REG - PipeHawk PLC - Half-year Report
24/03/2022 07:01
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RNS Number : 8203F PipeHawk PLC 24 March 2022
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse (Amendment)
(EU EXIT) Regulations 2019/310.
24
March 2022
PipeHawk plc
("PipeHawk" or the "Company")
Unaudited results for the six months ended 31 December 2021
Chairman's Statement
I am pleased to report that the Company's turnover in the six months ended 31
December 2021 was £3,247,000 (2020: £2,641,000), an increase of 23 per cent
over the comparable period last year, resulting in a loss before taxation of
£457,000 (2020: loss of £336,000) and a loss after taxation of £284,000
(2020: £161,000)
This has been an extremely challenging six months following the removal of the
UK government furlough support coupled with employee absences as a result of
ongoing variants of COVID-19, delays caused by material shortages, much longer
supply lead times and increased costs, all of which have caused operational
inefficiencies and uncertainty with existing and potential clients such that
expected orders have been delayed or deferred. Nevertheless, the underlying
direction of travel of our business is clear. We have accelerated progress at
both QM Systems Limited ("QM Systems") and Thomson Engineering Design Limited
("TED") and have now moved both operations to a state of the art premises five
times and three times respectively greater than their previous footprint.
This, and the level of interest evidenced by our current sales discussions,
positions the Company very well for the future.
QM Systems
Order intake for the initial six months ended 31 December 2021 was below
management expectations. This is predominantly the result of anticipated
projects being delayed rather than projects being cancelled or lost. In
addition, the operational team continues to be kept busy on project work as
the dramatic effects of the earlier COVID-19 pandemic lockdowns has continued
to affect the business into the later stages of project lifecycle for longer
than anticipated. This has meant that balancing the various team workloads has
become increasingly difficult compared to previous periods.
Since the beginning of 2022, QM Systems orderbook and order prospects have
improved, and it is anticipated that during the later stages of the current
financial year the QM Systems orderbook will result in production being at
full capacity. During the last few weeks our quotation levels and degree of
engagement have increased significantly with a number of projects expected to
start within the next one or two months.
Over the first six months ended 31 December 2021, we secured two contract
manufacturing contracts for completely different products. The first contract
will see QM Systems produce a product for the marine market and the second
contract concerns a partnership with Ventive Limited ("Ventive") to design and
subsequently manufacture an innovative, new technology home heating and hot
water system that is expected to replace conventional Gas and Oil fired
heating and hot water systems with a far more sustainable solution.
In order to enable QM Systems to reach the targeted start of production dates
for the above two manufacturing contracts of mid-2022 and late-2022,
respectively, QM Systems has relocated to a far larger premises a few minutes
away from its previous location. QM Systems has made significant investment
into the new facility to provide a 'state of the art' manufacturing facility
that our partners and QM Systems can be proud of. Despite the challenging
timescales QM Systems managed to complete the move within two months from
signing of the contracts and QM Systems is now up and running in the new
facility. Inevitably the disruption created through moving an entire operation
to a new location will impact our third quarter. However, we have kept
disruption to a minimum through careful planning and ensuring that our
manufacturing operations suffered minimal down time.
In the second half of the current financial year QM Systems expects to
continue to deliver its bespoke projects for assembly and test systems to its
existing and new clients as well as continued preparations for the start of
manufacturing the 'Ventive Home' system at the end of June 2022.
Thomson Engineering Design ("TED")
Business has continued to be relatively buoyant at TED as it continues to
remain largely immune to the impact of the COVID-19 pandemic. Historically a
pattern had emerged where the orderbook at TED had been light during the first
quarter of each new financial year and subsequently growing in the mid to
later stages of the second quarter of the financial year. The effort that has
been put into marketing, promoting and developing TED's business into further
international markets and with new clients this year has enabled TED to
continue the momentum and traction gained in the second part of the previous
2020/21 financial year into the first half of the new 2021/22 financial year.
This year TED entered the new financial year with a very healthy orderbook and
has since continued to win a number of orders with existing and new clients.
In particular, we have seen the size of orders increase significantly over the
last 12 months and TED has been very successful in winning and successfully
delivering bespoke track and rail-based gantry handling systems to a number of
clients. TED began the second half of the financial year with a very healthy
orderbook with a number of significant key contracts secured in the first two
months alone.
Operationally, TED has also relocated into a far more modern and much larger
facility. This has enabled the business to significantly improve productivity
and efficiency and provides a far more pleasant facility for our employees to
work within as well as to showcase to our clients. The move was completed over
a three-month period. The move involved firstly moving the assembly operations
and subsequently the machining and fabrication operations - which due to
careful planning resulted in minimal downtime for the manufacturing
operations. In order to cope with the increased workload at TED, a number of
new staff have been recruited across all levels of the business. TED
anticipates that the positive start to its financial year will continue to
gain momentum as it becomes established and embedded in the new facility.
Adien
Following the COVID-19 pandemic last year and the removal of furlough
payments, Adien continues to maintain an effective and profitable start to the
year's trading. The continuance of long term framework contracts has ensured a
consistent supply of work producing good margins, despite the increased costs
inflicted by the energy companies in addition to the ongoing costs of COVID-19
compliant working arrangements. Any increased operating costs are passed on to
the client in the first instance.
Adien was awarded key framework contracts with more than ten distributors of
5G telecom mast sites and several major distilleries, together with ongoing
framework contracts with several major players in the civil and construction
industries.
Adien has extended its offering to include Traffic Management, CCTV, Jetting,
Laser scanning and Drone 3D survey inspections. The activity levels in both
England and Scotland currently remain strong and we have since recruited
additional staff experienced in the relevant sectors in both England and
Scotland.
Adien is also adding additional services (STATS requisitioning - records of
the utility providers - and EV charging points) to Adien's core work services
and these continue to evolve in response to the demands of our clients and the
marketplace.
The order book is positive with a current continued upturn in Water,
Power, Defence, Telecom 5G plus highway and rail renewal projects.
Accordingly, the outlook for the remainder of the financial year is positive
for Aiden.
PipeHawk Technology/Utsi
While we have worked hard towards achieving tighter integration between the
two complimentary businesses of PipeHawk Technology and Utsi Electronics Ltd,
the shortage of essential electronic components, lengthening lead times and
quickly escalating prices; some by a factor of 4 to 10, have continued to
create extremely challenging trading conditions.
Our UK/EU enquiry numbers have continued to rise, as businesses here and in
Europe have begun returning to work. A number of markets further afield have
yet to do the same and therefore remain very sluggish, with overall enquiries
still well down when compared to pre-pandemic levels.
The notable exception to this is academic and environmental related enquiries,
where our ability to engage with online collaborators and remote working
units, has enabled us to derive benefit from funded research & development
projects, as well as maintaining communications for a number of future
potential opportunities for the pipeline, which are, for now, still in
abeyance.
Achieving a steady supply of components at stable prices is identified as a
key enabler for optimising price sensitive market access to our extended
product range and relevant to generating additional sales from existing
product resellers, as well as creating an attractive opportunity for the
recruitment of new resellers. Maintenance of good communications with our
supply chain throughout the pandemic and strong negotiation with key suppliers
post lockdowns, has enabled us to secure on favourable terms, the future
supply in quantity of the most essential components required in the
manufacture of our product line. While the increased costs of carrying higher
inventory quantities than normal will impact profits in the short-term, the
beneficial effects on margins of shielding future component requirements from
the more rampant price/availability fluctuations anticipated to impact
component supply over the coming months, are expected to more than compensate
over the medium term.
Related party transactions
As announced on 3 November 2021, my letter of financial support dated 28
September 2020 was renewed on 6 September 2021 to provide the group with
financial support until 31 December 2024.
In addition to the loans, I have provided to the Company in previous years, my
fellow directors and I have deferred a certain proportion of our fees and
interest payments until the Company is in a suitably strong position to make
the full payments. During the six months ended 31 December 2021, these
deferred fees and interest payments amounted to approximately £103,000 in
total, all of which have been accrued in the Company's interim results, and at
31 December 2021 amounted in total to £1,600,000.
Gordon Watt
Chairman
Enquiries:
PipeHawk Plc Tel no. 01252 338 959
Gordon Watt (Chairman)
Allenby Capital (Nomad and Broker) Tel no. 020 3328 5656
David Worlidge/Vivek Bhardwaj
Consolidated Statement of Comprehensive Income
As at 31 December 2021
6 months ended 31 December 2021 6 months ended Year ended
(unaudited) 31 December 2020 30 June
£'000 (unaudited) 2021 (audited)
£'000 £'000
Revenue 3,247 2,641 6,665
Staff costs (1,903) (1,697) (3,478)
General administrative expenses (1,698) (1,178) (2,930)
(Loss)/profit on ordinary activities before interest and taxation
(354) (234) 257
Finance costs (103) (102) (178)
(Loss)/profit before taxation (457) (336) 79
Taxation 173 175 443
(Loss)/profit for the period attributable to equity holders of the Company
(284) (161) 522
Other comprehensive income - - -
Total comprehensive (expense)/income for the period net of tax
(284) (161) 522
(Loss)/ earnings per share (pence) - basic (0.79) (0.46) 1.50
(Loss)/earnings per share (pence) - diluted (0.79) (0.46) 0.83
Consolidated Statement of Financial Position
As at 31 December 2021
As at As at As at
31 December 2021 31 December 2020 30 June
(unaudited) (unaudited) 2021 (audited)
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 585 302 528
Right of use 590 491 363
Goodwill 1,357 1,345 1,357
2,532 2,138 2,248
Current assets
Inventories 308 146 373
Current tax assets 182 255 442
Trade and other receivables 1,723 1,538 1,809
Cash 644 1,019 920
2,857 2,958 3,544
Total assets 5,389 5,096 5,792
Equity and liabilities
Equity
Share capital 358 349 349
Share premium 5,302 5,215 5,215
Other reserves (8,068) (8,467) (7,784)
(2,408) (2,903) (2,220)
Non-current liabilities
Borrowings 3,624 3,321 3,205
3,624 3,321 3,205
Current liabilities
Trade and other payables 2,012 2,771 2,651
Bank overdrafts and loans 2,161 1,907 2,156
4,173 4,678 4,807
Total equity and liabilities 5,389 5,096 5,792
Consolidated Statement of Cash Flow
For the six months ended 31 December 2021
6 months ended 31 December 2021 6 months ended Year ended
(unaudited) 31 December 2020 30 June
£'000 (unaudited) 2021 (audited)
£'000 £'000
Cash inflow from operating activities
(Loss)/profit from operations (354) (234) 257
Adjustment for:
Depreciation 162 97 192
(192) (137) 449
Decrease/(increase) in inventories 65 5 (171)
Decrease/(increase) in receivables 87 115 (136)
(Decrease)/increase in liabilities (88) 616 581
Cash generated (used in)/from operations (128) 599 723
Interest paid (36) (31) (50)
Corporation tax received 433 314 394
Net cash generated from operating activities
269 882 1,067
Cash flows from investing activities
Purchase of plant and equipment (446) (79) (130)
Acquisition of subsidiary net of cash acquired - - 42
Net cash utilised in investing activities (446) (79) (88)
Cash flows from financing activities
New loans and leases - 23 -
Proceeds from borrowings 250 35 339
Repayment of bank and other loans (221) (3) (483)
Repayment of leases (128) (89) (165)
Net cash utilised in financing activities (99) (34) (309)
(Decrease)/increase in cash and cash equivalents (276) 769 670
Cash and cash equivalents at beginning of period
920 250 250
Cash and cash equivalents at end of period 644 1,019 920
Consolidated Statement of Changes in Equity
For the six months ended 31 December 2021
Share premium account
Share capital Retained earnings
Total
£'000 £'000 £'000 £'000
6 months ended 31 December 2020
As at 1 July 2020 349 5,215 (8,306) (2,742)
Loss for the period - - (161) (161)
Total comprehensive income - - (161) (161)
As at 31 December 2020 349 5,215 (8,467) (2,903)
12 months ended 30 June 2021
As at 1 July 2020 349 5,215 (8,306) (2,742)
Profit for the period - - 522 522
Total comprehensive income - - 522 522
Issue of shares - - - -
As at 30 June 2021 349 5,215 (7,784) (2,220)
6 months ended 31 December 2021
As at 1 July 2021 349 5,215 (7,784) (2,220)
Loss for the period - - (284) (284)
Total comprehensive income - - (284) (284)
Issue of shares 9 87 - 96
As at 31 December 2021 358 5,302 (8,068) (2,408)
Notes to the Interim Results
1. Basis of preparation
The Interim Results for the six months ended 31 December 2021 are unaudited
and do not constitute statutory accounts in accordance with section 240 of the
Companies Act 2006.
Full accounts for the year ended 30 June 2021, on which the auditors gave an
unqualified report and contained no statement under Section 498 (2) or (3) of
the Companies Act 2006, have been delivered to the Registrar of Companies.
The interim financial information has been prepared on a basis which is
consistent with the accounting policies adopted by the Company for the last
financial statements and in compliance with basic principles of IFRS.
2. Segmental information
The Company operates in one geographical location being the UK. Accordingly,
the primary segmental disclosure is based on activity.
Utility detection and mapping services Development, assembly and sale of GPR equipment
Automation and test system solutions
Total
£'000 £'000 £'000 £'000
6 months ended 31 December 2021
Total segmental revenue 765 134 2,348 3,247
Segment result 104 (45) (413) (354)
Finance costs (16) (77) (10) (103)
Profit/(loss) before taxation 88 (122) (423) (457)
Segment assets 654 2,301 2,434 5,389
Segment liabilities 515 4,895 2,387 7,797
Non-current asset additions 3 55 388 446
Depreciation and amortisation 47 9 106 162
6 months ended 31 December 2020
Total segmental revenue 814 25 1,802 2,641
Segmental result 148 (1) (381) (234)
Finance costs (16) (71) (15) (102)
(Loss)/profit before taxation 132 (72) (396) (336)
Segment assets
Segment liabilities 767 1,983 2,346 5,096
Non-current asset addition 619 4,557 2,823 7,999
Depreciation and amortisation 45 - 34 79
12 months ended 30 June 2021
Total segmental revenue 1,395 150 5,120 6,665
Segmental result 130 (218) 345 257
Finance costs (29) (130) (19) (178)
Profit/(loss) before taxation 101 (348) 326 79
Segment assets 696 2,196 2,754 5,646
Segment liabilities 624 4,841 2,521 7,986
Non-current asset additions 50 4 77 131
Depreciation and amortisation 100 1 91 192
3. Loss per share
This has been calculated on the loss for the period of £284,000 (H1 2020:
loss £161,000) and the number of shares used was 35,812,823 (H1 2020:
34,860,515), being the weighted average number of shares in issue during the
period.
4. Dividends
No dividend is proposed for the six months ended 31 December 2021.
5. Copies of Interim Results
The Interim Results will be posted on the Company's website www.pipehawk.com
(http://www.pipehawk.com) and copies are available from the Company's
registered office at 4, Manor Park Industrial Estate, Wyndham Street,
Aldershot, GU12 4NZ.
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