Last checked at 20 Mar 2008 07:00
20 March 2008 Pipehawk Plc ("Pipehawk" or "the Company") Interim unaudited results for the six month period ended 31 December 2007
Chairman's Statement
Trading in the first half of the current financial year has been difficult particularly at the Company's wholly owned subsidiary, QM Systems Limited ("QM").
The Company's turnover in the six months ended 31 December 2007 was ‚£1,848,000 (2006: ‚£2,547,000) resulting in a loss before taxation of ‚£321,000 (2006: loss ‚£36,000). The core businesses of Adien and Sumo continue to trade ahead of management expectations but the Company has suffered some set backs at QM.
As announced on 12 November 2007, management and other changes at QM's major customer, GE Aviation ("GE"), has resulted in GE not collaborating with QM on bespoke test solution orders for its Joint Strike Fighter and other systems test work in direct contravention of verbal and written agreements between the two parties. Accordingly, QM's turnover in the period has fallen by ‚£900,000 compared with the same period in the previous year. To mitigate against this, we have made a number of staff changes and have reduced the staff costs of QM by 50 per cent. and your Board has also retained legal advisers to take appropriate action to seek compensation from GE Aviation on a largely contingent basis to minimise the associated costs of the action.
During the period under review, QM's directors have been actively engaged in building both a new customer base and new products for sale into the safety critical aerospace test industry and has achieved good success in both areas. Four new products have been developed in conjunction with several blue chip customers that will have wide applications in the aerospace sector. Sales to non-GE Aviation customers in the period under review have increased by 179 per cent. compared to the corresponding period last year.
The approval process for the Euro 8 million EU MineHawk grant is progressing despite political and financial disruption in both Tanzania and Kenya who are part of the grant approval process. Our grant advisors continue to provide positive feedback as to the process and I hope to bring you more encouraging news soon. Much of the software platform written for PipeHawk III will be common to that upon which the MineHawk will be built and consequently the Company will be well placed once the MineHawk project receives approval.
At the time of writing this statement the final testing of PipeHawk III is being undertaken and plans are well underway for its launch. In the years since the first PipeHawk equipment was produced the construction and underground utilities markets have moved on markedly, to the point where the use of GPR technology is more than an accepted technology, but is specified as an essential part of the construction process. Accordingly, the Board expects PipeHawk III, with its extensive use of modern communication software, will be readily accepted into the market place.
The evidence to support the acceptance and specification of GPR as best practice has been demonstrated by the continued growth of both Adien and SUMO. These two companies continue to lead the field with double digit percentage growth in sales during the period under review.
The Board considers that the Company's working capital position is sufficient for its immediate requirements. During the period under review the Company's directors have provided support in the form of unsecured loans on normal commercial terms.
In summary, the difficulties caused by both the GE Aviation and MineHawk situations are being dealt with proactively by your Board and the core businesses of Adien, SUMO and QM, are growing satisfactorily.
Gordon Watt
20 March 2008
Consolidated Income Statement
For the six months ended 31 December 2007
6 months ended 6 months ended Year ended 31 December 31 December 30 June 2007 2007 2006 (audited) (unaudited) (unaudited) ‚£'000 ‚£'000 ‚£'000 Revenue 1,848 2,547 4,471 Less: share of joint venture (648) (530) (865)turnover Revenue - continuing 1,200 2,017 3,606operations Operating costs (1,511) (2,063) (3,576) Operating (loss)/profit (311) (46) 30 Share of operating profit in 32 39 71joint venture (Loss)/profiton ordinary (279) (7) 101activities before interest and taxation Finance costs (42) (29) (78) (Loss)/profit before taxation (321) (36) 23 Taxation 30 46 86 (Loss)/profitfor the period (291) 10 109 (Loss)/earningsper share (1.08) 0.05 0.41(pence) - basic (Loss)/earnings per share (0.84) 0.05 0.32(pence) - diluted Consolidated Balance sheetAs at 31 December 2007Assets 6 months ended 6 months ended 12 months ended 30 June 2007 31 December 2007 31 December 2006 (audited) (unaudited) (unaudited) ‚£'000 ‚£'000 ‚£'000 Non-current assets Tangible fixed assets 258 325 287 Intangible assets 1,640 1,091 1,499 Investment in joint venture 118 54 86 2,016 1,470 1,872 Current assets Stock 338 516 279 Trade and other receivables 839 541 741 1,177 1,057 1,020 Total Assets 3,193 2,527 2,892 Equity and liabilities Equity Share capital 269 269 269 Share premium 4,842 4,842 4,842 Other reserves (4,517) (4,325) (4,226) 594 786 885 Non current liabilities Financial liabilities 551 569 563 551 569 563 Current liabilities Trade and other payables 1,705 1,061 1,411 Bank overdrafts and loans 343 111 33 2,048 1,172 1,444 Total equity and liabilities 3,193 2,527 2,892
Consolidated Cash Flow Statement
For the six months ended 31 December 2007
6 months to 6 months to 12 months to 31 December 2007 31 December 2006 30 June (unaudited) 2007 (unaudited) ‚£'000 (audited) ‚£'000 ‚£'000 Cash flow from operating activities Loss/profit from operations (311) (46) 30 Adjustments for: Depreciation 102 116 225 (209) 70 255 (Increase)/decrease in stocks (60) 241 478 (Increase)/decrease in receivables (98) 428 228 Decrease/(increase)/ in 152 (792) (436)liabilities Cash (used by)/generated from (215) (53) 525operations Interest received - - 3 Interest paid (42) (29) (81) Corporation tax received 30 46 86 Net cash (used in)/generatedfrom (227) (33) 533operating activities Cash flows from investing activities Purchase of intangibles assets (171) - (438) Purchase of plant and equipment (42) (13) (37) Net cash used in investing (213) (13) (475)activities Cash flows from financing activities Issue of ordinary shares less - 25 29expenses New loans 200 11 29 Repayment of bank loan (37) (42) (80) Finance lease principle payments (33) (25) (34) 130 (31) (56) Net cash used in financing (83) (41) (529)activities Net(decrease)/increasein cash and (310) (74) 4cash equivalents Cash and cash equivalents at (33) (37) (37)beginning of period Cash and cash equivalents at end (343) (111) (33)of period
Consolidated Statement of changes in equity
For the six months ended 31 December 2007
Share Share Retained Total capital premium earnings account ‚£'000 ‚£'000 ‚£'000 ‚£'000 12 months ended 30 June 2007 As at 1 July 2006 267 4,815 (4,335) 747 Profit for the period - - 109 109 Shares issued 2 27 - 29 As at 30 June 2007 269 4,842 (4,226) 885 6 months ended 31 December 2007 As at 1 July 2007 269 4,842 (4,226) 885 Loss for the period - - (291) (291) As at 31 December 2007 269 4,842 (4,517) 594 Notes to the Interim Results1. Basis of preparation
The Interim Results for the six months ended 31 December 2007 are unaudited and do not constitute statutory accounts in accordance with section 240 of the Companies Act 1985.
Full accounts for the year ended 30 June 2007, on which the auditors gave an unqualified report and contained no statement under Section 237 (2) or (3) of the Companies Act 1985, have been delivered to the Registrar of Companies.
2. Adoption of International Financial Reporting Standards (IFRS)
For all periods up to 30 June 2007 PipeHawk plc has prepared its financial statements in accordance with UK Generally Accepted Accounting Principles (UK GAAP). AIM Rules require that the annual consolidated financial statements of PipeHawk plc for the year ended 30 June 2008 be prepared in accordance with International Financial Reporting Standards (IFRS).
Accordingly, these interim financial statements which are for the six months ending 31 December 2007 have been prepared for the first time in accordance with International Financial Reporting Standards and are covered by IFRS1, First-time Adoption of IFRS.
The information presented within these interim financial statements is in compliance with IAS 34 `Interim Financial Reporting'.
In preparing these interim financial statements the comparative figures previously reported under UK GAAP have been restated for the transition to IFRS. The disclosures required by IFRS 1 regarding the transition for the relevant periods are given in note 3 below. Unless noted the same accounting policies and methods of computation have been followed in the interim financial statements as compared to the most recent annual financial statements.
3. Transition from UK GAAP to IFRS
As required under IFRS 1, the equity reconciliations at 1 July 2006 (the transition date for IFRS) and at 30 June 2007 (date of last UK GAAP financial statements) are set out below. For comparative purposes, the equity reconciliation at 31 December 2006 is also included to enable a comparison of the 2007 published interim figures
The amortisation charged under UK GAAP for the year ended 30 June 2007 was charged in accordance with UK GAAP policies and was also considered necessary to bring the goodwill to an accurate carrying value. Under IFRS goodwill cannot be amortised but an impairment is instead required for the year ended 30 June 2007. The resulting loss for the year ended 30 June 2007 is therefore the same under IFRS as reported in the audited accounts prepared under UK GAAP.
4. Reconciliation of UK GAAP equity to IFRS equity
30 June 31 December 1 July 2006 2007 2006 Capital and reserves according to UK 885 786 747GAAP - - - Effect of adopting IFRS Equity according to IFRS 885 786 747
Under IFRS goodwill previously accounted for on the acquisition of investments has been restated as "Other intangible assets" in accordance with IFRS 3 - Business combinations. This reclassification does not affect the figures previously stated. In addition the total assets, equity and liabilities reported under UK GAAP are the same as that reported under IFRS.
5. Segmental information
The group operates in one geographical location being the UK. Accordingly the primary segmental disclosure is based on activity.
Utility Development, Test system Total detection assembly and solutions and mapping sale of GPR services equipment ‚£'000 ‚£'000 ‚£'000 ‚£'000 6 months ended 31 December 2007 Total segmental revenue 1,474 55 319 1,848 Segmental result 50 (179) (163) (292) 6 months ended 31 December 2006 Total segmental revenue 1,262 74 1,211 2,547 Segmental result 95 (213) 128 10 12 months ended 30 June 2007 Total segmental revenue 2,488 151 1,832 4,471 Segmental result 230 (118) (3) 1096. (Loss)/earnings per share
This has been calculated on losses of ‚£291,000 (2006: profit ‚£10,000) and the number of shares used was 26,917,330 (2006: 26,897,803) being the weighted average number of share in issue during the year. For the fully diluted calculations the number of shares used for the calculation was 34,667,952.
7. Dividends
No dividend was proposed for the six months ended 31 December 2007.
8. Copies of Interim Results
Copies of the Interim Results will be sent to shareholders shortly and will also be available from the Company's registered office, Systems House, Mill Lane, Alton, Hampshire, GU34 2QG.
Further enquiries: Pipehawk Plc Tel: 01420 590990 Gordon Watt John East & Partners Limited Tel: 020 7628 2200 Simon Clements
PIPEHAWK PLC