TIDMFCRM
RNS Number : 7438X
Fulcrum Utility Services Ltd
23 December 2019
23 December 2019
FULCRUM UTILITY SERVICES LIMITED
("Fulcrum" or the "Company")
Unaudited interim results for the six months ended 30 September
2019
Fulcrum, the UK's market leading independent multi-utility
infrastructure and services provider, today announces its interim
results for the six-month period ended 30 September 2019.
Financial Highlights*
-- Revenue GBP19.5 million (2018: GBP24.8 million)
-- Adjusted EBITDA GBP1.4 million (2018: GBP4.7 million)
-- Loss before tax GBP0.9 million (2018 profit before tax: GBP2.6 million)
-- Net cash outflows from operations before Tax of GBP0.0
million (2018 inflows: GBP5.9 million)
-- Basic loss per share of 0.4p (2018 earnings per share: 1.2p)
-- Net debt at the period end of GBP2.3 million (31 March 2019
net cash GBP3.8 million) reflecting the investment of GBP5.1
million in acquiring utility assets
-- Interim dividend deferred until completion of the sale of the
domestic gas asset portfolio, as described in the announcement
published today
* comparative figures for the period to 30 September 2018 have
been restated in accordance with IFRS 16 and IFRS 15, as explained
in the Annual Report and Accounts to 31 March 2019.
Operational Highlights
-- Sustained growth in the infrastructure order book**, up 3.7%
since March 2019 to GBP62.6 million (March 2019: GBP60.5
million)
-- Increased operational capacity across the Group, including
the expansion of the Group's direct-delivery model into South East
England and London
-- Smart metering services business established and first meter exchanges complete
-- Sustained focus on operational efficiency to improve our capacity and optimise profits
-- Increased direct delivery offering to strengthen our
electrical and multi-utility capabilities
Post Period End
-- Sale of domestic customer gas connection assets, including
the order book and associated meters, for net consideration of
GBP33 million in cash to ESP Pipelines Limited ("ESP")
-- Total gross consideration of approximately GBP46 million in
cash; the net consideration of GBP33 million is stated after
deducting commitments in relation to external order book assets of
GBP13 million
-- The Group will continue to focus on adopting Industrial and
Commercial assets but intends to shift away from adopting domestic
assets utilising ESP as its preferred asset adopter
-- The Group has seen positive order inflow in recent months,
securing a variety of large contracts across all of its business
areas at the end of H1 and in early H2. These will partially
contribute to revenue within the second half of the current
financial year
-- To date, sales order intake in Q3 has averaged GBP5.4
million** per month, up 40% on the monthly average achieved in
H1
-- The search for a permanent CEO is ongoing
** The amount of secured infrastructure work representing the
construction value and the utility asset value
Phil Holder, Chairman of Fulcrum, said:
"Performance in H1 has been impacted by ongoing economic
uncertainty but, positively, the Group has recently seen improved
sales order intake in Q3. In addition, we are hopeful that the
General Election result will reduce economic and political
uncertainty, providing greater clarity and improving decision
making on contracts.
The sale of our domestic utility assets to ESP also
significantly strengthens our balance sheet and will provide a
basis for a return of capital to shareholders. The Group's core
growth strategy will focus on its design and build utility
connections activities, as well as on continuing to adopt assets in
its traditional I&C market where appropriate. Our new
relationship with ESP will enhance the Company's capabilities in
the future in all segments of the market."
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.
Enquiries:
+44 (0)114 280
Fulcrum Utility Services Limited 4102
Daren Harris, Chief Financial Officer
Cenkos Securities plc (Nominated adviser and broker) +44 (0)20 7397
Max Hartley (Nomad) / Michael Johnson (Sales) 8900
Camarco (Financial PR advisers)
Ginny Pulbrook / Tom Huddart +44(0)203 757 4992
Notes to Editors:
Fulcrum is a multi-utility infrastructure and services provider
based in Sheffield, UK. The Company's primary business is the
provision of utility infrastructure services to the residential,
commercial and industrial markets throughout the mainland UK. These
range from the design, installation or alteration of utility
services for single site properties to large complex multi-site
projects. Through its subsidiaries, Fulcrum Pipelines Limited and
Fulcrum Electricity Assets Limited, Fulcrum is also licensed as an
Independent Gas Transporter and Independent Distribution Network
Operator, owning and operating gas and electrical assets that
connect properties to the main UK gas and electricity networks.
Fulcrum is also a meter asset manager, owning and operating meter
assets across mainland UK.
http://www.fulcrum.co.uk/
Overview
The results for the six months ended 30 September 2019 reflect a
period of economic uncertainty in the UK and its impact in the form
of customers' delayed decision making on utility infrastructure
projects. The Group's financial performance in H1 has been affected
by this ongoing economic uncertainty and other external factors,
including the suspension of the UK capacity market during H1.
Operational Performance
Despite the UK economic uncertainty in the period, the Group has
seen a substantial increase in order inflow in the first months of
H2, securing a variety of large contracts.
The Group continues to win work in its chosen markets including
a GBP3.2m contract to install new high voltage electrical
infrastructure for two 50MW gas peaking plants, connecting them to
Northern Powergrid's 132kV network in North East England. In
addition, Fulcrum won a GBP2.4m contract to provide over six
kilometres of new gas, water and electrical infrastructure to a new
sustainable mixed-use residential, retail and commercial
development in the East Midlands. These recent contract wins
demonstrate continue successful execution of the Group's core
strategy and high service reputation. The Company has also
continued to secure a portfolio of projects up to GBP50,000 in
revenue.
Since the acquisition of Dunamis, the Group has seen increasing
numbers of collaborative gas and electricity opportunities being
generated. Importantly, the electrical capabilities of Dunamis has
enabled the Group to tender on, and win, new significant
electricity, dual fuel and multi-utility opportunities previously
unachievable to the business. During the period, decision making on
the larger, high voltage, infrastructure projects that Dunamis
specialises in, has been influenced by external pressures,
including the Capacity Market Suspension, which have resulted in
certain projects commencing later than expected. However, since the
lifting of the Capacity Market Suspension in October 2019, the
Group has also secured several orders, with a combined value of
c.GBP2.0m, to provide utility infrastructure to Short Term
Operating Reserve (STOR) sites across the UK.
The Group's ability to adopt and own the I&C electrical
infrastructure delivered by Dunamis will also provide a portfolio
of stable, secure, low risk and long-term income-generating I&C
utility assets.
Positively, the Board also considers recent market developments,
such as the decarbonisation of energy, announcement of a new 0%
benefit-in-kind (BIK) rate for new Electric Vehicles and a
commitment from the Conservative government to build at least a
million homes over the next five years, as developments which will
provide the Group with even greater levels of opportunity in these
strategically important markets.
Proposed sale of domestic customer gas connection assets and
order book
The Group has announced today that it has entered into a
conditional sale and purchase agreement to sell its domestic
customer gas connection assets, including the order book and
associated meters, to ES Pipelines Limited ("ESP") for net
consideration of GBP33 million in cash (the "Sale").
The Sale significantly strengthens the Group's balance sheet and
the Company intends to repay existing borrowings of approximately
GBP12 million in full on completion. The Group will retain its IGT
and IDNO licences and continue to pursue opportunities to design,
build and add Industrial and Commercial ("I&C") assets to its
portfolio of assets.
Strategy
The market for the design, installation and ownership of these
types of infrastructure assets has evolved significantly in the
last few years. As the values being ascribed to domestic connection
assets by participants in the market have increased materially,
reflecting the attractions of the predictable, stable, long-term
regulated cash flows associated with them, clients such as
housebuilders have increasingly demanded that the value of the
completed assets is reflected in the pricing structure agreed for
undertaking these design and build projects. For larger domestic
asset projects, this can result in all or a significant part of the
effective profit margin on contracts being accounted for by the
values ascribed to the completed assets, while the short-term net
cash flows associated with larger domestic projects are often
marginal or negative.
The Group's main competitors in the gas and electrical utility
connection ownership sector (being other IGT and/or IDNO licence
holders) are significantly larger businesses, which are typically
owned by large, private, infrastructure investment funds, and which
may not face the same funding constraints that The Group does as a
quoted business.
The Board believes that the Sale will put the Group in a
stronger position to pursue a strategy of winning design and build
work across the multi-utility space, in partnership with asset
owners and will provide the opportunity for the Group to generate
substantial value for its shareholders, supported by a progressive
dividend policy and share buy-back programme.
Following the Sale and excluding assets forming part of the Sale
but yet to be transferred, the Group retains a portfolio of
approximately 6,500 I&C connection assets, a small number of
domestic connections which form part of mixed networks and a small
portfolio of electrical connections.
The Group is retaining its IGT and IDNO licences and will
continue to pursue opportunities to design, build and add I&C
assets to its portfolio of assets, both independently and working
with ESP. I&C has always been a particular strength of The
Group's and the Group continues to win significant, attractively
priced contracts for I&C projects and the Board sees this as
key to the Group's future growth.
The Sale will also allow the Group to actively pursue
opportunities for growth, including in the rapidly developing EV
market.
The Group will continue to pursue opportunities for domestic gas
and electrical connection assets, but will partner with third party
IGT/IDNO licence holders when bidding for contracts involving new
domestic utility connections, with the Group bidding for the design
and build work based on back-to-back agreements with a partner
which will acquire the connection assets once completed. The terms
of the Sale provide for additional payments in respect of the
Assets if certain milestones are achieved with ESP when jointly
bidding for domestic gas assets over a five-year period.
Financial Performance
In the first six months the Group achieved an adjusted EBITDA of
GBP1.44 million. Period-on-period revenue decreased by GBP5.3
million, or -21.4%, to GBP19.5 million (2018 restated: GBP24.8
million). Performance in the period was impacted by economic
uncertainty and the Capacity Market Suspension, which resulted in
the delay of the commencement of new contracts. Significantly,
Dunamis' revenue from major energy generation contracts, which are
influenced by these external factors, and was GBP3.9m down 55.6%
(2018: GBP7.0 million).
Asset ownership revenues increased by 42.9% to GBP1.9 million
(2018: GBP1.3 million).
Gross profit decreased by GBP3.2 million to GBP6.2 million (2018
restated: GBP9.4 million), with gross profit margins down to 32.0%
(2018 restated: 38.0%). This change in margin was due to a
combination of the profile of contracts delivered in the period,
with a higher proportion of new housing schemes, coupled with
decreased efficiencies of delivery, driven by a lower volume of
work undertaken.
Loss before tax was GBP0.9 million (2018 restated profit before
tax of GBP3.0 million). This reduction was driven by the lower
EBITDA performance and additional depreciation costs following the
revaluation of our asset base at March 2019.
At 30 September 2019, the Group had net debt of GBP2.2 million
(31 March 2019: net cash of GBP3.8 million). This is driven by
continued investment in utility assets of GBP5.1 million and a
working capital unwind due to lower activity levels of GBP1.1
million, offset by the EBITDA of GBP1.4 million.
An interim dividend will be paid from the initial proceeds
received from the sale of the domestic gas asset portfolio.
The order book continued to grow, up 3.7% since March 2019 to
GBP62.6 million (March 2019: GBP60.5 million). The sustained growth
in the infrastructure order book is encouraging and demonstrates
the successful delivery of our sales growth strategy.
Delivering contracts safely, efficiently and profitably
Safety is paramount in our organisation. In the period, we
received the Royal Society for the Prevention of Accidents (RoSPA)
Order of Distinction, recognising 16 consecutive years of health
and safety excellence. This reinforces our commitment to the health
and safety of our customers, each other, suppliers, the public and
the environment.
We continue to drive a safety-first culture within our business
and bolstered our "SAFE" initiative in the period with additional
behavioural safety awareness and training in addition to
competence-based training. We also continued to recognise and
reward the people and teams who go above and beyond to demonstrate
safe behaviours with our quarterly "Safety Champion" and annual
"Safety Champion of Champions" awards.
Our focus remains on developing and delivering exceptional
customer service and driving operational efficiencies. In the
period, we increased our direct delivery offering by investing in a
new depot, delivery teams and vehicle fleet to serve the South East
and London in support of the Group's strategy to increase its
direct-delivery workforce and reduce the use of sub-contractors in
the region. We also invested in additional training to upskill our
operational people, to ensure that our service is always delivered
in line with our vision of being the UK's first choice utility
partner.
Our smart metering business continues to progress with positive
momentum and we bolstered our in-house Smart Metering team in the
period to meet the demand for its services.
We also look at ways to continually improve operational
performance and simplify the way we work. In the period the Group
successfully recruited a number of senior, highly experienced and
successful operational people from within the utility
infrastructure industry to drive continual improvements in
efficiency of our operational delivery.
Management Changes
Martin Harrison, Chief Executive, stepped down with immediate
effect during the period. Chairman Phil Holder has assumed day to
day responsibilities for the business pending the appointment of a
replacement. The Board is currently in the process of identifying a
successor and a further announcement will be made in due
course.
On 20 June, the Company announced the appointment of Daren
Harris as Chief Financial Officer. Daren brings with him
significant experience gained in various senior finance roles, with
his most recent role being Group Finance Director and primary Board
member of The Byrne Group, a construction services provider which
during his tenure achieved turnover in excess of GBP300
million.
Outlook
There are indications that the utility connections market is
improving with a number of substantial contracts being won, in
contrast to the six months to September 2019 which were marked by
continued political and economic uncertainty, resulting in a
slowdown in the Group's core markets and the deferral by key
customers of contract awards.
In addition, three legislative/regulatory announcements are
expected to benefit the Group:
-- the lifting of the suspension to the electrical capacity
market announced in October 2019 is expected to create a stronger
project flow for Dunamis;
-- the more stringent requirement for electricity suppliers to
exchange meters under the SMETS2 program will increase the
opportunities for the Group's smart metering business; and
-- the announcement of 0% benefit-in-kind rate for company car
drivers of electric vehicles is expected to stimulate demand for
EV's and the supporting electrical infrastructure.
The Board believes that these factors will contribute to a
stronger second half performance in the current year and underpin a
recovery in financial performance in FY 2020/21. However, given the
difficult trading conditions experienced in H1, offset by the
improvement in activity experienced in Q3, the Board now expects
that Adjusted EBITDA for FY 2019/20 will be approximately GBP5
million.
Consolidated Interim Statement of Comprehensive Income
For the six months ended 30 September 2019 (unaudited)
Restated unaudited Restated unaudited
Unaudited Six months ended 30 Year ended 31 March 2019
Six months ended 30 September 2018
September 2019
Note GBP'000 GBP'000 GBP'000
-------------------------- ----- ------------------------- -------------------------- --------------------------
Revenue 2, 3 19,518 24,835 48,905
Cost of sales -
underlying (13,421) (15,398) (29,708)
Cost of sales -
exceptional items 4 - - (883)
-------------------------- ----- ------------------------- -------------------------- --------------------------
Total cost of sales (13,421) (15,398) (30,591)
-------------------------- ----- ------------------------- -------------------------- --------------------------
Gross profit 6,097 9,437 18,314
Administrative expenses -
underlying (6,521) (6,181) (11,787)
Administrative expenses -
exceptional items 4 (391) (221) (411)
-------------------------- ----- ------------------------- -------------------------- --------------------------
Total administrative
expenses (6,912) (6,402) (12,198)
-------------------------- ----- ------------------------- -------------------------- --------------------------
Operating profit / (loss) (815) 3,035 6,116
-------------------------- ----- ------------------------- -------------------------- --------------------------
Net finance expense (126) (61) (160)
Profit / (loss) before
tax (941) 2,974 5,956
Taxation 6 (1) (315) (1,035)
-------------------------- ----- ------------------------- -------------------------- --------------------------
Profit / (loss) for the
financial period (942) 2,659 4,921
-------------------------- ----- ------------------------- -------------------------- --------------------------
Other comprehensive
income
Items that will never be
reclassified to profit
Revaluation of property,
plant and equipment - - 11,380
Surplus arising on
utility assets
internally adopted in
the year 649 608 1,100
Reversal of prior
increase of utility
assets (153) - (2,544)
Deferred tax on items
that will never be
reclassified to profit
or loss - - (1,848)
-------------------------- ----- ------------------------- -------------------------- --------------------------
Total comprehensive
income for the period (446) 3,267 13,009
-------------------------- ----- ------------------------- -------------------------- --------------------------
Profit per share attributable to the owners of the business
Basic 5 (0.4)p 1.2p 2.3p
Diluted 5 (0.4)p 1.1p 2.2p
-------------------------- ----- ------------------------- -------------------------- --------------------------
Adjusted EBITDA is the basis that the Board uses to measures and
monitor the Group's financial performance as it is a more accurate
reflection of the commercial reality of the Group's business.
Operating profit / (loss) (815) 3,035 6,116
Equity-settled share based payment
charges 31 52 115
Exceptional items 391 221 1,294
Depreciation and amortisation 1,834 1,452 3,169
-------------------------------------- ----- ----- ------
Adjusted EBITDA 1,441 4,760 10,694
Surplus arising on utility assets
internally adopted in year included
within Other Comprehensive Income 649 608 1,100
-------------------------------------- ----- ----- ------
Adjusted EBITDA plus increase
in value of internally adopted
utility assets included within
Other Comprehensive Income 2,090 5,368 11,794
-------------------------------------- ----- ----- ------
Consolidated Interim Statement of Changes in Equity
For the six months ended 30 September 2019 (unaudited)
Share capital Share premium Revaluation Merger reserve Retained Total equity
reserve earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------------- -------------- ---------------- --------------- ----------------- -------------
Balance at 1
April 2019 221 210 12,737 11,347 20,959 45,474
IFRS 16
adjustment - - - - (245) (245)
Restated balance
at 1 April 2019 221 210 12,737 11,347 20,714 45,229
Loss for the
period - - - - (942) (942)
Surplus arising
on utility
assets
internally
adopted in the
year - - 649 - - 649
Reversal of
prior increase
of utility
assets - - (153) - 153 -
Deferred tax
liability - - (85) - - (85)
Transactions
with equity
shareholders:
Issues of new
shares 1 106 - - - 107
Equity settled
share-based
payments - - - - 31 31
Balance at 30
September 2019 222 316 13,148 11,347 19,956 44,989
Six months
ended 30
September 2018
Balance at 1
April 2018 211 21,042 4,649 11,347 (695) 36,554
IFRS 16
adjustment - - - - (232) (232)
Restated balance
at 1 April 2018 211 21,042 4,649 11,347 (927) 36,322
Profit for the
period - - - - 2,659 2,659
Surplus arising
on utility
assets
internally
adopted in the
year - - 608 - - 608
Transactions
with equity
shareholders:
Issues of new
shares 9 302 - 407 - 718
Equity settled
share-based
payments - - - - 52 52
Balance at 30
September 2018 220 21,344 5,257 11,754 1,784 40,359
----------------- -------------- -------------- ---------------- --------------- ----------------- -------------
Consolidated Interim Balance Sheet
At 30 September 2019 (unaudited)
Unaudited Restated unaudited Restated unaudited
30 September 2019 30 September 2018 31 March 2019
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- ------------------- ------------------- -------------------
Non-current assets
Property, plant and equipment 44,348 25,651 39,314
Intangible assets 8 26,479 27,504 27,069
Right-of-use assets 2,152 2,457 2,464
Deferred tax assets 1,955 2,045 1,707
------------------------------- ----- ------------------- ------------------- -------------------
74,934 57,657 70,554
------------------------------- ----- ------------------- ------------------- -------------------
Current assets
Contract Assets 9,108 10,934 9,132
Inventories 629 207 607
Trade and other receivables 9 6,090 4,614 6,392
Cash and cash equivalents 11 3,782 10,417 6,824
19,609 26,172 22,955
------------------------------- ----- ------------------- ------------------- -------------------
Total assets 94,543 83,829 93,509
------------------------------- ----- ------------------- ------------------- -------------------
Current liabilities
Trade and other payables 10 (9,075) (8,926) (10,946)
Contract liabilities (26,460) (28,417) (26,343)
Borrowings 11 (6,000) - (3,000)
Lease liabilities (574) (351) (613)
Provisions (96) (98) (96)
------------------------------- ----- ------------------- ------------------- -------------------
(42,205) (37,792) (40,998)
------------------------------- ----- ------------------- ------------------- -------------------
Non-current liabilities
Lease liabilities (1,828) (2,346) (2,096)
Deferred tax liabilities (5,521) (3,332) (5,186)
------------------------------- ----- ------------------- ------------------- -------------------
(7,349) (5,678) (7,282)
------------------------------- ----- ------------------- ------------------- -------------------
Total liabilities (49,554) (43,470) (48,280)
------------------------------- ----- ------------------- ------------------- -------------------
Net assets 44,989 40,359 45,229
------------------------------- ----- ------------------- ------------------- -------------------
Equity
Share capital 222 220 221
Share premium 316 21,344 210
Revaluation reserve 13,148 5,257 12,737
Merger reserve 11,347 11,754 11,347
Retained earnings 19,956 1,784 20,714
---------------------- ------- ------- -------
Total equity 44,989 40,359 45,229
---------------------- ------- ------- -------
Consolidated Interim Cash flow Statement
For the six months ended 30 September 2019 (unaudited)
Unaudited Restated Unaudited
Six months ended 30 Six months ended 30 Restated unaudited
September 2019 September 2018 Year ended 31 March 2019
GBP'000 GBP'000 GBP'000
----------------------------- --------------------------- ---------------------------- --------------------------
Cash flows from operating
activities
Profit / (loss) before tax
for the period (941) 2,974 5,956
Depreciation 1,002 727 1,557
Amortisation of intangible
assets 832 725 1,612
Exceptional items - fixed
asset impairment - - 883
Net finance expense 147 11 60
Equity settled share based
payment charges 31 52 115
Decrease in Contract Assets 23 991 1,245
Decrease in trade and other
receivables 154 339 385
Increase in inventories (22) (366) (399)
Increase / (decrease) in
trade and other payables (1,374) 530 (374)
Increase in contract
liabilities 118 - 443
Decrease in provisions - - (2)
Cash generated from
operations (30) 5,983 11,481
Tax paid (345) - (42)
Net cash inflow from
operating activities (375) 5,983 11,439
----------------------------- --------------------------- ---------------------------- --------------------------
Cash flows from investing
activities
Acquisition of external
utility assets (2,346) (1,758) (3,566)
Capitalisation of utility
assets (2,707) (2,695) (7,374)
Acquisition of property,
plant and equipment (23) (205) (376)
Acquisition of intangible
assets (243) (353) (884)
Finance income received - - 13
Net cash used in investing
activities (5,319) (5,011) (12,187)
----------------------------- --------------------------- ---------------------------- --------------------------
Cash flows from financing activities
Dividends paid - - (4,738)
Borrowings 3,000 - 3,000
Payment of lease principal (307) (277) (569)
Finance costs paid (147) (11) (73)
Proceeds from issue of share capital 106 302 521
Net cash from financing activities 2,652 14 (1,859)
--------------------------------------------------------- -------- ------- --------
Net increase / (decrease) in cash and cash equivalents (3,042) 986 (2,607)
Cash and cash equivalents at beginning of period 6,824 9,431 9,431
--------------------------------------------------------- -------- ------- --------
Cash and cash equivalents at end of period 3,782 10,417 6,824
--------------------------------------------------------- -------- ------- --------
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. General information
Fulcrum Utility Services Limited is a limited company
incorporated in the Cayman Islands and domiciled in the UK. The
address of its registered office is PO Box 309, Ugland House, Grand
Cayman, KY1-1104, Cayman Islands. The Company is listed on the AIM
market of the London Stock Exchange.
The condensed consolidated interim financial information,
including the financial information for the year ended 31 March
2019 set out in this interim financial information, does not
comprise statutory accounts within the meaning of section 434 of
the Companies Act 2006. The information for the period ended 31
March 2019 is derived from the non-statutory accounts for that
financial period. The non-statutory accounts for the year ended 31
March 2019 were approved on 19 September 2019. The Auditor's report
on those accounts was unqualified and did not draw attention to any
matters by way of emphasis of matter.
1.1. Basis of preparation
The condensed consolidated interim financial information for the
period ended 30 September 2019 has been prepared in accordance with
IAS 34, 'Interim financial reporting' as adopted by the European
Union. The condensed consolidated interim financial information
should be read in conjunction with the Annual Report and Accounts
for the year ended 31 March 2019, which have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union. Except as described below, the
accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 March 2019, as described
in those financial statements.
1.2. Accounting policies
The financial statements have been prepared using consistent
accounting policies with those applied in the Group's financial
statements for the year ended 31 March 2019 as set out on pages 43
to 49 of those financial statements, with the exception of the
following:
The Group adopted IFRS 16 Leases for the period commencing 1
April 2019. This standard sets out the principles for the
recognition, measurement, presentation and disclosure of leases for
both lessees and lessors. It replaces IAS 17 Leases and IFRIC 4
Determining whether an arrangement contains a lease.
The Group has adopted IFRS 16 using the full retrospective
application of the standard, restating prior year comparatives, and
has applied the practical expedient to grandfather the definition
of a lease on transition and apply the recognition exemption for
both short term and low value assets. Revised accounting policies
and the impact of the adoption of IFRS 16 are set out in note
12.
The following new and revised standards, amendments and
interpretations, have been issued but have not been applied by the
Group in the condensed consolidated interim financial information
as there is no material impact:
-- Prepayment features with Negative Compensation - Amendments to IFRS 9
-- Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28
-- Annual Improvements to IFRS standards 2015 - 2017 Cycle
-- Plan Amendment, Curtailment or Settlement - Amendments to IAS 19
-- Interpretation 23 - Uncertainty over Income Tax Treatments
IFRS 15 Revenue from Contracts with Customers
In the year end ended 31 March 2019, the group reconsidered the
previous approach of recognising revenue in respect of the fair
value of the infrastructure assets that it constructed and then
owns and concluded that the asset is controlled by the Group
throughout construction.
Disclosure of the impact of IFRS 15 is set out in the Group's
Annual Report and Accounts for the period ended 31 March 2019 on
pages 48 and 49. The financial statements have been prepared using
a consistent accounting policy and comparatives have been amended
in accordance with the adjustments made to the last financial
statements.
2. Segmental analysis
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 three operating segments,
infrastructure services, gas transportation and Dunamis. Fulcrum's
infrastructure services provides utility infrastructure and
connections services and the pipeline business comprises both the
ownership of gas infrastructure assets and the safe and efficient
conveyance of gas through its gas 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 profit before exceptional items for
each segment and other financial and non-financial information used
to manage the business on a consolidated basis.
Six months to 30 September 2019 Restated Six months to 30 September 2018
Utility Utility
Infrastructure asset Infrastructure asset Total
Services ownership Dunamis Total Group Services ownership Dunamis Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- -------------- ---------- --------- ----------- -------------- ----------- --------- -----------
Revenue 14,534 1,894 3,090 19,518 16,550 1,325 6,960 24,835
Adjusted
EBITDA 1,010 781 (350) 1,441 3,479 658 623 4,760
Share based
payment
charge (31) - - (31) (52) - - (52)
Depreciation
&
amortisation (647) (534) (653) (1,834) (424) (310) (718) (1,452)
------------- -------------- ---------- --------- ----------- -------------- ----------- --------- -----------
Operating
profit
before
exceptional
items 332 247 (1,003) (424) 3,003 348 (95) 3,256
Exceptional
items (379) - (12) (391) (221) - - (221)
------------- -------------- ---------- --------- ----------- -------------- ----------- --------- -----------
Operating
profit (47) 247 (1,015) (815) 2,782 348 (95) 3,035
Net finance
(expense) /
income (40) (86) - (126) (62) - 1 (61)
Profit before
Tax (87) 161 (1,015) (941) 2,720 348 (94) 2,974
------------- -------------- ---------- --------- ----------- -------------- ----------- --------- -----------
Year ended 31 March 2019
Infrastructure
Services Utility asset ownership Dunamis Total Group
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ---------------- ----------------------- --------- -----------
Revenue 34,815 2,984 11,106 48,905
Adjusted EBITDA 7,992 1,792 910 10,694
Share based payment charge (115) - - (115)
Depreciation & amortisation (2,395) (701) (73) (3,169)
------------------------------------------ ---------------- ----------------------- --------- -----------
Operating profit before exceptional items 5,482 1,091 837 7,410
Exceptional items (354) (898) (42) (1,294)
------------------------------------------ ---------------- ----------------------- --------- -----------
Operating profit 5,128 193 795 6,116
Net finance (expense) / income (164) 2 2 (160)
Profit before Tax 4,964 195 797 5,956
------------------------------------------ ---------------- ----------------------- --------- -----------
The Group derives all of its revenue from the UK and all of the
Group's customers are based in the UK.
3. Revenue
The Group's operations and main revenue streams are those
described in the last annual financial statements. The Group's
revenue is derived from contracts with customers. The nature and
effect of initially adopting IFRS 15 on the Group's interim
financial statements are disclosed in Note 1.
A. Disaggregation of revenue
In the following table, revenue is disaggregated by primary
geographic market, service lines and timing of revenue recognition.
The table also includes a reconciliation of the disaggregated
revenue with the Group reportable segments (See note 2):
Infrastructure Services Gas Transportation Dunamis
---------------------------------------- ------------------------- -------------------- ------------
GBP'000 2019 2018 2019 2018 2019 2018
---------------------------------------- ------------ ----------- --------- --------- ----- -----
Primary geographic markets
United Kingdom 14,534 16,550 1,894 1,325 3,090 6,960
---------------------------------------- ------------ ----------- --------- --------- ----- -----
14,534 16,550 1,894 1,325 3,090 6,960
---------------------------------------- ------------ ----------- --------- --------- ----- -----
Service line
Service revenue on long term contracts 6,277 8,636 - - 1,654 5,240
Service revenue on short term contracts 8,257 7,914 - - 1,217 4
Maintenance contracts - - - - 219 1,716
Gas transportation - - 1,894 1,325 - -
---------------------------------------- ------------ ----------- --------- --------- ----- -----
14,534 16,550 1,894 1,325 3,090 6,960
---------------------------------------- ------------ ----------- --------- --------- ----- -----
Timing of revenue recognition
Services transferred over time 14,534 16,550 1,894 1,325 3,090 6,960
---------------------------------------- ------------ ----------- --------- --------- ----- -----
14,534 16,550 1,894 1,325 3,090 6,960
---------------------------------------- ------------ ----------- --------- --------- ----- -----
4. Exceptional items
Six months to 30 September Six months to 30 September Year ended 31 March 2019
2019 2018
GBP'000 GBP'000 GBP'000
Exceptional items included
in cost of sales - - 883
Exceptional items included
in administrative expenses 391 221 411
----------------------------- ----------------------------- ----------------------------- -------------------------
391 221 1,294
----------------------------- ----------------------------- ----------------------------- -------------------------
(a) Exceptional items included in cost of sales
Six months to 30 September Six months to 30 September Year ended 31 March 2019
2019 2018
GBP'000 GBP'000 GBP'000
----------------------------- ----------------------------- ----------------------------- -------------------------
Fixed asset impairment
arising on external
revaluation - - 883
----------------------------- ----------------------------- ----------------------------- -------------------------
- - 883
----------------------------- ----------------------------------------------------------- -------------------------
(b) Exceptional items included in administrative expenses
Six months to 30 September Six months to 30 September Year ended 31 March 2019
2019 2018
GBP'000 GBP'000 GBP'000
Restructuring costs 276 221 276
One-off legal and advisor
costs 40 - 135
Other one-off costs 75 - -
----------------------------- ----------------------------- ----------------------------- -------------------------
391 221 411
----------------------------- ----------------------------- ----------------------------- -------------------------
5. Earnings per share
Basic earnings per share have been calculated by dividing the
profit attributable to shareholders by the weighted average number
of ordinary shares in issue during the period, which were
221,650,686 (September 2018: 217,439,403, March 2019: 217,205,321).
Diluted earnings per share is calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue adjusted to assume conversion of
all potentially dilutive ordinary shares from the start of the
year, producing a figure of 231,141,106 (September 2018:
235,146,684, March 2019:227,043,123).
The earnings per share from continued operations were as
follows:
Six months to 30 September Six months to 30 September 2018 Year ended 31 March 2019
Profit per share 2019
------------------------ ------------------------------- -------------------------------- -------------------------
Basic (0.4)p 1.2p 2.3p
------------------------ ------------------------------- -------------------------------- -------------------------
Adjusted basic 0.1p 1.6p 3.5p
------------------------ ------------------------------- -------------------------------- -------------------------
Diluted basic (0.4)p 1.1p 2.2p
------------------------ ------------------------------- -------------------------------- -------------------------
Diluted adjusted basic 0.1p 1.5p 3.3p
------------------------ ------------------------------- -------------------------------- -------------------------
The calculation of the basic and diluted earnings per share is
based upon the following data:
Six months to 30 September Six months to 30 September Year ended 31 March 2019
2019 2018
Profit for the period GBP'000 GBP'000 GBP'000
Profit / (loss) for the
period attributable to
shareholders (942) 2,659 4,921
Add exceptional items 391 221 1,294
Less tax relief on
exceptional items (74) (42) (246)
Add amortisation of
intangibles 832 725 1,612
Adjusted profit for the
period attributable to
shareholders 207 3,563 7,581
----------------------------- ----------------------------- ----------------------------- -------------------------
6. Taxation
Six months to 30 September 2019 Six months to 30 September 2018 Year ended
31 March 2019
GBP'000 GBP'000 GBP'000
----------------- ------------------------------- ------------------------------- --------------
Current tax - 464 620
Deferred tax 1 (149) 415
----------------- ------------------------------- ------------------------------- --------------
Total tax charge 1 315 1,035
----------------- ------------------------------- ------------------------------- --------------
Deferred tax has been recognised in respect of tax losses
carried forward that are expected to be utilised against future
taxable profits.
Further reductions to 19% (effective from 1 April 2017) and to
18% (effective 1 April 2020) were substantively enacted on 26
October 2015. An additional reduction to 17% (effective from 1
April 2020) was announced in the Budget on 16 March 2016.
The deferred tax assets at balance sheet date have been
calculated based on these rates.
The Group has a further GBP1.5m (31 March 2019: GBP9.9 million)
of tax losses of which an additional deferred tax asset of GBP0.2m
has been recognised.
7. Capital commitments
At the 30 September 2019 the Group had entered into contracts to
purchase property, plant and equipment in the form of utility
assets for the amount of GBP16.4 million. The capital commitment at
31 March 2019 was GBP18.7 million and at 30 September 2018 was
GBP15.4 million.
8. Intangibles
Goodwill Brand & customer relationships Software Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- ------------------------------ -------- -------
Balance at beginning of period 14,251 11,045 1,773 27,069
Additions - - 242 242
Amortisation for the period - (678) (154) (832)
------------------------------- -------- ------------------------------ -------- -------
Balance at end of period 14,251 10,367 1,862 26,479
------------------------------- -------- ------------------------------ -------- -------
9. Trade and other receivables
Six months to 30 September 2019 Six months to 30 September 2018 Year ended 31 March 2019
GBP'000 GBP'000 GBP'000
------------------- -------------------------------- -------------------------------- -------------------------
Trade receivables 3,448 3,172 3,972
Other receivables 2,642 1,442 2,420
------------------- -------------------------------- -------------------------------- -------------------------
6,090 4,614 6,392
------------------- -------------------------------- -------------------------------- -------------------------
10. Trade and other payables
Six months to 30 September 2019 Six months to 30 September 2018 Year ended 31 March 2019
GBP'000 GBP'000 GBP'000
---------------- -------------------------------- -------------------------------- -------------------------
Trade payables 3,961 2,979 5,881
Other payables 5,114 5,947 5,065
---------------- -------------------------------- -------------------------------- -------------------------
9,075 8,926 10,946
---------------- -------------------------------- -------------------------------- -------------------------
11. Reconciliation to net funds
Six months to 30 September 2019 Six months to 30 September 2018 Year ended
31 March 2019
GBP'000 GBP'000 GBP'000
-------------------------- ------------------------------- ------------------------------- --------------
Cash and cash equivalents 3,782 10,417 6,824
Borrowings (6,000) - (3,000)
-------------------------- ------------------------------- ------------------------------- --------------
Net funds (2,218) 10,417 3,824
-------------------------- ------------------------------- ------------------------------- --------------
12. IFRS 16 Leases adoption
Previously leases of property, plant and equipment were
classified as either finance or operating leases under IAS 17.
Payments made under operating leases (net of any incentives
received from the lessor) were charged to profit or loss on a
straight-line basis over the period of the lease. Under IFRS 16,
which the Group has adopted effective for the period starting 1
April 2019, leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is
available for use by the Group. Each lease payment is allocated
between the liability and the finance cost. The finance cost is
charged to profit and loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the
liability for each period. The right-of-use asset is depreciated
over the shorter of the asset's useful life and the lease term on a
straight-line basis. The Group has applied IFRS 16 on a fully
retrospective basis with practical expedients from the date of
initial application (1 April 2019).
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- The use of a single discount rate to a portfolio of leases
with reasonably similar characteristics.
-- The accounting for short term operating leases under IAS 17,
for leases with a remaining term of less than twelve months as at
the initial application date.
-- The use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
-- The application of IFRS 16 to only those operating leases
accounted for under IAS 17 as at the initial application date.
Upon transition, a lease liability has been recognised based on
future lease payments discounted at an appropriate borrowing rate.
Additionally, a right of use asset has been recognised along with a
related lease liability. Within the income statement for the six
months ended 30 September 2019, the operating lease charge
(GBP349k) has been replaced by depreciation (GBP311k) and interest
expense (GBP43k). This has resulted in a decrease in administrative
expenses and an increase in finance costs.
The net impact on retained earnings at 31 March 2019 was a
decrease of GBP245k. This arose as a result of the recognition of
right-of-use assets (GBP2,464k) offset by lease liabilities
(GBP2,709k) under a fully retrospective approach.
13. Principal risks
The Board have assessed the Principal Risks as disclosed in the
2019 Annual Report and accounts and have determined that there has
been no change in risk faced or risk rating at 31 March 2019. The
principal risks which may affect the business and the future
performance of the Group are set out below:
Description Mitigating actions Change in risk
-------------------------------------------------- --------------------------------------------------
Growth and strategy execution
------------------------------------------------------------------------------------------------------ --------------
The Board has adopted its strategy, as it believes The Group's strategy is agreed by the Board at an No change
it is the one most likely to add the greatest annual strategy meeting and thereafter regularly
sustainable value for shareholders and reviewed at Board meetings and by the Executive
stakeholders. It is possible that, with time, Directors. The Board engages with management
factors and employees to ensure the strategy is
become known that indicate that the strategy communicated and understood and that all employees
currently being pursued is not the most effective have a clear understanding of the potential
or efficient and that alternative strategies may benefits and risks of the strategy.
be more appropriate.
-------------------------------------------------- --------------------------------------------------
Retention and recruitment
------------------------------------------------------------------------------------------------------ --------------
Success depends on the continued retention and The Group has put in place suitable reward and No change
performance of the Group's valued and talented recognition packages to all staff, comprising
employees across all business units and support a blend of short and long-term incentives for
functions to ensure that the business meets senior managers and Executives. Appropriate
it strategic goals. The Group operates in markets staff development programmes are in place to
with an ongoing demand for high calibre assess, manage and develop the leadership skills
people. of staff throughout the organisation. In addition,
we invest in succession planning and improving
learning and development, giving opportunities for
employees to upgrade skills.
-------------------------------------------------- -------------------------------------------------- --------------
Macroeconomic conditions
------------------------------------------------------------------------------------------------------ --------------
The Group derives all of its revenues from We continue to closely monitor the impact of the No change
mainland UK and is therefore predominately uncertainty on the UK economy and the Capacity
dependent Market auctions and how these factors could impact
on the macroeconomic conditions in the UK. As the the sectors in which we operate. The Group's
UK negotiates the terms of its exit from multi-channel, multi-utility strategy and the
the European Union, there remains a degree of increasingly diversified market position resulting
uncertainty on the outlook for the UK economy. from the Group's acquisitions in 2018 create a
Also, the suspension of the Capacity Market more balanced revenue base. Furthermore, we
auction process throughout the reporting period have been reducing reliance on larger electrical
has delayed certain infrastructure projects. The infrastructure projects and now offer the
suspension was lifted in October 2019 and end-to-end design and delivery of lower voltage,
it is expected that related infrastructure industrial, commercial and electric vehicle
projects will re-commence. charging infrastructure projects.
-------------------------------------------------- -------------------------------------------------- --------------
Competitive environment and reliance on key customers
----------------------------------------------------------------------------------------------------------- ---------
The business strategy relies fundamentally on the Our increasingly diversified position, including the No change
ability to increase revenues and ensuring addition of Dunamis and CDS, has reduced
that the cost base remains under control. However, our exposure to volatility in individual competitive
the markets in which the Group operates markets. These risks are managed through
are competitive. The actions of the Group's the corporate planning and review processes.
competitors, and/or our own inaction, can have
a significant and adverse impact on the Group
including those from organisations that may
be larger and/or have greater capital resources.
---------------------------------------------------- ----------------------------------------------------- ---------
Gas and electricity connections market and regulatory environment
----------------------------------------------------------------------------------------------------------- ---------
Operating in the gas industry carries with it The Group seeks to reduce the risk of losses arising No change
inherent risks, such as reliance on ageing from these circumstances through careful
infrastructure, planning, robust operational guidelines and the
potential injury to, or loss of, human life or sharing of risk with client and supplier
equipment, as well as the risk of downtime organisations
or low productivity caused by weather interruptions and by putting in place suitable insurance
or equipment failures. Losses could result arrangements.
from litigation or interruption of the Group's
business should these risks materialise.
There are also associated regulatory risks relating
to the Group's reliance on a number of
different licences, which it requires in order to
carry out the design and project management
of connections to gas pipelines and the electric
grid. Fulcrum Pipelines Limited, as an Independent
Gas Transporter (iGT), and Fulcrum Electricity
Assets Limited, as an Independent Network
Distribution
Operator (iDNO), are licensed by Ofgem. This brings
with it the risk that the regulatory environment
could change, which may have a direct and
significant impact on the Group's regulated
activities.
---------------------------------------------------- ----------------------------------------------------- ---------
Health and safety
----------------------------------------------------------------------------------------------------------- ---------
The health and safety of our employees, We ensure that the Board's health and safety strategy No change
subcontractors, suppliers and customers is of is implemented by our comprehensive
paramount management systems and controls, overseen by our
importance to us. Accidents on our sites could lead Group health and safety department to minimise
to reputational damage and financial penalties. the likelihood and impact of accidents.
---------------------------------------------------- -----------------------------------------------------
Working capital management and funding
----------------------------------------------------------------------------------------------------------- ---------
A changing mix of new contract sales, moving away In granting commercial credit terms, careful No change
from payments in advance toward credit terms, attention is paid to the timing of cash receipts
may place a strain on working capital as the volume and payments over the period of contract delivery.
of credit sales increases. The Group needs Where necessary, a deposit is requested
to ensure that it has the funding required to from customers prior to commencing work and invoicing
deliver on its strategy and future growth plans milestones with customers are matched
and that it manages its debt and cash balances where possible to the invoicing patterns with
effectively. contractors.
To support the forecast growth in utility asset
ownership of gas and electricity assets, the
Group has a debt facility of up to GBP20.0 million
with our existing bank, Lloyds Banking
Group plc. GBP6.0 million has been drawn down at the
half-year end and all covenants have
been complied with. Following the period end, the
Group has agreed to the conditional sale
of its residential and domestic portfolio which is
expected to generate net cash proceeds
of GBP33m over the next 3-4 years.
---------------------------------------------------- ----------------------------------------------------- ---------
IT systems and cyber security
----------------------------------------------------------------------------------------------------------- ---------
Fulcrum uses a range of computer systems across the The Group's IT strategies are reviewed regularly to No change
Group. Outages and interruptions could ensure they remain appropriate, with business
affect the ability to conduct day-to-day operations, continuity and disaster recovery testing performed.
which could result in loss of sales and We have a dedicated internal IT support
delays to cash flow. Key systems could be breached team who work closely with external support providers
causing financial loss, data loss, disruption to ensure that regular updates to technology,
or damage. In addition, any theft or misuse of data infrastructure, communications and application
held within the Group's systems could systems occur. The Group has advanced centralised
have both reputational and financial implications hardware and software security in place to ensure
for the Group. protection of commercial and sensitive data.
For new IT projects, external consultants are
utilised in conjunction with internal project
management, restricting access to data, systems and
code and ensuring all systems are secure
and up to date.
---------------------------------------------------- ----------------------------------------------------- ---------
14. Related parties
The Group has a related party relationship with its subsidiaries
and with its key management personnel. Details of the remuneration,
share options and pension entitlement of the Directors are included
in the Remuneration Report on page 30 of the Annual Report and
Accounts, which are available on the Fulcrum Utility Services
Limited's website at www.fulcrumutilityserviceslimited.co.uk.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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