RNS Number : 9733U

PipeHawk PLC

29 November 2023

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK Market Abuse Regulation

29 November 2023

PipeHawk plc

("PipeHawk", "Company" or the "Group")

Final Results for the year ended 30 June 2023


   -     Turnover of GBP6.5 million, an increase of 4.8% (2022: GBP6.2 million) 
   -     Loss before taxation for the financial year of GBP 3,284,000 (2022: loss GBP 1,576,000 ) 
   -     The Group's orderbook sits in excess of GBP6 million - the highest in the Group's history 

I can report that Group t urnover for the financial year ended 30 June 2023 (the "Financial Year" and the 2022/23 FY") increased to GBP6.5 million (2022: GBP6.2 million). The Group incurred an operating loss in the Financial Year of GBP2,899,000 (2022: GBP1,312,000), a loss before taxation for the Financial Year of GBP3,284,000 (2022: loss GBP1,576,000) and a loss after taxation of GBP2,484,000 (2022: loss GBP868 ,000 ). The loss per share for the financial year was 6.84p (2022: loss 2.42p).

Notwithstanding the resurgence of our businesses over the last few months, due to delay in the Start of Production for the contract manufacturing business, and given the effects of the wider downturn and volatility in the global market uncertainty the directors have taken a prudent view to recognise a goodwill impairment charge totalling GBP678k.

It is evident now that the disappointing results delivered during the last two financial years were created over a single 12-month period spanning January 2022 through until December 2022. This was as a result of a perfect storm on the back of a faltering recovery from Covid, the Russian invasion of the Ukraine in February 2022 and the political chaos resulting from the resignation of Boris Johnson as Prime Minister in June 2022, an interregnum until the appointment, and brief term in office, of Liz Truss from September 2022 and finally the appointment of Rishi Sunak in late October 2022. All this set against a background of rising fuel prices and price rises on just about every other manufactured good, whilst the Bank of England "helps" to reduce demand even further by increasing UK interest rates most months whilst saying there is more pain to come! Somewhat surprisingly and despite the aforementioned factors, quotations within the Group's businesses over this period remained buoyant, evidencing the desire of clients to place orders once they felt confident that a degree of stability had materialised.

The first half of the financial year saw a slow start on sales at GBP2.2 million, however the second half of the financial year saw this rise to GBP4.3 million. This improvement has continued into the first few months of the current financial year as we anticipate being able to make full use of the much larger facilities which we moved into at QM and TED when the market place was looking much more positive two years ago.

We entered the current year with a Group orderbook in excess of GBP6 million - the highest in our history, so, provided there are no more nasty surprises to upset the resurgence of stability and belief in our economy, I am confident the Group will be able to report a much-improved financial return at the end of the current financial year, with this improvement continuing thereafter.

QM Systems

For the reasons outlined above, QM had a very tough year having only just moved to premises five times larger with consequent increased overhead costs. Nevertheless, unlike some of its competitors, it has weathered the storm and has come out stronger.

Similar to the previous 2021/22 financial year, QM experienced a year of two halves although this time in reverse. The 2022/23 financial year saw QM report a 36% increase in revenue to GBP4.2m but with a significant loss after tax of GBP970k for the year. However, the loss was almost entirely created within the first six months where revenue was only GBP1.3m with a loss after tax of GBP950k. The company steadily grew revenue throughout the second part of the year achieving a return to profit within the final quarter.

Towards the end of the first quarter of the 2022/23 financial year, contract awards again began to flow into the business, and this accelerated through the latter part of 2022 and into 2023. Orders received during the period from September 2022 through to June 2023 exceeded GBP7m and resulted in QM ending the 2022/23 financial year with its healthiest ever forward orderbook of GBP5.8m. Many of these orders were quotations provided by QM 12-18 months prior, in some cases more.

The average size of order award for QM has increased to approximately GBP500k with a number of larger orders between GBP1m to GBP2m in value also being awarded. QM today sits in a competitive position for contracts with values above GBP300k. QM now has the infrastructure both in terms of resource and facilities to deliver large multi-million-pound contracts, and today sales generation is focused on larger contracts where QM can add real value to our clients with a very competitive pricing structure.

The current financial year will see the Start of Production (SOP) in three contract manufacturing business units with them entering SOP in Q1 2024. This in turn will create a business model that is not reliant totally on Capital expenditure project awards.

Revenue continues to increase month on month as we head into the 2023/24 financial year and we have short/medium term visibility on a good return to profitability and stability.

Thomson Engineering Design ("TED")

TED generated revenues in the Financial Year of GBP970k and a loss after tax of GBP267k and has followed a similar trajectory to QM with a depressed initial six-month period of financial year 2022/23 during which revenues were c. GBP400k, generating a loss after tax of c. GBP220k, followed by a more buoyant second half year where revenues were GBP570k, generating a reduced loss after tax of c. GBP50k. Sales however did remain below our expectations.

As Network Rail approaches the end of the CP6 funding round, a number of new contract awards have been delayed to align to the start of CP7 (March 2024). This clearly has a knock-on effect on TED in delaying UK-based client sales of equipment. However, this impact is restricted to the UK market only. As reported previously, TED signed a distribution agreement with Unipart Rail late in 2022 and this has resulted in a substantial amount of business being quoted to Unipart Rail. TED is now beginning to see a number of these quotations transition into orders. However, this has had little impact on financial year 2022/23. Unipart Rail are now placing orders with TED on a regular basis, and we fully expect to see a rapid growth in revenue contribution as the current financial year 2023/24 continues. Together with increased revenue, Unipart Rail brings a ready-made marketing system to TED's door that provides TED with unrivalled exposure to global markets. Unipart Rail is locally and actively present in South East Asia, Europe, North America, Australia and the Middle East. Because of this local presence, Unipart Rail understands the respective markets clearly and this in turn helps TED and Unipart Rail to work together to fine tune and develop products for each market.

Over the past year, Unipart Rail, with support from TED, has promoted the TED product catalogue at InnoTrans 2022 - the largest rail exhibition in Europe, Rail Live 2022 - the largest rail exhibition in the UK. Trax 2022 - North America, MTI - Japan - Nov 2022 and Aus Rail - Australia Nov 2022. Looking forwards over the coming year, TED's products will be exhibited at MTI - Japan - June 2024, Trax - North America - June 2024, Rail Live 2023 - UK - July 2024, RSSi / Remsa - US - July 2024 and InnoTrans - Berlin September 2024.

TED has continued development of a number of innovative 'High Output' machines. This suite of machines, consisting of track and panel handlers, gantry cranes, automated rail threaders and automated dust suppressed ballast brooms work hand in hand to provide rail maintenance and installation operators with a very capable set of tools that can greatly increase the speed with which track systems can be laid for a fraction of the cost of the bigger multi-million train-based systems utilised today. The equipment is far smaller and lightweight, can run on a track bed without needing rails and can be deployed quickly and easily to site at a fraction of the cost of conventional systems.


Adien was very badly affected by the disruption to business confidence as a result of the Conservative leadership debacle last year. Several large projects which had been awarded to Adien were shelved at short notice, and longer-term projects were reassessed and pushed onto the back burner.

As the reality of deferred work became evident as significantly more than a temporary blip, the company implemented a massive structural change to the business, including the appointment of a new Managing Director, consolidation of roles, leading to some staff being made redundant, implementation of a new corporate plan and a refocusing of the sales department as a whole. This, with the return of a degree of business confidence, has dramatically increased the prospects and resulting orders at Adien.

Turnover for the first quarter of the current, 23/24 financial year is almost double that of the same period last year, and resulting in a very satisfactory return to profitability. The forward order book is full, and order enquiries are extremely buoyant.

On the whole, the team at Adien are thoroughly enthused, working well together with full commitment to see a very successful 2023/24.


UTSI had a very cyclical year that saw the willingness of UK & EU customers to invest in new sensor technology rise and fall with every global event and interest rate hike. While some overseas markets remained resiliently buoyant, overall retail sales were still down. Demand for our more specialist systems and bespoke design service however remained strong and rose throughout the year, with a number of projects keeping R&D busy and bolstering turnover.

Even though the cost of many of our raw materials started to stabilise during the year, with some even falling, average electronic component prices remained higher at the year end than at the beginning, with a number of key components still in short supply and on long lead times. With retail and trade customers resisting further price increases, margins had to be tightened to remain competitive and although UTSI's overall turnover increased year on year, it could have been higher were it not for some lingering long lead times in the supply chain, preventing orders being completed during the financial year. As a result, a small loss was realised.

While UTSI continues to seek new R&D project opportunities externally, it has also been busy with a few of its own, with internal developments concentrating on new and better sensor systems for use in the growing environmental sciences sector. We expect to see the first of these systems entering the market within the next financial year.

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 26 November 2023 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 me, 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 GBP139,000. At 30 June 2023, these deferred fees and interest amounted to approximately GBP1.8 million in total, all of which has 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. Despite wider current market conditions, all divisions of the Group are currently performing well and I remain optimistic in my outlook for the Group.

Gordon Watt


Date: 28 November 2023


PipeHawk plc                                Tel. No. 01252 
 Gordon Watt (Chairman)                      338 959 
Allenby Capital Limited (Nomad and Broker)  Tel. No. 020 3328 

David Hart / Vivek Bhardwaj

For further information on the Company and its subsidiaries, please visit: www.pipehawk.com

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2023

                                                Note     30 June        30 June 
                                                            2023           2022 
                                                         GBP'000        GBP'000 
                                                      ----------      --------- 
 Revenue                                       2           6,470          6,191 
 Staff costs                                   5         (4,176)        (3,861) 
 Impairment of goodwill Operating costs        11          (678)              - 
                                                         (4,515)        (3,642) 
                                                      ----------      --------- 
 Operating (loss)                              4         (2,899)        (1,312) 
 (Loss) before interest and taxation                     (2,899)        (1,312) 
                                                      ----------      --------- 
 Finance costs                                 3           (385)          (264) 
                                                      ----------      --------- 
 (Loss) before taxation                                  (3,284)        (1,576) 
 Taxation                                      7             800            708 
 (Loss) for the year attributable to equity 
  holders of the parent                                  (2,484)          (868) 
                                                      ==========      ========= 
 Other comprehensive income                                    -              - 
 Total comprehensive (Loss) for the year 
  attributable to equity holder of the 
  parent                                                 (2,484)          (868) 
                                                      ==========      ========= 
 (Loss) per share (pence) - basic              8          (6.84)         (2.42) 
 (Loss) per share (pence) - diluted            8          (6.84)         (2.42) 

The notes form an integral part of these financial statements.

Consolidated Statement of Financial Position

at 30 June 2023

                                         Note    30 June         30 June 
                                                    2023            2022 
                                                 GBP'000         GBP'000 
                                               ---------       --------- 
 Non-current assets 
 Property, plant and equipment          9            783             828 
 Right of use                           10         2,283           2,549 
 Goodwill                               11           679           1,357 
                                               ---------       --------- 
                                                   3,745           4,734 
                                               ---------       --------- 
 Current assets 
 Inventories                            13           253             340 
 Current tax assets                                  826             710 
 Trade and other receivables            14         2,767           2,389 
 Cash and cash equivalents                           148               4 
                                               ---------       --------- 
                                                   3,994           3,443 
 Total assets                                      7,739           8,177 
                                               =========       ========= 
 Equity and liabilities 
 Share capital                          18           363             363 
 Share premium                                     5,316           5,316 
 Retained earnings                              (11,131)         (8,647) 
                                               ---------       --------- 
                                                 (5,452)         (2,968) 
                                               ---------       --------- 
 Non-current liabilities 
 Borrowings                                        4,913           5,612 
  Trade and other payables              16             -               - 
                                                   4,913           5,612 
                                               ---------       --------- 
 Current liabilities 
 Borrowings Trade and other payables    16         2,886           2,674 
                                         15        5,392           2,859 
                                                   8,278           5,533 
 Total equity and liabilities                      7,739           8,177 
                                               =========       ========= 

The notes form an integral part of these financial statements.

Consolidated Statement of Cash Flow

For the year ended 30 June 2023

                                                Note    30 June        30 June 
                                                           2023           2022 
                                                        GBP'000        GBP'000 
                                                      ---------      --------- 
 Cash flows from operating activities 
 Operating (Loss)                                       (2,899)        (1,312) 
 Adjustments for: 
 Impairment of goodwill                                     678              - 
  Depreciation                                   4          579            424 
                                                        (1,642)          (888) 
 Decrease / (increase) in inventories                        87             33 
 Decrease / (increase) in receivables                     (378)          (580) 
 Increase/(decrease) in liabilities                       2,759            286 
                                                      ---------      --------- 
 Cash generated/(used) by operations                        826        (1,149) 
 Interest paid                                            (196)          (124) 
 Corporation tax received                                   683            440 
                                                      ---------      --------- 
   Net cash generated from / (used in) 
   operating activities                                   1,313          (833) 
                                                      ---------      --------- 
 Cash flows from investing activities 
 Purchase of plant and equipment                          (111)          (325) 
 Net cash used in investing activities                    (111)          (325) 
                                                      ---------      --------- 
 Cash flows from financing activities 
 Proceeds / (repayments) from borrowings                  (210)            286 
 Proceeds / (repayments) of loan                          (393)            119 
 Repayment of leases                                      (455)          (163) 
                                                      ---------      --------- 
 Net cash (used in)/generated from financing 
  activities                                            (1,058)            242 
                                                      ---------      --------- 
 Net increase / (decrease) in cash 
  and cash equivalents                                      144          (916) 
 Cash and cash equivalents at the beginning 
  of year                                                     4            920 
 Cash and cash equivalents at end of 
  year                                                      148              4 
                                                      =========      ========= 

The notes form an integral part of these financial statements.

Statement of Changes in Equity

For the year ended 30 June 2023

                                                 Share premium    Retained 
   CONSOLIDATED                  Share capital         account    earnings     Total 
                                       GBP'000         GBP'000     GBP'000   GBP'000 
                              ----------------  --------------  ----------  -------- 
 As at 1 July 2021                         349           5,215     (7,779)   (2,215) 
 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) 
                              ================  ==============  ==========  ======== 
 Loss for the year                           -               -     (2,484)   (2,484) 
 Total comprehensive income                                        (2,484)   (2,484) 
  Issue of shares                            -               -           -         - 
 As at 30 June 2023                        363           5,316    (11,131)   (5,452) 
                              ================  ==============  ==========  ======== 

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. The principal activities of the Company and its subsidiaries (the Group) are described on page 9.

The financial statements are presented in pounds sterling, the functional currency of all companies in the Group. In accordance with section 408 of the Companies Act 2006 a separate statement of comprehensive income for the parent Company has not been presented. For the year to 30 June 2023 the Company recorded a net loss after taxation of GBP1,822,000 (2022: GBP282,000).

   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.

Adoption of new and revised standards

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and, in some cases, have not yet been adopted by the UK. The directors do not expect that the adoption of these standards will have a material impact on the financial statements of the Company in future periods.

   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 preparation of cash flow forecasts for the Group requires estimates to be made of the quantum and timing of cash receipts from future commercial revenues and the timing of future expenditure, all of which are subject to uncertainty. The directors have 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. The financial statement do not include adjustments which would arise in the event of not being a Going concern.

   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.

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 2023 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. The value of work in progress is reduced where appropriate to provide for irrecoverable costs


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, and processed through the profit & loss account.

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 did not receive benefits from Government grants.

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 GBP679,000 (2022: GBP1,357,000). The investment in subsidiaries at the year-end was GBP988,000 (2022: 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.

Going concern

The preparation of cash flow forecasts for the Group requires estimates to be made of the quantum and timing of cash receipts from future commercial revenues and the timing of future expenditure, all of which are subject to uncertainty.

   2              Segmental analysis 
                                         2023       2022 
                                      GBP'000    GBP'000 
                                    ---------  --------- 
  Turnover by geographical market 
  United Kingdom                        6,076      5,627 
  Europe                                  162        243 
  Other                                   232        321 
                                    ---------  --------- 
                                        6,470      6,191 
                                    =========  ========= 
        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"), the current 
         executive chairman, 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 
          *    Utsi Electronics Limited - Development, assembly and 
               sale of GPR equipment - Sale of goods 
          *    QM Systems Ltd - Automation and test system solutions 
               - Sale of services 
          *    Thomson Engineering Design 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 2023 
  Total segmental revenue                 1,125                 169        5,176     6,470 
                                  -------------  ------------------  -----------  -------- 
  Operating (loss) / profit               (214)               (859)      (1,826)   (2,899) 
  Finance costs                            (39)               (236)        (110)     (385) 
  (Loss) / Profit before 
   taxation                               (253)             (1,095)      (1,936)   (3,284) 
                                  -------------  ------------------  -----------  -------- 
  Segment assets                            558               1,181        6,000     7,739 
  Segment liabilities                       734               5,025        7,631    13,390 
  Non-current asset additions                 2                   -          265       267 
  Depreciation and amortisation              14                  18          482       579 
                                  =============  ==================  ===========  ======== 
                                        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 (loss) / profit                  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 
                                  =============  ==================  ===========  ======== 
   3              Finance costs 
                                                 2023       2022 
                                              GBP'000    GBP'000 
                                            ---------  --------- 
  Interest payable                                385        264 
                                            ---------  --------- 
                                                  385        264 
                                            =========  ========= 
  Interest payable comprises interest on: 
  Leases                                          107         69 
  Directors' loans                                192        140 
  Other                                            86         55 
                                            ---------  --------- 
                                                  385        264 
                                            =========  ========= 
   4              Operating profit for the year 
   This is arrived at after charging for the Group: 
                                                              2023            2022 
                                                           GBP'000         GBP'000 
                                                         ---------       --------- 
  Research and development costs not capitalised             2,644           2,333 
       Depreciation                                            579             424 
   Impairment of goodwill                                      678               - 
       Auditor's remuneration 
  Fees payable to the Company's auditor for the 
   audit of the Group's financial statements                    53              45 
  Fees payable to the Company's auditor and its 
   subsidiaries for the provision of tax services                8               7 
  The Company audit fee is GBP23,000 (2022: GBP9,000). 
   5              Staff costs 
  Group                                     2023   2022 
                                             No.    No. 
                                           -----  ----- 
  Average monthly number of employees, 
   including directors: 
  Production and research                     77     79 
  Selling and research                         9      9 
  Administration                              12      7 
                                              98     95 
                                           =====  ===== 
  Group                                     2023      2022 
                                         GBP'000   GBP'000 
                                        --------  -------- 
  Staff costs, including directors: 
  Wages and salaries                       3,602     3,387 
  Social security costs                      376       361 
  Other pension costs                        198       113 
                                           4,176     3,861 
                                        ========  ======== 
  Company                                   2023   2022 
                                             No.    No. 
                                           -----  ----- 
  Average monthly number of employees, 
   including directors: 
  Selling and research                         -      - 
  Administration                               1      1 
                                               1      1 
                                           =====  ===== 
  Company                                   2023      2022 
                                         GBP'000   GBP'000 
                                        --------  -------- 
  Staff costs, including directors: 
  Wages and salaries                          87       131 
  Social security costs                        -         7 
  Other pension costs                          -         4 
                                              87       142 
                                        ========  ======== 
   6              Directors' remuneration 
                             Salary   Benefits      2023      2022 
                           and fees    in kind     Total     Total 
                            GBP'000    GBP'000   GBP'000   GBP'000 
                         ----------  ---------  --------  -------- 
  G G Watt                       71          -        71        71 
  R MacDonnell                    2          -         2         2 
  T Williams                      6          -         6         - 
                         ----------  ---------  --------  -------- 
  Aggregate emoluments           79          -        79        73 
                         ==========  =========  ========  ======== 
  Directors' pensions                            2023    2022 
                                                  No.     No. 
                                               ------   ----- 
  The number of directors who are accruing 
   retirement benefits under: 
  Defined contributions policies                     -       1 
                                                 =====   ===== 
   The directors represent key management personnel. 
    Refer to note 18 for details of directors share options. 
   7              Taxation 
                                                                  2023                 2022 
                                                               GBP'000              GBP'000 
                                                           -----------      --------------- 
       United Kingdom Corporation Tax 
  Current taxation                                               (800)                (708) 
       Adjustments in respect of prior years                         -                    - 
                                                           -----------      --------------- 
                                                                 (800)                (708) 
       Deferred taxation                                             -                    - 
                                                           -----------      --------------- 
  Tax on loss                                                    (800)                (708) 
                                                           -----------      --------------- 
       Current tax reconciliation 
  Taxable loss for the year                                    (3,284)              (1,576) 
                                                           -----------      --------------- 
  Theoretical tax at UK corporation 
   tax rate 19% (2022: 19%)                                      (622)                (289) 
       Effects of: 
      R&D tax credit adjustments                                 (408)                (350) 
      Fixed asset timing differences                                28                (101) 
            Not deductible for tax purposes                          3                    2 
        Impairment of goodwill                                     129                    - 
      Deferred tax not recognised                                   73                   45 
      Adjustments in respect of prior 
       years                                                         -                    1 
           Utilisation of losses                                   (4)                    - 
      Short term timing differences                                  1                 (16) 
                                                           -----------      --------------- 
  Total income tax credit                                        (800)                (708) 
                                                           ===========      =============== 
   The Group has tax losses amounting to approximately GBP3,423,000 
    (2022: GBP3,033,706), 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 
    GBP650,000 (2022: GBP576,404). 
   8              Loss / profit per share 
    Basic (pence per share) 2023 - Loss (6.84) per share; 2022 - 
    Loss (2.42) per share 
    This has been calculated on a loss of GBP2,484,000 (2022: Loss 
    GBP868,000) and the number of shares used was 36,312,823 (2022: 
    35,812,823) being the weighted average number of shares in issue 
    during the year. 
    Diluted (pence per share) 2023 - (6.84) loss per share; 2022 
    - (2.42) loss 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. 
   9              Property, plant and equipment 
      Group                                   Equipment, 
                                                fixtures          Leasehold        Motor 
                                Freehold    and fittings       improvements     vehicles      Total 
                                 GBP'000         GBP'000            GBP'000      GBP'000    GBP'000 
                             -----------  --------------  -----------------  -----------   -------- 
  At 1 July 2022                     426           1,320            474              237      2,457 
  Additions                            -              56             55                -        111 
  Disposals                            -               -              -             (65)       (65) 
  At 30 June 2023                    426           1,376            529              172      2,503 
                             -----------  --------------  -------------  ---------------   -------- 
  At 1 July 2022                      45           1,179            168              237      1,629 
  Charged in year                      5              63             88                -        156 
  Disposals                            -               -              -             (65)       (65) 
  At 30 June 2023                     50           1,242            256              172      1,720 
                             -----------  --------------  -------------  ---------------   -------- 
      Net book value 
  At 30 June 2023                    376             134            273                -        783 
                             ===========  ==============  =============  ===============   ======== 
  At 30 June 2022                    381             141            306                -        828 
                             ===========  ==============  =============  ===============   ======== 
   10           Right of use 
  Group                              Equipment, 
                                       fixtures        Leasehold        Motor 
                       Property    and fittings     improvements     vehicles     Total 
                        GBP'000         GBP'000          GBP'000      GBP'000   GBP'000 
                    -----------  --------------  ---------------  -----------  -------- 
  At 1 July 2022          2,580             236              168          147     3,131 
  Additions                   -             156                -            -       156 
  Disposal                    -               -                -            -         - 
  At 30 June 2023         2,580             392              168          147     3,287 
                    -----------  --------------  ---------------  -----------  -------- 
  At 1 July 2022            299             156               12          115       582 
  Charged in year           296              63               42           21       422 
  Disposal                    -               -                -            -         - 
  At 30 June 2023           595             219               54          136     1,004 
                    -----------  --------------  ---------------  -----------  -------- 
  Net book value 
  At 30 June 2023         1,985             173              114           11     2,283 
                    ===========  ==============  ===============  ===========  ======== 
  At 30 June 2022         2,281              80              156           32     2,549 
                    ===========  ==============  ===============  ===========  ======== 

These assets have been offered as security in respect of these lease agreements. Depreciation charged in the period on those assets amounted to GBP422,000 (2022: GBP314,000)

   11           Goodwill 
 .    Group                        Goodwill      Total 
                                    GBP'000    GBP'000 
                                  ---------  --------- 
     At 1 July 2022                   1,357      1,357 
         Additions                        -          - 
                                  ---------  --------- 
     At 30 June 2023                  1,357      1,357 
                                  =========  ========= 
         As at 30 June 2023           (678)          - 
                                  =========  ========= 
      Net book value 
     At 30 June 2023                    679      1,357 
                                  =========  ========= 
     At 30 June 2022                  1,357      1,357 
                                  =========  ========= 
              The goodwill brought forward in the statement of financial position 
               at 30 June 2022 was GBP1,357,000 this has been impaired to GBP679,000 
               following a management review. The goodwill is made up of Adien 
               Limited in 2002 (GBP151,000), QM Systems Limited in 2006 (GBP516,000), 
               TED Limited in 2017 (GBP0), and Utsi Electronics Limited in 2021 
               We consider the CGUs to be the entities as acquired under business 
               combinations and managed as separate legal entities, each representing 
               a separately identifiable and independent group of assets contributing 
               to the cash flows of the CGU. 
               This financial year due to delay in the Start of Production for 
               the contract manufacturing business, and given the effects of 
               the wider downturn and volatility in the global market uncertainty 
               the directors have taken a prudent view to recognise a goodwill 
               impairment charge totalling GBP678,000, which consists of an impairment 
               charge on QM Systems Limited GBP487,000, TED GBP129,000 and Adien 
               Limited GBP62,000. 
               Adien Limited represents the segment utility detection and mapping 
               services and QM Systems Limited represents the segment test system 
               QM Systems Limited, TED, and Utsi are involved in projects surrounding: 
                *    The creation of innovative automated assembly systems 
                     for the manufacturing, food and pharmaceutical 
                *    The provision of inspection systems for the 
                     automotive, aerospace, rail and pharmaceutical 
                *    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 and calculation of 
               the terminal values. The key assumptions are those regarding the 
               discount rates, growth rates and expected changes to sales and 
               direct costs due to inflationary pressures 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 17.2% 
               per annum based on weighted average cost of capital. 
               The growth rate assumptions are based on management forecasts 
               as below. The results of these forecasts have then been further 
               impaired by the group directors in the interests of prudence. 
                *    Adien - These have been assessed as 28% growth for 
                     revenue in years 1 bringing it back into line with 
                     year ending June 2022, with and 2.5% for years 
                *    UTSI and PipeHawk combined these have been assessed 
                     as 63% for growth for revenue in year 1 and 76% for 
                     year 2, 45% for year 3, 54% for year 4, and 40% year 
                *    QM - The strong pipeline reported last year did 
                     convert, and at 30th June 2023 QM had a closing 
                     orderbook of GBP5.8m, the highest ever recorded. In 
                     addition, further orders have been received in the 
                     new financial year, and the company has a strong 
                     pipeline of enquiries. Based on this year 1 is 
                     showing growth of 102% This is followed by an 
                     expected 16% growth in year 2, 21% in year 3, 7% in 
                     year 4 and 23% for years 5, and is expected to 
                     include start of production in all three contract 
                     manufacturing client projects. 
                *    TED - A prudent approach has been applied to TED 
                     until activity generated from the recent distribution 
                     agreement with Unipart is fully underway. The 
                     forecasts are based on a 3% growth for year 1, 20% in 
                     year 2, 17% in year 3 and no increase for years 4 and 
   12           Non-current investments 
      Company                             Investment 
                                     in subsidiaries     Total 
                                             GBP'000   GBP'000 
                                   -----------------  -------- 
  At 1 July 2022                               1,903     1,903 
      Additions                                    -         - 
                                   -----------------  -------- 
  At 30 June 2023                              1,903     1,903 
                                   =================  ======== 
      Provided at 30 June 2023                 (916)         - 
                                   =================  ======== 
      Net book value 
  At 30 June 2023                                988     1,903 
                                   =================  ======== 
  At 30 June 2022                              1,903     1,903 
                                   =================  ======== 
                                    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 Design          100%         England & Wales   Specialist in railway 
    Ltd                                                                equipment 
   Wessex Precision Instruments        100%         England & Wales   Slip test solutions 
   Utsi Electronics Ltd                100%         England & Wales   GPR equipment 
   Wessex Test Equipment               100%         England & Wales   Dormant 
    Ltd (formerly Tech Sales 
    Services Ltd) 
   CE Marking Services Ltd             100%         England & Wales   Dormant 
    (formerly MineHawk Ltd) 
   An impairment assessment was performed in line with the assessment 
    of goodwill, see note 11 for further details. On the basis of 
    this assessment an impairment of the investment was made at 30 
    June 2023. 
    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 
                           Group                Company 
                   --------------------  -------------------- 
                        2023       2022       2023       2022 
                     GBP'000    GBP'000    GBP'000    GBP'000 
                   ---------  ---------  ---------  --------- 
  Raw materials          106        150          -          - 
  Finished goods         147        190          -          - 
                         253        340          -          - 
                   =========  =========  =========  ========= 
   The replacement cost of the above inventories would not be significantly 
    different from the values stated. 
    The cost of inventories recognised as an expense during the year 
    amounted to GBP2,294,000 (2022: GBP1,886,000). For the Parent 
    company this was GBPnil (2022: GBP41,612). 
   14           Trade and other receivables 
                                               Group                Company 
                                       --------------------  -------------------- 
                                            2023       2022       2023       2022 
                                         GBP'000    GBP'000    GBP'000    GBP'000 
                                       ---------  ---------  ---------  --------- 
  Trade receivables                        1,263      1,261          -          - 
  Amounts owed by Group undertakings 
   less provision                              -          -          9        469 
  Other Debtors                              374        522          2          - 
  Accrued income                             190        332          -         41 
  Prepayments                                940        274          -          - 
                                           2,767      2,389         11        510 
                                       =========  =========  =========  ========= 
   15           Trade and other payables 
                                               Group                Company 
                                       --------------------  -------------------- 
                                            2023       2022       2023       2022 
                                         GBP'000    GBP'000    GBP'000    GBP'000 
                                       ---------  ---------  ---------  --------- 
  Trade payables                           1,197        972         34         38 
  Other taxation and social security       1,002        447          -          - 
  Payments received on account             2,164        839          -          - 
  Accruals and other creditors             1,029        601        103        106 
                                           5,392      2,859        137        144 
                                       =========  =========  =========  ========= 
                                                Group                  Company 
                                       ----------------------   -------------------- 
                                             2023        2022        2023       2022 
                                          GBP'000     GBP'000     GBP'000    GBP'000 
                                       ----------  ----------   ---------  --------- 
  Amounts owed to Group undertakings            -            -      2,002      1,398 
  Other creditors                               -           -           -          - 
           -            -                                           2,002      1,398 
  ==========  ===========                                       =========  ========= 
   The performance obligations of the IFRS 15 contract liabilities 
    (payments received on account) are expected to be met within 
    the next financial year. The brought forward payments received 
    on account figure was GBP839,000, during the financial year 2023 
    GBP839,000 has been recognised as revenue in the statement of 
    comprehensive income. 
   16           Borrowing analysis 
                                               Group                Company 
                                       --------------------  -------------------- 
                                            2023       2022       2023       2022 
                                         GBP'000    GBP'000    GBP'000    GBP'000 
                                       ---------  ---------  ---------  --------- 
  Due within one year 
  Bank and other loans                       677        708        379        375 
  Directors' loan                          1,783      1,644      1,783      1,644 
  Obligations under lease agreements         426        322          -          - 
                                       ---------  ---------  ---------  --------- 
                                           2,886      2,674      2,162      2,019 
                                       =========  =========  =========  ========= 
  Due after more than one year 
  Bank and other loans                    350     491     221     331 
  Directors' loan                       2,501   2,751   2,501   2,751 
  Obligations under lease agreements    2,062   2,370       -       - 
                                       ------  ------  ------  ------ 
                                        4,913   5,612   2,722   3,082 
                                       ======  ======  ======  ====== 
  Due within 1 year                     2,886   2,729   2,162   2,072 
  Over 1 year but less than 2 years     3,040   3,249   2,611   2,861 
  Over 2 years but less than 5 years    1,873   2,361     111     221 
                                       ------  ------  ------  ------ 
                                        7,799   8,339   4,884   5,154 
                                       ======  ======  ======  ====== 

Directors' loans

Included with Directors' loans and borrowings due within one year are accrued fees and interest owing to G.G Watt of GBP1,783,000 (2022: GBP1,644,000). The accrued fees and interest are repayable on demand and no interest accrues on the balance.

The director's loan due in more than one year is a loan of GBP2,501,000 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 GBP1,501,000 (2022: GBP1,750,000) was outstanding in relation to this loan. During the year to 30 June 2023 GBP393,000 (2022: GBP200,000) 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 GBP2,501,000.

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.

   Bank and other loans 
    Included in bank and other loans is an invoice discounting facility 
    of GBP261,962 (2022: GBP299,635). The principal terms of which 
    are interest at 2.58% over Bank of England base rate and secured 
    on the company's debtors. 
    Included in bank and other loans is a secured mortgage of GBP107,438 
    which incurs an interest rate of 2.44% over base rate for 10 
    years and at a rate of 2.64% over base thereafter. 
    As a result of COVID 19, Coronavirus Business Interruption Loan 
    Scheme (CBILS) became available for the business. This enabled 
    the group to secure two loans. The loan for GBP GBP400,000 had 
    a remaining balance outstanding is GBP220,000, and the second 
    loan of GBP150,000 had a remaining balance outstanding is GBP110,000, 
    both at a rate of 2.96%. The amount of interest paid during the 
    year was GBP19,837. 
    The business was also able to secure a Bounce Back loan through 
    Wessex Precision Engineering of GBP24,000 the remaining balance 
    outstanding is GBP19,000, and Utsi obtained GBP50,000 bounce 
    back loan the remaining balance outstanding is GBP39,000 both 
    with an interest rate of 2.5%. 
  2023                                                                    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               4,446          (393)              -               231       4,284 
  Leases                      2,692          (455)            156                94       2,487 
  Other                       1,201          (210)              -                37       1,028 
                         ----------  -------------  -------------  ----------------  ---------- 
  Loans and borrowings        8,339        (1,058)            156               362       7,799 
                         ==========  =============  =============  ================  ========== 
  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 
                         ==========  =============  =============  ================  ========== 

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 2023, the top 3 customers 
    comprised 30% (2022: 34%) of total trade receivables in the segment 
    Automation and test system solutions. 
    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. 
    Within revenue there are two customers which individually represent 
    13.6% and 11.36% of the overall revenue for the financial year. 
   An analysis of trade and other receivables: 
  2023                 Weighted   Gross carrying        Impairment 
                   average loss            value    loss allowance 
                        GBP'000          GBP'000           GBP'000 
                 --------------  ---------------  ---------------- 
  Performing              0.00%            2,767                 - 
  2022                         Weighted       Gross carrying           Impairment 
                           average loss                value       loss allowance 
                                                     GBP'000              GBP'000 
                    -------------------  -------------------  ------------------- 
  Performing                      0.00%                2,389                    - 
    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 
    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: 
       2023                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                    1,734             -               -         1,734 
       Borrowings              2,514         2,594             204         5,312 
   Lease liability               426           393           1,668         2,487 
                          ----------  ------------  --------------      -------- 
                               4,674         2,987           1,872         9,533 
                          ==========  ============  ==============      ======== 
       2022                Less than   Due between     Due between 
                              1 year     1-2 years    2 - 5+ years 
                             GBP'000       GBP'000         GBP'000       GBP'000 
                          ----------  ------------  --------------      -------- 
  Trade and other 
   payables                    1,876             -               -         1,876 
       Borrowings              2,405         2,887             355         5,647 
   Lease liability               322           363           2,007         2,692 
                          ----------  ------------  --------------      -------- 
                               4,603         3,250           2,362        10,215 
                          ==========  ============  ==============      ======== 
   Financial liabilities of the Company are all due within less than 
    three months 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 
    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 
                                      2023      2023         2022      2022 
                                       No.   GBP'000          No.   GBP'000 
                               -----------  --------  -----------  -------- 
  Ordinary shares of 1p each    40,000,000       400   40,000,000       400 
                               ===========  ========  ===========  ======== 
  Allotted and fully paid 
  Brought forward               36,312,823       363   34,860,515       349 
  Issued during the year                 -         -    1,452,308        14 
  Carried forward               36,312,823       363   36,312,823       363 
                               ===========  ========  ===========  ======== 
   Fully paid ordinary shares carry one vote per share and carry 
    a right to dividends. 
    12,953,703 (2022: 11,773,703) share options were outstanding 
    at the year end, comprising the 2,100,000 employee options and 
    the 10,853,703 share options and warrants held by directors disclosed 
    Share based payments have been included in the financial statements 
    where they are material. No share-based payment expense has been 
    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 
  Between July 2016 and July 
   2023                                                   60,000                3.00p 
       Between November 2019 and                         400,000               3.875p 
        November 2026 
   Between November 2020 and                             100,000                3.75p 
    November 2027 
       Between March 2024 and March                    1,290,000                8.00p 
   Between January 2026 and January                    1,400,000               14.25p 
    Directors' share options 
                                            Number of options 
                           ---------  -----------------------------   ---------  ------------ 
                                       Granted   Lapsed                             Date from 
            Directors'           At     during   during      At end    Exercise         which 
            share options     start   the year      the     of year       price   exercisable 
                            of year                year 
                           --------  ---------  -------  ----------   ---------  ------------ 
                                                                                       18 Mar 
       G G Watt             750,000          -        -     750,000        8.0p          2024 
                                                                                       18 Mar 
       R MacDonnell         200,000          -        -     200,000        8.0p          2024 
                                                                                       10 Jan 
       T Williams                 -    200,000        -     200,000      14.25p          2026 
         The Company's share price at 30 June 2023 was 13p. The high and 
          low during the period under review were 16.5p and 11.25p 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 7.72 years (2022: 7.09 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 
    G.G Watt - GBP188,402 
    The directors are considered the key management personnel of 
    the Company. Remuneration to directors is disclosed in note 6. 
  Included within the amounts due from and to Group undertakings 
   were the following balances: 
                                                        2023      2022 
                                                         GBP       GBP 
                                                  ----------  -------- 
  Balance due from: 
        Thomson Engineering Design Limited           679,649   462,482 
        Wessex Precision Engineering Limited           8,520     6,120 
  Balance due to: 
        Adien Limited                                 99,278   147,738 
        QM Systems Limited                         1,702,813   979,323 
       Utsi Electronics Limited                      200,001   271,115 
   These intergroup balances vary through the flow of working capital 
    requirements throughout the Group as opposed to intergroup trading. 
    The balance due from TED GBP679,649 has been provided for based 
    on a review of recoverability of intercompany balances. 
   There is no ultimate controlling party of PipeHawk plc. 
   20           Government grants 
   In addition to the Government assistance disclosed in note 16, 
    no further Government grants were recognised during the period: 
                                             Group                 Company 
                                     ---------------------  -------------------- 
                                           2023       2022       2023       2022 
                                        GBP'000    GBP'000    GBP'000    GBP'000 
                                     ----------  ---------  ---------  --------- 
  Coronavirus Job Retention Scheme 
   grants                                     -         48          -          3 
                                              -         48          -          3 
  =============================================  =========  =========  ========= 
   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 21 December 2023.

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(END) Dow Jones Newswires

November 29, 2023 02:00 ET (07:00 GMT)

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