2016
PipeHawk plc is a dynamic business offering advanced engineering solutions to challenging technical
requirements across many industries.
We are the global market leader in ground probing radar technology with many applications including civil
engineering and land mine detection. Our technology provides a superior detection of hidden underground
objects and features, dramatically reducing risk, improving safety and saving substantial time and money
during identification and excavation.
Adien Limited, a wholly owned subsidiary, is a leader in the field of utility detection and mapping. Its
survey teams provide information that is critical in the design processes of almost all construction projects
that involve breaking the ground.
QM Systems, a division of PipeHawk PLC, is a market leader in providing solutions and services for
electronic system design and manufacture, test equipment, transfer systems and automation and assembly
solutions to the automotive, aerospace, rail and other related industries.
Powered by excellent people our reputation is built on exceeding our customers’ expectations in delivering
innovative, cost effective quality solutions in all aspects of our business.
Through our energetic, innovative and dynamic approach together with our significant investment in R&D
we will continue to strengthen our market leading positions.
Contents
Company information ......................................................1
Consolidated statement of comprehensive income ......12
Chairman’s statement ......................................................2
Consolidated statement of financial position ................13
Strategic report..................................................................4
Parent company statement of financial position ..........14
Report of the directors ......................................................5
Consolidated statement of cash flow ..............................15
Corporate governance ......................................................7
Parent company statement of cash flow ........................16
Directors’ biographies ......................................................8
Statement of changes in equity ......................................17
Statement of directors’ responsibilities for the
annual report ....................................................................9
Independent auditor’s report to the shareholders of
PipeHawk plc ..................................................................10
Notes to the financial statements ..................................18
Notice of annual general meeting ..................................40
Company Information
Directors Gordon G Watt (Executive Chairman)
Soumitra P Padmanathan (Finance Director)
Robert Randal MacDonnell (Non Executive)
Robert G Tallentire (Non Executive)
Secretary Soumitra P Padmanathan
Nominated Adviser Allenby Capital Limited
and Broker 3 St Helen’s Place
London
EC3A 6AB
Registered number 3995041
Registered office Manor Park Industrial Estate
Wyndham Street
Aldershot
Hampshire
GU12 4NZ
Auditor Crowe Clark Whitehill LLP
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
Solicitors Gowling WLG
4 More London Riverside
London
SE1 2AU
PipeHawk plc Annual Report and Accounts 2016
1
Chairman’s Statement
“We enter next year with a
very healthy order book”
“Significant step change
in reducing service strikes”
2
PipeHawk plc Annual Report and Accounts 2016
Technology Division
Our marketing of the e-Safe family of
products at a number of prestigious
industry events across Europe is beginning
to bear fruit with a number of new
PipeHawk Resellers covering Germany,
Austria, Spain, Italy and Slovenia all placing
orders. At the No-Dig Show in Poland
PipeHawk was awarded “Certificate of
Distinction” by the Polish Foundation for
Trenchless Technology for outstanding
innovation shown in development of e-Safe
which was recognised as a significant step
change in the approach to reducing service
strikes during both trenchless and
traditional excavation works.
In the UK the number of e-Safe units sold
continues to grow as major players in the
construction and utilities sectors begin to
adopt its use into their standard practices.
Trials have commenced with a number of
Tier 1 companies such as National Grid
Gas, Anglian Water and Morrison Utility
Services which are progressing with
positive results. In addition two major
equipment hire companies are now listing
the e-Safe+ and the new e-SafeLOG.
With renewed interest in alternative
methods for assessing the compliance
of Highway reinstatements against
standards; this year has also seen a
marked increase in enquiries for our
e-Spott & e-SpottHF system.
The application for the Phase 2 H2020
funding was submitted in October 2016,
which was later than expected with the
extra time used for further European
marketing to enhance the application. A
response is expected before the end of
2016. The increased presence of PipeHawk
across the European GPR market has also
led to a number of enquiries for
development of other GPR based products,
further work on which is expected to open
new opportunities, allowing us to further
enhance our provision of user friendly
GPR based systems.
I can report that turnover for the year
ended 30 June 2016 was £4.8 million
(2015: £4.6 million). The Group incurred a
loss before taxation for the year of
£1,017,000 (2015: loss £753,000). The
loss per share was 2.28p (2015: 1.52p).
QM Systems
2015/16 has proved challenging on a
number of levels. Low order intake during
the second quarter, delayed receipt of
expected orders during the latter part of the
third quarter and early part of the fourth
quarter which I can only assume related to
the uncertainty around Brexit. Despite this
QM Systems still managed to achieve an
order intake of approximately £3 million
during the last six months of the financial
year (approx. £800k for the first six months
of the financial year). Order intake for our
usually quieter period of the first quarter of
the current financial year is approximately
£1.25 million representing an excellent
start to this year. This seems to support the
theory that orders were delayed due to
uncertainty around Brexit. Our expected
order base continues to look buoyant with a
substantial amount of significant orders
under discussion.
The fragmented way in which orders arrived
throughout 2015/16 resulted in an
inefficient utilisation of resources. In
addition we experienced a substantial
deficit on budget on one of our key projects.
Despite this we put our client’s interests
first, ensuring that the project was delivered
on time and the close relationship was
maintained. Although QM Systems incurred
a loss on the project, it assisted in winning
a substantial order for an additional project
with the client at more advantageous terms
for QM Systems.
Looking forwards for the remainder of the
current financial year we enter the period
with a very healthy orderbook, and the
enquiry pipeline continues to look buoyant.
QM Systems has recruited an additional
experienced sales manager to the business
to continue growing the orderbook. We have
successfully put the project challenges
faced within the previous year and our
utilisation of resources across the business
is now far more efficient.
In addition to the loans I have provided to
the Company in previous years, my fellow
directors and I have deferred a certain
proportion of our fees and the interest due
to us until the Company is in a suitably
strong position to make the full payments.
Further fees and interest, amounting to
£71,000 were deferred in the year ended
30 June 2016. At 30 June 2016, these
deferred fees and interest amounted to
approximately £1.6 million in total, all of
which have been recognised as a liability in
the Company’s accounts.
Strategy & Outlook
The PipeHawk 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 the very
challenging year just endured, I remain
optimistic in my outlook for the Group.
Gordon Watt
Chairman
14 November 2016
Adien
Following a reasonable first half of the year
showing a small profit, Adien encountered
some very difficult trading during the
second six months largely due to the
deferment of any sort of decision being
taken by clients in the run up to the Brexit
referendum. Nevertheless Adien are now
experiencing an increase in volumes of both
work in progress and enquiries from all its
key clients; in the Water sector all of its
major frameworks are fully engaged; in
addition the Airport and Rail sectors are
increasing activity with significant contracts
in place with all the main Contractors
involved both north and south of the border.
In Scotland the Power sector has started a
new phase of funding for Substation
upgrades with an initial batch of 35 sites
starting in December 2016. The Highlands
Railway refurbishment is underway and
Adien have frameworks agreements in
place with all the major contractors.
The next six months is forecast to be
very busy.
SUMO
SUMO has also had a challenging year. It
made a small loss in the first half, then a
good profit in the third quarter and another
loss in the fourth quarter. Turnover for the
year ended 30 June 2016 was £4,664,000
(2015: £4,464,000) and the profit before
tax was £22,000 (2015: loss £136,000).
PipeHawk owns 28.4% of SUMO and
accounts for it as a joint venture – for
this reason the turnover of SUMO has
not been accounted for in the group
financial statements.
Financial position
The continuing losses mean that the
group continues to be in a net liability
position and reliant on my continuing
financial support.
My letter of support dated 7 December
2015 was renewed on 14 November 2016
for a further year. Loans, 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%.
Chairman’s Statement
PipeHawk plc Annual Report and Accounts 2016
3
Strategic Report
for the year ended 30 June 2016
Financial results
Turnover for the year ended 30 June 2016 was £4.8 million (2015: £4.6 million). The Group incurred a loss after taxation for the year of
£753,000 (2015: loss £503,000). The loss per share was 2.28p (2015: loss per share 1.52p). A detailed review of business as well as
future developments is included in the Chairman’s statement.
Key performance indicators
The Group’s key financial performance indicators are turnover, profit before tax, earnings per share and cash generation. An analysis of key
performance indicators for turnover, profit before tax and earnings per share is disclosed in the statement of comprehensive income within
the financial statements. An analysis of the cash generated by the Group is disclosed in the consolidated statement of cash flow within the
financial statements which show that the Group is cash generative from operations.
Non-financial key performance indicators are the strength of the order book and the ability of the company to generate turnover from the
PipeHawk III technology.
Principal risks and uncertainties
The principal risks and uncertainties facing the business are the level of repeat business from clients and the Group’s ability to attract and
retain new customers together with the management of working capital, compliance, legal and operational issues. When undertaking
research and development activities, the principal risks and uncertainties are the novelty of the product, the actions of competitors during
the development process and the ability to attract new customers for the developed product.
A key risk for the business is the continuing availability of the financial support arrangements provided by the Executive Chairman described
in the Report of the Directors and in note 1, which have been received fo a further 12 months.
The Group’s financial risks and policies to minimise these are set out in note 18.
Current trading
Current trading is satisfactory and in line with the directors’ expectations. The Strategic Report was approved by the Board on 14 November
2016 and signed on its behalf by:
Soumitra P Padmanathan
Finance Director
4
PipeHawk plc Annual Report and Accounts 2016
Report of the Directors
The directors present the annual report for the year ended 30 June 2016
The directors present the annual report on the affairs of the Group together with the financial statements for the year ended 30 June 2016.
Principal activities and review of business
The principal activities of the Group during the year were the development, assembly and sale of test system solutions and ground probing
radar (GPR) equipment; the provision of GPR based services and the undertaking of complementary Research and Development assignments.
Future developments
A review of the operations of the Group during the financial year and expected future developments are included in the Chairman’s
statement on page 2.
Results and dividends
The results for the Group for the year are set out in the consolidated statement of comprehensive income on page 12. The directors do not
recommend the payment of a dividend for the year (2015: £nil).
Directors
The directors who served during the year are set out below:
Gordon G Watt (Executive Chairman)
Soumitra P Padmanathan (Finance Director) – appointed 23 March 2016
Robert Randal MacDonnell (Non-Executive)
Robert G Tallentire (Non-Executive) – resigned as finance director and appointed as non-executive director 23 March 2016
The directors’ beneficial interests in the share capital of the company were as follows:
14 November 2016 30 June 2016 30 June 2015
Ordinary % of issued Ordinary % of issued Ordinary % of issued
Shares of 1p share capital Shares of 1p share capital Shares of 1p share capital
G G Watt 5,721,500 17.3% 5,721,500 17.3% 5,721,500 17.3%
R MacDonnell 931,436 3.1% 931,436 3.1% 1,031,436 3.1%
R G Tallentire - - - - - -
S P Padmanathan - - - - - -
The directors are also interested in unissued Ordinary Shares granted to them by the Company under share options held by them pursuant
to individual option schemes as set out in note 6.
Substantial share interests
Other than directors, the Company has been notified of the following persons being interested in more than 3% of the issued share capital of
the company at the date of this report.
Ordinary % of issued
Shares of 1p share capital
S Hamilton 4,583,334 13.9%
P Lobbenberg 3,100,000 9.4%
R J Chignell 2,204,200 6.7%
J Cresswell 1,700,000 5.2%
J T Twigg 1,054,830 3.2%
N G Wood 1,054,830 3.2%
Research and development
The Group continues to undertake research and development activities at its sites in Worcester and Aldershot. This will enable the Group to
expand its activity in technology and innovation that will help us greatly in developing new products that will begin directly generating
revenue in the future. The Group has undertaken research and development activities in the areas of ground probing radar and test &
measurement related equipment.
PipeHawk plc Annual Report and Accounts 2016
5
Report of the Directors
Auditor and disclosure of information to auditor
Each of the persons who are directors at the time when this report is approved has confirmed that:
(a) so far as each director is aware, there is no relevant audit information of which the company’s auditor is unaware; and
(b) each director has taken all the steps that ought to have been taken as a director in order to be aware of any information needed by the
company’s auditor in connection with preparing their report and to establish that the company’s auditor is aware of that information.
Auditor
The reappointment of Crowe Clark Whitehill LLP will be proposed at the forthcoming Annual General Meeting, in accordance with
section 489 of the Companies Act 2006.
Future developments
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the
Chairman’s statement and the summary of significant accounting policies – “critical judgements in applying accounting policies and key
sources of estimation uncertainty”.
Financial instruments
Note 18 to the financial statements describe the policies and processes for managing its capital, its financial risk management objectives,
details of its financial instruments and its exposure to credit risk and liquidity risk.
Going concern
As described in the Chairman’s report, the current economic environment is improving for the Group’s trading subsidiaries in their respective
markets as evidences by healthy order books however the directors consider that the outlook presents challenges in terms of sales volumes
and in terms of bringing R&D developments to commercialisation. The directors have instituted measures to preserve cash and secure
additional finance but these circumstances create uncertainties over future trading results and cashflows.
The directors have furthermore obtained a renewed pledge from GG Watt to provide ongoing financial support for a period of at least twelve
months from the approval date of the group statement of financial position. Nevertheless, in addition to the continuing support of the
Directors, after making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial
statements. A material uncertainty exists regarding the ability of the Group to remain a going concern without the continuing financial
support of the Executive Chairman.
Approval
The report of the directors was approved by the Board on 14 November 2016 and signed on its behalf by:
Soumitra P Padmanathan
Director
6
PipeHawk plc Annual Report and Accounts 2016
Corporate Governance
The Company is not subject to the Listing Rules of the Financial Conduct Authority which require listed companies to disclose how they have
applied the principles set out in the UK Corporate Governance Code and whether they have complied with its provisions throughout the
period. The Company considers these principles to be best practice, subject to their appropriateness given the size of the Company and the
composition of the Board. The following report summarises the current corporate governance processes that are in place.
Directors
The Board currently comprises the executive chairman, one executive director and two non-executive directors.
Executive directors’ normal retirement age is 65 and non-executive directors’ normal retirement age is 80. Both are subject to periodic
reappointment by shareholders. The requirements of the Company’s articles result in each director being reappointed every three years.
The full Board meets formally six times each year. There is a formal schedule of matters reserved for the Board’s decision. All directors have
access to the advice and services of the company secretary, who is also responsible for ensuring that Board procedures are followed. There
is also a procedure in place for any director to take independent professional advice, if necessary, at the company’s expense.
Internal controls
The directors have overall responsibility for ensuring that the Group maintains a system of internal control, and for reviewing its
effectiveness, to provide them with reasonable assurance that the assets of the Group are safeguarded and that the shareholders’
investments are protected. The system includes internal controls covering financial, operational and compliance areas, and risk
management. There are limitations in any system of internal control, which are designed to manage rather than eliminate risk and can
provide reasonable but not absolute assurance against material misstatement or loss.
The Board has undertaken an assessment of the major risk areas for the business and methods used to monitor and control them. In
addition to financial risk, this covered operational, commercial, marketing and research and development risks. This risk review has become
an ongoing process of identifying, evaluating and managing the significant risks faced by the Group, with regular review by the Board.
The additional key procedures designed to provide an effective system of internal control are that:
• There is an organisational structure with clearly defined lines of responsibility and delegation of authority.
• Annual budgets are prepared and updated as necessary.
• Management accounts are prepared on a quarterly basis and compared to budgets and forecasts to identify any significant variances.
• The Group appoints staff of the required calibre to fulfil their allotted responsibilities.
The Board has considered it inappropriate to establish an internal audit function. However, this decision will be reviewed as the operations of
the Group develop.
Identification of business risk
Regular assessments of ongoing risks facing the business are undertaken as part of the regular Group management meetings in the key
areas such as management of working capital, compliance, legal and operational issues. This risk management framework is applied to
major initiatives such as acquisitions as well as operational risks within the business including operational health and safety risks.
Remuneration
Basic salaries are set having regard to each director’s responsibilities and pay levels for comparable positions. In framing its remuneration
policy the committee aims to attract and retain directors to run the company successfully without making excessive payments.
Details of individual directors’ share options are included in the notes to the financial statements and details of their remuneration including
long term incentive schemes are included in note 6 to the audited financial statements. The notice period in all the directors’ service
contracts is one year.
Shareholder relationships
The Board attaches a high priority to communications with shareholders. Presentations are made to shareholders, institutions and analysts once
a year to coincide with the announcement of the final results. Additional dialogue with institutional shareholders is entered into as necessary.
The annual general meeting is to be held on 15 December 2016. The resolutions to be proposed at the annual general meeting, together
with explanatory notes, appear in the separate Notice of Annual General Meeting on page 40.
Other information about the Company is available on the Company’s web site.
PipeHawk plc Annual Report and Accounts 2016
7
Directors’ Biographies
Gordon Watt BA, FCA, FRSA
Chairman (63)
Gordon is a chartered accountant having been a partner at RSM Robson Rhodes and then Finance Director/Deputy Chief Executive of British
Bus Plc until it was sold to Arriva Plc. He is non-executive chairman of a number of private companies, he became a non-executive director
of the Group in 1998, became finance director in December 2001 and Chairman in January 2003.
Soumitra P Padmanathan BSc, FCA, CTA
Finance Director (52)
Soumitra (Mithi) was appointed as Group Finance Director on 23 March 2016. Having qualified with RSM Robson Rhodes, Mithi has gained
extensive experience in several Global multi-national businesses.
R Randal MacDonnell
Non-executive Director (76)
Randal joined the Group in February 2006. He was previously a director of Kleinwort Benson Securities, Laing & Cruickshank Securities and
Chase Manhattan Securities Limited. Prior to that he was a partner in stockbrokers Laurie Milbank & Co.
Robert Tallentire ACA MBA
Non-executive Director (57)
Bob joined PipeHawk in 2003 and has been both Managing Director of Adien and Group Finance Director. He is now a Non-executive
Director of the company since 11 April 2016. Bob is a chartered accountant having been a partner at RSM Robson Rhodes. He has
extensive consulting and management experience.
8
PipeHawk plc Annual Report and Accounts 2016
Statement of Directors’ Responsibilities for the Annual Report
The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to
prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and
applicable law.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing these financial
statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the
financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue
in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company and group’s
transactions and disclose with reasonable accuracy at any time the financial position of the company and group and enable them to ensure
that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company
and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
They are further responsible for ensuring that the Strategic Report and the Report of the Directors and other information included in the
Annual Report and Financial Statements is prepared in accordance with applicable law in the United Kingdom.
The maintenance and integrity of the PipeHawk plc web site is the responsibility of the directors; the work carried out by the auditors does
not involve the consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred
in the accounts since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other information included in annual
reports may differ from legislation in other jurisdictions.
PipeHawk plc Annual Report and Accounts 2016
9
Independent Auditor’s Report to the Members of PipeHawk plc
We have audited the financial statements of PipeHawk plc for the year ended 30 June 2016 which comprise the Group Statement of
Comprehensive Income, the Group and Parent Company Statement of Financial Position, the Group and Parent Company Statements of
Cash Flow, the Group and Parent Company Statements of Changes in Equity and the related notes numbered 1 to 21.
The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the Strategic Report and the Directors’ Report and any other surround
information to identify material inconsistencies with the audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we
become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion:
•(cid:0) the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 June 2016
and of the group’s loss for the year then ended;
•(cid:0) the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
•(cid:0) the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
as applied in accordance with the provisions of the Companies Act 2006; and
•(cid:0) the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Emphasis of matter – Going concern
Without qualifying our opinion we draw attention to the basis of preparation on going concern in note 1 to the financial statements. This
explains that a material uncertainty exists regarding the group’s ability to continue as a going concern without the continuing financial
support of the Executive Chairman. The financial statements do not include any adjustments that would result if the group was unable to
continue as a going concern.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
10
PipeHawk plc Annual Report and Accounts 2016
Independent Auditor’s Report to the Members of PipeHawk plc
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
•(cid:0) adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
•(cid:0) the parent company financial statements are not in agreement with the accounting records and returns; or
•(cid:0) certain disclosures of directors’ remuneration specified by law are not made; or
•(cid:0) we have not received all the information and explanations we require for our audit.
Stephen Bullock
Senior Statutory Auditor
for and on behalf of
Crowe Clark Whitehill LLP
Chartered Accountants
Statutory Auditor
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
United Kingdom
14 November 2016
PipeHawk plc Annual Report and Accounts 2016
11
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2016
Note 30 June 2016 30 June 2015
£’000 £’000
Revenue 2 4,813 4,628
Staff costs 5 (2,866) (2,575)
Operating costs (2,805) (2,617)
––––––––––––– –––––––––––––
Operating loss (858) (564)
Share of post-tax profits/(losses) of equity accounted joint venture 11 6 (39)
––––––––––––– –––––––––––––
Loss before interest and taxation (852) (603)
Finance costs 3 (165) (150)
––––––––––––– –––––––––––––
Loss before taxation (1,017) (753)
Taxation 7 264 250
––––––––––––– –––––––––––––
Loss for the year attributable to equity holders of the parent (753) (503)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Other comprehensive income - -
––––––––––––– –––––––––––––
Total comprehensive loss for the year attributable to equity holders of the parent (753) (503)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Loss per share (pence) – basic 8 (2.28) (1.52)
Loss per share (pence) – diluted 8 (2.28) (1.52)
The notes on pages 18 to 39 form an integral part of these financial statements.
12
PipeHawk plc Annual Report and Accounts 2016
Consolidated Statement of Financial Position
at 30 June 2016
Assets Note 30 June 2016 30 June 2015
£’000 £’000
Non-current assets
Property, plant and equipment 9 227 235
Goodwill 10 1,061 1,061
Investment in joint venture 11 53 47
––––––––––––– –––––––––––––
1,341 1,343
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current assets
Inventories 13 105 86
Current tax assets 181 127
Trade and other receivables 14 1,224 1,276
Cash and cash equivalents 24 43
––––––––––––– –––––––––––––
1,534 1,532
––––––––––––– –––––––––––––
Total assets 2,875 2,875
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity and liabilities
Equity
Share capital 19 330 330
Share premium 5,151 5,151
Retained earnings (9,236) (8,483)
––––––––––––– –––––––––––––
(3,755) (3,002)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Non-current liabilities
Borrowings 15 2,301 2,242
Trade and other payables 16 - 1,848
––––––––––––– –––––––––––––
2,301 4,090
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current liabilities
Trade and other payables 16 3,895 1,569
Borrowings 17 434 218
––––––––––––– –––––––––––––
4,329 1,787
––––––––––––– –––––––––––––
Total equity and liabilities 2,875 2,875
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 18 to 39 form an integral part of these financial statements.
The financial statements were approved by the board and authorised for issue on 14 November 2016 and signed on its behalf by:
Gordon G Watt
Director
Company No: 3995041
PipeHawk plc Annual Report and Accounts 2016
13
Parent Company Statement of Financial Position
at 30 June 2016
Assets Note 30 June 2016 30 June 2015
£’000 £’000
Non-current assets
Investment in subsidiaries 12 1,197 1,197
Investment in joint venture 11 198 198
––––––––––––– –––––––––––––
1,395 1,395
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current assets
Inventories 13 97 72
Current tax assets 82 50
Trade and other receivables 14 316 680
Cash and cash equivalents - 9
––––––––––––– –––––––––––––
495 811
––––––––––––– –––––––––––––
Total assets 1,890 2,206
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity and liabilities
Equity
Share capital 19 330 330
Share premium 5,151 5,151
Retained earnings (9,145) (8,773)
––––––––––––– –––––––––––––
(3,664) (3,292)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Non-current liabilities
Borrowings 15 2,225 2,225
Trade and other payables 16 1,261 3,142
––––––––––––– –––––––––––––
3,486 5,367
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current liabilities
Trade and other payables 16 2,068 131
––––––––––––– –––––––––––––
2,068 131
––––––––––––– –––––––––––––
Total equity and liabilities 1,890 2,206
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 18 to 39 form an integral part of these financial statements.
The financial statements were approved by the board and authorised for issue on 14 November 2016 and signed on its behalf by:
Gordon G Watt
Director
Company No: 3995041
14
PipeHawk plc Annual Report and Accounts 2016
Consolidated Statement of Cash Flow
For the year ended 30 June 2016
30 June 2016 30 June 2015
£’000 £’000
Cash flows from operating activities
Loss from operations (858) (564)
Adjustments for:
Profit on disposal of assets (1) -
Depreciation 112 138
––––––––––––– –––––––––––––
(747) (426)
(Increase)/decrease in inventories (19) 24
Decrease/(increase) in receivables 53 (198)
Increase in liabilities 328 454
––––––––––––– –––––––––––––
Cash used in operations (385) (146)
Interest paid (18) (12)
Corporation tax received 212 195
––––––––––––– –––––––––––––
Net cash (used in)/generated from operating activities (191) 37
––––––––––––– –––––––––––––
Cash flows from investing activities
Proceeds from sale of assets 2 -
Purchase of plant and equipment (105) (133)
––––––––––––– –––––––––––––
Net cash used in investing activities (103) (133)
––––––––––––– –––––––––––––
Cash flows from financing activities
Proceeds from borrowings 361 221
Repayment of loan - (160)
Repayment of finance leases (86) (42)
––––––––––––– –––––––––––––
Net cash generated from/(used in) financing activities 275 19
––––––––––––– –––––––––––––
Net decrease in cash and cash equivalents (19) (77)
Cash and cash equivalents at beginning of year 43 120
––––––––––––– –––––––––––––
Cash and cash equivalents at end of year 24 43
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 18 to 39 form an integral part of these financial statements.
PipeHawk plc Annual Report and Accounts 2016
15
Parent Company Statement of Cash Flow
For the year ended 30 June 2016
30 June 2016 30 June 2015
£’000 £’000
Cash flows from operating activities
Loss from operations (353) (232)
Decrease in inventories (25) 14
Increase in receivables 364 (60)
Increase in liabilities (80) 329
––––––––––––– –––––––––––––
Cash generated by operations (94) 51
Interest paid (2) -
Corporation tax received 87 110
––––––––––––– –––––––––––––
Net cash generated by operating activities (9) 161
––––––––––––– –––––––––––––
Cash flows from investing activities
Repayment of loan - (160)
––––––––––––– –––––––––––––
Net cash used in financing activities - (160)
––––––––––––– –––––––––––––
Net increase in cash and cash equivalents (9) 1
Cash and cash equivalents at beginning of year 9 8
––––––––––––– –––––––––––––
Cash and cash equivalents at end of year - 9
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 18 to 39 form an integral part of these financial statements.
16
PipeHawk plc Annual Report and Accounts 2016
Statement of Changes in Equity
For the year ended 30 June 2016
Consolidated Share
Share premium Retained
capital account earnings Total
£’000 £’000 £’000 £’000
As at 1 July 2014 330 5,151 (7,980) (2,499)
Loss for the year - - (503) (503)
Other comprehensive income - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income - - (503) (503)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As 30 June 2015 330 5,151 (8,483) (3,002)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Loss for the year - - (753) (753)
Other comprehensive income - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income - - (753) (753)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As 30 June 2016 330 5,151 (9,236) (3,755)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Parent Share
Share premium Retained
capital account earnings Total
£’000 £’000 £’000 £’000
As at 1 July 2014 330 5,151 (8,498) (3,017)
Loss for the year - - (275) (275)
Other comprehensive income - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income - - (275) (275)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As 30 June 2015 330 5,151 (8,773) (3,292)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Loss for the year - - (372) (372)
Other comprehensive income - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income - - (372) (372)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As 30 June 2016 330 5,151 (9,145) (3,664)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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 on pages 18 to 39 form an integral part of these financial statements.
PipeHawk plc Annual Report and Accounts 2016
17
Notes to the Financial Statements
For the year ended 30 June 2016
1. Summary of Significant Accounting Policies
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 at page 1. The principal
activities of the Company and its subsidiaries (the Group) are described on page 5.
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 Company has not been presented.
For the year to 30 June 2016 the Company recorded a net loss after taxation of £372,000 (2015: £275,000).
Basis of preparation
The financial statements have been prepared in accordance with international financial reporting standards as adopted by the EU
and under the historical cost convention. The principal accounting policies are set out below.
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 EU.
The directors do not expect that the adoption of these standards will have a material impact on the financial statements of the Group
in future periods, except that IFRS 9 will impact both the measurement and disclosures of financial instruments and IFRS 15 may
have an impact on revenue recognition and related disclosures. At this point it is not practicable for the directors to provide a
reasonable estimate of the effect of IFRS 9 and IFRS 15 as their detailed review of these standards is still ongoing.
In addition the directors are in the process of considering the potential changes that may occur to the financial statements under
IFRS 16 “Leases”. This is expected to apply to periods commencing on or after 1 January 2019 and the assessment will be made
over the next year and reported in future financial information.
Basis of preparation – Going concern
The directors have reviewed the Group’s funding requirements for the next twelve months which show positive anticipated cash flow
generation, prior to any repayment of loans from the Executive Chairman. The directors therefore have a reasonable expectation that
the entity has adequate resources to continue in its operational exercises for the foreseeable future. The directors have furthermore
obtained a renewed pledge from GG Watt 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 it appropriate to adopt the
going concern basis of preparation within these financial statements. A material uncertainty exists regarding the ability of the Group
to remain a going concern without the continuing financial support of the Executive Chairman.
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.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the purchase 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, plus any costs directly attributable to the business
combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under
IFRS 3 Business Combinations (revised) are recognised at their fair values at the acquisition date, except for non-current assets (or
disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations, which are recognised and measured at fair value less costs to sell.
18
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
1. Summary of Significant Accounting Policies (continued)
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. If,
after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities
exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.
Goodwill
Goodwill arising on the acquisition of a subsidiary or a jointly controlled entity represents the excess of the cost of acquisition over
the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary or jointly
controlled entity recognised at the date of acquisition. 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 or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the
profit or loss on disposal.
Investments in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to
joint control that is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the
unanimous consent of the parties sharing control.
The results and assets and liabilities of joint venture are incorporated in these financial statements using the equity method of
accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5
Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in joint ventures are carried in
the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net
assets of the joint venture, less any impairment in the value of individual investments. Losses of a joint venture in excess of the
Group’s interest in that joint venture (which includes any long-term interests that, in substance, form part of the Group’s net
investment in the joint venture) are recognised only to the extent that the Group has incurred legal or constructive obligations or
made payments on behalf of the joint venture.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent
liabilities of the joint venture recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the
carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group’s share of the
net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is
recognised immediately in profit or loss.
Where a group entity transacts with a joint venture of the Group, profits and losses are eliminated to the extent of the Group’s
interest in the relevant joint venture.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer
returns, rebates and other similar allowances.
PipeHawk plc Annual Report and Accounts 2016
19
Notes to the Financial Statements
For the year ended 30 June 2016
1. Summary of Significant Accounting Policies (continued)
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
•
•
•
•
the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective
control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the entity; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
For PipeHawk products this is generally at the point of delivery.
Rendering 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.
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 finance leases are depreciated over their expected useful lives on the same basis as owned assets
or, where shorter, the term of the relevant lease. The principal annual rates used to depreciate property, plant and equipment are:
Equipment, fixtures and fittings
Motor vehicles
25%
25%
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within the
Statement of Comprehensive Income.
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 outlays incurred on behalf of clients and an appropriate proportion of directly
attributable costs on incomplete assignments. Provision is made for irrecoverable costs where appropriate.
Financial assets
Financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract
whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially
measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss,
which are initially measured at fair value.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are
classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less
any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
20
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
1. Summary of Significant Accounting Policies (continued)
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the
relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points
paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the
expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest basis.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each statement of financial position date. Financial assets are impaired
where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial
asset, the estimated future cash flows of the investment have been impacted.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount
and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of
trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is
considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are
credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
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.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains
substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset.
Financial liabilities and equity instruments issued by the Group
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the
contractual arrangement.
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.
Intangible assets
Intangible assets acquired separately
Intangible assets acquired separately are reported at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method
are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a
prospective basis.
PipeHawk plc Annual Report and Accounts 2016
21
Notes to the Financial Statements
For the year ended 30 June 2016
1. Summary of Significant Accounting Policies (continued)
Internally-generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated
intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of
the following have been demonstrated:
•
•
•
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when
the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be
recognised, development expenditure is charged to profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and
accumulated impairment losses, on the same basis as intangible assets acquired separately.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the
definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at
the acquisition date.
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately.
Finance leases
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if
lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of
financial position as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss. Contingent rentals are
recognised as expenses in the periods in which they are incurred.
Operating leases
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The
aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
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.
22
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
1. Summary of Significant Accounting Policies (continued)
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 19.
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.
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.
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.
PipeHawk plc Annual Report and Accounts 2016
23
Notes to the Financial Statements
For the year ended 30 June 2016
1. Summary of Significant Accounting Policies (continued)
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, or where they arise
from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in
calculating goodwill or in determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets,
liabilities and contingent liabilities over the cost of the business combination.
Impairment of property, plant and equipment and intangible assets
At each year end date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets 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.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and
whenever there is an indication that the asset may be impaired.
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, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
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, unless the relevant asset is
carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Any impairment
made to the goodwill cannot be subsequently reversed.
Critical judgements 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 and investment in subsidiaries
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 acquired 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 10 for further details.
The carrying amount of goodwill at the year end date was £1,061,000 (2015: £1,061,000). The investment in subsidiaries at the
year end was £1,197,000 (2015: £1,197,000).
24
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
2. Segmental analysis
2016 2015
£’000 £’000
Turnover by geographical market
United Kingdom 4,745 4,529
Europe 68 9
Other - 90
––––––––––––– –––––––––––––
4,813 4,628
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
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”) 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 – Utility detection and mapping services
Technology Division – Development, assembly and sale of GPR equipment
QM Systems – Test system solutions
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 external and internal 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. Segment assets and liabilities are
presented inclusive of inter segment balances, as inter-segment pricing.
In utility detection and mapping services one customer accounted for 11% of revenue in 2016 and 12% in 2015. In development,
assembly and sale of GPR equipment one customer accounted for 10% of revenue in 2016 and 24% in 2015. In automation and
test system solutions one customer accounted for 15.5% of revenue and 8.5% in 2015.
Information regarding each of the operations of each reportable segments is included below, all non-current assets owned by the
group are held in the UK .
Utility Development,
detection assembly
and and sale Automation and
mapping of GPR test system
services equipment solutions Total
£’000 £’000 £’000 £’000
Year ended 30 June 2016
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total segmental revenue 1,241 151 3,421 4,813
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Segmental result (156) (354) (348) (858)
Finance costs (7) (137) (21) (165)
Share of operating profit in Joint venture 6
–––––––––––––
Loss before taxation (1,017)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Segment assets 521 1,334 1,019 2,874
Segment liabilities 510 4,293 1,827 6,630
Non-current asset additions 95 - 10 105
Depreciation and amortisation 72 - 40 112
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
PipeHawk plc Annual Report and Accounts 2016
25
Notes to the Financial Statements
For the year ended 30 June 2016
2. Segmental analysis (continued)
Utility Development,
detection assembly
and and sale Automation and
mapping of GPR test system
services equipment solutions Total
£’000 £’000 £’000 £’000
Year ended 30 June 2015
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total segmental revenue 1,295 210 3,123 4,628
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Segmental result (91) (232) (241) (564)
Finance costs (8) (138) (4) (150)
Share of operating loss in joint venture (39)
–––––––––––––
Loss before taxation (753)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Segment assets 511 1,432 932 2,875
Segment liabilities 833 3,822 1,222 5,877
Non current asset additions 85 - 49 134
Depreciation and amortisation 80 - 59 139
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The majority of the Group’s revenue is earned via the rendering of services.
3. Finance costs
2016 2015
£’000 £’000
Interest payable 165 150
––––––––––––– –––––––––––––
165 150
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Interest payable comprises interest on:
Finance leases 23 12
Directors’ loans 136 138
Other 6 -
––––––––––––– –––––––––––––
165 150
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
26
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
4. Operating loss for the year
This is arrived at after charging for the Group:
2016 2015
£’000 £’000
Research and development costs not capitalised 978 751
Depreciation of wholly owned property, plant and equipment 109 102
Depreciation of property, plant and equipment held under finance leases 29 36
Auditor’s remuneration
- Fees payable to the company’s auditor for the audit of the group’s
financial statements 24 23
- Fees payable to the company’s auditor and its subsidiaries for the
provision of tax services 4 4
Operating lease rentals:
- other including land and buildings 114 141
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The company audit fee is £8,500 (2015: £8,500).
5. Staff costs
2016 2015
No. No.
Average monthly number of employees, including directors:
Production and research 63 55
Selling and research 11 10
Administration 7 7
––––––––––––– –––––––––––––
81 72
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
2016 2015
£’000 £’000
Staff costs, including directors:
Wages and salaries 2,641 2,328
Social security costs 209 232
Other pension costs 16 15
––––––––––––– –––––––––––––
2,866 2,575
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
PipeHawk plc Annual Report and Accounts 2016
27
Notes to the Financial Statements
For the year ended 30 June 2016
6. Directors’ Remuneration
Salary Benefits 2016 2015
and fees in kind Total Total
£’000 £’000 £’000 £’000
G G Watt 71 - 71 71
R G Tallentire 24 - 24 24
S P Padmanathan 4 - 4 -
R MacDonnell - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Aggregate emoluments 99 - 99 95
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Directors’ pensions 2016 2015
No. No.
The number of directors who are accruing retirement benefits under:
- defined contributions policies - -
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The directors above represent key management personnel.
Directors’ share options No. of options
Granted Date from
At start during At end Exercise which
of year year of year price exercisable
R MacDonnell 500,000 - 500,000 3.0p 6-Mar-15
R G Tallentire 1,000,000 - 1,000,000 3.0p 6-Mar-15
The Company’s share price at 30 June 2016 was 3.625p. The high and low during the period under review were 2.875p and 7.75p
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. In consideration of loans made to
the Company R G Tallentire has warrants over 2,120,000 ordinary shares at an exercise price of 3.0p.
28
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
7. Taxation
2016 2015
£’000 £’000
United Kingdom Corporation Tax
Current taxation (264) (204)
Adjustments in respect of prior years - (46)
––––––––––––– –––––––––––––
(264) (250)
Deferred taxation - -
––––––––––––– –––––––––––––
Tax on loss (264) (250)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current tax reconciliation 2016 2015
£’000 £’000
Taxable (loss) for the year (1,023) (713)
––––––––––––– –––––––––––––
Theoretical tax at UK corporation tax rate 20.75% (2015: 20.75%) (205) (148)
Effects of:
- R&D tax credit adjustments (162) (108)
- other expenditure that is not tax deductible 4 6
- adjustments in respect of prior years 36 (46)
- accelerated capital allowances - 5
- losses carried forward 61 21
- short term timing differences 2 20
––––––––––––– –––––––––––––
Total income tax expense (264) (250)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The Group has tax losses amounting to approximately £2,492,000 (2015: £2,176,000), 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 £490,000 (2015: £435,000)
8. Loss per share
Group
Basic
This has been calculated on a loss of £753,000 (2015: loss £503,000) and the number of shares used was 33,020,515 (2015:
33,020,515) being the weighted average number of shares in issue during the year.
Diluted
This has been calculated on a loss of £753,000 (2015: loss £503,000) and the number of shares used was 67,111,718
(2015:67,111,718) being the diluted weighted average number of shares in issue during the year. The potential ordinary shares
included in the weighted average number of shares are anti-dilutive and therefore diluted earnings per share is equal to basic
earnings per share.
PipeHawk plc Annual Report and Accounts 2016
29
Notes to the Financial Statements
For the year ended 30 June 2016
9. Property, plant and equipment
Group Equipment,
fixtures and Leasehold Motor
fittings improvements vehicles Total
£’000 £’000 £’000 £’000
Cost
At 1 July 2015 1,311 223 346 1,880
Additions 78 - 27 105
Disposals - - (27) (27)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2016 1,389 223 346 1,958
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Depreciation
At 1 July 2015 1,176 159 310 1,645
Charged in year 64 23 25 112
Disposals - - (26) (26)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2016 1,240 182 309 1,731
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2016 149 41 37 227
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2015 135 64 36 235
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The net book value of the property, plant and equipment includes £116,965 (2015: £ 60,796) in respect of assets held under
finance lease agreements. These assets have been offered as security in respect of these finance lease agreements. Depreciation
charged in the period on those assets amounted to £28,842 (2015: £36,319).
Company Equipment,
fixtures and Leasehold
fittings improvements Total
£’000 £’000 £’000
Cost
At 1 July 2015 and 30 June 2016 196 45 241
––––––––––––– ––––––––––––– –––––––––––––
Depreciation
At 1 July 2015 and 30 June 2016 196 45 241
––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2016 - - -
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2015 - - -
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
30
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
10. Goodwill
Group Goodwill Total
£’000 £’000
Cost:
At 1 July 2015 and 30 June 2016 1,121 1,121
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Impairment
At 1 July 2015 and 30 June 2016 60 60
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Net book value
At 30 June 2016 1,061 1,061
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
At 30 June 2015 1,061 1,061
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The goodwill carried in the statement of financial position of £1,061,000 arose on the acquisition of Adien Limited in 2002
(£212,000) and the acquisition of QM Systems Limited in 2006 (£849,000).
Adien Limited represents the segment utility detection and mapping services and QM Systems Limited represents the segment test
system solutions.
QM Systems Limited is 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.
• 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. The key assumptions are those regarding the discount rates, growth rates and
expected changes to sales and direct costs 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 10% per
annum reflecting the prevailing pre-tax cost of capital in the company. The growth rates are based on forecasts and historic margins
achieved in both Adien Limited and QM Systems Limited and are 2.5% and 5% respectively, no terminal growth rate was applied.
The directors believe that any reasonable possible change in the key assumptions on which the recoverable amount is based would
not cause the carrying amount of goodwill attributed to Adien Limited and QM Systems Limited to exceed the recoverable amount.
Assumptions made are consistent with the prior year.
PipeHawk plc Annual Report and Accounts 2016
31
Notes to the Financial Statements
For the year ended 30 June 2016
11. Investment in Joint Venture
Group Investment
in shares
£’000
Cost:
At 1 July 2015 and 30 June 2016 198
–––––––––––––
Share of losses
At 1 July 2015 151
Share of profit for the year (6)
–––––––––––––
At 30 June 2016 145
–––––––––––––
Net investment
At 30 June 2016 53
–––––––––––––
–––––––––––––
At 30 June 2015 47
–––––––––––––
–––––––––––––
The investment in joint venture relates to a 28.4% shareholding in the ordinary share capital of SUMO Limited. SUMO Limited is
engaged in the development of a GPR franchise operation and has a year end of 31 December. For the purpose of preparing this
consolidation, financial information has been prepared for the year ended 30 June 2016. SUMO Limited’s principal place of
business is Havant, Hampshire.
Summarised financial information in respect of the Group’s joint venture is set out below:
30 June 2016 30 June 2015
£’000 £’000
Cash 12 34
Current assets 3,072 1,668
Non-current assets 965 853
––––––––––––– –––––––––––––
Total assets 4,049 2,555
Total liabilities (all current) 3,862 2,390
Net assets 187 165
Group’s share of net assets of joint venture 53 47
Year ended Year ended
30 June 2016 30 June 2015
£’000 £’000
Total revenue
4,664 4,464
Interest expense 63 95
Depreciation/amortisation 117 139
Total profit/(loss) for the period 22 (136)
Group’s share of profit/(loss) of joint venture 6 (39)
32
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
12. Non-current investments
Company Investments in Investments in
joint ventures subsidiaries Total
£’000 £’000 £’000
(note 11)
Cost
1 July 2015 198 1,197 1,395
––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2016 198 1,197 1,395
––––––––––––– ––––––––––––– –––––––––––––
Impairment
At 1 July 2015 and 30 June 2016 - - -
––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2016 198 1,197 1,395
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2015 198 1,197 1,395
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
Parent and group
interest in ordinary
shares and voting Country of
Subsidiary rights incorporation Principal activity
Adien Limited 100% England & Wales Specialist surveying
QM Systems Limited 100% England & Wales Test solutions
Tech Sales Services Limited 100% England & Wales Dormant
Minehawk Limited 100% England & Wales Dormant
An impairment assessment was performed in line with the assessment of goodwill, see note 10 for further details. On the basis of
this assessment no impairment of the investment was required at 30 June 2016.
13. Inventories
Group Company
2016 2015 2016 2015
£’000 £’000 £’000 £’000
Raw materials 97 82 89 68
Finished goods 8 4 8 4
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
105 86 97 72
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The replacement cost of the above inventories would not be significantly different from the values stated.
The cost of inventories recognised as an expense and included within cost of sales amounted to £1,598,000 (2015: £1,699,000).
PipeHawk plc Annual Report and Accounts 2016
33
Notes to the Financial Statements
For the year ended 30 June 2016
14. Trade and other receivables
Group
Company
2016 2015 2016 2015
£’000 £’000 £’000 £’000
Current
Trade receivables 1,126 1,199 7 -
Amounts owed by group undertakings - - 263 670
Other receivables 49 41 44 8
Prepayments and accrued income 49 36 2 2
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
1,224 1,276 316 680
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
15. Non-current liabilities: Borrowings
2016 2015 2016 2015
£’000 £’000 £’000 £’000
Group
Company
Borrowings (note 17) 2,301 2,242 2,225 2,225
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
16. Trade and other payables
Group
Company
2016 2015 2016 2015
£’000 £’000 £’000 £’000
Current
Trade payables 1,112 404 393 56
Other taxation and social security 393 336 4 -
Payments received on account 432 536 - -
Accruals 1,958 293 1,671 75
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
3,895 1,569 2,068 131
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Group
Company
2016 2015 2016 2015
£’000 £’000 £’000 £’000
Non-current
Trade payables - 299 - 299
Amounts owed to group undertakings - - 1,261 1,294
Accruals - 1,549 - 1,549
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
- 1,848 1,261 3,142
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Included in trade payables is an amount owed to G G Watt of £274,000 (2015: £299,000).
34
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
16. Trade and other payables (continued)
Included within accruals above are the following amounts owing to directors relating to unpaid fees and accrued interest;
2016 2015
G G Watt £1,544,754 £1,439,709
R G Tallentire £49,148 £83,034
R R MacDonnell £2,000 £2,000
17. Borrowing Analysis
Group
Company
2016 2015 2016 2015
£’000 £’000 £’000 £’000
Due within one year
Bank and other loans 404 173 - -
Obligations under finance lease
agreements 30 45 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
434 218 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Due after more than one year
Obligations under finance lease
agreements 76 17 - -
Directors’ loans 2,225 2,225 2,225 2,225
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
2,301 2,242 2,225 2,225
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Repayable
Due within 1 year 434 218 - -
Over 1 year but less than 2 years 1,244 1,238 1,225 1,225
Over 2 years but less than 5 years 1,057 1,004 1,000 1,000
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
2,735 2,460 2,225 2,225
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Finance lease agreements with Close Motor Finance are at a rate of 4.5% over base rate. The future minimum lease payments
under finance lease agreements at the year end date was £106,596 (2015: £61,863).
A working capital loan of £220,000 was given by Mirrasand Partnership from a trust settled by Mr G Watt. The loan attracts interest
at 10% per annum. £70,000 was repaid on 31 August 2016. The remainder is repayable in January 2017. The loan was
guaranteed personally by Mr G Watt.
The director’s loan due in more than one year is a loan of £1,225,000 from G G Watt. Directors’ loans attract interest at 2.15% over
Bank of England base rate. During the year to 30 June 2016 £nil (2015: £160,000 was repaid).
Included in bank and other loans is an invoice discounting facility of £160,000 (2015 £75,000).
On 13th August 2010 the Company issued £1 million of Convertible Unsecured Loan Stock 2014 (“CULS”) to G G Watt, the
Chairman of the Company. The CULS have been issued to replace loans made by G G Watt to the Company amounting to £1 million
and has been recognised in non-current liabilities of £2,225,000. The CULS were renewed on 13th November 2014.
PipeHawk plc Annual Report and Accounts 2016
35
Notes to the Financial Statements
For the year ended 30 June 2016
17. Borrowing Analysis (continued)
The principal terms of the CULS are as follows:
-
-
The CULS may be converted at the option of Gordon Watt at a price of 5p per share at any time prior to 13th November 2018;
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 13th November 2018 (“the Repayment Date”).
On the basis of materiality no equity element of the convertible loan stock has been recognised in these financial statements.
18. Financial Instruments and derivatives
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. Several high level
procedures are already in place to enable these risks to be controlled. These include profit 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. Of the amounts owed to the Group at
30 June 2016, the top 3 customers comprised 30.7% (2015: 37%) of total trade receivables.
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. 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. The directors believe that the Group does not have any
significant credit risk exposure to any single counterparty. At year end, the Group did not have any customer with a concentration of
credit in excess of 6% of gross assets.
An analysis of trade and other receivables:
Neither Past due but not impaired
Carrying impaired nor More than
2016 amount past due 61-90 days 91-120 days 121 days
Trade and other
receivables 1,224 854 199 92 78
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Neither Past due but not impaired
Carrying impaired nor More than
2015 amount past due 61-90 days 91-120 days 121 days
Trade and other
receivables 1,276 988 - 51 257
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
36
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
18. Financial Instruments and derivatives (continued)
The group allows an average receivables payment period of 60 days after invoice date. It is the group’s policy to assess receivables
for recoverability on an individual basis and to make provision where it is considered necessary. No debtors’ balances have been
renegotiated during the year or in the prior year. As at 30 June 2016, trade receivables of £nil (2015: £nil) were impaired and
provided for.
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. Notes 17 and 18 disclose the maturity of financial liabilities.
Contractual maturity analysis for financial liabilities, (see note 18 for maturity analysis of borrowings):
Due or due
in less than Due between Due between Due between
2016 1 month 1-3 months 3 months-1 year 1-5 years Total
Trade and other
payables 3,895 - - - 3,895
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Due or due
in less than Due between Due between Due between
2015 1 month 1-3 months 3 months-1 year 1-5 years Total
Trade and other
payables 1,529 - - 1,848 3,377
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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 floating rates of interest and are disclosed at note 17.
Fair value of financial instruments
The fair value of loans and receivables is measured at amortised cost using the effective interest method after consideration to
impairment losses. 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 entity manages trade debtors, trade creditors and borrowings and cash as capital. The entity is meeting its objective for
managing capital through continued support from GG Watt as described per Note 1.
PipeHawk plc Annual Report and Accounts 2016
37
Notes to the Financial Statements
For the year ended 30 June 2016
19. Share Capital
2016 2016 2015 2015
No £’000 No £’000
Authorised
Ordinary shares of 1p each 40,000,000 400 40,000,000 400
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Allotted and fully paid
Brought forward 33,020,525 330 33,020,525 330
Issued during the year - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Carried forward 33,020,525 330 33,020,525 330
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Fully paid ordinary shares carry one vote per share and carry a right to dividends.
In addition to the 13,323,703 share options and warrants held by directors, options over ordinary shares have been granted under
the Company’s share option scheme for staff, such that at 30 June 2016 the following options to subscribe for ordinary shares of 1p
each were outstanding.
450,000 options lapsed during the period, No options or warrants were exercised
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.
Date Options Exercisable Number of Shares Exercise Price
Between December 2008 and December 2016 117,500 13.5p
Between March 2015 and March 2022 200,000 3p
The weighted average contractual life of options and warrants outstanding at the year-end is 1.82 years (2015: 2.82 years).
No options were exercised during the period.
20. Financial Commitments
Group 2016 2015
£’000 £’000
Capital commitments
Capital expenditure commitments contracted for, but
not provided in the financial statements were as follows: - -
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Operating lease commitments
The future aggregate minimum lease payments under
non-cancellable operating leases are as follows:
Motor vehicles 25 37
Land and buildings
- within one year 42 65
- one to five years 77 119
––––––––––––– –––––––––––––
144 221
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
38
PipeHawk plc Annual Report and Accounts 2016
Notes to the Financial Statements
For the year ended 30 June 2016
21. Related Party Transactions
Directors’ loan disclosures are given in notes 17 and 18. The interest payable to directors in respect of their loans during the
year was:
G G Watt
R G Tallentire
£134,045 (2015: £135,602)
£1,614 (2015: £2,759)
The directors are considered the key management personnel of the company. Remuneration to directors is disclosed in note 6.
During the year ended 30 June 2016, there were the following transactions with SUMO Limited and SUMO Services Limited, a
subsidiary of the joint venture company SUMO Limited.
£
Sales Nil
As at 30 June 2016, there was an amount of £nil (2015: £986) due from SUMO Limited.
As at 30 June 2016, there was an amount of £5,082 (2015: £5,083) due from Wessex Precision Instruments, a company that G G
Watt is also a Director.
As at 30 June 2016, there was an amount of £39,539 (2015: £50,487) due from Online Engineering Limited, a company that G G
Watt is also a Director.
Included within the amounts due from and to group undertakings were the following balances:
2016 2015
£ £
Balance due from:
Adien Limited 139,808 546,845
QM Systems Limited 123,375 123,375
Balance due to:
Adien Limited 626,314 340,218
QM Systems Limited 634,620 954,793
There is no ultimate controlling party of PipeHawk plc.
PipeHawk plc Annual Report and Accounts 2016
39
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the annual general meeting (the AGM) will be held at the offices of Allenby Capital Limited, 3 St Helen’s Place,
London, EC3A 6AB at 2.30 on Thursday 15 December 2016 for the purpose of considering and, if thought fit, passing the following
resolutions:
Ordinary business
The following resolutions will be proposed as ordinary resolutions:
1. To receive the accounts for the year ended 30 June 2016
together with the reports of the directors and auditor thereon (Resolution 1)
2. To appoint Soumitra Padmanathan who, having been appointed
since the last AGM, retires but being eligible offers herself for re-election (Resolution 2)
3. To re-appoint Randal MacDonnell as Director, who retires but,
being eligible, offers himself for re-election. (Resolution 3)
4. To re-appoint Crowe Clark Whitehill LLP as auditor of the Company and
to authorise the Directors to set their remuneration. (Resolution 4)
To transact any other ordinary business
Serious loss of capital
To consider whether any, and if so what, steps should be taken to address the serious loss of capital within the Company, pursuant to
section 656 (1) of the Companies Act 2006.
Registered Office
Manor Park Industrial Estate
Wyndham Street
Aldershot
Hampshire
GU12 4NZ
Dated: 14 November 2016
Notes:
By order of the Board
S P Padmanathan
Secretary
1. A member of the Company entitled to attend and vote at the AGM may appoint one or more proxies to attend and, on a poll, vote on his/her behalf. A form of proxy for the use of members who are
unable to attend the AGM in person is enclosed. A proxy need not be a member of the Company. This instrument appointing a proxy and the power of attorney (if any) under which it is signed, or a
notarially certified copy of that power, must be deposited with the Company’s Registrars, SLC Registrars, Thames House, Portsmouth Road, Esher, Surrey, KT10 9AD not less than 48 hours before
the time of the General Meeting.
2. The completion of a proxy does not preclude a member from attending the AGM and voting in person.
3. As permitted by Regulation 41 of the Uncertified Securities Regulations 2001, only those shareholders who are registered on the Company’s Register of Members at 18.00 on 13th December
2016 shall be entitled to attend the Annual General Meeting and to vote in respect of the number of ordinary shares in their names at that time. Changes to entries on the register of members
after 18.30 on 13th December 2016 shall be disregarded in determining the rights of any person to attend/or vote at the AGM.
4. Copies of all the Directors’ service contracts are available for inspection at the Company’s registered office during normal business hours on business days from the date of this notice until the
close of the AGM and will be available for inspection at the place of the AGM for 15 minutes before the AGM and during the AGM.
40
PipeHawk plc Annual Report and Accounts 2016
Perivan Financial Print 243082