REG-PipeHawk Plc: Final Results <Origin Href="QuoteRef">PHWK.L</Origin>
15/11/2016 07:05
15 November 2016
PipeHawk plc
(“PipeHawk” or the “Company”)
Final results for the year ended 30 June 2016
Chairman’s Statement
I can report that turnover for the year ended 30 June 2016 was £4.8 million
(2015: £4.6 million). The Group incurred a loss before taxation for the year
of £1,017,000 (2015: loss £753,000). The loss per share was 2.28p (2015:
1.52p).
QM Systems
2015/16 has proved challenging on a number of levels. Low order intake during
the second quarter, delayed receipt of expected orders during the latter part
of the third quarter and early part of the fourth quarter which I can only
assume related to the uncertainty around Brexit. Despite this QM Systems still
managed to achieve an order intake of approximately £3 million during the
last six months of the financial year (approx. £800k for the first six months
of the financial year). Order intake for our usually quieter period of the
first quarter of the current financial year is approximately £1.25 million
representing an excellent start to this year. This seems to support the theory
that orders were delayed due to uncertainty around Brexit. Our expected order
base continues to look buoyant with a substantial amount of significant orders
under discussion.
The fragmented way in which orders arrived throughout 2015/16 resulted in an
inefficient utilisation of resources. In addition we experienced a substantial
deficit on budget on one of our key projects. Despite this we put our
client’s interests first, ensuring that the project was delivered on time
and the close relationship was maintained. Although QM Systems incurred a loss
on the project, it assisted in winning a substantial order for an additional
project with the client at more advantageous terms for QM Systems.
Looking forwards for the remainder of the current financial year we enter the
period with a very healthy orderbook, and the enquiry pipeline continues to
look buoyant. QM Systems has recruited an additional experienced sales manager
to the business to continue growing the orderbook. We have successfully put
the project challenges faced within the previous year and our utilisation of
resources across the business is now far more efficient.
Technology Division
Our marketing of the e-Safe family of products at a number of prestigious
industry events across Europe is beginning to bear fruit with a number of new
PipeHawk Resellers covering Germany, Austria, Spain, Italy and Slovenia all
placing orders. At the No-Dig Show in Poland PipeHawk was awarded
“Certificate of Distinction” by the Polish Foundation for Trenchless
Technology for outstanding innovation shown in development of e-Safe which
was recognised as a significant step change in the approach to reducing
service strikes during both trenchless and traditional excavation works.
In the UK the number of e-Safe units sold continues to grow as major players
in the construction and utilities sectors begin to adopt its use into their
standard practices. Trials have commenced with a number of Tier 1 companies
such as National Grid Gas, Anglian Water and Morrison Utility Services which
are progressing with positive results. In addition two major equipment hire
companies are now listing the e-Safe+ and the new e-SafeLOG.
With renewed interest in alternative methods for assessing the compliance of
Highway reinstatements against standards; this year has also seen a marked
increase in enquiries for our e-Spott & e-SpottHF system.
The application for the Phase 2 H2020 funding was submitted in October 2016,
which was later than expected with the extra time used for further European
marketing to enhance the application. A response is expected before the end
of 2016. The increased presence of PipeHawk across the European GPR market
has also led to a number of enquiries for development of other GPR based
products, further work on which is expected to open new opportunities,
allowing us to further enhance our provision of user friendly GPR based
systems.
Adien
Following a reasonable first half of the year showing a small profit, Adien
encountered some very difficult trading during the second six months largely
due to the deferment of any sort of decision being taken by clients in the run
up to the Brexit referendum. Nevertheless Adien are now experiencing an
increase in volumes of both work in progress and enquiries from all its key
clients; in the Water sector all of its major frameworks are fully
engaged; in addition the Airport and Rail sectors are increasing activity
with significant contracts in place with all the main Contractors involved
both north and south of the border.
In Scotland the Power sector has started a new phase of funding for Substation
upgrades with an initial batch of 35 sites starting in December 2016. The
Highlands Railway refurbishment is underway and Adien have frameworks
agrements in place with all the major contractors.
The next six months is forecast to be very busy.
SUMO
SUMO has also had a challenging year. It made a small loss in the first half,
then a good profit in the third quarter and another loss in the fourth
quarter. Turnover for the year ended 30 June 2016 was £4,664,000 (2015:
£4,464,000) and the profit before tax was £22,000 (2015: loss £136,000).
PipeHawk owns 28.4% of SUMO and accounts for it as a joint venture – for
this reason the turnover of SUMO has not been accounted for in the group
financial statements.
Financial position
The continuing losses mean that the group continues to be in a net liability
position and reliant on my continuing financial support.
My letter of support dated 7 December 2015 was renewed on 14 November 2016 for
a further year. Loans, other than those covered by the CULS agreement, are
unsecured and accrue interest at an annual rate of Bank of England base rate
plus 2.15%.
In addition to the loans I have provided to the Company in previous years, my
fellow directors and I have deferred a certain proportion of our fees and the
interest due to us until the Company is in a suitably strong position to make
the full payments. Further fees and interest, amounting to £71,000 were
deferred in the year ended 30 June 2016. At 30 June 2016, these deferred fees
and interest amounted to approximately £1.6 million in total, all of which
have been recognised as a liability in the Company’s accounts.
Strategy & Outlook
The PipeHawk 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 the very
challenging year just endured, I remain optimistic in my outlook for the
Group.
Gordon Watt
Chairman
14 November 2016
Enquiries:
PipeHawk Plc Gordon Watt (Chairman) Tel. 01252 338 959
Allenby Capital Limited (Nomad and Broker) David Worlidge/James Thomas Tel: 020 3328 5656
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2016
Note 30 June 2016 £’000 30 June 2015 £’000
Revenue 2 4,813 4,628
Staff costs 5 (2,866) (2,575)
Operating costs (2,805) 2,617)
Operating loss (858) (564)
Share of post-tax profits/(losses) of equity accounted joint venture 11 6 (39)
Loss before interest and taxation (852) (603)
Finance costs 3 (165) (150)
Loss before taxation (1,017) (753)
Taxation 7 264 250
Loss for the year attributable to equity holders of the parent (753) (503)
Other comprehensive income - -
Total comprehensive loss for the year attributable to equity holders of the parent (753) (503)
Loss per share (pence) – basic 8 (2.28) (1.52)
Loss per share (pence) – diluted 8 (2.28) (1.52)
Consolidated Statement of Financial Position
at 30 June 2016
Note 30 June 2016 30 June 2015
Assets £’000 £’000
Non-current assets
Property, plant and equipment 9 227 235
Goodwill 10 1,061 1,061
Investment in joint venture 11 53 47
1,341 1,343
Current assets
Inventories 13 105 86
Current tax assets 181 127
Trade and other receivables 14 1,224 1,276
Cash and cash equivalents 24 43
1,534 1,532
Total assets 2,875 2,875
Equity and liabilities
Equity
Share capital 19 330 330
Share premium 5,151 5,151
Retained earnings (9,236) (8,483)
(3,755) (3,002)
Non-current liabilities
Borrowings 15 2,301 2,242
Trade and other payables 16 - 1,848
2,301 4,090
Current liabilities
Trade and other payables 16 3,895 1,569
Borrowings 17 434 218
4,329 1,787
Total equity and liabilities 2,875 2,875
Parent Company Statement of Financial Position
at 30 June 2016
Assets Note 30 June 2016 30 June 2015
£’000 £’000
Non-current assets
Investment in subsidiaries 12 1,197 1,197
Investment in joint venture 11 198 198
1,395 1,395
Current assets
Inventories 13 97 72
Current tax assets 82 50
Trade and other receivables 14 316 680
Cash and cash equivalents - 9
495 811
Total assets 1,890 2,206
Equity and liabilities
Equity
Share capital 19 330 330
Share premium 5,151 5,151
Retained earnings (9,145) (8,773)
(3,664) (3,292)
Non-current liabilities
Borrowings 15 2,225 2,225
Trade and other payables 16 1,261 3,142
3,486 5,367
Current liabilities
Trade and other payables 16 2,068 131
2,068 131
Total equity and liabilities 1,890 2,206
Consolidated Statement of Cash Flow
For the year ended 30 June 2016
Note 30 June 2016 £’000 30 June 2015 £’000
Cash flows from operating activities
Loss from operations (858) (564)
Adjustments for:
Profit on disposal of assets (1) -
Depreciation 112 138
(747) (426)
(Increase)/decrease in inventories (19) 24
Decrease/(increase) in receivables 53 (198)
Increase in liabilities 328 454
Cash used in operations (385) (146)
Interest paid (18) (12)
Corporation tax received 212 195
Net cash (used in)/generated from operating activities (191) 37
Cash flows from investing activities
Proceeds from sale of assets 2 -
Purchase of plant and equipment (105) (133)
Net cash used in investing activities (103) (133)
Cash flows from financing activities
Proceeds from borrowings 361 221
Repayment of loan - (160)
Repayment of finance leases (86) (42)
Net cash generated from / (used in) financing activities 275 19
Net decrease in cash and cash equivalents (19) (77)
Cash and cash equivalents at beginning of year 43 120
Cash and cash equivalents at end of year 24 43
Parent Company Statement of Cash Flow
For the year ended 30 June 2016
30 June 2016 £’000 30 June 2015 £’000
Cash flows from operating activities
Loss from operations (353) (232)
Decrease in inventories (25) 14
Increase in receivables 364 (60)
Increase in liabilities (80) 329
Cash generated by operations (94) 51
Interest paid Corporation tax received (2) 87 - 110
Net cash generated by operating activities (9) 161
Cash flows from investing activities
Repayment of loan - (160)
Net cash used in financing activities - (160)
Net increase in cash and cash equivalents (9) 1
Cash and cash equivalents at beginning of year 9 8
Cash and cash equivalents at end of year - 9
Statement of Changes in Equity
For the year ended 30 June 2016
Consolidated Share capital Share premium account Retained earnings Total
£’000 £’000 £’000 £’000
As at 1 July 2014 330 5,151 (7,980) (2,499)
Loss for the year - - (503) (503)
Other comprehensive income - - - -
Total comprehensive income - - (503) (503)
As 30 June 2015 330 5,151 (8,483) (3,002)
Loss for the year - - (753) (753)
Other comprehensive income - - - -
Total comprehensive income - - (753) (753)
As 30 June 2016 330 5,151 (9,236) (3,755)
Parent Share capital Share premium account Retained earnings Total
£’000 £’000 £’000 £’000
As at 1 July 2014 330 5,151 (8,498) (3,017)
Loss for the year - - (275) (275)
Other comprehensive income - - - -
Total comprehensive income - - (275) (275)
As 30 June 2015 330 5,151 (8,773) (3,292)
Loss for the year - - (372) (372)
Other comprehensive income - - - -
Total comprehensive income - - (372) (372)
As 30 June 2016 330 5,151 (9,145) (3,664)
Summary of Significant Accounting Policies
1. Basis of preparation
The financial statements have been prepared in accordance with international
financial reporting standards as adopted by the EU and under the historical
cost convention. The principal accounting policies are set out below.
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 EU.
The directors do not expect that the adoption of these standards will have a
material impact on the financial statements of the Group in future periods,
except that IFRS 9 will impact both the measurement and disclosures of
financial instruments and IFRS 15 may have an impact on revenue recognition
and related disclosures. At this point it is not practicable for the directors
to provide a reasonable estimate of the effect of IFRS 9 and IFRS 15 as their
detailed review of these standards is still ongoing.
In addition the directors are in the process of considering the potential
changes that may occur to the financial statements under IFRS 16
“Leases”. This is expected to apply to periods commencing on or after 1
January 2019 and the assessment will be made over the next year and reported
in future financial information.
Basis of preparation – Going concern
The directors have reviewed the Group's funding requirements for the next
twelve months which show positive anticipated cash flow generation, prior to
any repayment of loans from the Executive Chairman. The directors therefore
have a reasonable expectation that the entity has adequate resources to
continue in its operational exercises for the foreseeable future. The
directors have furthermore obtained a renewed pledge from GG Watt 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 it appropriate to adopt the going concern
basis of preparation within these financial statements. A material uncertainty
exists regarding the ability of the Group to remain a going concern without
the continuing financial support of the Executive Chairman.
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.
2. Segmental analysis
2016 2015
£’000 £’000
Turnover by geographical market
United Kingdom 4,745 4,529
Europe 68 9
Other - 90
4,813 4,628
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 -Utility detection and mapping services
* Technology Division - Development, assembly and sale of GPR equipment
* QM Systems - Test system solutions
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 external and internal 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. Segment assets and
liabilities are presented inclusive of inter segment balances, as
inter-segment pricing.
In utility detection and mapping services one customer accounted for 11% of
revenue in 2016 and 12% in 2015. In development, assembly and sale of GPR
equipment one customer accounted for 10% of revenue in 2016 (£15,700) (24% in
2015). In automation and test system solutions one customer accounted for
15.5% (£529,700) of revenue (2015 one customers accounted for 8.5%).
Information regarding each of the operations of each reportable segments 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 2016
Total segmental revenue 1,241 151 3,421 4,813
Segmental result (156) (354) (348) (858)
Finance costs (7) (137) (21) (165)
Share of operating profit in Joint venture 6
Loss before taxation (1,017)
Segment assets 521 1,334 1,019 2,874
Segment liabilities 510 4,293 1,827 6,630
Non-current asset additions 95 - 10 105
Depreciation and amortisation 72 - 40 112
Utility detection and mapping services Development, assembly and sale of GPR equipment Automation and test system solutions Total
Year ended 30 June 2015
Total segmental revenue 1,295 210 3,123 4,628
Segmental result (91) (232) (241) (564)
Finance costs (8) (138) (4) (150)
Share of operating loss in joint venture (39)
Loss before taxation (753)
Segment assets 511 1,432 932 2,875
Segment liabilities 833 3,822 1,222 5,877
Non current asset additions 85 - 49 134
Depreciation and amortisation 80 - 59 139
The majority of the Group’s revenue is earned via the rendering of services.
3. Taxation
2016 2015
£’000 £’000
United Kingdom Corporation Tax
Current taxation (264) (204)
Adjustments in respect of prior years - (46)
(264) (250)
Deferred taxation - -
Tax on loss (264) (250)
Current tax reconciliation 2016 2015
£’000 £’000
Taxable (loss) for the year (1,023) (713)
Theoretical tax at UK corporation tax rate 20.75% (2014: 22.5%) (205) (148)
Effects of:
- R&D tax credit adjustments (162) (108)
- other expenditure that is not tax deductible 4 6
- adjustments in respect of prior years 36 (46)
- accelerated capital allowances - 5
- losses carried forward 61 21
- short term timing differences 2 20
Total income tax expense (264) (250)
The Group has tax losses amounting to approximately £2,492,000 (2015:
£2,176,000), 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 £490,000
(2015: £435,000)
4. Loss per share
Group
Basic
This has been calculated on a loss of £753,000 (2015: loss £503,000) and the
number of shares used was 33,020,515 (2015: 33,020,515) being the weighted
average number of shares in issue during the year.
Diluted
This has been calculated on a loss of £753,000 (2015: loss £503,000) and the
number of shares used was 67,111,718 (2015:67,111,718) being the diluted
weighted average number of shares in issue during the year. The potential
ordinary shares included in the weighted average number of shares are
anti-dilutive and therefore diluted earnings per share is equal to basic
earnings per share.
5. Investment in Joint Venture
Group Investment in shares
£’000
Cost:
At 1 July 2015 & 30 June 2016 198
Share of losses
At 1 July 2015 151
Share of profit for the year (6)
At 30 June 2016 145
Net investment
At 30 June 2016 53
At 30 June 2015 47
The investment in joint venture relates to a 28.4% shareholding in the
ordinary share capital of SUMO Limited. SUMO Limited is engaged in the
development of a GPR franchise operation and has a year end of 31 December.
For the purpose of preparing this consolidation, financial information has
been prepared for the year ended 30 June 2016. SUMO Limited’s principal
place of business is Havant, Hampshire.
Summarised financial information in respect of the Group’s joint venture is
set out below:
30 June 2016 £’000 30 June 2015 £’000
Cash 12 34
Current assets 3,072 1,668
Non-current assets 965 853
Total assets 4,049 2,555
Total liabilities (all current) 3,862 2,390
Net assets 187 165
Group’s share of net assets of joint venture 53 47
Year ended 30 June 2016 £’000 Year ended 30 June 2015 £’000
Total revenue 4,664 4,464
Interest expense 63 95
Depreciation/amortisation 117 139
Total profit/(loss) for the period 22 (136)
Group’s share of profit/(loss) of joint venture 6 (39)
6. Trade and other receivables
Group Company
2016 2015 2016 2015
£’000 £’000 £’000 £’000
Current
Trade receivables 1,126 1,199 7 -
Amounts owed by group undertakings - - 263 670
Other receivables 49 41 44 8
Prepayments and accrued income 49 36 2 2
1,224 1,276 316 680
7. Non-current liabilities: Borrowings
Group Company
2016 2015 2016 2015
£’000 £’000 £’000 £’000
Borrowings (note 18) 2,301 2,242 2,225 2,225
8. Trade and other payables
Group Company
2016 2015 2016 2015
Current £’000 £’000 £’000 £’000
Trade payables 1,112 404 393 56
Other taxation and social security 393 336 4 -
Payments received on account 432 536 - -
Accruals 1,958 293 1,671 75
3,895 1,569 2,068 131
Group Company
2016 2015 2016 2015
Non-current £’000 £’000 £’000 £’000
Trade payables - 299 - 299
Amounts owed to group undertakings - - 1,261 1,294
Accruals - 1,549 - 1,549
- 1,848 1,261 3,142
Included in trade payables is an amount owed to G G Watt of £274,000 (2015:
£299,000).
Included within accruals above are the following amounts owing to directors
relating to unpaid fees and accrued interest;
2016 2015
G G Watt £1,544,754 £1,439,709
R G Tallentire £49,148 £83,034
R R MacDonnell £2,000 £2,000
9. Borrowing Analysis
Group Company
2016 2015 2016 2015
£’000 £’000 £’000 £’000
Due within one year
Bank and other loans 404 173 - -
Obligations under finance lease agreements 30 45 - -
434 218 - -
Due after more than one year
Obligations under finance lease agreements 76 17 - -
Directors’ loans 2,225 2,225 2,225 2,225
2,301 2,242 2,225 2,225
Repayable
Due within 1 year 434 218 - -
Over 1 year but less than 2 years 1,244 1,238 1,225 1,225
Over 2 years but less than 5 years 1,057 1,004 1,000 1,000
2,735 2,460 2,225 2,225
Finance lease agreements with Close Motor Finance are at a rate of 4.5% over
base rate. The future minimum lease payments under finance lease agreements
at the year end date was £106,596 (2015: £61,863).
A working capital loan of £220,000 was given by Mirrasand Partnership from a
trust settled by Mr G Watt. The loan attracts interest at 10% per annum.
£70,000 was repaid on 31 August 2016. The remainder is repayable in January
2017. The loan was guaranteed personally by Mr G Watt.
The director’s loan due in more than one year is a loan of £1,225,000 from
G G Watt. Directors’ loans attract interest at 2.15% over Bank of England
base rate. During the year to 30 June 2016 £nil (2015: £160,000 was repaid).
Included in bank and other loans is an invoice discounting facility of
£160,000 (2015 £75,000).
On 13(th) August 2010 the Company issued £1 million of Convertible Unsecured
Loan Stock 2014 (“CULS”) to G G Watt, the Chairman of the Company. The
CULS have been issued to replace loans made by G G Watt to the Company
amounting to £1 million and has been recognised in non-current liabilities of
£2,225,000. The CULS were renewed on 13(th) November 2014.
The principal terms of the CULS are as follows:
- The CULS may be converted at the option of Gordon Watt at a price of
5p per share at any time prior to 13(th) November 2018;
- 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(th)
November 2018 ("the Repayment Date").
On the basis of materiality no equity element of the convertible loan stock
has been recognised in these financial statements.
10. Copies of the Report and Accounts
Copies of the Report and Accounts will be posted to shareholders tomorrow, 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.
11. Notice of Shareholder presentation and Annual General
Meeting
Notice is hereby given that the annual general meeting (the “AGM”) of
PipeHawk plc will be held at the offices of Allenby Capital Limited, 3 St
Helen’s Place, London, EC3A 6AB at 14.30 on Thursday 15 December 2016.
Copyright (c) 2016 PR Newswire Association,LLC. All Rights ReservedRecent news on Pipehawk
See all newsREG - PipeHawk PLC - Half-year Report
AnnouncementREG - PipeHawk PLC - Grant of options
AnnouncementREG - PipeHawk PLC - Result of Annual General Meeting
AnnouncementREG - PipeHawk PLC - AGM Statement & Trading Update
AnnouncementREG - PipeHawk PLC - Final results for the year ended 30 June 2024
Announcement