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PipeHawk Plc - Half-year ReportPipeHawk Plc - Half-year Report
PR Newswire
London, March 22
23 March 2018
PipeHawk plc
(“PipeHawk” or the “Company”)
Unaudited results for the six months ended 31 December 2017
Chairman’s Statement
I am pleased to report that the Company’s turnover in the six months ended 31 December 2017 was £2,310,000 (2016: £2,999,000), resulting in a loss before taxation of £118,000 (2016: loss of £180,000) and a profit after taxation of £18,000 (2016: £43,000). The results reflect a profit on sale of the 28.4 per cent. interest in SUMO Limited of £143,000.
This has been a most peculiar six months for all divisions of the Group; the level of enquiries and indications that we would be awarded orders has never been higher, however the orders, whilst not going away, simply did not happen during the period with consequent effect on underutilisation of staff – and hence profitability. Nevertheless, as described below, since the period end the orders have flowed in and we are now extremely busy.
The effect of lower turnover in the first six months of the financial year was largely offset by careful control of costs and overheads in general administrative expenses which at £1,140,000 was £495,000 lower than in the comparative period last year.
At QM Systems the first part of the year saw slower than expected order intake and this, combined with some restructuring activity within our operational departments is reflected in the loss in the interim results. I am however pleased to say that from December to date order intake has been very buoyant and our orderbook has now returned to a level that we would expect for year to date. We have experienced a particularly strong start to 2018 and we expect our position to recover fully by the end of the current financial year.
We continue to maintain quotation activity at a very high level. It is also worthy of note that a significant proportion of the work that we have quoted during the last 18 months is still yet to be awarded, predominantly due to delays in contract placement by our clients. A number of these projects are now overdue for placement and must be placed in the next 4-6 weeks if they are to meet client self-imposed deadlines. Taking this into account our immediate potential order book appears very strong. In terms of client industry focus we continue to diversify from our historical core, Automotive and Aerospace business. The Marine and Building Services sectors now form a significant part of our business plan, with opportunities in the Food and Pharmaceutical sectors also continuing to grow. This diversification, using our core key skills, enables us to secure a far more stable business model as we accelerate growth.
We are currently recruiting in a number of areas across the business to enable us to continue our planned growth in terms of adding to our existing key skillsets or adding complimentary skillsets and this is proving quite successful as we continue to build on the success of the previous financial year. We have further expanded our project management capability as we focus on client satisfaction and client retention. We continue to deliver best service in class.
Our approach to offer a 'one stop shop' for production and test requirements continues to draw great interest, particularly where a client does not already possess a number of other disjointed packages. Where a client has the freedom of choice to consider all aspects of a production or test system then QM Systems product and service offering is a very compelling one.
For PipeHawk Technology challenging trading conditions in the UK construction & utilities sectors contributed to GPR sales performing below expectation through the second half of 2017, however the lack of growth in the UK was not echoed in other markets and our international sales continue to show growth particularly on the back of our pre-Brexit push into Middle East & Asian markets. With new opportunities also beginning to show promise in South America, we look forward to our international growth continuing through 2018. We continue to receive encouraging feedback on our H2020 grant applications so we are continuing to submit applications albeit that none have been successful to date.
For Adien the six month period saw a notable progression in a number of key market areas, this is set against a backdrop of an increasingly competitive marketplace. Concentrating on the specialist sectors of Power, Airports, Water and Transport Infrastructure has been a successful strategy and has resulted in a full order book and a programme of work stretching forward to June 2018. Contracts won include a significant amount of sub -contract working which is optimised to provide additional and increased profitability. The Scottish division has made real progress in establishing Adien as a framework provider to a number of key client within the sectors noted above.
On 30 November 2017, the Group acquired Thomson Equipment Design Limited. Sales and results in the period to 31 December were negligible, however since the period end the level of enquiries has picked up and its integration with other parts of the Group is on track.
Related party transactions
At the Annual General Meeting shareholders approved the sale to me of PipeHawk’s minority interest in Sumo and this realised a profit for the Group over net book value of £143,000.
In the period under review, on 13 October 2017 I paid the £197,000 cash consideration payable on my purchase of the minority interest in SUMO and therefore provided working capital support to the Company until completion occurred following shareholder approval at the Annual General Meeting on 14 December 2017.
My letter of financial support was renewed on 30 October 2017 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.
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 and interest payments until the Company is in a suitably strong position to make the full payments. During the six months ended 31 December 2017, these deferred fees and interest payments amounted to approximately £ 101,000 in total, all of which have been accrued in the Company’s accounts, and at 31 December 2017 amounted in total to £1,667,000.
Gordon WattChairman
Enquiries:
| PipeHawk Plc Gordon Watt (Chairman) | Tel. No. 01252 338 959 |
| Allenby Capital (Nomad and Broker) David Worlidge/Asha Chotai | Tel. No. 020 3328 5656 |
Statement of Comprehensive IncomeFor the six months ended 31 December 2017
| 6 months ended 31 December 2017 (unaudited) £’000 | 6 months ended 31 December 2016 (unaudited) £’000 | Year ended 30 June 2017 (audited) £’000 | |
| Revenue | 2,310 | 2,999 | 5,702 |
| Staff costs | (1,353) | (1,455) | (2,876) |
| General administrative expenses | (1,140) | (1,635) | (2,842) |
| Operating loss | (183) | (91) | (16) |
| Profit on sale of joint venture investment | 143 | - | 1 |
| Loss on ordinary activities before interest and taxation | (40) | (91) | (15) |
| Finance costs | (78) | (89) | (178) |
| Loss before taxation | (118) | (180) | (193) |
| Taxation | 136 | 223 | 372 |
| Profit for the period attributable to equity holders of the Company | 18 | 43 | 179 |
| Other comprehensive income | - | - | - |
| Total comprehensive income for the period net of tax | 18 | 43 | 179 |
| Earnings per share (pence) – basic | 0.05 | 0.13 | 0.54 |
| Earnings per share (pence) – diluted | 0.03 | 0.13 | 0.47 |
Consolidated Statement of Financial PositionAs at 31 December 2017
| Assets | As at 31 December 2017 (unaudited) | As at 31 December 2016 (unaudited) | As at 30 June 2017 (audited) |
| £’000 | £’000 | £’000 | |
| Non-current assets | |||
| Property, plant and equipment | 446 | 190 | 145 |
| Goodwill | 1,169 | 1,061 | 1,061 |
| Investment in joint venture | - | 53 | 54 |
| 1,615 | 1,304 | 1,260 | |
| Current assets | |||
| Inventories | 177 | 93 | 156 |
| Current tax assets | 158 | 225 | 253 |
| Trade and other receivables | 1,147 | 1,770 | 745 |
| Cash | 95 | 26 | 72 |
| 1,577 | 2,114 | 1,226 | |
| Total Assets | 3,192 | 3,418 | 2,486 |
| Equity and liabilities | |||
| Equity | |||
| Share capital | 340 | 330 | 330 |
| Share premium | 5,191 | 5,151 | 5,151 |
| Other reserves | (9,039) | (9,193) | (9,057) |
| (3,508) | (3,712) | (3,576) | |
| Non-current liabilities | |||
| Borrowings | 2,659 | 2,308 | 2,266 |
| Trade and other payable | 251 | - | - |
| 2,910 | 2,308 | 2,266 | |
| Current liabilities | |||
| Trade and other payables | 1,632 | 4,461 | 1,609 |
| Bank overdrafts and loans | 2,158 | 361 | 2,187 |
| 3,790 | 4,822 | 3,796 | |
| Total equity and liabilities | 3,192 | 3,418 | 2,486 |
Consolidated Statement of Cash FlowFor the six months ended 31 December 2017
| 6 months ended 31 December 2017 (unaudited) £’000 | 6 months ended 31 December 2016 (unaudited) £’000 | Year ended 30 June 2017 (audited) £’000 | |
| Cash inflow from operating activities | |||
| Loss from operations | (183) | (91) | (16) |
| Adjustments for: | |||
| Depreciation | 47 | 52 | 100 |
| (136) | (39) | 84 | |
| Decrease/(Increase) in inventories | 11 | 11 | (51) |
| (Increase)/ Decrease in receivables | (321) | (554) | 478 |
| (Decrease)/Increase in liabilities | (311) | 501 | (577) |
| Cash used in operations | (757) | (81) | (66) |
| Interest paid | (3) | (15) | (2) |
| Corporation tax received | 278 | 188 | 299 |
| Net cash (used in)/generated from operating activities | (482) | 92 | 231 |
| Cash flows from investing activities | |||
| Purchase of plant and equipment | (1) | (15) | (18) |
| Sale of Joint Venture investment | 197 | - | - |
| Net cash (used in)/generated from investing activities | 196 | (15) | (18) |
| Cash flows from financing activities | |||
| New loans and finance leases | 308 | 68 | 97 |
| Repayment of bank and other loans | (2) | (121) | (210) |
| Repayment of finance leases | (8) | (22) | (52) |
| Net cash generated from/(utilised in) financing activities | 298 | (75) | (165) |
| Increase in cash and cash equivalents | 12 | 2 | 48 |
| Cash and cash equivalents at beginning of period | 72 | 24 | 24 |
| Acquisition of Subsidiary | 11 | - | - |
| Cash and cash equivalents at end of period | 95 | 26 | 72 |
Consolidated Statement of changes in equityFor the six months ended 31 December 2017
| Share capital | Share premium account | Retained earnings | Total | |
| £’000 | £’000 | £’000 | £’000 | |
| 6 months ended 31 December 2016 | ||||
| 330 | 5,151 | (9,236) | (3,755) | |
| As at 1 July 2016 | - | - | 43 | 43 |
| Profit for the period | ||||
| As at 31 December 2016 | 330 | 5,151 | (9,193) | (3,712) |
| 12 months ended 30 June 2016 | ||||
| As at 1 July 2016 | 330 | 5,151 | (9,236) | (3,755) |
| Profit for the period | - | - | 179 | 179 |
| As at 30 June 2017 | 330 | 5,151 | (9,057) | (3,576) |
| 6 months ended 31 December 2017 | ||||
| As at 1 July 2017 | 330 | 5,151 | (9,057) | (3,576) |
| Profit for the period | 10 | 40 | 18 | 68 |
| As at 31 December 2017 | 340 | 5,191 | (9,039) | (3,508) |
Notes to the Interim Results
1. Basis of preparation
The Interim Results for the six months ended 31 December 2017 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 2017, 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.
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 2017 | ||||
| Total segmental revenue | 747 | 106 | 1,457 | 2,310 |
| Segmental result | (12) | 38 | (209) | (183) |
| Finance costs | (3) | (66) | (9) | (78) |
| Profit on sale of joint venture investment | 143 | |||
| Loss before taxation | (118) | |||
| Segment assets | 625 | 1,357 | 1,210 | 3,192 |
| Segment liabilities | 637 | 4,302 | 1,761 | 6,700 |
| Depreciation and amortization | 31 | - | 16 | 47 |
| 6 months ended 31 December 2016 | ||||
| Total segmental revenue | 591 | 156 | 2,252 | 2,999 |
| Segmental result | (76) | 24 | (39) | (91) |
| Finance costs | (4) | (66) | (19) | (89) |
| Share of operating loss in joint venture | - | |||
| Loss before taxation | (180) | |||
| Segment assets | 507 | 1,449 | 1,462 | 3,418 |
| Segment liabilities | 523 | 5,485 | 1,122 | 7,130 |
| Depreciation and amortization | 34 | - | 18 | 52 |
| 12 months ended 30 June 2017 | 1,363 | 288 | 4,051 | 5,702 |
| Total segmental revenue | ||||
| Segmental result | 25 | (83) | 42 | (16) |
| Finance costs | (9) | (132) | (37) | (178) |
| Share of operating profit in joint venture | 1 | |||
| Loss before taxation | (193) | |||
| Segment assets | 498 | 1,381 | 607 | 2,486 |
| Segment liabilities | 418 | 5,404 | 240 | 6,062 |
| Non-current asset additions | 12 | - | 6 | 18 |
| Depreciation and amortisation | 66 | - | 34 | 100 |
3. Earnings per share
This has been calculated on the profit for the period of £18,000 (2016: £43,000) and the number of shares used was 33,105,447 (2016: 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 2017.
5. Copies of Interim Results
The Interim Results will be posted on the Company’s website www.pipehawk.com and copies are available from the Company's registered office at 4, Manor Park Industrial Estate, Wyndham Street, Aldershot, GU12 4NZ.