TIDMFCRM
RNS Number : 9883G
Fulcrum Utility Services Ltd
30 July 2021
30 July 2021
MAR
The information contained within the announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
FULCRUM UTILITY SERVICES LIMITED
("Fulcrum" or "the Group")
Final results for the year ended 31 March 2021 ("FY21")
"Emerging stronger to connect the UK's net-zero future"
Financial performance
-- Revenue up 2.2% to GBP47.1 million (2020: GBP46.1 million)
-- Adjusted EBITDA from continuing operations* of GBP0.1 million
(2020: GBP4.5 million), in line with the expectations stated in our
interim results
-- Loss before tax of GBP11.5 million (2020: GBP1.3 million
profit), impacted by exceptional items
-- Cash outflow from operating activities of GBP2.4 million (2020: GBP2.1 million inflow)
-- Adjusted earnings per share of (0.9)p (2020: 2.3p) and basic
earnings per share of (4.6)p (2020: 0.7p)
-- Net debt of GBP1.5 million as at 31 March 2021 (2020: GBP6.0 million net cash)
-- Debt facility headroom (from facilities negotiated during the
year) of GBP4.3 million as at 31 March 2021
-- Net assets of GBP35.4 million (2020: GBP46.3 million)
-- Net impairment to utility assets, intangible assets and
deferred tax assets of GBP9.0 million** in the year (2020: GBP1.0
million net revaluation)
-- The Board will not be recommending the payment of a dividend
in respect of the financial year ended 31 March 2021, considering
the loss for the year and continuing near-term economic
uncertainty
Operational highlights
-- Remained operational throughout Covid-19 with a safe, effective and rapid response
-- Renewed focus on margin and cost discipline
-- Made good progress in the execution of our strategy despite
Covid-19, with selective investment to strengthen operational and
business capabilities and secure new talent
-- Balance sheet strength supported by the ongoing and
successful execution of the sale of the Group's domestic asset
portfolio
-- Robust order book of GBP56.1 million and revised prudent approach to its valuation
-- Secured key contracts across all sectors, resulting in:
-- Strengthened smart metering operations, with a 34% growth in
the number of meters in the orderbook expected to be exchanged
-- A GBP4.2 million contract to provide 13.5km of new of high
voltage electrical infrastructure for a major redevelopment
project
-- Winning our first project with over 1,500 multi-utility connections
-- Successfully tendered on larger contracts, resulting in
significant contract awards post year end
-- Named as one of the top 10 utility companies to work for in
2021, recognising the positive and supportive culture the Group has
developed, particularly during the pandemic
*Adjusted EBITDA from continuing operations is operating loss
excluding the impact of exceptional items, other gains,
depreciation, amortisation and equity-settled share-based payment
charges
**Net impairment of utility assets and utility assets under
construction (GBP3.5 million), intangible assets (GBP4.9 million)
and deferred tax assets (GBP0.6 million)
Commenting on the full year results, Terry Dugdale, Chief
Executive Officer said:
"Just like many businesses, Fulcrum was affected by the
considerable challenges presented by the Covid-19 pandemic in the
year, and this is reflected in our financial performance.
However, we were agile, resilient and responded quickly and
effectively to Covid-19, remaining operational and making progress
in the execution of our strategy, with full year performance being
in line with the expectations stated in our interim results.
We still have much more to do, but we have emerged from FY21
stronger. Since taking over the role of CEO in January 2021, we
have renewed our focus on margin and cost discipline and are better
equipped to take advantage of the significant opportunities that
are presented to us as we connect the UK on its journey to a
net-zero future. I look to the future with increasing
confidence."
Enquiries:
Fulcrum Utility Services Limited +44 (0)114 280
Terry Dugdale, Chief Executive Officer 4150
Cenkos Securities plc (Nominated adviser and broker)
Camilla Hume / Callum Davidson (Nomad) / Michael +44 (0)20 7397
Johnson (Sales) 8900
Notes to Editors:
Fulcrum is a multi-utility infrastructure and services provider.
The Group operates nationally with its head office in Sheffield,
UK. It designs, builds, owns and maintains utility infrastructure
and offers smart meter exchange programmes.
https://investors.fulcrum.co.uk/
Chair's statement
" Refocusing in a challenging year"
I joined the Board in May 2020 and was appointed Chair on 10
December 2020.
FY21 has been a hugely challenging year for Fulcrum in several
respects and this is reflected in the Group's financial performance
for the year. Nevertheless, I am proud of how we responded to the
challenges presented to us. Against the backdrop of the Covid-19
pandemic, we invested significantly in stabilising the business and
strengthening its foundations. We have made positive progress on
all fronts, with the Group emerging stronger from FY21 with a clear
strategy to focus on our core markets and on becoming the UK's net
zero multi-utility connector of choice.
Changes to our Board
There were several changes to the Board during this year as we
began to implement our Board transition plan following the proposed
tender offer from Harwood Capital LLP. The Group invested
significant time and resources in responding to the offer in the
year and I am pleased with the positive outcomes of the
Relationship Agreement, which have resulted in a refreshed and
reenergised Board.
Each of the new team bring with them important skills and
experience as well as providing considerable shareholder
representation, all which will support the successful execution of
our strategy and growth. I was especially delighted that Terry
Dugdale was appointed to lead the business as our new CEO in
January 2021.
Results
The Group, like many businesses, faced significant challenges in
FY21 and first, I would like to thank our amazing people. They
demonstrated passion, tenacity and resilience, quickly delivering
an effective and safe response to the operational challenges
presented by Covid-19. Throughout the pandemic we played a vital
part in connecting and maintaining essential utility infrastructure
and provided enhanced services to projects, sites and customers
that were critical in in supporting essential services, frontline
workers and the NHS.
Covid-19 affected the Group's financial performance in the year
and, despite an initial strong bounce back from the impact of the
pandemic in the first half of the year, the second half was
adversely affected, especially as the national lockdowns delayed
the award, mobilisation and completion of some of our
contracts.
Despite the heightened impact of Covid-19 in the second half of
the year, the Group's performance for the full year was in line
with the expectations stated in our interim results, with a
positive adjusted EBITDA of GBP0.1 million.
Progress against our strategy
The UK needs more utility infrastructure to connect its net zero
infrastructure investments, such as the EV charging network, wind
and solar parks, and the many new homes the country requires. This
necessity has been expedited as the UK plans to build back better
from the pandemic and this need will only grow as the UK
transitions to a low carbon economy. The opportunity to become the
net zero utility connector of choice, is hugely exciting for the
Group and presents significant growth opportunities across all the
markets we operate in, as our capabilities and experience are
essential to enabling and supporting the net-zero revolution.
Our strategy to capitalise on these opportunities is clear. We
refocused our efforts on growing in our core markets and made
positive progress in executing this, despite the impact of
Covid-19. We made essential investments in the business to
strengthen its foundations, to deliver improvements and to support
the Group's future growth. This was done selectively and balanced
with maintaining financial prudence and flexibility.
Maintaining balance sheet strength, cash conservation and
supporting the Group's liquidity throughout the pandemic was a
priority. To support this, all planned tranches of the asset sale
to ESP were successfully delivered, and an enhanced payment
relating to the agreement with ESP was achieved. We also entered
into a new two-year GBP10.0 million Revolving Credit Facility with
Lloyds Banking Group.
ESG and sustainability
The Board and I are passionate about ensuring the Group has a
strong commitment to ESG and the sustainable approach the Group is
developing proved valuable to our effective response to the
Covid-19 pandemic.
We are committed to use our capabilities to support the UK's
net-zero revolution, and to also reduce the impact of the Group's
operations on climate change and I am very pleased to confirm that
Fulcrum is on a journey to be Carbon Neutral by 2030.
Dividend
Considering the loss for the year and the continuing near-term
economic uncertainty, the Board will not be recommending the
payment of a dividend in respect of the financial year ended 31
March 2021, but will continue to keep its dividend policy under
review.
Outlook
Despite the considerable impact of the Covid-19 pandemic on the
business in the year, the Group made progress against its strategic
priorities whilst we supported and protected our stakeholders. We
still have more to do, but we have grown stronger and began to lay
the foundations that will support the Group's future success.
The Board remains excited by the Group's potential and future.
There are incredibly strong short, medium, and long-term market
drivers that provide clear and significant growth opportunities for
Fulcrum, and the Group is now much better equipped, and more
strongly positioned, to capitalise on them.
Jennifer Babington
Non-executive Chair
30 July 2021
Chief Executive Officer's Statement
"Emerging stronger for our future success"
2021 review
Just like many businesses, Fulcrum was affected by the Covid-19
pandemic. FY21 was an extremely challenging year for the Group and
this is reflected in its financial performance in the year.
However, we were agile and resilient and responded quickly and
effectively to Covid-19, remaining operational and making progress
in the execution of our strategy, whilst we supported our customers
throughout.
I became CEO in the final quarter of the financial year and,
along with maintaining our operations and protecting our
stakeholders throughout the pandemic, my key focus has been to
improve the efficiency of the business to drive its future
profitability. This has presented considerable challenges, as
significant work and effort from all our people has been required
to stabilise the business and improve its foundations.
Delivering growth and profitability in our core markets is now
our number one priority. We have refocused our efforts on
strengthening the multi-utility capabilities of the business to
achieve future growth in these core markets and I am pleased with
the improvements made so far. Our efforts have been fruitful and
have enabled the Group to secure several of its largest ever
contract wins post year end.
I would like to say a personal thank you to all our people for
their resilience, their efforts, and the enthusiasm they have
demonstrated in what has been a year filled with significant
challenges.
Keeping the nation connected
We continued to put protecting our stakeholders first and
foremost and I'm proud that we kept everyone's safety as our main
priority while we continued to provide essential utility
infrastructure services to the nation. I'm also delighted that we
were able to use our capabilities to provide additional support to
projects and customers which were critical in helping the fight
against Covid-19.
How we responded to Covid-19 and supported our customers through
the pandemic helped us build even stronger relationships with them,
and I'm pleased that we maintained exceptional levels of customer
service throughout, achieving an "excellent" Net Promoter Score in
the year, supported with some of the best customer sentiment,
praise and feedback we've ever received.
The Covid-19 pandemic affected the Group's performance this
year. However, full year performance was in line with the
expectations stated in our interim results.
Despite our effective response and an initial strong turnaround,
the national lockdowns delayed the planned delivery of larger
scheduled projects and our smart metering exchange programmes. The
lockdowns also affected customer decision making on the award of
new contracts, with much of the significant investment and effort
in tenders not being realised as sales until after the year
end.
As well as focusing on remaining operational and delivering our
essential services to keep the nation connected, we executed our
strategy and invested in the business. We still have more to do,
but we are now stronger, with better foundations that will enable
us to fully capitalise on the significant growth opportunities
available to us both now and as the UK moves towards a net-zero
future.
A clear strategy to grow
There are clear and exciting market drivers presented by both
the UK's utility infrastructure needs today and as the UK
transitions to a low carbon economy, and the Group's capabilities
and expertise position it strongly to capitalise on this.
We have a clear strategy to ensure that we are best placed to
maximise on these opportunities as we grow, and we made positive
progress against each of our strategic priorities this year.
Significantly, we focused our efforts on improving business
capabilities to achieve future growth in our core markets.
We ensured that we maintained a healthy balance sheet, including
successfully completing the planned tranche of the asset sale to
ESP, achieving an enhanced payment milestone and negotiated more
attractive timings on future asset transfers and associated
payments.
We selectively invested in strengthening our operational
capabilities by investing in our people with best-in-class
multi-utility capabilities and we recruited top industry talent to
join our existing business development and operational teams. This
has been important in effectively executing our regional expansion
and growth plans.
We improved our ability to win larger opportunities and won a
variety of new and significant contracts in the year, including a
GBP1.6 million new housing contract, our first project with over
1,500 connections, a GBP4.2 million contract to provide 13.5km of
new high voltage electrical infrastructure for a major
redevelopment project, a GBP1.5 million contract to install 3.8km
of gas infrastructure for a large automotive manufacturing
operation and contracts with a major Charge Point Operator to
design and install electric vehicle charging infrastructure for two
national UK retailers.
The efforts that went into securing new contracts in the year,
many of which were previously unobtainable to the Group, not only
contributed to a healthy order book but also laid the foundations
for a succession of some of the Group's largest ever contract wins
which were secured post year end.
In the second half of the year, we adopted a refreshed and more
prudent approach to how we value our order book. This, combined
with the unwinding of some key contracts in the period, resulted in
a 15% reduction in the value of the Group's order book year on
year. Positively, we now have a robust view of our Group order
book, which has grown following the award of several significant
new contracts post year end.
We also implemented our high-performance behaviour framework and
strengthened our culture, balancing the desire to protect all of
our people throughout the pandemic with keeping a focus on ongoing
development and recruiting new talent. I'm pleased that our
approach to how we developed and improved our culture in the year
was recognised by Best Companies and resulted in us being named as
one of the top 10 utility companies to work for in the UK.
Financial performance and results
Total revenue increased year on year by GBP1.0 million to
GBP47.1 million (2020: GBP46.1 million) despite the impact of
Covid-19. Infrastructure revenues were 3.8% higher than the
previous year at GBP43.4 million (2020: GBP41.8 million). This,
however, was offset by utility asset ownership revenues which at
GBP3.7 million (2020: GBP4.3 million) were GBP0.6 million lower
than the previous financial year, as expected, due to the impact of
the sale of our domestic gas assets to ESP.
The Group incurred an operating loss of GBP11.2 million for the
year (2020: GBP2.1 million). This loss includes exceptional costs
of GBP8.5 million (2020: GBP2.6 million), depreciation and
amortisation of GBP3.7 million (2020: GBP4.0 million), a
share-based payment charge of GBP0.4 million (2020: GBPnil) offset
by other gains of GBP1.4 million (2020: GBPnil). Exceptional costs
include the income statement impact of the impairment of our
utility asset portfolio of GBP1.9 million (2020: GBP1.8 million) as
a result of an independent, external valuation of those assets at
year end, a GBP4.9 million (2020: GBPnil) impairment of goodwill,
brands and customer relationships, software and development costs
and GBP1.5 million (2020: GBP0.9 million) of restructuring and one
off legal and advisor costs which in the current year includes
costs incurred in the Group`s response to the Proposed Tender Offer
from Harwood Capital LLP. Other gains of GBP1.4 million (2020:
GBPnil) relate to the profit on sale of utility assets to ESP and
related enhanced payments from ESP as the Group met certain trigger
points in respect of new domestic connection wins.
Adjusted EBITDA from continuing operations for the year
decreased to GBP0.1 million from GBP4.5 million in the prior year,
in line with management expectations. The reduction from the prior
year was due to a dilution of the gross margin, affected by the
impact of Covid-19 on our core markets. Mobilisation on larger
projects was delayed due to customer uncertainty, resulting in
reduced gross profit being realised in the year, whilst fixed
operational costs continued. This was combined with increased
administrative expenses, as we invested in the Group's in-house
capabilities, people and operations, to support its regional
expansion and to lay the foundations needed to enable the Group to
execute its strategy and emerge stronger.
Liquidity and net cash
The Group's trading performance for the year has resulted in a
cash outflow from operating activities of GBP2.4 million (2020:
GBP2.1 million inflow). The Group places a high priority on cash
generation and the active management of working capital. As at 31
March 2021, the Group had net debt of GBP1.5 million (2020: GBP6.0
million net cash). Net cash outflow from investing activities was
GBP3.8 million (2020: GBP4.8 million inflow), benefiting from
GBP3.9 million of net receipts from the disposal of utility assets,
offset by investment in utility and other assets of GBP7.7
million.
Net cash outflow from financing activities of GBP5.7 million
(2020: GBP2.7 million inflow) was predominantly due to the
repayment of the previous GBP10.0 million Revolving Credit Facility
(RCF), a net GBP5.5 million draw down from the new RCF which was
agreed on 1 December 2020 and GBP1.2 million in lease and interest
payments. The cash proceeds from future asset sales, along with our
prudent financial discipline, will enable Fulcrum to maintain a
strong balance sheet and will support the generation of cash in the
future.
To support the Group's liquidity and cash position, the Group
successfully completed the planned tranche of the asset sale to ESP
for GBP4.6 million (gross) and achieved an enhanced payment
milestone, resulting in an additional GBP0.5 million in cash
received. We also negotiated more attractive timings on future
asset transfers and associated payments.
Reserves and net assets
Net assets decreased by GBP10.9 million during the year to
GBP35.4 million (2020: GBP46.3 million), primarily resulting from
GBP9.0 million of net asset impairments in the year (2020: GBP1.0
million net revaluation). Goodwill, brands and customer
relationships, software and development costs were impaired by
GBP4.9 million (2020: GBPnil), deferred tax assets of GBP0.6
million (2020: GBP0.1 million) were derecognised and the Group
incurred a net revaluation loss on the utility asset portfolio of
GBP3.5 million (2020: GBP1.1 million net revaluation). Net assets
per share at 31 March 2021 were 15.9p per share (2020: 20.8p).
As at 31 March 2021, the issued share capital of the Company was
222,117,945 ordinary shares (2020: 222,117,945) with a nominal
value of GBP221,118. At the end of the year, the Group operated a
Growth Share Scheme (GSS) plan, a new Long-Term Incentive Plan
(LTIP) and three Save As You Earn (SAYE) schemes.
Connecting the homes of the nation
The housing market continued to operate with Covid-19 safety
restrictions in place during the pandemic and we were quick to
respond to the needs of our homebuilder customers, making sure we
could continue to support them safely and effectively on their
sites. At the same time, we invested in our housing operations to
expand and grow.
Enquiry levels in the period were strong, as homebuilders sought
to meet demand stimulated by UK Government incentives, and market
drivers continued to present exciting growth opportunities for the
Group.
Homebuilders have the challenge of meeting the Future Homes
Standard ahead of them and we invested in the year to position
ourselves to best support them in their endeavours to do this.
These factors, combined with our currently limited market share,
mean we are perfectly positioned to capitalise on these growth
opportunities.
To make sure we maximise our share in this strategically
important market, we invested in our housing operations in the year
by strengthening our business development and delivery teams,
recruiting some of the best talent in the industry. This supported
our further regional expansion into new geographies, as we began to
win contracts in areas of the country where Fulcrum hadn't been
competitive before.
The utility adoption model we have developed with ESP also
boosted our competitiveness in this sector. The support from ESP
assists the Group to compete on much larger housing developments
and this helped us to win a strong succession of new housing
projects and our first contract with over 1,500 multi-utility
connections. This positive momentum continued post year end.
We have strong and longstanding relationships with homebuilders
across the country and made good progress in achieving sector
growth this year. However, there remains a significant opportunity
to expand and grow and we are now better placed to do so.
Energising business, industry and the electric vehicle
revolution
Our ability to design and build I&C multi-utility
infrastructure of all sizes and complexities, including EV charging
and specialist high voltage (132kV) electricity infrastructure, is
an important differentiator for the Group.
We continued to operate effectively on our I&C projects in
the year and enquiry levels in I&C remained strong. However,
customer decision making on larger schemes was affected by the
uncertainty created during the national lockdowns. This halted the
commencement and award of some important contracts.
The I&C market also presents some hugely exciting
opportunities for the Group. Electricity is a key enabler in
decarbonising the economy cost effectively by 2050, and demand for
electrical infrastructure to power renewable energy generating
equipment, battery storage and the EV charging network is expected
to grow rapidly.
We invested in strengthening our capabilities in I&C this
year, as there remains a significant opportunity to grow our market
share, especially in the multi-utility and EV charging
infrastructure markets. To support this, we established a major
projects business development team to target and secure the most
significant schemes, and we strengthened our EV business
development team and operational delivery function.
These actions delivered improvements in our work-winning ability
and we secured a variety of contracts.
Supporting the smart energy revolution
The pandemic presented considerable challenges for our smart
metering operations, disrupting the rollout of our planned smart
meter exchange programmes in the year.
In most instances, energy companies requested emergency only
support during the initial lockdown, but we acted quickly and
worked closely and collaboratively with our energy supplier
customers and smart meter installation partners, to ensure we were
able to remobilise speedily and safely, with new Covid-19 secure
measures in place to restart the rollout in a way that ensured we
protected people as we worked in consumers' homes.
Despite this, consumer concerns over Covid-19 continued to
impact exchanges throughout the year, but I am confident that our
proactive, safe and joined up approach maximised the exchanges
available to us and helped to develop even stronger relationships
with our customers.
We have quickly grown a reputation for service excellence in the
sector and our flexible and responsive service approach has helped
generate significant interest from gas and electricity suppliers
looking to fulfil their regulatory obligations. At the same time,
we bolstered our business development function, recruiting industry
experts to support our growth ambitions.
I'm pleased to confirm that this assisted the Group in securing
six new agreements with energy suppliers in the year and was
crucial in laying foundations for our largest ever contract, a five
year agreement worth an anticipated GBP20 million, with energy
supplier E, post year end.
The growth opportunities and market drivers for our smart
metering business are significant, with an estimated 29 million
meters to exchange in the UK by mid-2025.
Maintaining and owning the nation's essential utility
infrastructure
The Group's ability to own and maintain the UK's essential
utility infrastructure supports our strategy and growth ambitions
and I am very proud that we were able to use these strategically
important capabilities to support the fight against Covid-19 and
also strengthen the Group's foundations for future growth.
During the pandemic, we used our specialist electrical
maintenance capabilities to provide enhanced, responsive services
to support essential services and industries helping to combat
Covid-19, including inspections to make sure vital infrastructure
that supported the NHS, remained powered.
Our high voltage electrical maintenance capabilities will be
essential to maintain the additional electrical and renewable
energy generating infrastructure the UK needs to achieve net
zero.
The utility assets we own continue to provide a healthy
recurring income, and we continued to adopt I&C utility assets
in the year, adding them to our income generating portfolio.
The current and future proceeds from the asset sale agreement
with ESP provide the Group with additional financial strength that
underpins our growth ambitions and the execution of our strategy
across all sectors.
Emerging stronger from a challenging year, to capitalise on an
exciting future
Despite an extremely challenging and Covid-19 affected year, the
Group made progress, delivered improvements and laid foundations
that will support our future success.
The progress we have made, and the incredible resilience,
tenacity and effort demonstrated by everyone in the Group during
the pandemic, makes me confident that the business is now better
placed than ever to grow, be profitable and deliver returns to all
our stakeholders in the future.
We still have more to do, but we have emerged from FY21, and
entered FY22, stronger and better equipped to take advantage of the
significant opportunities that the markets we operate in present to
us as we connect the UK on its journey to a net-zero future.
Terry Dugdale
Chief Executive Officer
30 July 2021
Consolidated statement of comprehensive income
for the year ended 31 March 2021
Year Year
ended ended
31 March 31 March
2021 2020
Notes GBP'000 GBP'000
------------------------------------------------------ ----- --------- ---------
Revenue 2 47,054 46,101
------------------------------------------------------ ----- --------- ---------
Cost of sales - underlying (35,211) (31,955)
Cost of sales - exceptional items 4 (2,050) (1,766)
------------------------------------------------------ ----- --------- ---------
Total cost of sales (37,261) (33,721)
------------------------------------------------------ ----- --------- ---------
Gross profit 9,793 12,380
Administrative expenses - underlying (15,912) (13,611)
Administrative expenses - exceptional items 4 (6,400) (870)
------------------------------------------------------ ----- --------- ---------
Total administrative expenses (22,312) (14,481)
Other gains 5 1,353 -
------------------------------------------------------ ----- --------- ---------
Operating loss 6 (11,166) (2,101)
Profit on sale of subsidiary - exceptional items 4 - 3,886
Net finance expense (293) (472)
------------------------------------------------------ ----- --------- ---------
(Loss)/profit before taxation (11,459) 1,313
Taxation 7 1,178 243
------------------------------------------------------ ----- --------- ---------
(Loss)/profit for the year attributable to equity
holders of the parent (10,281) 1,556
Other comprehensive income
Items that will never be reclassified to profit
or loss:
Revaluation of utility assets 1,569 3,036
Surplus arising on utility assets internally
adopted in the year 10 338 951
Impairment of previously revalued utility assets (3,548) (1,086)
Deferred tax on items that will never be reclassified
to profit or loss 7 560 (321)
------------------------------------------------------ ----- --------- ---------
Total comprehensive (expense)/income for the
year (11,362) 4,136
------------------------------------------------------ ----- --------- ---------
(Loss)/profit per share attributable to the owners
of the business
Basic 9 (4.6)p 0.7p
Diluted 9 (4.5)p 0.7p
------------------------------------------------------ ----- --------- ---------
Adjusted EBITDA from continuing operations is the basis that the
Board uses to measure and monitor the Group's financial performance
as it is a more accurate reflection of the commercial reality of
the Group's business. Further details of Alternative Performance
Measures are included in note 3.
Operating loss (11,166) (2,101)
Equity-settled share-based payment charge/(credit) 436 (6)
Other gains 5 (1,353) -
Exceptional items within operating loss 4 8,450 2,636
Depreciation and amortisation 10,12,13 3,739 4,019
--------------------------------------------------- -------- -------- -------
Adjusted EBITDA from continuing operations 106 4,548
Surplus arising on sale of domestic utility
assets and enhanced payments 5 1,353 -
Surplus arising on sale of subsidiary 4 - 3,886
Adjusted EBITDA including sale of domestic
utility assets 1,459 8,434
--------------------------------------------------- -------- -------- -------
Consolidated statement of changes in equity
for the year ended 31 March 2021
Revaluation Retained
Share Share reserve Merger earnings Total
capital premium Restated(1) reserve Restated(1) equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----- -------- -------- ------------ -------- ------------ --------
Balance at 31 March 2019 221 210 12,737 11,347 20,813 45,328
Total comprehensive income
for the year
Profit for the year - - - - 1,556 1,556
Revaluation surplus on internal
revaluation - - 3,036 - - 3,036
Surplus arising on utility
assets internally adopted
in the year 10 - - 951 - - 951
Disposal of previously revalued
assets(1) 4 - - (3,461) - 3,461 -
Depreciation on previously
revalued assets - - (307) - 307 -
Exceptional items - fixed
asset impairment - - (1,086) - - (1,086)
Deferred tax liability 7 - - (321) - - (321)
Transactions with equity
shareholders
Equity-settled share-based
payment - - - - (6) (6)
Dividends 8 - - - - (3,331) (3,331)
Issue of new shares 14 1 179 - - - 180
-------------------------------- ----- -------- -------- ------------ -------- ------------ --------
Balance at 31 March 2020
(1) 222 389 11,549 11,347 22,800 46,307
Total comprehensive income
for the year
Loss for the year - - - - (10,281) (10,281)
Revaluation surplus on external
valuation - - 1,569 - - 1,569
Surplus arising on utility
assets internally adopted
in the year 10 - - 338 - - 338
Disposal of previously revalued
assets 5 - - (574) - 574 -
Depreciation on previously
revalued assets - - (342) - 342 -
Exceptional items - fixed
asset impairment - - (3,548) - - (3,548)
Deferred tax liability 7 - - 560 - - 560
Transactions with equity
shareholders
Equity-settled share-based
payment - - - - 436 436
-------------------------------- ----- -------- -------- ------------ -------- ------------ --------
Balance at 31 March 2021 222 389 9,552 11,347 13,871 35,381
-------------------------------- ----- -------- -------- ------------ -------- ------------ --------
(1) The revaluation reserve and retained earnings have been
restated to reallocate fair value gains and losses between these
reserves in relation to Tranche 1 of the utility assets sale in the
year ended 31 March 2020 as disclosed in note 4. As such the
balance sheet as at 31 March 2020 has been restated. There is no
impact on net assets.
Consolidated balance sheet
as at 31 March 2021
31 March
31 March 2020
2021 Restated(1)
Notes GBP'000 GBP'000
------------------------------ ----- -------- ------------
Non-current assets
Property, plant and equipment 10 37,314 38,820
Intangible assets 12 18,907 25,522
Right-of-use assets 13 3,081 2,720
Deferred tax assets 7 2,710 1,784
------------------------------ ----- -------- ------------
62,012 68,846
------------------------------ ----- -------- ------------
Current assets
Contract assets 15,640 12,279
Inventories 438 446
Trade and other receivables 6,550 6,826
Cash and cash equivalents 16 3,934 15,973
------------------------------ ----- -------- ------------
26,562 35,524
------------------------------ ----- -------- ------------
Total assets 88,574 104,370
------------------------------ ----- -------- ------------
Current liabilities
Trade and other payables (12,669) (11,909)
Contract liabilities (27,098) (27,905)
Borrowings 15 - (10,000)
Current lease liability 13 (996) (772)
Provisions (54) (58)
------------------------------ ----- -------- ------------
(40,817) (50,644)
------------------------------ ----- -------- ------------
Non-current liabilities
Non-current lease liability 13 (2,382) (2,226)
Borrowings 15 (5,483) -
Deferred tax liabilities 7 (4,511) (5,193)
------------------------------ ----- -------- ------------
(12,376) (7,419)
------------------------------ ----- -------- ------------
Total liabilities (53,193) (58,063)
------------------------------ ----- -------- ------------
Net assets 35,381 46,307
------------------------------ ----- -------- ------------
Equity
Share capital 14 222 222
Share premium 389 389
Revaluation reserve 9,552 11,549
Merger reserve 11,347 11,347
Retained earnings 13,871 22,800
------------------------------ ----- -------- ------------
Total equity 35,381 46,307
------------------------------ ----- -------- ------------
(1) The balance sheet has been restated to reflect a
reallocation between the revaluation revenue and retained earnings.
There is no impact on net assets.
The financial statements were approved by the Board of Directors
on 30 July 2021 and were signed on its behalf by:
Terry Dugdale
Chief Executive Officer
Company number FC030006
Consolidated cash flow statement
for the year ended 31 March 2021
Year Year
ended ended
31 March 31 March
2021 2020
Notes GBP'000 GBP'000
----------------------------------------------------- ----- --------- ---------
Cash flows from operating activities
(Loss)/profit for the year after tax (10,281) 1,556
Tax credit 7 (1,178) (243)
----------------------------------------------------- ----- --------- ---------
(Loss)/profit for the year before tax (11,459) 1,313
Adjustments for:
Depreciation 10,13 1,919 2,228
Amortisation of intangible assets 12 1,820 1,791
Exceptional items - fixed asset impairment 4 1,857 1,766
Exceptional items - intangible asset impairment 4 4,935 -
Net finance expense 293 472
Equity-settled share-based payment charge/(credit) 436 (6)
Profit on disposal of subsidiary 4 - (3,886)
Profit on disposal of utility assets 5 (873) -
Loss on disposal of assets - other - 3
Increase in contract assets (3,361) (3,147)
(Increase)/decrease in trade and other receivables (201) 916
Decrease in inventories 8 162
Increase/(decrease) in trade and other payables 2,995 (1,072)
(Decrease)/Increase in contract liabilities (807) 1,562
Decrease in provisions (4) (38)
----------------------------------------------------- ----- --------- ---------
Cash (outflow)/inflow from operating activities (2,442) 2,064
Tax paid (108) (410)
----------------------------------------------------- ----- --------- ---------
Net cash (outflow)/inflow from operating activities (2,550) 1,654
----------------------------------------------------- ----- --------- ---------
Cash flows from investing activities
Acquisition of external utility assets (3,958) (5,030)
Utility assets internally adopted (3,503) (6,475)
Acquisition of plant and equipment 10 (87) (98)
Acquisition of intangibles 12 (140) (326)
Proceeds on disposal of subsidiary 4 - 16,756
Proceeds on disposal of utility assets 5 4,578 -
Receipt of deferred consideration on disposal
of utility assets 4 670 -
Costs paid in relation to disposal of subsidiary 4 (1,245) -
Costs paid in relation to disposal of utility
assets 5 (102) -
Proceeds on disposal of assets - other 9 5
Finance income received - 3
----------------------------------------------------- ----- --------- ---------
Net cash (outflow)/inflow from investing activities (3,778) 4,835
----------------------------------------------------- ----- --------- ---------
Cash flows from financing activities
Dividends paid 8 - (3,331)
Borrowings received 15 5,700 7,000
Borrowings repaid 15 (10,000) -
Prepaid arrangement fees (247) -
Interest paid and banking charges (non-IFRS
16) (153) (273)
IFRS 16 - principal payments 13 (861) (797)
IFRS 16 - deposit payments (11) -
IFRS 16 - interest payments 13 (139) (119)
Proceeds from issue of share capital 14 - 180
----------------------------------------------------- ----- --------- ---------
Net cash (outflow)/inflow from financing activities (5,711) 2,660
----------------------------------------------------- ----- --------- ---------
(Decrease)/increase in net cash and cash equivalents (12,039) 9,149
Cash and cash equivalents at the beginning
of the year 15,973 6,824
----------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at the end of the
year 16 3,934 15,973
----------------------------------------------------- ----- --------- ---------
Notes to the consolidated financial statements
1. Accounting policies
The principal accounting policies adopted in the preparation of
these financial statements are set out below.
Basis of preparation
The financial information set out in this preliminary
announcement has been derived from the Group's consolidated
financial statements for the years ended 31 March 2021 and 31 March
2020. The audited financial information included in this
preliminary results announcement for the year ended 31 March 2021
and audited information for the year ended 31 March 2020 does not
comprise statutory accounts within the meaning of section 434
Companies Act 2006. The information has been extracted from the
audited non statutory financial statements for the year ended 31
March 2021 which will be delivered to the Registrar of Companies in
due course. Non statutory financial statements for the year ended
31 March 2020 were approved by the Board of directors and have been
delivered to the Registrar of Companies. The report of the
independent auditors for the year ended 31 March 2021 and 2020
respectively on these financial statements were unqualified.
Whilst the financial information included in this preliminary
announcement has been prepared on the basis of the requirements of
IFRSs in issue, as adopted by the United Kingdom and effective at
31 March 2021, this announcement does not itself contain sufficient
information to comply with IFRS.
The financial statements have been prepared on the historical
cost basis except for the revaluation of certain non-current
assets. Historical cost is generally based on the fair value of the
consideration given in exchange for assets.
Going concern
At 31 March 2021 the Group had net assets of GBP35.4 million
(2020: GBP46.3 million), net current liabilities of GBP14.3 million
(2020: GBP15.1 million), cash of GBP3.9 million (2020: GBP16.0
million) and borrowings of GBP5.5 million (2020: GBP10.0 million)
as set out in the consolidated balance sheet. In the year ended 31
March 2021, the Group generated a loss after tax of GBP10.3 million
and had net cash outflows of GBP12.0 million after investing GBP7.5
million in utility assets and repaying a net GBP4.3 million of
borrowings.
These financial statements are prepared on the basis that the
Group is a going concern. In forming its opinion as to going
concern, the Board have prepared a detailed budget for FY22, a
forecast for the 6 months to 30 September 2022 and a detailed 13
week cash flow forecast based upon its assumptions with particular
consideration to the key risks and uncertainties facing the
business, as well as taking into account available borrowing
facilities. The going concern period assessed is until September
2022 which has been selected as it can be projected with a good
degree of expected accuracy.
The Group secured a new GBP10.0 million Revolving Credit
Facility (RCF) on 1 December 2020 which it had drawn down GBP5.7
million against at year end (headroom of GBP4.3 million). This
facility includes two financial covenants; ratio of total debt to
EBITDA and ratio of the market value of pipeline assets to total
debt. The forecasts, as approved by the Board, satisfy these
financial covenants with reasonable levels of headroom.
The forecasts prepared reflect a cautious view on recovery from
Covid-19 and include a range of sensitivities including a severe
but plausible scenario together with mitigating actions. Changes to
the principal assumptions included a reduction in EBITDA of
approximately 37%. Even under the downside scenario, the Group
continues to project sufficient cash reserves, continues to operate
with headroom on borrowing facilities and associated covenants,
after the consideration of mitigation measures that are within
Management`s control, for example accelerating cash receipts and
reducing operating costs, that could be deployed to create further
cash and covenant headroom. Based on these considerations, the
Directors have a reasonable expectation that the Group has adequate
resources to meet its liabilities as they arise for at least 12
months from the approval of these financial statements and,
consequently, the Directors have adopted the going concern basis of
accounting in the preparation of these financial statements.
Adoption of new and revised International Financial Reporting
Standards (IFRSs) and IFRIC interpretations
New amendments and interpretations that became mandatory for the
first time during the year ended 31 March 2021 are listed below,
none of which had a significant impact on the Group's results.
-- Amendments to References to the Conceptual Framework in IFRS Standards
-- Definition of Material (Amendments to IAS 1 and IAS 8)
2. Operating segments
The Board has been identified as the chief operating
decision-maker (CODM) as defined under IFRS 8 "Operating Segments".
The Directors consider there to be two operating segments,
Infrastructure: Design and Build and Utility assets: Own and
Operate. Fulcrum's Infrastructure: Design and Build segment
provides utility infrastructure and connections services. Utility
assets: Own and Operate comprises both the ownership of gas,
electrical and meter assets and the safe and efficient conveyance
of gas and electricity through its transportation networks. Gas
transportation services are provided under the iGT licence granted
from Ofgem in June 2007 and electricity services are provided under
the iDNO licence granted from Ofgem in November 2017.
The information provided to the Board includes management
accounts comprising operating result before exceptional items for
each segment and other financial and non-financial information used
to manage the business on a consolidated basis.
Year ended 31 March Year ended 31 March
2021 2020
----------------------------------- -----------------------------------
Utility Infrastructure: Utility
Infrastructure: assets: Design assets:
Design and Own and Total and Own and Total
Build Operate Group Build Operate Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------------- -------- -------- --------------- -------- --------
Reportable segment revenue 43,400 3,654 47,054 41,848 4,253 46,101
Adjusted EBITDA from continuing
operations* (969) 1,075 106 2,341 2,207 4,548
Other gains 480 873 1,353 - - -
Share-based payment charge (436) - (436) 6 - 6
Depreciation and amortisation (2,979) (760) (3,739) (2,887) (1,132) (4,019)
---------------------------------- --------------- -------- -------- --------------- -------- --------
Reportable segment operating
(loss)/profit before exceptional
items (3,904) 1,188 (2,716) (540) 1,075 535
Cost of sales - exceptional
items - (2,050) (2,050) - (1,766) (1,766)
Administrative expenses
- exceptional items (6,400) - (6,400) (832) (38) (870)
---------------------------------- --------------- -------- -------- --------------- -------- --------
Reporting segment operating
loss (10,304) (862) (11,166) (1,372) (729) (2,101)
Profit on sale of subsidiary
- exceptional items - - - - 3,886 3,886
Net finance expense (171) (122) (293) (219) (253) (472)
---------------------------------- --------------- -------- -------- --------------- -------- --------
(Loss)/profit before tax (10,475) (984) (11,459) (1,591) 2,904 1,313
---------------------------------- --------------- -------- -------- --------------- -------- --------
*Adjusted EBITDA from continuing operations is operating loss
excluding the impact of exceptional items, other gains,
depreciation, amortisation and equity-settled share-based payment
charges. Full reconciliation of Alternative Performance Measures
(APMs) is provided in note 3.
The Group derives all of its revenue from the UK and all of the
Group's customers are based in the UK. The Group's revenue is
derived from contracts with customers.
3. Alternative Performance Measures
The Group uses Alternative Performance Measures (APMs), as
listed below, to present users of the accounts with a clear view of
what the Group considers to be the results of its underlying,
sustainable business operations, thereby enabling consistent
year-on-year comparisons and making it easier for users of the
accounts to identify trends.
Alternative Performance
Measure Definition
----------------------- ----------------------------------------------------
Adjusted EBITDA Operating loss excluding exceptional items,
from continuing other gains, amortisation and depreciation and
operations equity-settled share-based payments.
Adjusted (loss)/profit (Loss)/profit before taxation excluding amortisation
before taxation of acquired intangibles and exceptional items
included within cost of sales and administrative
expenses.
Net assets per Net assets divided by the number of shares in
share issue at the financial reporting date.
----------------------- ----------------------------------------------------
A reconciliation of these Alternative Performance Measures has
been disclosed in the tables below:
(a) Reconciliation of operating loss to "adjusted EBITDA from
continuing operations"
31 March 31 March
2021 2020
GBP'000 GBP'000
------------------------------------------- -------- --------
Operating loss (11,166) (2,101)
Adjusted for:
Exceptional items within operating loss 8,450 2,636
Other gains (1,353) -
Amortisation and depreciation 3,739 4,019
Equity-settled share-based payments 436 (6)
------------------------------------------- -------- --------
Adjusted EBITDA from continuing operations 106 4,548
------------------------------------------- -------- --------
(b) Reconciliation of (loss)/profit before tax to "adjusted
(loss)/profit before tax"
31 March 31 March
2021 2020
GBP'000 GBP'000
------------------------------------------------------ -------- --------
(Loss)/profit before tax (11,459) 1,313
Adjusted for:
Exceptional items included in cost of sales 2,050 1,766
Exceptional items included in administrative expenses 6,400 870
Amortisation of acquired intangibles 1,356 1,356
------------------------------------------------------ -------- --------
Adjusted (loss)/profit before tax (1,653) 5,305
------------------------------------------------------ -------- --------
(c) Net assets per share
31 March 31 March
2021 2020
GBP'000 GBP'000
------------------------------------- -------- --------
Net assets at the end of the year 35,381 46,307
Issued shares at the end of the year 222,118 222,118
Net assets per share 15.9p 20.8p
------------------------------------- -------- --------
4. Exceptional items
Year Year
ended ended
31 March 31 March
2021 2020
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Exceptional items included in cost of sales 2,050 1,766
Exceptional items included in administrative expenses 6,400 870
Profit on sale of subsidiary - (3,886)
------------------------------------------------------ --------- ---------
8,450 (1,250)
------------------------------------------------------ --------- ---------
(a) Exceptional items included in cost of sales
Year Year
ended ended
31 March 31 March
2021 2020
GBP'000 GBP'000
--------------------------------- --------- ---------
Fixed asset impairment 1,857 1,766
Remedial works to utility assets 193 -
--------------------------------- --------- ---------
2,050 1,766
--------------------------------- --------- ---------
Fixed asset impairment relates to the impairment of utility
assets not previously revalued upwards.
(b) Exceptional items included in administrative expenses
Year Year
ended ended
31 March 31 March
2021 2020
GBP'000 GBP'000
-------------------------------- --------- ---------
Restructuring costs 569 641
One-off legal and adviser costs 896 229
Intangible asset impairment 4,935 -
-------------------------------- --------- ---------
6,400 870
-------------------------------- --------- ---------
Restructuring costs relate to employee exit and severance costs.
One-off legal and adviser costs include costs incurred in the
Group's response to the Proposed Tender Offer from Harwood Capital
LLP. Intangible asset impairment relates to the impairment of
goodwill, brands and customer relationships and capitalised
software and development costs.
(c) Profit on sale of subsidiary
Year Year
ended ended
31 March 31 March
2021 2020
GBP'000 GBP'000
----------------------------- --------- ---------
Profit on sale of subsidiary - 3,886
----------------------------- --------- ---------
On 27 January 2020, utility assets belonging to one of the
Group's subsidiaries, Fulcrum Pipelines Limited, were transferred
to a fellow Group subsidiary, Gas Newco 1 Limited. On 31 March
2020, the Group disposed of its 100% equity interest in Gas Newco 1
Limited. The transaction gave rise to the following profit on
disposal:
Year
ended
31 March
2020
Restated
GBP'000
--------------------------------------------------------- ---------
Consideration - proceeds received 16,756
Consideration - retention (receivable in September 2021) 500
Consideration - deferred (received on 30 June 2020) 670
--------------------------------------------------------- ---------
Total consideration 17,926
Net book value of assets acquired (9,334)
Revaluation in prior periods (3,461)
Legal costs relating to the transaction (1,245)
--------------------------------------------------------- ---------
3,886
--------------------------------------------------------- ---------
Some of the disposed utility assets had previously been revalued
in accordance with the Group policy. Upon disposal, this gave rise
to a transfer between the revaluation reserve and retained earnings
of GBP3,461,000.
5. Other gains
Included within other gains are the following amounts:
Year
ended
31 March
2021
GBP'000
----------------------------- ---------
Profit on disposal of assets 873
Enhanced payments 480
----------------------------- ---------
1,353
----------------------------- ---------
Enhanced payments are amounts receivable by the Group when the
number of domestic connections introduced by the Group to a
third-party reaches certain pre-agreed thresholds.
The profit on disposal of assets represents the gain arising on
sale of certain of the Group's utility assets to a third-party. The
Group has entered into an agreement with the third party to sell
part of its utility assets portfolio in structured tranches. The
profit outlined below is the result of assets transferred in the
current financial year.
Year
ended
31 March
2021
GBP'000
-------------------------------------------------------- ---------
Consideration - proceeds received 4,578
Consideration - retention (receivable on 31 May 2022) 142
-------------------------------------------------------- ---------
Total consideration 4,720
Net book value of assets sold (including the effect of
previous revaluations) (3,712)
Legal costs relating to the transaction (102)
Discounting of retention consideration due in more than
one year (33)
-------------------------------------------------------- ---------
Profit on disposal of assets 873
-------------------------------------------------------- ---------
Some of the disposed utility assets had previously been revalued
in accordance with the Group policy. Upon disposal, this gave rise
to a transfer between the revaluation reserve and retained earnings
of GBP574,000.
6. Operating loss
Included in operating loss are the following charges:
Year Year
ended ended
31 March 31 March
2021 2020
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Amortisation of intangible assets 1,820 1,791
Depreciation of property, plant and equipment 1,027 1,419
Depreciation of right-of-use asset 892 809
---------------------------------------------- --------- ---------
7. Taxation
Year Year
ended ended
31 March 31 March
2021 2020
GBP'000 GBP'000
----------------- --------- ---------
Current tax (130) 128
Deferred tax (1,048) (371)
----------------- --------- ---------
Total tax credit (1,178) (243)
----------------- --------- ---------
At Budget 2020, the Government announced that the Corporation
Tax main rate (for all profits except ring fence profits) for the
years starting 1 April 2021 and 2022 would be 19%. At Budget 2021,
the Government announced that the Corporation Tax main rate would
rise to 25% for the tax year starting 1 April 2023. However, the
increase in the main rate to 25% had not been substantively enacted
at the year end. The rate that had been substantively enacted at
the year end was 19%, and accordingly the deferred tax balances
have been calculated on the basis that they will unwind at that
rate. If all of the deferred tax balances were to reverse at the
amended 25% rate, the impact on the closing deferred tax position
would be to increase the deferred tax assets by GBP0.9 million and
increase the deferred tax liabilities by GBP1.4 million.
The Group has GBP12.1 million (2020: GBP9.3 million) of tax
losses for which deferred tax assets of GBP2.7 million (2020:
GBP1.8 million) have been recognised. The deferred tax asset is
expected to be recovered over five years. The Group also has
unrecognised tax losses of GBP3.0 million (2020: GBP1.8 million)
for which no deferred tax asset has been recognised as there is
insufficient certainty over whether those losses will reverse.
Reconciliation of effective tax rate
Year
Year ended ended
31 March 31 March
2021 2020
GBP'000 GBP'000
------------------------------------------------ ---------- ---------
(Loss)/profit before taxation (11,459) 1,313
------------------------------------------------ ---------- ---------
Tax using the UK corporation tax rate of 19.0%
(2020: 19.0%) 2,177 (249)
Non-taxable items (614) 535
Effect of change in rate of corporation tax - (62)
Tax deductions for share options exercised (83) 16
Adjustment to tax charge in respect of previous
year's corporation tax 130 (128)
Adjustment to tax charge in respect of previous
year's deferred tax 148 219
Utilisation of previously unrecognised losses 345 -
Release of previously recognised losses (579) (88)
Chargeable gains arising (346) -
------------------------------------------------ ---------- ---------
Total tax credit 1,178 243
------------------------------------------------ ---------- ---------
Movement in deferred tax balances
31 March 2021 31 March 2020
---------------------------------------- ----------------------------- -----------------------------
Deferred Deferred Deferred Deferred
tax assets tax liabilities tax assets tax liabilities
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ----------- ---------------- ----------- ----------------
At the beginning of the year 1,784 (5,193) 1,729 (5,186)
Recognised in profit or loss
Adjustment in respect of previous
years 106 42 - 219
Tax losses recognised/(utilised) 1,055 - (49) -
Effect of change in rate of corporation
tax - - 200 (263)
Origination/reversal of other timing
differences 45 379 (8) 358
Reclassification between assets and
liabilities 299 (299) - -
Release of previously recognised losses (579) - (88) -
Recognised in other comprehensive
income
Revaluation of property, plant and
equipment - 560 - (321)
---------------------------------------- ----------- ---------------- ----------- ----------------
At the end of the year 2,710 (4,511) 1,784 (5,193)
---------------------------------------- ----------- ---------------- ----------- ----------------
8. Dividends
No dividends were paid in the year ended 31 March 2021.
Dividends of GBP3,331,000 were paid in the year ended 31 March
2020:
Year ended
31 March
2020
GBP'000
-------------------------------------------------- ----------
Equity dividend
Paid during the year:
Final dividend in respect of 2019: 1.5p per share 3,331
-------------------------------------------------- ----------
Total dividends 3,331
-------------------------------------------------- ----------
No interim dividends were declared and no final dividends are
proposed relating to the year ended 31 March 2021.
9. Earnings per share (EPS)
Basic earnings per share
The calculation of basic and diluted earnings per share has been
based on the following result attributable to ordinary shareholders
and weighted average number of ordinary shares outstanding:
Year ended Year ended
31 March 31 March
2021 2020
GBP'000 GBP'000
------------------------------------------------------ ---------- ----------
(Loss)/profit for the year used for calculation
of basic EPS (10,281) 1,556
Exceptional items included in cost of sales 2,050 1,766
Exceptional items included in administration expenses 6,400 870
Remove tax relief on exceptional items (1,606) (501)
Amortisation of intangibles 1,356 1,356
------------------------------------------------------ ---------- ----------
(Loss)/profit for the year used for calculation
of adjusted EPS (2,081) 5,047
------------------------------------------------------ ---------- ----------
Number of shares ('000):
31 March 31 March
2021 2020
Number Number
of shares of shares
----------------------------------------------- ---------- ----------
Weighted average number of ordinary shares for
the purpose of basic EPS 222,118 221,907
Effect of potentially dilutive ordinary shares 7,434 4,901
----------------------------------------------- ---------- ----------
Weighted average number of ordinary shares for
the purpose of diluted EPS 229,552 226,808
----------------------------------------------- ---------- ----------
EPS
Basic (4.6)p 0.7p
Diluted basic (4.5)p 0.7p
----------------------------------------------- ---------- ----------
Adjusted basic (0.9)p 2.3p
Adjusted diluted basic (0.9)p 2.2p
----------------------------------------------- ---------- ----------
10. Property, plant and equipment
(a) Reconciliation of carrying amount
Utility
assets Fixtures
Utility under and Computer
assets construction fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- ------------- --------- ---------- --------
Cost
At 1 April 2019 59,910 3,918 1,055 1,219 66,102
Additions 6,019 6,475 10 88 12,592
Assets completed in year 6,589 (6,589) - - -
Surplus arising on internally adopted
assets - 951 - - 951
Revaluation 3,036 - - - 3,036
Disposals (13,721) - - (31) (13,752)
-------------------------------------- -------- ------------- --------- ---------- --------
At 31 March 2020 61,833 4,755 1,065 1,276 68,929
Additions 3,485 3,170 19 68 6,742
Assets completed in year 7,729 (7,729) - - -
Surplus arising on internally adopted
assets - 338 - - 338
Revaluation 1,659 - - - 1,659
Disposals (3,860) - (15) - (3,875)
-------------------------------------- -------- ------------- --------- ---------- --------
At 31 March 2021 70,846 534 1,069 1,344 73,793
-------------------------------------- -------- ------------- --------- ---------- --------
Accumulated depreciation
At 1 April 2019 (25,234) - (591) (963) (26,788)
Depreciation charge for the year (1,112) - (126) (181) (1,419)
Impairment from internal revaluation (2,852) - - - (2,852)
Disposals 927 - - 23 950
-------------------------------------- -------- ------------- --------- ---------- --------
At 31 March 2020 (28,271) - (717) (1,121) (30,109)
Depreciation charge for the year (735) - (143) (149) (1,027)
Impairment from external revaluation (5,495) - - - (5,495)
Disposals 148 - 4 - 152
-------------------------------------- -------- ------------- --------- ---------- --------
At 31 March 2021 (34,353) - (856) (1,270) (36,479)
-------------------------------------- -------- ------------- --------- ---------- --------
Net book value
At 31 March 2021 36,493 534 213 74 37,314
-------------------------------------- -------- ------------- --------- ---------- --------
At 31 March 2020 33,562 4,755 348 155 38,820
-------------------------------------- -------- ------------- --------- ---------- --------
At 1 April 2019 34,676 3,918 464 256 39,314
-------------------------------------- -------- ------------- --------- ---------- --------
Utility assets include GBP0.4 million (2020: GBP0.5 million) of
meter assets valued at cost less depreciation to date.
Additions to utility assets and utility assets under
construction are stated at the full cost of construction of GBP8.8
million (2020: GBP17.7 million) less the deficit arising on
internally adopted assets of GBP5.6 million (2020: GBP11.2
million). The comparatives have been amended to reflect this
presentation.
Disposals include utility assets with a net book value of
GBP3,712,000 that were disposed of as part of Tranche 2 of the
utility assets sale as disclosed in note 5.
(b) Measurement of fair values
The fair value of utility assets was determined by external,
independent specialist valuers, having appropriate recognised
professional qualifications and experience in the assets being
valued. The valuation established the fair value of the assets at
31 March 2021. The key assumptions used in the valuation model
include current market prices, useful economic lives of the assets
and income generated by the assets discounted using a weighted
average cost of capital. The valuation technique used is classified
as a Level 3 fair value (based on unobservable inputs) under IFRS
13. The utility assets and utility assets under construction are
the only financial assets that are held at fair value in the
financial statements.
The value in use assessment is sensitive to changes in the key
assumptions used. Sensitivity analysis has been performed, with a
1.0% increase in the discount rate leading; to a GBP1.0 million
increase in the impairment charge and a 1.0% reduction in the
discount rate leading to a GBP1.2 million decrease in the
impairment charge.
c) Impairment loss
Following the valuation of the utility asset estate a net
impairment charge of GBP3.5 million (2020: GBP1.1 million net
revaluation) was recorded. GBP1.6 million of the impairment (2020:
GBP2.9 million of the revaluation) was offset against the
revaluation reserve with the remaining GBP1.9 million charge (2020:
GBP1.8 million) being included within exceptional items in cost of
sales in the consolidated statement of comprehensive income.
11. Capital commitments
The Group has entered into contracts to purchase property, plant
and equipment in the form of utility assets from external parties.
At 31 March 2021 the balance was GBP9.6 million (2020: GBP14.0
million).
12. Intangible assets
Brand Software
and and
customer development
Goodwill relationships costs Total
Reconciliation of carrying amount GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- -------------- ------------ --------
Cost
At 31 March 2019 14,251 12,607 4,440 31,298
Additions - - 326 326
Disposals - - (91) (91)
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2020 14,251 12,607 4,675 31,533
Additions - - 140 140
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2021 14,251 12,607 4,815 31,673
---------------------------------------- -------- -------------- ------------ --------
Accumulated amortisation and impairment
At 31 March 2019 - (1,562) (2,667) (4,229)
Amortisation for the year - (1,356) (435) (1,791)
Disposals - - 9 9
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2020 - (2,918) (3,093) (6,011)
Amortisation for the year - (1,356) (464) (1,820)
Impairment (4,494) (218) (223) (4,935)
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2021 (4,494) (4,492) (3,780) (12,766)
---------------------------------------- -------- -------------- ------------ --------
Net book value
At 31 March 2021 9,757 8,115 1,035 18,907
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2020 14,251 9,689 1,582 25,522
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2019 14,251 11,045 1,773 27,069
---------------------------------------- -------- -------------- ------------ --------
(a) Amortisation
The amortisation of brand, customer relationships and software
(including development costs) is included in administrative
expenses.
(b) Impairment testing
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill may be impaired.
The Group tests other intangible assets for impairment when there
is an indication that the assets might be impaired.
Given a number of internal and external factors, management
believes that indications for possible impairment exist for the
brands and customer relationships. Accordingly, an impairment test
has been carried out in relation to both goodwill and the brands
and customer relationships. Where an impairment is indicated,
goodwill would be impaired first, followed by the brands and
customer relationships on a pro-rata basis.
Goodwill and the brands and customer relationships are tested
for impairment by comparing the carrying amount of each CGU with
the recoverable amount. The recoverable amount is the higher of
fair value less costs to sell and the value in use.
Goodwill brought forward at the start of the year relates to the
acquisition of Fulcrum Group Holdings Limited on 8 July 2010, the
acquisition of The Dunamis Group Limited on 5 February 2018 and the
acquisition of CDS PSL Holdings Limited on 27 March 2018. The
carrying amount of the goodwill is allocated across cash-generating
units (CGUs). The goodwill held by the Group relates to either the
Fulcrum infrastructure services CGU; Dunamis, which has two CGUs;
or the CDS CGU. The brands and customer relationships also relate
to the same CGUs.
In the impairment tests, the recoverable amounts are determined
based on value in use calculations which require assumptions. The
fair value measurement was categorised as a Level 3 fair value
based on the inputs in the valuation technique used.
The recoverable amounts of the CGUs have been determined from
value in use calculations which have been predicated on discounted
cash flow projections from financial budgets approved by the Board
covering a one year period, together with management forecasts for
a further four year period. The values assigned to the key
assumptions represent management's assessment of future trends in
the relevant industries and have been based on historical data from
both external and internal sources, together with the Group's views
on the future achievable growth and the impact of committed cash
flows. Cash flows beyond this are extrapolated using the estimated
long-term growth rates as summarised in the following
paragraph.
The pre-tax cash flows that these projections produced were
discounted at pre-tax discount rates based on the Group's beta
adjusted cost of capital reflecting management's assessment of
specific risks related to each cash-generating unit. Pre-tax
discount rates of between 7.6% and 9.4% (2020: between 7.2% and
9.0%) have been used in the impairment calculations which the
Directors believe fairly reflect the risks inherent in each of the
CGUs. The terminal cash flows are extrapolated in perpetuity using
a growth rate of 2.0% (2020: 2.0%). This is prudently aligned with
the inflation rate and is not considered to be higher than the
long-term industry growth rate.
Following the review, the carrying value of the intangible
assets exceeded the associated value in use for the Dunamis and CDS
CGUs. Consequently, a total impairment of GBP4.7 million was made
to the carrying value of goodwill and brands and customer
relationships. GBP3.8 million of this was in relation to the
Dunamis CGU, with GBP0.9 million relating to the CDS CGU. No
impairment was recognised for the Fulcrum infrastructure services
CGU.
Impairment charges were made to the carrying value of goodwill
(GBP4.5 million), brands and customer relationships (GBP0.2
million) and software and development costs (GBP0.2 million).
After the above impairments, a segment-level summary of the
acquired intangible assets allocation is presented below:
Fulcrum Dunamis CDS Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- --------
Goodwill 2,225 7,532 - 9,757
Brands and customer relationships - 8,115 - 8,115
---------------------------------- -------- -------- -------- --------
The value in use assessment is sensitive to changes in the key
assumptions used. Sensitivity analysis has been performed on the
individual CGUs with a 1.0% increase in the discount rate and a
1.0% reduction in the long-term growth rate.
Based on this analysis, the reasonably possible downside
scenario to the discount rate would increase the impairment by
GBP2.4 million, and the change to the long-term growth rate would
increase the impairment by GBP1.9 million.
13. Leases
The Group has leases for land and buildings and plant and
machinery. Leases for land and buildings relate mainly to office
properties and depots, whilst the plant and machinery leases are
predominantly motor vehicles. With the exception of short-term
leases and leases of low-value underlying assets, each lease is
reflected on the balance sheet as a right-of-use asset and a lease
liability.
Leases of property range from a period of three to ten years,
and leases of motor vehicles are for three or four years. Lease
payments are generally fixed. The use of extension and termination
options within leases gives the Group flexibility and such options
are exercised when they align with the Group's strategy and where
economic benefits of exercising such options exceed the expected
overall costs.
31 March 31 March
2021 2020
Right-of-use assets GBP'000 GBP'000
-------------------- -------- --------
Land and buildings 1,500 1,234
Plant and machinery 1,581 1,486
-------------------- -------- --------
Total 3,081 2,720
-------------------- -------- --------
31 March 31 March
2021 2020
GBP'000 GBP'000
--------------------------------- -------- --------
Additions to right-of-use assets 1,252 938
--------------------------------- -------- --------
Additions to right-of-use assets include new leases and
extensions to existing lease agreements.
31 March 31 March
2021 2020
Depreciation on right-of-use assets GBP'000 GBP'000
------------------------------------ -------- --------
Land and buildings 247 247
Plant and machinery 645 562
------------------------------------ -------- --------
Total 892 809
------------------------------------ -------- --------
Plant and
Land and buildings machinery
-------------------- ------------------
31 March 31 March 31 March 31 March
2021 2020 2021 2020
Maturity of lease liabilities GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ --------- --------- -------- --------
Less than one year 310 212 686 560
Between one and five years 1,191 943 946 971
In more than five years 245 312 - -
------------------------------ --------- --------- -------- --------
Total 1,746 1,467 1,632 1,531
------------------------------ --------- --------- -------- --------
31 March 31 March
2021 2020
Other impact on profit and loss GBP'000 GBP'000
------------------------------------------- -------- --------
Finance costs on leases 139 119
Expense on short-term and low value leases 637 97
------------------------------------------- -------- --------
Total 776 216
------------------------------------------- -------- --------
31 March 31 March
2021 2020
Cash flows in respect of leases GBP'000 GBP'000
--------------------------------------------------- -------- --------
IFRS 16 - principal payments 861 797
IFRS 16 - interest payments 139 119
Cash outflows relating to short-term and low value
leases 637 97
--------------------------------------------------- -------- --------
Total 1,637 1,013
--------------------------------------------------- -------- --------
14. Share capital
31 March 31 March
2021 2020
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Authorised
500,000,000 ordinary shares of GBP0.001 each 500 500
--------------------------------------------------- -------- --------
Allotted, issued and fully paid
222,117,945 (2020: 222,117,945) ordinary shares of
GBP0.001 each 222 222
--------------------------------------------------- -------- --------
Ordinary shareholders are entitled to dividends as declared.
During the year ended 31 March 2021, no new ordinary shares were
issued. During the year ended 31 March 2020, 814,839 ordinary
shares with a nominal value of GBP815 were issued to employees
exercising vested share options. The shares issued in the year
ended 31 March 2020 had a nominal value of GBP0.001 each and were
issued at GBP0.221 each.
15. Interest-bearing loans and borrowings
On 4 June 2018, the Group entered into a three year revolving
credit facility agreement with Lloyds Banking Group for up to GBP20
million. The facility supported the forecast growth in utility
asset ownership of gas and electricity assets by the Group, with
drawdowns secured against the acquired utility assets. The facility
was structured as an "accordion" facility, with GBP10.0 million
committed at 31 March 2020. The facility was settled in full on 1
April 2020.
On 1 December 2020, the Group entered into a new two year
revolving credit facility agreement with Lloyds Banking Group for
GBP10 million. This facility supports the financing, construction
and acquisition of pipeline assets. On 4 December 2020, GBP5.7
million was drawn down from this facility. At 31 March 2021, GBP4.3
million of this facility remained available for future
drawdowns.
(a) Changes in liabilities arising from financing activities
31 March 31 March
2021 2020
GBP'000 GBP'000
------------------------------------------- -------- --------
At the beginning of the year 10,000 3,000
Repaid in year (10,000) -
New borrowings 5,700 7,000
Capitalised borrowing fees (260) -
Amortisation of capitalised borrowing fees 43 -
------------------------------------------- -------- --------
At the end of the year 5,483 10,000
------------------------------------------- -------- --------
(b) Terms and repayment schedule
Year 31 March 31 March
Nominal of 2021 2020
Currency interest rate maturity GBP'000 GBP'000
----------------------------------- --------- ---------------- ---------- -------- --------
Three year revolving credit
facility agreement GBP LIBOR + 2.0% 2021 - 10,000
Bank of England
Two year revolving credit facility Base Rate +
agreement GBP 3.5% 2022 5,700 -
----------------------------------- --------- ---------------- ---------- -------- --------
The Group has complied with the financial covenants (asset
cover, leverage and EBITDA covenants) relating to the above
facilities.
16. Reconciliation to net (debt)/funds
31 March 31 March
2021 2020
GBP'000 GBP'000
-------------------------- -------- --------
Cash and cash equivalents 3,934 15,973
Borrowings (5,483) (10,000)
-------------------------- -------- --------
Net (debt)/funds (1,549) 5,973
-------------------------- -------- --------
17. Related parties
The Group has related party relationships with its subsidiaries,
Directors and key management personnel. Details of the
remuneration, share options and pension entitlement of the
Directors will be included in the Remuneration Report of the Annual
Report and Accounts.
In the year, sales totalling GBP23,790 (2020: GBPnil) were made
by the Group to companies in which key management personnel held
significant interests. These sales were settled in full by the year
end.
In the year, purchases totalling GBP347,110 (2020: GBP60,817)
were made by the Group from companies in which key management
personnel held significant interests, of which GBP7,954 (2020:
GBPnil) was still outstanding at the year end. The purchases were
for equipment hire, fuel cards and sub-contracting services used in
the ordinary course of business.
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END
FR SEAFWUEFSELW
(END) Dow Jones Newswires
July 30, 2021 02:00 ET (06:00 GMT)
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