PipeHawk Regulatory News (PIP)

12 Nov 2007 10:59

12 November 2007 PipeHawk Plc ("PipeHawk", "the Group" or "the Company") Preliminary Results for the year ended 30 June 2007 CHAIRMAN'S STATEMENT

The Directors believe that the year to 30 June 2007 was a transitional year whereby the Company consolidated its achievements in the previous year and established a solid foundation upon which to grow the business in the short to medium term.

I am delighted to report the turnover for the year ended 30 June 2007 was ‚£ 4,471,000 (2006: ‚£3,312,000), which is an increase of 35 per cent. on the previous year and that the Group achieved a profit after taxation for the year of ‚£109,000 (2006: ‚£141,000). This result reflects solid growth in the Company's core operating units and recognises the considerable investment made in PipeHawk's core businesses Adien and SUMO. However, this was offset by isolated issues concerning QM Systems' principal customer.

The trading performances of the Group's four major business areas are set out below:

Adien

Adien, our high definition underground mapping and planning service has had another excellent year with a 26 per cent. rise in turnover to ‚£1,624,000 (2006: ‚£1,287,000) and an 87 per cent. increase in operating profits.

During the year Adien introduced a vacuum excavation service and is now able to offer clients guaranteed levels of accuracy in utility detection through this service. The benefits of vacuum excavation are that it saves the client time, money and is safer than traditional hand dug excavations or "trial holes". As far as the Directors are aware Adien are the only detection and mapping Company offering this service in the UK, which is used as part of Adien's range of solutions designed to assist clients in managing the risks associated with buried utility services.

Adien is a recognised industry contributor to Government sponsored initiatives (VISTA and Mapping the Underworld) programmes which consider the issues surrounding the mapping and cataloguing of buried utility services. Adien also continues to be involved with high visibility clients on major infrastructure projects such as the building of major new railway connections under central London and the refurbishment of Ministry of Defence sites across the country. At some of Adien's client sites it has a full time presence.

Additional teams and custom built vans were added during the year and Adien is well placed to continue their growth into 2008 when it intends to expand both geographically and in terms of the services offered.

SUMO

Sumo - a 36 per cent owned joint venture company, which is able to provide instant mark out services to its customers.

SUMO has also had another good year. It has increased its turnover from ‚£ 1,449,000 to ‚£2,401,000, and returned a profit for the year of ‚£197,000 (2006: ‚£2,000), and has strengthened its position within the utility detection and mapping marketplace. It now operates a fleet of 22 vehicles nationwide and has recently moved to larger premises to facilitate its growth plans in 2008 and beyond.

Substantial investment in a new utility mapping division has significantly changed the customer profile. While customers continue to enjoy the "rapid response" lower value sales, SUMO has now proved itself to be a leading utility mapping service provider and is consistently winning mapping projects with a value of in excess of ‚£50,000.

During the year, SUMO has been implementing new systems and marketing initiatives to introduce its unique franchise model to the established topographic surveying market. This is an exciting business opportunity for land surveyors to operate their own business under the umbrella of an established brand. The marketing for this initiative commenced during the latter half of the year and early indications are that the Company will accelerate its growth in 2008 from this activity.

Technology Division

PipeHawk Mk3 will be formally launched in Spring 2008 and represents the first product developed by a new and highly innovative technology generation. Other products are planned many of which are targeted upon providing Adien with a market advantage in its sector. The Directors consider the development of new architectural systems encompassed within these products to be essential to allow the Group technological steps which are likely to be required for the significantly delayed MineHawk project.

QM Systems ("QM")

In the second half of the year QM has taken steps to offset the effects of a slow down in orders for bespoke test solutions of its largest customer which has been caused primarily as a result of management and other changes. QM has invested in the development of products for targeted markets and has produced several designs leveraged on equipment designed for high power testing within the aerospace market. The Directors are encouraged by the inclusion of a QM single sourced product within Airbus' end user supply catalogue. Early sales and encouraging prospects for testing units for lightning strike protection and configurable production control systems underpin the Board's confidence in this division. QM will continue its development of a series of configurable products which address environmental testing and production workflow management, which are common requirements across a broad range of industries.

Strategy and Outlook

Our strategy remains as before "to remain at the forefront of applied GPR and non-invasive testing technologies, delivering high quality value added services and products which play a vital role in the safety and protection of people worldwide".

The difficulties with QM's principal customer has adversely impacted trading in the first quarter of the current year, nevertheless the Group's core GPR business continues to go from strength to strength. The many initiatives implemented during the year leave the Group well placed to achieve sustainable and evolutionary business growth.

Gordon WattChairman12 November 2007

Consolidated Profit and Loss Account

For the year ended 30 June 2007

Note 2007 2006 ‚£'000 ‚£'000 Turnover Group and share of joint venture 4,471 3,312 Less: share of joint venture turnover (865) (529) Group turnover - total continuing activities 3,606 2,783 Group operating costs (3,576) (2,690) Group operating profit 30 93 Share of operating profit 71 19 Profit on ordinary activities before interest and 101 112taxation Group interest receivable and similar income 3 4 Group interest payable and similar charges (81) (44) Profit on ordinary activities before taxation 23 72 Tax credit on profit on ordinary activities 5 86 69 Transfer to reserves 109 141 2007 2006 p p Earnings per share Basic 3 0.4 0.6 Diluted 3 0.3 0.4

There are no recognised gains or losses other than those reported above.

Consolidated Balance SheetAs at 30 June 2007 2007 2007 2006 2006 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Fixed assets Intangible assets 1,499 1,121 Tangible assets 287 354 Investment in joint venture: Share of gross assets 163 70 Share of gross liabilities (77) (55) 86 15 86 15 1,872 1,490 Current assets Stocks 279 757 Debtors 741 969 Cash at bank - 221 1,020 1,947 Creditors: amounts falling due (1,444) (2,088)within one year Net current liabilities (424) (141) Total assets less current 1,448 1,349liabilities Creditors: amounts falling due (563) (602)after more than one year Net assets 885 747 Capital and reserves Called up share capital 269 267 Share premium account 4,842 4,815 Profit and loss account (4,226) (4,335) Equity shareholders' funds 885 747

Consolidated Cash Flow Statement

For the year ended 30 June 2007

2007 2006 ‚£'000 ‚£'000 Net cash inflow from operating activities 525 133 Returns on investments and servicing of finance Interest received 3 4 Interest element of finance lease rentals (77) (3) Interest paid (4) (41) (78) 93 Corporation tax received 86 77 Capital expenditure and financial investment Payments for tangible fixed assets (37) (96) Payments for intangible fixed assets (438) - Receipts from sale of tangible fixed assets 2 - Acquisitions and disposals Cash acquired through purchase of subsidiary - 221 Costs of acquisition - (51) Cash inflow before use of liquid resources and 60 244financing Financing Issue of ordinary share capital 29 - New loans 29 - Repayment of loans (80) (110) Capital element of finance lease and hire (34) (21)purchase payments (56) (131) Increase in cash 4 113

Notes to the Cash Flow Statement

A. Reconciliation of Operating (Loss) to Net Cash Outflow from OperatingActivities 2007 2006 ‚£'000 ‚£'000 Operating profit 30 93 Amortisation of intangible assets 60 27 Depreciation of tangible fixed assets 164 169 Working capital movements Stock and work in progress 478 65 Debtors 228 (323) Creditors (435) 102 Net cash inflow from operating activities 525 133

B. Reconciliation of Net Cash Flow to Movement of Net Debt

2007 2006 ‚£'000 ‚£'000 Increase in cash 4 113 Increase in debt and finance lease agreements 85 (171) Decrease/(Increase) in net debt from cash flows 89 (58) New finance leases (63) - Debt acquired with subsidiary - (10) Reduction/(Increase) in net debt 26 (68) Opening net debt (794) (726) Closing net debt (768) (794)

C. Analysis of changes in net debt

1 July 2006 Cashflow 30 June 2007 ‚£'000 ‚£'000 ‚£'000 Cash at bank and in hand 221 221 - Bank overdraft (258) 225 (33) Cash (37) 4 (33) Loans (655) 51 (604) Finance leases (102) (29) (131) Borrowings (757) 22 (735) Net debt (794) 26 (768)

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 30 June 2007, 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. Going concern

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 balance sheet date the group has net current liabilities of ‚£424,000. 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 balance sheet. It is on this basis that the directors consider it appropriate to adopt the going concern basis of preparation within these financial statements.

3. Earnings per share

This has been calculated on profits of ‚£109,000 (2006: profit ‚£141,000) and the number of shares used was 26,917,330 (2006: 24,245,068) being the weighted average number of shares in issue during the year. For the fully diluted calculations the number of shares used for the calculation was 34,667,952.

4. Dividend

The Directors are not proposing the payment of a dividend in respect of theyear ended 30 June, 2007.5. Taxation 2007 2006 ‚£'000 ‚£'000 United Kingdom Corporation Tax Current taxation (80) (70) Adjustments in respect of prior years (6) 1 (86) (69) Deferred taxation - - Tax on loss on ordinary activities (86) (69) 2007 2006 ‚£'000 ‚£'000 Profit/(loss) on ordinary activities before 23 72taxation Theoretical tax at UK corporation tax rate 7 2130 per cent. Effects of: - losses brought forward (8) (93) - joint ventures' losses unrelieved - (6) - timing differences (131) - - R&D tax credit adjustments 16 15 - other expenditure that is not tax 1 2deductible - adjustments in respect of prior years (6) 12 - accelerated capital allowances 19 (3) - losses carried forward 19 15 - short term timing differences (3) (32) Actual current taxation charge (86) (69)

6. 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, Systems House, Mill Lane, Alton, Hampshire, GU34 2QG

Further Enquiries:PipeHawk Plc Gordon Watt, Chairman Tel: 01420 590990 John East & Partners Limited Simon Clements Tel: 020 7628 2200 J M Finn Sam Smith/Charles Cunningham Tel: 020 7628 9688