Final Results

PipeHawk PLC 11 November 2004 To be embargoed until 7.00am 11 November 2004 PipeHawk Plc ('the Group' or 'the Company') Preliminary Results for the year ending 30 June 2004 Chairman's Statement After an encouraging first half of the year, and after increasing our capacity as a result, we found the middle of 2004 difficult and disappointing. Nevertheless our results have improved to a loss after taxation of £717,000 (2003: £1,174,000) on turnover of £1,010,000 (2003: £1,095,000) and we continue to invest in the future. The Group has four major business opportunities: 1. Adien - our high-level mapping and planning service One of the principal industries benefiting from the use of ground penetrating radar (GPR) is the water industry, which effectively put most of its investment plans on hold whilst each water company negotiated its forthcoming five-year business plan with OfWat. As a result Adien's business largely dried up and it therefore turned its sales efforts to other industries. This has been relatively successful, particularly in the telecom business, and bodes well for the future. With the release on 5 August 2004 of OfWat's draft proposals on allowed price increases averaging 13.3 per cent. above the rate of inflation for the next five years, the water companies are now beginning to plan for some of their most urgently needed projects. Inherent in the water companies' plans and OfWat's determinations is the need for greater efficiency in operations; increased use of GPR techniques will much enhance their efficiency. 2. SUMO - is a franchise operation which provides an instant mark out service SUMO's uptake of new franchisees has been similarly affected, although again since the year-end business has picked up and two new franchisees were taken on in September. SUMO is just completing a small placing of its own of approximately £435,000 to provide additional working capital and funds for expansion. After capitalisation of some of our loans to SUMO at the placing price of £3 per share (as compared with an initial investment of £1 per share), PipeHawk will own 39.6 percent of the enlarged SUMO business. During the year our Technology Division has been particularly busy. We obtained full FCC approval for the sale of the PipeHawk machine in the USA. Richard Chignell, our Technical Director, whilst Chairman of Euro GPR, the GPR trade association, successfully guided ETSI (the European Telecommunications Standards Institute) in the drafting of licensing documentation regarding the use of Ultra Wide Band Technology in Ground and Wall probing radar applications. If there are no adverse public comments on these documents, they will become the European regulations, which taken with the FCC approval in the United States removes the historic degree of regulatory uncertainty from the environment in which we operate. 3. Hand held pipe detector The next stage of the hand held pipe locator project with the North East Gas Association (formerly NYGAS) has recently been signed. This is aimed at ensuring that a development prototype of an innovative product that should be attractive in the market place may effectively pass the American licensing regulations. We have already held discussions with a potential manufacturer and distributor of the final product. 4. Mine detection Finally, we have progressed our plans to develop a landmine detection vehicle following the successful feasibility field trials held in Bosnia two years ago. During the year we have carried out significant work developing key elements of the systems required, the technology, the marketing and the field introduction. We are currently engaged in seeking funding for this programme. This has been a difficult year for our Directors and staff and I would like to thank them for their dedication and professionalism. I welcome Tony Chambers to the Board as a non-executive director; his experience in the banking and military world add breadth and depth to the Board. I continue to look to the future with considerable confidence as each of the four parts of our business are making progress in environments which will increasingly need our services. Gordon G Watt Chairman 11 November 2004 Consolidated Profit and Loss Account For the year ended 30th June 2004 2004 Restated £'000 2003 £'000 Turnover Group and share of joint venture 1,010 1,095 Less: share of joint venture turnover (67) (34) -------- ----------- Group Turnover - total 943 1,061 Group operating costs (1,715) (1,938) -------- ----------- Group operating loss (772) (877) Share of operating loss in joint venture (69) (64) -------- ----------- Total operating loss (841) (941) Amounts written off investments - (230) -------- ----------- Loss on ordinary activities before interest and taxation (841) (1,171) Group interest receivable and similar income 1 1 Group interest payable and similar charges (52) (50) -------- ----------- Loss on ordinary activities before taxation (892) (1,220) Tax on profit on ordinary activities 175 46 -------- ----------- Transfer from reserves (717) (1,174) ======== =========== 2004 2003 p p Loss per share Basic and diluted (3.3) (6.5) ======== =========== There are no recognised gains or losses other than those reported above. Consolidated Balance Sheet As at 30th June 2004 Restated 2004 2003 £'000 £'000 Fixed assets Intangible assets 255 269 Tangible assets 365 362 Investment in joint venture: Share of gross assets 45 42 Share of gross liabilities (211) (150) -------- ----------- (166) (108) Goodwill 39 53 Loan to Joint Venture 148 80 -------- ----------- 21 25 -------- ----------- 641 656 Current assets Stocks 281 340 Debtors 285 280 Investments - 99 -------- ----------- 566 719 Creditors: amounts falling due within one year (720) (804) -------- ----------- Net Current liabilities (154) (85) -------- ----------- Total assets less current liabilities 487 571 Creditors: amounts falling due after more than one year (353) (402) Provisions for liabilities and charges - - -------- ----------- Net assets 134 169 ======== =========== Capital and reserves Called up equity share capital 232 202 Share premium account 4,081 3,429 Profit and loss account (4,179) (3,462) -------- ----------- Equity shareholders' funds 134 169 ======== =========== Consolidated Cash Flow Statement For the year ended 30th June 2004 Restated Note 2004 2003 £'000 £'000 Net cash flow from operating activities A (586) (87) Returns on investments and servicing of finance 1 1 Interest received Interest element of finance lease rentals and hire purchase (65) (63) payments Interest paid (36) (35) ---------- --------- (51) (41) Corporation tax received 105 36 Capital expenditure and financial investment Payments for tangible fixed assets (153) (54) Loan to joint venture (68) (60) Receipts from sale of current asset investment 95 - Receipts from sale of tangible fixed assets 4 - ---------- --------- (122) (114) Acquisitions and disposals Investment in joint venture - (16) Acquisition of subsidiary - (50) Costs of acquisition - (28) ---------- --------- - (94) ---------- --------- Cash outflow before use of liquid resources and (654) (300) financing ---------- --------- Financing New loans - 324 Repayment of loans C (51) (448) Capital element of finance lease and hire purchase C (28) (83) payments Issue of ordinary shares 682 408 ---------- --------- 603 201 ---------- --------- (Decrease) in cash C (51) (99) ========== ========= Notes to the Cash Flow Statement A. Reconciliation of Operating Loss to Net Cash Outflow from Operating Activities 2004 2003 £'000 £'000 Operating loss (772) (877) Amortisation of intangible assets 17 14 Depreciation of tangible fixed assets 146 122 (Profit)/loss on disposal of tangible fixed assets - 43 Loss on sale of investments 4 - Liquidation of subsidiary - 99 Working capital movements Stock and work in progress 59 70 Debtors (65) 301 Creditors (105) 121 ---------- ---------- Net cash outflow from operating activities (716) (107) ========== ========== B. Reconciliation of Net Cash Flow to Movement of Net Debt 2004 2003 £'000 £'000 (Decrease)/Increase in cash (51) (100) Cash inflow from increase in debt and hire purchase 79 207 finance ----------- ---------- (Decrease) in net debt from cash flows 28 107 Loan repaid by shares - 153 Debt acquired with subsidiary - (262) ----------- ---------- Increase/Reduction in net debt 28 (2) Opening net debt (626) (620) ----------- ---------- Closing net debt (598) (622) =========== ========== C. Analysis of changes in net debt 1 July 2003 Cash flows 30 June 2004 £'000 £'000 £'000 Cash at bank and in hand - - Overdrafts (146) (51) (197) --------- ---------- ---------- Cash (146) (51) (197) --------- ---------- ---------- Loans (426) 51 (375) Hire purchase agreements (54) 28 (26) --------- ---------- ---------- Borrowings (480) 79 (401) --------- ---------- ---------- Net debt (626) 28 (598) ========= ========== ========== Notes to the preliminary statements 1. Publication of non-statutory accounts The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The consolidated balance sheet at 30th June, 2004, and the consolidated profit and loss account, consolidated cash flow statement and associated notes for the period then ended have been extracted from the Group's financial statements. Those financial statements have not yet been delivered to the Registrar of Companies. 2. Loss per share The calculation of the basic loss per share is based on the loss on ordinary activities after taxation of £717,000 (2003: £1,174,000) divided by 21,798,121 (2003: 17,960,868) ordinary shares, being the weighted average number of shares in issue during the period. 3. Dividend The Directors are not proposing the payment of a dividend in respect of the period ended 30th June, 2004. 4. Taxation 2004 2003 £'000 £'000 United Kingdom Corporation Tax Current taxation - - Current tax refund 80 10 Adjustments in respect of prior years 95 36 ----------- ----------- 175 46 Deferred taxation - - ----------- ----------- Tax on loss on ordinary activities 175 46 =========== =========== 2004 2003 £'000 £'000 Loss on ordinary activities before taxation (892) (1,220) Theoretical tax at UK corporation tax rate 30% (268) (366) Effects of: - share of joint ventures' losses 21 19 - R&D tax credit adjustments 20 4 - other expenditure that is not tax deductible 8 10 - adjustments in respect of prior years (95) (36) - accelerated capital allowances 5 5 - losses carried forward 134 218 ----------- ----------- Actual current taxation charge (175) (46) =========== =========== 5. Report and Accounts Copies of the Report and Accounts will be sent to shareholders in due course and will be available from the Company's registered office. Further Enquiries: PipeHawk Plc Gordon Watt, Chairman Tel: 01420 590990 John East & Partners Limited Johnny Townsend/Simon Clements Tel: 020 7628 2200 J M Finn John Finn Tel: 020 7628 9688 This information is provided by RNS The company news service from the London Stock Exchange

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