TIDMPIP
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
Highlights
- 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
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
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
Chairman
Date: 28 November 2023
Enquiries:
PipeHawk plc Tel. No. 01252
Gordon Watt (Chairman) 338 959
Allenby Capital Limited (Nomad and Broker) Tel. No. 020 3328
5656
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
--------- ---------
Assets
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
Equity
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
Group
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
----------- -------------- ----------------- ----------- --------
Cost
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
----------- -------------- ------------- --------------- --------
Depreciation
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
----------- -------------- --------------- ----------- --------
Cost
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
----------- -------------- --------------- ----------- --------
Depreciation
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
--------- ---------
Cost
At 1 July 2022 1,357 1,357
Additions - -
--------- ---------
At 30 June 2023 1,357 1,357
========= =========
Impairment
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
(GBP12,000).
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
solutions.
QM Systems Limited, TED, and Utsi are involved in projects surrounding:
* The creation of innovative automated assembly systems
for the manufacturing, food and pharmaceutical
sectors.
* The provision of inspection systems for the
automotive, aerospace, rail and pharmaceutical
sectors.
* Slippage testing
* Assembly and sale of GPR equipment
* Automated test systems
The Group tests goodwill annually for impairment or more frequently
if there are indicators that it might be impaired.
The recoverable amounts are determined from value in use calculations
which use cash flow projections based on financial budgets approved
by the directors covering a five-year period 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
thereafter.
* 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
5.
* 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
5.
12 Non-current investments
Company Investment
in subsidiaries Total
GBP'000 GBP'000
----------------- --------
Cost
At 1 July 2022 1,903 1,903
Additions - -
----------------- --------
At 30 June 2023 1,903 1,903
================= ========
*
Impairment
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
Ltd
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
--------- --------- --------- ---------
Current
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
--------- --------- --------- ---------
Current
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
---------- ---------- --------- ---------
Non-current
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
====== ====== ====== ======
Repayable
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
rate
GBP'000 GBP'000 GBP'000
-------------- --------------- ----------------
Performing 0.00% 2,767 -
2022 Weighted Gross carrying Impairment
average loss value loss allowance
rate
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
point.
Liquidity risk
As stated in note 1 the Executive Chairman, G.G Watt, has pledged
to provide ongoing financial support for a period of at least
twelve months from the approval date of the Group statement
of financial position. It is on this basis that the directors
consider that neither the Group nor the Company is exposed to
a significant liquidity risk.
Contractual maturity analysis for financial liabilities:
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
Total
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
values.
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
be able to move to a position of providing returns for shareholders
and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
The Group manages trade debtors, trade creditors and borrowings
and cash as capital. The entity is meeting its objective for managing
capital through continued support from G G Watt as described per
note 1.
18 Share capital
2023 2023 2022 2022
No. GBP'000 No. GBP'000
----------- -------- ----------- --------
Authorised
Ordinary shares of 1p each 40,000,000 400 40,000,000 400
=========== ======== =========== ========
Allotted and fully paid
Brought forward 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
below.
Share based payments have been included in the financial statements
where they are material. No share-based payment expense has been
recognised.
No deferred tax asset has been recognised in relation to share
options due to the uncertainty of future available profits.
The director and employee share options were issued as part of
the Group's strategy on key employee remuneration, they lapse
if the employee ceases to be an employee of the Group during
the vesting period.
Employee options
Date options exercisable Number of Exercise price
shares
Between July 2016 and July
2023 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
2031
Between January 2026 and January 1,400,000 14.25p
2033
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
was:
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
FR KZMZMRRKGFZM
(END) Dow Jones Newswires
November 29, 2023 02:00 ET (07:00 GMT)
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