Final Results
22 October 2012
PipeHawk plc
("PipeHawk" or the "Company")
Final results for the year ended 30 June 2012
Chairman's Statement
I am pleased to be able to report that all parts of the Group have worked hard
in the last year and have achieved great progress. The second half of the year
showed a great improvement over the first half and we managed to turn around
the half year loss into a full year profit. I remain confident that we will see
the Group take further steps forward in the next year.
I can report that turnover for the year ended 30 June 2012 was £3,342,000
(2011: £2,875,000 after excluding £625,000 of one-off income arising from a
settlement with a customer) which is an increase of 16 per cent. The Group
achieved a profit after taxation for the year of £28,000 (2011: profit £
242,000) which is an excellent result considering that last year's results were
buoyed by the one-off income of £625,000.
Adien
Despite the fact that Adien operates largely in the UK construction industry,
the company reported an 8 per cent. growth in sales and a return to
profitability. This sales growth has come about as a result of focussing on
serving the needs of the utilities sector and has been converted into profits
due to increased efficiencies resulting from a restructuring of operations that
began some 15 months ago. Adien is associated with several high profile public
infrastructure projects and has won these contracts as a result of tracking
them carefully since their inception. The company is now well placed to
continue to grow and contribute profitably to the group.
Technology Division
In the period under review PipeHawk has invested in the continued development
of key new products to ensure maturity at launch. The development of e-Safe has
continued to move forward at a rapid rate and we are pleased to report that the
product is now approaching readiness for sale. In addition to this, the modular
design concept enables PipeHawk to offer a family of innovative and low cost
GPR products to the market that will provide a GPR solution for every
requirement and every budget.
The restructure of the PipeHawk business has enabled us to focus our efforts
directly on our clients' requirements and consequently interest in the e-Safe
and e-Spott products is proving very positive.
We are now developing distribution channels to ensure the successful
introduction to a global market for all of our new and innovative products.
During the year PipeHawk continued to develop new GPR products and as a
consequence has capitalised approximately £230,000 of research and development
expenditure.
QM Systems
Progress at QM Systems during the last 12 months has continued to be excellent,
with a significant growth in revenue and profit on normal operations. A number
of new contracts for production, assembly and test equipment have been received
and delivered, without exception, on time. The business has continued to expand
its diversity both in terms of the products and services offered and the client
base that QM supports. QM Systems has recently secured several new projects
with new clients that will more than double revenue in the coming year. Several
of these new projects are for complete turnkey production line solutions that
will drive QM's business model through rapid growth and expansion. We look
forward to a very exciting 12 months ahead at QM Systems.
SUMO
SUMO is more exposed to the construction market than Adien but has seen good
performances from Stratascan Limited, which it purchased on 30 June 2011 and
which is focused on geophysical GPR surveys. Turnover for the year ended 30
June 2012 was £2,407,000 (2011: £1,925,000) and the operating loss for the year
was £60,000 (2011: profit £136,000). Sumo is accounted for in the group
financial statements as a joint venture. The turnover of SUMO has not been
accounted for in the group financial statements given it is a joint venture.
Related party transactions
In the period under review, I was not called upon to provide working capital
support to the Company which is a further testament to the growing strength of
the Group.
My letter of support dated 7 October 2011 was renewed on 19 October 2012 for a
further year. Loans, other than those covered by the CULS agreement, are
unsecured and accrue interest at an annual rate of Bank of England base rate
plus 2.15 per cent.
The directors, other than myself, consider, having consulted with the Company's
nominated adviser, that the terms of the loans are fair and reasonable insofar
as the Company's shareholders are concerned.
In addition to the loans I have provided to the Company in previous years, my
fellow directors and I have deferred a certain proportion of our fees until the
Company is in a suitably strong position to make the full payments. These
deferred fees amounted to approximately £86,000 in the year ended 30 June 2012
and approximately £622,000 in total, all of which have been accrued in the
Company's accounts.
Strategy & Outlook
The PipeHawk group is geared towards creating sustainable earnings-based growth
and focuses on the expansion of its business with forward-looking products and
services. PipeHawk acts responsibly towards its shareholders, business
partners, employees, society and the environment - in each of its business
areas. PipeHawk is committed to technologies and products that unite the goals
of customer value and sustainable development. In the last six months of the
period under review it appears that the results for the business are beginning
to reflect the efforts put in by management and staff and therefore I remain
optimistic in my outlook for the Group.
Gordon Watt
Chairman
Enquiries:
PipeHawk Plc Tel. No. 01252 338 959
Gordon Watt (Chairman)
MerchantSecurities Limited(Nomad) Tel. No. 020 7628 2200
David Worlidge/Simon Clements
FinnCap (Broker) Tel. No. 020 7220 0569
Charlotte Stranner
Consolidated Statement of Comprehensive Income for the year ended 30 June 2012
Note 30 June 2012 30 June 2011
£'000 £'000
Revenue 2 3,342 2,875
Other income - 625
3,342 3,500
Staff costs (1,779) (1,687)
Operating costs (1,458) (1,553)
Operating profit 105 260
Share of (loss) / profit in joint venture (17) 45
Profit before interest and taxation 88 305
Finance costs (158) (162)
(Loss) / profit before taxation (70) 143
Taxation 3 98 99
Profit for the year attributable to equity 28 242
holders of the Company
Other comprehensive income - -
Total comprehensive income for the year net 28 242
of tax
Profit per share (pence) - basic 4 0.09 0.73
Profit per share (pence) - diluted 4 0.06 0.52
Consolidated Statement of Financial Position at 30 June 2012
Note 30 June 2012 30 June 2011
Assets £'000 £'000
Non-current assets
Property, plant and equipment 196 141
Goodwill 1,061 1,061
Intangible assets 2,348 2,123
Investment in joint venture 5 93 110
3,698 3,435
Current assets
Inventories 149 197
Current tax assets 104 70
Trade and other receivables 6 835 980
Cash and cash equivalents 189 112
1,277 1,359
Total assets 4,975 4,794
Equity and liabilities
Equity
Share capital 330 330
Share premium 5,151 5,151
Retained earnings (5,525) (5,553)
(44) (72)
Non-current liabilities
Borrowings 9 2,729 2,854
Trade and other payables 7 1,394 1,244
4,123 4,098
Current liabilities
Trade and other payables 8 779 751
Borrowings 9 117 17
896 768
Total equity and liabilities 4,975 4,794
Consolidated Statement of Cash Flow for the year ended 30 June 2012
Note 30 June 30 June
2012 2011
£'000 £'000
Cash flows from operating activities
Profit from operations 105 260
Adjustments for:
Depreciation 73 61
Impairment of intangibles 5 5
Profit on sale of fixed assets - (4)
183 322
(Increase) / decrease in inventories 48 (18)
(Increase) / decrease in receivables 131 (481)
Increase/(decrease) in liabilities 26 100
Cash generated by/(used) in 10 388 (77)
operations
Interest paid (6) (10)
Corporation tax received 78 179
Net cash from / (used in) operating 460 92
activities
Cash flows from investing activities
Development costs paid (230) (325)
Purchase of plant and equipment (128) (95)
Sale of plant and equipment - 4
Net cash used in investing activities (358) (416)
Cash flows from financing activities
Share issues - -
New loans and finance leases 118 386
Repayment of loan (125) (7)
Repayment of finance leases (18) (33)
Net cash generated from financing (25) 346
activities
Net increase in cash and cash 77 22
equivalents
Cash and cash equivalents at 112 90
beginning of year
Cash and cash equivalents at end of 189 112
year
Consolidated Statement of Changes in Equity for the year ended 30 June 2012
Consolidated Share Share Retained Total
capital premium earnings
account
£'000 £'000 £'000 £'000
As at 1 July 2010 330 5,151 (5,795) (314)
Loss for the period - - 242 242
Other comprehensive - - - -
income
Total comprehensive - - 242 242
income
As 30 June 2011 330 5,151 (5,553) (72)
Profit for the period 28 28
Other comprehensive - - - -
income
Total comprehensive - - 28 28
income
As 30 June 2012 330 5,151 (5,525) (44)
Notes to the Final Results for the year end 30 June 2012
1. Basis of preparation
The principal accounting policies adopted in the preparation of the financial
information in this announcement are set out in the Company's full financial
statements for the year ended 30 June 2012 and are consistent with those
adopted in the financial statements for the year ended 30 June 2011.
The financial statements have been prepared in accordance with international
financial reporting standards as adopted by the EU and under the historical
cost convention. The principal accounting policies are set out below.
The Group continues to develop its range of products and source new buyers and
is optimistic about the positive market reaction to these new products and the
award of significant new contracts within the near future. The directors have
reviewed the Group's funding requirements and the Executive Chairman, G G Watt,
has pledged to provide ongoing financial support for a period of at least
twelve months from the approval date of the group statement of financial
position. It is on this basis that the directors consider it appropriate to
adopt the going concern basis of preparation within these financial statements.
The financial information set out above does not constitute the Company's
statutory accounts for one year ended 30 June 2011 and 2012, but is derived
from those accounts. Statutory accounts for 2011 have been delivered to the
Registrar of Companies and those for 2012 will be delivered following the
Company's Annual General Meeting. The Auditors have reported on those accounts;
their reports were unqualified and did not contain any statements under
Companies Act 2006 section 498 (2) or (3).
The Auditor's report for the year ended 30 June 2012 contains the following
paragraph:
"Emphasis of Matter - Going Concern; without qualifying our opinion we draw
attention to the basis of preparation on going concern in note 1 to the
financial statements. This explains that a material uncertainty exists
regarding the group's ability to continue as a going concern without the
support of the Executive Chairman. The financial statements do not include any
adjustments that would result if the group was unable to continue as a going
concern.
2. Segmental Analysis
2012 2011
£'000 £'000
Turnover by geographical market
United Kingdom 3,249 2,777
Europe - 98
Other 93 -
3,342 2,875
The group operates out of one geographical location being the UK. Accordingly
the primary segmental disclosure is based on activity. Per IFRS 8 operating
segments are based on internal reports about components of the group, which are
regularly reviewed and used by Chief Operating Decision Maker ("CODM") for
strategic decision making and resource allocation, in order to allocate
resources to the segment and to assess its performance. The Group's reportable
operating segments are as follows:
* Utility detection and mapping services
* Development, assembly and sale of GPR equipment
* Test system solutions
The CODM monitors the operating results of each segment for the purpose of
performance assessments and making decisions on resource allocation.
Performance is based on external and internal revenue generations and profit
before tax, which the CODM believes are the most relevant in evaluating the
results relative to other entities in the industry. Segment assets and
liabilities are presented inclusive of inter segment balances, as inter-segment
pricing.
In utility detection and mapping services one customer accounted for 35% of
revenue. In development, assembly and sale of GPR equipment one customer
accounted for 27% of revenue. In test system solutions two customers accounted
for more than 10% of revenue and in aggregate these two customers represented
70% of segment revenue.
Information regarding each of the operations of each reportable segment is
included below.
Utility Development, Test system Total
detection assembly and solutions
and mapping sale of GPR
services equipment
£'000 £'000 £'000 £'000
Year ended 30 June 2012
Total segmental revenue 1,524 221 1,597 3,342
Total segmental other - - - -
income
1,524 22 1,597 3,342
Segmental result 76 (7) 36 105
Finance costs (158)
Share of operating loss (17)
in joint venture
(Loss) before taxation (70)
Segment assets 1,020 2,837 1,118 4,975
Segment liabilities 987 2,428 1,048 4,463
Depreciation and 49 2 33 84
amortisation
Utility Development, Test system Total
detection assembly and solutions
and mapping sale of GPR
services equipment
Year ended 30 June 2011
Total segmental revenue 1,414 75 1,386 2,875
- - 625 625
Segmental result (134) (230) 624 260
Finance costs (6) (154) (2) (162)
Share of operating 45
profit in joint venture
Profit before taxation 143
Segment assets 899 2,874 1,021 4,794
Segment liabilities 936 2,903 1,027 4,866
Depreciation and 56 6 4 66
amortisation
The majority of the Group's revenue is earned via the rendering of services.
3. Taxation
2012 2011
£'000 £'000
United Kingdom Corporation Tax
Current taxation (106) (70)
Adjustments in respect of prior years 8 (29)
(98) (99)
Deferred taxation - -
Tax on loss (98) (99)
Current tax reconciliation 2012 2011
£'000 £'000
Taxable (loss) / profit for the year (70) 143
Theoretical tax at UK corporation tax (18) 40
rate 25.5% (2011: 26.0%)
Effects of:
- R&D tax credit adjustments (164) (113)
- other expenditure that is not tax 11 -
deductible
- adjustments in respect of prior years - 8
- accelerated capital allowances (71) (87)
- losses carried forward 92 80
- short term timing differences 52 (27)
Total income tax expense (98) (99)
The Group has tax losses amounting to approximately £1,800,000 (2011: £
1,860,000), available for carry forward to set off against future trading
profits.
4. Profit / (Loss) per Share
Basic
This has been calculated on a profit of £28,000 (2011: profit £242,000) and the
number of shares used was 33,020,515 (2011: 33,020,515) being the weighted
average number of shares in issue during the year.
Diluted
This has been calculated on a profit of £28,000 (2011: profit £242,000) and the
number of shares used was 48,114,301 (2011: 47,677,315) being the diluted
weighted average number of shares in issue during the year.
5. Investment in Joint Venture
6.
Group
Investment in shares
£'000
Cost:
At 1 July 2011 & 30 June 2012 198
Share of losses
At 1 July 2011 88
Share of losses for the year 17
At 30 June 2012 105
Net investment
At 30 June 2012 93
At 30 June 2011 110
Group Investment in
shares
£'000
Cost:
At 1 July 2010 & 30 June 2011 198
Share of losses
At 1 July 2010 133
Share of losses for the year (45)
At 30 June 2011 88
Net investment
At 30 June 2011 110
At 30 June 2010 65
The investment in joint venture relates to a 29.02% shareholding in the
ordinary share capital of SUMO Limited. SUMO Limited is engaged in the
development of a GPR franchise operation and has a year end of 31 December. For
the purpose of preparing this consolidation, financial information has been
prepared for the year ended 30 June 2012. SUMO Limited's principal place of
business is Havant, Hampshire.
Summarised financial information in respect of the Group's joint venture is set
out below:
30/06/12 30/06/11
£'000 £'000
Total assets 2,156 2,149
Total liabilities 1,836 1,784
Net assets 320 365
Group's share of net assets of joint venture 93 110
Year ended Year ended 30
30/6/12 /6/11
Total revenue 2,118 1,925
Total (loss) / profit for the period (60) 136
Group's share of (loss) / profit of joint venture (17) 45
6. Trade and other receivables
2012 2011
£'000 £'000
Current
Trade receivables 800 856
Amounts owed by group - -
undertakings
Other receivables 8 98
Prepayments and accrued 27 26
income
_
835 980
2012 2011
£'000 £'000
Non-current
Amounts owing by group - -
undertakings
7. Non-current liabilities: Borrowings
8.
2012 2011
£'000 £'000
Borrowings 2,847 2,860
(note 9)
8. Current liabilities: Trade and other payables
9.
2012 2011
Current £'000 £'000
Trade 352 393
payables
Other 201 175
taxation and
social
security
Payments 101 -
received on
account
Accruals 125 183
779 751
2012 2011
Non-current £'000 £'000
Trade 209 209
payables
Amounts owed - -
to group
undertakings
Accruals 1,185 1,035
1,394 1,244
Included within the above amounts are the following amounts owing to directors;
2012 2011
G G Watt £1,136,176 £918,003
R G Tallentire £213,771 £184,870
R R MacDonnell £19,000 £19,000
The directors have undertaken not to call upon these amounts until the Group is
in a position to generate sufficient operating cashflows.
9. Borrowing Analysis
2012 2011
£'000 £'000
Due within one year
Bank loans 97 -
Obligations under finance 20 17
lease agreements
117 17
Due after more than one
year
Obligations under finance 27 27
lease agreements
Directors' loans 2,702 2,827
2,729 2,854
Repayable
Due within 1 year 117 17
Over 1 year but less than 2 2,717 2,842
years
Over 2 years but less than 12 12
5 years
2,846 2,860
Bank loans comprises a loan from Aldermore Bank PLC which is a confidential
invoice finance facility at a rate of 3.5% over base rate.
Finance lease agreements with Close Motor Finance are at a rate of 4.5% over
base rate. The future minimum lease payments under finance lease agreements at
the year end date was £47,540 (2011: £42,593)
The director's loan due in more than one year is a loan of £2,702,000 from G G
Watt. Directors' loans attract interest at 2.15% over Bank of England base
rate.
On 13th August 2010 the Company issued £1 million of Convertible Unsecured Loan
Stock 2014 ("CULS") to G G Watt, the Chairman of the Company. The CULS have
been issued to replace loans made by G G Watt to the Company amounting to £1
million.
The principal terms of the CULS are as follows:
- The CULS may be converted at the option of Gordon Watt at a price of 7p per
share at any time prior to 11 August 2014;
- Interest is payable at a rate of 10 per cent per annum on the principal
amount outstanding until converted, prepaid or repaid, calculated and
compounded on each anniversary of the issue of the CULS. On conversion of any
CULS, any unpaid interest shall be paid within 20 days of such conversion;
- The CULS are repayable, together with accrued interest on 11 August 2014
("the Repayment Date");
* The Company has the option, after 1 year to repay the CULS before the
Repayment Date, subject to the Company providing 10 days' notice.
10. Net Cash Inflow from Operating Activities
2011 2010
£'000 £'000
Operating profit 105 260
Amortisation of intangible assets 5 5
Depreciation of property, plant 73 61
and equipment
Profit on sale of fixed assets - (4)
Working capital movements
Inventories 48 (18)
Receivables 145 (481)
Payables 178 252
Net cash inflow/(outflow) from 554 75
operating activities
11. Dividends
The directors do not recommend the payment of a dividend (2011: Nil).
12. Copies of the Report and Accounts
Copies of the Report and Accounts will be posted to shareholders shortly, and
will be available from the Company's registered office, Manor Park Industrial
Estate, Wyndham Street, Aldershot, Hampshire GU12 4NZ and from the Company's
website www.pipehawk.com.
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