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2022
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PipeHawk plc is a dynamic business offering advanced engineering solutions to challenging technical
requirements across many industries.
QM Systems 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. It specialises in providing full turnkey solutions for any
automated assembly process.
Thomson Engineering Design produces an unparalleled range of machines, attachments and tools for
railway track renewal and maintenance across the globe.
Adien Limited 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.
Utsi is one of the global market leaders 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.
Wessex Precision Instruments is a leading manufacturer and service provider of specialist equipment to
test the skid resistance characteristics of vehicle and pedestrian surfaces.
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 ......17
Chairman’s statement ......................................................2
Consolidated statement of financial position ................18
Strategic report..................................................................5
Parent company statement of financial position ..........19
Report of the directors ......................................................7
Consolidated statement of cash flow ............................20
Corporate governance ......................................................9
Parent company statement of cash flow ........................21
Directors’ biographies......................................................11
Statement of changes in equity ......................................22
Statement of directors’ responsibilities for the
annual report ..................................................................12
Independent auditor’s report to the members of
PipeHawk plc ..................................................................13
Notes to the financial statements ..................................23
Notice of annual general meeting ..................................44
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Company Information
Directors: Gordon G Watt (Executive Chairman)
Robert Randal MacDonnell (Non-Executive)
Tim Williams (Non-Executive)
Secretary: Andrew Tombs
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
55 Ludgate Hill
London
EC4M 7JW
Solicitors: Gowling WLG
4 More London Riverside
London
SE1 2AU
PipeHawk plc Annual Report and Accounts 2022
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Chairman’s Statement
The Group reported an operating loss in the
year ended 30 June 2022 (the “financial
year” and the “2021/22 FY”) of £1,312,000
(2021: £257,000), a loss before taxation for
the financial year of £1,576,000 (2021:
profit £79,000) and a loss after taxation of
£868,000 (2021: profit £522,000).
Turnover for the financial year reduced to
£6.2 million (2021: £6.7 million). The loss
per share for the financial year was 2.42p
(2021: profit 1.50p).
In line with the outlook expressed in my
Chairman’s Statement last year, like others
in the industry, we have been faced with
difficult market conditions this financial
year. As outlined on 24 March 2022 in the
Group’s unaudited results for the six
months ended 31 December 2021 this has
been an extremely challenging year. Just
when we thought we were getting over the
vicissitudes of the Coronavirus (“COVID-
19”) pandemic with its consequent delays
caused by material shortages, extended
lead times and increased costs, all suffered
without the furlough buffer – then Russia
invades the Ukraine, fuel costs soar and
suddenly the world realises that energy is
the key to our standard of living and
economic livelihood at all levels.
As a consequence, the Group continued to
see decisions across all levels of the chain
be deferred and/or delayed throughout the
financial year. The impact of the delay in
receiving contract decisions continued to
impact the Group right up to late September
2022. However, following September 2022,
the Group has seen a number of larger
orders that have previously been in
abeyance for several months placed. In
addition, the Group notes a shift in market
sentiment, namely, that there appears to be
a general willingness to actively re-engage
and commit to forward-looking business
decisions (as opposed to remaining in tick-
over mode).
Despite the disappointing results for the
financial year, the directors believe, for the
reasons outlined above, that this merely
represents a temporary blip in our growth
trajectory. Notwithstanding this result, this
financial year has been critical for the
Group as seen by our underlying positive
direction of travel. In addition, we have
invested significantly to be able to take
advantage of the opportunities evident from
our groundwork. Not only have we
expanded Thomson Engineering Design’s
(“TED”) footprint fourfold (we have decided
to retain, and rebuild its original premises
whilst retaining its new premises, as we
foresee the need for further growth), QM
Systems Limited (“QM”) footprint has
increased fivefold, and a new line to QM
business, contract manufacturing, has been
established. Lastly, Adien is now fully
engaged in 5G work and the integration of
Utsi and PipeHawk’s technology bodes well
for the future.
I am confident therefore that the future
looks very promising.
QM Systems
QM Systems has completed a challenging
financial year where for a large part of that
time the orderbook has been significantly
below management expectation. This trend
continued longer than expected into the
2021/22 FY resulting in the inability of QM
Systems to pull through the expected level
of revenue and profit. It does seem as
though the effect of the pandemic
eventually rippled through QM Systems
later than initially anticipated. In addition,
following Russia’s invasion of the Ukraine,
decision makers decided to defer making
capital commitments, which manifested into
expected orders being delayed by several
months.
During the second half of the financial year,
QM Systems completed a move into a
modern and far larger facility on the
Hartlebury Trading Estate. The move
expands the available facilities from
approximately 8,000 sq ft to approximately
45,000 sq ft; providing approx. 200% more
office space and 600% more
manufacturing capacity. The move was
required to facilitate not only the anticipated
growth in the company’s project business
but also the housing of the newly
established contract manufacturing
business unit. In addition, QM Systems has
secured two manufacturing contracts with
both expected to begin operation with
manufactured product towards the end of
the current 2022/23 FY. Both contract
manufacturing projects bring the capacity
“This has been an
extremely challenging year”
“We have invested
significantly to be able
to take advantage of
the opportunities”
“I am confident therefore
that the future looks
very promising”
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Chairman’s Statement
for rapid growth in a new and exciting
direction for QM Systems. Inevitably a move
to a new facility of this size and scale brings
commercial challenges and has required
significant investment. In this regard, QM
have invested over £750k in securing and
fitting out the new facility to a very high
standard.
Looking ahead, I am pleased to report that
as we approached the end of the previous
2021/22 FY and entered the current FY
order enquiries have increased dramatically.
A number of projects that have been slow
to gestate have now arrived resulting in an
order intake for the first four months of the
current FY alone at QM Systems being in
excess of £3 million. Historically, this is an
unprecedented order intake in such a short
period of time and should enable QM
Systems to rapidly recover the ground lost
during the 2021/22 FY. In addition to orders
received the order pipeline has again
returned to a very healthy level with further
significant order intake expected through
the second quarter of the current FY and
anticipated for the following quarter. It is
also important to recognise that the projects
won are sizeable projects that are expected
to run across several months. This brings a
further level of stability to QM Systems
project business. To support the significant
growth in the QM Systems projects
business a number of new roles have been
advertised for and subsequently filled
across the engineering, projects and sales
departments during the first third of the
current FY. In addition to recruitment to
support the project business the start and
growth of the contract manufacturing
business will see approximately 30 new
employees join the QM Systems team over
the next few months to support the
production and administration activities
required across the three contract
manufacturing projects.
As a result of the above I fully expect to see
QM Systems recover to a position of
significant growth in both sales and profit
during this current FY whilst securing a
stable platform from which healthy growth
can continue for the foreseeable future.
Thomson Engineering Design
(“TED”)
Revenue at Thomson Engineering Design
(“TED”) continued to grow into this financial
year, with the best quarter on record
achieved during the final quarter of the
financial year. Revenue for FY2021/22
compared with the previous financial
increased from approx. £1.2 million to
£1.4 million (representing a circa16%
increase). This did not however translate
through into profit with a loss before
taxation of £57k.
There are three key drivers within the year
resulting in the reduction in profit versus
expectation. The first is the significant
upwards inflatory pressure regarding raw
material cost which skewed the material
content to be considerably higher than
previous years. The second key factor was
rising facility costs and investment into the
new premises required during the 2021/22
FY. The third factor is that whilst we
received a rent-free period in order to settle
into and upgrade the new premises there is
an accounting standard which requires us
to amortise that rent free period over the
life of the lease. The first two issues have
been addressed through re-balancing
margin on material and labour to
accommodate higher material content and
to provide for increased overhead recovery.
The third is a non-cash cost in the short
term.
Order intake at TED during the current
2022/23 FY continues to be strong,
predominantly focused on the UK market
with some export. Post the financial year, on
20 September 2022, TED entered into a
memorandum of understanding with
Unipart Rail, a global retailer of Rail
equipment for Unipart Rail to be the
exclusive partner for sales and distribution
of TED rail equipment into territories in
Europe, Asia, New Zealand, Australia and
the Americas. This enables TED to facilitate
its strategy for global growth by utilising an
established and well-respected distribution
partner. Unipart and TED jointly attended the
InnoTrans Expo in Berlin to launch the new
partnership, where a number of key TED
products have been on display to premium
rail clients. Since the year end, TED has
also entered into a partnership with a key
client to provide rail conversions for
Kawasaki Utility vehicles. This innovative
approach allows capital outlay and
emissions to be significantly reduced and
eliminates the need to use high-cost
excavators when carrying smaller loads and
tools. We expect this partnership to add
substantial additional revenue potential to
TED’s current portfolio over the next few
years.
Overall, having taken measures to address
profitability the future for TED both in the UK
and the wider global market appears
significantly positive.
Adien
After a very promising start last year’s
results ended with a disappointing loss of
£15k due to work volumes dropping in the
last few months of the year. This was,
mainly due to continually delayed starts
from the 5G telecom sector. The order
lethargy continued into July and August this
year, but has picked up dramatically since
the start of September.
Adien now supplies the majority of the key
contractors to the telecom providers.
Adien’s Ministry of Defence projects are
also starting to come on stream after a slow
start following the renewal of the framework
contracts in April this year. Similarly,
Scottish & Southern Electricity Networks
has recently put significant funding in place
which will allow us to progress with their
larger sites.
Positively, clients in the construction and
infrastructure sectors are showing
increased activity both in volume of the
orders placed and enquiries for new
projects.
Hybrid working for staff in the Doncaster
office and the rationalisation of the Scottish
operation has resulted in efficiencies, cost
reductions and reduced travel times as well
as a reduction in the carbon footprint of the
business.
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Chairman’s Statement
Strategy & Outlook
The Group remains committed to creating
sustainable earnings-based growth and
focusing on the expansion of its business
with forward-looking products and services.
PipeHawk acts responsibly towards its
shareholders, business partners,
employees, society and the environment in
each of its business areas.
PipeHawk is committed to technologies and
products that unite the goals of customer
value and sustainable development. In light
of market conditions, all divisions of the
Group are currently performing well and I
remain optimistic in my outlook for the
Group.
Gordon Watt
Chairman
Date: 28 November 2022
Financial position
The Group continues to be in a net liability
position and is still reliant on my continuing
financial support.
My letter of support dated 6 September
2021 was renewed on 11 October 2022 to
provide the group with financial support
until 31 December 2024. Loans due to me,
other than those covered by the CULS
agreement, are unsecured and accrue
interest at an annual rate of Bank of
England base rate plus 2.15%.
The CULS agreement for £1 million,
provided by myself, was renewed on
30 June 2022 and extended on identical
terms, such that the CULS are now
repayable on 13 August 2026.
In addition to the loans I have provided to
the Company in previous years, I have
deferred a certain proportion of fees and
the interest due until the Company is in a
suitably strong position to make the full
payments.
Historically, my fees and interest payable
have been deferred. During the year under
review, the deferred element amounted to
£160,000. At 30 June 2022, these
deferred fees and interest amounted to
approximately £1.8 million in total, all of
which have been recognised as a liability in
the Company’s accounts.
Recent investment in new vehicles that are
more efficient, cost effective, greener and
continued investment in new hardware and
software for the computer-aided design as
well as field teams ensure Adien is able to
survey and process data effectively to all
our clients’ various requirements.
The outlook for the current year remains
positive.
UTSI
As enquiry levels have steadily risen
through the 2022 calendar year, so too
have material costs, component shortages
and delivery timescales with the resulting
lengthening transition times between
enquiry, order and payment making the
business of doing business, severely
challenging. Sales of our flagship products;
those manufactured and ordered in the
largest quantities, have been most
disrupted by the continuing supply delays,
whereas those for more specialist, made to
order products and those requiring bespoke
alteration, have been less affected. Moving
from just in time supply to just in case,
namely, the increased stockholding of major
“at risk” and “long lead time” components
will reduce exposure to the worst supply
chain excesses over the medium term.
However, this change in approach has had
a notable immediate effect on UTSI’s
cashflow and profits in the short term. While
external R&D opportunities remain in
recovery, bringing forward internal R&D
timescales has offered a way towards
achieving near term cost savings as tighter
integration of existing PipeHawk & UTSI’s
product lines, becomes possible, whilst also
offering the promise of attractive hybrid
hardware/software solutions on the near
horizon. While UTSI continues to seek out
new opportunities, new partners and new
markets, the restrictions imposed by global
supply chain issues are expected to remain
a significant limiting factor into the second
half of 2022 and beyond.
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Strategic Report
Financial results
Turnover for the year ended 30 June 2022 was £6.2 million (2021: £6.7 million). The Group made a loss after taxation for the year of
£868,000 (2021: profit £522,000). The loss per share was 2.42p (2021: profit per share 1.50p). 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 and at note 2 “Segmental analysis”. 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:
1. 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;
2. 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;
3. technological changes – mitigated by continued investment in research and development;
4. 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;
5. continued ability to obtain supply of key components to enable projects to be complete in a timely manner– this risk is mitigated by multi
sourcing from several suppliers and allowing longer lead times for any potential delays; and
6. 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 17.
Statement by the Directors in performance of their statutory duties in accordance with s172(1) Companies Act 2006
The Directors of the Group must act in accordance with a set of general duties. These duties are detailed in section 172(1) of the U.K.
Companies Act 2006, which is summarised as follows:
A Director of a Company must act in the way he/she considers, in good faith, would be most likely to promote the success of the Company
for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
1. The likely consequences of any decision in the long term;
2. The interests of the Company’s employees;
3. The need to foster the Company’s business relationships with suppliers, customers and others;
4. The impact of the Company’s operations on the community and the environment;
5. The desirability of the Company maintaining a reputation for high standards of business conduct; and
6. The need to act fairly as between members of the Company.
The Board consider that they have fulfilled their duties in accordance with section 172(1) of the UK Companies Act 2006 and have acted in
a way which is most likely to promote the success of the Group for the benefit of its stakeholders as a whole in the following ways:
Long term benefit
Our strategy was designed to have a long-term beneficial impact on the Company and to contribute to its success in delivering excellence
with regards to service to its customers whilst ensuring the long term requirements of the other stakeholders are considered.
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Strategic Report
Employees
The Board considers the employees as one of the key stakeholders within the Group and fundamental to the long-term success of the
business. We have various engagement mechanisms, many of which have been in place for a number of years. Annual employee reviews
are undertaken and regular communication takes place between management and staff to ensure that any concern or issues are identified
and appropriately addressed. The Group provides training to employees as well as social occasions to promote the well-being and
connectivity of the teams.
The interest of the employees are always considered when determining the strategic decision and vision of the Group.
Customers
The commercial teams at each of the Group’s companies are in regular contact with our customers’ key people to ensure that they are well
informed and satisfied with the progress of the Group’s projects on their behalf. Face to face meetings take place, as well as other
communication such as email and video or phone conferences which allows for an on-going dialogue with the aim of reducing any potential
issues or concerns.
Suppliers
The group works closely with a number of suppliers in different disciplines. We aim to promote collaborative engagement and to build long
term partnerships with our suppliers with an objective to minimise risk and optimise costs through the full lifecycle of our relationship. We
seek to balance this with the need to ensure the company is not overly reliant on any single supplier.
Community and environment
The Board recognises its responsibilities with regard to the environment and wider community and takes actions to reduce any negative
impact the provision of its services might have in this area. The board regularly looks at ways in which it can operate a sustainable business
and has taken actions to reduce its carbon footprint. Currently all waste is recycled by responsible contractors, the target for the next year is
to reduce all waste by 50%.
Culture and values
The Board actively seeks to establish and maintain a corporate culture which will attract both future employees, customers and suppliers.
The Company promotes honesty, integrity and respect and all employees are expected to operate in an ethical manner in all their dealings,
whether internal or external. We do not tolerate behaviour which goes against these values which could cause reputational damage to the
business or create ongoing conflict or unnecessary tension internally.
Current trading
Current trading is satisfactory and in line with the directors’ expectations. The strategic report was approved by the Board on 28 November
2022 and signed on its behalf by:
Gordon G Watt
Executive Chairman
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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 2022.
Principal activities and review of business
The principal activities of the Group during the year were the development, assembly and sale of test system and rail industry 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. This includes the contract manufacturing, being fully engaged in
5G work, the integration of Utsi and PipeHawk Technology and “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 17. The directors do not
recommend the payment of a dividend for the year (2021: nil).
Subsequent events
There are no subsequent events to note.
Directors
The directors who served during the year are set out below:
Gordon G Watt (Executive Chairman)
Soumitra P Padmanathan (Finance Director) – Resigned 30 June 2022
Robert Randal MacDonnell (Non-Executive)
The directors’ beneficial interests in the share capital of the Company at the date of this report were as follows:
30 June 2022 30 June 2021
Ordinary % of issued Ordinary % of issued
Shares of 1p share capital Shares of 1p share capital
G G Watt 5,721,500 15.8% 5,721,500 16.4%
R MacDonnell 1,431,436 3.9% 1,431,436 4.1%
T Williams (appointed 18/11/2022) - - - -
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 18.
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 12.6%
P Lobbenberg 3,100,000 8.5%
R J Chignell 2,204,200 6.1%
N Slater 1,821,262 5.0%
Research and development
The Group continues to undertake research and development activities at its sites in Worcester, Aldershot, Cinderford, Cambridge and
Doncaster. 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, rail handling and safety equipment, 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
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 17 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 28 November 2022 and signed on its behalf by:
Gordon Watt
Chairman
Date: 28 November 2022
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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, and two non-executive directors, Randal MacDonnell and Tim Williams.
Randal MacDonnell acts as Senior Independent Director. Although Randal MacDonnell has been a non-executive director since 2006, the
Board still considers him to be independent.
Executive directors’ normal retirement age is 75 and non-executive directors’ normal retirement age is 85. Both executive and non-
executive directors are 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. Currently, this commitment is approximately 4 days per week for Gordon Watt, and 6 days per annum for Randal MacDonell and
Tim Williams.
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 director 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 again in 2023. During the year the Board, or its committees, have not sought advice on any
significant matter. However, the Chairman and Board members can call on external advisers as the need arises.
The Board and Committees
The full Board meets formally at least four times each year, during the year there were four board meetings. Gordon Watt, Randal
MacDonnell attended all meetings, and Soumitra Padmanathan attended three of the meetings. There was one audit and one remuneration
committee meeting during the year; all three directors attended each of these. 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.
The Board considers that, given the size and nature of the business, it is not beneficial to include a full audit committee report or a
remuneration committee report in the annual report and accounts for the year ended 30 June 2022. This will be kept under annual review
by the Board.
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Corporate Governance
Internal controls
The directors have overall responsibility for ensuring that the Group maintains a system of internal control, and for reviewing its
effectiveness, to provide them with reasonable assurance that the assets of the Group are safeguarded and that the shareholders’
investments are protected. The system includes internal controls covering financial, operational and compliance areas, and risk
management. There are limitations in any system of internal control, which are designed to manage rather than eliminate risk and can
provide reasonable but not absolute assurance against material misstatement or loss. The Board has undertaken an assessment of the
major risk areas for the business and methods used to monitor and control them. In addition to financial risk, this covered operational,
commercial, marketing and research and development risks. This risk review has become an ongoing process of identifying, evaluating and
managing the significant risks faced by the Group, with regular review by the Board.
The additional key procedures designed to provide an effective system of internal control are that:
• There is an organisational structure with clearly defined lines of responsibility and delegation of authority.
• Annual budgets are prepared and updated as necessary.
• Management accounts are prepared on a quarterly basis and compared to budgets and forecasts to identify any significant variances.
• The Group appoints staff of the required calibre to fulfil their allotted responsibilities.
The Board has considered it inappropriate to establish an internal audit function. However, this decision will be reviewed as the operations of
the Group develop.
Identification of business risk
Regular assessments of ongoing risks facing the business are undertaken as part of the regular Group management meetings in the key
areas such as management of working capital, compliance, legal and operational issues. This risk management framework is applied to
major initiatives such as acquisitions as well as operational risks within the business including operational health and safety risks. 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.
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 (69)
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.
R Randal MacDonnell
Non-executive Director (82)
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.
Tim Williams
Non-executive Director (67)
Tim joined the group earlier this month. He is an experienced HR Director with a broad background in global blue chip companies. He was
previously Group HR Director of Redde Northgate Plc, having served also with Cadbury Schweppes Plc, HSBC, Cardinal Health Inc. and
Revlan International.
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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 UK-adopted international accounting standards (IAS).
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.
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.
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Independent Auditor’s Report to the Members 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 2022, which comprise:
• the Group statement of comprehensive income for the year ended 30 June 2022;
• the Group and Parent Company statements of financial position as at 30 June 2022;
• the Group and Parent Company statements of cash flows for the year then ended:
• the Group and Parent Company 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 in accordance
with UK adopted International Accounting Standards.
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 2022
and of the Group’s loss for the period then ended;
• the Group and Parent company financial statements have been properly prepared in accordance with UK adopted International
Accounting Standards; 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 as applied to listed entities, 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 and Parent Company 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 ability of the Parent Company and the Group to continue as
a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going
concern basis of accounting included the following procedures:
We evaluated the Directors’ assessment of the Group’s and parent’s ability to continue as a going concern, which included a full assessment
of the Group’s and parent’s financial resources and working capital forecasts. We reviewed the mathematical accuracy of the forecasts and
challenged management on key assumptions including growth in revenue substantiated by orders signed subsequent to the year-end and
expected pipeline, impact of inflation on cost to deliver the projects and other significant items of cashflow considered in the forecasts. We
subjected this assessment to sensitivity testing to understand the impact of changes in the key assumptions. We further reviewed the Group
and parent’s liquidity position to understand whether there was is an indication of further support being required from the Executive
Chairman and the ability for this to be provided.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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 £50,000 (2021:
£50,000), based on 0.75% of the Group’s revenue. Materiality for the Parent Company financial statements as a whole was set at £40,000
(2021: £30,000) based on 2% of Total assets excluding intercompany balances.
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Independent Auditor’s Report to the Members of PipeHawk plc
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 at £35,000, based on the overall 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 £2,500. 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 Parent and its subsidiaries are accounted for from one central operating location. Our audit was conducted from the central operating
location and all Group companies were within the scope of our audit testing.
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.
Key audit matter How the scope of our audit addressed the key audit matter
Group – carrying value of goodwill (refer note 11)
Parent Company – carrying value of investments in subsidiaries
The financial statements of Pipehawk Plc include goodwill of
£1.4 million arising on the acquisition of Adien Limited, QM Systems
Limited, Thomson Engineering Design Limited, Wessex Precision
Instruments Limited and UTSI Electronics 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. Goodwill and
parent company’s investment in subsidiaries are assessed based on
financial performance of the underlying business in both cases.
Revenue recognition (refer note 1.7)
The Group derives revenue from bespoke service contracts with
customers which includes an element of sale of equipment and
rendering of services.
The revenue recognition policy varies depending on the underlying
contract and could result in revenue being recognised at a point in
time or on a percentage completion basis where certain conditions
are met.
The Group prepares discounted cashflow forecasts to support both
the carrying value of goodwill and the investment in subsidiaries in
the Parent Company financial statements.
We gained understanding of the process by which management
prepares its business forecast and design of any key controls.
We evaluated the appropriateness of managements’ identification of
cash generating units. We performed testing of the mathematical
accuracy of the cash flow models and challenged key assumptions
in management’s valuation models used to determine recoverable
amount which includes growth in revenue substantiated by orders
signed subsequent to the year-end and pipeline of orders, impact of
inflation on cost to deliver the projects. We performed sensitivity
analysis on the key assumptions and the discount rate used.
We assessed the appropriateness of the related disclosures in the
financial statements.
We gained an understanding of the revenue recognition process
and evaluated the design and implementation of key controls.
We validated a sample of contracts to supporting documentation
and agreed that revenue has been recognised in line with the
Group’s accounting policy. Where revenue is recognised over time
we challenged management on the contract budgeting process by
analysing historical estimates of contract costs compared to actual
outcomes. We also tested invoices raised during the period and
cash collected to gain evidence of existence.
We assessed the appropriateness of the related disclosures in the
financial statements.
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Independent Auditor’s Report to the Members of PipeHawk plc
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.
Opinions on other matters 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 strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the 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 12, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatement in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below:
We gained an understanding of the legal and regulatory framework applicable to the Company and Industry in which the company operates,
and considered the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud. These included but
were not limited to compliance with Companies Act 2006, Listing rules and Tax legislation.
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Independent Auditor’s Report to the Members of PipeHawk plc
Our procedures involved enquiries with management, review of the reporting to the directors with respect to compliance with laws and
regulation, review of board meeting minutes and review of legal correspondence.
We focused on laws and regulations that could give rise to a material misstatement in the financial statements. Our testing included but was
not limited to:
• agreement of the financial statement disclosures to underlying supporting documentation;
• enquires of management;
• testing of journal postings made during the year to identify potential management override of controls;
• review of minutes of board meetings throughout the period; and
• obtaining an understanding of the control environment in monitoring compliance with laws and regulations.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in
the financial statements, the less likely we are to become aware of it.
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.
Leo Malkin
Senior Statutory Auditor
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
Date: 28 November 2022
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Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
Note 30 June 2022 30 June 2021
£’000 £’000
Revenue 2 6,191 6,665
Staff costs 5 (3,861) (3,478)
Operating costs (3,642) (2,930)
––––––––––––– –––––––––––––
Operating (loss)/profit 4 (1,312) 257
––––––––––––– –––––––––––––
Profit/(loss) before interest and taxation (1,312) 257
––––––––––––– –––––––––––––
Finance costs 3 (264) (178)
––––––––––––– –––––––––––––
(Loss)/profit before taxation (1,576) 79
Taxation 7 708 443
––––––––––––– –––––––––––––
(Loss)/profit for the year attributable to equity holders of
the parent (868) 522
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Other comprehensive income - -
––––––––––––– –––––––––––––
Total comprehensive (loss)/profit for the year attributable to
equity holder of the parent (868) 522
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
(Loss)/profit per share (pence) – basic 8 (2.42) 1.50
(Loss)/profit per share (pence) – diluted 8 (2.42) 0.80
The notes on pages 23 to 43 form an integral part of these financial statements.
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Consolidated Statement of Financial Position
at 30 June 2022
Assets Note 30 June 2022 30 June 2021
£’000 £’000
Non-current assets
Property, plant and equipment 9 828 528
Right of use 10 2,549 363
Goodwill 11 1,357 1,357
––––––––––––– –––––––––––––
4,734 2,248
––––––––––––– –––––––––––––
Current assets
Inventories 13 340 373
Current tax assets 710 442
Trade and other receivables 14 2,389 1,809
Cash and cash equivalents 4 920
––––––––––––– –––––––––––––
3,443 3,544
––––––––––––– –––––––––––––
Total assets 8,177 5,792
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity and liabilities
Equity
Share capital 18 363 349
Share premium 5,316 5,215
Retained earnings (8,647) (7,784)
––––––––––––– –––––––––––––
(2,968) (2,220)
––––––––––––– –––––––––––––
Non-current liabilities
Borrowings 16 5,612 3,205
––––––––––––– –––––––––––––
5,612 3,205
––––––––––––– –––––––––––––
Current liabilities
Borrowings
Trade and other payables 16 2,674 2,156
15 2,859 2,651
––––––––––––– –––––––––––––
5,533 4,807
––––––––––––– –––––––––––––
Total equity and liabilities 8,177 5,792
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 23 to 43 form an integral part of these financial statements.
The financial statements were approved by the board and authorised for issue on 28 November 2022 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 2022
Assets Note 30 June 2022 30 June 2021
£’000 £’000
Non-current assets
Property, plant and equipment 9 0 3
Investment in subsidiaries 12 1,903 1,903
––––––––––––– –––––––––––––
1,903 1,906
––––––––––––– –––––––––––––
Current assets
Inventories 13 - 83
Current tax assets 75 94
Trade and other receivables 14 510 423
Cash and cash equivalents - 14
––––––––––––– –––––––––––––
585 614
––––––––––––– –––––––––––––
Total assets 2,488 2,520
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity and liabilities
Equity
Share capital 18 363 349
Share premium 5,316 5,215
Retained earnings (9,834) (9,552)
––––––––––––– –––––––––––––
(4,155) (3,988)
––––––––––––– –––––––––––––
Non-current liabilities
Borrowings 16 3,082 2,834
Trade and other payables 15 1,398 1,629
––––––––––––– –––––––––––––
4,480 4,463
––––––––––––– –––––––––––––
Current liabilities
Borrowings 16 2,019 1,796
Trade and other payables 15 144 249
––––––––––––– –––––––––––––
2,163 2,045
––––––––––––– –––––––––––––
Total equity and liabilities 2,488 2,520
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity includes loss for the year of the Parent Company of £282,000 (2021: £236,000).
The notes on pages 23 to 43 form an integral part of these financial statements.
The financial statements were approved by the board and authorised for issue on 28 November 2022 and signed on its behalf by:
Gordon G Watt
Director
Company No: 3995041
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Consolidated Statement of Cash Flow
For the year ended 30 June 2022
Note 30 June 2022 30 June 2021
£’000 £’000
Cash flows from operating activities
(Loss)/profit from operations (1,312) 257
Adjustments for:
Depreciation 4 424 192
––––––––––––– –––––––––––––
(888) 449
Decrease/(increase) in inventories 33 (171)
Decrease/(increase) in receivables (580) (136)
Increase/(decrease) in liabilities 286 581
––––––––––––– –––––––––––––
Cash generated/(used) by operations (1,149) 723
Interest paid (124) (50)
Corporation tax received 440 394
––––––––––––– –––––––––––––
Net cash generated from/(used in) operating activities (833) 1,067
––––––––––––– –––––––––––––
Cash flows from investing activities
Acquisition of subsidiary net of cash acquired - 42
Purchase of plant and equipment (325) (130)
––––––––––––– –––––––––––––
Net cash used in investing activities (325) (88)
––––––––––––– –––––––––––––
Cash flows from financing activities
Proceeds/(repayments) from borrowings 286 339
Proceeds/(repayments) of loan 119 (483)
Repayment of leases (163) (165)
––––––––––––– –––––––––––––
Net cash (used in)/generated from financing activities 242 (309)
––––––––––––– –––––––––––––
Net (decrease)/increase in cash and cash equivalents (916) 670
Cash and cash equivalents at the beginning of year 920 250
––––––––––––– –––––––––––––
Cash and cash equivalents at end of year 4 920
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 23 to 43 form an integral part of these financial statements.
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Parent Company Statement of Cash Flow
For the year ended 30 June 2022
Note 30 June 2022 30 June 2021
£’000 £’000
Cash flows from operating activities
Loss from operations (186) (194)
Depreciation 3 -
Decrease/(increase) in inventories 83 (9)
Decrease/(increase) in receivables (87) 32
Increase in liabilities (148) 643
––––––––––––– –––––––––––––
Cash generated by operations (335) 472
Interest paid (32) -
Corporation tax received 94 88
––––––––––––– –––––––––––––
Net cash generated from operating activities (273) 560
––––––––––––– –––––––––––––
Acquisition of business - (508)
Purchase of plant and equipment 9 - (4)
––––––––––––– –––––––––––––
Cash flow from investing activities - (512)
––––––––––––– –––––––––––––
Proceeds from borrowings 259 150
Repayment of loan - (186)
––––––––––––– –––––––––––––
Net cash used in financing activities 259 (36)
––––––––––––– –––––––––––––
Net increase in cash and cash equivalents (14) 12
Cash and cash equivalents at the beginning of year 14 2
––––––––––––– –––––––––––––
Cash and cash equivalents at end of year - 14
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 23 to 43 form an integral part of these financial statements.
PipeHawk plc Annual Report and Accounts 2022
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Statement of Changes in Equity
For the year ended 30 June 2022
Consolidated Share
Share premium Retained
capital account earnings Total
£’000 £’000 £’000 £’000
As at 1 July 2020 349 5,215 (8,301) (2,737)
Profit/(loss) for the year - - 522 522
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income - - 522 522
Issue of shares - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2021 349 5,215 (7,779) (2,215)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Profit/(loss) for the year - - (868) (868)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income (868) (868)
Issue of shares 14 101 - 115
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2022 363 5,316 (8,647) (2,968)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Parent Share
Share premium Retained
capital account earnings Total
£’000 £’000 £’000 £’000
As at 1 July 2020 349 5,215 (9,316) (3,752)
Loss for the year - - (236) (236)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive loss - - (236) (236)
Issue of shares - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2021 349 5,215 (9,552) (3,988)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Loss for the year – – (282) (282)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income - - (282) (282)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Issue of shares 14 101 - 115
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2022 363 5,316 (9,834) (4,155)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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 23 to 43 form an integral part of these financial statements.
22
PipeHawk plc Annual Report and Accounts 2022
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
1 Summary of significant accounting policies
1.1. General information
PipeHawk plc (the Company) is a limited company incorporated in the United Kingdom under the Companies Act 2006. The
addresses of its registered office and principal place of business are disclosed in the company information on page 1. The principal
activities of the Company and its subsidiaries (the Group) are described on page 7.
The financial statements are presented in pounds sterling, the functional currency of all companies in the Group. In accordance with
section 408 of the Companies Act 2006 a separate statement of comprehensive income for the parent Company has not been
presented. For the year to 30 June 2022 the Company recorded a net loss after taxation of £282,000 (2021: £236,000).
1.2. Basis of preparation
The financial statements have been prepared in accordance with UK-adopted international accounting standards (IAS) The principal
accounting policies are set out below.
1.3. Basis of preparation – Going concern
The directors have reviewed the Parent Company and Group's funding requirements for the next twelve months which show positive
anticipated cash flow generation, prior to any repayment of loans advanced by the Executive Chairman. The directors have
furthermore obtained a renewed pledge from G G Watt to provide ongoing financial support for a period of at least twelve months
from the approval date of the Group and Parent Company statement of financial positions. The directors therefore have a reasonable
expectation that the entity has adequate resources to continue in its operational exercises for the foreseeable future. It is on this
basis that the directors consider it appropriate to adopt the going concern basis of preparation within these financial statements.
However a material uncertainty exists regarding the ability of the Group and Parent Company to remain a going concern without the
continuing financial support of the Executive Chairman.
1.4. Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so
as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive
income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments
are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of
the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
1.5. Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The cost of the business combination is
measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3 Business 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.
PipeHawk plc Annual Report and Accounts 2022
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
1 Summary of significant accounting policies (continued)
1.6. Goodwill
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from
the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
1.7. Revenue recognition
For the year ended 30 June 2022 the Group used the five-step model as prescribed under IFRS 15 on the Group’s revenue
transactions. This included the identification of the contract, identification of the performance obligations under the same,
determination of the transaction price, allocation of the transaction price to performance obligations and recognition of revenue.
The point of recognition arises when the Group satisfies a performance obligation by transferring control of a promised good or
service to the customer, which could occur over time or at a point in time.
1.8. Sale of goods
Revenue generated from the sale of goods is recognised on delivery of the goods to the customer. On this basis revenue is
recognised at a point in time.
1.9. Sale of services
In relation to the design and manufacture of complete software and hardware test solutions and the provision of specialist surveying,
revenue is recognised through a review of the man-hours completed on the project at the year-end compared to the total man-
hours required to complete the projects. Provision is made for all foreseeable losses if a contract is assessed as unprofitable.
Revenue represents the amount of consideration to which the Group expects to be entitled in exchange for transferring promised
goods or services to a customer, excluding amounts collected on behalf of third parties.
Revenue from goods and services provided to customers not invoiced as at the reporting date is recognised as a contract asset and
disclosed as accrued income within trade and other receivables.
Although payment terms vary from contract to contract invoices are in general raised in advance of services performed. Where
billing has exceeded the revenue recognised in a period a contract liability is recognised and this is disclosed as payments received
on account in trade and other payables.
1.10. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is
charged so as to write off the cost of assets over their estimated useful lives, using the straight-line method. The estimated useful
lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted
for on a prospective basis. Assets held under leases are depreciated over their expected useful lives on the same basis as owned
assets or, where shorter, the term of the relevant lease. Gains and losses on disposals are determined by comparing the proceeds
with the carrying amount and are recognised within the Statement of Comprehensive Income.
The principal annual rates used to depreciate property, plant and equipment are:
Equipment, fixtures and fittings 25%
Motor vehicles 25%
24
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
1 Summary of significant accounting policies (continued)
1.11. Inventories and work in progress
Inventories are stated at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable
overhead expenses, are assigned to inventories by the method most appropriate to the particular class of inventory, with the majority
being valued on a first-in-first-out basis. Net realisable value represents the estimated selling price for inventories less all estimated
costs of completion and costs necessary to make the sale.
Work in progress is valued at cost, which includes expenses incurred on behalf of clients and an appropriate proportion of directly
attributable costs on incomplete assignments. Provision is made for irrecoverable costs where appropriate.
1.12. Financial assets
The Group's financial assets consist of cash and cash equivalents and trade and other receivables. The Group's accounting policy
for each category of financial asset is as follows:
Financial assets held at amortised cost
Trade receivables and other receivables are classified as financial assets held at amortised cost. They are initially recognised at fair
value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost
using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised based on its historical credit loss experience, adjusted for forward-looking factors specific to
the debtors and the economic environment, the amount of such a provision being the difference between the net carrying amount
and the present value of the future expected cash flows associated with the impaired receivable. For receivables, which are reported
net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in
the statement of comprehensive income. On confirmation that the receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision.
The Group’s financial assets held at amortised cost comprise other receivables and cash and cash equivalents in the statement of
financial position.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Financial liabilities are
subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield
basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability, or, where appropriate, a shorter period.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
PipeHawk plc Annual Report and Accounts 2022
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
1 Summary of significant accounting policies (continued)
1.13. Leased/Right of Use assets
The leases liability is initially measured at the present value of the remaining lease payments, discounted using the individual entities
incremental borrowing rate. The lease term comprises the non-cancellable period of the contract, together with periods covered by
an option to extend the lease where the Group is reasonably certain to exercise that option based on operational needs and
contractual terms. Subsequently, the lease liability is measured at amortised cost by increasing the carrying amount to reflect
interest on the lease liability, and reducing it by the lease payments made. The lease liability is remeasured when the Group changes
its assessment of whether it will exercise an extension or termination option.
Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability adjusted for any lease
payments made at or before the commencement date, lease incentives received and initial direct costs. Subsequently, right-of-use
assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for
certain remeasurement of the lease liability.
Depreciation is calculated on a straight-line basis over the length of the lease. The Group has elected to apply exemptions for short-
term leases and leases for which the underlying asset is of low value. For these leases, payments are charged to the income
statement on a straight-line basis over the term of the relevant lease. Right-of-use assets are presented within non-current assets
on the face of the statement of financial position, and lease liabilities are shown separately on the statement of financial position in
current liabilities and non-current liabilities depending on the maturity of the lease payments.
Under IFRS16, right-of-use assets will be tested for impairment in accordance with IAS36 Impairment of Assets.
Payments associated with short-term leases are recognised on a straight-line basis as an expense in the profit or loss. Short term
leases are leases with a lease term of 12 months or less.
1.14. Pension scheme contributions
Pension contributions are charged to the statement of comprehensive income in the period in which they fall due. All pension costs
are in relation to defined contribution schemes.
1.15. Share based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set
out in note 18.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period, based on the Group’s estimate of equity instruments that will eventually vest. At each statement of financial position
date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original
estimates, if any, is recognised in profit or loss over the remaining vesting period, with a corresponding adjustment to reserves.
1.16. Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at
30 June. Transactions in foreign currencies are recorded at the rates ruling at the date of the transactions.
1.17. Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated
statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the year end date.
26
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
1 Summary of significant accounting policies (continued)
1.17. Taxation (continued)
Deferred tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit, and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are
generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available
against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in
a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only recognised to the extent that it is probable that there will be
sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax
assets and liabilities are measured at the tax rates that are expected to apply in the year in which the liability is settled or the asset
realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the year end date. The measurement
of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at
the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised as an expense or income in the statement of comprehensive income, except when they
relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity.
1.18. Impairment of property, plant and equipment
At each year end date, the Group reviews the carrying amounts of its property, plant and equipment to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-
generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount
of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or
loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in the statement of comprehensive income.
PipeHawk plc Annual Report and Accounts 2022
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
1. Summary of significant accounting policies (continued)
1.19. Research and development
The Group undertakes research and development to expand its activity in technology and innovation to develop new products that
will begin directly generating revenue in the future. Expenditure on research is expensed as incurred, development expenditure is
capitalised only if the criteria for capitalisation are recognised in IAS 38. The Company claims tax credits on its research and
development activity and recognises the income in current tax.
1.20. Government grants
During the period, the Group received benefits from Government grants. Revenue based Government grants are recognised through
the consolidated statement of comprehensive income by netting off against the costs to which they relate. Where the grant is not
directly associated with costs incurred during the period, it is recognised as ‘other income’.
1.21. Critical judgement in applying accounting policies and key sources of estimation uncertainty
The following are the critical judgements and key sources of estimation uncertainty that the directors have made in the process of
applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in these financial
statements.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill
has been allocated. A similar exercise is performed in respect of investment and long term loans in subsidiary.
The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit
and a suitable discount rate in order to calculate present value, see note 11 for further details.
The carrying amount of goodwill at the year-end date was £1,357,000 (2021: £1,357,000). The investment in subsidiaries at the
year-end was £1,903,000 (2021: £1,903,000).
The methodology adopted in assessing impairment of Goodwill is set out in note 11 as is the sensitivity analysis applied in relation to
the outcomes of the assessment.
Impairment investment in subsidiaries and inter-company receivables
As set out in note 12, an impairment assessment of the carrying value of investments in subsidiaries and inter-company receivables
is in line with the methodologies adopted in the assessment of impairment of goodwill.
2 Segmental analysis
2022 2021
£’000 £’000
Turnover by geographical market
United Kingdom 5,627 6,103
Europe 243 172
Other 321 390
––––––––––––– –––––––––––––
6,191 6,665
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
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 Limited – Utility detection and mapping services – Sale of services
PipeHawk Limited and Utsi Electronics Limited – Development, assembly and sale of GPR equipment – Sale of goods
•
•
28
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264196 Pipehawk AR 2022 pp23_end.qxp 28/11/2022 15:59 Page 29
Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
2. Segmental analysis (continued)
•
•
•
QM Systems – Test system solutions – Sale of services
TED Limited – Rail trackside solutions (included in the test system solutions segment) – Sale of services
Wessex Precision Instruments Limited – Non trading
The CODM monitors the operating results of each segment for the purpose of performance assessments and making decisions on
resource allocation. Performance is based on revenue generations and profit before tax, which the CODM believes are the most
relevant in evaluating the results relative to other entities in the industry.
Information regarding each of the operations of each reportable segment is included below, all non-current assets owned by the
Group are held in the UK.
Utility Development,
detection assembly
and and sale Automation and
mapping of GPR test system
services equipment solutions Total
£’000 £’000 £’000 £’000
Year ended 30 June 2022
Total segmental revenue 1,453 246 4,492 6,191
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Operating profit/(loss) 21 (323) (1,010) (1,312)
Finance costs (36) (171) (57) (264)
(Loss)/profit before taxation (15) (494) (1,067) (1,576)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Segment assets 655 1,924 5,598 8,177
Segment liabilities 628 5,226 5,442 11,296
Non-current asset additions 17 55 2,941 3,013
Depreciation and amortisation 106 3 316 425
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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 2021
Total segmental revenue 1,395 150 5,120 6,665
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Operating profit/(loss) 130 (218) 345 257
Finance costs (29) (130) (19) (178)
Profit/(loss) before taxation 101 (348) 326 79
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Segment assets 696 2,196 2,754 5,646
Segment liabilities 624 4,841 2,521 7,986
Non-current asset additions 50 4 77 131
Depreciation and amortisation 100 1 91 192
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
PipeHawk plc Annual Report and Accounts 2022
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
3 Finance costs
2022 2021
£’000 £’000
Interest payable 264 178
––––––––––––– –––––––––––––
264 178
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Interest payable comprises interest on:
Leases 69 25
Directors’ loans 140 129
Other 55 24
––––––––––––– –––––––––––––
264 178
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
4 Operating profit for the year
This is arrived at after charging for the Group:
2022 2021
£’000 £’000
Research and development costs not capitalised 2,333 2,285
Depreciation 424 192
Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the Group’s financial statements 45 45
Fees payable to the Company’s auditor and its subsidiaries for the provision of tax services 7 7
Lease rentals
Other including land and buildings 352 156
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The Company audit fee is £9,000 (2021: £9,000).
5 Staff costs
Group 2022 2021
No. No.
Average monthly number of employees, including directors:
Production and research 79 78
Selling and research 9 10
Administration 7 5
––––––––––––– –––––––––––––
95 93
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Group 2022 2021
£’000 £’000
Staff costs, including directors:
Wages and salaries 3,387 3,032
Social security costs 361 350
Other pension costs 113 96
––––––––––––– –––––––––––––
3,861 3,478
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
30
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
5. Staff costs (continued)
Company 2022 2021
No. No.
Average monthly number of employees, including directors:
Selling and research 0 1
Administration 1 1
––––––––––––– –––––––––––––
1 2
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Company 2022 2021
£’000 £’000
Staff costs, including directors:
Wages and salaries 131 127
Social security costs 7 20
Other pension costs 4 3
––––––––––––– –––––––––––––
142 150
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
6 Directors’ remuneration
Salary Benefits 2022 2021
and fees in kind Total Total
£’000 £’000 £’000 £’000
G G Watt 71 - 71 71
S P Padmanathan 58 8 66 72
R MacDonnell 2 - 2 2
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Aggregate emoluments 131 8 139 145
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Directors’ pensions 2022 2021
No. No.
The number of directors who are accruing retirement benefits under:
Defined contributions policies 1 1
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The directors represent key management personnel.
Refer to note 18 for details of directors share options.
PipeHawk plc Annual Report and Accounts 2022
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
7 Taxation
2022 2021
£’000 £’000
United Kingdom Corporation Tax
Current taxation (708) (435)
Adjustments in respect of prior years - (8)
––––––––––––– –––––––––––––
(708) (443)
Deferred taxation - -
––––––––––––– –––––––––––––
Tax on profit/(loss) (708) (443)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current tax reconciliation
Taxable profit/(loss) for the year (1,576) 79
––––––––––––– –––––––––––––
Theoretical tax at UK corporation tax rate 19% (2021: 19%) (289) 15
Effects of:
R&D tax credit adjustments (350) (428)
Fixed asset timing differences (101) -
Not deductible for tax purposes 2 (12)
Deferred tax not recognised 45 28
Adjustments in respect of prior years 1 (18)
Utilisation of losses - (27)
Short term timing differences (16) (1)
––––––––––––– –––––––––––––
Total income tax credit (708) (443)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The Group has tax losses amounting to approximately £3,033,706 (2021: £3,008,408), 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 £576,404 (2021: £541,065).
8 Loss/profit per share
Group
Basic (pence per share) 2022 – Loss 2.42 profit per share; 2021 – 1.50 profit per share
This has been calculated on a loss of £868,000 (2021: Profit £522,000) and the number of shares used was 35,812,823 (2021:
34,860,515) being the weighted average number of shares in issue during the year.
Diluted (pence per share) 2022 – 2.42 loss per share; 2021 – 0.80 profit per share
In the current year the potential ordinary shares included in the weighted average of shares are anti-dilutive and therefore diluted
earnings per share is equal to basic earnings per share. The prior year calculation used earnings of £442,000 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
55,344,987 being the weighted average number of shares outstanding during the year of 34,860,515 adjusted for shares deemed
to be issued for no consideration relating to options and warrants and the impact of the convertible instrument.
32
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
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 2021 426 1,233 143 268 2,070
Additions - 97 331 - 428
Disposals - - - (31) (31)
Write off - (10) - - (10)
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2022 426 1,320 474 237 2,457
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Depreciation
At 1 July 2021 40 1,091 143 268 1,542
Charged in year 5 94 25 - 124
Disposals - - - (31) (31)
Write off - (6) - - (6)
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2022 45 1,179 168 237 1,629
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2022 381 141 306 - 828
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2021 386 142 - - 528
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The net book value of the property, plant and equipment includes £2,549,000 (2021: £363,000) in respect of assets held under
lease agreements. These assets have been offered as security in respect of these lease agreements. Depreciation charged in the
period on those assets amounted to £314,000 (2021: £138,000) – see note 10.
Company Equipment,
fixtures and Lease
fittings improvements Total
£’000 £’000 £’000
Cost
At 1 July 2021 3 - 3
Additions - - -
Write off (2) - (2)
––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2022 1 - 1
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
Depreciation
At 1 July 2021 1 - 1
Charged in year - - -
Write off - - -
––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2022 1 - 1
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2022 0 - 0
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2021 3 - 3
––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– –––––––––––––
PipeHawk plc Annual Report and Accounts 2022
33
264196 Pipehawk AR 2022 pp23_end.qxp 28/11/2022 15:59 Page 34
Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
10 Right of use
Group Equipment,
fixtures and Leasehold Motor
Freehold fittings improvement vehicles Total
£’000 £’000 £’000 £’000 £’000
Cost
At 1 July 2021 248 250 - 147 645
Additions 2,416 - 168 - 2,584
Disposal (84) (14) (98)
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2022 2,580 236 168 147 3,131
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Depreciation
At 1 July 2021 101 109 - 73 283
Charged in year 198 47 12 42 299
Disposal - - - - -
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2022 299 156 12 115 582
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2022 2,281 80 156 32 2,549
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2021 147 142 - 74 363
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
11 Goodwill
Group Goodwill Total
£’000 £’000
Cost
At 1 July 2021 1,357 1,357
Additions - -
––––––––––––– –––––––––––––
At 30 June 2022 1,357 1,357
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Impairment
As at 30 June 2021 and 30 June 2022 - -
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Net book value
At 30 June 2022 1,357 1,357
––––––––––––– –––––––––––––
At 30 June 2021 1,357 1,357
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The goodwill carried in the statement of financial position of £1,357,000 arose on the acquisitions of Adien Limited in 2002
(£212,000), QM Systems Limited in 2006 (£849,000), TED Limited in 2017 (£129,000), Wessex Precision Equipment Limited in
2019 (£155,000) and Utsi Electronics Limited in 2021 (£12,000) – see note 21.
Adien Limited represents the segment utility detection and mapping services and QM Systems Limited represents the segment test
system solutions.
34
PipeHawk plc Annual Report and Accounts 2022
264196 Pipehawk AR 2022 pp23_end.qxp 28/11/2022 15:59 Page 35
Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
11. Goodwill (continued)
QM Systems Limited, TED, Wessex and Utsi are involved in projects surrounding:
•
•
•
•
•
The creation of innovative automated assembly systems for the manufacturing, food and pharmaceutical sectors.
The provision of inspection systems for the automotive, aerospace, rail and pharmaceutical sectors.
Slippage testing.
Assembly and sale of GPR equipment.
Automated test systems.
The Group tests goodwill annually for impairment or more frequently if there are indicators that it might be impaired.
The recoverable amounts are determined from value in use calculations which use cash flow projections based on financial budgets
approved by the directors covering a five year period. 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 rate assumptions are based on forecasts and historic margins.
•
•
•
•
Adien these have been assessed as 22% growth for revenue in years 1 and 5% for years 2 and 3, 2.5% thereafter.
UTSI and PipeHawk combined these have been assessed as 15% for growth for revenue in year 1 and 55.2% for year 2,
65.9% for year 3, 35% for year 4, 8% year 5.
QM have been assessed largely based on the current orderbook, in addition to the expected orderbook. The business has
seen significant growth in order intake and has received confirmed orders in the first four months exceeding £3 million.
Management is expecting to convert a strong pipeline into orders which would see a 300% increase in year 1, a 183%
increase in year 2. This is followed by an expected 10 % in year 3 and 4 and 5% for year 5.
TED these have been assessed as 26% growth for revenue in year 1, 10% growth in years 2 and 3 and 5% thereafter. The
reason for the significant Year 1 revenue growth in Adien, QM and TED is an expectation based on current trading and the
expected order pipeline.
12. Non-current investments
Company Investment in
subsidiaries Total
£’000 £’000
Cost
At 1 July 2021 1,903 1,903
Additions - -
––––––––––––– –––––––––––––
At 30 June 2022 1,903 1,903
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Impairment
At 1 July 2021 and 30 June 2022 - -
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Net book value
At 30 June 2022 1,903 1,903
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
At 30 June 2021 1,903 1,903
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
PipeHawk plc Annual Report and Accounts 2022
35
264196 Pipehawk AR 2022 pp23_end.qxp 28/11/2022 15:59 Page 36
Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
12. Non-current investments (continued)
Parent and group
interest in ordinary
shares and voting Country of
Subsidiary rights incorporation Principal activity
Adien Ltd 100% England & Wales Specialist surveying
QM Systems Ltd 100% England & Wales Test solutions
Thomson Engineering Design Ltd 100% England & Wales Specialist in railway
equipment
Wessex Precision Instruments Ltd 100% England & Wales Slip test solutions
Utsi Electronics Ltd 100% England & Wales GPR equipment
Wessex Test Equipment Ltd
(formerly Tech Sales Services Ltd) 100% England & Wales Dormant
Minehawk Ltd 100% England & Wales Dormant
An impairment assessment was performed in line with the assessment of goodwill, see note 11 for further details. On the basis of
this assessment no impairment of the investment was required at 30 June 2022.
The registered office of all of the above named subsidiaries, except Thomson Engineering Design Ltd and Utsi Electronics Ltd is
Manor Park Industrial Estate, Wyndham Street, Aldershot, Hampshire, GU12 4NZ.
The registered office of Thomson Engineering Design Ltd is Units 2a & 3 Crabtree Road, Forest Vale Industrial Estate Cinderford,
Gloucestershire, United Kingdom, GL14 2YQ.
The registered office of Utsi Electronics Ltd is Unit 26, Glenmore Business Park, Ely Road, Waterbeach, Cambridge, Cambridgeshire,
CB25 9PG.
13 Inventories
Group Company
2022 2021 2022 2021
£’000 £’000 £’000 £’000
Raw materials 150 287 - 77
Finished goods 190 86 - 6
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
340 373 - 83
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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 £1,886,000 (2021: £2,078,000). For the Parent
company this was £41,612 (2021: £16,024).
36
PipeHawk plc Annual Report and Accounts 2022
264196 Pipehawk AR 2022 pp23_end.qxp 28/11/2022 15:59 Page 37
Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
14 Trade and other receivables
Group Company
2022 2021 2022 2021
£’000 £’000 £’000 £’000
Current
Trade receivables 1,261 1,066 - 3
Amounts owed by Group undertakings - - 469 405
Other Debtors 522 464 - -
Accrued income 332 3 41 3
Prepayments 274 276 - 12
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
2,389 1,809 510 423
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
15 Trade and other payables
Group Company
2022 2021 2022 2021
£’000 £’000 £’000 £’000
Current
Trade payables 972 581 38 5
Other taxation and social security 447 501 - 5
Payments received on account 839 786 - -
Accruals and other creditors 601 783 106 239
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
2,859 2,651 144 249
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Group Company
2022 2021 2022 2021
£’000 £’000 £’000 £’000
Non-current
Amounts owed to Group undertakings - - 1,398 1,629
Other creditors - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
- - 1,398 1,629
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The performance obligations of the IFRS 15 contract liabilities (payments received on account) are expected to be met within the
next financial year.
16 Borrowing analysis
Group Company
2022 2021 2022 2021
£’000 £’000 £’000 £’000
Due within one year
Bank and other loans 708 269 375 103
Directors’ loan 1,644 1,748 1,644 1,693
Obligations under lease agreements 322 139 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
2,674 2,156 1,753 1,796
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
PipeHawk plc Annual Report and Accounts 2022
37
264196 Pipehawk AR 2022 pp23_end.qxp 28/11/2022 15:59 Page 38
Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
16 Borrowing analysis (continued)
Due after more than one year
Bank and other loans 491 628 331 442
Directors’ loan 2,751 2,392 2,751 2,392
Obligations under lease agreements 2,370 185 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
5,612 3,205 3,136 2,834
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Repayable
Due within 1 year 2,729 2,156 2,072 1,796
Over 1 year but less than 2 years 3,249 2,576 2,861 2,503
Over 2 years but less than 5 years 2,361 629 221 331
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
8,339 5,361 5,154 4,630
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Directors’ loans
Included with Directors’ loans and borrowings due within one year are accrued fees and interest owing to G G Watt of £1,644,000
(2021: £1,643,000). 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 £2,750,000 from G G Watt. Directors’ loans comprise of two elements.
A loan attracting interest at 2.15% over Bank of England base rate. At the year end £1,750,000 (2021: £1,339,000) was
outstanding in relation to this loan. During the year to 30 June 2022 £200,000 (2021: £130,000) was repaid. The Company has the
right to defer payment 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 £1million and has been
recognised in non-current liabilities of £2,750,000.
Pursuant to amendments made on 13 November 2014 and 9 November 2018, and 30 June 2022 the principal terms of the CULS
are as follows:
–
–
The CULS may be converted at the option of Gordon Watt at a price of 3p per share at any time prior to 13 August 2026;
Interest is payable at a rate of 10% per annum on the principal amount outstanding until converted, prepaid or repaid,
calculated and compounded on each anniversary of the issue of the CULS. On conversion of any CULS, any unpaid interest
shall be paid within 20 days of such conversion;
–
The CULS are repayable, together with accrued interest on 13 August 2026 ("the Repayment Date").
No equity element of the convertible loan stock was recognised on issue of the instrument as it was not considered to be material.
Leases
The future minimum lease payments under lease agreements at the year end date was £206,033 (2021: £123,382). The difference
between the minimum lease payments and the present value is wholly attributable to future finance charges.
Bank and other loans
Included in bank and other loans is an invoice discounting facility of £299,635 (2021: £142,710). The principle terms of which are
interest at 2.58% over Bank of England base rate and secured on the company’s debtors.
Included in bank and other loans is a secured mortgage of £136,444 which incurs an interest rate of 2.44% over base rate for
10 years and at a rate of 2.64% over base thereafter.
As a result of COVID 19, Coronavirus Business Interruption Loan Scheme (CBILS) became available for the business. This enabled
the group to secure a loan of £400,000, on 15 May 2020 and £150,000, on 4 September 2020 for a term of 6 year at a rate of
2.96% with the 1st year being interest free and without repayment. The amount of interest paid during the year was £15,359.
38
PipeHawk plc Annual Report and Accounts 2022
264196 Pipehawk AR 2022 pp23_end.qxp 28/11/2022 15:59 Page 39
Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
16 Borrowing analysis (continued)
The business was also able to secure a Bounce Back loan through Wessex Precision Engineering of £24,000 on 5 June 2020, and
Utsi obtained £50,000 bounce back loan on 8 April 2021, both with an interest rate of 2.5%.
Non-cash:
Bought Cash Non-cash: Accrued fees/ Carried
forward flows New leases interests forward
2022 £’000 £’000 £’000 £’000 £’000
Director loan 4,140 119 - 187 4,446
Leases 324 (163) 2,584 (53) 2,692
Other 897 286 - 18 1,201
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Loans and borrowings 5,361 242 2,584 152 8,339
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Non-cash:
Bought Cash Non-cash: Accrued fees/ Carried
forward flows New leases interests forward
2021 £’000 £’000 £’000 £’000 £’000
Director loan 4,121 (180) - 199 4,140
Leases 420 (165) 63 6 324
Other 851 36 - 10 897
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Loans and borrowings 5,392 (309) 63 215 5,361
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
17 Financial instruments
The Group uses financial instruments, which comprise cash and various items, such as trade receivables and trade payables that
arise from its operations. The main purpose of these financial instruments is to finance the Group’s operations.
The main risks arising from the Group’s financial instruments are credit risk, liquidity risk and interest rate risk. A number of
procedures are in place to enable these risks to be controlled. For liquidity risk these include profit/cash forecasts by business
segment, quarterly management accounts and comparison against forecast. The board reviews and agrees policies for managing
this risk on a regular basis.
Credit risk
The credit risk exposure is the carrying amount of the financial assets as shown in note 14 (with the exception of prepayments
which are not financial assets) and the exposure to the cash balances. Of the amounts owed to the Group at 30 June 2022, the top
3 customers comprised 34% (2021: 43.00%) 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, also the Group invoices in advance where possible. The Group’s exposure and the credit ratings of its
counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved
counterparties. Having regard to the credit worthiness of the Groups significant customers the directors believe that the Group does
not have any significant credit risk exposure to any single counterparty.
PipeHawk plc Annual Report and Accounts 2022
39
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
17 Financial instruments (continued)
An analysis of trade and other receivables:
Weighted Gross carrying Impairment
average value loss allowance
2022 loss rate £’000 £’000
Performing 0.00% 1,809 -
Weighted Gross carrying Impairment
average value loss allowance
2021 loss rate £’000 £’000
Performing 0.00% 1,861 -
Interest rate risk
The Group finances its operations through a mixture of shareholders’ funds and borrowings. The Group borrows exclusively in
Sterling and principally at fixed and floating rates of interest and are disclosed at note 16.
As disclosed in note 16 the Group is exposed to changes in interest rates on its borrowings with a variable element of interest. If
interest rates were to increase by one percentage point the interest charge would be £15,000 higher. An equivalent decrease would
be incurred if interest rates were reduced by one percentage point.
Liquidity risk
As stated in note 1 the Executive Chairman, G G Watt, has pledged to provide ongoing financial support for a period of at least
twelve months from the approval date of the Group statement of financial position. It is on this basis that the directors consider that
neither the Group nor the Company is exposed to a significant liquidity risk.
Contractual maturity analysis for financial liabilities:
Less than Due between Due between
1 year 1-2 years 2-5 years+ Total
2022 £’000 £’000 £’000 £’000
Trade and
other payables 1,876 - - 1,576
Borrowings 2,405 2,887 355 5,647
Lease liability 322 363 2,007 2,692
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
4,603 3,250 2,362 10,215
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Due or due in
less than Due between Due between Due between
1 month 1-3 months 3 months-1 year 1-5 years+ Total
2021 £’000 £’000 £’000 £’000 £’000
Trade and
other payables 997 197 170 - 1,364
Borrowings 164 95 1,897 3,205 5,361
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
1,161 292 2,067 3,205 6,725
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
40
PipeHawk plc Annual Report and Accounts 2022
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
17 Financial instruments (continued)
Financial liabilities of the Company are all due within less than three month with the exception of the intercompany balances that are
due between 1 and 5 years.
Fair value of financial instruments
Loans and receivables are measured at amortised cost. Financial liabilities are measured at amortised cost using the effective
interest method. The directors consider that the fair value of financial instruments are not materially different to their carrying values.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to be
able to move to a position of providing returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
The Group manages trade debtors, trade creditors and borrowings and cash as capital. The entity is meeting its objective for
managing capital through continued support from G G Watt as described per note 1.
18 Share capital
2022 2022 2021 2021
No. £’000 No. £’000
Authorised
Ordinary shares of 1p each 40,000,000 400 40,000,000 400
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Allotted and fully paid
Brought forward 34,860,515 349 34,360,515 344
Issued during the year 1,452,308 14 500,000 5
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Carried forward 36,312,823 363 34,860,515 349
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Fully paid ordinary shares carry one vote per share and carry a right to dividends.
11,773,703 (2021: 12,773,703) share options were outstanding at the year end, comprising the 1.12m employee options and the
10,653,703 share options and warrants held by directors disclosed below.
Share based payments have been included in the financial statements where they are material. No share based payment expense
has been recognised.
No deferred tax asset has been recognised in relation to share options due to the uncertainty of future available profits.
The director and employee share options were issued as part of the Group’s strategy on key employee remuneration, they lapse if
the employee ceases to be an employee of the Group during the vesting period.
PipeHawk plc Annual Report and Accounts 2022
41
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
18 Share capital (continued)
Employee options
Date Options Exercisable Number of Shares Exercise Price
Between July 2016 and July 2023 80,000 3.00p
Between November 2019 and November 2026 400,000 3.875p
Between November 2020 and November 2027 300,000 3.75p
Between March 2024 and March 2031 1,290,000 8.00p
Directors’ share options
No. of options
Granted Lapsed Date from
At start during the during the At end of Exercise which
of year year year year price exercisable
G G Watt 750,000 - 750,000 8.0p 18 Mar 2024
S P Padmanathan 200,000 (200,000) - 3.9p
S P Padmanathan 300,000 (300,000) - 8.0p
R MacDonnell 200,000 - 200,000 8.0p 18 Mar 2024
The Company’s share price at 30 June 2022 was 16.5p. The high and low during the period under review were 37p and 5.6p
respectively.
In addition to the above, in consideration of loans made to the Company, G G Watt has warrants over 3,703,703 ordinary shares at
an exercise price of 13.5p and a further 6,000,000 ordinary shares at an exercise price of 3.0p.
The weighted average contractual life of share options outstanding at the year end is 7.09 years (2021: 6.87 years).
19 Related party transactions
Directors’ loan disclosures are given in note 16. The interest payable to directors in respect of their loans during the year was:
G G Watt
–
£140,005
The directors are considered the key management personnel of the Company. Remuneration to directors is disclosed in note 6.
Included within the amounts due from and to Group undertakings were the following balances:
2022 2021
£ £
Balance due from:
TED Limited 462,482 405,010
Wessex Precision Engineering Limited 6,120 -
Balance due to:
Adien Limited 147,738 116,998
QM Systems Limited 979,323 1,369,416
Utsi Electronics Limited 271,115 142,283
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.
42
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Notes Forming Part of the Financial Statements
For the year ended 30 June 2022
20 Government grants
In addition to the Government assistance disclosed in note 16, the following Government grants were received and has been
recognised during the period:
Group Company
2022 2021 2022 2021
£’000 £’000 £’000 £’000
Coronavirus Job Retention
Scheme grants 48 340 3 30
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
48 340 3 30
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
PipeHawk plc Annual Report and Accounts 2022
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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 11.30 a.m. on 22 December 2022 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 2022
together with the reports of the directors and auditor thereon. (Resolution 1)
2. Randal MacDonnell retires by rotation, in accordance with the
Articles of Association of the Company and having consented
to be considered for re-appointment, is hereby re-appointed
as a director of the Company. (Resolution 2)
3. Tim Williams, having been appointed as a director of the
Company since the date of the last annual general meeting,
becomes subject to retirement by rotation in accordance with
the Articles of Association of the Company and having
consented to be considered for re-appointment, is hereby
re-appointed as a director of the Company (Resolution 3)
4. To re-appoint Crowe U.K. LLP as auditor of the Company
and to authorise the directors to set their remuneration. (Resolution 4)
To transact any other ordinary business
Serious loss of capital
To consider whether any, and if so what, steps should be taken to address the serious loss of capital within the Company, pursuant to
section 656 (1) of the Companies Act 2006.
Registered Office By order of the Board
Manor Park Industrial Estate
Wyndham Street
Aldershot A Tombs
Hampshire Secretary
GU12 4NZ
Dated: 28 November 2022
Notes:
1. A member of the Company entitled to attend and vote at the AGM may appoint one or more proxies to attend and 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, P.O.Box 5222, Lancing, BN99 9FG, 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 6.30 p.m. on 20 December
2022 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 6.30 p.m. on 20 December 2022 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.
44
PipeHawk plc Annual Report and Accounts 2022
Perivan 264196
264196 Pipehawk AR 2022 Cover.qxp 28/11/2022 16:00 Page 2
PipeHawk plc is a dynamic business offering advanced engineering solutions to challenging technical
requirements across many industries.
QM Systems 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. It specialises in providing full turnkey solutions for any
automated assembly process.
Thomson Engineering Design produces an unparalleled range of machines, attachments and tools for
railway track renewal and maintenance across the globe.
Adien Limited 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.
Utsi is one of the global market leaders 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.
Wessex Precision Instruments is a leading manufacturer and service provider of specialist equipment to
test the skid resistance characteristics of vehicle and pedestrian surfaces.
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 ......17
Chairman’s statement ......................................................2
Consolidated statement of financial position ................18
Strategic report..................................................................5
Parent company statement of financial position ..........19
Report of the directors ......................................................7
Consolidated statement of cash flow ............................20
Corporate governance ......................................................9
Parent company statement of cash flow ........................21
Directors’ biographies......................................................11
Statement of changes in equity ......................................22
Statement of directors’ responsibilities for the
annual report ..................................................................12
Independent auditor’s report to the members of
PipeHawk plc ..................................................................13
Notes to the financial statements ..................................23
Notice of annual general meeting ..................................44
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