Half-yearly Report
PipeHawk Plc
("PipeHawk" or "the Company")
Interim unaudited results for the six months ended
31 December 2008
Chairman's Statement
The Company's turnover in the six months ended 31 December 2008 was £1,326,000
(2007 £1,200,000) resulting in a loss before taxation of £500,000 (2007: £321,000).
PipeHawk continued to develop GPR products during this six month period and has
expensed all of such costs to the profit and loss account, which has resulted
in the loss for the six months being higher than the comparable period last
year despite the increase in turnover. The result is that PipeHawk now has a
varied range of GPR products that are being well received in the market place.
I can report that sales enquiries in the first two and a half months of 2009
are at their highest level for several years.
Adien has enjoyed its busiest six months trading during the first half of this
financial year. Adien's strength in understanding the needs of its core clients
and providing relevant solutions has paid off in providing a steadily
increasing flow of work during the period. Two of its clients are now entering
national health and safety design awards based upon the benefits that Adien's
approach brought to their respective projects. Adien's consultative approach to
its clients puts it in a strong position to weather the recession.
At QM Systems ("QMS"), following the difficult period experienced during the
previous financial year, the business goes from strength to strength. A far
more diverse sales strategy has been implemented and the business has
experienced rapid growth over the last six months, which is all the more
impressive considering the current difficult economic climate. This strategy
has secured QMS a number of major test and automation projects in both the
automotive and aerospace industries. The order book currently stands at its
largest level for over two years. A number of opportunities across a variety of
industries are now materialising and QMS looks set to continue its growth in
order book and sales terms over the coming period.
QMS's commitment to the development of the Lightning Strike Protection Test
System is proving to be a sound investment. A number of units have now been
sold and QMS is experiencing increasing levels of interest from a number of
potential future clients. Increase in demand for this test equipment is further
fuelled by the move in the aerospace industry to composite airframes as
composite material is lighter and stronger.
I am extremely pleased with the progress made by QMS since the beginning of the
current financial year and am excited by the prospects that lie ahead for this
business. QMS is now focused on growth and with a diverse product offering is a
more stable business.
QMS's legal action against GE Aviation for breach of contract and IPR continues
on a contingent fee basis.
SUMO has suffered somewhat in the period under review and since the period end.
This is in line with other construction-based industries in the current
economic climate. The integration of a topographical survey business acquired
in 2008 has proved challenging. Accordingly, SUMO has taken steps to maintain
profitability.
During times of recession companies look at different ways of cutting costs,
from the time honoured method of reducing head count to wider use of new
technologies.
The PipeHawk Group cut its head count over two years ago in anticipation of
more difficult economic conditions whilst at the same time has:
* enhanced its professionalism in the use of GPR surveys;
* adapted its technology into new products; and
* focused on offering new labour saving technological innovations to two of
the hardest hit, but critical, global markets; the automotive and aerospace
industries.
Whilst the results are not evident in these latest six month figures, orders
and enquiries received since December 2008 give me confidence. Consequently, I
remain cautiously optimistic for the future.
Related party transactions
During the period under review both I and Robert Tallentire, Finance Director,
have continued to provide financial support to the Company through director
loans. During the six month period ended 31 December 2008 I advanced loans of £
290,000. In addition, since 31 December 2008, I have advanced further loans of
£80,000. These loans have been made in accordance with a letter of support
dated 17 November 2008. The loans are unsecured and accrue interest at an
annual rate of base rate plus 2.15 per cent.
Chairman's Statement - continued
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 during the period and
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 amount to approximately £74,000 in the six month
period ended 31 December 2008 and approximately £351,000 in total, all of which
have been accrued in the Company's accounts.
The Company will be providing a presentation to shareholders at 3.00pm on
Thursday 26 March at the offices of FinnCap, 4 Coleman Street, London, EC1 and
the presentation will be made available on the Company's website (
www.pipehawk.com) at that time.
Gordon Watt
Chairman
20 March 2009
Consolidated Income Statement
For the six months ended 31 December 2008
6 months ended 6 months ended Year ended
31 December 31 December 30 June
2008 2007 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Revenue - continuing operations 1,326 1,200 2,411
Staff costs (1,084) (908) (1,436)
General administrative expenses (692) (603) (1,391)
Operating loss (450) (311) (416)
Share of operating profit in joint 5 32 66
venture
Loss on ordinary activities before (445) (279) (350)
interest and taxation
Finance costs (55) (42) (88)
Loss before taxation (500) (321) (438)
Taxation 35 30 111
Loss for the period (465) (291) (327)
Loss per share (pence) - basic (1.73) (1.08) (1.21)
Loss per share (pence) - diluted (1.10) (0.84) (1.00)
Consolidated Balance sheet
As at 31 December 2008
Assets As at As at As at
31 December 31 December 30 June
2008 2007 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 176 258 231
Goodwill 1,061 1,061 1,061
Intangible assets 1,006 579 1,025
Investment in joint venture 157 118 152
2,400 2,016 2,469
Current assets
Inventories 451 338 268
Current tax assets 106 110 106
Trade and other receivables 965 729 742
1,522 1,177 1,116
Total Assets 3,922 3,193 3,585
Equity and liabilities
Equity
Share capital 269 269 269
Share premium 4,842 4,842 4,842
Other reserves (5,018) (4,517) (4,553)
93 594 558
Non-current liabilities
Borrowings 524 551 705
524 551 705
Current liabilities
Trade and other payables 2,785 1,705 1,959
Bank overdrafts and loans 520 343 363
3,305 2,048 2,322
Total equity and liabilities 3,922 3,193 3,585
Consolidated Cash Flow Statement
For the six months ended 31 December 2008
6 months ended 6 monthsended Year ended
31 December 31 December 30 June
2008 2007 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash inflow from operating
activities
Loss from operations (450) (311) (416)
Adjustments for:
Profit on sale of fixed assets (23) - -
Depreciation 84 102 134
(389) (209) (282)
(Increase)/decrease in inventories (183) (60) 11
Increase in receivables (223) (98) (107)
Decrease in liabilities 582 152 265
Cash used in operations (213) (215) (113)
Interest paid (55) (42) (88)
Corporation tax received 35 30 111
Net cash used in operating (233) (227) (90)
activities
Cash flows from investing
activities
Development costs paid - (171) (587)
Purchase of plant and equipment (52) (42) (78)
Sale of plant and equipment 65 - -
Net cash generated from / (used in) 13 (213) (665)
investing activities
Cash flows from financing
activities
New loans and finance leases 291 200 540
Repayment of bank loan (194) (37) (40)
Repayment of finance leases (34) (33) (75)
Net cash generated from financing 63 130 425
activities
Decrease in cash and cash (157) (310) (330)
equivalents
Cash and cash equivalents at (363) (33) (33)
beginning of period
Cash and cash equivalents at end of (520) (343) (363)
period
Consolidated Statement of changes in equity
For the six months ended 31 December 2008
Share Share Retained Total
capital premium earnings
account
£'000 £'000 £'000 £'000
6 months ended 31 December 2007
As at 1 July 2007 269 4,842 (4,226) 885
Loss for the period - - (291) (291)
As at 31 December 2007 269 4,842 (4,517) 594
12 months ended 30 June 2008
As at 1 July 2007 269 4,842 (4,226) 885
Loss for the period - - (327) (327)
As at 30 June 2008 269 4,842 (4,553) 558
6 months ended 31 December 2008
As at 1 July 2008 269 4,842 (4,553) 558
Loss for the period - - (465) (465)
As at 31 December 2008 269 4,842 (5,018) 93
Notes to the Interim Results
1. Basis of preparation
The Interim Results for the six months ended 31 December 2008 are unaudited and
do not constitute statutory accounts in accordance with section 240 of the
Companies Act 1985.
Full accounts for the year ended 30 June 2008, on which the auditors gave an
unqualified report and contained no statement under Section 237 (2) or (3) of
the Companies Act 1985, have been delivered to the Registrar of Companies.
The interim financial information has been prepared on a basis which is
consistent with the accounting policies adopted by the Group for the last
financial statements and in compliance with IAS 34.
2. Segmental information
The group operates in one geographical location being the UK. Accordingly the
primary segmental disclosure is based on activity.
Utility Development, Test system Total
detection assembly and solutions
and mapping sale of GPR
services equipment
£'000 £'000 £'000 £'000
6 months ended 31 December
2008
Total segmental revenue 945 33 348 1,326
Segmental result 47 (397) (155) (505)
Share of operating profit in 5
joint venture
Loss before taxation (500)
Segment assets 1,485 1,462 975 3,922
Segment liabilities (1,041) (1,578) (1,210) (3,829)
Depreciation 52 1 32 85
Additions to non-current 42 - 10 52
assets
6 months ended 31 December
2007
Total segmental revenue 826 55 319 1,200
Segmental result 18 (208) (163) (353)
Share of operating profit in 32
joint venture
Loss before taxation 321
Segment assets 1,119 1,639 435 3193
Segment liabilities (776) (1,347) (476) (2,599)
Depreciation 61 31 10 102
Additions to non-current 42 172 - 214
assets
12 months ended 30 June 2008
Total segmental revenue 1,687 150 574 2,411
Segmental result 71 (341) (234) (504)
Share of operating profit in 66
joint venture
Loss before taxation (438)
Segment assets 920 2,004 661 3,585
Segment liabilities (523) (1,763) (741) (3,027)
Depreciation 119 1 15 135
Additions to non-current 77 362 225 664
assets
3. Loss per share
This has been calculated on losses of £465,000 (2007: £291,000) and the number
of shares used was 26,937,181 (2007: 26,917,330) being the weighted average
number of share in issue during the year. For the fully diluted calculations
the number of shares used for the calculation was 42,178,849 (2007: 34,667,952)
4. Dividends
No dividend is proposed for the six months ended 31 December 2008.
5. Copies of Interim Results
The Interim Results will be posted on the company's web site www.pipehawk.com
and copies are available from the Company's registered office at Systems House,
Mill Lane, Alton, Hampshire GU34 2QG..
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