Half-yearly report

9 March 2010 PipeHawk Plc (the "Company") Interim results for the six months ended 31 December 2009 Chairman's Statement I am pleased to report that the Company's turnover in the six months ended 31 December 2009 was Â£1,582,000, an increase on the corresponding period last year of 19.3 per cent. (2008: Â£1,326,000), resulting in a loss before taxation of Â£334,000 (2008: Â£500,000). In the period under review PipeHawk continued to develop new GPR products and as a consequence has, in the six months ended 31 December 2009, capitalised approximately Â£200,000 of research and development expenditure. I can report a good level of interest in our e-Spott product, which allows spot testing to be conducted on road and layered surfaces, and the e-Safe product, a mini "customer friendly" e-Spade - cable location product. The e-Safe product has attracted interest from international distributors, which gives us confidence that sales volumes in the short to medium term could be higher than that achieved for any other PipeHawk product. Notwithstanding this, the results belie the progress made during the period by the various segments of the business. Adien operates in the large infrastructure project part of the construction industry. Â During this six month period Adien has suffered from the withdrawal of funding for projects that it had been awarded. Â In the period two projects were postponed indefinitely which if completed would have generated turnover in excess of Â£200,000. Â In addition, as was the case five years ago, the water companies have delayed the appointment of their framework partners for the next phase of Asset Management Plans ("AMP") and this also delayed Adien's participation in the detailed design and planning process that precedes these capital projects. Â Adien has aligned its overhead base to better match the sales activity being experienced in the market and is encouraged by the upturn in the level of enquiries and orders that the first two months of 2010 has brought as the construction sector slowly starts to recover. At QM Systems ("QMS"), following the difficult period experienced during the previous financial year, I can report that the business was profitable at an operating level in the second quarter of this financial year. Â The business continues to diversify into a provider of automated engineering services and test systems. Â I have already reported on a number of large contracts that QMS won in 2009 in the rail and automotive industries and I hope to be able to report further encouraging news soon. Â QMS's commitment to research and development of products to support the Lightning Strike Protection Test System has been maintained throughout the period. Like Adien, SUMO has suffered somewhat in the period under review. Â This is in line with other construction-based industries in the current economic climate. SUMO's management have taken the necessary steps to restore its profitability in 2010. Related party transactions During the period under review I have continued to provide financial support to the Company through director loans. During the six month period ended 31 December 2009, I advanced loans of Â£180,000. Â Accordingly, the loans advanced by me to date aggregate to Â£1,546,000. Â These loans have been made in accordance with a letter of support dated 12 November 2009. Â The loans are unsecured and accrue interest at an annual rate of base rate plus 2.15 per cent. TheDirectors, 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 salaries and fees until the Company is in a suitably strong position to make the full payments. Â These deferred fees amount to approximately Â£73,000 in the six month period ended 31 December 2009 and approximately Â£814,000 in total, all of which have been accrued in the Company's accounts. The Company will be providing a presentation to shareholders at 11.30am on Wednesday 14 April 2010 at the offices of its brokers, FinnCap, 4 Coleman Street, London, EC1 and the presentation will be made available on the Company's website (www.pipehawk.com < http://www.pipehawk.com/>) at that time. Gordon Watt Chairman 8 March 2010 Consolidated Income Statement For the six months ended 31 December 2009 Â 6 months ended 6 months ended Year ended 31 December 2009 31 December 2008 30 June 2009 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Revenue - continuing operations 1,582 1,326 3,241 Staff costs (828) (1,084) (1,841) General administrative expenses (1,031) (692) (1,900) ------------------------------------------------ Operating loss (277) (450) (500) Share of operating(loss) / profit in joint venture (66) 5 (17) ------------------------------------------------ Loss on ordinary activities before interest and taxation (343) (445) (517) Finance costs (32) (55) (87) ------------------------------------------------ Loss before taxation (375) (500) (604) Taxation 80 35 206 ------------------------------------------------ Loss for the period (295) (465) (398) Loss per share (pence) - Â basic (1.00) (1.73) (1.48) Loss per share (pence) - Â diluted (0.67) (1.10) (0.97) Consolidated Balance sheet As at 31 December 2009 Â As at As at As at Â 31 December 2009 31 December 2008 Â 30 June 2009 Assets (unaudited) (unaudited) (audited) Â Â£'000 Â£'000 Â£'000 Non-current assets Property, plant and equipment 111 176 143 Goodwill 1,061 1,061 1,061 Intangible assets 1,625 1,006 1,426 Investment in joint 69 157 135 venture -------------------------------------------------------- Â 2,866 2,400 2,765 -------------------------------------------------------- Current assets Inventories 216 451 299 Current tax assets 240 106 156 Trade and other receivables 801 965 674 -------------------------------------------------------- Â 1,257 1,522 1,129 -------------------------------------------------------- Total Assets 4,123 3,922 3,894 Equity and liabilities Equity Share capital 297 269 269 Share premium 5,034 4,842 4,842 Other reserves (5,246) (5,018) (4,951) -------------------------------------------------------- Â 85 93 160 -------------------------------------------------------- Non-current liabilities Borrowings 3 24 17 Director's support 500 500 500 -------------------------------------------------------- Â 503 524 517 -------------------------------------------------------- Current liabilities Trade and other 1,066 1,178 1,418 payables Directors' support 1,860 1,607 1,326 Bank overdrafts and 609 520 473 loans -------------------------------------------------------- Â 3,535 3,305 3,217 -------------------------------------------------------- Total equity and 4,123 3,922 3,894 liabilities ConsolidatedCash Flow Statement For the six months ended 31 December 2009 Year ended 6 months ended 6 months ended 30 June 31 December 2009 31 December 2008 Â 2009 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Cash inflow from operating activities Loss from operations (277) (450) (500) Adjustments for: Profit on sale of fixed assets - (23) (23) Depreciation 35 84 138 ---------------------------------------------- Â (242) (389) (385) Decrease/(Increase) in (31) inventories 83 (183) (Increase)/Decrease in 18 receivables (211) (223) Decrease in liabilities 11 582 332 ---------------------------------------------- Cash used in operations (359) (213) (66) Interest paid (32) (55) (87) Corporation tax received 80 35 206 ---------------------------------------------- Net cash(used in)/generated from operating activities (311) (233) 53 ---------------------------------------------- Cash flows from investing activities Development costs paid (199) - (435) Purchase of plant and equipment (3) (52) (58) Sale of plant and equipment - 65 65 ---------------------------------------------- Net cash(used in)/generated from investing activities (202) 13 (428) ---------------------------------------------- Cash flows from financing activities Issue of share capital 220 - - New loans and finance leases 180 291 521 Repayment of bank loan (5) (194) (209) Repayment of finance leases (18) (34) (47) ---------------------------------------------- Net cash generated from financing 265 activities 377 63 ---------------------------------------------- Decrease in cash and cash equivalents (136) (157) (110) Cash and cash equivalents at (363) beginning of period (473) (363) ---------------------------------------------- Cash and cash equivalents at end (473) of period (609) (520) Consolidated Statement of changes in equity For the six months ended 31 December 2009 Â Â Share premium Share capital account Retained earnings Total Â Â£'000 Â£'000 Â£'000 Â£'000 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 269 4,842 (5,018) 93 2008 ----------------------------------------------------------- 12 months ended 30 June Â 2009 As at 1 July 2008 269 4,842 (4,553) 558 Loss for the period - - (398) (398) ----------------------------------------------------------- As at 30 June 2009 269 4,842 (4,951) 160 ----------------------------------------------------------- 6 months ended 31 December 2009 As at 1 July 2009 269 4,842 (4,951) 160 Loss for the period - - (295) (295) Issue of shares 28 192 - 220 ----------------------------------------------------------- As at 31 December 297 5,034 (5,246) 85 2009 ----------------------------------------------------------- Notes to the Interim Results 1. Basis of preparation The Interim Results for the six months ended 31 December 2009 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 2009, 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. Â Utility detection and Development, mapping assembly and sale services of GPR equipment Test system solutions Total Â Â£'000 Â£'000 Â£'000 Â£'000 6 months ended 31 December 2009 Total segmental 460 176 946 1,582 revenue ------------------------------------------------------------ Segmental result (221) (21) (67) (309) Share of Â Â Â (66) operatingloss in joint venture --------- Loss before Â Â Â (375) taxation Segment assets 1,106 1,955 1,062 4,123 Segment liabilities (904) (1,715) (1,419) (4,038) Depreciation 32 1 2 35 Additions to 2 199 1 202 non-current assets 6 months ended 31 December 2008 Total segmental 945 33 348 1,326 revenue Segmental result 47 (397) (155) (505) Share of operating Â Â Â 5 profit in joint venture --------- Loss before Â Â Â (500) taxation 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 42 - 10 52 non-current assets 12 months ended 30 June 2009 Total segmental 1,732 161 1,348 3,241 revenue Segmental result 27 (374) (240) (587) Share of operating Â Â Â 17 profit in joint venture --------- Loss before Â Â Â 570 taxation Segment assets 1,271 1,876 747 3,894 Segment liabilities (848) (1,819) (1,067) (3,734) Depreciation 86 2 16 104 Additions to 48 435 10 493 non-current assets 3. Loss per share This has been calculated on the loss for the period of Â£295,000 (2008: Â£465,000) and the number of shares used was 28,096,522 (2008: 26,937,181), being the weighted average number of share in issue during the year. Â For the fully diluted calculations, the number of shares used for the calculation was 42,368,219 (2008: 42,178,849) . 4. Dividends No dividend is proposed for the six months ended 31 December 2009. 5. Copies of Interim Results The Interim Results will be posted on the Company's web sitewww.pipehawk.com < http://www.pipehawk.com/> and copies are available from the Company's registered office at Systems House, Mill Lane, Alton, Hampshire GU34 2QG. 1. 1. i. Enquiries: PipeHawk Plc Tel. No.01420 590 990 Gordon Watt (Chairman) Merchant John East Securities Limited (Nomad) Tel. No. 020 7628 2200 David Worlidge/Simon Clements FinnCap (Broker) Tel. No. 020 7600 1658 Charles Cunningham [HUG#1391910]

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