Pipehawk PLC : Half-yearly report

6 March 2012

PipeHawk plc
("PipeHawk" or the "Company")

Half-yearly results for the six months ended 31 December 2011

Chairman's Statement

I am pleased to report that the Company's turnover in the six months ended 31 December 2011 was £1,589,000, an increase on the recurring turnover for the corresponding period last year of 46.3 per cent. (2010: £1,086,000), resulting in a loss before taxation of £213,000 (2010: loss on recurring activities £400,000 after excluding £625,000 received in respect of claims brought against a third party).

In the period under review PipeHawk continued to develop new GPR products and as a consequence has, in the six months ended 31 December 2011, capitalised approximately £114,000 of research and development expenditure.   We have continued with the development of the e-Safe and we have had further encouraging meetings with potential worldwide distributors.

During the period QM Systems ("QM") has continued to develop its business in the fields of test, automation, control and consultancy. Significant contract wins in the rail and automotive industries have resulted in an increase in revenue of 62 per cent. when compared to the corresponding period last year. In addition, QM has continued to develop long term relationships with new and existing clients across several industries. The consultancy business unit has continued to develop its core competency in green and leading edge technology with a number of projects now being undertaken within the automotive and aerospace sectors. Capitalising on many years of experience in power management within the aerospace industry, QM has made a successful transition to utilise this experience to benefit newer automotive clients, this business unit continues to go from strength to strength. QM has completed the relocation of the business into new state-of-the-art facilities and is now well positioned to continue its growth in profit and revenue over the coming period.

Adien operates at the premium end of the utility detection and mapping market and particularly in major infrastructure projects.  During the six month period under review Adien has continued its recovery through the establishment of a further framework agreement with a major utility company and has won orders from other major players in the utilities market.  The bad weather which affected our site this time last year has, so far this year, not disrupted the business as much and with orders currently 35 per cent. ahead of last year we expect Adien to enjoy good trading in the second half of this financial year.

SUMO has integrated the business of Stratascan into its operations during the period under review.  SUMO's services are allied closely to the construction sector where activity dipped markedly in the last quarter of 2011.  Steps have been taken to reduce overhead levels and they are looking forward to better trading in the second half of our financial year.

Related party transactions

During the period under review I have continued to provide financial support to the Company through director loans. The loans advanced by me to date aggregate to £2,825,595 in addition to £1 million of Convertible Unsecured Loan Stock 2014 ("CULS").  The loans have been made in accordance with a letter of support dated 7 October 2011.  The loans are unsecured and accrue interest at an annual rate of 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 during previous years, my fellow directors and I have deferred a certain proportion of our salaries, fees and interest until the Company is in a suitably strong position to make the full payments.  These deferred amounts total approximately £126,000 in the six month period ended 31 December 2011 and approximately £1,255,000 in total, all of which have been accrued in the Company's accounts.  

Gordon Watt
Chairman

Enquiries: 

PipeHawk Plc Gordon Watt (Chairman)	Tel. No. 01252 338 959
Merchant Securities Limited (Nomad) David Worlidge/Simon Clements	Tel. No. 020 7628 2200
FinnCap (Broker) Charles Cunningham	Tel. No. 020 7600 1658

Statement of Comprehensive Income
For the six months ended 31 December 2011

	6 months ended 31 December 2011 (unaudited) £'000	6 months ended 31 December 2010 (unaudited) £'000	Year ended 30 June 2011 (audited) £'000
Revenue	1,589	1,086	2,875
Other income	-	625	625
		1,711	3,500
Staff costs	(910)	(673)	(1,687)
General administrative expenses	(775)	(729)	(1,553)
Operating (loss) / profit	(96)	309	260
Share of operating (loss) / profit in joint venture	(30)	-	45
(Loss) / Profit on ordinary activities before interest and taxation	(126)	309	305
Finance costs	(87)	(84)	(162)
(Loss) / Profit before taxation	(213)	225	143
Taxation	42	87	99
(Loss) / Profit for the period attributable to equity holders of the Company	(171)	312	242
Other comprehensive income	-	-	-
Total comprehensive (loss) / income for the period net of tax	(171)	312	242
(Loss) / Profit per share (pence) -  basic	(0.51)	0.95	(2.85)
(Loss) / Profit per share (pence) -  diluted	(0.51)	0.66	(2.85)

Consolidated Statement of Financial Position
As at 31 December 2011

Assets	As at 31 December 2011 (unaudited)	As at 31 December 2010 (unaudited)	As at 30 June 2011 (audited)
	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	193	88	141
Goodwill	1,061	1,061	1,061
Intangible assets	2,237	1,931	2,123
Investment in joint venture	80	65	110
	3,571	3,145	3,435
Current assets
Inventories	94	191	197
Current tax assets	35	150	70
Trade and other receivables	1,284	718	980
Cash	124	704	112
	1,537	1,763	1,359
Total Assets	5,108	4,908	4,794
Equity and liabilities
Equity
Share capital	330	330	330
Share premium	5,151	5,151	5,151
Other reserves	(5,724)	(5,483)	(5,553)
	(243)	(2)	(72)
Non-current liabilities
Borrowings	3,801	4,382	4,206
	3,801	4,382	4,206
Current liabilities
Trade and other payables	1,537	526	643
Bank overdrafts and loans	13	2	17
	1,550	528	660
Total equity and liabilities	5,108	4,908	4,794

Consolidated Statement of Cash Flow
For the six months ended 31 December 2011

	6 months ended 31 December 2011 (unaudited) £'000	6 months ended 31 December 2010 (unaudited) £'000	Year ended 30 June 2011 (audited) £'000
Cash inflow from operating activities
Profit / (loss) from operations	(96)	309	260
Adjustments for:
Profit on sale of fixed assets	-	-	61
Impairment of intangible assets	-	-	5
Depreciation	34	32	(4)
	(62)	341	322
Decrease / (Increase) in inventories	103	(12)	(18)
(Increase)/Decrease in receivables	(304)	(225)	(481)
Increase in liabilities	391	33	252
Cash generated/(used) in operations	128	137	75
Interest paid	(87)	(84)	(162)
Corporation tax received	77	93	179
Net cash generated from operating activities	118	146	92
Cash flows from investing activities
Development costs paid	(114)	(128)	(325)
Purchase of plant and equipment	(86)	(13)	(95)
Sale of plant and equipment	-	-	4
Net cash (used in)/generated from investing activities	(82)	5	(416)
Cash flows from financing activities
Issue of share capital		-	-
New loans and finance leases	91	625	386
Repayment of bank loan	-	(5)	(7)
Repayment of finance leases	(10)	(11)	(33)
Net cash generated from financing activities	81	609	346
(Decrease) / Increase in cash and cash equivalents	(1)	614	22
Cash and cash equivalents at beginning of period	112	90	90
Cash and cash equivalents at end of period	111	704	112

Consolidated Statement of changes in equity
For the six months ended 31 December 2011

	Share capital	Share premium account	Retained earnings	Total
	£'000	£'000	£'000	£'000
6 months ended 31 December 2010
As at 1 July 2010	330	5,151	(5,795)	(314)
Profit for the period	-	-	312	312
As at 31 December 2010	330	5,151	(5,483)	(2)
12 months ended 30 June  2011
As at 1 July 2010	330	5,151	(5,795)	(314)
Profit for the period	-	-	242	242
As at 30 June 2011	330	5,151	(5,553)	(72)
6 months ended 31 December 2011
As at 1 July 2011	330	5,151	(5,553)	(72)
Loss for the period	-	-	(171)	(171)
As at 31 December 2011	330	5,151	(5,724)	(243)

Notes to the Interim Results

1. Basis of preparation

The Interim Results for the six months ended 31 December 2011 are unaudited and do not constitute statutory accounts in accordance with section 240 of the Companies Act 2006.

Full accounts for the year ended 30 June 2011, on which the auditors gave an unqualified report and contained no statement under Section 237 (2) or (3) of the Companies Act 2006, 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 basic principles of IFRS.

Gordon Watt has confirmed that he will not recall loans payable to him, within the next 12 months.  Therefore non-current liabilities at 31 December 2010 and 30 June 2011 have been restated to include amounts owing to Gordon Watt which were previously shown in current liabilities.

2. Segmental information

The Group operates in one geographical location being the UK. Accordingly the primary segmental disclosure is based on activity.

	Utility detection and mapping services	Development, assembly and sale of GPR equipment	Test system solutions	Total
	£'000	£'000	£'000	£'000
6 months ended 31 December 2011
Total segmental revenue	674	122	793	1,589
Segmental result	(59)	(109)	(15)	(183)
Share of operating loss in joint venture				(30)
Loss before taxation				(213)
Segment assets	779	2,913	1,416	5,108
Segment liabilities	876	3,048	1,427	5,351
Depreciation	24	-	10	34
Additions to non-current assets	19	-	69	88
6 months ended 31 December 2010
Total segmental revenue	553	44	1,114	1,711
Other income	-	-	625	625
Segmental result	(95)	(183)	503	225
Share of operating profit/(loss) in joint venture				-
Profit before taxation				225
Segment assets	717	3,230	961	4,908
Segment liabilities	(708)	(3,153)	(1,049)	(4,910)
Depreciation	28	1	3	32
Additions to non-current assets	13	128	-	141
12 months ended 30 June 2011
Total segmental revenue	1,414	75	1,386	2,875
Other income	-	-	625	625
Segmental result	(140)	(384)	622	98
Share of operating profit in joint venture				45
Profit before taxation				143
Segment assets	899	2,874	1,021	4,794
Segment liabilities	936	2,903	1,027	4,866
Depreciation	56	6	4	66
Additions to non-current assets	33	325	14	372

3. Profit / (Loss) per share

This has been calculated on the loss for the period of £171,000 (2010: profit £312,000) and the number of shares used was 33,020,515 (2010: 33,020,515), being the weighted average number of share in issue during the period.

4. Dividends

No dividend is proposed for the six months ended 31 December 2011.

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 4, Manor Park Industrial Estate, Wyndham Street, Aldershot GU12 4NZ.

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Source: Pipehawk PLC via Thomson Reuters ONE

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