Annual Report and Accounts 2021 & Notice of AGM

2021

PipeHawk plc is a dynamic business offering advanced engineering solutions to challenging technical requirements across many industries.

We are the global market leader in ground probing radar technology with many applications including civil engineering and land mine detection. Our technology provides a superior detection of hidden underground objects and features, dramatically reducing risk, improving safety and saving substantial time and money during identification and excavation.

Adien Limited is a leader in the field of utility detection and mapping. Its survey teams provide information that is critical in the design processes of almost all construction projects that involve breaking the ground.

QM Systems 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.

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
Chairman's statement ......................................................	2
Strategic report..................................................................	5
Report of the directors ......................................................	7
Corporate governance ......................................................	9
Directors' biographies......................................................	11
Statement of directors' responsibilities for the
annual report ..................................................................	12
Independent auditor's report to the members of
PipeHawk plc ..................................................................	13

Consolidated statement of comprehensive income	......17
Consolidated statement of financial position ................	18
Parent company statement of financial position ..........	19
Consolidated statement of cash flow ............................	20
Parent company statement of cash flow ........................	21
Statement of changes in equity ......................................	22
Notes to the financial statements ..................................	23
Notice of annual general meeting ..................................	44

Company Information

Directors	Gordon G Watt (Executive Chairman)
	Soumitra P Padmanathan (Finance Director)
	Robert Randal MacDonnell (Non-Executive)
Secretary	Soumitra P Padmanathan
Nominated Adviser	Allenby Capital Limited
and Broker	5 St Helen's Place
	London
	EC3A 6AB
Registered number	3995041
Registered office	Manor Park Industrial Estate
	Wyndham Street
	Aldershot
	Hampshire
	GU12 4NZ
Auditor	Crowe U.K. LLP
	55 Ludgate Hill
	London
	EC4M 7JW
Solicitors	Gowling WLG
	4 More London Riverside
	London
	SE1 2AU

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PipeHawk plc Annual Report and Accounts 2021

Chairman's Statement

"enter the next financial year with healthiest orderbook ever"

"two businesses relocating to significantly larger premises"

"Significantly enhances the quality of our earnings"

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I am pleased to report that the Group made an operating profit in the year of £257,000 (2020: £405,000), a profit before taxation for the year of £79,000 (2020: £194,000) and a profit after taxation of £522,000 (2020: £590,000) despite turnover decreasing by 19.3% to £6.7 million (2020: £8.3 million) in what has been a challenging period with the ongoing Covid-19 pandemic. The earnings per share for the year was 1.50p (2020: 1.69p).

This year has been very much a year of two halves, the first six months was a turnover of £2.6 million and a pretax loss of £336,000, the second six months saw a turnover of £4.1 million and a pretax profit of £415,000. I think there is a feeling that we, as a nation, have put behind us the uncertainty of the outcome of Brexit as exacerbated by how best to tackle the global pandemic, and now see a way forward; there will be slip-ups and setbacks but, broadly speaking, confidence has now returned and we can get on with business in whatever the new normal turns out to be. Certainly, the PipeHawk Group's second six months saw a return to near pre-pandemic levels and, even more importantly, we go into the next financial year with our healthiest orderbook ever.

Two of our businesses are relocating to significantly larger premises in order to be able to fulfil the confidently predicted increases in sales orders, and the future looks very good.

QM Systems As reported in the interim statement performance in the first half of the financial year was hampered through reduced orders created directly by the effects of the pandemic lockdowns. Thankfully the effects seen due to the lockdown during the early part of 2021 were short lived and order intake returned to a far more buoyant level from March 2021 onwards.

Following the difficult start to the Financial Year, both order intake and order completion have returned to pre-pandemic levels. In fact, QM Systems has experienced its strongest quarter ever in terms of profitability during the final quarter of the financial year, achieving a profit before tax

in the quarter alone of approximately £350k.

Final results for the year, whilst showing a reduction compared to 2019/20 FY rebounded strongly during the second half of the year achieving a total revenue of £3.93m with a pre-tax profit of £189k (post tax £480k) representing an excellent recovery for the second half of the Financial Year. Our orderbook entering the new Financial Year stood at over £2 million with a healthy sales pipeline for the coming period.

Material sourcing has been challenging throughout the period, partly due to shortages of semiconductors, partly due to the continuing impacts of Brexit and global shipping issues however despite these added challenges I am pleased to report that at the time of writing all current projects remain on track for delivery against planned timescales.

In my interim statement we announced that QM had established a new division, QM manufacturing which undertakes contract manufacturing services for our customers, complementing the extensive offering of services already provided by the company. We have continued to develop this business line and are hopeful to sign a number of further manufacturing contracts in the coming months. In order to facilitate this business and to provide further space to continue to grow our project business we have taken the decision to relocate the entire operational activities to a far more modern and far larger facility within a few miles of our current location just outside Worcester. The new facilities will provide over five times the production space currently available with a doubling of the office space.

The establishment of the QM Manufacturing division complements the existing product, project and service offering already provided by QM and creates an ability for QM to accelerate growth both in revenue and profit over the next few years. Manufacturing brings much stability to our business, and significantly enhances the quality of our earnings.

PipeHawk plc Annual Report and Accounts 2021

Chairman's Statement

With the return to pre pandemic order intake, addition of the contract manufacturing division and re location to a far larger and more modern premises the future for QM Systems looks very bright.

Thomson Engineering Design ("TED")

As previously mentioned in the half year interim results TED experienced a slowdown in order intake for the first part of the financial year however this slowdown was relatively short lived and both order intake and sales achieved accelerated. I am pleased to report that despite the initial slow start to the year TED performed strongly with a best ever result. Revenue achieved was £1.2 million, representing a growth year on year in excess of 20% with

• profit before tax of c£109k. This is an excellent result achieved in a difficult climate. Export sales represented approximately 27% of total sales showing a growth of approximately 5% in international markets. We anticipate further expansion into international markets in the current Financial Year.

During the year TED have delivered a number of innovative new products, in particular TED have developed a Gantry Crane system that enables the user to replace a very expensive excavator with a purpose made crane at a fraction of the capital outlay and with far simpler operating characteristics. The first three crane systems have already been delivered; two additional crane systems are under current manufacture and due for delivery by the end of next week. Further orders are expected. The crane system can be fitted with most of the excavator attachments that TED currently offers. Further new and innovative products will be launched over the next few months including an intelligent sleeper laying machine.

Sales of existing products have remained buoyant with a number of manipulators, sleeper spreaders, sleeper handlers, declippers, fastclip machines, autoloks and cable yokes being shipped to new and existing clients.

Unlike last year, the company enters the new 2021/22 FY with a full orderbook. This will enable us to continue the trend in growth for this coming year. Order pipeline remains buoyant with a number of significant orders due to be received over the coming weeks. This provides stability and further opportunity for significant growth.

To facilitate both the growth achieved and anticipated further expansion we are in the process of relocating into new facilities within the same industrial estate. The facilities are far more modern tripling our manufacturing space and providing a significant increase in office space.

Technology Division - PipeHawk Technology and Utsi Electronics

With all trade events and client demonstration opportunities cancelled or postponed for many months and much of its global customer base operating on reduced hours or simply closed altogether, PipeHawk Technology has been in tickover/furlough mode for the greater part of the last financial year. Trading only taking place in very sporadic response to the receipt of confirmed orders from the few clients able to continue trading and then only where the products required were held in-stock or their components being available from one of the few parts of the supply chain still operating. The outcome being expectedly poor sales figures. Swift cancellation and/or deferral of incoming supply orders and other cost controls have helped to avoid the burden of significant costs and therefore lessened the losses incurred. Whilst we expect the UK to be one of the first to reopen for business. PipeHawk Technology sales are not expected to return to pre-pandemic levels until primary overseas markets (particularly Asia) are trading once again. Actions are therefore in place to find new avenues to market as well as widen the scope of existing products in order to increase opportunity to access new markets. This process has been greatly enhanced by the acquisition of Utsi Electronics Ltd (Utsi) during the year which; in addition to a number of R&D projects ongoing or, under discussion at the time of acquisition also provides immediate access to a second

product range, with wider market appeal, existing access to other markets and great potential for additional market exploitation including entry into new fields of endeavour. The additional product range available is mature, technically very clever and recognised internationally as being very capable across a wide range of largely scientific markets. Already in progress, the plan is to integrate the two businesses and their market offerings through a process of profit optimisation, natural redundancy and new innovation to produce a leaner product list focused on achieving the maximum revenue from a reduced component base alongside a common marketing strategy.

Adien

On balance it has been a good year for

Adien.

Trading for the first six months to December was very strong and profitable, however from January 2021 trading began to slow as major tenders in the defence and 5G telecom sectors were delayed due to uncertainty over budget renewals in March/April 2021.

Since May/June this trading has begun to increase and continues to do so.

Recruitment of specialist staff who can multi task allows more flexible and profitable working.

The acquisition of the latest survey kit and more economic and greener vehicles coming on line over the coming months coupled with the best insurance cover and all the key accreditation continues to keep Adien at the leading edge of our industry.

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PipeHawk plc Annual Report and Accounts 2021