TIDMPIP

RNS Number : 6303S

PipeHawk PLC

18 March 2021

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse (Amendment) (EU EXIT) Regulations 2019/310.

18 March 2021

PipeHawk plc

("PipeHawk" or the "Company")

Unaudited results for the six months ended 31 December 2020

Chairman's Statement

I am pleased to report that the Company's turnover in the six months ended 31 December 2020 was GBP2,641,000 (H1 2019: GBP4,518,000), a decrease of 42 per cent over the comparable period last year, resulting in a loss before taxation of GBP336,000 (H1 2019: profit of GBP111,000) and a loss after taxation of GBP161,000 (H1 2019: profit GBP283,000). I believe that this is a very creditable result given the exceptionally challenging six months of uncertainty surrounding both Brexit and COVID lockdowns, with orders being postponed and deferred, but few actually being cancelled or being placed elsewhere. So, with the assistance of the UK Government's COVID financial aid in the form of furlough grants and CBILS loans, the operational side of our businesses, with the notable exception of Adien, concentrated on completing the orders in hand, whilst our salespeople have worked tirelessly on new concepts and developments which clients have indicated they will require once sufficient confidence returns. We believe that there is a significant overhang of orders waiting to be placed when the time is right.

In the meantime, we have taken the opportunity to implement some strategic decisions: the post-period end acquisition of Utsi Electronics to integrate with PipeHawk Technology; full absorption of Wessex slip testing into QM Systems; and development of a manufacturing offering also within QM Systems.

QM Systems

At QM Systems, trading has been hampered by the effect of the initial lockdown and again by the effect of the third lockdown. Despite entering the first lockdown with a very full orderbook, low order intake for the period from March through to July 2020 impacted the ability to pull sales through the business in the latter part of 2020 which has effectively resulted in the loss for the period under review. However, once the first lockdown eased, order intake returned to more normal levels and we were fortunate in that short period to be able to secure orders that have enabled the Company to return to trading at a near normal level.

We have now again returned to a period of uncertainty through the third lockdown, where a number of expected orders have been delayed. We have, however, secured a number of follow-on contracts that will carry us through this period with the aim that we are in an excellent position to capitalise on what is anticipated to be a very buoyant market for our solutions later this year. At the time of writing, we continue to remain relatively busy in all areas of the business.

It is fair to say that we have weathered a difficult period better than many of our competitors. Not content though with standing still we have been exploring ways in which we can add further value and revenue to our business. I am pleased to announce that following a recent contract win we will be establishing a new business enterprise to provide contract manufacturing capability to our clients where this may be beneficial. This will move the Company into a new and exciting direction and is designed to complement the products and services that we offer today, effectively enabling QM Systems to work with its clients, where required, from conceptualisation through to product manufacture, service and support.

Operationally we have taken the opportunity to make some changes to our structure which has resulted in more efficient design and manufacturing teams. All current projects are progressing well and to plan, with a number due to be delivered by the end of this financial year or early into the next financial year.

Following the acquisition of Wessex Precision Instruments Ltd in October 2019, we have undertaken a major exercise to reduce costs whilst dramatically improving the service that we offer. We have relocated the manufacturing facilities to our Aldershot office and have reviewed our stock and supplier structure to ensure that we now maintain a stock of key products, spares and consumables 'on the shelf' to ensure our clients can have orders fulfilled in the shortest timeframe possible.

Thomson Engineering Design ("TED")

TED suffered similarly to QM with a significant slowdown in orders over the summer months. However, during November 2020 TED received a large order for 2 new products totalling over GBP200k with a challenging delivery timescale of mid-February 2021. I am pleased to report that the team at TED were able to demonstrate their ability as a true 'can do' business and achieved the delivery of this incredibly aggressive lead-time, on time.

I am pleased to report that, even ignoring the above, order intake for TED since November 2020 has remained buoyant. Following a very solid performance for 2019/20 FY, where TED achieved good growth with a return to profit, TED is now set to continue its growth trajectory with an increase in sales year-on-year. It has been pleasing to see of late that the domestic market appears more buoyant than last year whilst the international market also appears strong. This we believe is down to increases in marketing, linked to the solid reputation that TED has achieved for delivering quality product and support internationally. At the time of writing TED is quoting on further major contracts within the Asia Pacific territory.

During the period, TED has delivered a mixture of domestic and international sales across a broad spectrum of products including Sleeper Spreaders, Panel Handlers, Rail Grabs, Gantries, Cable Yokes, De-Clippers, Fast Clip Machines, Threader Draggers, Manipulators and others. It is gratifying to see that the investment provided by the Group to TED during the last three years since acquisition to support the development of new products is really starting to bear fruit.

I am fully expecting that TED's trading in the second part of the 2020/21 FY will significantly outperform the initial six months (a repeat of last year) and I anticipate TED will achieve growth on last financial year's results. Given the current climate that TED operates within, particularly within manufacturing, this would be a great achievement.

Adien

Adien has had an excellent six months increasing turnover by 15%, working, as the team does, largely in the open air, and having both adjusted quickly to the needs, and additional costs, of the pandemic they continued to supply their service (whilst others didn't), and were able to fulfil the long term framework contracts which had been successfully re-secured in the previous year.

Increasingly within the framework contracts Adien is able to supply a one-stop shop for the subcontract elements of Traffic Management, CCTV, Jetting, Laser scanning and Drone 3D surveys with inspections, which provides increased profitability over and above the core survey elements of the contract.

The activity levels in both England and Scotland currently remain very strong and we have recruited additional staff experienced in the relevant sectors to assist Adien's growth.

The order book is positive as a result of the current upturn in Defense, Telecoms, 5G and Power Distribution, plus infrastructure renewal. Accordingly, the outlook for the remainder of the financial year and beyond for Adien is most encouraging.

PipeHawk Technology

PipeHawk Technology has been in tickover/furlough mode for most of the six months under review. However during the period, discussions and negotiations were held with the owners of a complementary company, Utsi Electronics Limited, and this business was successfully acquired on 27 January 2021 for essentially net asset value plus a profit related payout over the next two years.

The Utsi products are technically well designed and recognised internationally as being very capable ground penetrating radar (GPR) systems with most models being available with a selection of antenna types/frequencies making them suitable for use across a wide range of markets from the common and highly competitive Utility Survey market to the very specialist fields of Structural Fault analysis, Environmental/Pollution research and Railway standards compliance. Some models are also available in versions designed specifically for operation in harsh climates (deserts/polar regions) and/or over rough terrain.

The majority of these products and markets are complementary to those of our own PipeHawk brand systems. The acquisition of Utsi will provide an increased portfolio of GPR system offerings into a significantly wider range of markets as well as offering excellent opportunity to extend R&D activities into the highly desirable Environmental/Water/Structural Faults markets and increase unit profitability across the dual product ranges achieved through enhanced marketing, rationalised designs and parts sourcing.

By combining the PipeHawk & Utsi systems there is the opportunity for improvements and growth for both product lines (thereby maintaining servicing of both ends of the market) while at the same time rationalising boards and components used, to improve sales, productivity and profit margins.

Related party transactions

As announced on 21 October 2020, my letter of financial support dated 7 October 2019 was renewed on 28 September 2020 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 2020, these deferred fees and interest payments amounted to approximately GBP107,000 in total, all of which have been accrued in the Company's accounts, and at 31 December 2020 amounted in total to GBP1,574,000.

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 2020

 
                                               6 months ended      6 months ended           Year ended 
                                                  31 December         31 December              30 June 
                                                         2020                2019       2020 (audited) 
                                                  (unaudited)         (unaudited)              GBP'000 
                                                      GBP'000             GBP'000 
                                           ------------------  ------------------  ------------------- 
 
    Revenue                                             2,641               4,518                8,325 
 
    Staff costs                                       (1,697)             (1,190)              (3,776) 
    General administrative expenses                   (1,178)             (2,404)              (4,144) 
                                           ------------------  ------------------  ------------------- 
 
    (Loss)/profit on ordinary activities 
     before interest and taxation                       (234)                 204                  405 
    Finance costs                                       (102)               (118)                (211) 
                                           ------------------  ------------------  ------------------- 
 
    (Loss)/profit before taxation                       (336)                 111                  194 
 
    Taxation                                              175                 172                  396 
                                           ------------------  ------------------  ------------------- 
 
    (Loss)/profit for the period 
     attributable to equity holders 
     of the Company                                     (161)                 283                  590 
 
    Other comprehensive income                              -                   -                    - 
                                           ------------------  ------------------  ------------------- 
    Total comprehensive (expense)/income 
     for the period net of tax                          (161)                 283                  590 
                                           ==================  ==================  =================== 
 
    (Loss)/ earnings per share 
     (pence) - basic                                   (0.46)                0.82                 1.69 
    (Loss)/earnings per share (pence) 
     - diluted                                         (0.99)                0.58                 0.93 
                                           ==================  ==================  =================== 
 
 

Consolidated Statement of Financial Position

As at 31 December 2020

 
                                                As at                     As at                        As at 
                                          31 December               31 December                      30 June 
                                                 2020                      2019 
                                          (unaudited)               (unaudited)               2020 (audited) 
                                              GBP'000                   GBP'000                      GBP'000 
     Assets 
                                    -----------------          ----------------          ------------------- 
 
    Non-current assets 
    Property, plant and equipment                 793                       761                          811 
    Goodwill                                    1,345                     1,279                        1,345 
                                    -----------------          ----------------          ------------------- 
                                                2,138                     2,040                        2,156 
                                    -----------------          ----------------          ------------------- 
 
    Current assets 
    Inventories                                   146                       295                          151 
    Current tax assets                            255                       167                          394 
    Trade and other receivables                 1,538                     1,120                        1,654 
    Cash                                        1,019                        99                          250 
                                    -----------------          ----------------          ------------------- 
                                                2,958                     1,681                        2,449 
                                    -----------------          ----------------          ------------------- 
 
 
    Total assets                                5,096                     3,721                        4,605 
                                    =================          ================          =================== 
 
    Equity and liabilities 
 
    Equity 
    Share capital                                 349                       344                          349 
    Share premium                               5,215                     5,205                        5,215 
    Other reserves                            (8,467)                   (8,613)                      (8,306) 
                                    -----------------          ----------------          ------------------- 
                                              (2,903)                   (3,064)                      (2,742) 
                                    -----------------          ----------------          ------------------- 
 
    Non-current liabilities 
    Borrowings                                  3,321                     2,846                        3,255 
    Trade and other payable                         -                        19                            6 
                                    -----------------          ----------------          ------------------- 
                                                3,321                     2,865                        3,261 
                                    -----------------          ----------------          ------------------- 
 
    Current liabilities 
    Trade and other payables                    2,771                     1,677                        1,949 
    Bank overdrafts and loans                   1,907                     2,224                        2,137 
                                    -----------------          ----------------          ------------------- 
                                                4,678                     3,920                        4,086 
                                    -----------------          ----------------          ------------------- 
 
 
    Total equity and liabilities                5,096                     3,721                        4,605 
                                    =================          ================          =================== 
 
 
 

Consolidated Statement of Cash Flow

For the six months ended 31 December 2020

 
                                               6 months ended      6 months ended           Year ended 
                                                  31 December         31 December              30 June 
                                                         2020                2019       2020 (audited) 
                                                  (unaudited)         (unaudited)              GBP'000 
                                                      GBP'000             GBP'000 
                                           ------------------  ------------------  ------------------- 
 
    Cash inflow from operating 
     activities 
    (Loss)/profit from operations                       (234)                 204                  405 
 
    Adjustment for: 
    Depreciation                                           97                  87                  191 
                                           ------------------  ------------------  ------------------- 
                                                        (137)                 291                  596 
 
    Decrease/(increase) in inventories                      5               (112)                 (18) 
    Decrease/(increase) in receivables                    115                 480                 (52) 
    Increase/(decrease) in liabilities                    616             (1,706)              (1,037) 
                                           ------------------  ------------------  ------------------- 
 
    Cash generated from/(used in) 
     operations                                           599             (1,047)                (511) 
 
    Interest paid                                        (31)                (23)                 (69) 
    Corporation tax received                              314                 320                  318 
                                           ------------------  ------------------  ------------------- 
 
    Net cash generated from/(utilised 
     in) operating activities                             882               (750)                (262) 
                                           ------------------  ------------------  ------------------- 
 
 
    Cash flows from investing activities 
    Purchase of plant and equipment                      (79)               (319)                (474) 
    Proceeds from disposal of fixed                         -                 (1)                    - 
     assets 
 
    Net cash utilised in investing 
     activities                                          (79)               (320)                (474) 
                                           ------------------  ------------------  ------------------- 
 
 
    Cash flows from financing activities 
    New loans and finance leases                           23                 557                    - 
    Proceeds from borrowings                               35                   -                  523 
    Repayment of bank and other 
     loans                                                (3)               (105)                (165) 
    Repayment of finance leases                          (89)                (81)                (170) 
                                           ------------------  ------------------  ------------------- 
 
    Net cash (utilised in)/generated 
     from financing activities                           (34)                 371                  188 
                                           ------------------  ------------------  ------------------- 
 
 
    Increase/(decrease) in cash 
     and cash equivalents                                 769               (699)                (548) 
    Cash and cash equivalents at 
     beginning of period                                  250                 774                  774 
    Acquisition of subsidiary                               -                  24                   24 
                                           ------------------  ------------------  ------------------- 
 
    Cash and cash equivalents at 
     end of period                                      1,019                  99                  250 
                                           ==================  ==================  =================== 
 

Consolidated Statement of Changes in Equity

For the six months ended 31 December 2020

 
                                                      Share premium 
                                      Share capital         account     Retained 
                                                                        earnings     Total 
                                            GBP'000         GBP'000      GBP'000   GBP'000 
                                   ----------------  --------------  -----------  -------- 
 
 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) 
                                   ================  ==============  ===========  ======== 
 
 
 12 months ended 30 June 2020 
 
 As at 1 July 2019                              344           5,205      (8,896)   (3,347) 
 Loss for the period                              -               -          590       590 
 
 Total comprehensive income                       -               -          590       590 
                                   ----------------  --------------  -----------  -------- 
 
 Issue of shares                                  5              10            -        15 
 
 As at 30 June 2020                             349           5,215      (8,306)   (2,742) 
                                   ================  ==============  ===========  ======== 
 
 6 months ended 31 December 2020 
 
 As at 1 July 2020                              349           5,215      (8,306)   (2,742) 
 Profit for the period                            -               -        (161)     (161) 
 
 Total comprehensive income                       -               -        (161)     (161) 
                                   ----------------  --------------  -----------  -------- 
 
 As at 31 December 2020                         349           5,215      (8,467)   (2,903) 
                                   ================  ==============  ===========  ======== 
 
 

Notes to the Interim Results

1. Basis of preparation

The Interim Results for the six months ended 31 December 2020 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 2020, on which the auditors gave an unqualified report and contained no statement under Section 498 (2) or (3) of the Companies Act 2006, have been delivered to the Registrar of Companies.

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

2. Segmental information

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

 
                                       Utility        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 
  2020 
 Total segmental revenue                   814                  25                1,802     2,641 
                                 =============  ==================  ===================  ======== 
 
 Segment result                            148                 (1)                (381)     (234) 
 Finance costs                            (16)                (71)                 (15)     (102) 
 Profit/(loss) before taxation             132                (72)                (396)     (336) 
                                 -------------  ------------------  -------------------  -------- 
 
 
 Segment assets                            767               1,983                2,346     5,096 
 Segment liabilities                       619               4,557                2,823     7,999 
 Non-current asset additions                45                   -                   34        79 
 Depreciation and amortisation              51                   -                   46        97 
                                 =============  ==================  ===================  ======== 
 
 
 6 months ended 31 December 
  2019 
 Total segmental revenue                   638                  49                3,831     4,518 
                                 =============  ==================  ===================  ======== 
 
 Segmental result                        (110)                  51                  263       204 
 Finance costs                             (7)                (72)                 (14)      (93) 
 (Loss)/profit before taxation           (118)                  23                  206       111 
                                 -------------  ------------------  -------------------  -------- 
 
 Segment assets                            691               1,604                1,426     3,721 
 Segment liabilities                       610               4,329                1,846     6,785 
 Non-current asset addition                118                  18                  155       291 
 Depreciation and amortisation              43                   6                   38        87 
                                 =============  ==================  ===================  ======== 
  12 months ended 30 June 2020 
 Total segmental revenue                 1,344                  81                6,900     8,325 
                                 =============  ==================  ===================  ======== 
 
 Segmental result                           75                (15)                  345       405 
 Finance costs                            (33)               (141)                 (37)     (211) 
 Profit/(loss) before taxation              42               (156)                  308       194 
                                 -------------  ------------------  -------------------  -------- 
 
 Segment assets                            771               1,527                2,307     4,605 
 Segment liabilities                       664               4,379                2,304     7,347 
 Non-current asset additions               225                   1                  258       484 
 Depreciation and amortisation              95                   1                   95       191 
                                 =============  ==================  ===================  ======== 
 
 

3. (Loss)/earnings per share

This has been calculated on the loss for the period of GBP161,000 (H1 2019: profit GBP283,000) and the number of shares used was 34,860,515 (H1 2019: 34,360,515), 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 2020.

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.

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