COMPANY NO: 3995041
A N N U A L R E P O R T
Year ended
30 June 2023
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 ..................................43
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
1
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PipeHawk plc Annual Report 2023
Chairman’s Statement
“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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PipeHawk plc Annual Report 2023
I can report that Group turnover for the
financial year ended 30 June 2023 (the
“Financial Year” and the 2022/23 FY”)
increased to £6.5million (2022: £6.2 million).
The Group incurred an operating loss in the
Financial Year of £2,899,000 (2022:
£1,312,000), a loss before taxation for the
Financial Year of £3,284,000 (2022: loss
£1,576,000) and a loss after taxation of
£2,484,000 (2022: loss £868,000). The loss
per share for the financial year was 6.84p
(2022: loss 2.42p).
Notwithstanding the resurgence of our
businesses over the last few months, due to
delay in the Start of Production for the
contract manufacturing business, and given
the effects of the wider downturn and
volatility in the global market uncertainty the
directors have taken a prudent view to
recognise a goodwill impairment charge
totalling £678k.
It is evident now that the disappointing results
delivered during the last two financial years
were created over a single 12-month period
spanning January 2022 through until
December 2022. This was as a result of a
perfect storm on the back of a faltering
recovery from Covid, the Russian invasion of
the Ukraine in February 2022 and the political
chaos resulting from the resignation of Boris
Johnson as Prime Minister in June 2022, an
interregnum until the appointment, and brief
term in office, of Liz Truss from September
2022 and finally the appointment of Rishi
Sunak in late October 2022. All this set
against a background of rising fuel prices and
price rises on just about every other
manufactured good, whilst the Bank of
England “helps” to reduce demand even
further by increasing UK interest rates most
months whilst saying there is more pain to
come! Somewhat surprisingly and despite the
aforementioned factors, quotations within the
Group’s businesses over this period remained
buoyant, evidencing the desire of clients to
place orders once they felt confident that
a degree of stability had materialised.
The first half of the financial year saw a
slow start on sales at £2.2 million, however
the second half of the financial year saw
this rise to £4.3 million. This improvement
has continued into the first few months of
the current financial year as we anticipate
being able to make full use of the much
larger facilities which we moved into at QM
and TED when the market place was
looking much more positive two years ago.
We entered the current year with a Group
orderbook in excess of £6 million – the
highest in our history, so, provided there are
no more nasty surprises to upset the
resurgence of stability and belief in our
economy, I am confident the Group will be
able to report a much-improved financial
return at the end of the current financial
year, with this improvement continuing
thereafter.
QM Systems
For the reasons outlined above, QM had a
very tough year having only just moved to
premises five times larger with consequent
increased overhead costs. Nevertheless,
unlike some of its competitors, it has
weathered the storm and has come
out stronger.
Similar to the previous 2021/22 financial
year, QM experienced a year of two halves
although this time in reverse. The 2022/23
financial year saw QM report a 36%
increase in revenue to £4.2m but with a
significant loss after tax of £970k for the
year. However, the loss was almost entirely
created within the first six months where
revenue was only £1.3m with a loss after
tax of £950k. The company steadily grew
revenue throughout the second part of the
year achieving a return to profit within the
final quarter.
Towards the end of the first quarter of the
2022/23 financial year, contract awards
again began to flow into the business, and
this accelerated through the latter part of
2022 and into 2023. Orders received
during the period from September 2022
through to June 2023 exceeded £7m and
resulted in QM ending the 2022/23
financial year with its healthiest ever
forward orderbook of £5.8m. Many of these
orders were quotations provided by QM
12-18 months prior, in some cases more.
The average size of order award for QM has
increased to approximately £500k with a
number of larger orders between £1m to
£2m in value also being awarded. QM today
Chairman’s Statement
sits in a competitive position for contracts
with values above £300k. QM now has the
infrastructure both in terms of resource and
facilities to deliver large multi-million-pound
contracts, and today sales generation is
focused on larger contracts where QM can
add real value to our clients with a very
competitive pricing structure.
The current financial year will see the Start
of Production (SOP) in three contract
manufacturing business units with them
entering SOP in Q1 2024. This in turn will
create a business model that is not reliant
totally on Capital expenditure project
awards.
Revenue continues to increase month on
month as we head into the 2023/24
financial year and we have short/medium
term visibility on a good return to
profitability and stability.
Thomson Engineering Design
(“TED”)
TED generated revenues in the Financial
Year of £970k and a loss after tax of £267k
and has followed a similar trajectory to QM
with a depressed initial six-month period of
financial year 2022/23 during which
revenues were c. £400k, generating a loss
after tax of c. £220k, followed by a more
buoyant second half year where revenues
were £570k, generating a reduced loss
after tax of c. £50k. Sales however did
remain below our expectations.
As Network Rail approaches the end of the
CP6 funding round, a number of new
contract awards have been delayed to align
to the start of CP7 (March 2024). This
clearly has a knock-on effect on TED in
delaying UK-based client sales of
equipment. However, this impact is
restricted to the UK market only. As
reported previously, TED signed a
distribution agreement with Unipart Rail late
in 2022 and this has resulted in a
substantial amount of business being
quoted to Unipart Rail. TED is now
beginning to see a number of these
quotations transition into orders. However,
this has had little impact on financial year
2022/23. Unipart Rail are now placing
orders with TED on a regular basis, and we
fully expect to see a rapid growth in
revenue contribution as the current financial
year 2023/24 continues. Together with
increased revenue, Unipart Rail brings a
ready-made marketing system to TED’s
door that provides TED with unrivalled
exposure to global markets. Unipart Rail is
locally and actively present in South East
Asia, Europe, North America, Australia and
the Middle East. Because of this local
presence, Unipart Rail understands the
respective markets clearly and this in turn
helps TED and Unipart Rail to work together
to fine tune and develop products for
each market.
Over the past year, Unipart Rail, with
support from TED, has promoted the TED
product catalogue at InnoTrans 2022 – the
largest rail exhibition in Europe, Rail Live
2022 – the largest rail exhibition in the UK.
Trax 2022 – North America, MTI – Japan –
Nov 2022 and Aus Rail – Australia Nov
2022. Looking forwards over the coming
year, TED’s products will be exhibited at MTI
– Japan – June 2024, Trax – North
America – June 2024, Rail Live 2023 – UK
– July 2024, RSSi / Remsa – US – July
2024 and InnoTrans – Berlin
September 2024.
TED has continued development of a
number of innovative ‘High Output’
machines. This suite of machines,
consisting of track and panel handlers,
gantry cranes, automated rail threaders and
automated dust suppressed ballast brooms
work hand in hand to provide rail
maintenance and installation operators with
a very capable set of tools that can greatly
increase the speed with which track
systems can be laid for a fraction of the
cost of the bigger multi-million train-based
systems utilised today. The equipment is far
smaller and lightweight, can run on a track
bed without needing rails and can be
deployed quickly and easily to site at a
fraction of the cost of conventional systems.
Adien
Adien was very badly affected by the
disruption to business confidence as a
result of the Conservative leadership
debacle last year. Several large projects
which had been awarded to Adien were
shelved at short notice, and longer-term
projects were reassessed and pushed onto
the back burner.
As the reality of deferred work became
evident as significantly more than a
temporary blip, the company implemented a
massive structural change to the business,
including the appointment of a new
Managing Director, consolidation of roles,
leading to some staff being made
redundant, implementation of a new
corporate plan and a refocusing of the sales
department as a whole. This, with the return
of a degree of business confidence, has
dramatically increased the prospects and
resulting orders at Adien.
Turnover for the first quarter of the current,
23/24 financial year is almost double that
of the same period last year, and resulting
in a very satisfactory return to profitability.
The forward order book is full, and order
enquiries are extremely buoyant.
On the whole, the team at Adien are
thoroughly enthused, working well together
with full commitment to see a very
successful 2023/24.
UTSI
UTSI had a very cyclical year that saw the
willingness of UK & EU customers to invest
in new sensor technology rise and fall with
every global event and interest rate hike.
While some overseas markets remained
resiliently buoyant, overall retail sales were
still down. Demand for our more specialist
systems and bespoke design service
however remained strong and rose
throughout the year, with a number of
projects keeping R&D busy and
bolstering turnover.
Even though the cost of many of our raw
materials started to stabilise during the
year, with some even falling, average
electronic component prices remained
higher at the year end than at the
beginning, with a number of key
components still in short supply and on long
lead times. With retail and trade customers
resisting further price increases, margins
had to be tightened to remain competitive
and although UTSI’s overall turnover
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PipeHawk plc Annual Report 2023
Strategy & Outlook
The Group remains committed to creating
sustainable earnings-based growth and
focusing on the expansion of its business
with forward-looking products and services.
PipeHawk acts responsibly towards its
shareholders, business partners,
employees, society and the environment in
each of its business areas.
PipeHawk is committed to technologies and
products that unite the goals of customer
value and sustainable development. Despite
wider current market conditions, all
divisions of the Group are currently
performing well and I remain optimistic
in my outlook for the Group.
Gordon Watt
Chairman
Date: 28 November 2023
Chairman’s Statement
increased year on year, it could have been
higher were it not for some lingering long
lead times in the supply chain, preventing
orders being completed during the financial
year. As a result, a small loss was realised.
While UTSI continues to seek new R&D
project opportunities externally, it has also
been busy with a few of its own, with
internal developments concentrating on
new and better sensor systems for use in
the growing environmental sciences sector.
We expect to see the first of these systems
entering the market within the next
financial year.
Financial position
The Group continues to be in a net liability
position and is still reliant on my continuing
financial support.
My letter of support dated 6 September
2021 was renewed on 26 November 2023
to provide the Group with financial support
until 31 December 2024. Loans due to me,
other than those covered by the CULS
agreement, are unsecured and accrue
interest at an annual rate of Bank of
England base rate plus 2.15%.
The CULS agreement for £1 million,
provided by me, was renewed on 30 June
2022 and extended on identical terms,
such that the CULS are now repayable on
13 August 2026.
In addition to the loans, I have provided to
the Company in previous years, I have
deferred a certain proportion of fees and
the interest due until the Company is in a
suitably strong position to make the
full payments.
Historically, my fees and interest payable
have been deferred. During the year under
review, the deferred element amounted to
£139,000. At 30 June 2023, these
deferred fees and interest amounted to
approximately £1.8 million in total, all of
which has been recognised as a liability in
the Company’s accounts.
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PipeHawk plc Annual Report 2023
Strategic Report
Financial results
Turnover for the year ended 30 June 2023 was £6.5 million (2022: £6.2 million). The Group made a loss after taxation for the year of
£2,484,000 (2022: loss £868,000). The loss per share was 6.84p (2022: loss per share 2.42p). 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.
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.
7. Major global conflicts causing uncertainty amongst clients.
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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PipeHawk plc Annual Report 2023
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 Board recognises the dedication, commitment and engagement of the employees through the year and
extends its thanks to them for their efforts.
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 engage and motivate its employees and 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
2023 and signed on its behalf by:
Gordon G Watt
Executive Chairman
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PipeHawk plc Annual Report 2023
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 2023.
Principal activities and review of business
The principal activities of the Group during the year were the development, assembly and sale of automated manufacturing units, test
system, 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.
Results and dividends
The results for the Group for the year are set out in the consolidated statement of comprehensive income on page 19. The directors do not
recommend the payment of a dividend for the year (2022: 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)
Robert Randal MacDonnell (Non-Executive)
Tim Williams (Non-Executive)
The directors’ beneficial interests in the share capital of the Company at the date of this report were as follows:
30 June 2023 30 June 2022
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 15.8%
R MacDonnell 1,431,436 3.9% 1,431,436 3.9%
T Williams 20,000 0.1% - -
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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PipeHawk plc Annual Report 2023
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 that he is not intending to not request repayment of the loans advanced to the group and will 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 2023 and signed on its behalf by:
Gordon Watt
Chairman
Date: 28 November 2023
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PipeHawk plc Annual Report 2023
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.
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
MacDonnell 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 three times each year, during the year there were three board meetings. Gordon Watt, Randal
MacDonnell and Tim Williams attended all 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 2023. This will be kept under annual review
by the Board.
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PipeHawk plc Annual Report 2023
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.
10
PipeHawk plc Annual Report 2023
Directors’ Biographies
Gordon Watt BA, FCA, FRSA
Chairman
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.
Randal MacDonnell
Non-executive Director
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
Tim joined the group in November 2022. 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
Revlon International.
11
PipeHawk plc Annual Report 2023
Statement of Directors’ Responsibilities for the year ended 30 June 2023
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.
12
PipeHawk plc Annual Report 2023
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 2023, which comprise:
• the Consolidated statement of comprehensive income for the year ended 30 June 2023;
• the Consolidated and Parent Company statements of financial position as at 30 June 2023;
• the Consolidated and Parent Company statements of cash flows for the year then ended;
• the Consolidated and Parent Company statements of changes in equity for the year then ended; and
• the notes to the financial statements, including significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and 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 2023 and of the Group’s loss for
the period then ended;
• have been properly prepared in accordance with UK-adopted international accounting standards;
• 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 and the Parent Company 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 Group and Company’s ability 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 directors’ 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 Group’s and Parent Company’s ability to continue
to adopt the going concern basis of accounting included the following procedures:
• obtaining an understanding of directors’ going concern evaluation process;
• review of directors’ cash flow forecasts for at least twelve months from the date of sign off;
• challenging the key assumptions inherent within the forecast including management’s severe but plausible downside scenarios and
mitigations plans;
• review of the Group’s liquidity position to understand whether there was an indication of further support being required from the
Executive Chairman and the ability for this to be provided; and
• considering the adequacy and appropriateness of the disclosures within the financial statements.
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.
13
PipeHawk plc Annual Report 2023
Independent Auditor’s Report to the Members of PipeHawk plc
Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be £65,000
(2022: £50,000), based on 1% percent of Group Revenue. Materiality for the Parent Company financial statements as a whole was set at
£22,000 (2022: £40,000) based on 2% of Total Assets.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial
statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our
evaluation of the specific risk of each audit area having regard to the internal control environment. This is set at £45,500 (2022:£35,000)
for the group and £15,400 (2022 :£28,000) for the parent.
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 £3,250 (2022: £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 Group consists of Pipehawk Plc itself and the subsidiaries as disclosed in Note 12 to the financial statements. Our Group audit was
scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material
misstatement at the Group level.
Based on this understanding we assessed those aspects of the Group’s transactions and balances which were most likely to give rise to a
material misstatement and were most susceptible to irregularities including fraud or error. Specifically, we identified what we considered to
be key audit matters and planned our audit approach accordingly. We undertook a fully substantive audit with a combination of analytical
procedures and substantive testing on significant transactions, balances, and disclosures. The Group 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
(refer note 12)
Following impairment, the financial statements of Pipehawk Plc
includes goodwill of £0.7 million arising on the acquisition of Adien
Limited, QM Systems Limited, Thomson Engineering Design Limited,
and UTSI Electronics Limited. As required by IAS 36, goodwill is
subject to an annual impairment review and the recoverable amount
of goodwill is measured in accordance with IAS 36. The group has
been making operating losses and therefore 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 further impaired.
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 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. We specifically challenged the management on three
assumption which were the revenue growth rate, discount rate and
profit margins.
We assessed the appropriateness of the related disclosures in the
financial statements.
14
PipeHawk plc Annual Report 2023
Independent Auditor’s Report to the Members of PipeHawk plc
Key audit matter How the scope of our audit addressed the key audit matter
Revenue recognition (refer note 1.7)
The Group recognises revenue from different client contracts.
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 complete basis where certain conditions
are met. As revenue has highly judgemental elements it was
deemed to be a key audit matter.
We validated a sample of contracts to supporting documentation
and agreed that revenue has been recognised in line with the
Group’s accounting policy.
We considered the revenue policy and considered whether this is in
line with IFRS 15.
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 for completed projects
We also reviewed the performance of the contacts subsequent to
year-end to ensure that the cost estimates and revenue recognised
as at reporting date is appropriate.
We assessed the appropriateness of the related disclosures in the
financial statements.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to
enable us to express an opinion on these matters individually and we express no such opinion.
Other information
The directors are responsible for the other information contained within the annual report. 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.
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 this gives rise to a material misstatement in the
financial statements themselves. 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.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit
• the information given in the strategic report and the directors' report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 14, 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.
15
PipeHawk plc Annual Report 2023
Independent Auditor’s Report to the Members of PipeHawk plc
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 misstatements 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.
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 is available 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
28 November 2023
16
PipeHawk plc Annual Report 2023
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2023
Note 30 June 2023 30 June 2022
£’000 £’000
Revenue 2 6,470 6,191
Staff costs 5 (4,176) (3,861)
Impairment of goodwill 11 (678) -
Operating costs (4,515) (3,642)
––––––––––––– –––––––––––––
Operating (loss) 4 (2,899) (1,312)
––––––––––––– –––––––––––––
(Loss) before interest and taxation (2,899) (1,312)
––––––––––––– –––––––––––––
Finance costs 3 (385) (264)
––––––––––––– –––––––––––––
(Loss) before taxation (3,284) (1,576)
Taxation 7 800 708
––––––––––––– –––––––––––––
(Loss) for the year attributable to equity holders of
the parent (2,484) (868)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Other comprehensive income - -
––––––––––––– –––––––––––––
Total comprehensive (Loss) for the year attributable to
equity holder of the parent (2,484) (868)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
(Loss) per share (pence) - basic 8 (6.84) (2.42)
(Loss) per share (pence) - diluted 8 (6.84) (2.42)
The notes on pages 25 to 45 form an integral part of these financial statements.
17
PipeHawk plc Annual Report 2023
Consolidated Statement of Financial Position
at 30 June 2023
Assets Note 30 June 2023 30 June 2022
£’000 £’000
Non-current assets
Property, plant and equipment 9 783 828
Right of use 10 2,283 2,549
Goodwill 11 679 1,357
––––––––––––– –––––––––––––
3,745 4,734
––––––––––––– –––––––––––––
Current assets
Inventories 13 253 340
Current tax assets 826 710
Trade and other receivables 14 2,767 2,389
Cash and cash equivalents 148 4
––––––––––––– –––––––––––––
3,994 3,443
––––––––––––– –––––––––––––
Total assets 7,739 8,177
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity and liabilities
Equity
Share capital 18 363 363
Share premium 5,316 5,316
Retained earnings (11,131) (8,647)
––––––––––––– –––––––––––––
(5,452) (2,968)
––––––––––––– –––––––––––––
Non-current liabilities
Borrowings 16 4,913 5,612
Trade and other payables - -
––––––––––––– –––––––––––––
4,913 5,612
––––––––––––– –––––––––––––
Current liabilities
Borrowings 16 2,886 2,674
Trade and other payables 15 5,392 2,859
––––––––––––– –––––––––––––
8,278 5,533
––––––––––––– –––––––––––––
Total equity and liabilities 7,739 8,177
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 25 to 45 form an integral part of these financial statements.
The financial statements were approved by the board and authorised for issue on 28 November 2023 and signed on its behalf by:
Gordon G Watt
Director
Company No: 3995041
18
PipeHawk plc Annual Report 2023
Parent Company Statement of Financial Position
at 30 June 2023
Assets Note 30 June 2023 30 June 2022
£’000 £’000
Non-current assets
Property, plant and equipment 9 - -
Investment in subsidiaries 12 988 1,903
––––––––––––– –––––––––––––
988 1,903
––––––––––––– –––––––––––––
Current assets
Inventories 13 - -
Current tax assets 42 75
Trade and other receivables 14 11 510
Cash and cash equivalents 4 -
––––––––––––– –––––––––––––
57 585
––––––––––––– –––––––––––––
Total assets 1,045 2,488
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity and liabilities
Equity
Share capital 18 363 363
Share premium 5,316 5,316
Retained earnings (11,657) (9,834)
––––––––––––– –––––––––––––
(5,978) (4,155)
––––––––––––– –––––––––––––
Non-current liabilities
Borrowings 16 2,722 3,082
Trade and other payables 15 2,002 1,398
––––––––––––– –––––––––––––
4,724 4,480
––––––––––––– –––––––––––––
Current liabilities
Borrowings 16 2,162 2,019
Trade and other payables 15 137 144
––––––––––––– –––––––––––––
2,299 2,163
––––––––––––– –––––––––––––
Total equity and liabilities 1,045 2,488
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Equity includes loss for the year of the Parent Company of £1,822,000 (2022: £282,000).
The notes on pages 25 to 45 form an integral part of these financial statements.
The financial statements were approved by the board and authorised for issue on 28 November 2023 and signed on its behalf by:
Gordon G Watt
Director
Company No: 3995041
19
PipeHawk plc Annual Report 2023
Consolidated Statement of Cash Flow
For the year ended 30 June 2023
Note 30 June 2023 30 June 2022
£’000 £’000
Cash flows from operating activities
Operating (Loss) (2,899) (1,312)
Adjustments for:
Impairment of goodwill 678 -
Depreciation 4 579 424
––––––––––––– –––––––––––––
(1,642) (888)
Decrease/(increase) in inventories 87 33
Decrease/(increase) in receivables (378) (580)
Increase/(decrease) in liabilities 2,759 286
––––––––––––– –––––––––––––
Cash generated/(used) by operations 826 (1,149)
Interest paid (196) (124)
Corporation tax received 683 440
––––––––––––– –––––––––––––
Net cash generated from/(used in) operating activities 1,313 (833)
––––––––––––– –––––––––––––
Cash flows from investing activities
Purchase of plant and equipment (111) (325)
––––––––––––– –––––––––––––
Net cash used in investing activities (111) (325)
––––––––––––– –––––––––––––
Cash flows from financing activities
Proceeds/(repayments) from borrowings (210) 286
Proceeds/(repayments) of loan (393) 119
Repayment of leases (455) (163)
––––––––––––– –––––––––––––
Net cash (used in)/generated from financing activities (1,058) 242
––––––––––––– –––––––––––––
Net increase/(decrease) in cash and cash equivalents 144 (916)
Cash and cash equivalents at the beginning of year 4 920
––––––––––––– –––––––––––––
Cash and cash equivalents at end of year 148 4
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 25 to 45 form an integral part of these financial statements.
20
PipeHawk plc Annual Report 2023
Parent Company Statement of Cash Flow
For the year ended 30 June 2023
Note 30 June 2023 30 June 2022
£’000 £’000
Cash flows from operating activities
Loss from operations (1,628) (186)
Impairment of investment 916 -
Provision for inter-company receivables
Depreciation 680 3
Decrease/(Increase) in inventories - 83
Decrease/(increase) in receivables (181) (87)
Increase in liabilities 396 (148)
––––––––––––– –––––––––––––
Cash generated by operations 183 (335)
Interest paid (48) (32)
Corporation tax received 74 94
––––––––––––– –––––––––––––
Net cash generated from operating activities 209 (273)
––––––––––––– –––––––––––––
Cash flow from investing activities - -
––––––––––––– –––––––––––––
Proceeds from borrowings (205) 259
––––––––––––– –––––––––––––
Net cash used in financing activities (205) 259
––––––––––––– –––––––––––––
Net increase in cash and cash equivalents 4 (14)
Cash and cash equivalents at the beginning of year - 14
––––––––––––– –––––––––––––
Cash and cash equivalents at end of year 4 -
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The notes on pages 25 to 45 form an integral part of these financial statements.
21
PipeHawk plc Annual Report 2023
Statement of Changes in Equity
For the year ended 30 June 2023
Consolidated Share
Share premium Retained
capital account earnings Total
£’000 £’000 £’000 £’000
As at 1 July 2021 349 5,215 (7,779) (2,215)
Loss for the year - - (868) (868)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income - - (868) (868)
Issue of shares 14 101 - 115
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2022 363 5,316 (8,647) (2,968)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Loss for the year - - (2,484) (2,484)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income (2,484) (2,484)
Issue of shares - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2023 363 5,316 (11,131) (5,452)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Parent Share
Share premium Retained
capital account earnings Total
£’000 £’000 £’000 £’000
As at 1 July 2021 349 5,215 (9,552) (3,988)
Loss for the year - - (282) (282)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive loss - - (282) (282)
Issue of shares 14 101 - 115
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2022 363 5,316 (9,834) (4,155)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Loss for the year - - (1,823) (1,823)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Total comprehensive income - - (1,823) (1,823)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Issue of shares - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
As at 30 June 2023 363 5,316 (11,657) (5,978)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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 25 to 45 form an integral part of these financial statements.
22
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
1 Summary of significant accounting policies
1.1. General information
PipeHawk plc (the Company) is a limited company incorporated in the United Kingdom under the Companies Act 2006. The
addresses of its registered office and principal place of business are disclosed in the company information on page 3. The principal
activities of the Company and its subsidiaries (the Group) are described on page 9.
The financial statements are presented in pounds sterling, the functional currency of all companies in the Group. In accordance with
section 408 of the Companies Act 2006 a separate statement of comprehensive income for the parent Company has not been
presented. For the year to 30 June 2023 the Company recorded a net loss after taxation of £1,822,000 (2022: £282,000).
1.2. Basis of preparation
The financial statements have been prepared in accordance with UK-adopted international accounting standards (IAS) The principal
accounting policies are set out below.
Adoption of new and revised standards
A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and,
in some cases, have not yet been adopted by the UK. The directors do not expect that the adoption of these standards will have
a material impact on the financial statements of the Company in future periods.
1.3. Basis of preparation – Going concern
The directors have reviewed the Parent Company and Group's funding requirements for the next twelve months which show positive
anticipated cash flow generation, prior to any repayment of loans advanced by the Executive Chairman. The preparation of cash flow
forecasts for the Group requires estimates to be made of the quantum and timing of cash receipts from future commercial revenues
and the timing of future expenditure, all of which are subject to uncertainty. The directors have obtained a renewed pledge from
G G Watt to provide ongoing financial support for a period of at least twelve months from the approval date of the Group and Parent
Company statement of financial positions. The directors therefore have a reasonable expectation that the entity has adequate
resources to continue in its operational exercises for the foreseeable future. It is on this basis that the directors consider it
appropriate to adopt the going concern basis of preparation within these financial statements. However, a material uncertainty exists
regarding the ability of the Group and Parent Company to remain a going concern without the continuing financial support of the
Executive Chairman. The financial statement do not include adjustments which would arise in the event of not being a Going
concern.
1.4. Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive
income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments
are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members
of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
1.5. Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The cost of the business combination
is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3 Business.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business
combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.
23
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
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 2023 the Group used the five-step model as prescribed under IFRS 15 on the Group’s revenue
transactions. This included the identification of the contract, identification of the performance obligations under the same,
determination of the transaction price, allocation of the transaction price to performance obligations and recognition of revenue.
The point of recognition arises when the Group satisfies a performance obligation by transferring control of a promised good or
service to the customer, which could occur over time or at a point in time.
1.8. Sale of goods
Revenue generated from the sale of goods is recognised on delivery of the goods to the customer. On this basis revenue is
recognised at a point in time.
1.9. Sale of services
In relation to the design and manufacture of complete software and hardware test solutions and the provision of specialist surveying,
revenue is recognised through a review of the man-hours completed on the project at the year-end compared to the total
man-hours required to complete the projects. Provision is made for all foreseeable losses if a contract is assessed as unprofitable.
Revenue represents the amount of consideration to which the Group expects to be entitled in exchange for transferring promised
goods or services to a customer, excluding amounts collected on behalf of third parties.
Revenue from goods and services provided to customers not invoiced as at the reporting date is recognised as a contract asset and
disclosed as accrued income within trade and other receivables.
Although payment terms vary from contract-to-contract invoices are in general raised in advance of services performed. Where
billing has exceeded the revenue recognised in a period a contract liability is recognised and this is disclosed as payments received
on account in trade and other payables.
1.10. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is
charged so as to write off the cost of assets over their estimated useful lives, using the straight-line method. The estimated useful
lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted
for on a prospective basis. Assets held under leases are depreciated over their expected useful lives on the same basis as owned
assets or, where shorter, the term of the relevant lease. Gains and losses on disposals are determined by comparing the proceeds
with the carrying amount and are recognised within the Statement of Comprehensive Income.
The principal annual rates used to depreciate property, plant and equipment are:
Equipment, fixtures and fittings 25%
Motor vehicles 25%
24
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
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. The value of work in progress is reduced where appropriate to provide for
irrecoverable costs.
1.12. Financial assets
The Group's financial assets consist of cash and cash equivalents and trade and other receivables. The Group's accounting policy
for each category of financial asset is as follows:
Financial assets held at amortised cost
Trade receivables and other receivables are classified as financial assets held at amortised cost. They are initially recognised at fair
value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost
using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised based on its historical credit loss experience, adjusted for forward-looking factors specific to
the debtors and the economic environment, the amount of such a provision being the difference between the net carrying amount
and the present value of the future expected cash flows associated with the impaired receivable. For receivables, which are reported
net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in
the statement of comprehensive income. On confirmation that the receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision.
The Group’s financial assets held at amortised cost comprise other receivables and cash and cash equivalents in the statement of
financial position.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Financial liabilities are
subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective
yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability, or, where appropriate, a shorter period.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
25
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
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, and processed through
the profit & loss account.
1.17. Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated
statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the year end date.
26
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
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.
27
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
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 did not receive benefits from Government grants.
1.21. Critical judgement in applying accounting policies and key sources of estimation uncertainty
The following are the critical judgements and key sources of estimation uncertainty that the directors have made in the process of
applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in these financial
statements.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill
has been allocated. A similar exercise is performed in respect of investment and long-term loans in subsidiary.
The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit
and a suitable discount rate in order to calculate present value, see note 11 for further details.
The carrying amount of goodwill at the year-end date was £679,000 (2022: £1,357,000). The investment in subsidiaries at the
year-end was £988,000 (2022: £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.
Going concern
The preparation of cash flow forecasts for the Group requires estimates to be made of the quantum and timing of cash receipts from
future commercial revenues and the timing of future expenditure, all of which are subject to uncertainty.
2 Segmental analysis
2023 2022
£’000 £’000
Turnover by geographical market
United Kingdom 6,076 5,627
Europe 162 243
Other 232 321
––––––––––––– –––––––––––––
6,470 6,191
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The Group operates out of one geographical location being the UK. Accordingly, the primary segmental disclosure is based on activity.
Per IFRS 8 operating segments are based on internal reports about components of the Group, which are regularly reviewed and used by
Chief Operating Decision Maker (“CODM”), the current executive chairman, for strategic decision making and resource allocation, in
order to allocate resources to the segment and to assess its performance. The Group’s reportable operating segments are as follows:
•
•
28
Adien Limited - Utility detection and mapping services – Sale of services
Utsi Electronics Limited - Development, assembly and sale of GPR equipment – Sale of goods
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
2 Segmental analysis (continued)
•
•
•
QM Systems Ltd – Automation and test system solutions – Sale of services
Thomson Engineering Design Limited – Rail trackside solutions (included in the test system solutions segment) – Sale of services
Wessex Precision Instruments Limited – Non trading
The CODM monitors the operating results of each segment for the purpose of performance assessments and making decisions on
resource allocation. Performance is based on revenue generations and profit before tax, which the CODM believes are the most
relevant in evaluating the results relative to other entities in the industry.
Information regarding each of the operations of each reportable segment is included below, all non-current assets owned by the
Group are held in the UK.
Utility Development,
detection assembly
and and sale Automation and
mapping of GPR test system
services equipment solutions Total
£’000 £’000 £’000 £’000
Year ended 30 June 2023
Total segmental revenue 1,125 169 5,176 6,470
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Operating (loss)/profit (214) (859) (1,826) (2,899)
Finance costs (39) (236) (110) (385)
(Loss)/Profit before taxation (253) (1,095) (1,936) (3,284)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Segment assets 558 1,181 6,000 7,739
Segment liabilities 734 5,025 7,631 13,390
Non-current asset additions 2 - 265 267
Depreciation and amortisation 14 18 482 579
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Utility Development,
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 (loss)/profit 21 (323) (1,010) (1,312)
Finance costs (36) (171) (57) (264)
(Loss)/Profit before taxation (15) (494) (1,067) (1,576)
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Segment assets 655 1,924 5,598 8,177
Segment liabilities 628 5,226 5,442 11,296
Non-current asset additions 17 55 2,941 3,013
Depreciation and amortisation 106 3 316 425
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
29
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
3 Finance costs
2023 2022
£’000 £’000
Interest payable 385 264
––––––––––––– –––––––––––––
385 264
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Interest payable comprises interest on:
Leases 107 69
Directors’ loans 192 140
Other 86 55
––––––––––––– –––––––––––––
385 264
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
4 Operating profit for the year
This is arrived at after charging for the Group:
2023 2022
£’000 £’000
Research and development costs not capitalised 2,644 2,333
Depreciation 579 424
Impairment of goodwill 678 -
Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the Group’s financial statements 53 45
Fees payable to the Company’s auditor and its subsidiaries for the provision of tax services 8 7
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The Company audit fee is £23,000 (2022: £9,000).
5 Staff costs
Group 2023 2022
No. No.
Average monthly number of employees, including directors:
Production and research 77 79
Selling and research 9 9
Administration 12 7
––––––––––––– –––––––––––––
98 95
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
30
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
5 Staff costs (continued)
Group 2023 2022
£’000 £’000
Staff costs, including directors:
Wages and salaries 3,602 3,387
Social security costs 376 361
Other pension costs 198 113
––––––––––––– –––––––––––––
4,176 3,861
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Company 2023 2022
No. No.
Average monthly number of employees, including directors:
Selling and research - -
Administration 1 1
––––––––––––– –––––––––––––
1 1
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Company 2023 2022
£’000 £’000
Staff costs, including directors:
Wages and salaries 87 131
Social security costs - 7
Other pension costs - 4
––––––––––––– –––––––––––––
87 142
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
6 Directors’ remuneration
Salary Benefits 2023 2022
and fees in kind Total Total
£’000 £’000 £’000 £’000
G G Watt 71 - 71 71
R MacDonnell 2 - 2 2
T Williams 6 - 6 -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Aggregate emoluments 79 - 79 73
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Directors’ pensions 2023 2022
No. No.
The number of directors who are accruing retirement benefits under:
Defined contributions policies - 1
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The directors represent key management personnel.
Refer to note 18 for details of directors share options.
31
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
7 Taxation
2023 2022
£’000 £’000
United Kingdom Corporation Tax
Current taxation (800) (708)
Adjustments in respect of prior years - -
––––––––––––– –––––––––––––
(800) (708)
Deferred taxation - -
––––––––––––– –––––––––––––
Tax on loss (800) (708)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Current tax reconciliation
Taxable loss for the year (3,284) (1,576)
––––––––––––– –––––––––––––
Theoretical tax at UK corporation tax rate 19% (2022: 19%) (622) (289)
Effects of:
R&D tax credit adjustments (408) (350)
Fixed asset timing differences 28 (101)
Not deductible for tax purposes 3 2
Impairment of goodwill 129 -
Deferred tax not recognised 73 45
Adjustments in respect of prior years - 1
Utilisation of losses (4) -
Short term timing differences 1 (16)
––––––––––––– –––––––––––––
Total income tax credit (800) (708)
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The Group has tax losses amounting to approximately £3,423,000 (2022: £3,033,706), available for carry forward to set off against
future trading profits. No deferred tax assets have been recognised in these financial statements due to the uncertainty regarding
future taxable profits.
Potential deferred tax assets not recognised are approximately £650,000 (2022: £576,404).
8 Loss/profit per share
Group
Basic (pence per share) 2023 – Loss (6.84) per share; 2022 – Loss (2.42) per share
This has been calculated on a loss of £2,484,000 (2022: Loss £868,000) and the number of shares used was 36,312,823 (2022:
35,812,823) being the weighted average number of shares in issue during the year.
Diluted (pence per share) 2023 – (6.84) loss per share; 2022 – (2.42) loss per share
In the current year the potential ordinary shares included in the weighted average of shares are anti-dilutive and therefore diluted
earnings per share is equal to basic earnings per share.
32
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
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 2022 426 1,320 474 237 2,457
Additions - 56 55 - 111
Disposals - - - (65) (65)
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2023 426 1,376 529 172 2,503
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Depreciation
At 1 July 2022 45 1,179 168 237 1,629
Charged in year 5 63 88 - 156
Disposals - - - (65) (65)
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2023 50 1,242 256 172 1,720
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2023 376 134 273 - 783
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2022 381 141 306 - 828
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
10 Right of use
Group Equipment,
fixtures and Leasehold Motor
Property fittings improvements vehicles Total
£’000 £’000 £’000 £’000 £’000
Cost
At 1 July 2022 2,580 236 168 147 3,131
Additions - 156 - - 156
Disposal - - - - -
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2023 2,580 392 168 147 3,287
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Depreciation
At 1 July 2022 299 156 12 115 582
Charged in year 296 63 42 21 422
Disposal - - - - -
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2023 595 219 54 136 1,004
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Net book value
At 30 June 2023 1,985 173 114 11 2,283
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
At 30 June 2022 2,281 80 156 32 2,549
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
These assets have been offered as security in respect of these lease agreements. Depreciation charged in the period on those
assets amounted to £422,000 (2022: £314,000)
33
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
11 Goodwill
Group Goodwill Total
£’000 £’000
Cost
At 1 July 2022 1,357 1,357
Additions - -
––––––––––––– –––––––––––––
At 30 June 2023 1,357 1,357
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Impairment
As at 30 June 2023 (678) -
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Net book value
At 30 June 2023 679 1,357
––––––––––––– –––––––––––––
At 30 June 2022 1,357 1,357
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
The goodwill brought forward in the statement of financial position at 30 June 2022 was £1,357,000 this has been impaired to
£679,000 following a management review. The goodwill is made up of Adien Limited in 2002 (£151,000), QM Systems Limited in
2006 (£516,000), TED Limited in 2017 (£0), and Utsi Electronics Limited in 2021 (£12,000).
We consider the CGUs to be the entities as acquired under business combinations and managed as separate legal entities, each
representing a separately identifiable and independent group of assets contributing to the cash flows of the CGU.
This financial year due to delay in the Start of Production for the contract manufacturing business, and given the effects of the wider
downturn and volatility in the global market uncertainty the directors have taken a prudent view to recognise a goodwill impairment
charge totalling £678,000, which consists of an impairment charge on QM Systems Limited £487,000, TED £129,000 and
Adien Limited £62,000.
Adien Limited represents the segment utility detection and mapping services and QM Systems Limited represents the segment test
system solutions.
QM Systems Limited, TED, and Utsi are involved in projects surrounding:
•
•
•
•
•
The creation of innovative automated assembly systems for the manufacturing, food and pharmaceutical sectors.
The provision of inspection systems for the automotive, aerospace, rail and pharmaceutical sectors.
Slippage testing
Assembly and sale of GPR equipment
Automated test systems
The Group tests goodwill annually for impairment or more frequently if there are indicators that it might be impaired.
The recoverable amounts are determined from value in use calculations which use cash flow projections based on financial budgets
approved by the directors covering a five-year period and calculation of the terminal values. The key assumptions are those
regarding the discount rates, growth rates and expected changes to sales and direct costs due to inflationary pressures during the
period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of
money and the risks specific to the business. This has been estimated at 17.2% per annum based on weighted average cost
of capital.
34
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
11 Goodwill (continued)
The growth rate assumptions are based on management forecasts as below. The results of these forecasts have then been further
impaired by the group directors in the interests of prudence.
•
•
•
•
Adien - These have been assessed as 28% growth for revenue in years 1 bringing it back into line with year ending June
2022, with and 2.5% for years thereafter.
UTSI and PipeHawk combined these have been assessed as 63% for growth for revenue in year 1 and 76% for year 2,
45% for year 3, 54% for year 4, and 40% year 5.
QM - The strong pipeline reported last year did convert, and at 30th June 2023 QM had a closing orderbook of £5.8m, the
highest ever recorded. In addition, further orders have been received in the new financial year, and the company has a strong
pipeline of enquiries. Based on this year 1 is showing growth of 102% This is followed by an expected 16% growth in year 2,
21% in year 3, 7% in year 4 and 23% for years 5, and is expected to include start of production in all three contract
manufacturing client projects.
TED – A prudent approach has been applied to TED until activity generated from the recent distribution agreement with
Unipart is fully underway. The forecasts are based on a 3% growth for year 1, 20% in year 2, 17% in year 3 and no increase
for years 4 and 5.
12 Non-current investments
Company Investment in
subsidiaries Total
£’000 £’000
Cost
At 1 July 2022 1,903 1,903
Additions - -
––––––––––––– –––––––––––––
At 30 June 2023 1,903 1,903
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Impairment
Provided at 30 June 2023 (916) -
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Net book value
At 30 June 2023 988 1,903
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
At 30 June 2022 1,903 1,903
––––––––––––– –––––––––––––
––––––––––––– –––––––––––––
Parent and Group
interest in ordinary
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
CE Marking Services Ltd (formerly MineHawk Ltd) 100% England & Wales Dormant
35
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
12 Non-current investments (continued)
An impairment assessment was performed in line with the assessment of goodwill, see note 11 for further details. On the basis of
this assessment an impairment of the investment was made at 30 June 2023.
The registered office of all of the above named subsidiaries, except Thomson Engineering Design Ltd and Utsi Electronics Ltd is
Manor Park Industrial Estate, Wyndham Street, Aldershot, Hampshire, GU12 4NZ.
The registered office of Thomson Engineering Design Ltd is Units 2a & 3 Crabtree Road, Forest Vale Industrial Estate Cinderford,
Gloucestershire, United Kingdom, GL14 2YQ
The registered office of Utsi Electronics Ltd is Unit 26, Glenmore Business Park, Ely Road, Waterbeach, Cambridge, Cambridgeshire,
CB25 9PG.
13 Inventories
Group Company
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Raw materials 106 150 - -
Finished goods 147 190 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
253 340 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The replacement cost of the above inventories would not be significantly different from the values stated.
The cost of inventories recognised as an expense during the year amounted to £2,294,000 (2022: £1,886,000). For the Parent
company this was £nil (2022: £41,612).
14 Trade and other receivables
Group Company
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Current
Trade receivables 1,263 1,261 - -
Amounts owed by Group undertakings
less provision - - 9 469
Other Debtors 374 522 2 -
Accrued income 190 332 - 41
Prepayments 940 274 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
2,767 2,389 11 510
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
36
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
15 Trade and other payables
Group Company
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Current
Trade payables 1,197 972 34 38
Other taxation and social security 1,002 447 - -
Payments received on account 2,164 839 - -
Accruals and other creditors 1,029 601 103 106
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
5,392 2,859 137 144
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Group Company
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Non-current
Amounts owed to Group undertakings - - 2,002 1,398
Other creditors - - - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
- - 2,002 1,398
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
The performance obligations of the IFRS 15 contract liabilities (payments received on account) are expected to be met within the
next financial year. The brought forward payments received on account figure was £839,000, during the financial year 2023
£839,000 has been recognised as revenue in the statement of comprehensive income.
16 Borrowing analysis
Group Company
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Due within one year
Bank and other loans 677 708 379 375
Directors’ loan 1,783 1,644 1,783 1,644
Obligations under lease agreements 426 322 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
2,886 2,674 2,162 2,019
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Due after more than one year
Bank and other loans 350 491 221 331
Directors’ loan 2,501 2,751 2,501 2,751
Obligations under lease agreements 2,062 2,370 - -
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
4,913 5,612 2,722 3,082
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Repayable
Due within 1 year 2,886 2,729 2,162 2,072
Over 1 year but less than 2 years 3,040 3,249 2,611 2,861
Over 2 years but less than 5 years 1,873 2,361 111 221
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
7,799 8,339 4,884 5,154
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
37
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
16 Borrowings analysis (continued)
Directors’ loans
Included with Directors’ loans and borrowings due within one year are accrued fees and interest owing to G.G Watt of £1,783,000
(2022: £1,644,000). The accrued fees and interest are repayable on demand and no interest accrues on the balance.
The director’s loan due in more than one year is a loan of £2,501,000 from G.G Watt. Directors’ loans comprise of two elements.
A loan attracting interest at 2.15% over Bank of England base rate. At the year-end £1,501,000 (2022: £1,750,000) was
outstanding in relation to this loan. During the year to 30 June 2023 £393,000 (2022: £200,000) 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 £2,501,000.
Pursuant to amendments made on 13 November 2014 and 9 November 2018, and 30 June 2022 the principal terms of the CULS
are as follows:
–
–
–
The CULS may be converted at the option of Gordon Watt at a price of 3p per share at any time prior to 13 August 2026;
Interest is payable at a rate of 10 per cent per annum on the principal amount outstanding until converted, prepaid or repaid,
calculated and compounded on each anniversary of the issue of the CULS. On conversion of any CULS, any unpaid interest
shall be paid within 20 days of such conversion;
The CULS are repayable, together with accrued interest on 13 August 2026 ("the Repayment Date").
No equity element of the convertible loan stock was recognised on issue of the instrument as it was not considered to be material.
Bank and other loans
Included in bank and other loans is an invoice discounting facility of £261,962 (2022: £299,635). The principal terms of which are
interest at 2.58% over Bank of England base rate and secured on the company’s debtors.
Included in bank and other loans is a secured mortgage of £107,438 which incurs an interest rate of 2.44% over base rate for
10 years and at a rate of 2.64% over base thereafter.
As a result of COVID 19, Coronavirus Business Interruption Loan Scheme (CBILS) became available for the business. This enabled
the group to secure two loans. The loan for £ £400,000 had a remaining balance outstanding is £220,000, and the second loan of
£150,000 had a remaining balance outstanding is £110,000, both at a rate of 2.96%. The amount of interest paid during the year
was £19,837.
The business was also able to secure a Bounce Back loan through Wessex Precision Engineering of £24,000 the remaining balance
outstanding is £19,000, and Utsi obtained £50,000 bounce back loan the remaining balance outstanding is £39,000 both with an
interest rate of 2.5%.
Non-cash:
Bought Cash Non-cash: Accrued fees/ Carried
forward flows New leases interests forward
2023 £’000 £’000 £’000 £’000 £’000
Director loan 4,446 (393) - 231 4,284
Leases 2,692 (455) 156 94 2,487
Other 1,201 (210) - 37 1,028
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Loans and borrowings 8,339 (1,058) 156 362 7,799
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
38
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
16 Borrowings analysis (continued)
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
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
–––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
17 Financial instruments
The Group uses financial instruments, which comprise cash and various items, such as trade receivables and trade payables that
arise from its operations. The main purpose of these financial instruments is to finance the Group’s operations.
The main risks arising from the Group’s financial instruments are credit risk, liquidity risk and interest rate risk. A number of
procedures are in place to enable these risks to be controlled. For liquidity risk these include profit/cash forecasts by business
segment, quarterly management accounts and comparison against forecast. The board reviews and agrees policies for managing
this risk on a regular basis.
Credit risk
The credit risk exposure is the carrying amount of the financial assets as shown in note 14 (with the exception of prepayments
which are not financial assets) and the exposure to the cash balances. Of the amounts owed to the Group at 30 June 2023, the
top 3 customers comprised 30% (2022: 34%) of total trade receivables in the segment Automation and test system solutions.
The Group has adopted a policy of only dealing with creditworthy counterparties and the Group uses its own trading records to rate
its major customers, also the Group invoices in advance where possible. The Group’s exposure and the credit ratings of its
counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved
counterparties. Having regard to the credit worthiness of the Groups significant customers the directors believe that the Group does
not have any significant credit risk exposure to any single counterparty.
Within revenue there are two customers which individually represent 13.6% and 11.36% of the overall revenue for the
financial year.
An analysis of trade and other receivables:
Weighted Gross carrying Impairment
average value loss allowance
2023 loss rate £’000 £’000
Performing 0.00% 2,767 -
Weighted Gross carrying Impairment
average value loss allowance
2022 loss rate £’000 £’000
Performing 0.00% 2,389 -
39
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
17 Financial instruments (continued)
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
2023 £’000 £’000 £’000 £’000
Trade and other payables 1,734 - - 1,734
Borrowings 2,514 2,594 204 5,312
Lease liability 426 393 1,668 2,487
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
4,674 2,987 1,872 9,533
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
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 - - 1,876
Borrowings 2,405 2,887 355 5,647
Lease liability 322 363 2,007 2,692
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
4,603 3,250 2,362 10,215
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Financial liabilities of the Company are all due within less than three months with the exception of the intercompany balances that
are due between 1 and 5 years.
Fair value of financial instruments
Loans and receivables are measured at amortised cost. Financial liabilities are measured at amortised cost using the effective
interest method. The directors consider that the fair value of financial instruments are not materially different to their
carrying values.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to be
able to move to a position of providing returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
The Group manages trade debtors, trade creditors and borrowings and cash as capital. The entity is meeting its objective for
managing capital through continued support from G G Watt as described per note 1.
40
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
18 Share capital
2023 2023 2022 2022
No. £’000 No. £’000
Authorised
Ordinary shares of 1p each 40,000,000 400 40,000,000 400
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Allotted and fully paid
Brought forward 36,312,823 363 34,860,515 349
Issued during the year - - 1,452,308 14
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Carried forward 36,312,823 363 36,312,823 363
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
Fully paid ordinary shares carry one vote per share and carry a right to dividends.
12,953,703 (2022: 11,773,703) share options were outstanding at the year end, comprising the 2,100,000 employee options and
the 10,853,703 share options and warrants held by directors disclosed below.
Share based payments have been included in the financial statements where they are material. No share-based payment expense
has been recognised.
No deferred tax asset has been recognised in relation to share options due to the uncertainty of future available profits.
The director and employee share options were issued as part of the Group’s strategy on key employee remuneration, they lapse if
the employee ceases to be an employee of the Group during the vesting period.
Employee options
Date options exercisable Number of shares Exercise price
Between July 2016 and July 2023 60,000 3.00p
Between November 2019 and November 2026 400,000 3.875p
Between November 2020 and November 2027 100,000 3.75p
Between March 2024 and March 2031 1,290,000 8.00p
Between January 2026 and January 2033 1,400,000 14.25p
Directors’ share options
Number of options
Granted Lapsed Date from
Directors’ share At start during the during the At end of Exercise which
options of year year year year price exercisable
G G Watt 750,000 - - 750,000 8.0p 18 Mar 2024
R MacDonnell 200,000 - - 200,000 8.0p 18 Mar 2024
T Williams - 200,000 - 200,000 14.25p 10 Jan 2026
The Company’s share price at 30 June 2023 was 13p. The high and low during the period under review were 16.5p and 11.25p
respectively.
In addition to the above, in consideration of loans made to the Company, G.G Watt has warrants over 3,703,703 ordinary shares at
an exercise price of 13.5p and a further 6,000,000 ordinary shares at an exercise price of 3.0p.
The weighted average contractual life of share options outstanding at the year-end is 7.72 years (2022: 7.09 years).
41
PipeHawk plc Annual Report 2023
Notes to the Financial Statements
For the year ended 30 June 2023
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
–
£188,402
The directors are considered the key management personnel of the Company. Remuneration to directors is disclosed in note 6.
Included within the amounts due from and to Group undertakings were the following balances:
2023 2022
£ £
Balance due from:
Thomson Engineering Design Limited 679,649 462,482
Wessex Precision Engineering Limited 8,520 6,120
Balance due to:
Adien Limited 99,278 147,738
QM Systems Limited 1,702,813 979,323
Utsi Electronics Limited 200,001 271,115
These intergroup balances vary through the flow of working capital requirements throughout the Group as opposed to intergroup
trading. The balance due from TED £679,649 has been provided for based on a review of recoverability of intercompany balances.
There is no ultimate controlling party of PipeHawk plc.
20 Government grants
In addition to the Government assistance disclosed in note 16, no further Government grants were recognised during the period:
Group Company
2023 2022 2023 2022
£’000 £’000 £’000 £’000
Coronavirus Job Retention
Scheme grants - 48 - 3
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
- 48 - 3
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
––––––––––––– ––––––––––––– ––––––––––––– –––––––––––––
42
PipeHawk plc Annual Report 2023
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 am. on 21 December 2023 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 2023
together with the reports of the directors and auditor thereon. (Resolution 1)
2. Gordon Watt 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. To re-appoint Crowe U.K. LLP as auditor of the Company
and to authorise the directors to set their remuneration. (Resolution 3)
To transact any other ordinary business
Serious loss of capital
To consider whether any, and if so what, steps should be taken to address the serious loss of capital within the Company, pursuant to
section 656 (1) of the Companies Act 2006.
Registered Office By order of the Board
Manor Park Industrial Estate
Wyndham Street
Aldershot A Tombs
Hampshire Secretary
GU12 4NZ
Dated: 28 November 2023
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 6.30pm on 19 December
2023 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 6.30pm on 19 December 2023 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.
Perivan.com
266609
43
PipeHawk plc Annual Report 2023
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.
C o p y T o C o m e
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 ..................................43
COMPANY NO: 3995041
A N N U A L R E P O R T
Year ended
30 June 2023