TIDMPIP
RNS Number : 8454H
PipeHawk PLC
29 November 2022
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.
29 November 2022
PipeHawk plc
("PipeHawk", "Company" or the "Group")
Final Results for the year ended 30 June 2022
Highlights
- Turnover of GBP6.2 million, a decrease of 7.5% (2021: GBP6.7 million)
- Loss before taxation for the financial year of GBP1,576,000 (2021: profit GBP79,000)
- QM Systems completed a move into a modern and far larger
facility on the Hartlebury Trading Estate, providing approx. 200%
more office space and 600% more manufacturing capacity
- TED has moved into a significantly larger premises and since
the financial year end has signed a global distribution memorandum
of understanding with Unipart Rail Limited
The Group reported an operating loss in the year ended 30 June
2022 (the "financial year" and the "2021/22 FY") of GBP1,312,000
(2021: GBP257,000), a loss before taxation for the financial year
of GBP1,576,000 (2021: profit GBP79,000) and a loss after taxation
of GBP868,000 (2021: profit GBP 522,000 ). T urnover for the
financial year reduced to GBP6.2million (2021: GBP6.7 million) .
The loss per share for the financial year was 2.42p (2021: profit
1.50p).
In line with the outlook expressed in my Chairman's Statement
last year, like others in the industry, we have been faced with
difficult market conditions this financial year. As outlined on 24
March 2022 in the Group's unaudited results for the six months
ended 31 December 2021 this has been an extremely challenging year.
Just when we thought we were getting over the vicissitudes of the
Coronavirus ("COVID-19") pandemic with its consequent delays caused
by material shortages, extended lead times and increased costs, all
suffered without the furlough buffer - then Russia invades the
Ukraine, fuel costs soar and suddenly the world realises that
energy is the key to our standard of living and economic livelihood
at all levels.
As a consequence, the Group continued to see decisions across
all levels of the chain be deferred and/or delayed throughout the
financial year. The impact of the delay in receiving contract
decisions continued to impact the Group right up to late September
2022. However, following September 2022, the Group has seen a
number of larger orders that have previously been in abeyance for
several months placed. In addition, the Group notes a shift in
market sentiment, namely, that there appears to be a general
willingness to actively re-engage and commit to forward-looking
business decisions (as opposed to remaining in tick-over mode).
Despite the disappointing results for the financial year, the
directors believe, for the reasons outlined above, that this merely
represents a temporary blip in our growth trajectory.
Notwithstanding this result, this financial year has been critical
for the Group as seen by our underlying positive direction of
travel. In addition, we have invested significantly to be able to
take advantage of the opportunities evident from our groundwork.
Not only have we expanded Thomson Engineering Design's ("TED")
footprint fourfold (we have decided to retain, and rebuild its
original premises whilst retaining its new premises, as we foresee
the need for further growth), QM Systems Limited ("QM") footprint
has increased fivefold, and a new line to QM business, contract
manufacturing, has been established. Lastly, Adien is now fully
engaged in 5G work and the integration of Utsi and PipeHawk's
technology bodes well for the future.
I am confident therefore that the future looks very
promising.
QM Systems
QM Systems has completed a challenging financial year where for
a large part of that time the orderbook has been significantly
below management expectation. This trend continued longer than
expected into the 2021/22 FY resulting in the inability of QM
Systems to pull through the expected level of revenue and profit.
It does seem as though the effect of the pandemic eventually
rippled through QM Systems later than initially anticipated. In
addition, following Russia's invasion of the Ukraine, decision
makers decided to defer making capital commitments, which
manifested into expected orders being delayed by several
months.
During the second half of the financial year, QM Systems
completed a move into a modern and far larger facility on the
Hartlebury Trading Estate. The move expands the available
facilities from approximately 8,000 sq ft to approximately 45,000
sq ft; providing approx. 200% more office space and 600% more
manufacturing capacity. The move was required to facilitate not
only the anticipated growth in the company's project business but
also the housing of the newly established contract manufacturing
business unit. In addition, QM Systems has secured two
manufacturing contracts with both expected to begin operation with
manufactured product towards the end of the current 2022/23 FY.
Both contract manufacturing projects bring the capacity for rapid
growth in a new and exciting direction for QM Systems. Inevitably a
move to a new facility of this size and scale brings commercial
challenges and has required significant investment. In this regard,
QM have invested over GBP750k in securing and fitting out the new
facility to a very high standard.
Looking ahead, I am pleased to report that as we approached the
end of the previous 2021/22 FY and entered the current FY order
enquiries have increased dramatically. A number of projects that
have been slow to gestate have now arrived resulting in an order
intake for the first four months of the current FY alone at QM
Systems being in excess of GBP3 million. Historically, this is an
unprecedented order intake in such a short period of time and
should enable QM Systems to rapidly recover the ground lost during
the 2021/22 FY. In addition to orders received the order pipeline
has again returned to a very healthy level with further significant
order intake expected through the second quarter of the current FY
and anticipated for the following quarter. It is also important to
recognise that the projects won are sizeable projects that are
expected to run across several months. This brings a further level
of stability to QM Systems project business. To support the
significant growth in the QM Systems projects business a number of
new roles have been advertised for and subsequently filled across
the engineering, projects and sales departments during the first
third of the current FY. In addition to recruitment to support the
project business the start and growth of the contract manufacturing
business will see approximately 30 new employees join the QM
Systems team over the next few months to support the production and
administration activities required across the three contract
manufacturing projects.
As a result of the above I fully expect to see QM Systems
recover to a position of significant growth in both sales and
profit during this current FY whilst securing a stable platform
from which healthy growth can continue for the foreseeable
future.
Thomson Engineering Design ("TED")
Revenue at Thomson Engineering Design ("TED") continued to grow
into this financial year, with the best quarter on record achieved
during the final quarter of the financial year. Revenue for
FY2021/22 compared with the previous financial increased from
approx. GBP1.2 million to GBP1.4 million (representing a circa16%
increase). This did not however translate through into profit with
a loss before taxation of GBP57k.
There are three key drivers within the year resulting in the
reduction in profit versus expectation. The first is the
significant upwards inflationary pressure regarding raw material
cost which skewed the material content to be considerably higher
than previous years. The second key factor was rising facility
costs and investment into the new premises required during the
2021/22 FY. The third factor is that whilst we received a rent-free
period in order to settle into and upgrade the new premises there
is an accounting standard which requires us to amortise that rent
free period over the life of the lease. The first two issues have
been addressed through re-balancing margin on material and labour
to accommodate higher material content and to provide for increased
overhead recovery. The third is a non-cash cost in the short
term.
Order intake at TED during the current 2022/23 FY continues to
be strong, predominantly focused on the UK market with some export.
Post the financial year, on 20 September 2022, TED entered into a
memorandum of understanding with Unipart Rail Limited ("Unipart
Rail"), a global retailer of Rail equipment for Unipart Rail to be
the exclusive partner for sales and distribution of TED rail
equipment into territories in Europe, Asia, New Zealand, Australia
and the Americas. This enables TED to facilitate its strategy for
global growth by utilising an established and well-respected
distribution partner. Unipart and TED jointly attended the
InnoTrans Expo in Berlin to launch the new partnership, where a
number of key TED products have been on display to premium rail
clients. Since the year end, TED has also entered into a
partnership with a key client to provide rail conversions for
Kawasaki Utility vehicles. This innovative approach allows capital
outlay and emissions to be significantly reduced and eliminates the
need to use high-cost excavators when carrying smaller loads and
tools. We expect this partnership to add substantial additional
revenue potential to TED's current portfolio over the next few
years.
Overall, having taken measures to address profitability the
future for TED both in the UK and the wider global market appears
significantly positive.
Adien
After a very promising start last year's results ended with a
disappointing loss of GBP15k due to work volumes dropping in the
last few months of the year. This was, mainly due to continually
delayed starts from the 5G telecom sector. The order lethargy
continued into July and August this year, but has picked up
dramatically since the start of September.
Adien now supplies the majority of the key contractors to the
telecom providers.
Adien's Ministry of Defence projects are also starting to come
on stream after a slow start following the renewal of the framework
contracts in April this year. Similarly, Scottish & Southern
Electricity Networks has recently put significant funding in place
which will allow us to progress with their larger sites.
Positively, clients in the construction and infrastructure
sectors are showing increased activity both in volume of the orders
placed and enquiries for new projects.
Hybrid working for staff in the Doncaster office and the
rationalisation of the Scottish operation has resulted in
efficiencies, cost reductions and reduced travel times as well as a
reduction in the carbon footprint of the business.
Recent investment in new vehicles that are more efficient, cost
effective, greener and continued investment in new hardware and
software for the computer-aided design as well as field teams
ensure Adien is able to survey and process data effectively to all
our clients' various requirements.
The outlook for the current year remains positive.
UTSI
As enquiry levels have steadily risen through the 2022 calendar
year, so too have material costs, component shortages and delivery
timescales with the resulting lengthening transition times between
enquiry, order and payment making the business of doing business,
severely challenging. Sales of our flagship products; those
manufactured and ordered in the largest quantities, have been most
disrupted by the continuing supply delays, whereas those for more
specialist, made to order products and those requiring bespoke
alteration, have been less affected. Moving from just in time
supply to just in case, namely, the increased stockholding of major
"at risk" and "long lead time" components will reduce exposure to
the worst supply chain excesses over the medium term. However, this
change in approach has had a notable immediate effect on UTSI's
cashflow and profits in the short term. While external R&D
opportunities remain in recovery, bringing forward internal R&D
timescales has offered a way towards achieving near term cost
savings as tighter integration of existing PipeHawk & UTSI's
product lines, becomes possible, whilst also offering the promise
of attractive hybrid hardware/software solutions on the near
horizon. While UTSI continues to seek out new opportunities, new
partners and new markets, the restrictions imposed by global supply
chain issues are expected to remain a significant limiting factor
into the second half of 2022 and beyond.
Financial position
The Group continues to be in a net liability position and is
still reliant on my continuing financial support.
My letter of support dated 6 September 2021 was renewed on 11
October 2022 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 on 30 June 2022 and extended on identical terms, such that
the CULS are now repayable on 13 August 2026.
In addition to the loans I have provided to the Company in
previous years, I have deferred a certain proportion of fees and
the interest due until the Company is in a suitably strong position
to make the full payments.
Historically, my fees and interest payable have been deferred.
During the year under review, the deferred element amounted to
GBP160,000. At 30 June 2022, these deferred fees and interest
amounted to approximately GBP1.8 million in total, all of which
have been recognised as a liability in the Company's accounts.
Strategy & Outlook
The Group remains committed to creating sustainable
earnings-based growth and focusing on the expansion of its business
with forward-looking products and services. PipeHawk acts
responsibly towards its shareholders, business partners, employees,
society and the environment in each of its business areas.
PipeHawk is committed to technologies and products that unite
the goals of customer value and sustainable development. In light
of market conditions, all divisions of the Group are currently
performing well and I remain optimistic in my outlook for the
Group.
Gordon Watt
Chairman
Date: 28 November 2022
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
30 June 30 June
Note 2022 2021
GBP'000 GBP'000
--------- ---------
Revenue 2 6,191 6,665
Staff costs 5 (3,861) (3,478)
Operating costs (3,642) (2,930)
--------- ---------
Operating (loss) / profit 4 (1,312) 257
Profit / (loss) before interest and
taxation (1,312) 257
--------- ---------
Finance costs 3 (264) (178)
--------- ---------
(Loss) / profit before taxation (1,576) 79
Taxation 7 708 443
(Loss) / profit for the year attributable
to equity holders of
the parent (868) 522
========= =========
Other comprehensive income - -
Total comprehensive (Loss) / profit for
the year attributable to
equity holder of the parent (868) 522
========= =========
(Loss) / profit per share (pence) -
basic 8 (2.42) 1.50
(Loss) / profit per share (pence) -
diluted 8 (2.42) 0.80
The notes form an integral part of these financial
statements.
Consolidated Statement of Financial Position
at 30 June 2022
30 June 30 June
Note 2022 2021
GBP'000 GBP'000
--------- ---------
Assets
Non-current assets
Property, plant and equipment 9 828 528
Right of use 10 2,549 363
Goodwill 11 1,357 1,357
--------- ---------
4,734 2,248
--------- ---------
Current assets
Inventories 13 340 373
Current tax assets 710 442
Trade and other receivables 14 2,389 1,809
Cash and cash equivalents 4 920
--------- ---------
3,443 3,544
Total assets 8,177 5,792
========= =========
Equity and liabilities
Equity
Share capital 18 363 349
Share premium 5,316 5,215
Retained earnings (8,647) (7,784)
--------- ---------
(2,968) (2,220)
--------- ---------
Non-current liabilities
Borrowings 16 5,612 3,205
5,612 3,205
--------- ---------
Current liabilities
Borrowings 16 2,674 2,156
Trade and other payables 15 2,859 2,651
5,533 4,807
Total equity and liabilities 8,177 5,792
========= =========
The notes form an integral part of these financial
statements.
Consolidated Statement of Cash Flow
For the year ended 30 June 2022
Note 30 June 30 June
2022 2021
GBP'000 GBP'000
--------- ---------
Cash flows from operating activities
(Loss) / profit from operations (1,312) 257
Adjustments for:
Depreciation 4 424 192
---------
(888) 449
Decrease / (increase) in inventories 33 (171)
Decrease / (increase) in receivables (580) (136)
Increase/(decrease) in liabilities 286 581
--------- ---------
Cash generated/(used) by operations (1,149) 723
Interest paid (124) (50)
Corporation tax received 440 394
--------- ---------
Net cash generated from / (used in)
operating activities (833) 1,067
--------- ---------
Cash flows from investing activities
Acquisition of subsidiary net of cash
acquired - 42
Purchase of plant and equipment (325) (130)
---------
Net cash used in investing activities (325) (88)
--------- ---------
Cash flows from financing activities
Proceeds / (repayments) from borrowings 286 339
Proceeds / (repayments) of loan 119 (483)
Repayment of leases (163) (165)
--------- ---------
Net cash (used in)/generated from financing
activities 242 (309)
--------- ---------
Net (decrease)/increase in cash and
cash equivalents (916) 670
Cash and cash equivalents at the beginning
of year 920 250
---------
Cash and cash equivalents at end of
year 4 920
========= =========
The notes form an integral part of these financial
statements.
Statement of Changes in Equity
For the year ended 30 June 2022
Share premium Retained
Share capital account earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------------- ---------- --------
As at 1 July 2020 349 5,215 (8,301) (2,737)
Profit / (loss) for the
year - - 522 522
Total comprehensive income - - 522 522
Issue of shares - - - -
---------------- -------------- ---------- --------
As at 30 June 2021 349 5,215 (7,779) (2,215)
================ ============== ========== ========
Profit / (loss) for the
year - - (868) (868)
Total comprehensive income (868) (868)
Issue of shares 14 101 - 115
As at 30 June 2022 363 5,316 (8,647) (2,968)
================ ============== ========== ========
The share premium account reserve arises on the issuing of
shares. Where shares are issued at a value that exceeds their
nominal value, a sum equal to the difference between the issue
value and the nominal value is transferred to the share premium
account reserve.
The notes form an integral part of these financial
statements.
1 Summary of significant accounting policies
1.1. General information
PipeHawk plc (the Company) is a limited company incorporated in
the United Kingdom under the Companies Act 2006. The addresses of
its registered office and principal place of business are disclosed
in the company information on page 3 of the Report and Accounts.
The principal activities of the Company and its subsidiaries (the
Group) are described on page 9 of the Report and Accounts.
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 2022 the Company recorded a net loss after
taxation of GBP282,000 (2021: GBP236,000).
1.2. Basis of preparation
The financial statements have been prepared in accordance with
UK-adopted international accounting standards (IAS) The principal
accounting policies are set out below.
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 G G Watt to provide ongoing
financial support for a period of at least twelve months from the
approval date of the Group and Parent Company statement of
financial positions. The directors therefore have a reasonable
expectation that the entity has adequate resources to continue in
its operational exercises for the foreseeable future. It is on this
basis that the directors consider it appropriate to adopt the going
concern basis of preparation within these financial statements.
However a material uncertainty exists regarding the ability of the
Group and Parent Company to
remain a going concern without the continuing financial support of the Executive Chairman.
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 is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment
losses.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash-generating units expected to benefit from
the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the
unit. An impairment loss recognised for goodwill is not reversed in
a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
1.7. Revenue recognition
For the year ended 30 June 2022 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
reasonably certain to exercise that option based on operational
needs and contractual terms. Subsequently, the lease liability is
measured at amortised cost by increasing the carrying amount to
reflect interest on the lease liability, and reducing it by the
lease payments made. The lease liability is remeasured when the
Group changes its assessment of whether it will exercise an
extension or termination option.
Right-of-use assets are initially measured at cost, comprising
the initial measurement of the lease liability adjusted for any
lease payments made at or before the commencement date, lease
incentives received and initial direct costs. Subsequently,
right-of-use assets are measured at cost, less any accumulated
depreciation and any accumulated impairment losses, and are
adjusted for certain remeasurement of the lease liability.
Depreciation is calculated on a straight-line basis over the
length of the lease. The Group has elected to apply exemptions for
short-term leases and leases for which the underlying asset is of
low value. For these leases, payments are charged to the income
statement on a straight-line basis over the term of the relevant
lease. Right-of-use assets are presented within non-current assets
on the face of the statement of financial position, and lease
liabilities are shown separately on the statement of financial
position in current liabilities and non-current liabilities
depending on the maturity of the lease payments.
Under IFRS16, right-of-use assets will be tested for impairment
in accordance with IAS36 Impairment of Assets.
Payments associated with short-term leases are recognised on a
straight-line basis as an expense in the profit or loss. Short term
leases are leases with a lease term of 12 months or less.
1.14. Pension scheme contributions
Pension contributions are charged to the statement of
comprehensive income in the period in which they fall due. All
pension costs are in relation to defined contribution schemes.
1.15. Share based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. Details regarding the
determination of the fair value of equity-settled share-based
transactions are set out in note 18.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest. At each statement of
financial position date, the Group revises its estimate of the
number of equity instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised in profit
or loss over the remaining vesting period, with a corresponding
adjustment to reserves.
1.16. Foreign currencies
Monetary assets and liabilities denominated in foreign
currencies are translated into sterling at the rates of exchange
ruling at 30 June. Transactions in foreign currencies are recorded
at the rates ruling at the date of the transactions.
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
GBP1,357,000 (2021: GBP1,357,000). The investment in subsidiaries
at the year-end was GBP1,903,000 (2021: GBP1,903,000).
The methodology adopted in assessing impairment of Goodwill is
set out in note 11 as is the sensitivity analysis applied in
relation to the outcomes of the assessment.
Impairment investment in subsidiaries and inter-company
receivables
As set out in note 12, an impairment assessment of the carrying
value of investments in subsidiaries and inter-company receivables
is in line with the methodologies adopted in the assessment of
impairment of goodwill.
2 Segmental analysis
2022 2021
GBP'000 GBP'000
--------- ---------
Turnover by geographical market
United Kingdom 5,627 6,103
Europe 243 172
Other 321 390
--------- ---------
6,191 6,665
========= =========
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.
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 Development, Automation
detection assembly and test
and mapping and sale system
services of GPR equipment solutions Total
GBP'000 GBP'000 GBP'000 GBP'000
------------- ------------------ ----------- --------
Year ended 30 June 2022
Total segmental revenue 1,453 246 4,492 6,191
------------- ------------------ ----------- --------
Operating profit/(loss) 21 (323) (1,010) (1,312)
Finance costs (36) (171) (57) (264)
(Loss) / profit before
taxation (15) (494) (1,067) (1,576)
------------- ------------------ ----------- --------
Segment assets 655 1,924 5,598 8,177
Segment liabilities 628 5,226 5,442 11,296
Non-current asset additions 17 55 2,941 3,013
Depreciation and amortisation 106 3 316 425
============= ================== =========== ========
Utility Development, Automation
detection assembly and test
and mapping and sale system
services 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
============= ================== =========== ========
3 Finance costs
2022 2021
GBP'000 GBP'000
--------- ---------
Interest payable 264 178
--------- ---------
264 178
========= =========
Interest payable comprises interest on:
Leases 69 25
Directors' loans 140 129
Other 55 24
--------- ---------
264 178
========= =========
4 Operating profit for the year
This is arrived at after charging for the Group:
2022 2021
GBP'000 GBP'000
--------- ---------
Research and development costs not capitalised 2,333 2,285
Depreciation 424 192
Auditor's remuneration
Fees payable to the Company's auditor for the
audit of the Group's financial statements 45 45
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 352 156
========= =========
The Company audit fee is GBP9,000 (2021: GBP9,000).
5 Staff costs
2022 2021
No. No.
----- -----
Average monthly number of employees,
including directors:
Production and research 79 78
Selling and research 9 10
Administration 7 5
-----
95 93
===== =====
2022 2021
GBP'000 GBP'000
-------- --------
Staff costs, including directors:
Wages and salaries 3,387 3,032
Social security costs 361 350
Other pension costs 113 96
--------
3,861 3,478
======== ========
6 Directors' remuneration
Salary Benefits 2022 2021
and fees in kind Total Total
GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- -------- --------
G G Watt 71 - 71 71
S P Padmanathan 58 8 66 72
R MacDonnell 2 - 2 2
---------- --------- -------- --------
Aggregate emoluments 131 8 139 145
========== ========= ======== ========
Directors' pensions 2022 2021
No. No.
----- -----
The number of directors who are accruing
retirement benefits under:
Defined contributions policies 1 1
===== =====
The directors represent key management personnel.
Refer to note 18 for details of directors share options.
7 Taxation
2022 2021
GBP'000 GBP'000
--------------- --------------
United Kingdom Corporation Tax
Current taxation (708) (435)
Adjustments in respect of prior years - (8)
--------------- --------------
(708) (443)
Deferred taxation - -
--------------- --------------
Tax on profit / (loss) (708) (443)
--------------- --------------
Current tax reconciliation
Taxable profit / (loss) for the year (1,576) 79
--------------- --------------
Theoretical tax at UK corporation
tax rate 19% (2021: 19%) (289) 15
Effects of:
R&D tax credit adjustments (350) (428)
Fixed asset timing differences (101) -
Not deductible for tax purposes 2 (12)
Deferred tax not recognised 45 28
Adjustments in respect of prior
years 1 (18)
Utilisation of losses - (27)
Short term timing differences (16) (1)
--------------- --------------
Total income tax credit (708) (443)
=============== ==============
The Group has tax losses amounting to approximately GBP3,033,706
(2021: GBP3,008,408), 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
GBP576,404 (2021: GBP541,065).
8 Loss / profit per share
Basic (pence per share) 2022 - Loss 2.42 profit per share; 2021
- 1.50 profit per share
This has been calculated on a loss of GBP868,000 (2021: Profit
GBP522,000) and the number of shares used was 35,812,823 (2021:
34,860,515) being the weighted average number of shares in issue
during the year.
Diluted (pence per share) 2022 - 2.42 loss per share; 2021 -
0.80 profit per share
In the current year the potential ordinary shares included in
the weighted average of shares are anti-dilutive and therefore
diluted earnings per share is equal to basic earnings per share.
The prior year calculation used earnings of GBP442,000 being
the profit for the year plus the interest paid on the convertible
loan note (net of 20% tax) of GBP80,000 and the number of shares
used was 55,344,987 being the weighted average number of shares
outstanding during the year of 34,860,515 adjusted for shares
deemed to be issued for no consideration relating to options
and warrants and the impact of the convertible instrument.
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 2021 426 1,233 143 268 2,070
Additions - 97 331 - 428
Disposals - - - (31) (31)
Write off - (10) - - (10)
At 30 June 2022 426 1,320 474 237 2,457
----------- -------------- --------------- ----------- --------
Depreciation
At 1 July 2021 40 1,091 143 268 1,542
Charged in year 5 94 25 - 124
Disposals - - - (31) (31)
Write off - (6) - - (6)
At 30 June 2022 45 1,179 168 237 1,629
----------- -------------- --------------- ----------- --------
Net book value
At 30 June 2022 381 141 306 - 828
=========== ============== =============== =========== ========
At 30 June 2021 386 142 - - 528
=========== ============== =============== =========== ========
The net book value of the property, plant and equipment includes
GBP2,549,000 (2021: GBP363,000) 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 GBP314,000 (2021: GBP138,000)
- see note 10.
10 Right of use
Equipment,
fixtures Leasehold Motor
Freehold and fittings improvements vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- --------------- ----------- --------
Cost
At 1 July 2021 248 250 - 147 645
Additions 2,416 - 168 - 2,584
Disposal (84) (14) (98)
At 30 June 2022 2,580 236 168 147 3,131
----------- -------------- --------------- ----------- --------
Depreciation
At 1 July 2021 101 109 - 73 283
Charged in year 198 47 12 42 299
Disposal - - - - -
At 30 June 2022 299 156 12 115 582
----------- -------------- --------------- ----------- --------
Net book value
At 30 June 2022 2,281 80 156 32 2,549
=========== ============== =============== =========== ========
At 30 June 2021 147 142 - 74 363
=========== ============== =============== =========== ========
11 Goodwill
Goodwill Total
GBP'000 GBP'000
--------- ---------
Cost
At 1 July 2021 1,357 1,357
Additions - -
--------- ---------
At 30 June 2022 1,357 1,357
========= =========
Impairment
As at 30 June 2021 and 30 - -
June 2022
========= =========
Net book value
At 30 June 2022 1,357 1,357
========= =========
At 30 June 2021 1,357 1,357
========= =========
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 rate assumptions are based on forecasts and historic
margins.
* Adien these have been assessed as 22% growth for
revenue in years 1 and 5% for years 2 and 3, 2.5%
thereafter.
* UTSI and PipeHawk combined these have been assessed
as 15% for growth for revenue in year 1 and 55.2% for
year 2, 65.9% for year 3, 35% for year 4, 8% year 5.
* QM have been assessed largely based on the current
orderbook, in addition to the expected orderbook. The
business has seen significant growth in order intake
and has received confirmed orders in the first four
months exceeding GBP3million. Management is expecting
to convert a strong pipeline into orders which would
see a 300% increase in year 1, a 183% increase in
year 2. This is followed by an expected 10 % in year
3 and 4 and 5% for years 5.
* TED these have been assessed as 26% growth for
revenue in year 1, 10% growth in years 2 and 3 and 5%
thereafter. The reason for the significant Year 1
revenue growth in Adien, QM and TED is an expectation
based on current trading and the expected order
pipeline.
12 Non-current investments
Parent and
Group interest
in ordinary Country of
Subsidiary shares and incorporation Principal activity
voting rights
----------------------------- ---------------- ---------------- ----------------------
Adien Ltd 100% England & Wales Specialist surveying
QM Systems Ltd 100% England & Wales Test solutions
Thomson Engineering 100% England & Wales Specialist in railway
Design Ltd equipment
Wessex Precision Instruments 100% England & Wales Slip test solutions
Ltd
Utsi Electronics Ltd 100% England & Wales GPR equipment
Wessex Test Equipment 100% England & Wales Dormant
Ltd (formerly Tech Sales
Services Ltd)
Minehawk Ltd 100% England & Wales Dormant
An impairment assessment was performed in line with the assessment
of goodwill, see note 11 for further details. On the basis of
this assessment no impairment of the investment was required
at 30 June 2022.
The registered office of all of the above named subsidiaries,
except Thomson Engineering Design Ltd and Utsi Electronics Ltd
is Manor Park Industrial Estate, Wyndham Street, Aldershot, Hampshire,
GU12 4NZ.
The registered office of Thomson Engineering Design Ltd is Units
2a & 3 Crabtree Road, Forest Vale Industrial Estate
Cinderford, Gloucestershire, United Kingdom, GL14 2YQ
The registered office of Utsi Electronics Ltd is Unit 26, Glenmore
Business Park, Ely Road, Waterbeach, Cambridge, Cambridgeshire,
CB25 9PG.
13 Inventories
2022 2021
GBP'000 GBP'000
--------- ---------
Raw materials 150 287
Finished goods 190 86
340 373
========= =========
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 GBP1,886,000 (2021: GBP2,078,000). For the Parent
company this was GBP41,612 (2021: GBP16,024).
14 Trade and other receivables
2022 2021
GBP'000 GBP'000
--------- ---------
Current
Trade receivables 1,261 1,066
Amounts owed by Group undertakings - -
Other Debtors 522 4 64
Accrued income 332 3
Prepayments 274 2 76
2,389 1,809
========= =========
15 Trade and other payables
2022 2021
GBP'000 GBP'000
--------- ---------
Current
Trade payables 972 581
Other taxation and social security 447 5 01
Payments received on account 839 786
Accruals and other creditors 601 783
2 ,859 2 ,651
========= =========
2022 2021
GBP'000 GBP'000
--------- ---------
Non-current
Amounts owed to Group undertakings - -
Other creditors - -
- -
========= =========
The performance obligations of the IFRS 15 contract liabilities
(payments received on account) are expected to be met
within the next financial year.
16 Borrowing analysis
2022 2021
GBP'000 GBP'000
--------- ---------
Due within one year
Bank and other loans 708 269
Directors' loan 1,644 1,748
Obligations under lease agreements 322 139
--------- ---------
2,674 2,156
========= =========
Due after more than one year
Bank and other loans 491 628
Directors' loan 2,751 2,392
Obligations under lease agreements 2,370 185
------ ------
5,612 3,205
====== ======
Repayable
Due within 1 year 2,729 2,156
Over 1 year but less than 2 years 3,249 2,576
Over 2 years but less than 5
years 2,361 629
--------- --------
8,339 5,361
========= ========
Directors' loans
Included with Directors' loans and borrowings due within one
year are accrued fees and interest owing to G G Watt of
GBP1,644,000 (2021: GBP1,643,000). 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
GBP2,750,000 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 GBP1,750,000 (2021: GBP1,339,000) was
outstanding in relation to this loan. During the year to 30 June
2022 GBP200,000 (2021: GBP130,000) 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 GBP1million and has been recognised in
non-current liabilities of GBP2,750,000.
Pursuant to amendments made on 13 November 2014 and 9 November
2018, and 30 June 2022 the principal terms of the CULS are as
follows:
- The CULS may be converted at the option of Gordon Watt at a
price of 3p per share at any time prior to 13 August 2026;
- Interest is payable at a rate of 10 per cent per annum on the
principal amount outstanding until converted, prepaid or repaid,
calculated and compounded on each anniversary of the issue of the
CULS. On conversion of any CULS, any unpaid interest shall be paid
within 20 days of such conversion;
- The CULS are repayable, together with accrued interest on 13
August 2026 ("the Repayment Date").
No equity element of the convertible loan stock was recognised
on issue of the instrument as it was not considered to be
material.
Leases
The future minimum lease payments under lease agreements at the
year end date was GBP206,033 (2021: GBP123,382). The difference
between the minimum lease payments and the present value is wholly
attributable to future finance charges.
2022 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 4,140 119 - 187 4,446
Leases 324 (163) 2,584 (53) 2,692
Other 897 286 - 18 1,201
---------- ------------- ------------- ---------------- ----------
Loans and borrowings 5,361 242 2,584 152 8,339
========== ============= ============= ================ ==========
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
========== ============= ============= ================ ==========
17 Financial instruments
The Group uses financial instruments, which comprise cash and
various items, such as trade receivables and trade payables
that arise from its operations. The main purpose of these financial
instruments is to finance the Group's operations.
The main risks arising from the Group's financial instruments
are credit risk, liquidity risk and interest rate risk. A number
of procedures are in place to enable these risks to be controlled.
For liquidity risk these include profit/cash forecasts by business
segment, quarterly management accounts and comparison against
forecast. The board reviews and agrees policies for managing
this risk on a regular basis.
Credit risk
The credit risk exposure is the carrying amount of the financial
assets as shown in note 14 (with the exception of prepayments
which are not financial assets) and the exposure to the cash
balances. Of the amounts owed to the Group at 30 June 2022,
the top 3 customers comprised 34% (2021: 43.00%) 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:
2022 Weighted Gross carrying Impairment
average loss value loss allowance
rate
GBP'000 GBP'000 GBP'000
-------------- --------------- ----------------
Performing 0.00% 1,809 -
2021 Weighted Gross carrying Impairment
average loss value loss allowance
rate
GBP'000 GBP'000
--------------- --------------- ----------------
Performing 0.00% 1,861 -
Interest rate risk
The Group finances its operations through a mixture of shareholders'
funds and borrowings. The Group borrows exclusively in Sterling
and principally at fixed and floating rates of interest and
are disclosed at note 16.
As disclosed in note 16 the Group is exposed to changes in interest
rates on its borrowings with a variable element of interest.
If interest rates were to increase by one percentage point the
interest charge would be 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:
2022 Less than Due between Due between
1 year 1-2 years 2 - 5+ years Total
GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------ -------------- --------
Trade and other
payables 1,876 - - 1,576
Borrowings 2,405 2,887 355 5,647
Lease liability 322 363 2,007 2,692
---------- ------------ -------------- --------
4,603 3,250 2,362 10,215
========== ============ ============== ========
2021 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 997 197 170 - 1,364
Borrowings 164 95 1,897 3,205 5,361
----------- ------------ ------------ ------------ --------
1,161 292 2,067 3,205 6,725
=========== ============ ============ ============ ========
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 G G Watt as described per
note 1.
18 Share capital
2022 2022 2021 2021
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 34,860,515 349 34,360,515 344
Issued during the year 1,452,308 14 500,000 5
Carried forward 36,312,823 363 34,860,515 349
=========== ======== =========== ========
Fully paid ordinary shares carry one vote per share and carry
a right to dividends.
11,773,703 (2021: 12,773,703) share options were outstanding
at the year end, comprising the 1.12m employee options and the
10,653,703 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 Exercise price
shares
Between July 2016 and July
2023 80,000 3.00p
Between November 2019 and 400,000 3.875p
November 2026
Between November 2020 and 300,000 3.75p
November 2027
Between March 2024 and March
2031 1,290,000 8.00p
Directors' share options
Number of options
--------- -------------------------------- --------- ------------
Directors' Granted Lapsed Date from
share options At during during At end Exercise which
start the year the year of year price exercisable
of year
-------- --------- ---------- ---------- --------- ------------
18 Mar
G G Watt 750,000 - 750,000 8.0p 2024
S P Padmanathan 200,000 (200,000) - 3.9p
S P Padmanathan 300,000 (300,000) - 8.0p
18 Mar
R MacDonnell 200,000 - 200,000 8.0p 2024
The Company's share price at 30 June 2022 was 16.5p. The high
and low during the period under review were 37p and 5.6p respectively.
In addition to the above, in consideration of loans made to the
Company, G G Watt has warrants over 3,703,703 ordinary shares
at an exercise price of 13.5p and a further 6,000,000 ordinary
shares at an exercise price of 3.0p.
The weighted average contractual life of share options outstanding
at the year end is 7.09 years (2021: 6.87 years).
19 Related party transactions
Directors' loan disclosures are given in note 16. The interest
payable to directors in respect of their loans during the year
was:
G G Watt - GBP140,005
The directors are considered the key management personnel of
the Company. Remuneration to directors is disclosed in note 6.
There is no ultimate controlling party of PipeHawk plc.
20 Government grants
In addition to the Government assistance disclosed in note 16,
the following Government grants were received and has been recognised
during the period:
2022 2021
GBP'000 GBP'000
--------- ---------
Coronavirus Job Retention Scheme
grants 48 340
48 340
========= =========
21 Copies of Report and Accounts
Copies of the Report and Accounts will be posted to shareholders
later today and will be available from the Company's registered
office, Manor Park Industrial Estate, Wyndham Street, Aldershot,
Hampshire GU12 4NZ and from the Company's website www.pipehawk.com
.
22 Notice of Annual General Meeting
The Report and Accounts will include a notice that the annual
general meeting will be held at the offices of Allenby Capital
Limited, 5 St Helen's Place, London, EC3A 6AB at 11:30 am. on 22
December 2022.
.
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END
FR PPGQWGUPPGRR
(END) Dow Jones Newswires
November 29, 2022 02:00 ET (07:00 GMT)
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