REG - PipeHawk PLC - Final Results for the year ended 30 June 2022
29/11/2022 07:00
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RNS Number : 8454H PipeHawk PLC 29 November 2022
This announcement contains inside information as stipulated under the Market
Abuse Regulations (EU) no. 596/2014 (which forms part of domestic UK law
pursuant to the European Union (Withdrawal) Act 2018) ("MAR"). With the
publication of this announcement via a Regulatory Information Service, this
inside information is now considered to be in the public domain.
29 November 2022
PipeHawk plc
("PipeHawk", "Company" or the "Group")
Final Results for the year ended 30 June 2022
Highlights
- Turnover of £6.2 million, a decrease of 7.5% (2021: £6.7 million)
- Loss before taxation for the financial year of £1,576,000 (2021:
profit £79,000)
- QM Systems completed a move into a modern and far larger facility on
the Hartlebury Trading Estate, providing approx. 200% more office space and
600% more manufacturing capacity
- TED has moved into a significantly larger premises and since the
financial year end has signed a global distribution memorandum of
understanding with Unipart Rail Limited
The Group reported an operating loss in the year ended 30 June 2022 (the
"financial year" and the "2021/22 FY") of £1,312,000 (2021: £257,000), a
loss before taxation for the financial year of £1,576,000 (2021: profit
£79,000) and a loss after taxation of £868,000 (2021: profit £522,000).
Turnover for the financial year reduced to £6.2million (2021: £6.7 million).
The loss per share for the financial year was 2.42p (2021: profit
1.50p).
In line with the outlook expressed in my Chairman's Statement last year, like
others in the industry, we have been faced with difficult market conditions
this financial year. As outlined on 24 March 2022 in the Group's unaudited
results for the six months ended 31 December 2021 this has been an extremely
challenging year. Just when we thought we were getting over the vicissitudes
of the Coronavirus ("COVID-19") pandemic with its consequent delays caused by
material shortages, extended lead times and increased costs, all suffered
without the furlough buffer - then Russia invades the Ukraine, fuel costs soar
and suddenly the world realises that energy is the key to our standard of
living and economic livelihood at all levels.
As a consequence, the Group continued to see decisions across all levels of
the chain be deferred and/or delayed throughout the financial year. The impact
of the delay in receiving contract decisions continued to impact the Group
right up to late September 2022. However, following September 2022, the Group
has seen a number of larger orders that have previously been in abeyance for
several months placed. In addition, the Group notes a shift in market
sentiment, namely, that there appears to be a general willingness to actively
re-engage and commit to forward-looking business decisions (as opposed to
remaining in tick-over mode).
Despite the disappointing results for the financial year, the directors
believe, for the reasons outlined above, that this merely represents a
temporary blip in our growth trajectory. Notwithstanding this result, this
financial year has been critical for the Group as seen by our underlying
positive direction of travel. In addition, we have invested significantly to
be able to take advantage of the opportunities evident from our groundwork.
Not only have we expanded Thomson Engineering Design's ("TED") footprint
fourfold (we have decided to retain, and rebuild its original premises whilst
retaining its new premises, as we foresee the need for further growth), QM
Systems Limited ("QM") footprint has increased fivefold, and a new line to QM
business, contract manufacturing, has been established. Lastly, Adien is now
fully engaged in 5G work and the integration of Utsi and PipeHawk's technology
bodes well for the future.
I am confident therefore that the future looks very promising.
QM Systems
QM Systems has completed a challenging financial year where for a large part
of that time the orderbook has been significantly below management
expectation. This trend continued longer than expected into the 2021/22 FY
resulting in the inability of QM Systems to pull through the expected level of
revenue and profit. It does seem as though the effect of the pandemic
eventually rippled through QM Systems later than initially anticipated. In
addition, following Russia's invasion of the Ukraine, decision makers decided
to defer making capital commitments, which manifested into expected orders
being delayed by several months.
During the second half of the financial year, QM Systems completed a move into
a modern and far larger facility on the Hartlebury Trading Estate. The move
expands the available facilities from approximately 8,000 sq ft to
approximately 45,000 sq ft; providing approx. 200% more office space and 600%
more manufacturing capacity. The move was required to facilitate not only the
anticipated growth in the company's project business but also the housing of
the newly established contract manufacturing business unit. In addition, QM
Systems has secured two manufacturing contracts with both expected to begin
operation with manufactured product towards the end of the current 2022/23 FY.
Both contract manufacturing projects bring the capacity for rapid growth in a
new and exciting direction for QM Systems. Inevitably a move to a new facility
of this size and scale brings commercial challenges and has required
significant investment. In this regard, QM have invested over £750k in
securing and fitting out the new facility to a very high standard.
Looking ahead, I am pleased to report that as we approached the end of the
previous 2021/22 FY and entered the current FY order enquiries have increased
dramatically. A number of projects that have been slow to gestate have now
arrived resulting in an order intake for the first four months of the current
FY alone at QM Systems being in excess of £3 million. Historically, this is
an unprecedented order intake in such a short period of time and should enable
QM Systems to rapidly recover the ground lost during the 2021/22 FY. In
addition to orders received the order pipeline has again returned to a very
healthy level with further significant order intake expected through the
second quarter of the current FY and anticipated for the following quarter. It
is also important to recognise that the projects won are sizeable projects
that are expected to run across several months. This brings a further level of
stability to QM Systems project business. To support the significant growth in
the QM Systems projects business a number of new roles have been advertised
for and subsequently filled across the engineering, projects and sales
departments during the first third of the current FY. In addition to
recruitment to support the project business the start and growth of the
contract manufacturing business will see approximately 30 new employees join
the QM Systems team over the next few months to support the production and
administration activities required across the three contract manufacturing
projects.
As a result of the above I fully expect to see QM Systems recover to a
position of significant growth in both sales and profit during this current FY
whilst securing a stable platform from which healthy growth can continue for
the foreseeable future.
Thomson Engineering Design ("TED")
Revenue at Thomson Engineering Design ("TED") continued to grow into this
financial year, with the best quarter on record achieved during the final
quarter of the financial year. Revenue for FY2021/22 compared with the
previous financial increased from approx. £1.2 million to £1.4 million
(representing a circa16% increase). This did not however translate through
into profit with a loss before taxation of £57k.
There are three key drivers within the year resulting in the reduction in
profit versus expectation. The first is the significant upwards inflationary
pressure regarding raw material cost which skewed the material content to be
considerably higher than previous years. The second key factor was rising
facility costs and investment into the new premises required during the
2021/22 FY. The third factor is that whilst we received a rent-free period in
order to settle into and upgrade the new premises there is an accounting
standard which requires us to amortise that rent free period over the life of
the lease. The first two issues have been addressed through re-balancing
margin on material and labour to accommodate higher material content and to
provide for increased overhead recovery. The third is a non-cash cost in the
short term.
Order intake at TED during the current 2022/23 FY continues to be strong,
predominantly focused on the UK market with some export. Post the financial
year, on 20 September 2022, TED entered into a memorandum of understanding
with Unipart Rail Limited ("Unipart Rail"), a global retailer of Rail
equipment for Unipart Rail to be the exclusive partner for sales and
distribution of TED rail equipment into territories in Europe, Asia, New
Zealand, Australia and the Americas. This enables TED to facilitate its
strategy for global growth by utilising an established and well-respected
distribution partner. Unipart and TED jointly attended the InnoTrans Expo in
Berlin to launch the new partnership, where a number of key TED products have
been on display to premium rail clients. Since the year end, TED has also
entered into a partnership with a key client to provide rail conversions for
Kawasaki Utility vehicles. This innovative approach allows capital outlay and
emissions to be significantly reduced and eliminates the need to use high-cost
excavators when carrying smaller loads and tools. We expect this partnership
to add substantial additional revenue potential to TED's current portfolio
over the next few years.
Overall, having taken measures to address profitability the future for TED
both in the UK and the wider global market appears significantly positive.
Adien
After a very promising start last year's results ended with a disappointing
loss of £15k due to work volumes dropping in the last few months of the year.
This was, mainly due to continually delayed starts from the 5G telecom sector.
The order lethargy continued into July and August this year, but has picked up
dramatically since the start of September.
Adien now supplies the majority of the key contractors to the telecom
providers.
Adien's Ministry of Defence projects are also starting to come on stream after
a slow start following the renewal of the framework contracts in April this
year. Similarly, Scottish & Southern Electricity Networks has recently put
significant funding in place which will allow us to progress with their larger
sites.
Positively, clients in the construction and infrastructure sectors are showing
increased activity both in volume of the orders placed and enquiries for new
projects.
Hybrid working for staff in the Doncaster office and the rationalisation of
the Scottish operation has resulted in efficiencies, cost reductions and
reduced travel times as well as a reduction in the carbon footprint of the
business.
Recent investment in new vehicles that are more efficient, cost effective,
greener and continued investment in new hardware and software for the
computer-aided design as well as field teams ensure Adien is able to survey
and process data effectively to all our clients' various requirements.
The outlook for the current year remains positive.
UTSI
As enquiry levels have steadily risen through the 2022 calendar year, so too
have material costs, component shortages and delivery timescales with the
resulting lengthening transition times between enquiry, order and payment
making the business of doing business, severely challenging. Sales of our
flagship products; those manufactured and ordered in the largest quantities,
have been most disrupted by the continuing supply delays, whereas those for
more specialist, made to order products and those requiring bespoke
alteration, have been less affected. Moving from just in time supply to just
in case, namely, the increased stockholding of major "at risk" and "long lead
time" components will reduce exposure to the worst supply chain excesses over
the medium term. However, this change in approach has had a notable immediate
effect on UTSI's cashflow and profits in the short term. While external
R&D opportunities remain in recovery, bringing forward internal R&D
timescales has offered a way towards achieving near term cost savings as
tighter integration of existing PipeHawk & UTSI's product lines, becomes
possible, whilst also offering the promise of attractive hybrid
hardware/software solutions on the near horizon. While UTSI continues to seek
out new opportunities, new partners and new markets, the restrictions imposed
by global supply chain issues are expected to remain a significant limiting
factor into the second half of 2022 and beyond.
Financial position
The Group continues to be in a net liability position and is still reliant on
my continuing financial support.
My letter of support dated 6 September 2021 was renewed on 11 October 2022 to
provide the group with financial support until 31 December 2024. Loans due to
me, 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%.
The CULS agreement for £1 million, provided by myself, was renewed on 30 June
2022 and extended on identical terms, such that the CULS are now repayable on
13 August 2026.
In addition to the loans I have provided to the Company in previous years, I
have deferred a certain proportion of fees and the interest due until the
Company is in a suitably strong position to make the full payments.
Historically, my fees and interest payable have been deferred. During the year
under review, the deferred element amounted to £160,000. At 30 June 2022,
these deferred fees and interest amounted to approximately £1.8 million in
total, all of which have been recognised as a liability in the Company's
accounts.
Strategy & Outlook
The Group remains committed to creating sustainable earnings-based growth and
focusing 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 light of market conditions, all
divisions of the Group are currently performing well and I remain optimistic
in my outlook for the Group.
Gordon Watt
Chairman
Date: 28 November 2022
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
30 June 2022 30 June 2021
Note £'000 £'000
Revenue 2 6,191 6,665
Staff costs 5 (3,861) (3,478)
Operating costs (3,642) (2,930)
Operating (loss) / profit 4 (1,312) 257
Profit / (loss) before interest and taxation (1,312) 257
Finance costs 3 (264) (178)
(Loss) / profit before taxation (1,576) 79
Taxation 7 708 443
(Loss) / profit for the year attributable to equity holders of
the parent (868) 522
Other comprehensive income - -
Total comprehensive (Loss) / profit for the year attributable to
equity holder of the parent (868) 522
(Loss) / profit per share (pence) - basic 8 (2.42) 1.50
(Loss) / profit per share (pence) - diluted 8 (2.42) 0.80
The notes form an integral part of these financial statements.
Consolidated Statement of Financial Position
at 30 June 2022
30 June 2022 30 June 2021
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 828 528
Right of use 10 2,549 363
Goodwill 11 1,357 1,357
4,734 2,248
Current assets
Inventories 13 340 373
Current tax assets 710 442
Trade and other receivables 14 2,389 1,809
Cash and cash equivalents 4 920
3,443 3,544
Total assets 8,177 5,792
Equity and liabilities
Equity
Share capital 18 363 349
Share premium 5,316 5,215
Retained earnings (8,647) (7,784)
(2,968) (2,220)
Non-current liabilities
Borrowings 16 5,612 3,205
5,612 3,205
Current liabilities
Borrowings 16 2,674 2,156
Trade and other payables 15 2,859 2,651
5,533 4,807
Total equity and liabilities 8,177 5,792
The notes form an integral part of these financial statements.
Consolidated Statement of Cash Flow
For the year ended 30 June 2022
Note 30 June 2022 30 June 2021
£'000 £'000
Cash flows from operating activities
(Loss) / profit from operations (1,312) 257
Adjustments for:
Depreciation 4 424 192
(888) 449
Decrease / (increase) in inventories 33 (171)
Decrease / (increase) in receivables (580) (136)
Increase/(decrease) in liabilities 286 581
Cash generated/(used) by operations (1,149) 723
Interest paid (124) (50)
Corporation tax received 440 394
Net cash generated from / (used in) operating activities (833) 1,067
Cash flows from investing activities
Acquisition of subsidiary net of cash acquired - 42
Purchase of plant and equipment (325) (130)
Net cash used in investing activities (325) (88)
Cash flows from financing activities
Proceeds / (repayments) from borrowings 286 339
Proceeds / (repayments) of loan 119 (483)
Repayment of leases (163) (165)
Net cash (used in)/generated from financing activities 242 (309)
Net (decrease)/increase in cash and cash equivalents (916) 670
Cash and cash equivalents at the beginning of year 920 250
Cash and cash equivalents at end of year 4 920
The notes form an integral part of these financial statements.
Statement of Changes in Equity
For the year ended 30 June 2022
Share premium account Retained earnings
Share capital Total
£'000 £'000 £'000 £'000
As at 1 July 2020 349 5,215 (8,301) (2,737)
Profit / (loss) for the year - - 522 522
Total comprehensive income - - 522 522
Issue of shares - - - -
As at 30 June 2021 349 5,215 (7,779) (2,215)
Profit / (loss) for the year - - (868) (868)
Total comprehensive income (868) (868)
Issue of shares 14 101 - 115
As at 30 June 2022 363 5,316 (8,647) (2,968)
The share premium account reserve arises on the issuing of shares. Where
shares are issued at a value that exceeds their nominal value, a sum equal to
the difference between the issue value and the nominal value is transferred to
the share premium account reserve.
The notes form an integral part of these financial statements.
1 Summary of significant accounting policies
1.1. General information
PipeHawk plc (the Company) is a limited company incorporated in the United
Kingdom under the Companies Act 2006. The addresses of its registered office
and principal place of business are disclosed in the company information on
page 3 of the Report and Accounts. The principal activities of the Company
and its subsidiaries (the Group) are described on page 9 of the Report and
Accounts.
The financial statements are presented in pounds sterling, the functional
currency of all companies in the Group. In accordance with section 408 of
the Companies Act 2006 a separate statement of comprehensive income for the
parent Company has not been presented. For the year to 30 June 2022 the
Company recorded a net loss after taxation of £282,000 (2021: £236,000).
1.2. Basis of preparation
The financial statements have been prepared in accordance with UK-adopted
international accounting standards (IAS) The principal accounting policies are
set out below.
1.3. Basis of preparation - Going concern
The directors have reviewed the Parent Company and Group's funding
requirements for the next twelve months which show positive anticipated cash
flow generation, prior to any repayment of loans advanced by the Executive
Chairman. The directors have furthermore obtained a renewed pledge from G G
Watt to provide ongoing financial support for a period of at least twelve
months from the approval date of the Group and Parent Company statement of
financial positions. The directors therefore have a reasonable expectation
that the entity has adequate resources to continue in its operational
exercises for the foreseeable future. It is on this basis that the directors
consider it appropriate to adopt the going concern basis of preparation within
these financial statements. However a material uncertainty exists regarding
the ability of the Group and Parent Company to remain a going concern without
the continuing financial support of the Executive
Chairman.
1.4. Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated statement of comprehensive income from the
effective date of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to the financial statements
of subsidiaries to bring their accounting policies into line with those used
by other members of the Group. All intra-group transactions, balances, income
and expenses are eliminated in full on consolidation.
1.5. Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the
acquisition method. The cost of the business combination is measured as the
aggregate of the fair values (at the date of exchange) of assets given,
liabilities incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree. The acquiree's identifiable assets,
liabilities and contingent liabilities that meet the conditions for
recognition under IFRS 3 Business Combinations (revised) are recognised at
their fair values at the acquisition date, except for non-current assets (or
disposal groups) that are classified as held for sale in accordance with IFRS
5 Non-current Assets Held for Sale and Discontinued Operations, which are
recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially
measured at cost, being the excess of the cost of the business combination
over the Group's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised.
1.6. Goodwill
Goodwill is initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the unit. An
impairment loss recognised for goodwill is not reversed in a subsequent
period.
On disposal of a subsidiary, the attributable amount of goodwill is included
in the determination of the profit or loss on disposal.
1.7. Revenue recognition
For the year ended 30 June 2022 the Group used the five-step model as
prescribed under IFRS 15 on the Group's revenue transactions. This included
the identification of the contract, identification of the performance
obligations under the same, determination of the transaction price, allocation
of the transaction price to performance obligations and recognition of
revenue.
The point of recognition arises when the Group satisfies a performance
obligation by transferring control of a promised good or service to the
customer, which could occur over time or at a point in time.
1.8. Sale of goods
Revenue generated from the sale of goods is recognised on delivery of the
goods to the customer. On this basis revenue is recognised at a point in time.
1.9. Sale of services
In relation to the design and manufacture of complete software and hardware
test solutions and the provision of specialist surveying, revenue is
recognised through a review of the man-hours completed on the project at the
year-end compared to the total man-hours required to complete the projects.
Provision is made for all foreseeable losses if a contract is assessed as
unprofitable.
Revenue represents the amount of consideration to which the Group expects to
be entitled in exchange for transferring promised goods or services to a
customer, excluding amounts collected on behalf of third parties.
Revenue from goods and services provided to customers not invoiced as at the
reporting date is recognised as a contract asset and disclosed as accrued
income within trade and other receivables.
Although payment terms vary from contract to contract invoices are in general
raised in advance of services performed. Where billing has exceeded the
revenue recognised in a period a contract liability is recognised and this is
disclosed as payments received on account in trade and other payables.
1.10. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses. Depreciation is charged so as to write off
the cost of assets over their estimated useful lives, using the straight-line
method. The estimated useful lives, residual values and depreciation method
are reviewed at each year end, with the effect of any changes in estimate
accounted for on a prospective basis. Assets held under leases are
depreciated over their expected useful lives on the same basis as owned assets
or, where shorter, the term of the relevant lease. Gains and losses on
disposals are determined by comparing the proceeds with the carrying amount
and are recognised within the Statement of Comprehensive Income.
The principal annual rates used to depreciate property, plant and equipment
are:
Equipment, fixtures and fittings 25%
Motor vehicles
25%
1.11. Inventories and work in progress
Inventories are stated at the lower of cost and net realisable value. Costs,
including an appropriate portion of fixed and variable overhead expenses, are
assigned to inventories by the method most appropriate to the particular class
of inventory, with the majority being valued on a first-in-first-out basis.
Net realisable value represents the estimated selling price for inventories
less all estimated costs of completion and costs necessary to make the sale.
Work in progress is valued at cost, which includes expenses incurred on behalf
of clients and an appropriate proportion of directly attributable costs on
incomplete assignments. Provision is made for irrecoverable costs where
appropriate.
1.12. Financial assets
The Group's financial assets consist of cash and cash equivalents and trade
and other receivables. The Group's accounting policy for each category of
financial asset is as follows:
Financial assets held at amortised cost
Trade receivables and other receivables are classified as financial assets
held at amortised cost. They are initially recognised at fair value plus
transaction costs that are directly attributable to their acquisition or issue
and are subsequently carried at amortised cost using the effective interest
rate method, less provision for impairment.
Impairment provisions are recognised based on its historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and
the economic environment, the amount of such a provision being the difference
between the net carrying amount and the present value of the future expected
cash flows associated with the impaired receivable. For receivables, which are
reported net, such provisions are recorded in a separate allowance account
with the loss being recognised within administrative expenses in the statement
of comprehensive income. On confirmation that the receivable will not be
collectable, the gross carrying value of the asset is written off against the
associated provision.
The Group's financial assets held at amortised cost comprise other receivables
and cash and cash equivalents in the statement of financial position.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to
the cash flows from the asset expire; or it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another
entity.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Group are recorded at the proceeds received, net of direct issue
costs.
Financial liabilities
Financial liabilities, including borrowings, are initially measured at fair
value, net of transaction costs. Financial liabilities are subsequently
measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the financial
liability, or, where appropriate, a shorter period.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's
obligations are discharged, cancelled or they expire.
1.13. Leased/Right of Use assets
The leases liability is initially measured at the present value of the
remaining lease payments, discounted using the individual entities incremental
borrowing rate. The lease term comprises the non-cancellable period of the
contract, together with periods covered by an option to extend the lease where
the Group is reasonably certain to exercise that option based on operational
needs and contractual terms. Subsequently, the lease liability is measured at
amortised cost by increasing the carrying amount to reflect interest on the
lease liability, and reducing it by the lease payments made. The lease
liability is remeasured when the Group changes its assessment of whether it
will exercise an extension or termination option.
Right-of-use assets are initially measured at cost, comprising the initial
measurement of the lease liability adjusted for any lease payments made at or
before the commencement date, lease incentives received and initial direct
costs. Subsequently, right-of-use assets are measured at cost, less any
accumulated depreciation and any accumulated impairment losses, and are
adjusted for certain remeasurement of the lease liability.
Depreciation is calculated on a straight-line basis over the length of the
lease. The Group has elected to apply exemptions for short-term leases and
leases for which the underlying asset is of low value. For these leases,
payments are charged to the income statement on a straight-line basis over the
term of the relevant lease. Right-of-use assets are presented within
non-current assets on the face of the statement of financial position, and
lease liabilities are shown separately on the statement of financial position
in current liabilities and non-current liabilities depending on the maturity
of the lease payments.
Under IFRS16, right-of-use assets will be tested for impairment in accordance
with IAS36 Impairment of Assets.
Payments associated with short-term leases are recognised on a straight-line
basis as an expense in the profit or loss. Short term leases are leases with a
lease term of 12 months or less.
1.14. Pension scheme contributions
Pension contributions are charged to the statement of comprehensive income in
the period in which they fall due. All pension costs are in relation to
defined contribution schemes.
1.15. Share based payments
Equity-settled share-based payments to employees and others providing similar
services are measured at the fair value of the equity instruments at the grant
date. Details regarding the determination of the fair value of
equity-settled share-based transactions are set out in note 18.
The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based
on the Group's estimate of equity instruments that will eventually vest. At
each statement of financial position date, the Group revises its estimate of
the number of equity instruments expected to vest. The impact of the revision
of the original estimates, if any, is recognised in profit or loss over the
remaining vesting period, with a corresponding adjustment to reserves.
1.16. Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are
translated into sterling at the rates of exchange ruling at 30 June.
Transactions in foreign currencies are recorded at the rates ruling at the
date of the transactions.
1.17. Taxation
Income tax expense represents the sum of the tax currently payable and
deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the consolidated statement of
comprehensive income because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that are
never taxable or deductible. The Group's liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by
the year end date.
Deferred tax
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted for using
the statement of financial position liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences, and deferred
tax assets are generally recognised for all deductible temporary differences
to the extent that it is probable that taxable profits will be available
against which those deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
associated with investments in subsidiaries and associates, and interests in
joint ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments and
interests are only recognised to the extent that it is probable that there
will be sufficient taxable profits against which to utilise the benefits of
the temporary differences and they are expected to reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each statement of
financial position date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered. Deferred tax assets and liabilities are
measured at the tax rates that are expected to apply in the year in which the
liability is settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the year end date. The
measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at
the reporting date, to recover or settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised as an expense or income in the
statement of comprehensive income, except when they relate to items credited
or debited directly to equity, in which case the tax is also recognised
directly in equity.
1.18. Impairment of property, plant and equipment
At each year end date, the Group reviews the carrying amounts of its property,
plant and equipment to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to estimate the
recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, corporate
assets are also allocated to individual cash-generating units, or otherwise
they are allocated to the smallest group of cash-generating units for which a
reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in the statement of
comprehensive income.
1.19. Research and development
The Group undertakes research and development to expand its activity in
technology and innovation to develop new products that will begin directly
generating revenue in the future. Expenditure on research is expensed as
incurred, development expenditure is capitalised only if the criteria for
capitalisation are recognised in IAS 38. The Company claims tax credits on its
research and development activity and recognises the income in current tax.
1.20. Government grants
During the period, the Group received benefits from Government grants. Revenue
based Government grants are recognised through the consolidated statement of
comprehensive income by netting off against the costs to which they relate.
Where the grant is not directly associated with costs incurred during the
period, it is recognised as 'other income'.
1.21. Critical judgement in applying accounting policies and key sources of
estimation uncertainty
The following are the critical judgements and key sources of estimation
uncertainty that the directors have made in the process of applying the
entity's accounting policies and that have the most significant effect on the
amounts recognised in these financial statements.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value
in use of the cash-generating units to which goodwill has been allocated. A
similar exercise is performed in respect of investment and long term loans in
subsidiary.
The value in use calculation requires the directors to estimate the future
cash flows expected to arise from the cash-generating unit and a suitable
discount rate in order to calculate present value, see note 11 for further
details.
The carrying amount of goodwill at the year-end date was £1,357,000 (2021:
£1,357,000). The investment in subsidiaries at the year-end was £1,903,000
(2021: £1,903,000).
The methodology adopted in assessing impairment of Goodwill is set out in note
11 as is the sensitivity analysis applied in relation to the outcomes of the
assessment.
Impairment investment in subsidiaries and inter-company receivables
As set out in note 12, an impairment assessment of the carrying value of
investments in subsidiaries and inter-company receivables is in line with the
methodologies adopted in the assessment of impairment of goodwill.
2 Segmental analysis
2022 2021
£'000 £'000
Turnover by geographical market
United Kingdom 5,627 6,103
Europe 243 172
Other 321 390
6,191 6,665
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:
· Adien Limited - Utility detection and mapping services - Sale of
services
· PipeHawk Limited and Utsi Electronics Limited - Development,
assembly and sale of GPR equipment - Sale of goods
· QM Systems - Test system solutions - Sale of services
· TED Limited - Rail trackside solutions (included in the test
system solutions segment) - Sale of services
· Wessex Precision Instruments Limited - Non trading
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 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.
Information regarding each of the operations of each reportable segment is
included below, all non-current assets owned by the Group are held in the UK.
Utility detection and mapping services Development, assembly and sale of GPR equipment Automation and test system solutions
Total
£'000 £'000 £'000 £'000
Year ended 30 June 2022
Total segmental revenue 1,453 246 4,492 6,191
Operating profit/(loss) 21 (323) (1,010) (1,312)
Finance costs (36) (171) (57) (264)
(Loss) / profit before taxation (15) (494) (1,067) (1,576)
Segment assets 655 1,924 5,598 8,177
Segment liabilities 628 5,226 5,442 11,296
Non-current asset additions 17 55 2,941 3,013
Depreciation and amortisation 106 3 316 425
Utility detection and mapping services Development, assembly and sale of GPR equipment Automation and test system solutions
Total
£'000 £'000 £'000 £'000
Year ended 30 June 2021
Total segmental revenue 1,395 150 5,120 6,665
Operating profit/(loss) 130 (218) 345 257
Finance costs (29) (130) (19) (178)
Profit /(loss) before taxation 101 (348) 326 79
Segment assets 696 2,196 2,754 5,646
Segment liabilities 624 4,841 2,521 7,986
Non-current asset additions 50 4 77 131
Depreciation and amortisation 100 1 91 192
3 Finance costs
2022 2021
£'000 £'000
Interest payable 264 178
264 178
Interest payable comprises interest on:
Leases 69 25
Directors' loans 140 129
Other 55 24
264 178
4 Operating profit for the year
This is arrived at after charging for the Group:
2022 2021
£'000 £'000
Research and development costs not capitalised 2,333 2,285
Depreciation 424 192
Auditor's remuneration
Fees payable to the Company's auditor for the audit of the Group's financial
statements
45 45
Fees payable to the Company's auditor and its subsidiaries for the provision
of tax services
7 7
Lease rentals
Other including land and buildings 352 156
The Company audit fee is £9,000 (2021: £9,000).
5 Staff costs
2022 2021
No. No.
Average monthly number of employees, including directors:
Production and research 79 78
Selling and research 9 10
Administration 7 5
95 93
2022 2021
£'000 £'000
Staff costs, including directors:
Wages and salaries 3,387 3,032
Social security costs 361 350
Other pension costs 113 96
3,861 3,478
6 Directors' remuneration
Salary Benefits 2022 2021
and fees in kind Total Total
£'000 £'000 £'000 £'000
G G Watt 71 - 71 71
S P Padmanathan 58 8 66 72
R MacDonnell 2 - 2 2
Aggregate emoluments 131 8 139 145
Directors' pensions 2022 2021
No. No.
The number of directors who are accruing retirement benefits under:
Defined contributions policies 1 1
The directors represent key management personnel.
Refer to note 18 for details of directors share options.
7 Taxation
2022 2021
£'000 £'000
United Kingdom Corporation Tax
Current taxation (708) (435)
Adjustments in respect of prior years - (8)
(708) (443)
Deferred taxation - -
Tax on profit / (loss) (708) (443)
Current tax reconciliation
Taxable profit / (loss) for the year (1,576) 79
Theoretical tax at UK corporation tax rate 19% (2021: 19%) (289) 15
Effects of:
R&D tax credit (350) (428)
adjustments
Fixed asset timing differences (101) -
Not deductible for tax purposes 2 (12)
Deferred tax not recognised 45 28
Adjustments in respect of prior years 1 (18)
Utilisation of losses - (27)
Short term timing differences (16) (1)
Total income tax credit (708) (443)
The Group has tax losses amounting to approximately £3,033,706 (2021:
£3,008,408), available for carry forward to set off against future trading
profits. No deferred tax assets have been recognised in these financial
statements due to the uncertainty regarding future taxable profits.
Potential deferred tax assets not recognised are approximately £576,404
(2021: £541,065).
8 Loss / profit per share
Basic (pence per share) 2022 - Loss 2.42 profit per share; 2021 - 1.50 profit
per share
This has been calculated on a loss of £868,000 (2021: Profit £522,000) and
the number of shares used was 35,812,823 (2021: 34,860,515) being the weighted
average number of shares in issue during the year.
Diluted (pence per share) 2022 - 2.42 loss per share; 2021 - 0.80 profit per
share
In the current year the potential ordinary shares included in the weighted
average of shares are anti-dilutive and therefore diluted earnings per share
is equal to basic earnings per share. The prior year calculation used earnings
of £442,000 being the profit for the year plus the interest paid on the
convertible loan note (net of 20% tax) of £80,000 and the number of shares
used was 55,344,987 being the weighted average number of shares outstanding
during the year of 34,860,515 adjusted for shares deemed to be issued for no
consideration relating to options and warrants and the impact of the
convertible instrument.
9 Property, plant and equipment
Equipment, fixtures and fittings
Leasehold improvements Motor vehicles
Freehold Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2021 426 1,233 143 268 2,070
Additions - 97 331 - 428
Disposals - - - (31) (31)
Write off - (10) - - (10)
At 30 June 2022 426 1,320 474 237 2,457
Depreciation
At 1 July 2021 40 1,091 143 268 1,542
Charged in year 5 94 25 - 124
Disposals - - - (31) (31)
Write off - (6) - - (6)
At 30 June 2022 45 1,179 168 237 1,629
Net book value
At 30 June 2022 381 141 306 - 828
At 30 June 2021 386 142 - - 528
The net book value of the property, plant and equipment includes £2,549,000
(2021: £363,000) in respect of assets held under lease agreements. These
assets have been offered as security in respect of these lease agreements.
Depreciation charged in the period on those assets amounted to £314,000
(2021: £138,000) - see note 10.
10 Right of use
Equipment, fixtures and fittings
Leasehold improvements Motor vehicles
Freehold Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2021 248 250 - 147 645
Additions 2,416 - 168 - 2,584
Disposal (84) (14) (98)
At 30 June 2022 2,580 236 168 147 3,131
Depreciation
At 1 July 2021 101 109 - 73 283
Charged in year 198 47 12 42 299
Disposal - - - - -
At 30 June 2022 299 156 12 115 582
Net book value
At 30 June 2022 2,281 80 156 32 2,549
At 30 June 2021 147 142 - 74 363
11 Goodwill
Goodwill Total
£'000 £'000
Cost
At 1 July 2021 1,357 1,357
Additions - -
At 30 June 2022 1,357 1,357
Impairment
As at 30 June 2021 and 30 June 2022 - -
Net book value
At 30 June 2022 1,357 1,357
At 30 June 2021 1,357 1,357
The goodwill carried in the statement of financial position of £1,357,000
arose on the acquisitions of Adien Limited in 2002 (£212,000), QM Systems
Limited in 2006 (£849,000), TED Limited in 2017 (£129,000), Wessex Precision
Equipment Limited in 2019 (£155,000) and Utsi Electronics Limited in 2021
(£12,000) - see note 21.
Adien Limited represents the segment utility detection and mapping services
and QM Systems Limited represents the segment test system solutions.
QM Systems Limited, TED, Wessex and Utsi are involved in projects surrounding:
· The creation of innovative automated assembly systems for the
manufacturing, food and pharmaceutical sectors.
· The provision of inspection systems for the automotive,
aerospace, rail and pharmaceutical sectors.
· Slippage testing
· Assembly and sale of GPR equipment
· Automated test systems
The Group tests goodwill annually for impairment or more frequently if there
are indicators that it might be impaired.
The recoverable amounts are determined from value in use calculations which
use cash flow projections based on financial budgets approved by the directors
covering a five year period. The key assumptions are those regarding the
discount rates, growth rates and expected changes to sales and direct costs
during the period. Management estimates discount rates using pre-tax rates
that reflect current market assessments of the time value of money and the
risks specific to the business. This has been estimated at 10% per annum
reflecting the prevailing pre-tax cost of capital in the Company.
The growth rate assumptions are based on forecasts and historic margins.
· Adien these have been assessed as 22% growth for revenue in years
1 and 5% for years 2 and 3, 2.5% thereafter.
· UTSI and PipeHawk combined these have been assessed as 15% for
growth for revenue in year 1 and 55.2% for year 2, 65.9% for year 3, 35% for
year 4, 8% year 5.
· QM have been assessed largely based on the current orderbook, in
addition to the expected orderbook. The business has seen significant growth
in order intake and has received confirmed orders in the first four months
exceeding £3million. Management is expecting to convert a strong pipeline
into orders which would see a 300% increase in year 1, a 183% increase in year
2. This is followed by an expected 10 % in year 3 and 4 and 5% for years 5.
· TED these have been assessed as 26% growth for revenue in year 1,
10% growth in years 2 and 3 and 5% thereafter. The reason for the significant
Year 1 revenue growth in Adien, QM and TED is an expectation based on current
trading and the expected order pipeline.
12 Non-current investments
Parent and Group interest in ordinary shares and voting rights
Country of incorporation
Subsidiary Principal activity
Adien Ltd 100% England & Wales Specialist surveying
QM Systems Ltd 100% England & Wales Test solutions
Thomson Engineering Design Ltd 100% England & Wales Specialist in railway equipment
Wessex Precision Instruments Ltd 100% England & Wales Slip test solutions
Utsi Electronics Ltd 100% England & Wales GPR equipment
Wessex Test Equipment Ltd (formerly Tech Sales Services Ltd) 100% England & Wales Dormant
Minehawk Ltd 100% England & Wales Dormant
An impairment assessment was performed in line with the assessment of
goodwill, see note 11 for further details. On the basis of this assessment
no impairment of the investment was required at 30 June 2022.
The registered office of all of the above named subsidiaries, except Thomson
Engineering Design Ltd and Utsi Electronics Ltd is Manor Park Industrial
Estate, Wyndham Street, Aldershot, Hampshire, GU12 4NZ.
The registered office of Thomson Engineering Design Ltd is Units 2a & 3
Crabtree Road, Forest Vale Industrial Estate
Cinderford, Gloucestershire, United Kingdom, GL14 2YQ
The registered office of Utsi Electronics Ltd is Unit 26, Glenmore Business
Park, Ely Road, Waterbeach, Cambridge, Cambridgeshire, CB25 9PG.
13 Inventories
2022 2021
£'000 £'000
Raw materials 150 287
Finished goods 190 86
340 373
The replacement cost of the above inventories would not be significantly
different from the values stated.
The cost of inventories recognised as an expense during the year amounted to
£1,886,000 (2021: £2,078,000). For the Parent company this was £41,612
(2021: £16,024).
14 Trade and other receivables
2022 2021
£'000 £'000
Current
Trade receivables 1,261 1,066
Amounts owed by Group undertakings - -
Other Debtors 522 464
Accrued income 332 3
Prepayments 274 276
2,389 1,809
15 Trade and other payables
2022 2021
£'000 £'000
Current
Trade payables 972 581
Other taxation and social security 447 501
Payments received on account 839 786
Accruals and other creditors 601 783
2,859 2,651
2022 2021
£'000 £'000
Non-current
Amounts owed to Group undertakings - -
Other creditors - -
- -
The performance obligations of the IFRS 15 contract liabilities (payments
received on account) are expected to be met within the next financial year.
16 Borrowing analysis
2022 2021
£'000 £'000
Due within one year
Bank and other loans 708 269
Directors' loan 1,644 1,748
Obligations under lease agreements 322 139
2,674 2,156
Due after more than one year
Bank and other loans 491 628
Directors' loan 2,751 2,392
Obligations under lease agreements 2,370 185
5,612 3,205
Repayable
Due within 1 year 2,729 2,156
Over 1 year but less than 2 years 3,249 2,576
Over 2 years but less than 5 years 2,361 629
8,339 5,361
Directors' loans
Included with Directors' loans and borrowings due within one year are accrued
fees and interest owing to G G Watt of £1,644,000 (2021: £1,643,000). The
accrued fees and interest is repayable on demand and no interest accrues on
the balance.
The director's loan due in more than one year is a loan of £2,750,000 from G
G Watt. Directors' loans comprise of two elements. A loan attracting
interest at 2.15% over Bank of England base rate. At the year end
£1,750,000 (2021: £1,339,000) was outstanding in relation to this loan.
During the year to 30 June 2022 £200,000 (2021: £130,000) was repaid. The
Company has the right to defer payment for a period of 366 days.
On 13 August 2010 the Company issued £1 million of Convertible Unsecured Loan
Stock ("CULS") to G G Watt, the Chairman of the Company. The CULS were
issued to replace loans made by G G Watt to the Company amounting to
£1million and has been recognised in non-current liabilities of £2,750,000.
Pursuant to amendments made on 13 November 2014 and 9 November 2018, and 30
June 2022 the principal terms of the CULS are as follows:
- The CULS may be converted at the option of Gordon Watt at a price of
3p per share at any time prior to 13 August 2026;
- 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 13 August
2026 ("the Repayment Date").
No equity element of the convertible loan stock was recognised on issue of the
instrument as it was not considered to be material.
Leases
The future minimum lease payments under lease agreements at the year end date
was £206,033 (2021: £123,382). The difference between the minimum lease
payments and the present value is wholly attributable to future finance
charges.
2022 Non-cash:
Bought forward Non-cash: Accrued fees/interests Carried forward
Cash flows New leases
£'000 £'000 £'000 £'000 £'000
Director loan 4,140 119 - 187 4,446
Leases 324 (163) 2,584 (53) 2,692
Other 897 286 - 18 1,201
Loans and borrowings 5,361 242 2,584 152 8,339
2021 Non-cash:
Bought forward Non-cash: Accrued fees/interests Carried forward
Cash flows New leases
£'000 £'000 £'000 £'000 £'000
Director loan 4,121 (180) - 199 4,140
Leases 420 (165) 63 6 324
Other 851 36 - 10 897
Loans and borrowings 5,392 (309) 63 215 5,361
17 Financial instruments
The Group uses financial instruments, which comprise cash and various items,
such as trade receivables and trade payables that arise from its operations.
The main purpose of these financial instruments is to finance the Group's
operations.
The main risks arising from the Group's financial instruments are credit risk,
liquidity risk and interest rate risk. A number of procedures are in place
to enable these risks to be controlled. For liquidity risk these include
profit/cash forecasts by business segment, quarterly management accounts and
comparison against forecast. The board reviews and agrees policies for
managing this risk on a regular basis.
Credit risk
The credit risk exposure is the carrying amount of the financial assets as
shown in note 14 (with the exception of prepayments which are not financial
assets) and the exposure to the cash balances. Of the amounts owed to the
Group at 30 June 2022, the top 3 customers comprised 34% (2021: 43.00%) of
total trade receivables.
The Group has adopted a policy of only dealing with creditworthy
counterparties and the Group uses its own trading records to rate its major
customers, also the Group invoices in advance where possible. The Group's
exposure and the credit ratings of its counterparties are continuously
monitored and the aggregate value of transactions concluded is spread amongst
approved counterparties. Having regard to the credit worthiness of the
Groups significant customers the directors believe that the Group does not
have any significant credit risk exposure to any single counterparty.
An analysis of trade and other receivables:
2022 Weighted average loss rate Gross carrying Impairment loss allowance
value
£'000 £'000 £'000
Performing 0.00% 1,809 -
2021 Weighted average loss rate Gross carrying value Impairment loss allowance
£'000 £'000
Performing 0.00% 1,861 -
Interest rate risk
The Group finances its operations through a mixture of shareholders' funds and
borrowings. The Group borrows exclusively in Sterling and principally at
fixed and floating rates of interest and are disclosed at note 16.
As disclosed in note 16 the Group is exposed to changes in interest rates on
its borrowings with a variable element of interest. If interest rates were to
increase by one percentage point the interest charge would be £15,000
higher. An equivalent decrease would be incurred if interest rates were
reduced by one percentage point.
Liquidity risk
As stated in note 1 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 that neither the Group nor the Company is
exposed to a significant liquidity risk.
Contractual maturity analysis for financial liabilities:
2022 Less than Due between Due between
1 year 1-2 years 2 - 5+ years Total
£'000 £'000 £'000 £'000
Trade and other payables 1,876 - - 1,576
Borrowings 2,405 2,887 355 5,647
Lease liability 322 363 2,007 2,692
4,603 3,250 2,362 10,215
2021 Due or due in less than Due between 1-3 months Due between Due between
1 month 3 months-1 year 1-5 years+
Total
£'000 £'000 £'000 £'000 £'000
Trade and other payables 997 197 170 - 1,364
Borrowings 164 95 1,897 3,205 5,361
1,161 292 2,067 3,205 6,725
Financial liabilities of the Company are all due within less than three month
with the exception of the intercompany balances that are due between 1 and 5
years.
Fair value of financial instruments
Loans and receivables are measured at amortised cost. Financial liabilities
are measured at amortised cost using the effective interest method. The
directors consider that the fair value of financial instruments are not
materially different to their carrying values.
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to be able to move to a
position of providing returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce the cost
of capital.
The Group manages trade debtors, trade creditors and borrowings and cash as
capital. The entity is meeting its objective for managing capital through
continued support from G G Watt as described per note 1.
18 Share capital
2022 2022 2021 2021
No. £'000 No. £'000
Authorised
Ordinary shares of 1p each 40,000,000 400 40,000,000 400
Allotted and fully paid
Brought forward 34,860,515 349 34,360,515 344
Issued during the year 1,452,308 14 500,000 5
Carried forward 36,312,823 363 34,860,515 349
Fully paid ordinary shares carry one vote per share and carry a right to
dividends.
11,773,703 (2021: 12,773,703) share options were outstanding at the year end,
comprising the 1.12m employee options and the 10,653,703 share options and
warrants held by directors disclosed below.
Share based payments have been included in the financial statements where they
are material. No share based payment expense has been recognised.
No deferred tax asset has been recognised in relation to share options due to
the uncertainty of future available profits.
The director and employee share options were issued as part of the Group's
strategy on key employee remuneration, they lapse if the employee ceases to be
an employee of the Group during the vesting period.
Employee options
Date options exercisable Number of shares Exercise price
Between July 2016 and July 2023 80,000 3.00p
Between November 2019 and November 2026 400,000 3.875p
Between November 2020 and November 2027 300,000 3.75p
Between March 2024 and March 2031 1,290,000 8.00p
Directors' share options
Number of options
Directors' share options Granted during the year Lapsed during the year Date from
At start At end of year Exercise price which
of year exercisable
GGWatt 750,000 - 750,000 8.0p 18 Mar 2024
SPPadmanathan 200,000 (200,000) - 3.9p
SPPadmanathan 300,000 (300,000) - 8.0p
RMacDonnell 200,000 - 200,000 8.0p 18 Mar 2024
The Company's share price at 30 June 2022 was 16.5p. The high and low during
the period under review were 37p and 5.6p respectively.
In addition to the above, in consideration of loans made to the Company, G G
Watt has warrants over 3,703,703 ordinary shares at an exercise price of 13.5p
and a further 6,000,000 ordinary shares at an exercise price of 3.0p.
The weighted average contractual life of share options outstanding at the year
end is 7.09 years (2021: 6.87 years).
The Company's share price at 30 June 2022 was 16.5p. The high and low during
the period under review were 37p and 5.6p respectively.
In addition to the above, in consideration of loans made to the Company, G G
Watt has warrants over 3,703,703 ordinary shares at an exercise price of 13.5p
and a further 6,000,000 ordinary shares at an exercise price of 3.0p.
The weighted average contractual life of share options outstanding at the year
end is 7.09 years (2021: 6.87 years).
19 Related party transactions
Directors' loan disclosures are given in note 16. The interest payable to
directors in respect of their loans during the year was:
G G Watt - £140,005
The directors are considered the key management personnel of the Company.
Remuneration to directors is disclosed in note 6.
There is no ultimate controlling party of PipeHawk plc.
20 Government grants
In addition to the Government assistance disclosed in note 16, the following
Government grants were received and has been recognised during the period:
2022 2021
£'000 £'000
Coronavirus Job Retention Scheme grants 48 340
48 340
21 Copies of Report and Accounts
Copies of the Report and Accounts will be posted to shareholders later today
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 (http://www.pipehawk.com) .
22 Notice of Annual General Meeting
The Report and Accounts will include a notice that the annual general meeting
will be held at the offices of Allenby Capital Limited, 5 St Helen's Place,
London, EC3A 6AB at 11:30 am. on 22 December 2022.
.
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