REG - PipeHawk PLC - Half-year Report
30/03/2023 07:00
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RNS Number : 7004U PipeHawk PLC 30 March 2023
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.
30 March 2023
PipeHawk plc
("PipeHawk" or the "Company")
Unaudited results for the six months ended 31 December 2022
Chairman's Statement
The Company's turnover in the six months ended 31 December 2022 was
£2,239,000 (December 2021: £3,247,000), a reduction of 28 per cent over the
comparable period last year, resulting in a loss before taxation of
£1,797,000 (2021: loss of £457,000) and a loss after taxation of £1,440,000
(2021: loss £284,000).
As indicated in my November Chairman's Statement accompanying the annual
accounts for the year ended 30 June 2022, the challenges faced within the
first half of 2022 calendar year continued further into the second half of
2022 than originally expected resulting in a significant drop in turnover
compared with the six months to 31 December 2021 and an accompanying
significant pre-tax loss for the six months ended 31 December 2022. War in
Ukraine, fuel cost spikes, interest rate rises, three UK Prime Ministers - all
are contributing factors for delays that a number of the group businesses have
faced in receiving contract awards from clients. It has been very
challenging to manage resource levels across the group where we have protected
staffing levels to be able to switch on quickly where contract award appeared
imminent. Nevertheless, also as previously reported, Rishi Sunak introduced a
degree of confidence into the marketplace which appears to have provided a
level of confidence for our clients to again start to award contracts and work
started to flow in the later part of 2022. This appears to be accelerating
into the start of 2023 with several contacts being awarded, with the result
that we have recruited significant additional staff in order to be able to
cope with the current and anticipated workload. It now appears that the move
by QM Systems to premises five times the size of its previous premises and TED
to premises three times the size of its previous premises was well judged and
both premises are nearing a far more satisfactory level of occupation.
Orderbooks are healthy, time charged and revenue recognised from existing
projects is greatly improved and order pipeline appears healthy.
The Directors of PipeHawk therefore believe that the outlook does look very
positive for the remainder of this year and beyond.
QM Systems ("QM")
As reported in the accounts for the year ended 30 June 2022 (the "2021/22
FY"), QM witnessed an order intake that was significantly below management
expectations. Whilst quotations and the expected orderbook through the latter
part of 2021/22 FY increased dramatically, the gestation period from quotation
to order placement remained protracted as our clients continued to grapple
with the material uncertainties within their markets created initially by
Covid-19 and then aggravated further by the invasion of Ukraine by Russia. In
2021/22 FY, we reported that order intake had increased significantly in the
first four months of this current financial year. In this regard, I am pleased
to say that this trend has continued with a number of projects moving forward
from a protracted quotation phase to order placement. New orders received this
financial year up to 29 March 2023 stood at over £5.8M. Quotation activity
remains buoyant and we have a significant expected orderbook that we are
confident in converting to orders during this [financial year], providing fuel
for further growth at QM.
Timescales for projects over the last 18 months have increased significantly,
predominantly due to extended timescales surrounding material and component
availability. This hampers our ability to generate revenue at a quicker rate
as we experience longer periods of waiting time for materials to be delivered
following the release from the design phase. Consequently, the effects of
increases in order intake to positively ripple through all areas of our
business is longer than that ordinarily anticipated. In addition, given the
reduced orderbook in 2021/22 FY we had reduced staffing levels to accommodate
the workload at that time. This workforce reduction has further impacted our
ability to realise revenue quickly, particularly in being able to respond to
sudden and significant increases in order placement. The result of the
aforementioned conditions has contributed to the reduction in revenue in the
first part of the 2022/23 FY and this is reflected in the figures published.
We are however pleased to report that material and component delivery times
are improving and we have recruited a number of additional mechanical,
electrical and software engineers for both our engineering and manufacturing
teams. Since 30 June 2022, the QM workforce has increased from 44 to 55
despite recruitment of high calibre engineers being and continuing to remain
difficult. We continue to recruit as we anticipate our workload to further
increase. These factors are anticipated to enable us to significantly
accelerate revenue recognition during the final six months of this current FY
and the current orderbook and forecasts indicate that we anticipate to be able
to generate profit within the final 6 months of this FY with a large uptick in
revenue anticipated to be recognised within this next period.
Our preparations for the start of our contract manufacturing business
continues to gain momentum as we move towards production start dates later
this year. One of our contract manufacturing opportunities which will involve
the filling and assembly of vials for PCR testing of respiratory diseases in
humans and animals has led to us invest in the installation of a Clean Room at
QM's Hartlebury facility. This will be the first of our contract manufacturing
business to start production towards the end of the 2022/23 FY. Our other
contract manufacturing business (including Ventive) are now due to enter
production in the second half of 2023.
Thomson Engineering Design ("TED")
Following a very buoyant end to the 2021/22 FY at TED, order intake for the
first part of the 2022/23 FY has been below management expectations. Despite
healthy quotation activity, a number of the orders that were anticipated have
been slow to materialise. TED's projects tend to have relatively short
timescales (e.g. 1-4 months) and, hence unlike QM Systems, a downturn in order
intake at TED can have a relatively quick consequences on revenue recognition
and profitability for TED.
However, order intake for TED post 2021/22 FY has seen a significant increase
and this is anticipated to enable us to accelerate revenue recognition through
the second part of the financial year. Combined with this change in momentum,
the relationship with Unipart Rail is gaining traction and a number of
quotations totalling over £1.6M have now been provided for the export product
that is far in excess of export quotations delivered previously. We remain
hopeful that a number of these quotations will convert to orders in this
second half of the current FY. Furthermore, Unipart Rail is currently
conducting a major marketing campaign to push our products worldwide.
Accordingly, with this increase in exposure, we are confident that this will
contribute to further significant sales in the next financial year's figures.
Previously we stated that TED had entered a partnership to design and
manufacture Rail conversions for Kawasaki Mule vehicles. We are pleased to
report that TED has since been awarded the first order for 10 units with a
further 10 expected to follow shortly. In addition to the Mule conversions,
TED has also been developing with our partner a rail conversion for a trailer
assembly to be towed by the Mule. This combination provides an easy to deploy,
low cost solution that can be driven on road direct to the rail work site and
can be quickly and easily mounted to a rail track for maintenance purposes.
In anticipation of the growth expected above, we have recently expanded our
design capacity by the addition of two extra people and two new SolidWorks
seats. Furthermore, we have expanded our machining capacity with two
additional CNC machines and operators to match.
Adien
As previously reported, the reduced work volumes as a result of continual
delays in contract start dates in the first half of calendar year 2022
continued into the second half and then volumes picked up significantly in the
fourth quarter. The pickup has continued into the first months of 2023 and is
anticipated to continue.
Confidence in the demand for our services is such that we have invested in new
vehicles, new survey equipment, new CAD hardware and software and renewed
sales training. We have also recruited additional surveyors to enable an
additional team to be deployed thereby increasing our total turnover capacity.
We therefore believe that the outlook for Adien for the rest of this year and
next year is positive.
Utsi/PipeHawk Technology
Our work to move Utsi & PipeHawk products toward utilising a common
architecture while progressing greatly, but our ability to complete has been
greatly impacted by the continuing long lead times of some component lines and
the advanced redundancy of others.
While good management of resources has achieved some control over our own
rising energy costs, the effect on supply chain prices have been far more
significant, placing increased pressure on margins and our ability to remain
competitive.
A mid year switch of focus from our general use products to bespoke products
for more specialist markets, has succeeded in drawing new opportunities from
industrial clients however, continuing market uncertainty has stretched client
timelines for delivery beyond those initially required, into the new year.
While traditional R&D opportunities routed in academia continue to be on
hold or awaiting grant funding, we continue to seek opportunities within new
fields of endeavour, where our experience of developing innovative sensor
technology may provide an alternative income stream.
Related party transactions
As announced on 29 November 2022, my letter of financial support dated 6
September 2021 was renewed on 11 October 2022 to provide the group with
financial support until 31 December 2024.
In addition to the loans I have provided to the Company in previous years, my
fellow directors and I have deferred a certain proportion of our fees and
interest payments until the Company is in a suitably strong position to make
the full payments. During the six months ended 31 December 2022, these
deferred fees and interest payments amounted to approximately £3,000 in
total, all of which have been accrued in the Company's interim results, and at
31 December 2022 amounted in total to £1,640,000.
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 2022
6 months ended 31 December 2022 6 months ended 31 December 2021 Year ended
(unaudited) (unaudited) 30 June
£'000 £'000 2022 (audited)
£'000
Revenue 2,239 3,247 6,191
Staff costs (1,962) (1,903) (3,861)
General administrative expenses (1,902) (1,698) (3,642)
Loss on ordinary activities before interest and taxation
(1,625) (354) (1,312)
Finance costs (172) (103) (264)
Loss before taxation (1,797) (457) (1,576)
Taxation 357 173 708
Loss for the period attributable to equity holders of the Company
(1,440) (284) (868)
Other comprehensive income - - -
Total comprehensive expense for the period net of tax
(1,440) (284) (868)
Loss per share (pence) - basic (3.97) (0.79) (2.42)
Loss per share (pence) - diluted (3.97) (0.79) (2.42)
Consolidated Statement of Financial Position
As at 31 December 2022
As at As at As at
31 December 2022 31 December 2021 30 June
(unaudited) (unaudited) 2022 (audited)
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 814 585 828
Right of use 2,381 590 2,549
Goodwill 1,357 1,357 1,357
4,552 2,532 4,734
Current assets
Inventories 308 308 340
Current tax assets 1,067 182 710
Trade and other receivables 1,949 1,723 2,389
Cash 149 644 4
3,473 2,857 3,443
Total assets 8,025 5,389 8,177
Equity and liabilities
Equity
Share capital 363 358 363
Share premium 5,316 5,302 5,316
Other reserves (10,087) (8,068) (8,647)
(4,408) (2,408) (2,968)
Non-current liabilities
Borrowings 5,317 3,624 5,612
5,317 3,624 5,612
Current liabilities
Bank overdrafts and loans 2,633 2,161 2,674
Trade and other payables 4,483 2,012 2,859
7,116 4,173 5,533
Total equity and liabilities 8,025 5,389 8,177
Consolidated Statement of Cash Flow
For the six months ended 31 December 2022
6 months ended 31 December 2022 6 months ended Year ended
(unaudited) 31 December 2021 30 June
£'000 (unaudited) 2022 (audited)
£'000 £'000
Cash inflow from operating activities
Loss from operations (1,625) (354) (1,312)
Adjustment for:
Depreciation 271 162 424
(1,354) (192) (888)
Decrease in inventories 32 65 33
Decrease/(Increase) in receivables 439 87 (580)
Increase/(Decrease) in liabilities 1,735 (88) 286
Cash generated from/(used in) operations 852 (128) (1,149)
Interest paid (91) (36) (124)
Corporation tax received - 433 440
Net cash generated from/(utilised in) operating activities
761 269 (833)
Cash flows from investing activities
Purchase of plant and equipment (47) (446) (325)
Net cash utilised in investing activities (47) (446) (325)
Cash flows from financing activities
(Repayments)/Proceeds from borrowings (218) 250 286
(Repayments)/Proceeds of bank and other loans (158) (221) 119
Repayment of leases (193) (128) (163)
Net cash (utilised in)/generated from financing activities (569) (99) 242
Increase/(Decrease) in cash and cash equivalents 145 (276) (916)
Cash and cash equivalents at beginning of period
4 920 920
Cash and cash equivalents at end of period 149 644 4
Consolidated Statement of Changes in Equity
For the six months ended 31 December 2022
Share premium account
Share capital Retained earnings
Total
£'000 £'000 £'000 £'000
6 months ended 31 December 2021
As at 1 July 2021 349 5,215 (7,779) (2,215)
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 (8,063) (2,403)
12 months ended 30 June 2022
As at 1 July 2021 349 5,215 (7,779) (2,215)
Profit for the period - - (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)
6 months ended 31 December 2022
As at 1 July 2022 363 5,316 (8,647) (2,968)
Loss for the period - - (1,440) (1,440)
Total comprehensive income - - (1,440) (1,440)
Issue of shares - - -
As at 31 December 2022 363 5,316 (10,087) (4,408)
Notes to the Interim Results
1. Basis of preparation
The Interim Results for the six months ended 31 December 2022 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 2022, 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 2022
Total segmental revenue 449 79 1,711 2,239
Segment result (164) (26) (1,435) (1,625)
Finance costs (16) (104) (52) (172)
Loss before taxation (180) (130) (1,487) (1,797)
Segment assets 441 1,872 5,712 8,025
Segment liabilities 544 5,079 7,027 12,650
Non-current asset additions - - 102 102
Depreciation and amortisation 30 9 232 271
6 months ended 31 December 2021
Total segmental revenue 765 134 2,348 3,247
Segmental 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 addition 3 55 388 446
Depreciation and amortisation 47 9 106 162
12 months ended 30 June 2022
Total segmental revenue 1,453 246 4,492 6,191
Segmental result 21 (323) (1,010) (1,312)
Finance costs (36) (171) (57) (264)
Loss 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. Loss per share
This has been calculated on the loss for the period of £1,440,000 (2021: loss
£868,000) and the number of shares used was 36,312,823 (2021: 35,812,823),
being the weighted average number of shares in issue during the period.
4. Dividends
No dividend is proposed for the six months ended 31 December 2022.
5. Copies of Interim Results
The Interim Results will be posted on the Company's website www.pipehawk.com
(http://www.pipehawk.com) and copies will be available from the Company's
registered office at 4, Manor Park Industrial Estate, Wyndham Street,
Aldershot, GU12 4NZ.
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