Final Results

RNS Number : 0047Q

PipeHawk PLC

12 October 2011

 



11 October 2011

PipeHawk plc

("PipeHawk" or the "Company")

Final results for the year ended 30 June 2011

Chairman's Statement

We are all aware of the current global economic outlook and that domestic economic growth has been negligible compared to what we all hoped and believed would be the case just a year ago.  Despite this 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.  I am confident that 2012 will see the Group take further steps forward.

I can report the turnover plus other income for the year ended 30 June 2011 was £3,500,000 (2010: £2,636,000) which is an increase of 33 per cent. on the previous year.  After removing extraordinary income, which came in the form of a settlement we agreed with a customer, the increase was still 9 per cent. on the previous year  The Group achieved a profit after taxation for the year of £242,000 (2010: loss £844,000). 

Adien

Adien operates in the large infrastructure project section of the construction industry.  During the year there has been a gradual increase in activity in this market albeit at lower rates and margins than has previously been enjoyed.  Adien is in the process of restructuring its operations to operate profitably in these conditions and has incurred costs in training and technology which are designed to bring efficiency and effectiveness improvements in the coming year.  The wider construction industry remains challenging but the benefit of Adien's cost-saving, non-intrusive survey methods make its service a very relevant offering in these difficult times.

Technology Division

During the last six months we have completed a restructure of the Technology Division to focus on business growth and new product roll out. Nick Field, the Managing Director of QM Systems, has assumed the role of Managing Director of the Technology Division. During the period excellent progress with the e-Safe utility avoidance product has been achieved.  We have produced a very user friendly "human machine interface" which enables an inexperienced user to use the product - this was a key step required to open new marketing channels.  We are engaging several international distributors in negotiations to ensure we achieve successful distribution of this new and exciting product.  We are confident that this new product will be very successful in the short to medium term.

In the period under review PipeHawk continued to develop new GPR products and as a consequence has capitalised approximately £325,000 of research and development expenditure. Adien have focused on marketing the e-Spott layer re-instatement equipment as both a service offering and a capital equipment sale opportunity.  The e-Spott has recently received a very favourable independent report undertaken by TRL (the Transport Research Laboratory) and sales prospects appear very encouraging after an intense period of marketing.  Discussions with interested parties who can successfully undertake the global distribution of this product have been encouraging.

QM Systems

Progress at QM Systems over the past 12 months has been excellent. The business has continued to expand its project, consultancy and product facets into new and exciting markets. QM Systems is now firmly established as a leading supplier of automation and test solutions to the automotive, aerospace, rail, pharmaceutical and beverage markets. During the last 12 months, QM Systems has continued to develop a leading edge consultancy and systems business unit by focussing on core skills in modelling, simulation, high power management systems and RF systems to offer consultancy and services to the automotive, aerospace and rail sectors. QM Systems has developed a stable and profitable business model that will enable it to continue to build on its extensive skill base. This is demonstrated by a return to solid profit during the second half of the financial year combined with the recruitment of a number of high calibre individuals into a range of engineering and administration roles. QM Systems enters the 2011/12 financial year with a healthy order book that will keep the team busy well into 2012 and a large

Chairman's Statement - cont'd

number of prospects that is expected to enable the business to achieve rapid growth. To continue the development of QM Systems, we have relocated to a new, much larger and far more modern premises with 'state of the art' office, laboratory and build facilities. This will enable QM Systems to readily serve its expanding customer base with large infrastructure projects.  

SUMO

SUMO has seen a recovery in the demand for its services in the period under review.  As part of its expansion plans Sumo acquired the business of Stratascan Limited on 30 June 2011. Stratascan is focused on geophysical GPR surveys.  Turnover for the year ended 30 June 2011 was £2,429,000 (2010: £2,278,000) and the operating loss for that period was £136,000 (2010: £233,000 loss).  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, as in previous years, I undertook to provide working capital to the Company. During the year ended 30 June 2011 I advanced loans to the Company of £336,000, in aggregate.

My letter of support dated 2 November 2010 was renewed on 7 October 2011 for a further year. Loans other than those covered by the CULS agreement 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 the year 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 £106,000       in the year ended 30 June 2011 and approximately £536,000 in total, all of which have been accrued in the Company's accounts.

Directors

Richard Chignell retired as a director at the end of March 2011, after founding the original business some twenty years ago. Since that time GPR has become established as a key tool in the ground survey market significantly reducing the number of accidental strikes on pipes and cables worldwide. On behalf of the Board, I would like to pay tribute to Richard's contribution to the Group's development and to thank him for the guidance he has provided to the Board. We shall miss his wisdom and enthusiasm and wish him well in his retirement.

The Board intends to recruit a further director to the Board in due course.

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.  After a difficult year my outlook for the group remains optimistic.

Gordon Watt

Chairman

FURTHER ENQUIRIES

PipeHawk Plc Gordon Watt (Chairman)	01252 338959
Merchant Securities Limited David Worlidge/Simon Clements	020 7628 2200

Consolidated Statement of Comprehensive Income for the year ended 30 June 2011

	Note	30 June 2011 £'000	30 June 2010 £'000
Revenue	2	2,875	2,636
Other Income		625	-
		3,500	2,636
Staff costs		(1,687)	(1,626)
Operating costs		(1,553)	(1,876)
Operating profit / (loss)		260	(866)
Share of  profit/(loss) in joint venture		45	(70)
Profit / (loss) before interest and taxation		305	(936)
Finance costs		(162)	(79)
Profit / (loss) before taxation		143	(1,015)
Taxation	3	99	171
Profit / (loss) for the year attributable to equity holders of the Company		242	(844)
Other comprehensive income		-	-
Total comprehensive income for the year net of tax		242	(844)
Profit / (loss) per share (pence) -  basic	4	0.73	(2.85)
Profit / (loss) per share (pence) - diluted	4	0.52	(2.85)

Consolidated Statement of Financial Position at 30 June 2011

	Note	30 June 2011	30 June 2010
Assets		£'000	£'000
Non-current assets
Property, plant and equipment		141	107
Goodwill		1,061	1,061
Intangible assets		2,123	1,803
Investment in joint venture	5	110	65
		3,435	3,036
Current assets
Inventories		197	179
Current tax assets		70	156
Trade and other receivables	6	980	493
Cash and cash equivalents		112	90
		1,359	918
Total assets		4,794	3,954
Equity and liabilities
Equity
Share capital		330	330
Share premium		5,151	5,151
Retained Earnings		(5,553)	(5,795)
		(72)	(314)
Non-current liabilities
Borrowings	7	2,854	2,503
		2,854	2,503
Current liabilities
Trade and other payables	8	1,995	1,743
Borrowings	9	17	22
		2,012	1,765
Total equity and liabilities		4,794	3,954

Consolidated Statement of Cash Flow for the year ended 30 June 2011

	Note	30 June 2011 £'000	30 June 2010 £'000
Cash flows from operating activities
Profit / (loss) from operations		260	(866)
Adjustments for:
Depreciation		61	74
Impairment of intangibles		5	5
Profit on sale of fixed assets		(4)	-
		322	(787)
(Increase) / decrease in inventories		(18)	120
(Increase) / decrease in receivables		(481)	175
Increase/(decrease) in liabilities		252	(93)
Cash generated by/(used) in operations	10	75	(585)
Interest paid		(162)	(79)
Corporation tax received		179	177
Net cash from / (used in) operating activities		92	(487)
Cash flows from investing activities
Development costs paid		(325)	(382)
Purchase of plant and equipment		(95)	(41)
Sale of plant and equipment		4	3
Net cash used in investing activities		(416)	(420)
Cash flows from financing activities
Share issues		-	370
New loans and finance leases		386	1,139
Repayment of bank loan		(7)	(10)
Repayment of finance leases		(33)	(29)
Net cash generated from financing activities		346	1,470
Net increase in cash and cash equivalents		22	563
Cash and cash equivalents at beginning of year		90	(473)
Cash and cash equivalents at end of year		112	90

Consolidated Statement of Changes in Equity for the year ended 30 June 2011

	Share capital	Share premium account	Retained earnings	Total
	£'000	£'000	£'000	£'000
As at 1 July 2009	269	4,842	(4,951)	160
Loss for the period	-	-	(844)	(844)
Other comprehensive income	-	-	-	-
Total comprehensive income	-	-	(844)	(844)
Share issue	61	309	-	370
As 30 June 2010	330	5,151	(5,795)	(314)
Profit for the period	-	-	242	242
Other comprehensive income	-	-	-	-
Total comprehensive income	-	-	242	242
As 30 June 2011	330	5,151	(5,553)	(72)

Notes to the Final Results for the year end 30 June 2011

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 2011 and are consistent with those adopted in the financial statements for the year ended 30 June 2010.

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 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. However at the statement of financial position date the group has net current liabilities of £653,000. 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 2010 and 2011, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 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 2011 contained 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".   

This announcement was approved by the Board on 11 October 2011.

2.         Segmental Analysis

	2011	2010
	£'000	£'000
Turnover by geographical market
United Kingdom	2,777	2,151
Europe	98	69
Other	-	416
	2,875	2,636

The group operates out of one geographical location being the UK. Accordingly the primary segmental disclosure is based on activity. The Group has adopted IFRS 8 Operating Segments effective from the year beginning 1 July 2009. 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.

Information regarding each of the operations of each reportable segments is included below:

	Utility detection and mapping services	Development, assembly and sale of GPR equipment	Test system solutions	Total
	£'000	£'000	£'000	£'000
Year ended 30 June 2011
Total segmental revenue	1,414	75	1,386	2,875
Total segmental other income	-	-	625	625
Segmental result	(134)	(230)	624	260
Finance costs	(6)	(154)	(2)	(162)
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 and amortisation	56	6	4	66

	Utility detection and mapping services	Development, assembly and sale of GPR equipment	Test system solutions	Total
Year ended 30 June 2010
Total segmental revenue	1,073	283	1,280	2,636
Segmental result	(308)	(153)	(405)	(866)
Finance costs	(10)	(68)	(1)	(79)
Share of operating profit in joint venture				(70)
Loss before taxation				(1,015)
Segment assets	921	2,210	823	3,954
Segment liabilities	816	1,982	1,470	4,268
Depreciation and amortisation	66	5	7	79

The majority of the Group's revenue is earned via the rendering of services.

3.         Taxation

	2011	2010
	£'000	£'000
United Kingdom Corporation Tax
Current taxation	(70)	(150)
Adjustments in respect of prior years	(29)	(21)
	(99)	(171)
Deferred taxation	-	-
Tax on loss	(99)	(171)

Current tax reconciliation	2011	2010
	£'000	£'000
Taxable profit / (loss) for the year	143	(1,015)
Theoretical tax at UK corporation tax rate 28% (2010: 28.0%)	40	(284)
Effects of:
- R&D tax credit adjustments	(113)	24
- other expenditure that is not tax deductible	-	3
- adjustments in respect of prior years	29	21
- accelerated capital allowances	(87)	(116)
- losses carried forward	80	131
- short term timing differences	(27)	50
Total income tax expense	(99)	(171)

The Group has tax losses amounting to approximately £1,250,000 (2010: £860,000), available for carry forward to set off against future trading profits.

 4.        Profit / (Loss) per Share

This has been calculated on a profit of £242,000 (2010: loss £844,000) and the number of shares used was 33,020,515 (2010: 29,443,591) being the diluted weighted average number of share in issue during the year. 

This has been calculated on a profit of £242,000 (2010: loss £844,000) and the number of shares used was 46,651,718 being the diluted weighted average number of share in issue during the year.  There were no potentially dilutive ordinary shares in the year ended 30 June 2010.

5.         Investment in Joint Venture

	Investment in shares
	£'000
Cost:
At 1 July 2010 & 30 June 2011	198
Share of losses
At 1 July 2010	(133)
Share of profits for the year	45
At 30 June 2011	88
Net investment
At 30 June 2011	110
At 30 June 2010	65

	Investment in shares
	£'000
Cost:
At 1 July 2009 & 30 June 2010	198
Share of losses
At 1 July 2009	(63)
Share of losses for the year	(70)
At 30 June 2010	(133)
Net investment
At 30 June 2010	65
At 30 June 2009	135

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 2011.  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:

	30/06/11            £'000	30/06/10            £'000
Total assets	2,149	2,356
Total liabilities	1,784	2,139
Net assets	365	217
Group's share of net assets of joint venture	110	65
	Year ended 30/6/11	Year ended 30/6/10
Total revenue	2,429	2,278
Total profit for the period	136	(233)
Group's share of profits of joint venture	45	(70)

6.         Trade and other receivables

	2011	2010
	£'000	£'000
Current
Trade receivables	856	419
Other receivables	98	45
Prepayments and accrued income	26	29
	980	493

7.         Non-current liabilities: Borrowings

 

	2011	2010
	£'000	£'000
Borrowings (note 9)	2,854	2,503

8.         Current liabilities: Trade and other payables

 

	2011	2010
	£'000	£'000
Trade payables	602	506
Other taxation and social security	175	278
Payments received on account	-	86
Accruals	1,218	873
	1,995	1,743

Included within the above amounts are the following amounts owing to directors;

	2011	2010
G G Watt	£918,003	£689,181
R G Tallentire	£184,870	£200,779
R J Chignell	£12,000	£15,000
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

 

	2011	2010
	£'000	£'000
Due within one year
Bank loans	-	7
Obligations under finance lease agreements	17	15
	17	22
Due after more than one year
Obligations under finance lease agreements	27	12
Directors' loans	2,827	2,491
	2,854	2,503
Repayable
Due within 1 year	17	22
Over 1 year but less than 2 years	2,842	2,496
Over 2 years but less than 5 years	12	-
	2,860	2,525

Bank loans include loans from the Bank of Scotland £nil (2010: £7,220).

The loan with Bank of Scotland is at a rate of 14.1% and is repayable in monthly instalments, the final instalment being in April 2011.  The loan is secured over various plant and equipment.

Finance lease agreements with Close Motor Finance and Banque PSA 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 £42,593 (2010: £22,333)

The director's loan due in more than one year is a loan of £2,827,000 from G G Watt.  Directors' loans attract interest at 2.15% over Bank of England base rate.

On 13 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 / (loss)		260	(866)
Amortisation of intangible assets		5	5
Depreciation of property, plant and equipment		61	74
Profit on sale of fixed assets		(4)	-
Working capital movements
Inventories		(18)	120
Receivables		(481)	175
Payables		252	(93)
Net cash inflow/(outflow) from operating activities		75	(585)

11.        Dividends        

The directors do not recommend the payment of a dividend (2010: 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.

 

END

 

 

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