TIDMPIP
RNS Number : 1328R
PipeHawk PLC
03 November 2021
This announcement contains inside information as stipulated
under the Market Abuse Regulations (EU) no. 596/2014 (which forms
part of domestic UK law pursuant to the European Union (Withdrawal)
Act 2018) ("MAR"). With the publication of this announcement via a
Regulatory Information Service, this inside information is now
considered to be in the public domain.
3 November 2021
PipeHawk plc
("PipeHawk", "Company" or the "Group")
Final Results for the year ended 30 June 2021
Highlights
- Turnover of GBP6.7 million, a decrease of 19.3% (2020: GBP8.3 million)
- Profit before tax of GBP79,000, a decrease of 84.2% (2020: GBP194,000)
- Earnings per share of 1.50p, down 11.91% (2020: 1.69p)
- QM Systems has experienced its strongest quarter ever in terms
of profitability during the final quarter of the financial year
Chairman's Statement
I am pleased to report that the Group made an operating profit
in the year of GBP257,000 (2020: GBP405,000), a profit before
taxation for the year of GBP79,000 (2020: GBP194,000) and a profit
after taxation of GBP522,000 (2020: GBP590,000) despite turnover
decreasing by 19.3% to GBP6.7 million (2020: GBP8.3 million) in
what has been a challenging period with the ongoing Covid-19
pandemic. The earnings per share for the year was 1.50p (2020:
1.69p).
This year has been very much a year of two halves, the first six
months was a turnover of GBP2.6 million and a pretax loss of
GBP336,000, the second six months saw a turnover of GBP4.1 million
and a pretax profit of GBP415,000. I think there is a feeling that
we, as a nation, have put behind us the uncertainty of the outcome
of Brexit as exacerbated by how best to tackle the global pandemic,
and now see a way forward; there will be slip-ups and setbacks but,
broadly speaking, confidence has now returned and we can get on
with business in whatever the new normal turns out to be.
Certainly, the PipeHawk Group's second six months saw a return to
near pre-pandemic levels and, even more importantly, we go into the
next financial year with our healthiest orderbook ever.
Two of our businesses are relocating to significantly larger
premises in order to be able to fulfil the confidently predicted
increases in sales orders, and the future looks very good.
QM Systems
As reported in the interim statement performance in the first
half of the financial year was hampered through reduced orders
created directly by the effects of the pandemic lockdowns.
Thankfully the effects seen due to the lockdown during the early
part of 2021 were short lived and order intake returned to a far
more buoyant level from March 2021 onwards.
Following the difficult start to the Financial Year, both order
intake and order completion have returned to pre-pandemic levels.
In fact, QM Systems has experienced its strongest quarter ever in
terms of profitability during the final quarter of the financial
year, achieving a profit before tax in the quarter alone of
approximately GBP350k.
Final results for the year, whilst showing a reduction compared
to 2019/20 FY rebounded strongly during the second half of the year
achieving a total revenue of GBP3.93m with a pre-tax profit of
GBP189k (post tax GBP480k) representing an excellent recovery for
the second half of the Financial Year. Our orderbook entering the
new Financial Year stood at over GBP2 million with a healthy sales
pipeline for the coming period.
Material sourcing has been challenging throughout the period,
partly due to shortages of semiconductors, partly due to the
continuing impacts of Brexit and global shipping issues however
despite these added challenges I am pleased to report that at the
time of writing all current projects remain on track for delivery
against planned timescales.
In my interim statement we announced that QM had established a
new division, QM manufacturing which undertakes contract
manufacturing services for our customers, complementing the
extensive offering of services already provided by the company. We
have continued to develop this business line and are hopeful to
sign a number of further manufacturing contracts in the coming
months. In order to facilitate this business and to provide further
space to continue to grow our project business we have taken the
decision to relocate the entire operational activities to a far
more modern and far larger facility within a few miles of our
current location just outside Worcester. The new facilities will
provide over five times the production space currently available
with a doubling of the office space.
The establishment of the QM Manufacturing division complements
the existing product, project and service offering already provided
by QM and creates an ability for QM to accelerate growth both in
revenue and profit over the next few years. Manufacturing brings
much stability to our business, and significantly enhances the
quality of our earnings.
With the return to pre pandemic order intake, addition of the
contract manufacturing division and re location to a far larger and
more modern premises the future for QM Systems looks very
bright.
Thomson Engineering Design ("TED")
As previously mentioned in the half year interim results TED
experienced a slow-down in order intake for the first part of the
financial year however this slowdown was relatively short lived and
both order intake and sales achieved accelerated. I am pleased to
report that despite the initial slow start to the year TED
performed strongly with a best ever result. Revenue achieved was
GBP1.2 million, representing a growth year on year in excess of 20%
with a profit before tax of cGBP109k. This is an excellent result
achieved in a difficult climate. Export sales represented
approximately 27% of total sales showing a growth of approximately
5% in international markets. We anticipate further expansion into
international markets in the current Financial Year.
During the year TED have delivered a number of innovative new
products, in particular TED have developed a Gantry Crane system
that enables the user to replace a very expensive excavator with a
purpose made crane at a fraction of the capital outlay and with far
simpler operating characteristics. The first three crane systems
have already been delivered; two additional crane systems are under
current manufacture and due for delivery by the end of next week.
Further orders are expected. The crane system can be fitted with
most of the excavator attachments that TED currently offers.
Further new and innovative products will be launched over the next
few months including an intelligent sleeper laying machine.
Sales of existing products have remained buoyant with a number
of manipulators, sleeper spreaders, sleeper handlers, declippers,
fastclip machines, autoloks and cable yokes being shipped to new
and existing clients.
Unlike last year, the company enters the new 2021/22 FY with a
full orderbook. This will enable us to continue the trend in growth
for this coming year. Order pipeline remains buoyant with a number
of significant orders due to be received over the coming weeks.
This provides stability and further opportunity for significant
growth.
To facilitate both the growth achieved and anticipated further
expansion we are in the process of relocating into new facilities
within the same industrial estate. The facilities are far more
modern tripling our manufacturing space and providing a significant
increase in office space.
Technology Division - PipeHawk Technology and Utsi
Electronics
With all trade events and client demonstration opportunities
cancelled or postponed for many months and much of its global
customer base operating on reduced hours or simply closed
altogether, PipeHawk Technology has been in tickover/furlough mode
for the greater part of the last financial year. Trading only
taking place in very sporadic response to the receipt of confirmed
orders from the few clients able to continue trading and then only
where the products required were held in-stock or their components
being available from one of the few parts of the supply chain still
operating. The outcome being expectedly poor sales figures. Swift
cancellation and/or deferral of incoming supply orders and other
cost controls have helped to avoid the burden of significant costs
and therefore lessened the losses incurred. Whilst we expect the UK
to be one of the first to reopen for business. PipeHawk Technology
sales are not expected to return to pre-pandemic levels until
primary overseas markets (particularly Asia) are trading once
again. Actions are therefore in place to find new avenues to market
as well as widen the scope of existing products in order to
increase opportunity to access new markets. This process has been
greatly enhanced by the acquisition of Utsi Electronics Ltd (Utsi)
during the year which; in addition to a number of R&D projects
ongoing or, under discussion at the time of acquisition also
provides immediate access to a second product range, with wider
market appeal, existing access to other markets and great potential
for additional market exploitation including entry into new fields
of endeavour. The additional product range available is mature,
technically very clever and recognised internationally as being
very capable across a wide range of largely scientific markets.
Already in progress, the plan is to integrate the two businesses
and their market offerings through a process of profit
optimisation, natural redundancy and new innovation to produce a
leaner product list focused on achieving the maximum revenue from a
reduced component base alongside a common marketing strategy.
Adien
On balance it has been a good year for Adien.
Trading for the first six months to December was very strong and
profitable, however from January 2021 trading began to slow as
major tenders in the defense and 5G telecom sectors were delayed
due to uncertainty over budget renewals in March/April 2021.
Since May/June this trading has begun to increase and continues
to do so.
Recruitment of specialist staff who can multi task allows more
flexible and profitable working.
The acquisition of the latest survey kit and more economic and
greener vehicles coming on line over the coming months coupled with
the best insurance cover and all the key accreditation continues to
keep Adien at the leading edge of our industry.
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 28 September 2020 was renewed on 6
September 2021 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 GBP1 million, provided by myself, was
renewed last year and extended on identical terms, such that the
CULS are now repayable on 13 August 2022.
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
GBP200,000. At 30 June 2021, these deferred fees and interest
amounted to approximately GBP1.6 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. Other than
PipeHawkTechnology/Utsi (which bode well for the future), all
divisions of the Group are currently performing well and I remain
optimistic in my outlook for the Group.
Gordon Watt
Chairman
Date: 3 November 2021
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
Notes to Editors
For further information on the Company and its subsidiaries, please visit: www.pipehawk.com
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2021
Note 30 June 2021 30 June 2020
GBP'000 GBP'000
------------- -------------
Revenue 2 6,665 8,325
Staff costs 5 (3,478) (3,776)
Operating costs (2,930) (4,144)
------------- -------------
Operating profit 4 257 405
Profit before interest and taxation 257 405
------------- -------------
Finance costs 3 (178) (211)
------------- -------------
Profit before taxation 79 194
Taxation 7 443 396
Profit for the year attributable to equity
holders of the parent 522 590
============= =============
Other comprehensive income - -
Total comprehensive profit for the year
attributable to equity holder of the
parent 522 590
============= =============
Profit per share (pence) - basic 8 1.50 1.69
Profit per share (pence) - diluted 8 0.80 0.93
The notes to the financial statements form an integral part of
these financial statements.
Consolidated Statement of Financial Position
at 30 June 2021
Note 30 June 2021 30 June 2020
GBP'000 GBP'000
------------- -------------
Assets
Non-current assets
Property, plant and equipment 9 528 339
Right of use 10 363 472
Goodwill 11 1,357 1,345
------------- -------------
2,248 2,156
------------- -------------
Current assets
Inventories 13 373 151
Current tax assets 442 394
Trade and other receivables 14 1,809 1,654
Cash and cash equivalents 920 250
------------- -------------
3,544 2,449
Total assets 5,792 4,605
============= =============
Equity and liabilities
Equity
Share capital 18 349 349
Share premium 5,215 5,215
Retained earnings (7,784) (8,306)
------------- -------------
(2,220) (2,742)
------------- -------------
Non-current liabilities
Borrowings 16 3,205 3,255
Trade and other payables 15 - 6
------------- -------------
3,205 3,261
------------- -------------
Current liabilities
Trade and other payables 15 2,651 1,949
Borrowings 16 2,156 2,137
------------- -------------
4,807 4,086
Total equity and liabilities 5,792 4,605
============= =============
The notes to the financial statements form an integral part of
these financial statements.
The financial statements were approved by the board and
authorised for issue on 3 November 2021 and signed on its behalf
by:
Gordon G Watt
Director
Company No: 3995041
Consolidated Statement of Cash Flow
For the year ended 30 June 2021
Note 30 June 2021 30 June 2020
GBP'000 GBP'000
------------- -------------
Cash flows from operating activities
Profits from operations 257 405
Adjustments for:
Depreciation 4 192 191
449 596
Increase in inventories (171) (18)
Increase in receivables (136) (52)
Increase/(decrease) in liabilities 581 (1,036)
------------- -------------
Cash generated/(used) by operations 723 (510)
Interest paid (50) (69)
Corporation tax received 394 318
------------- -------------
Net cash generated/ (used in) from
operating activities 1,067 (261)
------------- -------------
Cash flows from investing activities
Acquisition of subsidiary net of cash
acquired 21 42 23
Purchase of plant and equipment 9/10 (130) (474)
Net cash used in investing activities (88) (451)
------------- -------------
Cash flows from financing activities
Proceeds from borrowings 339 523
Repayment of loan (483) (165)
Repayment of leases (165) (170)
------------- -------------
Net cash (used in)/generated from financing
activities (309) 188
------------- -------------
Net (decrease)/increase in cash and
cash equivalents 670 (524)
Cash and cash equivalents at the beginning
of year 250 774
Cash and cash equivalents at end of
year 920 250
============= =============
The notes to the financial statements form an integral part of
these financial statements.
Statement of Changes in Equity
For the year ended 30 June 2021
Share premium Retained
CONSOLIDATED Share capital account earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------------- ---------- --------
As at 1 July 2019 344 5,205 (8,896) (3,347)
Profit for the year - - 590 590
Total comprehensive income - - 590 590
Issue of shares 5 10 - 15
---------------- -------------- ---------- --------
As at 30 June 2020 349 5,215 (8,306) (2,742)
================ ============== ========== ========
Profit for the year - - 522 522
Total comprehensive income - - 522 522
As at 30 June 2021 349 5,215 (7,784) (2,220)
================ ============== ========== ========
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 to the financial statements 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 2021 the Company recorded a net loss after
taxation of GBP236,000 (2020: loss GBP48,000).
1.2. Basis of preparation
The financial statements have been prepared in accordance with
international financial reporting standards in conformity with the
requirements of the Companies Act 2006 and under the historical
cost convention. The principal accounting policies are set out
below.
1.3. Basis of preparation - Going concern
The directors have reviewed the Parent Company and Group's
funding requirements for the next twelve months which show positive
anticipated cash flow generation, prior to any repayment of loans
advanced by the Executive Chairman. The directors have furthermore
obtained a renewed pledge from GG Watt to provide ongoing financial
support for a period of at least twelve months from the approval
date of the Group and Parent Company statement of financial
positions. The directors therefore have a reasonable expectation
that the entity has adequate resources to continue in its
operational exercises for the foreseeable future. It is on this
basis that the directors consider it appropriate to adopt the going
concern basis of preparation within these financial statements.
However, a material uncertainty exists regarding the ability of the
Group and Parent Company to
remain a going concern without the continuing financial support of the Executive Chairman.
1.4. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated statement of comprehensive
income from the effective date of acquisition or up to the
effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with those used by other
members of the Group. All intra-group transactions, balances,
income and expenses are eliminated in full on consolidation
1.5. Business combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The cost of the business combination
is measured as the aggregate of the fair values (at the date of
exchange) of assets given, liabilities incurred or assumed, and
equity instruments issued by the Group in exchange for control of
the acquiree. The acquiree's identifiable assets, liabilities and
contingent liabilities that meet the conditions for recognition
under IFRS 3 Business Combinations (revised) are recognised at
their fair values at the acquisition date, except for non-current
assets (or disposal groups) that are classified as held for sale in
accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, which are recognised and measured at fair
value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities recognised
1.6. Goodwill
Goodwill arising on the acquisition of a subsidiary or a jointly
controlled entity represents the excess of the cost of acquisition
over the Group's interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities of the subsidiary or
jointly controlled entity recognised at the date of acquisition.
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 or a jointly controlled entity, 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 2021 the Group used the five-step
model as prescribed under IFRS 15 on the Group's revenue
transactions. This included the identification of the contract,
identification of the performance obligations under the same,
determination of the transaction price, allocation of the
transaction price to performance obligations and recognition of
revenue.
The point of recognition arises when the Group satisfies a
performance obligation by transferring control of a promised good
or service to the customer, which could occur over time or at a
point in time.
1.8. Sale of goods
Revenue generated from the sale of goods is recognised on
delivery of the goods to the customer. On this basis revenue is
recognised at a point in time.
1.9. Sale of services
In relation to the design and manufacture of complete software
and hardware test solutions and the provision of specialist
surveying, revenue is recognised through a review of the man-hours
completed on the project at the year-end compared to the total
man-hours required to complete the projects. Provision is made for
all foreseeable losses if a contract is assessed as
unprofitable.
Revenue represents the amount of consideration to which the
Group expects to be entitled in exchange for transferring promised
goods or services to a customer, excluding amounts collected on
behalf of third parties.
Revenue from goods and services provided to customers not
invoiced as at the reporting date is recognised as a contract asset
and disclosed as accrued income within trade and other
receivables.
Although payment terms vary from contract to contract invoices
are in general raised in advance of services performed. Where
billing has exceeded the revenue recognised in a period a contract
liability is recognised and this is disclosed as payments received
on account in trade and other payables.
1.10. Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses.
Depreciation is charged so as to write off the cost of assets over
their estimated useful lives, using the straight-line method. The
estimated useful lives, residual values and depreciation method are
reviewed at each year end, with the effect of any changes in
estimate accounted for on a prospective basis. Assets held under
leases are depreciated over their expected useful lives on the same
basis as owned assets or, where shorter, the term of the relevant
lease. Gains and losses on disposals are determined by comparing
the proceeds with the carrying amount and are recognised within the
Statement of Comprehensive Income.
The principal annual rates used to depreciate property, plant
and equipment are:
Equipment, fixtures and fittings 25%
Motor vehicles 25%
1.11. Inventories and work in progress
Inventories are stated at the lower of cost and net realisable
value. Costs, including an appropriate portion of fixed and
variable overhead expenses, are assigned to inventories by the
method most appropriate to the particular class of inventory, with
the majority being valued on a first-in-first-out basis. Net
realisable value represents the estimated selling price for
inventories less all estimated costs of completion and costs
necessary to make the sale.
Work in progress is valued at cost, which includes expenses
incurred on behalf of clients and an appropriate proportion of
directly attributable costs on incomplete assignments. Provision is
made for irrecoverable costs where appropriate .
1.12. Financial assets
The Group's financial assets consist of cash and cash
equivalents and trade and other receivables. The Group's accounting
policy for each category of financial asset is as follows:
Financial assets held at amortised cost
Trade receivables and other receivables are classified as
financial assets held at amortised cost. They are initially
recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue and are subsequently
carried at amortised cost using the effective interest rate method,
less provision for impairment.
Impairment provisions are recognised based on its historical
credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment, the amount of
such a provision being the difference between the net carrying
amount and the present value of the future expected cash flows
associated with the impaired receivable. For receivables, which are
reported net, such provisions are recorded in a separate allowance
account with the loss being recognised within administrative
expenses in the statement of comprehensive income. On confirmation
that the receivable will not be collectable, the gross carrying
value of the asset is written off against the associated
provision.
The Group's financial assets held at amortised cost comprise
other receivables and cash and cash equivalents in the statement of
financial position.
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire; or it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs. Financial
liabilities are subsequently measured at amortised cost using the
effective interest method, with interest expense recognised on an
effective yield basis.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where
appropriate, a shorter period.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
1.13. Leased/Right of Use assets
The leases liability is initially measured at the present value
of the remaining lease payments, discounted using the individual
entities incremental borrowing rate. The lease term comprises the
non-cancellable period of the contract, together with periods
covered by an option to extend the lease where the Group is
reasonable 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 balance sheet, 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. This has replaced
the previous requirements to recognise a provision for onerous
lease contracts.
Payments associated with short-term leases are recognised on a
straight-line basis as an expense in the profit or loss. Short term
leases are leases with a lease term of 12 months or less.
1.14. Pension scheme contributions
Pension contributions are charged to the statement of
comprehensive income in the period in which they fall due. All
pension costs are in relation to defined contribution schemes.
1.15. Share based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. Details regarding the
determination of the fair value of equity-settled share-based
transactions are set out in note 18.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest. At each statement of
financial position date, the Group revises its estimate of the
number of equity instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised in profit
or loss over the remaining vesting period, with a corresponding
adjustment to reserves.
1.16. Foreign currencies
Monetary assets and liabilities denominated in foreign
currencies are translated into sterling at the rates of exchange
ruling at 30 June. Transactions in foreign currencies are recorded
at the rates ruling at the date of the transactions.
1.17. Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
consolidated statement of comprehensive income because it excludes
items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by
the year end date.
Deferred tax
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the statement of financial
position liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences, and deferred tax
assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary
differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from
the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the Group
is able to control the reversal of the temporary difference and it
is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and
interests are only recognised to the extent that it is probable
that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
statement of financial position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply in the year in which the liability is
settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the year end
date. The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from the manner in
which the Group expects, at the reporting date, to recover or
settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised as an expense or income
in the statement of comprehensive income, except when they relate
to items credited or debited directly to equity, in which case the
tax is also recognised directly in equity.
1.18. Impairment of property, plant and equipment
At each year end date, the Group reviews the carrying amounts of
its property, plant and equipment to determine whether there is any
indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss
(if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in the statement of
comprehensive income.
1.19. Research and development
The Group undertakes research and development to expand its
activity in technology and innovation to develop new products that
will begin directly generating revenue in the future. Expenditure
on research is expensed as incurred, development expenditure is
capitalised only if the criteria for capitalisation are recognised
in IAS 38. The Company claims tax credits on its research and
development activity and recognises the income in current tax.
1.20. Government grants
During the period, the Group received benefits from Government
grants. Revenue based Government grants are recognised through the
consolidated statement of comprehensive income by netting off
against the costs to which they relate. Where the grant is not
directly associated with costs incurred during the period, it is
recognised as 'other income'.
1.21. Critical judgement in applying accounting policies and key
sources of estimation uncertainty
The following are the critical judgements and key sources of
estimation uncertainty that the directors have made in the process
of applying the entity's accounting policies and that have the most
significant effect on the amounts recognised in these financial
statements.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation
of the value in use of the cash-generating units to which goodwill
has been allocated. A similar exercise is performed in respect of
investment and long term loans in subsidiary.
The value in use calculation requires the directors to estimate
the future cash flows expected to arise from the cash-generating
unit and a suitable discount rate in order to calculate present
value, see note 11 for further details.
The carrying amount of goodwill at the year-end date was
GBP1,356,000 (2020: GBP1,345,000). The investment in subsidiaries
at the year-end was GBP1,903,000 (2020: GBP1,197,000).
The methodology adopted in assessing impairment of Goodwill is
set out in note 11 as is the sensitivity analysis applied in
relation to the outcomes of the assessment.
Impairment investment in subsidiaries and inter-company
receivables
As set out in note 12, an impairment assessment of the carrying
value of investments in subsidiaries and inter-company receivables
is in line with the methodologies adopted in the assessment of
impairment of goodwill.
2 Segmental analysis
2021 2020
GBP'000 GBP'000
--------- ---------
Turnover by geographical market
United Kingdom 6,103 8,285
Europe 172 19
Other 390 21
--------- ---------
6,665 8,325
========= =========
The Group operates out of one geographical location being the
UK. Accordingly, the primary segmental disclosure is based on
activity. Per IFRS 8 operating segments are based on internal
reports about components of the Group, which are regularly reviewed
and used by Chief Operating Decision Maker ("CODM") for strategic
decision making and resource allocation, in order to allocate
resources to the segment and to assess its performance. The Group's
reportable operating segments are as follows :
* Adien Limited - Utility detection and mapping
services - Sale of services
* PipeHawk Limited and Utsi Electronics Limited -
Development, assembly and sale of GPR equipment -
Sale of goods
* QM Systems - Test system solutions - Sale of services
* TED Limited - Rail trackside solutions (included in
the test system solutions segment) - Sale of services
* Wessex Precision Instruments Limited - Non-trading
The CODM monitors the operating results of each segment for the
purpose of performance assessments and making decisions on resource
allocation. Performance is based on revenue generations and profit
before tax, which the CODM believes are the most relevant in
evaluating the results relative to other entities in the industry.
In utility detection and mapping services three customers accounted
for 53% of revenue in 2021 and two customers accounted for 22%
of revenue in 2020. In development, assembly and sale of GPR
equipment two customers accounted for 50% of revenue in 2021
and one customer accounted for 68% of revenue in 2020. In automation
and test system solutions three customer accounted for 49% of
revenue in 2021 and three customers accounted for 42% of revenue
in 2020.
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 Development, Automation
and mapping assembly and test
services and sale system
of GPR equipment solutions Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------------------ ----------- --------
Year ended 30 June 2021
Total segmental revenue 1,395 150 5,120 6,665
------------------ ------------------ ----------- --------
Operating profit/(loss) 130 (218) 345 257
Finance costs (29) (130) (19) (178)
Profit/(loss) before
taxation 101 (348) 326 79
------------------ ------------------ ----------- --------
Segment assets 696 2,196 2,754 5,646
Segment liabilities 624 4,841 2,521 7,986
Non-current asset additions 50 4 77 131
Depreciation and amortisation 100 1 91 192
================== ================== =========== ========
Utility detection Development, Automation
and mapping assembly and test
services and sale system
of GPR equipment solutions Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------------------ ----------- --------
Year ended 30 June 2020
Total segmental revenue 1,344 81 6,900 8,325
------------------ ------------------ ----------- --------
Operating profit/(loss) 75 (15) 345 405
Finance costs (33) (141) (37) (211)
Profit/(loss) before
taxation 42 (156) 308 194
------------------ ------------------ ----------- --------
Segment assets 771 1,527 2,307 4,605
Segment liabilities 664 4,379 2,304 7,347
Non-current asset additions 225 1 258 484
Depreciation and amortisation 95 1 95 191
================== ================== =========== ========
3 Finance costs
2021 2020
GBP'000 GBP'000
--------- ---------
Interest payable 178 211
--------- ---------
178 211
========= =========
Interest payable comprises interest on:
Leases 25 26
Directors' loans 129 141
Other 24 44
--------- ---------
178 211
========= =========
4 Operating profit for the year
This is arrived at after charging for the Group:
2021 2020
GBP'000 GBP'000
--------- ---------
Research and development costs not capitalised 2,285 2,141
Depreciation 192 191
Auditor's remuneration
Fees payable to the Company's auditor for the
audit of the Group's financial statements 45 43
Fees payable to the Company's auditor and its
subsidiaries for the provision of tax services 7 7
Lease rentals
Other including land and buildings 156 163
========= =========
The Company audit fee is GBP9,000 (2020: GBP9,000).
5 Staff costs
2021 2020
No. No.
----- -----
Average monthly number of employees,
including directors:
Production and research 78 85
Selling and research 10 10
Administration 5 6
93 101
===== =====
2021 2020
GBP'000 GBP'000
-------- --------
Staff costs, including directors:
Wages and salaries 3,032 3,382
Social security costs 350 326
Other pension costs 96 68
3,478 3,776
======== ========
6 Directors' remuneration
Salary Benefits 2021 2020
and fees in kind Total Total
GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- -------- --------
G G Watt 71 - 71 71
S P Padmanathan 64 8 72 25
R MacDonnell 2 - 2 4
---------- --------- -------- --------
Aggregate emoluments 137 8 145 100
========== ========= ======== ========
Directors' pensions 2021 2020
No. No.
----- -----
The number of directors who are accruing
retirement benefits under:
Defined contributions policies 1 -
===== =====
The directors represent key management personnel.
Number of options
----------------------------------- ----------- -------------
Directors' share Granted Date from
options At start during At end Exercise which
of year the year of year price exercisable
----------- ---------- ---------- ----------- -------------
G G Watt - 750,000 750,000 8.0p 18 Mar 2024
S P Padmanathan 200,000 - 200,000 3.9p 15 Nov 2019
S P Padmanathan - 300,000 300,000 8.0p 18 Mar 2024
R MacDonnell - 200,000 200,000 8.0p 18 Mar 2024
The Company's share price at 30 June 2021 was 7.75p. The high
and low during the period under review were 9.38 and 4.00p 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.
7 Taxation
2021 2020
GBP'000 GBP'000
--------------- --------
United Kingdom Corporation Tax
Current taxation (435) (396)
Adjustments in respect of prior years (8) -
--------------- --------
(443) (396)
Deferred taxation - -
--------------- --------
Tax on profits/loss (443) (396)
--------------- --------
Current tax reconciliation
Taxable profit for the year 79 194
--------------- --------
Theoretical tax at UK corporation
tax rate 19% (2020: 19%) 15 37
Effects of:
R&D tax credit adjustments (428) (414)
Income not taxable - (3)
Other expenditure that is not tax
deductible (12) 1
Deferred tax not recognised 28 -
Adjustments in respect of prior
years (18) (17)
Utilisation of losses (27) -
Short term timing differences (1) -
--------------- --------
Total income tax credit (443) (396)
=============== ========
The Group has tax losses amounting to approximately GBP3,008,408
(2020: GBP2,855,000), 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
GBP541,065 (2020: GBP535,000).
8 Profit per share
Basic (pence per share) 2021 - 1.50 profit per share; 2020 -
1.69 profit per share
This has been calculated on a profit of GBP522,000 (2020: GBP590,000)
and the number of shares used was 34,860,515 (2020: 34,860,515)
being the weighted average number of shares in issue during the
year.
Diluted (pence per share) 2021 - 0.80 profit per share; 2020
- 0.93 profit per share
The current year calculation used earnings of GBP442,000 (2020:
GBP510,000) being the profit for the year, plus the interest
paid on the convertible loan note (net of 20% tax) of GBP80,000
(2020: GBP80,000) and the number of shares used was 55,344,987
(2020: 55,095,386) being the weighted average number of shares
outstanding during the year of 34,860,515 (2020: 34,860,515)
adjusted for shares deemed to be issued for no consideration
relating to options and warrants of 484,472 (2020: 530,409) and
the impact of the convertible instrument of 20,000,000 (2020:
20,000,000).
9 Property, plant and equipment
Equipment,
fixtures Leasehold Motor
Freehold and fittings improvements vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- --------------- ----------- --------
Cost
At 1 July 2020 265 1,640 223 280 2,408
Transferred in on acquisition
of subsidiary 161 56 - - 217
Additions - 67 - - 67
Disposals - (15) - (12) (27)
Transfer from Right
of use - 38 - - 38
Write off - (553) (80) - (633)
At 30 June 2021 426 1,233 143 268 2,070
----------- -------------- --------------- ----------- --------
Depreciation
At 1 July 2020 18 1,548 223 280 2,069
Transfer in on acquisition
of subsidiary 18 55 - - 73
Charged in year 4 51 - - 55
Disposals - (15) - (12) (27)
Transfer from Right
of use - 5 - - 5
Write off - (553) (80) - (633)
At 30 June 2021 40 1,091 143 268 1,542
----------- -------------- --------------- ----------- --------
Net book value
At 30 June 2021 386 142 - - 528
=========== ============== =============== =========== ========
At 30 June 2020 247 92 - - 339
=========== ============== =============== =========== ========
The net book value of the property, plant and equipment includes
GBP362,946 (2020: GBP471,506) in respect of assets held under
lease agreements. These assets have been offered as security
in respect of these lease agreements. Depreciation charged in
the period on those assets amounted to GBP137,963 (2020: GBP148,397)
- see note 10.
10 Right of use
Equipment,
fixtures Motor
Freehold and fittings vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ----------- --------
Cost
At 1 July 2020 248 248 124 620
Additions - 40 23 63
Transfer to Property,
plant and equipment - (38) - (38)
At 30 June 2021 248 250 147 645
----------- -------------- ----------- --------
Depreciation
At 1 July 2020 55 61 32 148
Charged in year 46 52 41 139
Transfer to Property,
plant and equipment - (5) - (5)
At 30 June 2021 101 108 73 282
----------- -------------- ----------- --------
Net book value
At 30 June 2021 147 142 74 363
=========== ============== =========== ========
At 30 June 2020 193 187 92 472
=========== ============== =========== ========
11 Goodwill
Goodwill Total
GBP'000 GBP'000
--------- ---------
Cost
At 1 July 2020 1,405 1,405
Additions 12 12
--------- ---------
At 30 June 2021 1,417 1,417
========= =========
Impairment
As at 30 June 2020 and 30
June 2021 60 60
========= =========
Net book value
At 30 June 2021 1,357 1,357
========= =========
At 30 June 2020 1,345 1,345
========= =========
The goodwill carried in the statement of financial position of
GBP1,357,000 arose on the acquisitions of Adien Limited in 2002
(GBP212,000), QM Systems Limited in 2006 (GBP849,000), TED Limited
in 2017 (GBP129,000), Wessex Precision Equipment Limited in 2019
(GBP155,000) and Utsi Electronics Limited in 2021 (GBP12,000)
- see note 21.
Adien Limited represents the segment utility detection and mapping
services and QM Systems Limited represents the segment test system
solutions.
QM Systems Limited, TED, Wessex and Utsi are involved in projects
surrounding:
* The creation of innovative automated assembly systems
for the manufacturing, food and pharmaceutical
sectors.
* The provision of inspection systems for the
automotive, aerospace, rail and pharmaceutical
sectors.
* Slippage testing
* Assembly and sale of GPR equipment
* Automated test systems
The Group tests goodwill annually for impairment or more frequently
if there are indicators that it might be impaired.
The recoverable amounts are determined from value in use calculations
which use cash flow projections based on financial budgets approved
by the directors covering a five year period. The key assumptions
are those regarding the discount rates, growth rates and expected
changes to sales and direct costs during the period. Management
estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks specific
to the business. This has been estimated at 10% per annum reflecting
the prevailing pre-tax cost of capital in the Company. The growth
rates are based on forecasts and historic margins achieved in
both Adien Limited, QM Systems Limited and TED. For Adien these
have been assessed as 19% growth for revenue in years 1 and 5%
for years 2 and 3 and 2.5% thereafter and 2.5% for overhead growth.
For QM Systems these have been assessed as 1% growth for revenue
in year 1 and 10 % in year 2 and 3 and 5% for years 3 to 5 and
5% for overhead growth. For TED these have been assessed as 27%
growth for revenue in year 1 and 20 % in year 2 and 3 and 5%
for years 3 to 5 and 5% for overhead growth. No terminal growth
rate was applied. The reason for the significant Year 1 revenue
growth in Adien and TED is an expectation based on current trading
and the expected order pipeline.
12 Inventories
Group Company
-------------------- --------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Raw materials 2 87 72 77 69
Finished goods 8 6 79 6 6
3 73 151 83 75
========= ========= ========= =========
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 GBP2,078,000 (2020: GBP2,726,000). For the Parent
company this was GBP16,024 (2020: GBP(3,533)).
13 Trade and other receivables
Group Company
-------------------- ------------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ----------- -----------
Current
1,06
Trade receivables 6 1,010 3 -
Amounts owed by Group undertakings - - 4 05 444
Other Debtors 4 64 3 64 - -
Accrued income 3 - 3 -
Prepayments 2 76 2 80 12 11
1,80
9 1,654 423 455
========= ========= =========== ===========
14 Trade and other payables
Group Company
-------------------- --------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Current
Trade payables 581 528 5 4
Other taxation and social security 5 01 699 5 -
Payments received on account 786 195 - -
Accruals and other creditors 783 527 239 42
2 ,651 1,949 249 46
========= ========= ========= =========
Group Company
--------------------- --------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- --------- ---------
Non-current
Amounts owed to Group undertakings - - 1,629 1,063
Other creditors - 6 - -
- 6 1,629 1,063
=============================================== ========= ========= =========
The performance obligations of the IFRS 15 contract liabilities
(payments received on account) are expected to be met within
the next financial year.
15 Borrowing analysis
Group Company
-------------------- --------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Due within one year
Bank and other loans 269 275 103 -
Directors' loan 1,748 1,718 1,693 1,663
Obligations under lease agreements 139 144 - -
--------- --------- --------- ---------
2,156 2,137 1,796 1,663
========= ========= ========= =========
Due after more than one year
Bank and other loans 628 576 442 400
Directors' loan 2,392 2,403 2,392 2,403
Obligations under lease agreements 185 276 - -
------ ------ ------ ------
3,205 3,255 2,834 2,803
====== ====== ====== ======
Repayable
Due within 1 year 2,156 2,137 1,796 1,663
Over 1 year but less than 2 years 2,576 2,470 2,503 2,349
Over 2 years but less than 5 years 629 785 331 400
------ ------ ------ ------
5,361 5,392 4,630 4,412
====== ====== ====== ======
Directors' loans
Included with Directors' loans and borrowings due within one
year are accrued fees and interest owing to GG Watt of GBP1,643,000
(2020: GBP1,614,000). The accrued fees and interest is repayable on
demand and no interest accrues on the balance.
The director's loan due in more than one year is a loan of
GBP2,339,000 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 GBP1,339,000 (2020: GBP1,349,000) was
outstanding in relation to this loan. During the year to 30 June
2021 GBP130,000 (2020: GBP84,000) was repaid. The Company has the
right to defer payment for a period of 366 days.
On 13 August 2010 the Company issued GBP1 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 GBP1 million and has been recognised in
non-current liabilities of GBP2,339,000.
Pursuant to amendments made on 13 November 2014 and 9 November
2018, 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 2022;
- 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 2022 ("the Repayment Date").
No equity element of the convertible loan stock was recognised
on issue of the instrument as it was not considered to be
material.
Leases
Lease agreements with Close Motor Finance are at a rate of 4.5%
and 5.19% over base rate. The future minimum lease payments under
lease agreements at the year end date was GBP123,382 (2020:
GBP157,119) and GBPnil (2020: GBP14,038). The difference between
the minimum lease payments and the present value is wholly
attributable to future finance charges.
Bank and other loans
Included in bank and other loans is an invoice discounting
facility of GBP142,710 (2020: GBP3,505).
Included in bank and other loans is a secured mortgage of
GBP136,444 which incurs an interest rate of 2.44% over base rate
for 10 years and at a rate of 2.64% over base thereafter. The
mortgage is secured over the freehold property. As a result of
COVID 19, the capital element of the mortgage was deferred for 6
months, extending the mortgage term for 6 months.
As a result of COVID 19, Coronavirus Business Interruption Loan
Scheme (CBILS) became available for the business. This enabled the
group to secure a loan of GBP400,000, on 15 May 2020 and
GBP150,000, on 4 September 2020 for a term of 6 year at a rate of
2.96% with the 1(st) year being interest free and without
repayment. The amount of interest paid during the year was
GBP570.
The business was also able to secure a Bounce Back loan through
Wessex Precision Engineering of GBP24,000 on 5 June 2020, and Utsi
obtained GBP50,000 bounce back loan on 8 April 2021, both with an
interest rate of 2.5% with the 1(st) year being interest free and
without repayment.
2021 Non-cash:
Bought Non-cash: Accrued Carried
forward Cash flows New leases fees/interests forward
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------- ------------- ---------------- ----------
Director loan 4,121 (180) - 199 4,140
Leases 420 (165) 63 6 324
Other 851 36 - 10 897
---------- ------------- ------------- ---------------- ----------
Loans and borrowings 5,392 (309) 63 215 5,361
========== ============= ============= ================ ==========
2020 Non-cash:
Bought Non-cash: Accrued Carried
forward Cash flows New leases fees/interests forward
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------- ------------- ---------------- ----------
Director loan 4,147 (165) - 140 4,121
Leases 370 (170) 194 26 420
Other 285 523 - 43 851
---------- ------------- ------------- ---------------- ----------
Loans and borrowings 4,802 188 194 209 5,392
========== ============= ============= ================ ==========
*Included in working capital adjustments in cash flow statement.
16 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 13 (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 2021, the top 3 customers
comprised 43% (2020: 45.00%) of total trade receivables.
The Group has adopted a policy of only dealing with creditworthy
counterparties and the Group uses its own trading records to rate
its major customers, also the Group invoices in advance where
possible. The Group's exposure and the credit ratings of its
counterparties are continuously monitored and the aggregate value
of transactions concluded is spread amongst approved
counterparties. Having regard to the credit worthiness of the
Groups significant customers the directors believe that the Group
does not have any significant credit risk exposure to any single
counterparty.
An analysis of trade and other receivables
2021 Weighted Gross carrying Impairment
average loss value loss allowance
rate
GBP'000 GBP'000
-------------- --------------- ----------------
Performing 0.00% 1,861 -
2020 Weighted Gross carrying Impairment
average loss value loss allowance
rate
GBP'000 GBP'000
-------------- --------------- ----------------
Performing 0.00% 1,654 -
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 15.
As disclosed in note 15 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 GBP15,000 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:
2021 Due or Due between Due between
due in Due between 3 months-1 1-5 years
less than 1-3 months year Total
1 month
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ------------ ------------ --------
Trade and other
payables 997 197 170 - 1,364
Borrowings 164 95 1,897 3,205 5,361
----------- -------------- ------------ ------------ --------
1,161 292 2,067 3,205 6,725
=========== ============== ============ ============ ========
2020 Due or Due between Due between Due between
due in 1-3 months 3 months-1 1-5 years
less than year Total
1 month
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ------------ ------------ ------------ --------
Trade and other
payables 1,055 - - 6 1,061
Borrowings 55 386 1,696 3,255 5,392
----------- ------------ ------------ ------------ --------
1,110 386 1,696 3,261 6,453
=========== ============ ============ ============ ========
Financial liabilities of the Company are all due within less than
three month with the exception of the intercompany balances that
are due between 1 and 5 years.
Fair value of financial instruments
Loans and receivables are measured at amortised cost. Financial
liabilities are measured at amortised cost using the effective
interest method. The directors consider that the fair value of
financial instruments are not materially different to their carrying
values.
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
be able to move to a position of providing returns for shareholders
and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
The Group manages trade debtors, trade creditors and borrowings
and cash as capital. The entity is meeting its objective for managing
capital through continued support from GG Watt as described per
note 1.
17 Share capital
2021 2021 2020 2020
No. GBP'000 No. GBP'000
----------- -------- ----------- --------
Authorised
Ordinary shares of 1p each 40,000,000 400 40,000,000 400
=========== ======== =========== ========
Allotted and fully paid
Brought forward 34,360,515 344 34,360,515 344
Issued during the year 500,000 5 500,000 5
Carried forward 34,860,515 349 34,860,515 349
=========== ======== =========== ========
Fully paid ordinary shares carry one vote per share and carry
a right to dividends.
12,773,703 (2020:10,903,703) share options were outstanding at
the year end, comprising the 3.07m employee options and the 9,903,703
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 March 2015 and March
2022 500,000 3.75p
Between July 2016 and July
2023 80,000 3.00p
Between November 2019 and 600,000 3.875p
November 2026
Between November 2020 and 300,000 3.75P
November 2027
Between March 2024 and March
2031 1,590,000 8.00p
Directors' share options
No. of options
-------------------------------------
Date from
At start Granted At end of Exercise which exercisable
of year during year price
year
G G Watt - 750,000 750,000 8.00p 18 Mar 2024
S P Padmanathan 200,000 - 200,000 3.875p 15 Nov 2019
S P Padmanathan - 300,000 300,000 8.00p 18 Mar 2024
R MacDonnell - 200,000 200,000 8.00p 18 Mar 2024
The Company's share price at 30 June 2021 was 7.75p. The high
and low during the period under review were 9.38p and 4.00p 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 options and warrants
outstanding at the year end is 6.09 years (2020: 2.89 years).
18 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 - GBP128,531
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:
2021 2020
GBP GBP
---------- --------------
Balance due from:
TED Limited 405,010 377,323
Wessex Precision Engineering Limited - 66,766
Balance due to:
Adien Limited 116,998 53,194
QM Systems Limited 1,369,416 1,009,923
Utsi Electronics Limited 142,283 -
These intergroup balances vary through the flow of working capital
requirements throughout the Group as opposed to intergroup trading.
There is no ultimate controlling party of PipeHawk plc.
19 Government grants
In addition to the Government assistance disclosed in note 15,
the following Government grants were received and has been recognised
during the period:
Group Company
-------------------- --------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Coronavirus Job Retention Scheme
grants 340 175 30 23
340 175 30 23
========= ========= ========= =========
20 Business Combination
On 27 January 2021, the Company acquired 100% of the voting
equity instrument of UTSI Electronics Limited. The Group applies
the acquisition method in accounting for business combinations. The
Consideration transferred by the Group to obtain control of a
subsidiary is calculated as the sum of the acquisition date fair
value of assets transferred, liabilities incurred, and the equity
interests issued by the Group, which includes the fair value of any
asset or liability arising from a contingent consideration
agreement. Acquisition costs are expensed as incurred.
A decision was made to purchase Utsi as its business was
complementary to PipeHawk Technology in terms of its offerings,
markets and technologies .
The Group recognises identifiable assets acquired and
liabilities assumed in a business combination regardless of whether
they have been previously recognised in the acquiree's financial
statements prior to the acquisition. Assets acquired and
liabilities assumed are generally measured at their acquisition
date fair values.
Book Value Adjustment Fair value
GBP'000 GBP'000 GBP'000
Tangible Assets 115 29 144
Stock 49 - 49
Trade receivables 16 - 16
Other debtors 2 - 2
Cash 550 - 550
Trade payables (34) - (34)
Accruals and other creditors (33) - (33)
----------- ----------- -----------
Total 665 - 694
=========== =========== ===========
On acquisition the tangible assets were fair valued to bring the
fair value of the assets in line with the valuation performed by
the external surveyor.
GBP'000
Initial Cash Consideration 508
--------
Deferred Consideration 198
Total Consideration 706
Net assets at acquisition 694
Goodwill 12
========
Copies of Report and Accounts
Copies of the Report and Accounts will be posted to shareholders
later today and will be shortly 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 .
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the annual general meeting (the AGM)
will be held at the offices of Allenby Capital Limited, 5 St
Helen's Place, London, EC3A 6AB at 11 a.m. on 6 December 2021 for
the purpose of considering and, if thought fit, passing the
following resolutions:
Ordinary business
The following resolutions will be proposed as ordinary
resolutions:
1. To receive the accounts for the year ended 30 June 2021
together with the reports of the directors and auditor thereon.
(Resolution 1)
2. To re-appoint Randal McDonnell as Non-Executive Director, who
retires but, being eligible, offers himself for re-election.
(Resolution 2)
3. To re-appoint Crowe U.K. LLP as auditor of the Company and to
authorise the Directors to set their remuneration.
(Resolution 3)
To transact any other ordinary business
Serious loss of capital
To consider whether any, and if so what, steps should be taken
to address the serious loss of capital within the Company, pursuant
to section 656 (1) of the Companies Act 2006.
Registered Office By order of the Board
Manor Park Industrial Estate
Wyndham Street
Aldershot
Hampshire
GU12 4NZ
S P Padmanathan
Dated: 3 November 2021 Secretary
Notes:
1. A member of the Company entitled to attend and vote at the
AGM may appoint one or more proxies to attend and, on a poll, vote
on his/her behalf. A form of proxy for the use of members who are
unable to attend the AGM in person is enclosed. A proxy need not be
a member of the Company. This instrument appointing a proxy and the
power of attorney (if any) under which it is signed, or a
notarially certified copy of that power, must be deposited with the
Company's Registrars, SLC Registrars, P.O.Box 5222, Lancing, BN99
3FG, not less than 48 hours before the time of the General
Meeting.
2. The completion of a proxy does not preclude a member from
attending the AGM and voting in person.
3. As permitted by Regulation 41 of the Uncertified Securities
Regulations 2001, only those shareholders who are registered on the
Company's Register of Members at 18.00 on 2nd December 2021 shall
be entitled to attend the Annual General Meeting and to vote in
respect of the number of ordinary shares in their names at that
time. Changes to entries on the register of members after 18.00 on
2nd December 2021 shall be disregarded in determining the rights of
any person to attend/or vote at the AGM.
4. Copies of all the Directors' service contracts are available
for inspection at the Company's registered office during normal
business hours on business days from the date of this notice until
the close of the AGM and will be available for inspection at the
place of the AGM for 15 minutes before the AGM and during the
AGM.
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END
FR KZMGMLZZGMZM
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November 03, 2021 03:00 ET (07:00 GMT)
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