REG - PipeHawk PLC - Final Results for the year ended 30 June 2023
29/11/2023 07:00
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RNS Number : 9733U PipeHawk PLC 29 November 2023
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the UK Market Abuse
Regulation
29 November 2023
PipeHawk plc
("PipeHawk", "Company" or the "Group")
Final Results for the year ended 30 June 2023
Highlights
- Turnover of £6.5 million, an increase of 4.8% (2022: £6.2 million)
- Loss before taxation for the financial year of £3,284,000 (2022:
loss £1,576,000)
- The Group's orderbook sits in excess of £6 million - the highest in
the Group's history
I can report that Group turnover for the financial year ended 30 June 2023
(the "Financial Year" and the 2022/23 FY") increased to £6.5 million (2022:
£6.2 million). The Group incurred an operating loss in the Financial Year of
£2,899,000 (2022: £1,312,000), a loss before taxation for the Financial Year
of £3,284,000 (2022: loss £1,576,000) and a loss after taxation of
£2,484,000 (2022: loss £868,000). The loss per share for the financial year
was 6.84p (2022: loss 2.42p).
Notwithstanding the resurgence of our businesses over the last few months, due
to delay in the Start of Production for the contract manufacturing business,
and given the effects of the wider downturn and volatility in the global
market uncertainty the directors have taken a prudent view to recognise a
goodwill impairment charge totalling £678k.
It is evident now that the disappointing results delivered during the last two
financial years were created over a single 12-month period spanning January
2022 through until December 2022. This was as a result of a perfect storm on
the back of a faltering recovery from Covid, the Russian invasion of the
Ukraine in February 2022 and the political chaos resulting from the
resignation of Boris Johnson as Prime Minister in June 2022, an interregnum
until the appointment, and brief term in office, of Liz Truss from September
2022 and finally the appointment of Rishi Sunak in late October 2022. All this
set against a background of rising fuel prices and price rises on just about
every other manufactured good, whilst the Bank of England "helps" to reduce
demand even further by increasing UK interest rates most months whilst saying
there is more pain to come! Somewhat surprisingly and despite the
aforementioned factors, quotations within the Group's businesses over this
period remained buoyant, evidencing the desire of clients to place orders once
they felt confident that a degree of stability had materialised.
The first half of the financial year saw a slow start on sales at £2.2
million, however the second half of the financial year saw this rise to £4.3
million. This improvement has continued into the first few months of the
current financial year as we anticipate being able to make full use of the
much larger facilities which we moved into at QM and TED when the market place
was looking much more positive two years ago.
We entered the current year with a Group orderbook in excess of £6 million -
the highest in our history, so, provided there are no more nasty surprises to
upset the resurgence of stability and belief in our economy, I am confident
the Group will be able to report a much-improved financial return at the end
of the current financial year, with this improvement continuing thereafter.
QM Systems
For the reasons outlined above, QM had a very tough year having only just
moved to premises five times larger with consequent increased overhead costs.
Nevertheless, unlike some of its competitors, it has weathered the storm and
has come out stronger.
Similar to the previous 2021/22 financial year, QM experienced a year of two
halves although this time in reverse. The 2022/23 financial year saw QM report
a 36% increase in revenue to £4.2m but with a significant loss after tax of
£970k for the year. However, the loss was almost entirely created within
the first six months where revenue was only £1.3m with a loss after tax of
£950k. The company steadily grew revenue throughout the second part of the
year achieving a return to profit within the final quarter.
Towards the end of the first quarter of the 2022/23 financial year, contract
awards again began to flow into the business, and this accelerated through the
latter part of 2022 and into 2023. Orders received during the period from
September 2022 through to June 2023 exceeded £7m and resulted in QM ending
the 2022/23 financial year with its healthiest ever forward orderbook of
£5.8m. Many of these orders were quotations provided by QM 12-18 months
prior, in some cases more.
The average size of order award for QM has increased to approximately £500k
with a number of larger orders between £1m to £2m in value also being
awarded. QM today sits in a competitive position for contracts with values
above £300k. QM now has the infrastructure both in terms of resource and
facilities to deliver large multi-million-pound contracts, and today sales
generation is focused on larger contracts where QM can add real value to our
clients with a very competitive pricing structure.
The current financial year will see the Start of Production (SOP) in three
contract manufacturing business units with them entering SOP in Q1 2024.
This in turn will create a business model that is not reliant totally on
Capital expenditure project awards.
Revenue continues to increase month on month as we head into the 2023/24
financial year and we have short/medium term visibility on a good return to
profitability and stability.
Thomson Engineering Design ("TED")
TED generated revenues in the Financial Year of £970k and a loss after tax of
£267k and has followed a similar trajectory to QM with a depressed initial
six-month period of financial year 2022/23 during which revenues were c.
£400k, generating a loss after tax of c. £220k, followed by a more buoyant
second half year where revenues were £570k, generating a reduced loss after
tax of c. £50k. Sales however did remain below our expectations.
As Network Rail approaches the end of the CP6 funding round, a number of new
contract awards have been delayed to align to the start of CP7 (March 2024).
This clearly has a knock-on effect on TED in delaying UK-based client sales of
equipment. However, this impact is restricted to the UK market only. As
reported previously, TED signed a distribution agreement with Unipart Rail
late in 2022 and this has resulted in a substantial amount of business being
quoted to Unipart Rail. TED is now beginning to see a number of these
quotations transition into orders. However, this has had little impact on
financial year 2022/23. Unipart Rail are now placing orders with TED on a
regular basis, and we fully expect to see a rapid growth in revenue
contribution as the current financial year 2023/24 continues. Together with
increased revenue, Unipart Rail brings a ready-made marketing system to TED's
door that provides TED with unrivalled exposure to global markets. Unipart
Rail is locally and actively present in South East Asia, Europe, North
America, Australia and the Middle East. Because of this local presence,
Unipart Rail understands the respective markets clearly and this in turn helps
TED and Unipart Rail to work together to fine tune and develop products for
each market.
Over the past year, Unipart Rail, with support from TED, has promoted the TED
product catalogue at InnoTrans 2022 - the largest rail exhibition in Europe,
Rail Live 2022 - the largest rail exhibition in the UK. Trax 2022 - North
America, MTI - Japan - Nov 2022 and Aus Rail - Australia Nov 2022. Looking
forwards over the coming year, TED's products will be exhibited at MTI - Japan
- June 2024, Trax - North America - June 2024, Rail Live 2023 - UK - July
2024, RSSi / Remsa - US - July 2024 and InnoTrans - Berlin September 2024.
TED has continued development of a number of innovative 'High Output'
machines. This suite of machines, consisting of track and panel handlers,
gantry cranes, automated rail threaders and automated dust suppressed ballast
brooms work hand in hand to provide rail maintenance and installation
operators with a very capable set of tools that can greatly increase the speed
with which track systems can be laid for a fraction of the cost of the bigger
multi-million train-based systems utilised today. The equipment is far smaller
and lightweight, can run on a track bed without needing rails and can be
deployed quickly and easily to site at a fraction of the cost of conventional
systems.
Adien
Adien was very badly affected by the disruption to business confidence as a
result of the Conservative leadership debacle last year. Several large
projects which had been awarded to Adien were shelved at short notice, and
longer-term projects were reassessed and pushed onto the back burner.
As the reality of deferred work became evident as significantly more than a
temporary blip, the company implemented a massive structural change to the
business, including the appointment of a new Managing Director, consolidation
of roles, leading to some staff being made redundant, implementation of a new
corporate plan and a refocusing of the sales department as a whole. This, with
the return of a degree of business confidence, has dramatically increased the
prospects and resulting orders at Adien.
Turnover for the first quarter of the current, 23/24 financial year is almost
double that of the same period last year, and resulting in a very satisfactory
return to profitability. The forward order book is full, and order enquiries
are extremely buoyant.
On the whole, the team at Adien are thoroughly enthused, working well together
with full commitment to see a very successful 2023/24.
UTSI
UTSI had a very cyclical year that saw the willingness of UK & EU
customers to invest in new sensor technology rise and fall with every global
event and interest rate hike. While some overseas markets remained resiliently
buoyant, overall retail sales were still down. Demand for our more specialist
systems and bespoke design service however remained strong and rose throughout
the year, with a number of projects keeping R&D busy and bolstering
turnover.
Even though the cost of many of our raw materials started to stabilise during
the year, with some even falling, average electronic component prices remained
higher at the year end than at the beginning, with a number of key components
still in short supply and on long lead times. With retail and trade customers
resisting further price increases, margins had to be tightened to remain
competitive and although UTSI's overall turnover increased year on year, it
could have been higher were it not for some lingering long lead times in the
supply chain, preventing orders being completed during the financial year. As
a result, a small loss was realised.
While UTSI continues to seek new R&D project opportunities externally, it
has also been busy with a few of its own, with internal developments
concentrating on new and better sensor systems for use in the growing
environmental sciences sector. We expect to see the first of these systems
entering the market within the next financial year.
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 26 November 2023 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 me, 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 £139,000. At 30 June 2023,
these deferred fees and interest amounted to approximately £1.8 million in
total, all of which has 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. Despite wider current 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 2023
Enquiries:
PipeHawk plc Tel. No. 01252 338 959
Gordon Watt (Chairman)
Allenby Capital Limited (Nomad and Broker) Tel. No. 020 3328 5656
David Hart / Vivek Bhardwaj
For further information on the Company and its subsidiaries, please visit:
www.pipehawk.com (http://www.pipehawk.com/)
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2023
30 June 2023 30 June 2022
Note
£'000 £'000
Revenue 2 6,470 6,191
Staff costs 5 (4,176) (3,861)
Impairment of goodwill 11 (678) -
Operating costs
(4,515) (3,642)
Operating (loss) 4 (2,899) (1,312)
(Loss) before interest and taxation (2,899) (1,312)
Finance costs 3 (385) (264)
(Loss) before taxation (3,284) (1,576)
Taxation 7 800 708
(Loss) for the year attributable to equity holders of
the parent
(2,484) (868)
Other comprehensive income - -
Total comprehensive (Loss) for the year attributable to
equity holder of the parent
(2,484) (868)
(Loss) per share (pence) - basic 8 (6.84) (2.42)
(Loss) per share (pence) - diluted 8 (6.84) (2.42)
The notes form an integral part of these financial statements.
Consolidated Statement of Financial Position
at 30 June 2023
30 June 2023 30 June 2022
Note
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 783 828
Right of use 10 2,283 2,549
Goodwill 11 679 1,357
3,745 4,734
Current assets
Inventories 13 253 340
Current tax assets 826 710
Trade and other receivables 14 2,767 2,389
Cash and cash equivalents 148 4
3,994 3,443
Total assets 7,739 8,177
Equity and liabilities
Equity
Share capital 18 363 363
Share premium 5,316 5,316
Retained earnings (11,131) (8,647)
(5,452) (2,968)
Non-current liabilities
Borrowings 16 4,913 5,612
Trade and other payables
- -
4,913 5,612
Current liabilities
Borrowings 16 2,886 2,674
Trade and other payables
15 5,392 2,859
8,278 5,533
Total equity and liabilities 7,739 8,177
The notes form an integral part of these financial statements.
Consolidated Statement of Cash Flow
For the year ended 30 June 2023
Note 30 June 2023 30 June 2022
£'000 £'000
Cash flows from operating activities
Operating (Loss) (2,899) (1,312)
Adjustments for:
Impairment of goodwill 678 -
Depreciation 4 579 424
(1,642) (888)
Decrease / (increase) in inventories 87 33
Decrease / (increase) in receivables (378) (580)
Increase/(decrease) in liabilities 2,759 286
Cash generated/(used) by operations 826 (1,149)
Interest paid (196) (124)
Corporation tax received 683 440
Net cash generated from / (used in) operating activities 1,313 (833)
Cash flows from investing activities
Purchase of plant and equipment (111) (325)
Net cash used in investing activities (111) (325)
Cash flows from financing activities
Proceeds / (repayments) from borrowings (210) 286
Proceeds / (repayments) of loan (393) 119
Repayment of leases (455) (163)
Net cash (used in)/generated from financing activities (1,058) 242
Net increase / (decrease) in cash and cash equivalents 144 (916)
Cash and cash equivalents at the beginning of year 4 920
Cash and cash equivalents at end of year 148 4
The notes form an integral part of these financial statements.
Statement of Changes in Equity
For the year ended 30 June 2023
Share premium account Retained earnings
CONSOLIDATED Share capital Total
£'000 £'000 £'000 £'000
As at 1 July 2021 349 5,215 (7,779) (2,215)
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)
Loss for the year - - (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)
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. The principal activities of the Company and its subsidiaries (the
Group) are described on page 9.
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 2023 the
Company recorded a net loss after taxation of £1,822,000 (2022: £282,000).
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.
Adoption of new and revised standards
A number of new standards and amendments to standards and interpretations have
been issued but are not yet effective and, in some cases, have not yet been
adopted by the UK. The directors do not expect that the adoption of these
standards will have a material impact on the financial statements of the
Company in future periods.
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 preparation of cash flow forecasts for the Group requires
estimates to be made of the quantum and timing of cash receipts from future
commercial revenues and the timing of future expenditure, all of which are
subject to uncertainty. The directors have 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. The financial
statement do not include adjustments which would arise in the event of not
being a Going concern.
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.
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 2023 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. The value of work in progress is reduced where
appropriate to provide for irrecoverable costs
.
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, and processed through the profit & loss account.
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 did not receive benefits from Government grants.
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 £679,000 (2022:
£1,357,000). The investment in subsidiaries at the year-end was £988,000
(2022: £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.
Going concern
The preparation of cash flow forecasts for the Group requires estimates to be
made of the quantum and timing of cash receipts from future commercial
revenues and the timing of future expenditure, all of which are subject to
uncertainty.
2 Segmental analysis
2023 2022
£'000 £'000
Turnover by geographical market
United Kingdom 6,076 5,627
Europe 162 243
Other 232 321
6,470 6,191
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"),
the current executive chairman, 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
· Utsi Electronics Limited - Development, assembly and sale of GPR
equipment - Sale of goods
· QM Systems Ltd - Automation and test system solutions - Sale of
services
· Thomson Engineering Design 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 2023
Total segmental revenue 1,125 169 5,176 6,470
Operating (loss) / profit (214) (859) (1,826) (2,899)
Finance costs (39) (236) (110) (385)
(Loss) / Profit 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
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 (loss) / profit 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
3 Finance costs
2023 2022
£'000 £'000
Interest payable 385 264
385 264
Interest payable comprises interest on:
Leases 107 69
Directors' loans 192 140
Other 86 55
385 264
4 Operating profit for the year
This is arrived at after charging for the Group:
2023 2022
£'000 £'000
Research and development costs not capitalised 2,644 2,333
Depreciation 579 424
Impairment of goodwill 678 -
Auditor's remuneration
Fees payable to the Company's auditor for the audit of the Group's financial
statements
53 45
Fees payable to the Company's auditor and its subsidiaries for the provision
of tax services
8 7
The Company audit fee is £23,000 (2022: £9,000).
5 Staff costs
Group 2023 2022
No. No.
Average monthly number of employees, including directors:
Production and research 77 79
Selling and research 9 9
Administration 12 7
98 95
Group 2023 2022
£'000 £'000
Staff costs, including directors:
Wages and salaries 3,602 3,387
Social security costs 376 361
Other pension costs 198 113
4,176 3,861
Company 2023 2022
No. No.
Average monthly number of employees, including directors:
Selling and research - -
Administration 1 1
1 1
Company 2023 2022
£'000 £'000
Staff costs, including directors:
Wages and salaries 87 131
Social security costs - 7
Other pension costs - 4
87 142
6 Directors' remuneration
Salary Benefits 2023 2022
and fees in kind Total Total
£'000 £'000 £'000 £'000
G G Watt 71 - 71 71
R MacDonnell 2 - 2 2
T Williams 6 - 6 -
Aggregate emoluments 79 - 79 73
Directors' pensions 2023 2022
No. No.
The number of directors who are accruing retirement benefits under:
Defined contributions policies - 1
The directors represent key management personnel.
Refer to note 18 for details of directors share options.
7 Taxation
2023 2022
£'000 £'000
United Kingdom Corporation Tax
Current taxation (800) (708)
Adjustments in respect of prior years - -
(800) (708)
Deferred taxation - -
Tax on loss (800) (708)
Current tax reconciliation
Taxable loss for the year (3,284) (1,576)
Theoretical tax at UK corporation tax rate 19% (2022: 19%) (622) (289)
Effects of:
R&D tax credit (408) (350)
adjustments
Fixed asset timing differences 28 (101)
Not deductible for tax purposes 3 2
Impairment of goodwill 129 -
Deferred tax not recognised 73 45
Adjustments in respect of prior years - 1
Utilisation of losses (4) -
Short term timing differences 1 (16)
Total income tax credit (708)
(800)
The Group has tax losses amounting to approximately £3,423,000 (2022:
£3,033,706), 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 £650,000
(2022: £576,404).
8 Loss / profit per share
Group
Basic (pence per share) 2023 - Loss (6.84) per share; 2022 - Loss (2.42) per
share
This has been calculated on a loss of £2,484,000 (2022: Loss £868,000) and
the number of shares used was 36,312,823 (2022: 35,812,823) being the weighted
average number of shares in issue during the year.
Diluted (pence per share) 2023 - (6.84) loss per share; 2022 - (2.42) loss 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.
9 Property, plant and equipment
Group Equipment, fixtures and fittings
Leasehold improvements Motor vehicles
Freehold Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2022 426 1,320 474 237 2,457
Additions - 56 55 - 111
Disposals - - - (65) (65)
At 30 June 2023 426 1,376 529 172 2,503
Depreciation
At 1 July 2022 45 1,179 168 237 1,629
Charged in year 5 63 88 - 156
Disposals - - - (65) (65)
At 30 June 2023 50 1,242 256 172 1,720
Net book value
At 30 June 2023 376 134 273 - 783
At 30 June 2022 381 141 306 - 828
10 Right of use
Group Equipment, fixtures and fittings
Leasehold improvements Motor vehicles
Property Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 July 2022 2,580 236 168 147 3,131
Additions - 156 - - 156
Disposal - - - - -
At 30 June 2023 2,580 392 168 147 3,287
Depreciation
At 1 July 2022 299 156 12 115 582
Charged in year 296 63 42 21 422
Disposal - - - - -
At 30 June 2023 595 219 54 136 1,004
Net book value
At 30 June 2023 1,985 173 114 11 2,283
At 30 June 2022 2,281 80 156 32 2,549
These assets have been offered as security in respect of these lease
agreements. Depreciation charged in the period on those assets amounted to
£422,000 (2022: £314,000)
11 Goodwill
. Group Goodwill Total
£'000 £'000
Cost
At 1 July 2022 1,357 1,357
Additions - -
At 30 June 2023 1,357 1,357
Impairment
As at 30 June 2023 (678) -
Net book value
At 30 June 2023 679 1,357
At 30 June 2022 1,357 1,357
The goodwill brought forward in the statement of financial position at 30 June
2022 was £1,357,000 this has been impaired to £679,000 following a
management review. The goodwill is made up of Adien Limited in 2002
(£151,000), QM Systems Limited in 2006 (£516,000), TED Limited in 2017
(£0), and Utsi Electronics Limited in 2021 (£12,000).
We consider the CGUs to be the entities as acquired under business
combinations and managed as separate legal entities, each representing a
separately identifiable and independent group of assets contributing to the
cash flows of the CGU.
This financial year due to delay in the Start of Production for the contract
manufacturing business, and given the effects of the wider downturn and
volatility in the global market uncertainty the directors have taken a prudent
view to recognise a goodwill impairment charge totalling £678,000, which
consists of an impairment charge on QM Systems Limited £487,000, TED
£129,000 and Adien Limited £62,000.
Adien Limited represents the segment utility detection and mapping services
and QM Systems Limited represents the segment test system solutions.
QM Systems Limited, TED, 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 and calculation of the terminal values. The key
assumptions are those regarding the discount rates, growth rates and expected
changes to sales and direct costs due to inflationary pressures 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 17.2% per annum based on
weighted average cost of capital.
The growth rate assumptions are based on management forecasts as below. The
results of these forecasts have then been further impaired by the group
directors in the interests of prudence.
· Adien - These have been assessed as 28% growth for revenue in
years 1 bringing it back into line with year ending June 2022, with and 2.5%
for years thereafter.
· UTSI and PipeHawk combined these have been assessed as 63% for
growth for revenue in year 1 and 76% for year 2, 45% for year 3, 54% for year
4, and 40% year 5.
· QM - The strong pipeline reported last year did convert, and at
30th June 2023 QM had a closing orderbook of £5.8m, the highest ever
recorded. In addition, further orders have been received in the new financial
year, and the company has a strong pipeline of enquiries. Based on this year 1
is showing growth of 102% This is followed by an expected 16% growth in year
2, 21% in year 3, 7% in year 4 and 23% for years 5, and is expected to include
start of production in all three contract manufacturing client projects.
· TED - A prudent approach has been applied to TED until activity
generated from the recent distribution agreement with Unipart is fully
underway. The forecasts are based on a 3% growth for year 1, 20% in year 2,
17% in year 3 and no increase for years 4 and 5.
12 Non-current investments
Company Investment in subsidiaries
Total
£'000 £'000
Cost
At 1 July 2022 1,903 1,903
Additions - -
At 30 June 2023 1,903 1,903
*
Impairment
Provided at 30 June 2023 (916) -
Net book value
At 30 June 2023 988 1,903
At 30 June 2022 1,903 1,903
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
CE Marking Services Ltd (formerly 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
an impairment of the investment was made at 30 June 2023.
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
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Raw materials 106 150 - -
Finished goods 147 190 - -
253 340 - -
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
£2,294,000 (2022: £1,886,000). For the Parent company this was £nil
(2022: £41,612).
14 Trade and other receivables
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Current
Trade receivables 1,263 1,261 - -
Amounts owed by Group undertakings less provision - - 9 469
Other Debtors 374 522 2 -
Accrued income 190 332 - 41
Prepayments 940 274 - -
2,767 2,389 11 510
15 Trade and other payables
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Current
Trade payables 1,197 972 34 38
Other taxation and social security 1,002 447 - -
Payments received on account 2,164 839 - -
Accruals and other creditors 1,029 601 103 106
5,392 2,859 137 144
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Non-current
Amounts owed to Group undertakings - - 2,002 1,398
Other creditors - - - -
- - 2,002 1,398
The performance obligations of the IFRS 15 contract liabilities (payments
received on account) are expected to be met within the next financial year.
The brought forward payments received on account figure was £839,000, during
the financial year 2023 £839,000 has been recognised as revenue in the
statement of comprehensive income.
16 Borrowing analysis
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Due within one year
Bank and other loans 677 708 379 375
Directors' loan 1,783 1,644 1,783 1,644
Obligations under lease agreements 426 322 - -
2,886 2,674 2,162 2,019
Due after more than one year
Bank and other loans 350 491 221 331
Directors' loan 2,501 2,751 2,501 2,751
Obligations under lease agreements 2,062 2,370 - -
4,913 5,612 2,722 3,082
Repayable
Due within 1 year 2,886 2,729 2,162 2,072
Over 1 year but less than 2 years 3,040 3,249 2,611 2,861
Over 2 years but less than 5 years 1,873 2,361 111 221
7,799 8,339 4,884 5,154
Directors' loans
Included with Directors' loans and borrowings due within one year are accrued
fees and interest owing to G.G Watt of £1,783,000 (2022: £1,644,000). The
accrued fees and interest are repayable on demand and no interest accrues on
the balance.
The director's loan due in more than one year is a loan of £2,501,000 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
£1,501,000 (2022: £1,750,000) was outstanding in relation to this loan.
During the year to 30 June 2023 £393,000 (2022: £200,000) 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 £2,501,000.
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.
Bank and other loans
Included in bank and other loans is an invoice discounting facility of
£261,962 (2022: £299,635). The principal terms of which are interest at
2.58% over Bank of England base rate and secured on the company's debtors.
Included in bank and other loans is a secured mortgage of £107,438 which
incurs an interest rate of 2.44% over base rate for 10 years and at a rate of
2.64% over base thereafter.
As a result of COVID 19, Coronavirus Business Interruption Loan Scheme (CBILS)
became available for the business. This enabled the group to secure two loans.
The loan for £ £400,000 had a remaining balance outstanding is £220,000,
and the second loan of £150,000 had a remaining balance outstanding is
£110,000, both at a rate of 2.96%. The amount of interest paid during the
year was £19,837.
The business was also able to secure a Bounce Back loan through Wessex
Precision Engineering of £24,000 the remaining balance outstanding is
£19,000, and Utsi obtained £50,000 bounce back loan the remaining balance
outstanding is £39,000 both with an interest rate of 2.5%.
2023 Non-cash:
Bought forward Non-cash: Accrued fees/interests Carried forward
Cash flows New leases
£'000 £'000 £'000 £'000 £'000
Director loan 4,446 (393) - 231 4,284
Leases 2,692 (455) 156 94 2,487
Other 1,201 (210) - 37 1,028
Loans and borrowings 8,339 (1,058) 156 362 7,799
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
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 2023, the top 3 customers comprised 30% (2022: 34%) of total
trade receivables in the segment Automation and test system solutions.
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.
Within revenue there are two customers which individually represent 13.6% and
11.36% of the overall revenue for the financial year.
An analysis of trade and other receivables:
2023 Weighted average loss rate Gross carrying Impairment loss allowance
value
£'000 £'000 £'000
Performing 0.00% 2,767 -
2022 Weighted average loss rate Gross carrying value Impairment loss allowance
£'000 £'000
Performing 0.00% 2,389 -
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:
2023 Less than Due between Due between
1 year 1-2 years 2 - 5+ years Total
£'000 £'000 £'000 £'000
Trade and other payables 1,734 - - 1,734
Borrowings 2,514 2,594 204 5,312
Lease liability 426 393 1,668 2,487
4,674 2,987 1,872 9,533
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 - - 1,876
Borrowings 2,405 2,887 355 5,647
Lease liability 322 363 2,007 2,692
4,603 3,250 2,362 10,215
Financial liabilities of the Company are all due within less than three months
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
2023 2023 2022 2022
No. £'000 No. £'000
Authorised
Ordinary shares of 1p each 40,000,000 400 40,000,000 400
Allotted and fully paid
Brought forward 36,312,823 363 34,860,515 349
Issued during the year - - 1,452,308 14
Carried forward 36,312,823 363 36,312,823 363
Fully paid ordinary shares carry one vote per share and carry a right to
dividends.
12,953,703 (2022: 11,773,703) share options were outstanding at the year end,
comprising the 2,100,000 employee options and the 10,853,703 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 60,000 3.00p
Between November 2019 and November 2026 400,000 3.875p
Between November 2020 and November 2027 100,000 3.75p
Between March 2024 and March 2031 1,290,000 8.00p
Between January 2026 and January 2033 1,400,000 14.25p
Directors' share options
Number of options
Granted during the year Lapsed during the year Date from
Directors' share options At start At end of year Exercise price which
of year exercisable
GGWatt 750,000 - - 750,000 8.0p 18 Mar 2024
RMacDonnell 200,000 - - 200,000 8.0p 18 Mar 2024
TWilliams - 200,000 - 200,000 14.25p 10 Jan 2026
The Company's share price at 30 June 2023 was 13p. The high and low during the
period under review were 16.5p and 11.25p 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 7.72 years (2022: 7.09 years).
The Company's share price at 30 June 2023 was 13p. The high and low during the
period under review were 16.5p and 11.25p 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 7.72 years (2022: 7.09 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 - £188,402
The directors are considered the key management personnel of the Company.
Remuneration to directors is disclosed in note 6.
Included within the amounts due from and to Group undertakings were the
following balances:
2023 2022
£ £
Balance due from:
Thomson Engineering Design Limited 679,649 462,482
Wessex Precision Engineering Limited 8,520 6,120
Balance due to:
Adien Limited 99,278 147,738
QM Systems Limited 1,702,813 979,323
Utsi Electronics Limited 200,001 271,115
These intergroup balances vary through the flow of working capital
requirements throughout the Group as opposed to intergroup trading. The
balance due from TED £679,649 has been provided for based on a review of
recoverability of intercompany balances.
There is no ultimate controlling party of PipeHawk plc.
20 Government grants
In addition to the Government assistance disclosed in note 16, no further
Government grants were recognised during the period:
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Coronavirus Job Retention Scheme grants - 48 - 3
- 48 - 3
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 21 December 2023.
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