REG - PipeHawk PLC - Half-year Report
27/03/2024 07:00
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RNS Number : 4153I PipeHawk PLC 27 March 2024
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse (Amendment)
(EU EXIT) Regulations 2019/310.
27
March 2024
PipeHawk plc
("PipeHawk", the "Company" or the "Group")
Unaudited results for the six months ended 31 December 2023
Chairman's Statement
I am pleased to report a continuing improvement in the Group's results, though
we are not out of the woods yet. The Group's turnover in the six months ended
31 December 2023 was £4,572,000 (December 2022: £2,239,000), an increase of
104 per cent over the comparable period last year. The loss before taxation
was £633,000 (H1 2022: loss of £1,797,000) and the loss after taxation was
£441,000 (H1 2022: loss £1,440,000).
As indicated in my November Chairman's Statement accompanying the annual
accounts for the year ended 30 June 2023, the Governor of the Bank of England
has done a sterling job of dampening down demand with high interest rates
which, coupled with various other uncertainties and head winds, has meant very
few new orders have been placed during the period, with the notable exception
of Adien, although enquiries and quotations have remained high.
We had worked hard to enter this six-month period with a record order book and
have converted those orders into recognised turnover. However, without the
steady flow of new orders coming in, our efficiency in utilisation of staff
has been suboptimal.
Nevertheless, just in the last month, TED has received a record level of new
orders and QM has been advised that a number of continually stalled orders
will be placed within the next six weeks. Adien has turned its fortunes
around very well and Utsi's new developments look well set to enter the market
in the next financial year.
Accordingly, we are cautiously optimistic that next year will be a return to
good profitability where, after a two year "hiccup" in our financial plans, we
will be able to take proper advantage of QM Systems' move to premises five
times the size of its previous premises and TED's move to premises three times
the size of its previous premises.
QM Systems ("QM")
QM's first six months have provided an insight into a market in recession. We
have seen a reduction in the number of orders as well as value, but an
increase in potential customers of significance. These potential customers are
in innovative markets with the requirement for multiple machines across
multiple production facilities within the UK and Europe. This provides us with
confidence for the future as we form strategic partnerships in sustainable and
innovative markets such as medical devices, assisted mobility and building
services, amongst others. The downturn in orders is heavily linked to the
limited access in lending facilities created by high interest rates and, as
such, the projects have not been lost, but have simply been deferred until
lending rates allow a more attractive investment opportunity. As a result, we
currently sit on a pending sales pipeline in excess of £9m across 12 projects
which we believe have a high prospect of success. The total prospective
sales pipeline for the next 12 months is in excess of £20m.
Material uncertainties for our customers have marginally improved on raw
materials such as steel, oil, grain and lumber which is allowing these
customers to switch their focus back onto production. In turn this is
highlighting the issues they face surrounding staffing levels at mid to high
volumes as a result of which we have seen an upturn in enquiry requests since
the end of January 2024 as customers look towards increased automation.
The problems of the last few years have caused a major reassessment of
clients' supply lines. Some have moved manufacturing to locations across
Europe with cheaper labour and we have witnessed automotive clients in
particular, looking to undertake this re-alignment over the past 12 months.
However, the pandemic also illustrated the reliance the UK had on Chinese
manufacturing and as such FMCG, MOD, building services and medical device
manufacturers have increased their investment in the UK. Modular building
services is also seeing a significant backing from the government as we move
closer to their modular building target by 2026.
The first six months of the trading year have resulted in a loss. However,
we have reduced the loss month on month despite supply chain and staffing
issues. For example, manufacturers are increasingly using either a European
hub or build to order processes, whereas historically they would be held in
stock in the UK. This access to stock can impact project timings, with delays
in excess of 4-6 weeks for bought out components. We have also had several
local machining companies, as well as fabricators, feel the pinch of the
recession and cease trading whilst holding orders for QM. Again, this has had
an impact on project timings as we have had to establish alternative suppliers
who are able to pass our quality audit.
Recruitment has been a challenge as we have increased our staff levels to
support the pending build profile of the contract manufacturing solutions.
Inflation and cost of living increases have resulted in increased salary
demands across the business. We have seen an increase of staff from 55 to 75
with more resource being required to support the contract manufacturing aspect
of the business for both Caudwell Marine and Ventive, as well as
considerations for Fast MDX, moving in to the latter stages of 2024.
Commencement of contract manufacturing has suffered delays for the above
reasons, but is moving ever closer. Caudwell is targeting start of production
in July this year which will generate additional revenue towards the latter
stages of 2024. In addition, Ventive has production targets on a similar
timeframe.
QM still has many challenges ahead, however continuing to follow its strategic
plan is proving to be positive. The infrastructure that has been implemented
will only aid profitability moving forward. We expect to secure substantial
projects in the months ahead as well as many further projects thereafter,
whilst simultaneously working through our existing projects to bring them to
conclusion over the next six months. QM's average order value has increased to
over £500,000 with several projects currently quoted in excess of £1m. QM's
short to medium term targets look achievable and we are optimistic that the
deferred projects of the past will come to fruition to leave a strong order
book as we conclude the current financial year and move into next year.
Thomson Engineering Design ("TED")
As I previously reported in November 2023, Network Rail's new funding round,
CP7, commences in March 2024. As a result, virtually no major orders have
been placed in the UK rail industry for the last twelve months, causing two
major suppliers to the UK rail industry to fail. This badly affected TED's
turnover in the six-month period. We were hopeful that this slack would be
taken up by our global distribution agreement with Unipart Rail, which it was
to a small extent, but these were slower to materialise than we would have
wished. Nevertheless, they are happening now as the strategic partnership
between TED and Unipart Rail starts to strengthen, and Unipart increases its
presence and marketing in the global rail export area.
We are also pleased to announce that TED and Unipart Rail have embarked on a
joint venture to produce new innovative rail plant equipment for the Global
Centre of Rail Excellence (GCRE). Working with Innovate UK, the funding will
be sponsored by the Department of Business and Trade. This novel innovative
equipment will provide a low-cost effective solution to manipulate rail track
panels to accelerate the process of laying track on the UK rail
infrastructure. Going forward, the equipment will be developed at the GCRE
site in South Wales and, upon completion, will be marketed by Unipart Rail
around the world. There is already significant interest being shown in North
America and Europe.
In terms of UK business, TED is experiencing a definite upturn in order intake
in March as Network Rail starts to release contracts as part of the new
'control period' CP7.
We anticipate that as a result of the release of CP7, contracts will be
awarded to the UK rail contractors, which in turn will result in strategic
purchases from TED for rail maintenance equipment to complete the contracts.
This should result in a significant upturn in UK business in the next and
following years.
This, taken with the success of Unipart Rail's global marketing initiatives,
bodes extremely well for TED.
Adien
Following on from a strong finish to 2023, Adien is continuing to perform
extremely well. Client orders are very healthy and most importantly,
consistent. Having managed its way through the pains of last year's management
shake-up, Adien is growing as a team and providing some excellent results.
Whilst national infrastructure spending remains very low, Adien has been
successful in broadening its market presence to other sectors that are less
susceptible to the disruption of government. Having secured a fresh framework
agreement with SSE this quarter and a healthy tranche of MOD works, the team
is very positive of the future of the business.
Adien was successful in getting to the desired number of teams last year and
has ambitions to put a further two crews on the road this summer, although
recruitment of quality staff is still proving to be quite difficult. The
healthy order book and consistent month on month profitability will allow this
needed expansion to occur and help launch several new services within the next
18 months.
Utsi
At Utsi, sales and enquiries from the UK and EU have broadly remained flat,
the latter not being helped by ongoing changes to Import/Export procedures.
However, markets further afield have been more buoyant, delivering the greater
portion of sales and repeat orders to date.
Our earlier decision to switch focus to more specialist markets is also
beginning to bear fruit, with enquiries for specialist GPR systems
significantly up, particularly those used for environmental research or having
potential for industrial application.
With signs that raw material, energy and shipping costs are beginning to
stabilise and the price and lead times of many electronic components beginning
to lessen, profit margins are also beginning to look better. There are,
however, a number of key components that still remain in short supply, or have
been withdrawn or discontinued early. For some projects, this has triggered a
degree of system redesign, significantly affecting delivery schedules and
thereby profitability and cashflow.
However, the overall picture for the year does remain positive with an
increasing order book and promising long term project enquiries.
Related party transactions
As announced on 29 November 2022, my letter of financial support dated 6
September 2021 was renewed on 11 October 2022 to provide the group with
financial support until 31 December 2024.
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
these payments in full. During the six months ended 31 December 2023, these
deferred fees and interest payments amounted to approximately £82,000 in
total, all of which have been accrued in the Company's interim results, and at
31 December 2023 amounted in total to £1,865,000.
Gordon Watt
Chairman
Enquiries:
PipeHawk Plc Tel no. 01252 338 959
Gordon Watt (Chairman)
Allenby Capital (Nomad and Broker) Tel no. 020 3328 5656
David Hart/Vivek Bhardwaj
Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2023
6 months ended 31 December 2023 6 months ended 31 December 2022 Year ended
(unaudited) (unaudited) 30 June
£'000 £'000 2023 (audited)
£'000
Revenue 4,572 2,239 6,470
Staff costs (2,404) (1,962) (4,176)
Impairment of goodwill - - (678)
General administrative expenses (2,566) (1,902) (4,515)
Loss on ordinary activities before interest and taxation
(398) (1,625) (2,899)
Finance costs (235) (172) (385)
Loss before taxation (633) (1,797) (3,284)
Taxation 192 357 800
Loss for the period attributable to equity holders of the Company
(441) (1,440) (2,484)
Other comprehensive income - - -
Total comprehensive expense for the period net of tax
(441) (1,440) (2,484)
Loss per share (pence) - basic (1.21) (3.97) (6.84)
Loss per share (pence) - diluted (1.21) (3.97) (6.84)
Consolidated Statement of Financial Position
As at 31 December 2023
As at As at As at
31 December 2023 31 December 2022 30 June
(unaudited) (unaudited) 2023 (audited)
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 722 814 783
Right of use 2,143 2,381 2,283
Goodwill 679 1,357 679
3,544 4,552 3,745
Current assets
Inventories 213 308 253
Current tax assets 1,012 1,067 826
Trade and other receivables 2,983 1,949 2,767
Cash 63 149 148
4,271 3,473 3,994
Total assets 7,815 8,025 7,739
Equity and liabilities
Equity
Share capital 363 363 363
Share premium 5,316 5,316 5,316
Other reserves (11,572) (10,087) (11,131)
(5,893) (4,408) (5,452)
Non-current liabilities
Borrowings 5,561 5,317 4,913
5,561 5,317 4,913
Current liabilities
Bank overdrafts and loans 3,151 2,633 2,886
Trade and other payables 4,996 4,483 5,392
8,147 7,116 8,278
Total equity and liabilities 7,815 8,025 7,739
Consolidated Statement of Cash Flow
For the six months ended 31 December 2023
6 months ended 31 December 2023 6 months ended Year ended
(unaudited) 31 December 2022 30 June
£'000 (unaudited) 2023 (audited)
£'000 £'000
Cash inflow from operating activities
Loss from operations (398) (1,625) (2,899)
Adjustment for:
Impairment of goodwill - - 678
Depreciation 315 271 579
(83) (1,354) (1,642)
Decrease in inventories 40 32 87
Decrease/(Increase) in receivables (216) 439 (378)
Increase/(Decrease) in liabilities (240) 1,735 2,759
Cash generated from/(used in) operations (499) 852 826
Interest paid (116) (91) (196)
Corporation tax received 7 - 683
Net cash generated from/(utilised in) operating activities
(608) 761 (1,313)
Cash flows from investing activities
Purchase of plant and equipment (25) (47) (111)
Net cash utilised in investing activities (25) (47) (111)
Cash flows from financing activities
(Repayments)/Proceeds from borrowings 170 (218) (210)
Repayments of bank and other loans (199) (158) (393)
Proceeds of bank and other loans 863 - -
Repayment of leases (286) (193) (455)
Net cash (utilised in)/generated from financing activities 548 (569) (1,058)
Increase/(Decrease) in cash and cash equivalents (85) 145 144
Cash and cash equivalents at beginning of period
148 4 4
Cash and cash equivalents at end of period 63 149 148
Consolidated Statement of Changes in Equity
For the six months ended 31 December 2023
Share premium account
Share capital Retained earnings
Total
£'000 £'000 £'000 £'000
6 months ended 31 December 2022
As at 1 July 2022 363 5,316 (8,647) (2,968)
Loss for the period - - (1,440) (1,440)
Total comprehensive income - - (1,440) (1,440)
Issue of shares - - -
As at 31 December 2022 363 5,316 (10,087) (4,408)
12 months ended 30 June 2023
As at 1 July 2022 363 5,316 (8,647) (2,968)
Profit for the period - - (2,484) (2,484)
Total comprehensive income - - (2,484) (2,484)
Issue of shares - - - -
As at 30 June 2023 363 5,316 (11,131) (5,452)
6 months ended 31 December 2023
As at 1 July 2023 363 5,316 (11,131) (5,452)
Loss for the period - - (441) (441)
Total comprehensive income - - (441) (441)
Issue of shares - - -
As at 31 December 2023 363 5,316 (11,572) (5,893)
Notes to the Interim Results
1. Basis of preparation
The Interim Results for the six months ended 31 December 2023 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 2023, on which the auditors gave an
unqualified report and contained no statement under Section 498 (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 Company for the last
financial statements and in compliance with basic principles of IFRS.
2. Segmental information
The Company 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
Automation and test system solutions
Total
£'000 £'000 £'000 £'000
6 months ended 31 December 2023
Total segmental revenue 715 52 3,805 4,572
Segment result (5) 180 (573) (398)
Finance costs (19) (143) (73) (235)
Loss before taxation (24) 37 (646) (633)
Segment assets 561 1,154 6,100 7,815
Segment liabilities 633 6,143 7,114 13,890
Non-current asset additions 46 - 70 116
Depreciation and amortisation 35 9 271 315
6 months ended 31 December 2022
Total segmental revenue 449 79 1,711 2,239
Segment result (164) (26) (1,435) (1,625)
Finance costs (16) (104) (52) (172)
Loss before taxation (180) (130) (1,487) (1,797)
Segment assets 441 1,872 5,712 8,025
Segment liabilities 544 5,079 7,027 12,650
Non-current asset additions - - 102 102
Depreciation and amortisation 30 9 232 271
12 months ended 30 June 2023
Total segmental revenue 1,125 169 5,176 6,470
Segmental result (214) (859) (1,826) (2,899)
Finance costs (39) (236) (110) (385)
Loss before taxation (253) (1,095) (1,936) (3,284)
Segment assets 558 1,181 6,000 7,739
Segment liabilities 734 5,025 7,631 13,390
Non-current asset additions 2 - 265 267
Depreciation and amortisation 14 18 482 579
3. Loss per share
This has been calculated on the loss for the period of £441,000 (H1 2022:
loss £1,440,000) and the number of shares used was 36,312,823 (H1 2022:
36,312,823), being the weighted average number of shares in issue during the
period.
4. Dividends
No dividend is proposed for the six months ended 31 December 2023.
5. Copies of Interim Results
The Interim Results will be posted on the Company's website www.pipehawk.com
(http://www.pipehawk.com) and copies will be available from the Company's
registered office at 4, Manor Park Industrial Estate, Wyndham Street,
Aldershot, GU12 4NZ.
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