margins to ensure that we are paid for the significant value that we offer. Revenue is recognized and invoiced as services are delivered. And then finally, as the banner across the software and the services segment suggests, the the revenues from these combined segments is seen as recurring in the case of software and repeatable for the majority of services as a result of being in the long term contracts. Thanks, Dan. So I'd just like to take a moment to talk about routes to market. Traditionally, PENNANT has been a direct to market business with all of our, orders coming from relationships that we'd established ourselves.

5:42 We're very fortunate at PENNANT that we benefit from a very high quality customer base that includes, as you can see on that slide, Australia Defense, Canadian Defense, and a number of main prime contractors such as Boeing, BA Systems. The most important point to take away from that left hand part of the slide is that fact that we see substantial expansion within those existing customers alongside development of the channel partners and technology partners. With the launch of the integrated suite in q two this year, we've now got a capability that increases our stickiness from this customer base and will allow us to grow our wallet share. And as we move away from project based tool into more of an enterprise type system, we see significant growth in that customer base. But alongside that, and as part of our strategy, what we talked about on these calls before, is how we're trying to grow our indirect channels and our partners.

6:33 I've seen in the chat already in the questions, there's been a number of questions raised about Siemens. And just to talk about in context on this slide, we first engaged with Siemens over two years ago as a potential partner. They were looking at a make buy decision to establish whether they should develop a capability or should partner with someone or acquire someone. I'm pleased to say in July 25, we won that competition with Siemens against stiff competition from US primes, We've and been on a journey for the last twelve months to get onboarded with our partner. That's culminated with the first sale of our products in June this year, followed quickly by the second sale. Now this has taken a lot longer to get to market than we expected, but actually the potential in this is significant in the sense that Siemens have over 300 account managers, over 17 product managers, and we spent a lot of time over the last twelve months doing a number of things. One, we've been training the product managers and educating the account managers.

7:28 Two, we factor improve our support systems, our licensing platform, our security. And three, the access that have to market, particularly in US defense is something that we can we would not establish as small SME in The UK. All that's culminating in the fact that Siemens are now starting to show momentum, releasing blogs, launching a marketing campaign, including Octane in the price list. It's still still early days in terms of this relationship, but we've got high hopes that this will form part of, our our core strategy going forward alongside others. I'd also like to point factor one point on there as a technology partner. We launched announced a new capability in May this year, working with one point to draw create a service capability called ConvertWise, which takes legacy data and brings it into a digitalized system. Having launched that, we've already won two or three contracts now to actually provide that capability.

8:18 And this is the strategy for this business going forward, expand the customer base we have in terms of direct channels, increase our market share, continue to work with our technology partners to access new markets, bring new capability, and in the middle there, establish a series of channel partners in markets and territories such as South Korea, Japan, India, where language, culture, distance is a challenge for us to allow us to scale and put some real horsepower behind the auxiliary prod suite. We'll come back to them shortly in QA at the end, but I just wanna take the opportunity to give a bit of color around Siemens. So moving on, what what have we done? What has the first six months of '26, meant for PENNANT as a group? I think the first thing I'd say is that it's been a solid performance. And I think the first half results, which you hopefully will see this morning, demonstrates that our plan is delivering.

9:07 Just like to pull out a couple of points on here. Number one, adjusted EBITDA from a 1,100,000 loss to a naught 500,000 profits. That's a significant turnaround and shows the momentum we're starting to build in the business. Secondly, and what I'm personally very proud is our operational delivery. We secured important contracts with Canadian DND, launched the obsolete inventory solution, launched our new PUPS capability, and we continue to deliver key milestones in all contracts, which is testament to the team and people at PENNAL delivering. And the final thing I'd like to say is as we look forward to the end of this year '26, over 95% coverage of revenue for expectations. We're confident in meeting expectations this year. And looking forward beyond that, we're looking forward to delivering '27 beyond with with over 80% coverage for '27. So as I stand here today or sit here today in front of you all, I'm very pleased with the solid progress we made and feel very confident what back the next six to twelve months means for this business.

10:06 But I'd just like to take a moment to look back and say what did we say we're gonna do and how are we performing? So in January this year, as a board, we put out some three year strategic targets. These were the objectives the business set itself between '25 and '28. Hopefully, you've all seen them, or if you haven't, take take a moment to have a look at these. We are these were they were geared around growing recurring repeatable revenues, improving operating margins, generating stronger cash flows, and effectively moving towards a scalable business. The progress in the first half have provided me with evidence that this plan is working, so what I'd like to do is talk you through now the commitments we made and how we're getting on by segment for each of these areas. Before I do that, just a reminder what those commitments were. So when Darren and I sat in front of everyone in the interims or the full year results in March, April, we talked through these aspirations for each of the segments. These are the commitments we made we will look to achieve in 2026.

11:04 So without further ado, let us show you how we're doing against each of these areas in each segment. Obsidian. Solid progress. I'll come back to the AR in minute, but just to remind you what it is for those who haven't heard before. What was Ilium now is the cornerstone of our software and services strategy. The platform brings together our three applications, which are Genesys, Analyzer, and OffRite into one holistic solution for our users. The tool enables our customers to manage complex technical information, knowledge, operational data, data efficiency all in one single source of truth and most critically avoid lies data driven decisions.

11:49 In the current environment, those decisions are vital for operational readiness and availability. It ensures it delivers on mission. It ensures those systems are available when they're needed, when they're needed, and they work. And that's becoming more apparent day by day as you watch the news. And this software capability differentiate PENNANT from its competitors. Nobody else has this integrated solution in the market, and we're first the first organization to bring this to market. So what what have we done? Continues to gain momentum. You you'd have seen the interim result stating the 2,600,000 ARR, but sat here in front of you today, we're currently at 2,900,000 of ARR running towards achieving our 3,000,000 target for the year, on track.

12:35 We completed the major integration of our suite, as I mentioned earlier, that was released in June. Since releasing that in June, we've seen traction with both Siemens and a major shipbuilder in the APAC region, and we'll progress a number of big OEM opportunities that walk this full capability. The Siemens partnership has delivered and has grown momentum, and we've launched the integrate and we've launched other capability. The creep, we've done down, be very proud of this, we're on track to fund the software development from operating cash flows. We said we'd do it, and we're on track to do that. So good progress from Autzillium. I'm gonna hand it to Darren. I wanna give you a bit more color and flavor around what the Octillium story is and where we are. K. Thanks, Phil. This is quite a busy slide. It's a it's a new slide as well or a new presentation, of of a story here. So I'll I'll series through the content as it's intended to be received.

13:27 This presentation will be made available on our website, so you'll have a chance to digest this in your own time.

13:33 We're essentially plotting out the ten year auxiliary software revenue and investment story here between 2019 and 2028. Therefore, this has two or three years here of forward looking projections or trajectory in '27, '28. 2019 to '25 are historic reported numbers. The first thing I'll focus on here is at the foot of the chart in orange, the capitalized development expenditures that have been directed at the Orzilium suite of products, largely since 2020, at which time there was an acquisition of a company called ADG, which is where the R4I software came from. And with that was a 2,700,000 investment in the acquired, capitalized development at that point of r four I product. Since then, you can trace an increasing level of investment in product development as we move through the gears of bringing the best in class IBS software products to market, culminating in the release that Phil mentioned earlier in q two of the fully integrated all the Xilium suite. And we shouldn't overlook the importance of of that stage of investment.

14:40 Was built now as an off the shelf solution on a modern technology stack that operates with a single fully integrated back end database, meaning the customers now have a single authoritative source of data within a modern user friendly interface. This is this has been a huge, huge development for us, and it's taken time. We're now starting to see that investment bear fruit in our commercial performance. So above the x axis in the shades of blue are the revenue streams derived from a resilient products and services. At the foot of the stack there in light blue is the recurring revenue from software product sales. That means subscriptions and maintenance contracts that have been sold off the back of a perpetual license. The growth trajectory is very clear. From a base of 800,000 in 2019 through to an estimated 3,100,000 of recurring revenue in 2026, there's a clear correlation with the decision to increase the investment in product development.

15:35 Related to this and at the top of the revenue stack in turquoise are revenues from one off sales of auxiliary products. What does that mean? That's perpetual license sales. And since introducing that subscription pricing off with the 2024 that I mentioned earlier, we've seen minimal sales under perpetual licenses, marking a clear customer preference to roll license and support purchase into one annual transaction. The more complicated story, I guess, lies in in in the dark blue block of revenues there. Represents revenue from our associated auxiliary services, contracts for training, consultancy, data conversion, and expert use of our software products, the largest of which is represented by our relation with the Canadian Department of Defense. Now up until 2023, we sold all Exileum service activities to the Canadian DND under a long term framework agreement.

16:25 In 2023, this contract was broken up by the Canadian government into individual tasks, which were put out to tender for competition. Throughout '23, '24, and '25, PENNANT got busy winning back that work in smaller contractual pack packages. That transition had a negative impact on '23 to '25 revenues you can see there in the dark blue block.

16:46 But in h one twenty six, we were really pleased to announce the award of many of these tasks under a new long term agreement with potential revenues of 35,000,000 Canadian dollars over eleven years, six years, actual five years options. This gives us enormous confidence in estimating that auxiliary service revenues will begin to grow back to 2020, 22 levels by 2028. So to wrap this up, we're anticipating a new com combined high from repeating and recurring revenues in 2026 of 6,300,000, and expect this to be the engine room of profitability growth at PENNANT over the course of our three year plan and in accordance with our stated objectives. And finally, as we contemplate our levels of software development investment through 2728 following the release of our integrated product, Our product roadmap is not much more modular as Phil and I would explain it, consisting of features and enhancements designed to meet specific customer requirements.

17:41 We therefore expect more optionality on what we spend when we spend it, which should be conducive to further growth in in auxiliary ROI in the coming years. So took a bit of time on that slide, but it's an introduction of a think it's a new numbers and a new and a new element to the story. So thanks for your patience. Thanks, Darren.

18:03 So just to build on that, I think Darren's covered a lot of this already in that, summary, But the takeaway here is the technical services part of the group is gaining momentum. We're very pleased to have secured the multiyear contract Canadian d and d. For me, that's twofold. One, it validates the tool sets, and two, it's a long term sustainable revenue now in terms of services. We've also launched the new technical publication conversion service and won contracts on the back of that alongside our partner, OnePoint. Great news. And we expect to issue a a release of our new viewing distribution capability in the final quarter of the year. And importantly, we expect a stronger second half performance as the revenues from the D and D contract come on board and we start to deliver the conversion capability.

18:49 So a good story in technical services gained momentum through the year and pushed into 2027.

18:56 The the final segment I'd like to cover is training systems. Often, been PENNANT's Achilles' heel over the years, but, you know, I just want to tend take a couple of minutes to talk about where we are. It says on the title there, training systems in delivery mode. I think the most pleasing part for me at the moment is the trading systems business is operating and delivering. It's delivering its order book, it's hitting its milestones, and it's contribution to the group. But it's got a current order book of 9,600,000 deliverable over the next three years, which means that the business having been restructured at the end of twenty four billion twenty five is now making positive contributions of the group and adding value. I think one point to pull out, and I think we may have mentioned this in the last IMC, was around the new contract that we received for the, training simulator in The UK. Whilst the initial contract's for 1,000,000, I think the opportunity here shouldn't be lost that there's a chance to turn it into production orders. The customer expects to make further deliveries across the next five years, and we're expecting to actually create a reoccurring point capability for that for that end user and these customers to deliver training capability for the foreseeable future, which is a very different model than the training business. But the takeaway here is that training is is delivering.

20:09 Now I'm gonna hand over to Darren, who's gonna take you through the financial performance of the first half in a bit more detail. Okay. Thanks, Phil. I guess the first thing to say is that we're pleased with these first half results. And and more than anything, we'd like to thank all of our team members for their important contribution. Going into the from a highlights perspective, picking out a few highlights, revenue has increased 30% over h one twenty five to 5,800,000, and we'll go into a little bit more detail segmentally on the next slide. Also important to note is the growth in gross margins. Gross margins have improved significantly and compare well against the full year 2025 margin of 50. We anticipate this this level of margin to carry through to the full year for 2026 as we continue to win work at prices that reflect value as well as as well as continuing to focus on rightsizing our cost base.

21:07 Of course, well, as we increase or as the software segment increases its proportion of contribution to the group's revenue, then we see a natural organic growth in margin, and we expect that to continue in in the coming months and over the three year plan. I think maybe a story that we haven't pulled out until now is the overheads when adjusted for one off items have actually reduced year over year, and that's a purposeful move towards a more sustainable proportion of sales and doing more with the same. The one off costs of restructuring our cost base have been recognized as exceptional items in the period and totaled 600,000 when combined with smaller charges for acquired intangible amortization and IFRS two charges. As a result, we've posted an adjusted first half EBITDA of 500,000, which compares to a loss of 1.1 for the first half of twenty twenty five.

22:01 With respect to our three year plan to sustain an improving level of profitability for the business, it's important to note the progress in both our ARR from auxiliary software products and our efforts to maintain a strong order book. ARR at the half year was reported at 2,600,000, and that's grown over 20% since the prior the equivalent prior period. With further growth in the two months post period end and a solid order intake in the first half means that our order book gives us excellent coverage in 2027, which Phil mentioned earlier, currently in excess of 80% of market expected revenue. And lastly, on the highlights slide, I'll pick out net debt. At 1,000,000, that's increased from a reported 500,000 at 2025 year end when including, a shareholder loan. And that's in part due to payments of one off restructuring costs of 500,000.

22:50 It's important to note that in the second half of the year, we're expecting milestone receipts on some of our key training systems projects, meaning that it's our expectation for h two cash flow to be better than h one. It's also important to note that we continue to receive strong support from our bank HSBC, and the PENNANT remains appropriately funded. So we'll go into a little bit more detail now. We'll skip over the statutory income statement and go into, the segmental analysis. So first of all, system support software, aka Auxilian, 17% increase versus h one twenty five. That's over 1,400,000 in the half. And that's been driven by increase of 9% in the number of licensed users of Auxilian.

23:36 That's a 9% increase over the last twelve months, and that's a risen from sales to 15 new customers across defense, maritime, and space. And as mentioned earlier, the large portion of those sales were under subscription, the the vast majority. I've already mentioned ARR and the growth year over year and the fact that we've we've hit a new all time high of 2,900,000 at the time of announcement today. And those opportunities have been amplified by the successful release of the fully integrated William suite, meaning we're very confident of meeting our stated objective to exceed 3,000,000 as we exit 2026. Technical services revenue, were weaker than expected in h one twenty six, and that was due to the delayed award of the IPS services contract that I mentioned earlier with the Canadian d DND, and that means we're confident of catching that up in the, in the second half of the year.

24:31 In fact, we expect the full year revenue from technical services to exceed prior year, and well on the way to our state objective of exceeding 7,000,000 of revenue in financial year 2028. And then finally to training, total revenue from training sis systems segment more than tripled year over year to 1,900,000, and that's due to the strong order intake that we saw at the back of last year with the the order from the MOD for the Genflight project and the order from BAE Systems Australia for the for the project project. And those are the two programs that are contributing the most to that that revenue increase, and as Phyllis mentioned, delivering to plan or on plan.

25:15 And then lastly, on this slide, I would say that the Phil's already mentioned that the deliverable order book for the training system second stands at 9,600,000 against that stated objective of keeping that number above £5,000,000 all at all times and removing the feast and famine in that segment that we've seen in the past. Okay. Thanks, Bill. And then quickly touch on the next couple of slides. So this is the statement of financial position and or the balance sheet. Two things to note here. Again, there's more details in the in the full interim announcements on our website. Prior year current assets, 1,100,000 of assets held for sale as we completed The UK property disposal program last year. And something I'd like to pull out around our net current liabilities, they do include, at the June 30, 1,900,000 in the trading six segment of contract liabilities.

26:11 There was zero balance on that on that account, the equivalent point thirty June twenty five. That is cash received into the business ahead of us ahead of the revenue being recognized or the service being delivered. I think it's important to pull that out and note that in our net current liabilities balance.

26:29 Thanks, Phil. Already touched on kind of the net debt figure, but just going to the a little bit more detail around our first half cash flow. We delivered a net cash inflow from operating activities for the first half of the year. Phil and I are pleased about that. And that was after after incurring a 500,000 of one off restructuring payments. So gross of that, it would have been a 1,100,000 operating cash inflow. That's important because of our objective in this three year plan to begin to cover the cost of auxiliary development, which is in the investing activities line through our operating activities to fund that development organically in the business. We're very close to doing that, and we should we should achieve that for full year.

27:14 In financing activities of minus 0.5, we repaid the aforementioned shareholder loan as well as meeting our ongoing lease liabilities.

27:24 And then lastly on this subject, the as the final bullet point alludes to there, in q three, HSBC have given us some good support to temporarily increase our overrefer limit post period end to see us through some working capital timings on our key contracts. And in q four, we're expecting those milestone payments from from ongoing to target deliveries on our trading system contracts to bring us back within, within headroom. Okay. Thanks, Phil. So outlook, just to wrap up today before we go to q and a, I think my takeaway from this is the plan is working. EBITDA has moved from a loss to a profit. Recurring revenue is increasing. Darren's touched on the AR growth to 2.9 and continued momentum.

28:13 Order book gives us high visibility for 26 complete revenue and 27. Margins are improving. And as a management team in the board, we remain very confident meeting 26 expectations. So with that, we're finishing on that positive note, Tom. Let's hand back to you for q and a. Yeah. Lovely. Yeah. Thank you, Phil. Thank you, Darren. And now if we could turn to the questions, we have a number of questions submitted ahead of the presentation, but please do continue to submit your questions by the q and a tab. You'll be unsurprised to hear that we've had quite a few around Siemens

28:43 agreement. So maybe we can just start with Siemens. I'm gonna group two questions together, which are largely the same. I'm relatively new to the story and delighted on news of the two contract wins via Siemens OEM deal. Are you able to provide any further details on the scale of the opportunity? And Matt asks, how significant could the Siemens partnership become over the next three years? Are we talking about a handful of opportunistic sales, or do you see Siemens becoming a material distribution channel?

29:13 K. I'll I'll I'll I'll have a go first. Tom, great questions, and then Darren chip in. Yeah. Sure. So if I covered some of this during the presentation, but I think it's important to recognize why Siemens originally sought out a solution. Siemens had a gap in their team center offering that they needed to address. Their competitors in in the PLN market have capability, and they were under criticism from a number of big primes for this weakness. They've picked up Xilium, our product suite to address that gap because they felt there was a need, to do that. Siemens' strategy is to sell Xilium into The US defense market, a market that's relatively small for us but a huge market. But beyond that, they wanna take it globally and into other sectors, but the priority is US defense.

30:00 It's early stage in the relationship, but the point I would make in terms of in terms of the ARR objectives that we stated as a board, Siemens is not included in that 4,000,000 target in 2028. So we're talking about ARR growth to 4,000,000 by the end of twenty twenty eight organically through our our direct sales, the partnered channels. 50 Siemens is not part of that strategy.

30:22 We're quite excited about Siemens as you imagine. Big organization, but it's been hard work to get to this stage. We're looking forward to the next period. They've got a number of marketing campaigns, webinars, blogs coming out, and working closely with them. Darren can talk about the strategy we've got in terms of product and and strategy with them as well.

30:40 But it feels like momentum's starting to grow. And during this during this process of securing Siemens, they can provide indications of what they thought they could contribute in terms of revenue and opportunities. We haven't seen that yet. We've seen a couple of sales. We've seen momentum, but I just go back. I'm cautiously optimistic. It's early days, and we really need to see how it progress over the next six months. Yeah. It's taken us a long time to get to this point, longer than we thought. The onboarding process was quite involved. And since formally kinda launching on their price list in in June, May, June this year, feels right. We've seen two sales into into US defense end users, which is extremely encouraging because that's the gap in the market for us. But we're seeing momentum now. So on a biweekly basis, we've got two two conversations going on with Siemens, one through their product group, the the product specialists around product support, IPS space. That's a good route in to specific opportunities.

31:37 We've also developed a good relationship with the aerospace and defense strategy team. So we're having biweekly meetings there to give us access to global account managers and start to demonstrate and promote auxiliary software into Siemens globally. So some really good routes to market being developed in in in collaboration with Siemens, and we we're very optimistic about about further opportunities in the coming months. The the the bit I would add is there's two bits to Siemens. I think there's everyone's focused on the opportunity, and I don't disagree. There's a big opportunity there, but there's also the intangible if you want the credibility of the software. Yeah. As a very small SME competing in a global defense market, it shouldn't be lost by the fact that Siemens Teamcenter picked Octillium as the tool to support its software when we're in competition with two very large international US primes.

32:25 That's a big endorsement to the technical confidence and capability of our product set And the fact now they've sold it into US Defense and they're actively pursued tells you that they rate the product. So I think, for me, that endorsement of the investment we've made in the product is equally important to the opportunity.

32:39 The opportunity will come, but that gives us real credibility when we're having conversation with large defense primes that Siemens are actively marketing this solution for. I'll probably just close that that whole answer up by saying that I think we're in the process of ascertaining what that pipeline will be. Yeah. So with some some early wins and some early visibility, I think we're starting to jointly develop that that pipeline visibility. Great. And we'll we'll have it in short course, I'm sure.

33:09 Now that we shall come back to, but an extension to to the question there is, are the two recent wins indicative of the value we might expect from any further successes, I. E, a 150 to 200,000 ARR per deal?

33:26 I think it's hard to say at this stage, in terms of the size and the scale of opportunity. At the moment, the sales that have been made have been into a project team and into a particular site. They haven't been an enterprise solution or a whole company solution. They've always been trials. I think we we believe the opportunities are bigger than that, but at this stage, we've got nothing else to go on. So, yeah, at the moment, a 100 k would be a sensible ballpark, but we we'll have to validate that as we move forward.

33:53 You touched on it a little bit, but maybe we can just see if there's anything else you have. How can Pennant support Siemens to improve their sales efforts, and what visibility do you have of the pipeline? I'll start again. Go for it. Yeah. Yeah. Got an answer. Yeah. You've got an answer. So the last twelve months, the onboarding process, we've provided significant input and support into Siemens. So we've had to train or educate over a 100 300 account managers now. They've got a product team of about 70 product specialists. Each one of those have required training on product, the capability, and what it can do. So we've invested a lot of time and effort in, educating their teams about the product. Second bit is having got the first sales away, we've now got a live use case that they can use in the business to articulate what it did for that customer, why that customer wanted it. That's been really important because they can now see what it what it delivers for large defense primes.

34:47 And the the third bit for me is we've got dedicated account managers and product owners now that will work with down tools on a biweekly basis, which means we're starting to build that drumbeat meetings, that visibility pipeline, that engagement around marketing strategy seminar. So it's it's it's it took till June this year to get on the prices and we fully onboarded, but now we're seeing a complete shift in the way we operate Siemens. I think you've nailed it actually. But, you know, Phil's spot on. So a lot of focus has been on training the product group, the product specialists, and now actually our focus. So how can we help Siemens? Our focus now is on working with the account management, the business development group to promote, to demonstrate our software and how it can solve customers' problems. So that's where our focus is right now. Excellent. Another question. Are you able to provide an update on any other potential OEM deals? And could any future deals encompass the entire auxiliary suite or similar in nature to Siemens, which only required Gen s?

35:45 Well, clearly, I can't give specifics around potential deals. What what I'll say is this that Siemens aren't the only product life cycle management tool available in the market, so we continue to engage with other PLM providers in terms of joining their technology programs, their partnership programs, and the view to working with them. And in terms of our our strategy, we're trying to sell Zoom's enterprise solution for a whole of defense or defense primes. We have a number of major defense, organizations, whether that's a Ministry of Defense or OEM primes that are assessing auxiliary in its full capability, not just Gen S. So in in Eastern Europe, Western Europe, we got a number of big trials underway with defense organization that are looking to adopt the full auxiliary suite. Okay. So thank you.

36:33 Question from Joseph. Are you looking to integrate your software with ERP and CRM software? The answer to that is not directly. It's clearly got a universal API that can link into anything. At the moment, the key is to link into the the, product life of a management with the engine and datasets, but there's absolutely no reason why we couldn't. There hasn't been a demand yet to link it into the CRM or ERP system, but we could. We do extract data from the ERP systems, particularly with some of the defense primes. We take data out of those acquisition systems or AP systems. We don't currently do anything with the CRM, but with the with the creation of our connectors, universal APIs, there's no reason we couldn't influence demand, but currently, there is no demand. And from Mike Jeremy, Equity Development. Good morning, and congratulations.

37:21 To what extent do any of the recommendations in the defense in the investment plan, notably concerning hybrid naval systems or data inputs, have potential for PENNANT? Yeah. It's it's a good question. Yeah. I mean, I I would say that at the moment, PENNANT isn't doing as much as with The UK mod as we do with overseas defense forces. So our primary markets perversely for a UK company are with Canada, Australia, and and growing traction in Mainland Europe. That's not to say that we shouldn't have a growing presence with The UK MOD on our software. I think that question is specifically aimed at our software products and not our training products. Agreed. Maybe I'd add to that, from Mike. Great question. Is in terms of the, question around autonomous or unmanned systems, I think it's become very topical, particularly in the space we operate.

38:17 We published a article on our website last week talking about rapid acquisition. I think there's two types of unmanned or hybrid naval systems. You've got those that go one way and then come back, and you've those that operate in conjunction with traditional fleets. In fact, we're finding that the need for the thirst for data, the thirst for for decision making is even greater when you're running unmanned systems or autonomous vehicles or planes. There's a lot more requirement in terms of support than there is on normal vessels. So there's a great article on our website talking about rapid acquisition and support for, hybrid systems. But for us, I think we're seeing it as a need for our systems as opposed to a risk. In fact, one of our last customer wins in in in Northern, North America was an unmanned naval system. And I think the last thing I'd say to Mike there, in case we haven't answered this question directly, is that I think The UK's defense investment plan kind of mirrors a lot of other defense investment plans in terms of how it moves towards PENNANT's technology, in terms of the interoperability of data, especially as it pertains to UK's role in NATO.

39:22 And we've got a presence on integrated support, you know, panels and discussion groups that that we're trying to influence and trying to mature The UK's, I guess, approach to integrated product support. And I guess those discussions and the global movement towards taking sustainable assets more seriously in defense can only be a good thing for PENNANT, I would say. Agreed. Terrific. A question from Joseph. Have you been invited to take part in The UK's future combat air systems program? Not Joseph, not directly. We obviously have a long standing historic arrangement with BA systems in particular, and we've produced a lot of training systems for BA systems, particularly on their air sector into The Middle East.

40:07 It's a conversation I have had with and the team there, but the training system comes much later. So for us, it's just early engagement and awareness. In terms of the IPS software, again, it's early stages of conversations around that. So we've not formally been invited, but we are engaged in dialogue. Super. Two questions which are aligned. Should you raise some money to invest in and accelerate growth? And has PENNANT got the resources to continue to scale the business? Yeah. So Yeah. So so different questions, I guess. I mean, taking the second question first, Tom, if you don't mind. Mhmm. So, yes, our plan remains, as we've mentioned it in the slides and as we went to market within January, is to build this balance sheet organically.

40:57 So to return to profitability, to turn that profit into cash, and, and then to to kind of get to a position where we can sit down and have question have discussions about how we look at inorganic opportunities in the future. But that's not our focus right now. Our focus is rebuilding that balance sheet organically. We remain properly funded at this point in time. We've got great support from the bank, and we've got continued support as we proved last year from from from our investors. So, yes, we feel appropriately resourced from a macro perspective to deliver this plan. Yeah. And that's our focus. Questions around micro resource and kind of have we got skills and, you know, are we investing in the right areas? That's a different topic, and it's probably a three hour discussion.

41:42 But at a macro level, yeah, we feel we feel well positioned. First question may be slightly different. No. I think what what I'd add to that is that the Xilium product's been a long time in development and now released. The ambition was to release the integrated solutions to the market. That's now in the market and now being sold. There's always things you wanna do with software, improve it, enhance it, change it. What we've got is a very much a feature based road map now where we've got bespoke capability that we can choose to add or not. So give me £10,000,000. Could I accelerate the product capability? Of course, I could. But if I had no money as well, I could cherry pick the ones that have generated a great return. So we're in a great position at the moment. We spent a lot of time and money creating this capability. We've got a clear objective of what where we wanna go with the product, and we've appropriately funded to deliver that. Could we accelerate it? Of course. Could we slow it down?

42:29 Yes. We could. But I think each each question comes with a impact in terms of returns and growth. So I think we're in a really good place. I think we're I think we're we're where we need to be. Super. And I think you've therefore answered the last question, but I'll read it anyway. Steven asks, are you actively searching for acquisitions to accelerate your growth? And if yes, what type of target business offerings are you considering? But But I think you've already answered that. K. I think so. I think so. So I'm gonna focus right now. K. Super. Great. Alright. Thank you, Phil. Thank you, Darren, for updating investors today. Could I ask investors not to close this session as you will automatically be directed to for your opportunity to find your feedback? If anyone has further questions or would like additional information on PENNANT, please do get in touch via [email protected].

43:15 We look forward to updating you again soon.