TIDMPIP

RNS Number : 7190G

PipeHawk PLC

19 March 2020

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR").

19 March 2020

PipeHawk plc

("PipeHawk" or the "Company")

Unaudited results for the six months ended 31 December 2019

Chairman's Statement

I am pleased to report that the Company's turnover in the six months ended 31 December 2019 was GBP4,518,000 (H1 2019: GBP2,901,000), an increase of 56 per cent over the comparable period last year, resulting in a profit before taxation of GBP111,000 (H1 2019: loss of GBP164,000) and a profit after taxation of GBP283,000 (H1 2019: GBP12,000). Our current order book had been strong on all fronts and everything was looking good - and then the country and the Company were hit with Coronavirus which is causing all sorts of problems; in particular it has affected access to client sites and deferment of decisions on new orders.

QM Systems

During the initial six month period QM has continued its positive trend both in growth in revenue and profit. This presented an almost doubling in sales when compared with the same period last year and has generated a profit of GBP335k after interest and management charges paid to the Company (H1 2019: GBP73k). This represents an excellent performance for this subsidiary of the group.

During the period, order intake was very strong with approximately GBP3.4 million of orders received. Moving into the final six months of the current financial year, QM's orderbook is full, ensuring a strong start to the second half of the year. However, Coronavirus has hit and, whilst we are doing everything we can to mitigate its impact while keeping our employees and stakeholders safe and also keeping the operational facility open and running, we are in unchartered waters as to how this will play out.

To support this sustained period of growth, QM continued to recruit within Design and Manufacturing roles. In particular QM has invested significantly into the Project Management team to ensure that it continues to offer the high level of support that its clients require.

QM has seen continued sales of a number of our products, particularly the Q-Mac range of versatile carousel conveyors, with its largest to date, a 60 station carousel being manufactured for an automotive client. QM has also seen sales of its Electronic Interface module to a core Petrochemical Client and its PERA product continues to sell well within the Aerospace industry.

QM has been awarded a second phase of project work with its partner Penso to deliver an expansion of the automated Carbon Fibre manufacturing facility. This second phase enables a new range of larger carbon fibre composite vehicles to be manufactured within Penso's production cell.

QM's work with Cox Powertrain to deliver a complete turnkey production facility for the manufacture of its innovative high power diesel outboard motor is now drawing to a close as QM completes the final commissioning activities and Cox begins the volume ramp up.

In October 2019, the Group acquired a small company called Wessex Precision Instruments. The company manufactures a range of slip testing equipment for ensuring floor surfaces perform as required. The products are sold to contract slip testing companies and laboratories that test floor and road surface performance. The company is small today, however it presents a great opportunity for growth into this emerging sector. The company now forms part of QM's Test division.

Thomson Engineering Design ("TED")

TED's performance has again improved, generating a small profit after tax on a revenue of GBP364k (H1 2019: GBP224k). During the period a number of loan units of the Thomson De-clipper and 7 Sleeper Spreader units were manufactured for use as demonstration and stock sale units. All units are currently out on loan. This has enabled a number of TED's clients to be offered a 'Try before you buy' service. This has directly led to a number of requests for quotation that TED fully expects will turn into product sales as budgets become available after the Coronavirus situation has been resolved.

Order intake and quotation activity within the domestic market has remained relatively static, predominantly with interest focused on TED's latest products in rail clipping and de-clipping and sleeper handling. However, during the same period, TED has seen a significant increase in international enquiries with a number of substantial orders being received from outside of the UK. In particular TED has received a GBP140k order for a range of new rail equipment for a company based in New Zealand, which will be used on a project in Australia.

Also during the period work has begun on diversifying TED's capabilities into other markets. TED has seen orders received for a new gimbal product from an automotive client that totals approximately GBP150k. The first 30 units have been manufactured and shipped with a further 24 units to be shipped by the end of April. TED is expecting more orders for this new and exciting product range, again when the economy recovers from the effects of the Coronavirus.

Adien

During this review period Adien demonstrated an effective start to the year's trading. The renewal of significant long term framework contracts ensured the supply of continued work producing good margins.

The award of major contracts within different sectors: Telecomms 5G, Defence consultancy, Distilleries, and Balfour Beatty all contain significant sub contract elements that provide increased profitability above the core survey elements of the contract, these include the provision of: Traffic Management, CCTV, Jetting, Laser scanning and Drone 3D surveys with inspections. The activity levels in both England and Scotland remain consistently high and Adien has now recruited additional staff with experience in the relevant industry sectors.

The order book was looking very strong with the upturn in Defence, Telecomms 5G and SSEN, plus infrastructure renewal, however Coronavirus is now impacting on our ability to deliver to site and it is too early to quantify what impact Covid-19 will have on Adien.

Related party transactions

My letter of financial support dated 24 October 2018 was renewed on 7 October 2019 for a further year.

In addition to the loans I have provided to the Company in previous years, my fellow directors and I have deferred a certain proportion of our fees and interest payments until the Company is in a suitably strong position to make the full payments. During the six months ended 31 December 2019, these deferred fees and interest payments amounted to approximately GBP72,000 in total, all of which have been accrued in the Company's accounts, and as at 31 December 2019 amounted in total to GBP1,420,000.

Gordon Watt

Chairman

 
 Enquiries: 
 
 PipeHawk Plc                         Tel no. 01252 338 959 
  Gordon Watt (Chairman) 
 
 Allenby Capital (Nomad and Broker)   Tel no. 020 3328 5656 
  David Worlidge/Asha Chotai 
 

Statement of Comprehensive Income

For the six months ended 31 December 2019

 
                                               6 months ended      6 months ended           Year ended 
                                                  31 December         31 December              30 June 
                                                         2019                2018       2019 (audited) 
                                                  (unaudited)         (unaudited)              GBP'000 
                                                      GBP'000             GBP'000 
                                           ------------------  ------------------  ------------------- 
 
    Revenue                                             4,518               2,901                6,680 
 
    Staff costs                                       (1,190)             (1,533)              (3,265) 
    General administrative expenses                   (2,404)             (1,462)              (3,358) 
                                           ------------------  ------------------  ------------------- 
 
    Profit/(loss) on ordinary activities 
     before interest and taxation                         204                (94)                   57 
    Finance costs                                       (118)                (70)                 (45) 
                                           ------------------  ------------------  ------------------- 
 
    Profit/(loss) before taxation                         111               (164)                   12 
 
    Taxation                                              172                 176                  300 
                                           ------------------  ------------------  ------------------- 
 
    Profit for the period attributable 
     to equity holders of the Company                     283                  12                  312 
 
    Other comprehensive income                              -                   -                    - 
                                           ------------------  ------------------  ------------------- 
    Total comprehensive income 
     for the period net of tax                            283                  12                  312 
                                           ==================  ==================  =================== 
 
    Earnings per share (pence) 
     - basic                                             0.82                0.04                 0.91 
    Earnings per share (pence) 
     - diluted                                           0.58                0.04                 0.72 
                                           ==================  ==================  =================== 
 
 

Consolidated Statement of Financial Position

As at 31 December 2019

 
                                        6 months ended      6 months ended           Year ended 
      Assets                               31 December         31 December              30 June 
                                                  2019                2018       2019 (audited) 
                                           (unaudited)         (unaudited)              GBP'000 
                                               GBP'000             GBP'000 
                                    ------------------  ------------------  ------------------- 
 
    Non-current assets 
    Property, plant and equipment                  761                 490                  525 
    Goodwill                                     1,279               1,190                1,190 
                                    ------------------  ------------------  ------------------- 
                                                 2,040               1,680                1,715 
                                    ------------------  ------------------  ------------------- 
 
    Current assets 
    Inventories                                    295                 169                  134 
    Current tax assets                             167                 274                  315 
    Trade and other receivables                  1,120               1,453                1,592 
    Cash                                            99                  72                  774 
                                    ------------------  ------------------  ------------------- 
                                                 1,681               1,968                2,815 
                                    ------------------  ------------------  ------------------- 
 
 
    Total assets                                 3,721               3,648                4,530 
                                    ==================  ==================  =================== 
 
    Equity and liabilities 
 
    Equity 
    Share capital                                  344                 340                  344 
    Share premium                                5,205               5,191                5,205 
    Other reserves                             (8,613)             (9,196)              (8,896) 
                                    ------------------  ------------------  ------------------- 
                                               (3,064)             (3,665)              (3,347) 
                                    ------------------  ------------------  ------------------- 
 
    Non-current liabilities 
    Borrowings                                   2,846               2,928                2,661 
    Trade and other payable                         19                   4                    3 
                                    ------------------  ------------------  ------------------- 
                                                 2,865               2,932                2,664 
                                    ------------------  ------------------  ------------------- 
 
    Current liabilities 
    Trade and other payables                     1,677               2,246                3,270 
    Bank overdrafts and loans                    2,224               2,135                1,943 
                                    ------------------  ------------------  ------------------- 
                                                 3,920               4,381                5,213 
                                    ------------------  ------------------  ------------------- 
 
 
    Total equity and liabilities                 3,721               3,648                4,530 
                                    ==================  ==================  =================== 
 
 
 

Consolidated Statement of Cash Flow

For the six months ended 31 December 2019

 
                                               6 months ended      6 months ended           Year ended 
                                                  31 December         31 December              30 June 
                                                         2019                2018       2019 (audited) 
                                                  (unaudited)         (unaudited)              GBP'000 
                                                      GBP'000             GBP'000 
                                           ------------------  ------------------  ------------------- 
 
    Cash inflow from operating 
     activities 
    Profit/(loss) from operations                         204                (94)                   57 
 
    Adjustment for: 
    Profit on disposal of fixed 
     assets                                                 -                (13)                 (13) 
    Depreciation                                           87                  41                   90 
                                           ------------------  ------------------  ------------------- 
                                                          291                (66)                  134 
 
    (Decrease)/Increase in inventories                  (112)                  10                   44 
    Increase/(Decrease) in receivables                    480               (278)                (417) 
    (Decrease)/Increase in liabilities                (1,706)                 104                1,570 
                                           ------------------  ------------------  ------------------- 
 
    Cash used in operations                           (1,047)               (230)                1,331 
 
    Interest paid                                        (23)                (32)                (147) 
    Corporation tax received                              320                 274                  358 
                                           ------------------  ------------------  ------------------- 
 
    Net cash generated/(utilised) 
     from operating activities                          (750)                  12                1,542 
                                           ------------------  ------------------  ------------------- 
 
 
    Cash flows from investing activities 
    Purchase of plant and equipment                     (319)                (55)                 (75) 
    Proceeds from disposal of fixed 
     assets                                               (1)                  17                   16 
    Sale of joint venture investment                        -                   -                   17 
    Other income                                            -                  17                    - 
                                           ------------------  ------------------  ------------------- 
 
    Net cash (utilised)/generated 
     from investing activities                          (320)                (21)                 (42) 
                                           ------------------  ------------------  ------------------- 
 
 
    Cash flows from financing activities 
    New loans and finance leases                          557                  83                    - 
    Repayment of bank and other 
     loans                                              (105)                 (8)                (676) 
    Repayment of finance leases                          (81)                (13)                 (69) 
                                           ------------------  ------------------  ------------------- 
 
    Net cash generated/(utilised) 
     financing activities                                 371                  62                (745) 
                                           ------------------  ------------------  ------------------- 
 
 
    (Decrease)/Increase in cash 
     and cash equivalents                               (699)                  53                  755 
    Cash and cash equivalents at 
     beginning of period                                  774                  19                   19 
    Acquisition of subsidiary                              24                   -                    - 
                                           ------------------  ------------------  ------------------- 
 
    Cash and cash equivalents at 
     end of period                                         99                  72                  774 
                                           ==================  ==================  =================== 
 

Consolidated Statement of Changes in Equity

For the six months ended 31 December 2019

 
                                                      Share premium 
                                      Share capital         account     Retained 
                                                                        earnings     Total 
                                            GBP'000         GBP'000      GBP'000   GBP'000 
                                   ----------------  --------------  -----------  -------- 
 
 6 months ended 31 December 2018 
 
 As at 1 July 2018                              340           5,191      (9,208)   (3,677) 
 Profit for the period                            -               -           12        12 
 
 Total comprehensive income                       -               -           12        12 
                                   ----------------  --------------  -----------  -------- 
 
 
 As at 31 December 2018                         340           5,191      (9,196)   (3,665) 
                                   ================  ==============  ===========  ======== 
 
 
 12 months ended 30 June 2019 
 
 As at 1 July 2018                              340           5,191      (9,208)   (3,677) 
 Loss for the period                              -               -          312       312 
 
 Total comprehensive income                       -               -          312       312 
                                   ----------------  --------------  -----------  -------- 
 
 Issue of shares                                  4              14            -        18 
 
 As at 30 June 2019                             344           5,205      (8,896)   (3,347) 
                                   ================  ==============  ===========  ======== 
 
 6 months ended 31 December 2019 
 
 As at 1 July 2019                              344           5,205      (8,896)   (3,347) 
 Profit for the period                            -               -          283       283 
 
 Total comprehensive income                       -               -          283       283 
                                   ----------------  --------------  -----------  -------- 
 
 As at 31 December 2019                         344           5,205      (8,613)   (3,064) 
                                   ================  ==============  ===========  ======== 
 
 

Notes to the Interim Results

1. Basis of preparation

The Interim Results for the six months ended 31 December 2019 are unaudited and do not constitute statutory accounts in accordance with section 240 of the Companies Act 2006.

Full accounts for the year ended 30 June 2019, on which the auditors gave an unqualified report and contained no statement under Section 498 (2) or (3) of the Companies Act 2006, have been delivered to the Registrar of Companies.

The interim financial information has been prepared on a basis which is consistent with the accounting policies adopted by the Company for the last financial statements and in compliance with basic principles of IFRS except as disclosed below:

IFRS 16 - Leases - Accounting Policies and Transition

IFRS 16 leases, which is applicable for periods starting on or after 1 January 2019. The accounting policies applied here in are consistent with those expected to be applied in the financial statements for the year ended 30 June 2020.

The group has applied the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 will continue to apply to those leases entered into before 1 January 2019.

IFRS has introduced a single, on-balance sheet accounting model for lessees, eliminating the distinction between operating and finance leases. IFRS 16 has impacted how the Group accounts for leases under IAS 17. On initial application at 1 July 2019 and followed the modified retrospective method, the group has performed the following:

o Recognised right of use assets and lease liabilities in the Consolidated Statement of Financial Position, measured at the present value of future lease payments, discounted using the rate implicit in the lease or the lessee's incremental borrowing rate, if this is not stated. These are included within Property, plant and equipment and current and non-current borrowing.

o Recognised depreciation of right of use assets and interest on lease liabilities in the Consolidated Statement of Comprehensive income.

o Separated the total amount of cash paid into a principal portion and interest, presented within financing activities within the Consolidated Statement of cash flow.

The incremental borrowing rate is calculated on a lease by lease basis. The weighted average leasee's borrowing rate applied on the lease liability on 1 July 2019 was 3.19 per cent.

Reconciliation of operating lease commitments to lease the lease liability at 1 July 2019:

 
                                                                GBP'000 
                                                               -------- 
 
 Operating leases disclosed at 30 June 2019                         224 
 Discounted using the weighted average incremental borrowing 
  rate                                                             (26) 
                                                               -------- 
 Lease liability recognised at 1 July 2019                          198 
                                                               ======== 
 

At 1 July 2019 the right of use asset recognised was GBP198,000 and a corresponding lease liability was GBP198,000.

At 31 December 2019 the financial impact following the introduction of IFRS 16 is as follows:

 
 Right of use asset     GBP'000 
                       -------- 
 
 At 1 July 2019             198 
 Additions                  109 
 Depreciation              (39) 
                       -------- 
 At 31 December 2019        268 
                       ======== 
 
 
 Lease liabilities      GBP'000 
                       -------- 
 
 At 1 July 2019             198 
 Additions                  109 
 Repayments                (42) 
 Interest                     5 
                       -------- 
 At 31 December 2019        270 
                       ======== 
 
 Current                     58 
 Non-current                212 
                       -------- 
 Total                      270 
                       ======== 
 
 
 Amounts recorded in the income statement       GBP'000 
                                               -------- 
 
 Depreciation charges on right of use assets         39 
 Interest on lease liabilities                        5 
                                               -------- 
 Total                                               44 
                                               ======== 
 

The total cash outflow for leases during the year was GBP42,000.

2. Segmental information

The Company operates in one geographical location being the UK. Accordingly, the primary segmental disclosure is based on activity.

 
                                        Utility        Development, 
                                      detection            assembly           Automation 
                                    and mapping            and sale             and test 
                                       services    of GPR equipment     system solutions 
                                                                                             Total 
                                        GBP'000             GBP'000              GBP'000   GBP'000 
                                  -------------  ------------------  -------------------  -------- 
 
 6 months ended 31 December 
  2019 
 Total segmental revenue                    638                  49                3,831     4,518 
                                  =============  ==================  ===================  ======== 
 
 Segment result                           (110)                  51                  263       204 
 Finance costs                              (7)                (72)                 (14)      (93) 
                                                                                          -------- 
 Profit before taxation                                                                        111 
                                                                                          ======== 
 
 
 Segment assets (incl. IFRS 
  16 note 1)                                691               1,604                1,426     3,721 
 Segment liabilities (incl. 
  IFRS 16 note 1)                           610               4,329                1,846     6,785 
 Non-current asset additions 
  (incl. 16 note 1)                         118                  18                  155       291 
 Depreciation and amortisation 
  (incl. IFRS 16 note 1)                     43                   6                   38        87 
                                  =============  ==================  ===================  ======== 
 
 
 6 months ended 31 December 
  2018 
 Total segmental revenue                    709                 107                2,085     2,901 
                                  =============  ==================  ===================  ======== 
 
 
 Segmental result                          (15)                   4                 (83)      (94) 
 Finance costs                              (5)                (51)                 (14)      (70) 
                                                                                          -------- 
 Loss before taxation                                                                        (164) 
                                                                                          ======== 
 
 Segment assets                             479               1,444                1,725     3,648 
 Segment liabilities                        528               4,394                2,391     7,313 
 Non-current                               (20)                   -                   32        12 
 Depreciation and amortisation               26                   -                   15        41 
                                  =============  ==================  ===================  ======== 
 
 
 
   12 months ended 30 June 2019 
 Total segmental revenue                  1,314                 192                5,174     6,680 
                                  =============  ==================  ===================  ======== 
 
 Segmental result 
 Finance costs                             (47)                  34                   70        57 
 Profit before taxation                    (10)                 (1)                 (34)      (45) 
                                                                                          -------- 
                                                                                                12 
                                                                                          ======== 
 
 Segment assets                             529               1,322                2,679     4,530 
 Segment liabilities                        481               4,239                3,157     7,877 
 Non-current asset additions                 75                   -                   62       137 
 Depreciation and amortisation               55                   -                   35        90 
                                  =============  ==================  ===================  ======== 
 
 

3. Earnings per share

This has been calculated on the profit for the period of GBP283,000 (H1 2019: GBP12,000) and the number of shares used was 34,360,515 (H1 2019: 34,020,515), being the weighted average number of shares in issue during the period.

4. Dividends

No dividend is proposed for the six months ended 31 December 2019.

5. Copies of Interim Results

The Interim Results will be posted on the Company's website www.pipehawk.com and copies are available from the Company's registered office at 4, Manor Park Industrial Estate, Wyndham Street, Aldershot, GU12 4NZ.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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