Last checked at 22 Oct 2012 07:00
22 October 2012 PipeHawk plc ("PipeHawk" or the "Company") Final results for the year ended 30 June 2012
Chairman's Statement
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. The second half of the year showed a great improvement over the first half and we managed to turn around the half year loss into a full year profit. I remain confident that we will see the Group take further steps forward in the next year.
I can report that turnover for the year ended 30 June 2012 was £3,342,000 (2011: £2,875,000 after excluding £625,000 of one-off income arising from a settlement with a customer) which is an increase of 16 per cent. The Group achieved a profit after taxation for the year of £28,000 (2011: profit £ 242,000) which is an excellent result considering that last year's results were buoyed by the one-off income of £625,000.
Adien
Despite the fact that Adien operates largely in the UK construction industry, the company reported an 8 per cent. growth in sales and a return to profitability. This sales growth has come about as a result of focussing on serving the needs of the utilities sector and has been converted into profits due to increased efficiencies resulting from a restructuring of operations that began some 15 months ago. Adien is associated with several high profile public infrastructure projects and has won these contracts as a result of tracking them carefully since their inception. The company is now well placed to continue to grow and contribute profitably to the group.
Technology Division
In the period under review PipeHawk has invested in the continued development of key new products to ensure maturity at launch. The development of e-Safe has continued to move forward at a rapid rate and we are pleased to report that the product is now approaching readiness for sale. In addition to this, the modular design concept enables PipeHawk to offer a family of innovative and low cost GPR products to the market that will provide a GPR solution for every requirement and every budget.
The restructure of the PipeHawk business has enabled us to focus our efforts directly on our clients' requirements and consequently interest in the e-Safe and e-Spott products is proving very positive.
We are now developing distribution channels to ensure the successful introduction to a global market for all of our new and innovative products.
During the year PipeHawk continued to develop new GPR products and as a consequence has capitalised approximately £230,000 of research and development expenditure.
QM Systems
Progress at QM Systems during the last 12 months has continued to be excellent, with a significant growth in revenue and profit on normal operations. A number of new contracts for production, assembly and test equipment have been received and delivered, without exception, on time. The business has continued to expand its diversity both in terms of the products and services offered and the client base that QM supports. QM Systems has recently secured several new projects with new clients that will more than double revenue in the coming year. Several of these new projects are for complete turnkey production line solutions that will drive QM's business model through rapid growth and expansion. We look forward to a very exciting 12 months ahead at QM Systems.
SUMO
SUMO is more exposed to the construction market than Adien but has seen good performances from Stratascan Limited, which it purchased on 30 June 2011 and which is focused on geophysical GPR surveys. Turnover for the year ended 30 June 2012 was £2,407,000 (2011: £1,925,000) and the operating loss for the year was £60,000 (2011: profit £136,000). 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, I was not called upon to provide working capital support to the Company which is a further testament to the growing strength of the Group.
My letter of support dated 7 October 2011 was renewed on 19 October 2012 for a further year. Loans, other than those covered by the CULS agreement, are unsecured and accrue interest at an annual rate of Bank of England 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 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 amounted to approximately £86,000 in the year ended 30 June 2012 and approximately £622,000 in total, all of which have been accrued in the Company's accounts.
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. In the last six months of the period under review it appears that the results for the business are beginning to reflect the efforts put in by management and staff and therefore I remain optimistic in my outlook for the Group.
Gordon WattChairmanEnquiries:PipeHawk Plc Tel. No. 01252 338 959 Gordon Watt (Chairman) MerchantSecurities Limited(Nomad) Tel. No. 020 7628 2200 David Worlidge/Simon Clements FinnCap (Broker) Tel. No. 020 7220 0569 Charlotte Stranner
Consolidated Statement of Comprehensive Income for the year ended 30 June 2012
Note 30 June 2012 30 June 2011 £'000 £'000 Revenue 2 3,342 2,875 Other income - 625 3,342 3,500 Staff costs (1,779) (1,687) Operating costs (1,458) (1,553) Operating profit 105 260 Share of (loss) / profit in joint venture (17) 45 Profit before interest and taxation 88 305 Finance costs (158) (162) (Loss) / profit before taxation (70) 143 Taxation 3 98 99 Profit for the year attributable to equity 28 242holders of the Company Other comprehensive income - - Total comprehensive income for the year net 28 242of tax Profit per share (pence) - basic 4 0.09 0.73 Profit per share (pence) - diluted 4 0.06 0.52
Consolidated Statement of Financial Position at 30 June 2012
Note 30 June 2012 30 June 2011 Assets £'000 £'000 Non-current assets Property, plant and equipment 196 141 Goodwill 1,061 1,061 Intangible assets 2,348 2,123 Investment in joint venture 5 93 110 3,698 3,435 Current assets Inventories 149 197 Current tax assets 104 70 Trade and other receivables 6 835 980 Cash and cash equivalents 189 112 1,277 1,359 Total assets 4,975 4,794 Equity and liabilities Equity Share capital 330 330 Share premium 5,151 5,151 Retained earnings (5,525) (5,553) (44) (72) Non-current liabilities Borrowings 9 2,729 2,854 Trade and other payables 7 1,394 1,244 4,123 4,098 Current liabilities Trade and other payables 8 779 751 Borrowings 9 117 17 896 768 Total equity and liabilities 4,975 4,794
Consolidated Statement of Cash Flow for the year ended 30 June 2012
Note 30 June 30 June 2012 2011 £'000 £'000 Cash flows from operating activities Profit from operations 105 260 Adjustments for: Depreciation 73 61 Impairment of intangibles 5 5 Profit on sale of fixed assets - (4) 183 322 (Increase) / decrease in inventories 48 (18) (Increase) / decrease in receivables 131 (481) Increase/(decrease) in liabilities 26 100 Cash generated by/(used) in 10 388 (77)operations Interest paid (6) (10) Corporation tax received 78 179 Net cash from / (used in) operating 460 92activities Cash flows from investing activities Development costs paid (230) (325) Purchase of plant and equipment (128) (95) Sale of plant and equipment - 4 Net cash used in investing activities (358) (416) Cash flows from financing activities Share issues - - New loans and finance leases 118 386 Repayment of loan (125) (7) Repayment of finance leases (18) (33) Net cash generated from financing (25) 346activities Net increase in cash and cash 77 22equivalents Cash and cash equivalents at 112 90beginning of year Cash and cash equivalents at end of 189 112year
Consolidated Statement of Changes in Equity for the year ended 30 June 2012
Consolidated Share Share Retained Total capital premium earnings account £'000 £'000 £'000 £'000 As at 1 July 2010 330 5,151 (5,795) (314) Loss for the period - - 242 242 Other comprehensive - - - -income Total comprehensive - - 242 242income As 30 June 2011 330 5,151 (5,553) (72) Profit for the period 28 28 Other comprehensive - - - -income Total comprehensive - - 28 28income As 30 June 2012 330 5,151 (5,525) (44)
Notes to the Final Results for the year end 30 June 2012
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 2012 and are consistent with those adopted in the financial statements for the year ended 30 June 2011.
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 principal accounting policies are set out below.
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. 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 2011 and 2012, but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 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 2012 contains 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.
2. Segmental Analysis 2012 2011 £'000 £'000 Turnover by geographical market United Kingdom 3,249 2,777 Europe - 98 Other 93 - 3,342 2,875
The group operates out of one geographical location being the UK. Accordingly the primary segmental disclosure is based on activity. 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.
In utility detection and mapping services one customer accounted for 35% of revenue. In development, assembly and sale of GPR equipment one customer accounted for 27% of revenue. In test system solutions two customers accounted for more than 10% of revenue and in aggregate these two customers represented 70% of segment revenue.
Information regarding each of the operations of each reportable segment isincluded below. Utility Development, Test system Total detection assembly and solutions and mapping sale of GPR services equipment £'000 £'000 £'000 £'000 Year ended 30 June 2012 Total segmental revenue 1,524 221 1,597 3,342 Total segmental other - - - -income 1,524 22 1,597 3,342 Segmental result 76 (7) 36 105 Finance costs (158) Share of operating loss (17)in joint venture (Loss) before taxation (70) Segment assets 1,020 2,837 1,118 4,975 Segment liabilities 987 2,428 1,048 4,463 Depreciation and 49 2 33 84amortisation Utility Development, Test system Total detection assembly and solutions and mapping sale of GPR services equipment Year ended 30 June 2011 Total segmental revenue 1,414 75 1,386 2,875 - - 625 625 Segmental result (134) (230) 624 260 Finance costs (6) (154) (2) (162) Share of operating 45profit in joint venture Profit before taxation 143 Segment assets 899 2,874 1,021 4,794 Segment liabilities 936 2,903 1,027 4,866 Depreciation and 56 6 4 66amortisation
The majority of the Group's revenue is earned via the rendering of services.
3. Taxation 2012 2011 £'000 £'000 United Kingdom Corporation Tax Current taxation (106) (70) Adjustments in respect of prior years 8 (29) (98) (99) Deferred taxation - - Tax on loss (98) (99) Current tax reconciliation 2012 2011 £'000 £'000 Taxable (loss) / profit for the year (70) 143 Theoretical tax at UK corporation tax (18) 40 rate 25.5% (2011: 26.0%) Effects of: - R&D tax credit adjustments (164) (113) - other expenditure that is not tax 11 - deductible - adjustments in respect of prior years - 8
- accelerated capital allowances (71) (87)
- losses carried forward 92 80 - short term timing differences 52 (27) Total income tax expense (98) (99)
The Group has tax losses amounting to approximately £1,800,000 (2011: £ 1,860,000), available for carry forward to set off against future trading profits.
4. Profit / (Loss) per Share
Basic
This has been calculated on a profit of £28,000 (2011: profit £242,000) and the number of shares used was 33,020,515 (2011: 33,020,515) being the weighted average number of shares in issue during the year.
Diluted
This has been calculated on a profit of £28,000 (2011: profit £242,000) and the number of shares used was 48,114,301 (2011: 47,677,315) being the diluted weighted average number of shares in issue during the year.
5. Investment in Joint Venture
6. Group Investment in shares £'000 Cost: At 1 July 2011 & 30 June 2012 198 Share of losses At 1 July 2011 88 Share of losses for the year 17 At 30 June 2012 105 Net investment At 30 June 2012 93 At 30 June 2011 110 Group Investment in shares £'000 Cost: At 1 July 2010 & 30 June 2011 198 Share of losses At 1 July 2010 133 Share of losses for the year (45) At 30 June 2011 88 Net investment At 30 June 2011 110 At 30 June 2010 65
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 2012. SUMO Limited's principal place of business is Havant, Hampshire.
Summarised financial information in respect of the Group's joint venture is setout below: 30/06/12 30/06/11 £'000 £'000 Total assets 2,156 2,149 Total liabilities 1,836 1,784 Net assets 320 365 Group's share of net assets of joint venture 93 110 Year ended Year ended 30 30/6/12 /6/11 Total revenue 2,118 1,925 Total (loss) / profit for the period (60) 136 Group's share of (loss) / profit of joint venture (17) 45
6. Trade and other receivables
2012 2011 £'000 £'000 Current Trade receivables 800 856 Amounts owed by group - -undertakings Other receivables 8 98 Prepayments and accrued 27 26income _ 835 980 2012 2011 £'000 £'000 Non-current Amounts owing by group - -undertakings
7. Non-current liabilities: Borrowings
8. 2012 2011 £'000 £'000 Borrowings 2,847 2,860(note 9)
8. Current liabilities: Trade and other payables
9. 2012 2011 Current £'000 £'000 Trade 352 393payables Other 201 175taxation and social security Payments 101 -received on account Accruals 125 183 779 751 2012 2011 Non-current £'000 £'000 Trade 209 209payables Amounts owed - -to group undertakings Accruals 1,185 1,035 1,394 1,244
Included within the above amounts are the following amounts owing to directors;
2012 2011 G G Watt £1,136,176 £918,003 R G Tallentire £213,771 £184,870 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 2012 2011 £'000 £'000 Due within one year Bank loans 97 - Obligations under finance 20 17lease agreements 117 17 Due after more than one year Obligations under finance 27 27lease agreements Directors' loans 2,702 2,827 2,729 2,854 Repayable Due within 1 year 117 17 Over 1 year but less than 2 2,717 2,842years Over 2 years but less than 12 125 years 2,846 2,860
Bank loans comprises a loan from Aldermore Bank PLC which is a confidential invoice finance facility at a rate of 3.5% over base rate.
Finance lease agreements with Close Motor 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 £47,540 (2011: £42,593)
The director's loan due in more than one year is a loan of £2,702,000 from G G Watt. Directors' loans attract interest at 2.15% over Bank of England base rate.
On 13th 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 105 260 Amortisation of intangible assets 5 5 Depreciation of property, plant 73 61and equipment Profit on sale of fixed assets - (4) Working capital movements Inventories 48 (18) Receivables 145 (481) Payables 178 252 Net cash inflow/(outflow) from 554 75operating activities 11. Dividends
The directors do not recommend the payment of a dividend (2011: 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.
XLON