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2018
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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 ......15
Chairman’s statement ......................................................2
Consolidated statement of financial position ................16
Strategic report..................................................................5
Parent company statement of financial position ..........17
Report of the directors ......................................................6
Consolidated statement of cash flow..............................18
Corporate governance ......................................................8
Parent company statement of cash flow ........................19
Directors’ biographies ....................................................10
Statement of changes in equity ......................................20
Statement of directors’ responsibilities for the
annual report....................................................................11
Independent auditor’s report to the Shareholders of
PipeHawk plc ..................................................................12
Notes to the financial statements ..................................21
Notice of annual general meeting ..................................45
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Company Information
Directors Gordon G Watt (Executive Chairman)
Soumitra P Padmanathan (Finance Director)
Robert Randal MacDonnell (Non-Executive)
Secretary Soumitra P Padmanathan
Nominated Adviser Allenby Capital Limited
and Broker 5 St Helen’s Place
London
EC3A 6AB
Registered number 3995041
Registered office Manor Park Industrial Estate
Wyndham Street
Aldershot
Hampshire
GU12 4NZ
Auditor Crowe U.K. 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 2018
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Chairman’s Statement
I can report that turnover for the year ended
30 June 2018 was £4.8 million (2017:
£5.7 million), a decrease of 15.8%. The
Group made an operating loss in the year of
£408,000 (2017: £16,000 loss) and
incurred a loss before taxation for the year
of £502,000 (2017: loss £193,000) and a
loss after taxation of £151,000 (2017;
profit £179,000). The loss per share was
0.45p (2017: profit per share 0.54p).
As I mentioned in my Interim Statement we
had a most peculiar start to the year, the
level of enquiries and indications that we
would be awarded orders had never been
higher, however the orders, whilst not going
away, simply were not received until late in
the financial year with consequent
underutilisation of staff – and hence
profitability. Nevertheless, as described
below, since the third quarter the orders
have flowed in and we are now extremely
busy.
Despite these setbacks we acquired
Thomson Engineering Design Limited
during the year and, after a very slow start
which exacerbated our group losses, it is
now profitable and contributing to the
Group.
QM Systems
As highlighted above the first half of the
2017/18 financial year witnessed difficult
trading conditions with a lower than
expected order intake. It is difficult to know
what led to this however what appears to
be clear is that a number of key expected
projects were delayed. Quotation activity
throughout the year remained buoyant and
from January 2018 through until the end of
the financial year order intake returned to
the expected level. The retardation of orders
received during the first half of the financial
year resulted in our software and
manufacturing teams being under
occupied. It was important however to
retain staffing levels given the continued
imminence of orders being placed. Order
intake post year end also continues to be
buoyant and is worthy of note to mention
the additional order received from Cox
Powertrain for approximately £1.2 million in
early July bringing the total order received
from Cox since April 2018 to approximately
£1.7 million.
In early 2018 we took the opportunity to
restructure our mechanical engineering
team. This initially resulted in a reduction in
personnel to re-align key skills with current
client requirements and this in turn created
a temporary reduction in our ability to bring
through new work quickly enough to have a
material impact on recovery to a profitable
position during the 2017/18 financial year.
Our focus remains on ensuring that we
have the right skill availability for the
2018/19 financial year. Here I am pleased
to report that during the last four months
we have recruited six Mechanical Design
Engineers and five Software Engineers into
our business. This provides us with a very
significant increase in our ability to carry
out the new projects won and with our
overhead remaining stable this has enabled
us to accelerate client projects and return
to profitability. This combined with our
significant increase in order book and large
portfolio of potential orders enables us to
enter our new financial year with
considerable confidence.
During the 2017/18 financial year QM
Systems undertook some very interesting
projects, including the development of a
machine that provides high accuracy
inspection of aerospace components by
combining robotics, high end vision
inspection and laser scanning. The first
system is very near completion and based
on market feedback it is fully expected that
a number of these systems will be sold over
the next few years. QM Systems has also
developed a test interface system with a
key client for the petrochemical industry.
This exciting development has led the client
to select QM Systems to be its partner for
the production of the final units and it is
anticipated that 200-400 units could be
required over the next 2-3 years.
During the period QM Systems has worked
hard to build a strong order book including
potential repeat sales together with a strong
team to lead this dynamic business forward
and I am very confident that we will witness
a much improved 2018/19 financial year.
Thomson Engineering Design
(“TED”)
Following the acquisition of TED at the end
of November 2017 our focus has been to
“positive outlook for all
divisions”
“strong order book;
strong team”
“strategic acquisition
through synergies in
business models”
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Chairman’s Statement
develop new sales opportunities within TED.
TED’s existing business model is to provide
expertise and innovation in providing
trackside manipulation and handling
equipment suitable for handling, laying and
maintaining track, sleepers, track panels
and electrification masts and supporting
structures. TED has an excellent reputation
within the industry, however its current
model has predominantly focused on the
UK markets in this very niche sector.
Sales during the final part of the 2017/18
financial year have largely been based on
quotation activity prior to acquisition and
clearly this has limited the sales that could
be achieved in the closing part of the
financial year. During the time since
acquisition the TED team have been
integrated into the QM Systems family of
divisions forming a core and central part of
the QM Rail Systems division. This enables
the group to provide a much greater level of
engineering support into TED greatly
enhancing the engineering capability. Since
acquisition, the services that can be offered
by TED have been widened both within the
rail sector, where combined with QM
Systems’ capability far more automated
systems can be provided and also by taking
TED’s key skills to opportunities that exist
outside of the rail sector for similar
equipment. The TED team are experts in
providing light and heavy duty handling and
manipulation systems and with the support
of QM Systems’ wide and diverse client
network we are able to open many
opportunities that previously were not
accessible to TED. As a result TED’s
quotation activity has more than doubled
compared with the six months prior to our
acquisition and this is translating into sales
such that TED is having to recruit more
staff. In addition to this we have started to
establish a wider distribution network to aid
distribution of TED products and services
into Europe and worldwide. We are
beginning to see a marked increase in
quotation activity with Europe and also
evidence that TED’s capability is being
recognised worldwide.
Technology Division
During the 2017/18 financial year
PipeHawk has not made the progress in
sales development anticipated. This is
predominantly due to one of our key UK
distributors ceasing trading. This has
resulted in a temporary lower than
anticipated domestic sales output as we
work to re-establish sales channels.
Following an increased presence at a
number of trade shows and continued press
coverage we are identifying new and
exciting lines of enquiry for the e-Safe and
e-Spade lite family of products. Many of
these new opportunities are yet to
materialise into real sales. However interest
in the products has gained momentum.
Since July we have seen the UK sales start
to increase and take encouragement in the
decision by Skanska, MWH Global and
Balfour Beatty Joint Venture to evaluate e-
Safe as part of their involvement in eight2O,
the largest water sector alliance in the UK.
In addition to this we continue to see
growth in support services, for example
servicing and spares. Here we have
developed a solution that enables our
premier overseas distribution partners to
service their in market client products. This
is beginning to establish a regular income
through added value for both our partners
and us whilst providing the most efficient
and environmentally friendly solution to
sustainable product and support roll out.
International sales have continued to grow
with the Japanese market particularly
worthy of note.
Our e-Safe PRO model, released in July
2017, has been well received. We have
continued to develop our products with the
addition of operator interface refinements
and GPS log recording. In addition to
increasing client appeal we have focused
on cost reduction activity which has
increased return per unit.
We continue to explore grant funding
opportunities with refinement of our H2020
application together with exploring other
more UK centric funding opportunities.
Funding is required to realise a true global
expansion of this exciting range of
products.
Adien
Adien has improved further this year and
marginally increased both the turnover and
profit for the year.
This situation would have been further
improved had Adien not suffered significant
loss in both revenue and profit due to the
failure of Carillion.
The first quarter of the new financial year
has been very busy with our teams working
to the full capacity available in the
programme of works, the level of activity
within the power supply and distribution
industries continues at a significant level.
Airports, highways and major infrastructure
are all very active with only the rail sector
being somewhat quiet at the moment, the
MOD/DIO framework has started to
increase the number of project start ups.
The levels of activity in Scotland continue to
increase within the main sectors of power,
infrastructure and civil works.
Adien has a significant order book going
forward, with the prospect of some
significant contract awards due over the
next three to four months within our existing
frameworks for our key clients.
SUMO
At the Annual General Meeting shareholders
approved the sale to me of PipeHawk’s
minority interest in Sumo and this realised a
profit for the Group over net book value of
£142,000. In the period under review, on
13 October 2017 I paid the £197,000 cash
consideration payable on my purchase of
the minority interest in SUMO and therefore
provided working capital support to the
Company until completion occurred
following shareholder approval at the
Annual General Meeting on 12 December
2017. Since the year end, at the request of
SUMO management, I sold some of those
Sumo shares and remitted 50% of the profit
thereon (£17,107) to PipeHawk, in
accordance with the terms of the sale to
me.
Financial position
The loss sustained during the year means
that the group continues to be in a net
liability position and reliant on my
continuing financial support.
My letter of support dated 30 October 2017
was renewed on 24 October 2018 for a
further year. Loans, other than those
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Chairman’s Statement
covered by the CULS agreement, are
unsecured and accrue interest at an annual
rate of Bank of England base rate plus
2.15%.
The CULS agreement for £1 million,
provided by myself, was due to expire and
be repaid on 13 August 2018. In agreement
with the independent directors this has
been extended for a further four years, on
identical terms and is now repayable on 13
August 2022.
In addition to the loans I have provided to
the Company in previous years, I have
deferred a certain proportion of fees and
the interest due until the Company is in a
suitably strong position to make the full
payments.
Further fees and interest, amounting to
£71,000 were deferred in the year ended
30 June 2018. At 30 June 2018, 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. All
divisions of the Group are currently
performing well and I remain optimistic in
my outlook for the Group.
Gordon Watt
Chairman
16 November 2018
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Strategic Report
Financial results
Turnover for the year ended 30 June 2018 was £4.8 million (2017: £5.7 million). The Group incurred a loss after taxation for the year of
£151,000 (2017: profit £179,000). The loss per share was 0.45p (2017: profit per share 0.54p). 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 and profit before tax and an analysis using these KPIs is included in the
Chairman’s statement. The primary non-financial KPI is the strength of the order book which is also discussed in the Chairman’s statement.
Principal risks and uncertainties
The principal risks and uncertainties facing the business are;
• the acceptance by end customers of its products – the Group mitigates this risk by sharing and getting sign off on the proposed solution
and by ensuring open lines of communication such that any challenges are identified at an early stage and are resolved with the
customer prior to delivery;
• competitive pressure on pricing and delivery timescales – this risk is mitigated by the high level of technological quality offered by the
Group’s solutions and its strong relationships with its key customers;
• technological changes – mitigated by continued investment in research and development;
• availability of sufficient working capital – the Group monitors cash flow as part of its day to day control procedures. The Board considers
cash flow projections at its meetings and ensures that appropriate facilities are available to be drawn down upon as necessary;
• 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 extended for 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 16 November
2018 and signed on its behalf by:
Soumitra P Padmanathan
Finance Director
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Report of the Directors
The directors present the annual report on the affairs of the Group together with the financial
statements for the year ended 30 June 2018
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
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”.
Results and dividends
The results for the Group for the year are set out in the consolidated statement of comprehensive income on page 15. The directors do not
recommend the payment of a dividend for the year (2017: nil).
Subsequent events
See note 23 for details of the subsequent events.
Directors
The directors who served during the year are set out below:
Gordon G Watt (Executive Chairman)
Soumitra P Padmanathan (Finance Director)
Robert Randal MacDonnell (Non-Executive)
The directors’ beneficial interests in the share capital of the company were as follows:
16 November 2018 30 June 2018 30 June 2017
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 16.8% 5,721,500 17.3% 5,721,500 17.3%
R MacDonnell 931,436 2.7% 931,436 3.1% 931,436 3.1%
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 13.5%
P Lobbenberg 3,100,000 9.1%
R J Chignell 2,204,200 6.5%
J T Twigg 1,054,830 3.1%
N G Wood 1,054,830 3.1%
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.
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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
On 25 June 2018 Crowe Clark Whitehill LLP changed its name to Crowe U.K. LLP.
The reappointment of Crowe U.K. LLP will be proposed at the forthcoming Annual General Meeting, in accordance with section 489 of the
Companies Act 2006.
Financial instruments
Note 18 to the financial statements describes the policies and processes for managing the Company’s 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 evidenced 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 reviewed the Group’s funding requirements for the next twelve months which show positive anticipated cash flow
generation, prior to any repayment of loans advanced by the Executive Chairman. The directors have obtained a renewed pledge from
Gordon 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. The directors therefore have a reasonable expectation that the entity has adequate resources to continue in its operational
exercises for the foreseeable future. It is on this basis that the directors consider it appropriate to adopt the going concern basis of
preparation for 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.
Approval
The report of the directors was approved by the Board on 16 November 2018 and signed on its behalf by:
Soumitra P Padmanathan
Director
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Corporate Governance
On 27 September 2018, the Company adopted the Corporate Governance Code (the “Code”), published by the Quoted Company Alliance
(the “QCA”). The Company considers the principles within the Code to be best practice, subject to their appropriateness given the size of the
Company and the composition of the Board. The following report summarises how the Company complies with the Code.
Strategy and Business Model
The Company’s business model and strategy is explained within the Chairman’s Report, including a summary of the challenges in execution
of the strategy and how the Company addresses such challenges.
Directors
The Board currently comprises the executive chairman, Gordon Watt, one executive director, Soumitra Padmanathan and one non-executive
director, Randal MacDonnell. Randal MacDonnell acts as Senior Independent Director. The Board does not comply with the requirement of
the Code to have at least two non-executive directors, but the Board intends, at an appropriate time in the future when the Company is in a
position to afford a further non-executive director, to make such an appointment. Although Randal MacDonnell has been a non-executive
director since 2006, the Board still considers him to be independent. The Board also considers that Soumitra Padmanathan is independent.
Executive directors’ normal retirement age is 70 and non-executive directors’ normal retirement age is 75. Both are executive and
non-executive directors subject to periodic reappointment by shareholders. The requirements of the Company’s articles result in each director
being reappointed every three years. The time commitment required from each Director varies in line with the operations of the business.
The full Board meets formally at least four times each year, during the year there were nine board meetings. Gordon Watt and Randal
MacDonnell attended all meetings and Soumitra Padmanathan attended four meetings. 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.
For relevant experience, skills and personal qualities of the Directors see the Directors’ Biographies section.
As described in the Directors biographies the Board believe the Directors have the correct skillset to deliver the strategy. In order to keep
their skillset up to date the Directors read relevant publications from applicable professional bodies and attend relevant seminars when
possible.
The Chairman has regular meetings with the managing directors and boards of the Group’s subsidiary companies. The Chairman holds
regular update meetings with each Director to ensure they are performing as they are required.
The ability of individual members and the board as a whole to deliver the Company strategy is reviewed annually in an exercise undertaken
by the Chairman. Due to the Company’s size and nature, the Board does not consider it necessary to establish a formal board evaluation
process, but Board composition will be reviewed and refreshed again in 2019. The Chairman and Board members can call on external
advisers as the need arises.
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.
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Corporate Governance
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. Further
details on the principal risks and uncertainties to the Group can be found within the Strategic Report.
Through holding the ISO 9001, OHSAS 18001 and other quality standards, the Company ensures compliance with health and safety and
other regulations.
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 Company’s next annual general meeting is to be held on 13 December 2018. 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 45. All shareholders are invited
to attend the AGM. Following the AGM, the Company usually gives a short presentation on each aspect of the Group, and time is set aside to
allow for questions from attending shareholders to any Board member.
Other information about the Company is available on the Company’s website. The Company’s details are displayed on its website allowing
shareholders to contact the Company if they so wish. As the Company is small, it does not have a dedicated investor relations department
and so the Chairman, Gordon Watt, is responsible for reviewing and dealing with all communications received from members.
Corporate Culture
The Board and directors take a forward-looking, proactive approach to culture within the Group in order to achieve a level of discipline that
aids management with its oversight of risks within the business. There are several values that are important to the Company including:
• promoting a culture of respect and tolerance: team members throughout the Group work well together across a broad range of projects;
being a team player, honesty and straightforwardness with clients and suppliers and among employees are values that are highly
regarded; and
• the importance of the individual: we recognise that the business would fail without the loyalty of our employees, so we encourage free-
thinking and individuality in the workplace wherever possible.
These matters are considered as part of the annual performance evaluation of all employees and reported to the Board. This enables the
Board to ensure the Company’s corporate culture is being promoted amongst its employees.
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Directors’ Biographies
Gordon Watt BA, FCA, FRSA
Chairman (65)
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 (54)
Soumitra (Mithi) was appointed as Group Finance Director on 11 April 2016. Having qualified with RSM Robson Rhodes, Mithi has gained
extensive experience in several global multi-national businesses.
R Randal MacDonnell
Non-executive Director (78)
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.
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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 laws 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 website 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 2018
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Independent Auditor’s Report to the Shareholders of PipeHawk plc
Opinion
We have audited the financial statements of Pipehawk Plc (the “Parent Company”) and its subsidiaries (the “Group”) for the year ended
30 June 2018, which comprise:
• the Group statement of comprehensive income for the year ended 30 June 2018;
• the Group and Parent Company statements of financial position as at 30 June 2018;
• the Group and Parent Company statements of cash flows and statements of changes in equity for the year then ended; and
• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.
The financial reporting framework that has been applied in the preparation of the financial statements 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.
In our opinion:
• 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 2018
and of the Group’s loss for the period then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• 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
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We
are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 1 in the financial statements, which explains that the group is reliant on the continued support of the Executive
Chairman. As stated in note 1, these events or conditions, along with the other matters as set forth in note 1, indicate that a material
uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in
respect of this matter.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected
to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our testing and to
evaluate the impact of misstatements identified.
Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be £40,000, based
on 8% of the Group’s loss before tax.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial
statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our
evaluation of the specific risk of each audit area having regard to the internal control environment.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party transactions and
directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of £2,000. Errors below that threshold would also be
reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.
Overview of the scope of our audit
The Group and its subsidiaries are accounted for from one central operating location, the group’s registered office. Our audit was conducted
from the main operating location and all group companies were within the scope of our audit testing.
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Independent Auditor’s Report to the Shareholders of PipeHawk plc
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in
the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to
be communicated in our report.
This is not a complete list of all risks identified by our audit.
How the scope of our audit addressed
Key audit matter the key audit matter
Group – carrying value of goodwill
Parent company – carrying value of investments in subsidiaries
The financial statements of Pipehawk Plc include goodwill of £1.2 million arising on the
acquisition of Adien Limited, QM Systems Limited and Thomson Engineering Design Limited.
As required by IAS 38, goodwill is subject to an annual impairment review and the
recoverable amount of goodwill is measured in accordance with IAS 36. There is a risk that
the carrying value of goodwill in the Group financial statements and of investments in
subsidiaries in the Parent Company financial statements are impaired.
We evaluated the appropriateness of
managements’ identification of cash
generating units. We benchmarked and
challenged key assumptions in
management’s valuation models used to
determine recoverable amount and discount
rates, performed testing of the
mathematical accuracy of the cash flow
models and challenged and agreeing key
assumptions to available data.
Revenue recognition
The Group recognises revenue over the period of contracts. Revenue from contracts is
material.
The Group uses the percentage of completion method to determine the appropriate amount
of revenue to recognise in the period. A number of judgements are made by management in
making its assessment of estimated costs and profitability. There is a risk that revenue may
be inappropriately recognised.
We assessed the appropriateness of the
related disclosures in the financial
statements
We validated a sample of contracts to
supporting documentation and agreed that
the revenue has been recognised in line
with the Group’s accounting policy.
We challenged management on the
contract budgeting process by analysing
historical contract performance compared
to actual outcome.
We assessed the appropriateness of the
related disclosures in the financial
statements.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to
enable us to express an opinion on these matters individually and we express no such opinion.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
PipeHawk plc Annual Report and Accounts 2018
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Independent Auditor’s Report to the Shareholders of PipeHawk plc
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit
• 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; and
• the directors’ report and strategic report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
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:
• 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
• the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 11, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
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.
Stephen Bullock
Senior Statutory Auditor
for and on behalf of
Crowe U.K. LLP
Chartered Accountants, Statutory Auditor
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
United Kingdom
Date: 16 November 2018
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Consolidated Statement of Comprehensive Income
For the year ended 30 June 2018
Note 30 June 2018 30 June 2017
£’000 £’000
Revenue 2 4,789 5,702
Staff costs 5 (2,703) (2,876)
Operating costs (2,494) (2,842)
––––––––––––– –––––––––––––
Operating loss (408) (16)
Share of post-tax profits of equity accounted joint venture 11 - 1
Sale of Shares in joint venture 11 142 -
––––––––––––– –––––––––––––
Loss before interest and taxation (266) (15)
––––––––––––– –––––––––––––
Finance costs 3 (236) (178)
––––––––––––– –––––––––––––
Loss before taxation (502) (193)
Taxation 7 351 372
––––––––––––– –––––––––––––
(Loss)/Profit for the year attributable to equity holders of the parent (151) 179
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Other comprehensive income - -
––––––––––––– –––––––––––––
Total comprehensive (loss)/profit for the year attributable to equity holders of the parent (151) 179
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
(Loss)/Profit per share (pence) – basic 8 (0.45) 0.54
(Loss)/Profit per share (pence) – diluted 8 (0.45) 0.47
The notes on pages 21 to 44 form an integral part of these financial statements
PipeHawk plc Annual Report and Accounts 2018
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Consolidated Statement of Financial Position
at 30 June 2018
Assets Note 30 June 2018 30 June 2017
£’000 £’000
Non-current assets
Property, plant and equipment 9 481 145
Goodwill 10 1,190 1,061
Investment in joint venture 11 - 54
––––––––––––– –––––––––––––
1,671 1,260
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current assets
Inventories 13 178 156
Current tax assets 372 253
Trade and other receivables 14 1,175 745
Cash and cash equivalents 19 72
––––––––––––– –––––––––––––
1,744 1,226
––––––––––––– –––––––––––––
Total assets 3,415 2,486
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity and liabilities
Equity
Share capital 19 340 330
Share premium 5,191 5,151
Retained earnings (9,208) (9,057)
––––––––––––– –––––––––––––
(3,677) (3,576)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Non-current liabilities
Borrowings 15 2,966 2,266
Trade and other payables 16 8 -
––––––––––––– –––––––––––––
2,974 2,266
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current liabilities
Trade and other payables 16 1,972 1,609
Borrowings 17 2,146 2,187
––––––––––––– –––––––––––––
4,118 3,796
––––––––––––– –––––––––––––
Total equity and liabilities 3,415 2,486
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 21 to 44 form an integral part of these financial statements.
The financial statements were approved by the board and authorised for issue on 16 November 2018 and signed on its behalf by:
Gordon G Watt
Director
Company No: 3995041
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Parent Company Statement of Financial Position
at 30 June 2018
Assets Note 30 June 2018 30 June 2017
£’000 £’000
Non-current assets
Investment in subsidiaries 12 1,197 1,197
Investment in joint venture 11 - 198
––––––––––––– –––––––––––––
1,197 1,395
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current assets
Inventories 13 92 148
Current tax assets 86 100
Trade and other receivables 14 541 363
Cash and cash equivalents - -
––––––––––––– –––––––––––––
719 611
––––––––––––– –––––––––––––
Total assets 1,916 2,006
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity and liabilities
Equity
Share capital 19 340 330
Share premium 5,191 5,151
Retained earnings (9,349) (9,223)
––––––––––––– –––––––––––––
(3,818) (3,742)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Non-current liabilities
Borrowings 15 2,537 2,225
Trade and other payables 16 1,439 1,583
––––––––––––– –––––––––––––
3,976 3,808
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current liabilities
Borrowings 15 1,658 1,725
Trade and other payables 16 100 215
––––––––––––– –––––––––––––
1,758 1,940
––––––––––––– –––––––––––––
Total equity and liabilities 1,916 2,006
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity includes loss for the year of the parent company of £126,000 (2017: £78,000).
The notes on pages 21 to 44 form an integral part of these financial statements.
The financial statements were approved by the board and authorised for issue on 16 November 2018 and signed on its behalf by:
Gordon G Watt
Director
Company No: 3995041
PipeHawk plc Annual Report and Accounts 2018
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Consolidated Statement of Cash Flow
For the year ended 30 June 2018
30 June 2018 30 June 2017
£’000 £’000
Cash flows from operating activities
Loss from operations (408) (16)
Adjustments for:
Depreciation 106 100
––––––––––––– –––––––––––––
(302) 84
Decrease/(increase) in inventories 10 (51)
(Increase)/decrease in receivables (196) 478
Increase/(decrease) in liabilities 143 (577)
––––––––––––– –––––––––––––
Cash used in operations (345) (66)
Interest paid (87) (2)
Corporation tax received 232 299
––––––––––––– –––––––––––––
Net cash (used in)/generated from operating activities (200) 231
––––––––––––– –––––––––––––
Cash flows from investing activities
Proceeds from sale of joint venture 197 -
Acquisition of subsidiary net of cash acquired 11 -
Purchase of plant and equipment (17) (18)
––––––––––––– –––––––––––––
Net cash used in investing activities 191 (18)
––––––––––––– –––––––––––––
Cash flows from financing activities
Proceeds from borrowings - 97
Repayment of loan (10) (210)
Repayment of finance leases (34) (52)
––––––––––––– –––––––––––––
Net cash generated used in financing activities (44) (165)
––––––––––––– –––––––––––––
Net (decrease)/increase in cash and cash equivalents (53) 48
Cash and cash equivalents at beginning of year 72 24
––––––––––––– –––––––––––––
Cash and cash equivalents at end of year 19 72
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 21 to 44 form an integral part of these financial statements.
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Parent Company Statement of Cash Flow
For the year ended 30 June 2018
30 June 2018 30 June 2017
£’000 £’000
Cash flows from operating activities
Loss from operations (101) (83)
Decrease/(increase) in inventories 56 (51)
Increase in receivables (178) (47)
(Decrease)/increase in liabilities (88) 62
––––––––––––– –––––––––––––
Cash used in operations (311) (119)
Corporation tax received 127 119
––––––––––––– –––––––––––––
Net cash used in operating activities (184) -
––––––––––––– –––––––––––––
Proceeds from sale of joint venture
197 -
Cash flow from investing activities 197 -
Proceeds from borrowing - 25
Repayment of loan (13) (25)
––––––––––––– –––––––––––––
Net cash used in financing activities (13) -
––––––––––––– –––––––––––––
Net increase in cash and cash equivalents - -
Cash and cash equivalents at beginning of year - -
––––––––––––– –––––––––––––
Cash and cash equivalents at end of year - -
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 21 to 44 form an integral part of these financial statements.
PipeHawk plc Annual Report and Accounts 2018
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Statement of Changes in Equity
For the year ended 30 June 2018
Consolidated Share
Share premium Retained
capital account earnings Total
£’000 £’000 £’000 £’000
As at 1 July 2016 330 5,151 (9,236) (3,755)
Profit for the year - - 179 179
Other comprehensive income - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income - - 179 179
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2017 330 5,151 (9,057) (3,576)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Loss for the year - - (151) (151)
Other comprehensive income - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income - - (151) (151)
Issue of shares 10 40 - 50
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2018 340 5,191 (9,208) (3,677)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Parent Share
Share premium Retained
capital account earnings Total
£’000 £’000 £’000 £’000
As at 1 July 2016 330 5,151 (9,145) (3,664)
Loss for the year - - (78) (78)
Other comprehensive income - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive loss - - (78) (78)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2017 330 5,151 (9,223) (3,742)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Loss for the year - - (126) (126)
Other comprehensive income - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive loss - - (126) (126)
Issue of shares 10 40 - 50
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2018 340 5,191 (9,349) (3,818)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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 21 to 44 form an integral part of these financial statements.
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Notes to the Financial Statements
For the year ended 30 June 2018
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 on page 1. The principal
activities of the Company and its subsidiaries (the Group) are described on page 36.
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 2018 the Company recorded a net loss after taxation of £112,000 (2017: £78,000).
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 the measurement of financial instruments and IFRS 15 may have an impact on
revenue recognition and related disclosures.
IFRS 15, Revenue from Contracts with Customers, has been adopted from 1 January 2018. Management has undertaken a process
of reviewing contracts within each revenue stream, having regard to the requirements of IFRS 15. At this stage management do not
consider the impact of IFRS 15 to have a material impact on the financial statements because in general contracts with customers
have one performance obligation, the delivery of the system solution or mapping drawings and the company has a right to payment
for performance completed to date. On this basis revenue is recognised over time in line with the current revenue recognition policy.
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, managements assessment will be
made over the next year and reported in future financial information. Under the new standard the substantial majority of the Groups
operating lease commitments would be bought onto the balance sheet and depreciated separately. There will be no impact on
cashflows although the presentation of the cash flow statement will change significantly. As set out in note 20 the future aggregate
minimum lease payments of the Groups operating leases were £51,000 at 30 June 2018 on an undiscounted basis.
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 advanced by the Executive Chairman. 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. The directors therefore have a reasonable expectation that the entity has adequate
resources to continue in its operational exercises for the foreseeable future. It is on this basis that the directors consider it
appropriate to adopt the going concern basis of preparation within these financial statements. However a material uncertainty exists
regarding the ability of the Group 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.
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
1. Summary of Significant Accounting Policies (continued)
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The cost of the business combination is
measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3 Business 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.
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.
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.
The investment in joint venture is held at cost in the parent entity financial statements.
22
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Notes to the Financial Statements
For the year ended 30 June 2018
1. Summary of Significant Accounting Policies (continued)
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.
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 expenses 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.
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
1. Summary of Significant Accounting Policies (continued)
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.
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.
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.
24
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Notes to the Financial Statements
For the year ended 30 June 2018
1. Summary of Significant Accounting Policies (continued)
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, 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.
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 20.
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.
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
1. Summary of Significant Accounting Policies (continued)
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only recognised to the extent that it is probable that there will be
sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax
assets and liabilities are measured at the tax rates that are expected to apply in the year in which the liability is settled or the asset
realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the year end date. The measurement
of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at
the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised as an expense or income in the statement of comprehensive income, except when they
relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity.
Impairment of property, plant and equipment
At each year end date, the Group reviews the carrying amounts of its property, plant and equipment to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-
generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount
of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or
loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in the statement of comprehensive income.
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
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill
has been allocated. A similar exercise is performed in respect of investment and long term loans in subsidiary.
26
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Notes to the Financial Statements
For the year ended 30 June 2018
1. Summary of Significant Accounting Policies (continued)
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 £1,190,000 (2017: £1,061,000). The investment in subsidiaries at the
year-end was £nil (2017: £1,197,000).
The methodology adopted in assessing impairment of Goodwill is set out in note 10 as is sensitivity analysis applied in relation to
the outcomes of the assessment.
Impairment investment in subsidiaries and inter-company receivables
As set out in note 12, an impairment assessment of the carrying value of investments in subsidiaries and inter-company receivables
is in line with the methodologies adopted in the assessment of impairment of goodwill.
2. Segmental analysis
2018 2017
£’000 £’000
Turnover by geographical market
United Kingdom 4,787 5,671
Europe - 28
Other 2 3
––––––––––––– –––––––––––––
4,789 5,702
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
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
TED – Rail trackside solutions (included in the test system solutions segment)
The CODM monitors the operating results of each segment for the purpose of performance assessments and making decisions on
resource allocation. Performance is based on revenue generations and profit before tax, which the CODM believes are the most
relevant in evaluating the results relative to other entities in the industry.
In utility detection and mapping services one customer accounted for 5% of revenue in 2018 and 10% in 2017. In development,
assembly and sale of GPR equipment two customers accounted for 54% of revenue in 2018 and one customer for 23% in 2017. In
automation and test system solutions one customer accounted for 16% of revenue and 23% in 2017.
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.
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
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 2018
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total segmental revenue 1,534 173 3,082 4,789
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Operating profit/loss 52 (102) (358) (408)
Finance costs (28) (149) (59) (236)
Profit/loss before taxation 24 (109) (417) (502)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Segment assets 596 1,375 1,444 3,415
Segment liabilities 615 4,308 2,169 7,092
Non-current asset additions 91 - 457 548
Depreciation and amortisation 63 - 43 106
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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 2017
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total segmental revenue 1,364 288 4,050 5,702
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Operating profit 25 (83) 42 (16)
Finance costs (9) (132) (37) (178)
Loss before taxation 16 (215) 5 (193)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Segment assets 498 1,381 607 2,486
Segment liabilities 418 5,404 240 6,062
Non-current asset additions 12 0 6 18
Depreciation and amortisation 66 0 34 100
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The majority of the Group’s revenue is earned via the rendering of services.
28
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
3. Finance costs
2018 2017
£’000 £’000
Interest payable 224 178
––––––––––––– –––––––––––––
224 178
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Interest payable comprises interest on:
Finance leases 8 9
Directors’ loans 138 132
Other 90 37
––––––––––––– –––––––––––––
236 178
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
4. Operating loss for the year
This is arrived at after charging for the Group:
2018 2017
£’000 £’000
Research and development costs not capitalised 1,049 1,232
Depreciation of wholly owned property, plant and equipment 51 62
Depreciation of property, plant and equipment held under finance leases 55 38
Auditor’s remuneration
- Fees payable to the company’s auditor for the audit of the group’s
financial statements 28 22
- 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 118 125
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The company audit fee is £8,500 (2017: £8,500).
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
5. Staff costs
Group 2018 2017
No. No.
Average monthly number of employees, including directors:
Production and research 64 62
Selling and research 11 10
Administration 6 7
––––––––––––– –––––––––––––
81 79
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Group 2018 2017
£’000 £’000
Staff costs, including directors:
Wages and salaries 2,408 2,589
Social security costs 253 257
Other pension costs 42 30
––––––––––––– –––––––––––––
2,703 2,876
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Company 2018 2017
No. No.
Average monthly number of employees, including directors:
Production and research 1 2
Selling and research 2 2
Administration 2 2
––––––––––––– –––––––––––––
5 6
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Company 2018 2017
£’000 £’000
Staff costs, including directors:
Wages and salaries 178 246
Social security costs 22 12
Other pension costs 5 -
––––––––––––– –––––––––––––
205 258
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
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Notes to the Financial Statements
For the year ended 30 June 2018
6. Directors’ Remuneration
Salary Benefits 2018 2017
and fees in kind Total Total
£’000 £’000 £’000 £’000
G G Watt 71 - 71 71
S P Padmanathan 25 - 25 25
R MacDonnell 2 - 2 2
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Aggregate emoluments 98 - 98 98
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Directors’ pensions 2018 2017
No. No.
The number of directors who are accruing retirement benefits under:
- defined contributions policies - -
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The directors 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
S P Padmanathan 200,000 - 200,000 3.9p 15-Nov-19
The Company’s share price at 30 June 2018 was 3.55p. The high and low during the period under review were 5.83p and 2.80p
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.
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
7. Taxation
2018 2017
£’000 £’000
United Kingdom Corporation Tax
Current taxation (329) (253)
Adjustments in respect of prior years (22) (119)
––––––––––––– –––––––––––––
(351) (372)
Deferred taxation - -
––––––––––––– –––––––––––––
Tax on loss (351) (372)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current tax reconciliation 2018 2017
£’000 £’000
Taxable (loss) for the year (502) (193)
––––––––––––– –––––––––––––
Theoretical tax at UK corporation tax rate 19% (2017: 20%) (95) (39)
Effects of:
- R&D tax credit adjustments (186) (215)
- Income not taxable (27) -
- other expenditure that is not tax deductible 8 5
- adjustments in respect of prior years (22) (118)
- short term timing differences (29) (5)
––––––––––––– –––––––––––––
Total income tax credit (351) (372)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The Group has tax losses amounting to approximately £2,460,000 (2017: £2,470,000), 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 £418,000 (2017: £490,000)
8. (Loss)/profit per share
Group
Basic (pence per share) 2018 – 0.45 loss per share; 2017 – 0.54 profit per share
This has been calculated on a loss of £151,000 (2017: profit of £179,000) and the number of shares used was 33,543,803
(2017: 33,020,515) being the weighted average number of shares in issue during the year.
Diluted (pence per share) 2018 – 0.45 loss per share; 2017 – 0.47 profit per share
In the current 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. The prior year calculation used earnings of £259,000 being the
profit for the year plus the interest paid on the convertible loan note (net of 20% tax) of £80,000 and the number of shares used
was 55,247,667 being the weighted average number of shares outstanding during the year of 33,020,515 adjusted for shares
deemed to be issued for no consideration relating to options and warrants of 2,227,152 and convertible instrument of 20,000,000.
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Notes to the Financial Statements
For the year ended 30 June 2018
9. Property, plant and equipment
Group Equipment,
fixtures and Leasehold Motor
Freehold fittings improvements vehicles Total
£’000 £’000 £’000 £’000 £’000
Cost
At 1 July 2017 - 1,397 223 321 1,941
Acquisitions of subsidiary 265 183 - - 448
Additions - 100 - - 100
Disposals - - - (30) (30)
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2018 265 1,680 223 291 2,459
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Depreciation
At 1 July 2017 - 1,293 205 298 1,796
Acquisitions of subsidiary 12 94 - - 106
Charged in year 1 76 18 11 106
Disposals - - - (30) (30)
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2018 13 1,463 223 279 1,978
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2018 252 217 - 12 481
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2017 - 104 18 23 145
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The net book value of the property, plant and equipment includes £195,322 (2017: £78,789) 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 £55,183 (2017: £38,226).
Company Equipment,
fixtures and Leasehold
fittings improvements Total
£’000 £’000 £’000
Cost
At 1 July 2017 and 30 June 2018 196 45 241
––––––––––––– ––––––––––––– –––––––––––––
Depreciation
At 1 July 2017 and 30 June 2018 196 45 241
––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2018 - - -
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2017 - - -
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
10. Goodwill
Group Goodwill Total
£’000 £’000
Cost:
At 1 July 2017 1,121 1,121
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Acquisitions of subsidiary 129 129
At 30 June 2018 1,250 1,250
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Impairment
At 1 July 2017 and 30 June 2018 60 60
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Net book value
At 30 June 2018 1,190 1,190
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
At 30 June 2017 1,061 1,061
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The goodwill carried in the statement of financial position of £1,190,000 arose on the acquisition of Adien Limited in 2002
(£212,000) and the acquisition of QM Systems Limited in 2006 (£849,000), and the acquisition of TED during the year (£129,000),
see note 22.
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.
Management assessed the goodwill arising on the TED acquisition for impairment at the year end. Management reviewed the
forecasts and assumptions made at the acquisition date and confirmed that they remain appropriate. Management assessed that
there were no significant changes in the assumptions and the carrying value of the goodwill at 30 June 2018 was supported. On
this basis no impairment in goodwill is required.
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. For Adien these have been assessed as 7.5% growth for revenue in years
1 and 2 and 2.5% for years 3 to 5 and 2.5% for overhead growth. For QM Systems these have been assessed as 45% growth for
revenue in year 1 and 10 % in year 2 and 3 and 5% for years 3 to 5 and 5% for overhead growth. No terminal growth rate was
applied. The reason for the significant Year 1 revenue growth is an expectation based on current trading and the pipeline and that no
difficult trading period is expected this year.
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Notes to the Financial Statements
For the year ended 30 June 2018
10. Goodwill (continued)
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
except as disclosed below:
If the QM Systems starting revenue was the same as the 2018 level the goodwill would be fully impaired. The directors have regard
to the sales pipeline and are satisfied that the forecast revenues and growth rates used can be achieved.
If the QM Systems discount rate was increased to 35% an impairment charge of £134k would be recognised.
11. Investment in Joint Venture
Group Investment
in shares
£’000
Cost:
At 1 July 2017 196
Disposal (196)
–––––––––––––
-
–––––––––––––
Share of losses
At 1 July 2017 142
Disposal (142)
–––––––––––––
-
–––––––––––––
At 30 June 2018 -
–––––––––––––
Net investment
At 30 June 2018 -
–––––––––––––
–––––––––––––
At 30 June 2017 54
–––––––––––––
–––––––––––––
The investment in joint venture relates to a 28.4% shareholding in the ordinary share capital of SUMO Limited. SUMO Limited was
sold on 13 October 2017 see note 23 for details.
Summarised financial information in respect of the Group’s joint venture is set out below:
30 June 2018 30 June 2017
£’000 £’000
Cash - 30
Current assets - 1,947
Non-current assets - 950
Total assets - 2,927
Total liabilities (all current) - 2,736
Net assets - 192
Group’s share of net assets of joint venture - 54
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
11. Investment in Joint Venture (continued)
Year ended Year ended
30 June 2018 30 June 2017
£’000 £’000
Total revenue - 4,608
Interest expense - 80
Depreciation/amortisation - 168
Total profit/(loss) for the period - 24
Group’s share of profit of joint venture - 1
30 June 2018
£’000
Disposal of Joint Venture
Cash Consideration 196
Investment in Joint venture (54)
–––––––––––––
Profit on sale of joint venture 142
–––––––––––––
–––––––––––––
12. Non-current investments
Company Investments in Investments in
joint ventures subsidiaries Total
£’000 £’000 £’000
(note 11)
Cost
1 July 2017 198 1,197 1,395
Disposal (198) - (198)
––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2018 - 1,197 1,197
––––––––––––– ––––––––––––– –––––––––––––
Impairment
At 1 July 2017 and 30 June 2018 - - -
––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2018 - 1,197 1,197
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2017 198 1,197 1,395
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
Subsidiary Parent and group
interest in ordinary
shares and voting Country of
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 2018.
The registered office of the above named subsidiaries is Manor Park Industrial Estate, Wyndham Street, Aldershot, Hampshire,
GU12 4NZ.
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Notes to the Financial Statements
For the year ended 30 June 2018
13. Inventories
Group Company
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Raw materials 87 150 86 142
Finished goods 91 6 6 6
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
178 156 92 148
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The replacement cost of the above inventories would not be significantly different from the values stated.
The cost of inventories recognised as an expense during the year amounted to £1,157,000 (2017: £1,591,000). For the parent
company this was £37,000 (2017: £163,000).
14. Trade and other receivables
Group Company
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Current
Trade receivables 720 666 5 16
Amounts owed by group undertakings - - 533 345
Other receivables - 48 - -
Prepayments and accrued income 455 31 3 2
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
1,175 745 541 363
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
15. Non-current liabilities: Borrowings
Group Company
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Borrowings (note 17) 2,966 2,266 2,537 2,225
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
16. Trade and other payables
Group Company
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Current
Bank overdraft 13 12 13 12
Trade payables 743 544 40 120
Other taxation and social security 329 527 6 3
Payments received on account 437 164 - -
Accruals and other creditors 450 362 41 80
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
1,972 1,609 100 215
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Group Company
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Non-current
Trade payables - - - -
Amounts owed to group undertakings - - 1,439 1,583
Other loans - - - -
Other creditors 8 - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
8 - 1,439 1,583
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
17. Borrowing Analysis
Group Company
2018 2017 2018 2017
£’000 £’000 £’000 £’000
Due within one year
Bank and other loans 426 306 - -
Directors’ loan 1,658 1,858 1,658 1,725
Obligations under finance lease
agreements 62 23 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
2,146 2,187 1,658 1,725
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Due after more than one year
Obligations under finance lease
agreements 118 41 - -
Bank and other loans
Directors’ loan 311 - - -
2,537 2,225 2,537 2,225
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
2,966 2,266 2,537 2,225
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Repayable
Due within 1 year 2,146 2,187 1,658 1,725
Over 1 year but less than 2 years 2,774 2,240 2,537 2,225
Over 2 years but less than 5 years 192 26 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
5,112 4,453 4,195 3,950
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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Notes to the Financial Statements
For the year ended 30 June 2018
17. Borrowing Analysis (continued)
Directors’ loan
Included with Directors’ loans and borrowings due within one year are accrued fees and interest owing to GG Watt of £1,658,000
(2017: £1,858,000). The accrued fees and interest is repayable on demand and no interest accrues on the balance.
The director’s loan due in more than one year is a loan of £1,537,000 from G G Watt. Directors’ loans attract interest at 2.15% over
Bank of England base rate. During the year to 30 June 2018 £nil (2017: £nil) was repaid. The Company has the right to defer
repayment for a period of 366 days.
On 13 August 2010 the Company issued £1 million of Convertible Unsecured Loan Stock (“CULS”) to G G Watt, the Chairman of the
Company. The CULS were issued to replace loans made by G G Watt to the Company amounting to £1 million and has been
recognised in non-current liabilities of £2,537,000.
Pursuant to amendments made on 13 November 2014 and 9 November 2018, 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 13 August 2022;
Interest is payable at a rate of 10 per cent per annum on the principal amount outstanding until converted, prepaid or repaid,
calculated and compounded on each anniversary of the issue of the CULS. On conversion of any CULS, any unpaid interest
shall be paid within 20 days of such conversion;
The CULS are repayable, together with accrued interest on 13 August 2022 (“the Repayment Date”).
No equity element of the convertible loan stock has been recognised in these financial statements as this is not considered to be
material.
Finance leases
Finance lease agreements with Close Motor Finance are at a rate of 4.5% and 5.19% over base rate. The future minimum lease
payments under finance lease agreements at the year end date was £116,844 (2017: £63,775) and £62,167 (2017: £nil). The
difference between the minimum lease payments and the present value is wholly attributable to future finance charges.
Bank and other loans
A working capital loan balance of £227,000 was given by Mirrasand Partnership from a trust settled by Mr G Watt. The loan attracts
interest at 10% per annum. The remainder is repayable on 30 September 2019. The loan was guaranteed personally by Mr G Watt.
Included in bank and other loans is an invoice discounting facility of £133,000 (2017 £97,000).
Included in bank and other loans is a balance of £200,000 being amounts owed to the vendors of the business. The balances are
interest free and repayable in quarterly instalments over 4 years.
Included in bank and other loans are two secured mortgages of £173,000 which incurs interest of 4.42% until March 2019
followed by a rate of 2.44% over base rate for 10 years, and an interest rate of 2.64% over base rate until March 2029. The
mortgage is secured over the freehold property.
Non-cash:
Brought Cash Non-cash: Non-cash: Accrued fees/ Carried
2018 forward flows Acquisition New leases interest forward
Director loan 4,083 (10) - - 122 4,195
Finance leases 64 (34) 76 74 - 180
Other 306 - 408 - 23 737
–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Loans and
borrowings 4,453 (44) 484 74 145 5,112
–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
17. Borrowing Analysis (continued)
Cash:
Brought Cash Cash: Discounting Non-cash: Carried
2017 forward flows advance facility* Accrued costs forward
Director loan 4,093 (175) 97 - 68 4,083
Finance leases 106 (52) - - 10 64
Other 404 (35) - (63) 306
–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Loans and
borrowings 4,603 (262) 97 (63) 78 4,453
–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
*Included in working capital adjustments in cashflow statement
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. A number of
procedures are 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 (with the exception of prepayments
which are not financial assets) and the exposure to the cash balances. Of the amounts owed to the Group at 30 June 2018, the top
3 customers comprised 19.38% (2017: 33.5%) 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
2018 amount past due 61-90 days 91-120 days 121 days
Trade and other
receivables 720 532 102 12 74
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Neither Past due but not impaired
Carrying impaired nor More than
2017 amount past due 61-90 days 91-120 days 121 days
Trade and other
receivables 714 603 30 17 64
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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Notes to the Financial Statements
For the year ended 30 June 2018
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 2018, trade receivables of £nil (2017: £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 17 for maturity analysis of borrowings):
Due or due in
less than 1 Due between Due between Due between
2018 month 1-3 months 3 months-1 year 1-5 years Total
Trade and other
payables 1,206 - - 8 1,214
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Due or due in
less than 1 Due between Due between Due between
2017 month 1-3 months 3 months-1 year 1-5 years Total
Trade and other
payables 918 - - - 918
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Financial liabilities of the company are all due within less than one month with the exception of the intercompany balances that are
due between 1 and 5 years.
Interest rate risk
The Group finances its operations through a mixture of shareholders’ funds and borrowings. The group borrows exclusively in
Sterling and principally at fixed and floating rates of interest and are disclosed at note 17.
Fair value of financial instruments
Loans and receivables are measured at amortised cost. Financial liabilities are measured at amortised cost using the effective
interest method. The directors consider that the fair value of financial instruments are not materially different to their carrying
values.
Capital risk management
The Group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to be
able to move to a position of providing returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
The Group manages trade debtors, trade creditors and borrowings and cash as capital. The entity is meeting its objective for
managing capital through continued support from GG Watt as described per Note 1.
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
19. Share Capital
2018 2018 2017 2017
No £’000 No £’000
Authorised
Ordinary shares of 1p each 40,000,000 400 40,000,000 400
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Allotted and fully paid
Brought forward 33,020,515 330 33,020,515 330
Issued during the year 1,000,000 10 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Carried forward 34,020,515 340 33,020,515 330
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Fully paid ordinary shares carry one vote per share and carry a right to dividends.
11,403,703 (2017:11,403,703) share options were outstanding at the year end, comprising the 1m employee options and the
10,403,703 share options and warrants held by directors disclosed below.
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.
The director and employee share options were issued as part of the Group’s strategy on key employee remuneration, they lapse if
the employee ceases to be an employee of the Group during the vesting period.
Employee options
Date Options Exercisable Number of Shares Exercise Price
Between March 2015 and March 2022 500,000 3.75p
Between July 2016 and July 2023 100.000 3.00p
Between November 2019 and November 2026 400,000 3.875p
Directors’ share options
No. of options
Date from
At start Granted At end Exercise which
of year during year of year price exercisable
R MacDonnell 500,000 - 500,000 3.0p 6-Mar-15
S P Padmanathan 200,000 - 200,000 3.9p 15-Nov-19
The Company’s share price at 30 June 2018 was 3.55p. The high and low during the period under review were 5.83p and 2.80p
respectively.
In addition to the above, in consideration of loans made to the Company, G G Watt has warrants over 3,703,703 ordinary shares at
an exercise price of 13.5p and a further 6,000,000 ordinary shares at an exercise price of 3.0p, the warrants are exercisable up to
12 December 2018.
The weighted average contractual life of options and warrants outstanding at the year-end is 1.2 years (2017: 2.5 years).
42
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Notes to the Financial Statements
For the year ended 30 June 2018
20. Financial Commitments
Group 2018 2017
£’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 16 25
Land and buildings
- within one year 35 42
- one to five years - 35
––––––––––––– –––––––––––––
51 102
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
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 Wat
£137,174
The directors are considered the key management personnel of the company. Remuneration to directors is disclosed in note 6.
As at 30 June 2018, there was an amount of £3,444 (2017: £4,794) due from Online Engineering Limited, a company that
G G Watt is also a Director. The only transaction was that this balance was partly repaid during the year.
Included within the amounts due from and to group undertakings were the following balances:
2018 2017
£ £
Balance due from:
Adien Limited - 53,770
QM Systems Limited 459,375 291,375
TED Limited 73,643 -
Balance due to:
Adien Limited 32,141 -
QM Systems Limited 1,405,866 1,582,729
These intergroup balances vary through the flow of working capital requirements throughout the group as opposed to intergroup
trading.
There is no ultimate controlling party of PipeHawk plc.
PipeHawk plc Annual Report and Accounts 2018
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Notes to the Financial Statements
For the year ended 30 June 2018
22. Acquisition
On 29 November 2017 the Group acquired 100% of the issued share capital of Thomson Engineering Design Limited (‘TED’). The
acquisition was made due to synergy of business opportunity with QM Systems including significant fabrication needs which QM
currently outsources. The Group obtained control by offer and acceptance of £1 for the entire issued share capital of TED.
The goodwill arising from the acquisition of TED of £129k is attributable to the acquired workforce and the anticipated future profit
from international expansion opportunities and synergy of the business opportunities mentioned above.
Following the acquisition, TED made a turnover of £188k with and operating loss of £103k. Details of the future focus of this
company is stated in the Chairman’s statement
30 June 2018
£’000
Consideration -
Fixed Assets 342
Stock 32
Debtors 234
Cash 11
Finance lease (76)
Director loans (238)
Trade and other creditors (264)
Borrowing (170)
–––––––––––––
Net Liabilities (129)
Consideration -
–––––––––––––
Goodwill (129)
–––––––––––––
–––––––––––––
23. Subsequent events
On 13 October 2017 the Company sold its 28.4 per cent. joint venture interest in the ordinary share capital of SUMO Limited
(“SUMO”) to Gordon Watt, the Executive Chairman of the Company, for a consideration of £197,499, being the original cost of the
investment, subject to shareholder approval, which was obtained on 14 December 2017 (“the SUMO Share Sale”). The
consideration was satisfied in cash. Gordon Watt agreed to pay the consideration immediately and therefore the payment of
£197,499 was treated as a loan, on identical terms to the existing loans due to Gordon Watt, until such amount becomes payable
under the agreement for the SUMO Share Sale.
Gordon Watt agreed that in the event that SUMO effects a fundraising at a pre-money valuation in excess of £700,000 (equivalent
to £2 per SUMO share, the price being paid by Gordon Watt) before 30 June 2018 or SUMO effects a sale of the company or an IPO
at a price greater than £2 per SUMO share before 13 October 2020, then further consideration of 50 per cent. of the value of such
excess will be payable in cash to the Company by Gordon Watt.
In September 2018, at the request of the directors of SUMO, Gordon Watt sold 34,214 shares in SUMO at a price of £3 per share to
encourage greater employee participation. In accordance with the agreement with Gordon Watt, 50 per cent. of the profit, equating
to £17,107, was remitted to the Company.
On 9 November 2018, the Company entered into a letter of amendment with Gordon Watt to extend the repayment date of the CULS
to 13 August 2022. All the other terms of the CULS remained the same as before.
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Notice of Annual General Meeting
PIPEHAWK PLC
(Registered in England & Wales No. 3995041)
NOTICE IS HEREBY GIVEN that the annual general meeting (the AGM) will be held at the offices of Allenby Capital Limited, 5 St Helen’s
Place, London, EC3A 6AB at 11.00 a.m. on Thursday 13 December 2018 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 2018
together with the reports of the directors and auditor thereon. (Resolution 1)
2. To re-appoint Soumitra Padmanathan as Director, who retires
but, being eligible, offers herself for re-election. (Resolution 2)
3. To re-appoint Crowe U.K. LLP as auditor of the Company and
to authorise the Directors to set their remuneration. (Resolution 3)
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 By order of the Board
Manor Park Industrial Estate
Wyndham Street
Aldershot S P Padmanathan
Hampshire Secretary
GU12 4NZ
Dated: 16 November 2018
Notes:
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, Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey,
KT13 0TS, 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 11 December 2018
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
18.00 on 11 December 2018 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.
PipeHawk plc Annual Report and Accounts 2018
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Notes
46
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Notes
PipeHawk plc Annual Report and Accounts 2018
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Perivan Financial Print 252453
252453 PIPEHAWK COVER.qxp 19/11/2018 12:21 Page 2
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 ......15
Chairman’s statement ......................................................2
Consolidated statement of financial position ................16
Strategic report..................................................................5
Parent company statement of financial position ..........17
Report of the directors ......................................................6
Consolidated statement of cash flow..............................18
Corporate governance ......................................................8
Parent company statement of cash flow ........................19
Directors’ biographies ....................................................10
Statement of changes in equity ......................................20
Statement of directors’ responsibilities for the
annual report....................................................................11
Independent auditor’s report to the Shareholders of
PipeHawk plc ..................................................................12
Notes to the financial statements ..................................21
Notice of annual general meeting ..................................45
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2018