TIDMFCRM
RNS Number : 3424U
Fulcrum Utility Services Ltd
01 August 2022
1 August 2022
FULCRUM UTILITY SERVICES LIMITED
("Fulcrum" or "the Group")
Final results for the year ended 31 March 2022 ("FY22")
Headlines:
-- Revenue up 31.2% to GBP61.8 million (2021: GBP47.1 million)
-- Adjusted EBITDA(1) of GBP0.5 million (2021: GBP0.1 million)
-- Loss before tax of GBP14.2 million (2021: GBP11.5 million)(2)
-- Cash outflow from operating activities of GBP7.6 million (2021: GBP2.4 million)
-- Adjusted earnings per share of (1.4)p (2021: (0.9)p) and
basic earnings per share of (5.2)p (2021: (4.6)p)
-- Net cash of GBP11.2 million as at 31 March 2022 (2021: GBP1.5 million net debt)
-- Debt facility headroom of GBP10 million as at 31 March 2022 (2021: GBP4.3 million)
-- Net assets of GBP45.9 million (2021: GBP35.4 million)
(1) Adjusted EBITDA is operating loss excluding the impact of
exceptional items, other net gains, depreciation, amortisation and
equity-settled share-based payment charges.
(2) Includes GBP10.6 million of exceptional items (2021: GBP8.5
million), including GBP5.6 million for onerous contracts (2021:
GBPnil)
Commenting on the full year results, Antony Collins, Chief
Executive Officer, said:
"I was delighted to have the opportunity to join the Group in
January 2022. Whilst, as with most businesses, Fulcrum is not
without challenges, I strongly believe the business has the
essential capabilities to be successful in an exciting and growing
marketplace.
"Despite the significant challenges presented to the Group this
year, including the impact of the UK's energy crisis and wider,
very difficult trading conditions, I am confident that Fulcrum can
grow and be successful in several exciting and growing markets. At
the same time, the new executive team is identifying improvement
opportunities and ensuring optimal performance to deliver
long-term, sustainable growth for the benefit of all
shareholders.
"The Group's medium to long-term growth also remains underpinned
by strong market drivers and government stimulus. These, I believe,
position Fulcrum well to benefit from the UK's transition to a low
carbon economy and a net-zero future."
This announcement contains inside information.
Enquiries:
Fulcrum Utility Services Limited +44 (0)114 280
Antony Collins, 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
As has been widely reported, FY22 was a challenging year for the
UK's energy infrastructure sector and Fulcrum has not been immune
to this. Whilst the Group initially experienced a strong recovery
from the impact of Covid-19 and positive progress was made in the
first half of the year, the impact of difficult market conditions
is reflected in the Group's overall performance for the full
year.
Results
It was pleasing that Fulcrum's first half financial performance
was in line with management's expectations, and significantly ahead
of the first half of the prior year. The Group also secured a
strong succession of its largest ever contract wins.
Notwithstanding this positive start to the year, with the
Group's diverse business operations initially helping to insulate
it from the energy crisis, the sustained turbulence in the energy
market, coupled with wider market issues of supply chain pressure
and cost inflation in materials and labour, along with exceptional
costs, significantly affected the Group's profitability in the
final quarter of the year.
Revenue for the year ended 31 March 2022 was slightly ahead of
market expectations at GBP61.8 million, representing year-on-year
growth of 31.2%, with adjusted EBITDA for the same period at GBP0.5
million. Adjusted EBITDA is operating loss of GBP13.7 million,
excluding the impact of exceptional items of GBP10.6 million
(including GBP5.6 million for onerous contracts), other net gains
of GBP0.3 million, depreciation and amortisation of GBP3.3 million
and an equity-settled share-based payment charge of GBP0.6
million.
I would like to express my personal thanks to all of our people
for their hard work, efforts and resilience in what has been
another year of difficult market conditions.
Impact of the UK's energy crisis and challenging trading
conditions
Since the Group's successful fundraise in December 2021, the UK
energy market has continued to experience considerable turbulence.
Predominantly, this affected the performance and profitability of
the Group's meter exchange operations.
Wider market issues of supply chain pressure and cost inflation
in materials and labour also weighed on the profitability of the
Group's multi-utility contracting operations, especially in its
major electrical and multi-utility projects, which are inherently
complex and longer term in nature.
The Board expects that whilst the challenges in the energy
market and the difficult market conditions continue, the Group's
order book will also soften, and this is reflected in the order
book value of GBP48 million(1) as at 31 March 2022. We have put
appropriate actions and controls in place to mitigate risk and
protect the business whilst the UK's energy crisis and challenging
market conditions prevail.
(1) Orderbook value excluding metering's onerous contracts
A refocus on our core strategy
The Group has refocused its attention on its core multi-utility
contracting and asset ownership growth strategy and the Board has
put in place a new executive team to execute it.
The Board believes that there is a significant opportunity for
the Group to grow its multi-utility contracting operations across
the housing and industrial & commercial, including electric
vehicle connections, sectors. The Board further believes that the
Group's essential and niche capabilities position it well for
future growth and that this belief is underpinned by the long-term
strategic tailwinds of the UK's utility and energy infrastructure
needs now, and for its net-zero future.
The Group's network of utility assets, valued in excess of GBP36
million as at 31 March 2022, continue to generate recurring income
and provide attractive and predictable long-term returns. The Board
continues to believe that additional asset ownership presents a
significant growth opportunity for the Group.
To support the execution of our asset growth strategy, Fulcrum
announced on 15 December 2021 that it had raised gross proceeds of
GBP20.05 million by way of a conditional placing and subsequently
raised gross proceeds of approximately GBP1.2 million through an
open offer. The Board is grateful for the continued support of
existing investors. We are mindful that, whilst presenting risks,
the current instability in the energy market produces opportunities
for the Group to acquire additional asset portfolios at attractive
valuations and as such the Board is continuing to identify and
review potential asset acquisition opportunities.
At the same time, the Board is mindful of maintaining balance
sheet strength, and supporting the Group's liquidity remains a
priority. As such, the Group became debt free in the year, and all
planned tranches of the asset sale to ESP were also successfully
delivered.
Changes to our team
The Board appointed Antony Collins as CEO in January 2022.
Antony has a strong background in business turnaround and his focus
has been to improve business operations and refocus the Group on
its core utility infrastructure and asset ownership growth strategy
and, since joining Fulcrum, he has put in place a strong and
experienced executive team to lead the Group. Stuart Crossman
joined the Group in January 2022 as COO and is a Chartered Engineer
with over 40 years in multi-utilities and has vast experience in
asset management, operational performance and health and safety and
Jonathan Jager joined the Group as CFO in February 2022. Jonathan
is a highly experienced CFO with over 20 years' experience of
developing high performing finance functions within the energy
sector.
The new team is focused on executing the Group's core
multi-utility and utility asset growth strategy and the Board is
pleased to report that business improvements are being delivered
that will both protect the business in the current market climate
and support the Group's long-term, sustainable growth.
ESG and sustainability
We are committed to using our capabilities to support the UK's
net-zero revolution, and to also reduce the impact of the Group's
operations on climate change. Fulcrum remains on its journey to be
carbon neutral by 2030.
Dividend
Considering the full year performance and the continuing
turbulence in the Group's core markets, the Board will not be
recommending the payment of a dividend in respect of the financial
year ended 31 March 2022 but will continue to keep its dividend
policy under review.
Outlook
Despite the current difficult trading conditions and the UK's
energy crisis, market fundamentals, supported by government
stimulus that underpins the UK's transition to a low carbon
economy, remain strong and, the Board believes, continue to provide
significant and strategic growth opportunities for the Group across
the diverse sectors it operates in.
Whilst the Board is mindful of the ongoing volatility in the UK
energy market, we are confident that the Group remains well
positioned to successfully grow in the long term. Fulcrum has the
essential experience and
capabilities needed to support the expansion of the UK's energy
infrastructure, which is needed now, and to achieve our net-zero
future. The Board remains excited by the opportunities this
presents.
Jennifer Babington
Non-executive Chair
1 August 2022
Chief Executive Officer's statement
2022 review
I was delighted to have the opportunity to join the Group in
January 2022. Whilst, as with most businesses, Fulcrum is not
without challenges, I strongly believe the business has the
essential capabilities to be successful in an exciting and growing
marketplace.
In the year under review, the Group began to recover from the
impact of Covid-19 and, in line with its stated growth strategy,
secured several of its largest ever contracts.
However, the sustained effects of the UK's energy crisis and
wider market issues of supply chain pressure and cost inflation
presented significant challenges to the Group's operations. This
affected the profitability of the
Group's multi-utility contracting business and its meter
exchange operations, particularly in the final quarter of the
year.
Since joining the business, my immediate priority has been to
protect and improve margins and refocus the Group on its core
utility infrastructure and asset ownership growth strategy. To
support me in doing this, the Board and I also appointed a new,
highly experienced, executive team to lead the Group.
Acting quickly to protect the business, the executive team has
identified contracts where performance and profitability were
materially affected by adverse market conditions and agreed to
mutually terminate them to protect the business by mitigating their
impact on the Group and its performance.
Delivering growth in core markets
In line with the Board's strategy, the new executive team is
actively reviewing the Group's activities to ensure it performs
optimally, identifying opportunities to improve profitability, and
ensuring Fulcrum remains focused on delivering its core strategy
and achieving sustainable growth for the benefit of all
shareholders.
Despite the challenges presented by the current difficult
trading conditions, Fulcrum has, I believe, the essential
capabilities required to be successful and achieve long-term growth
in what are exciting and growing markets.
In terms of its core multi-utility contracting and asset
ownership growth strategy:
1. The Group is well established and has a diverse multi-utility
contracting business. It operates across a variety of sectors,
nationally, and is one of only a few businesses that can deliver
all sizes and complexity of utility infrastructure, including high
voltage electrical infrastructure, designed, and delivered through
the Group's Dunamis business. The limited market share that the
Group has in each of these markets presents a sizeable opportunity
for growth.
2. The Group's network of utility assets, valued in excess of
GBP36 million as at 31 March 2022, continues to generate recurring
income and provide attractive and predictable long-term returns.
Additional asset ownership presents a significant growth
opportunity for the Group and, whilst presenting risks, the current
instability in the energy market produces opportunities to acquire
additional asset portfolios at attractive valuations.
To underpin the execution of our core growth strategy, in
December 2021 gross proceeds of GBP20.05 million were raised by way
of conditional placing and gross proceeds of approximately GBP1.2
million were through an open offer. We also successfully completed
the planned tranches of the asset sale to ESP for a total
consideration of GBP6.7 million in the year.
Progress on asset growth strategy
Further to the successful fundraise, the Group is pleased to
confirm that, in line with its asset growth strategy, it acquired
an Industrial & Commercial gas meter asset portfolio on 29 July
2022.
This acquisition, at a consideration of GBP0.6 million, follows
a due diligence process and provides the Group with additional
assets that generate recurring income and provide attractive and
predictable returns. The Group also continues to search for, and
review, potential additional asset acquisition opportunities and is
at varying stages of discussion and due diligence with several
prospects.
Financial performance and results
Total revenue increased year on year by GBP14.7 million to
GBP61.8 million (2021: GBP47.1 million) as the business recovered
well from the impacts of Covid-19. Infrastructure revenues were 33%
higher than the previous year at GBP57.6 million (2021: GBP43.4
million). Utility asset ownership revenues were 14% higher than the
previous year at GBP4.2 million (2021: GBP3.7 million).
The Group incurred an operating loss of GBP13.7 million for the
year (2021: GBP11.2 million). This loss includes exceptional costs
of GBP10.6 million (2021: GBP8.5 million), depreciation and
amortisation of GBP3.3 million (2021: GBP3.7 million), a
share-based payment charge of GBP0.6 million (2021: GBP0.4 million)
offset by other net gains of GBP0.3 million (2021: GBP1.4 million).
Exceptional costs include the income statement impact of the
impairment of our utility asset portfolio of GBP1.9 million (2021:
GBP1.9 million) as a result of an independent, external valuation
of those assets at year end, GBP2.3 million impairment of
intangible assets (2021: GBP4.9 million) and GBP5.6 million of
onerous contracts (2021: GBPnil) related to losses from the Group's
smart meter exchange and management contracts with energy suppliers
and the loss for a complex, high voltage infrastructure project.
Other net gains of GBP0.3 million (2021: GBP1.4 million) 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(1) for the year increased to GBP0.5 million from
GBP0.1 million in the prior year. Adjusted EBITDA was affected by a
dilution of the gross margin, particularly as cost of materials
were impacted by significant inflationary effects, and the impact
of the turbulent energy sector making trading conditions more
challenging in the second half of the year and predominantly in the
last quarter of the year. However, mobilisation on larger projects
improved as expected as customers regained confidence post
Covid-19, resulting in increasing revenues in the year, whilst
fixed operational costs continued. Administrative expenses
(excluding exceptional items) reduced by 5%, as the business
applied greater cost controls on discretionary spending.
(1) Adjusted EBITDA is operating loss excluding the impact of
exceptional items, other net gains, depreciation, amortisation, and
equity-settled share-based payment charges
Liquidity and net cash
The Group's trading performance for the year has resulted in a
cash outflow from operating activities of GBP7.6 million (2021:
GBP2.4 million). The Group places a high priority on cash
generation and the active management of working capital. As at 31
March 2022, the Group had net cash of GBP11.2 million (2021: GBP1.5
million net debt).
Net cash inflow from investing activities was GBP1.4 million
(2021: GBP3.8 million outflow), benefiting from GBP7 million of net
receipts (GBP6.5 million received for planned tranche sales and an
enhanced payment milestone of GBP0.6 million) from the disposal of
utility assets (2021: GBP5 million), partly offset by investment in
utility and other assets of GBP5.6 million (2021: GBP8
million).
Net cash inflow from financing activities of GBP13.4 million
(2021: GBP5.7 million outflow) was predominantly due to the
successful share issue that raised a net GBP20.6 million, less the
net repayment of the Revolving Credit Facility (RCF) totalling
GBP5.7 million, and GBP1.4 million in lease and interest payments
(2021: GBP1.2 million). Net cash outflow from exceptional items was
GBP1.6 million (2021: GBP1.2 million). The cash proceeds from
further 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.
Reserves and net assets
Net assets increased by GBP10.5 million during the year to
GBP45.9 million (2021: GBP35.4 million), primarily resulting from
increasing contract assets to GBP20.2 million (2021: GBP15.6
million) and an improved cash balance of GBP11.2 million (2021:
GBP3.9 million). The Group received a net revaluation gain on the
utility asset portfolio of GBP1.9 million (2021: GBP3.8 million net
impairment). Net assets per share at 31 March 2022 were 11.5p per
share (2021: 15.9p).
As at 31 March 2022, the issued share capital of the Company was
399,313,458 ordinary shares (2021: 222,117,945) with a nominal
value of GBP339,313 (2021: GBP222,118). At the end of the year, the
Group operated one Save As You Earn (SAYE) scheme.
Housing
The Group designs, installs and delivers new electricity, gas,
water and fibre connections to provide a complete multi-utility
service for homebuilders across mainland UK. Fulcrum is a
well-established brand in the housing market and works with various
UK housebuilders of all sizes, with the Group's expertise and
credibility offering added value and reassurance for
developers.
The Group's multi-utility infrastructure expertise has become
increasingly vital to homebuilders of all sizes, as we offer advice
and support on how to ensure new utility infrastructure is designed
and installed to meet emerging needs, like EV charging, powering
energy generating infrastructure such as heat pumps, and meeting
regulatory requirements, like the Future Homes Standard. The
essential support we provide to homebuilders saw Fulcrum win the
"Highly Commended" title in the Subcontractor/Service Provider of
the Year category at the Housebuilder Awards 2021.
We selectively tender on new opportunities in line with our
margin strategy and, in the year, secured a healthy flow of new
contract wins, including some of the Group's largest ever new
housing developments. Adversely, these larger sites were the most
affected by the ongoing difficult trading conditions of supply
chain pressure and cost inflation in materials and labour, by being
inherently more complex and more long-term in nature.
Mid to long-term market drivers remain strong in the housing
sector. The UK's current undersupply of housing remains well
documented and bridging the housing gap is supported by strong
government incentives. This presents substantial potential growth
opportunities for the Group.
Industrial and commercial (I&C) including electric vehicle
(EV) and high voltage (HV) connections
The Group provides multi-utility infrastructure for all sizes
and complexities of I&C and EV projects. The Group's ability to
design and build I&C multi-utility and EV charging
infrastructure of all sizes and complexities, particularly niche
high voltage (132kV) electricity infrastructure, delivered through
the Group's Dunamis business, is an important differentiator for
the Group. Fulcrum also selectively adopts and owns I&C gas and
electricity utility assets in line with our asset growth
strategy.
The Group used its capabilities to secure a variety of major
multi-utility and EV charging infrastructure projects in the
period, supporting projects of national significance. These were
selectively tendered on in line with the Group's margin strategy
but, like the large housing contracts secured, these were most
severely impacted by supply chain pressure and cost inflation by
being significantly complex, and longer-term contracts. As part of
our ongoing business improvement review, we identified a materially
loss-making complex, high voltage infrastructure project which has
been provided for within exceptional items in cost of sales.
The I&C market, including EV connections, presents some
hugely exciting opportunities for the Group and medium to long-term
market growth drivers are very strong. Electricity is a key enabler
in decarbonising the economy cost effectively by 2050, and demand
for electrical infrastructure to power the EV charging network,
renewable energy generating equipment and battery storage
infrastructure, essential to transition to net zero, is expected to
grow rapidly.
This increased need for more electrical infrastructure is
essential to transition to net zero, and Fulcrum remains one of a
limited number of businesses in the UK with the essential
capabilities required to facilitate this.
Maintenance and ownership
The Group's ability to adopt, own and maintain the UK's
essential utility infrastructure is fundamental to our growth
strategy.
The utility assets we own continue to provide a healthy
recurring income and deliver attractive and predictable long-term
returns, and we continued to adopt additional I&C utility
assets in the year, adding them to our income generating
portfolio.
Additional utility asset ownership presents a significant growth
opportunity for the Group and, whilst we are cognisant that the
current market conditions present risk, the current instability in
the market also presents opportunities to acquire asset portfolios
at attractive valuations. Additionally, the current and future
proceeds from the asset sale agreement with ESP provide the Group
with additional financial strength that underpins our asset
ownership growth ambitions and the execution of our strategy.
Our high voltage electrical maintenance capabilities, delivered
though our Maintech Power business, are niche, and will be
essential to maintain the additional electrical and renewable
energy generating infrastructure the UK needs to achieve net
zero.
Smart metering
The UK's energy crisis has presented considerable challenges for
our smart metering operations in the year, affecting the
performance and profitability of the Group's various smart meter
exchange and management contracts.
The sustained volatility and turbulence in the market affected
the performance and profitability of the Group's smart meter
exchange and management contracts with energy suppliers. The
contracts were deeply impacted in the second half of the year,
primarily resulting from the insolvency of several of the Group's
other, smaller energy supplier customers and one of the Group's
labour-only sub-contractors.
After the year end, we agreed to mutually terminate contracts
affected by the UK energy crisis to protect the business by
mitigating their impact on the Group and its performance.
Delivering contracts safely
Maintaining the highest standards of health and safety remains
our highest priority. A safety-first strategy is in place to ensure
zero harm and, although this is well embedded into our culture and
operations, we are never complacent and are committed to continuous
improvement in health and safety performance.
Antony Collins
Chief Executive Officer
1 August 2022
Consolidated statement of comprehensive income
for the year ended 31 March 2022
Year ended Year ended
31 March 31 March
2022 2021
Notes GBP'000 GBP'000
Revenue 61,846 47,054
Cost of sales -- underlying (50,149) (35,211)
Cost of sales -- exceptional items 4 (5,422) (2,050)
Total cost of sales (55,571) (37,261)
Gross profit 6,275 9,793
Administrative expenses -- underlying (15,094) (15,912)
Administrative expenses -- exceptional items 4 (5,202) (6,400)
Total administrative expenses (20,296) (22,312)
Other net gains 5 330 1,353
Operating loss 6 (13,691) (11,166)
Net finance expense (496) (293)
Loss before taxation (14,187) (11,459)
Taxation 7 765 1,178
Loss for the year attributable to equity holders of the parent (13,422) (10,281)
Other comprehensive income
Items that will never be reclassified to profit or loss:
Revaluation of utility assets 10 4,252 1,569
Surplus arising on utility assets internally adopted in the year 10 57 338
Impairment of previously revalued utility assets (477) (3,548)
Deferred tax on items that will never be reclassified to profit or loss (1,083) 560
Total comprehensive expense for the year (10,673) (11,362)
Loss per share attributable to the owners of the business
Basic 9 (5.2)p (4.6)p
Diluted 9 (5.1)p (4.5)p
Adjusted EBITDA 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 (13,691) (11,166)
Equity-settled share-based payment charge 639 436
Other net gains 5 (330) (1,353)
Exceptional items within operating loss 4 10,624 8,450
Depreciation and amortisation 10, 12, 13 3,257 3,739
Adjusted EBITDA 499 106
Surplus arising on sale of domestic utility assets and enhanced payments 5 330 1,353
Adjusted EBITDA including sale of domestic utility assets and enhanced payments 829 1,459
Consolidated statement of changes in equity
for the year ended 31 March 2022
Share Share Revaluation Merger Retained Total
capital premium reserve Restated(1) reserve earnings Restated(1) equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 March 2020 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 of
utility assets -- -- 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 in respect of
items that will never be
reclassified to profit
and loss -- -- 560 -- -- 560
Transactions with equity
shareholders
Equity-settled share-based
payment credit -- -- -- -- 436 436
Balance at 31 March 2021 222 389 9,552 11,347 13,871 35,381
Restatement of opening
balances(1) -- -- (671) -- 671 --
-------------------------- ----- -------- -------- -------------------- -------- --------------------- --------
Balance at 31 March 2021
(restated) (1) 222 389 8,881 11,347 14,542 35,381
Total comprehensive income
for the year
Loss for the year -- -- -- -- (13,422) (13,422)
Revaluation surplus on
external valuation of
utility assets 10 -- -- 4,252 -- -- 4,252
Surplus arising on utility
assets internally adopted
in the year 10 -- -- 57 -- -- 57
Disposal of previously
revalued assets 5 -- -- (1,445) -- 1,445 --
Depreciation on previously
revalued assets -- -- (179) -- 179 --
Additional costs allocated
to previously revalued
assets -- -- (37) -- -- (37)
Exceptional items -- fixed
asset impairment -- -- (477) -- -- (477)
Deferred tax in respect of
items that will never be
reclassed to profit and
loss -- -- (1,083) -- -- (1,083)
Transactions with equity
shareholders
Equity-settled share-based
payment credit -- -- -- -- 639 639
Issue of new shares net of
transaction costs 177 20,388 -- -- -- 20,565
Balance at 31 March 2022 399 20,777 9,969 11,347 3,383 45,875
(1) The revaluation reserve and retained earnings have been
restated to reallocate fair value gains and losses between these
reserves in relation to disposals of utility assets in previous
years. As such, the balance sheet as at 31 March 2021 has been
restated. There is no impact on net assets.
Consolidated balance sheet
as at 31 March 2022
31 March 31 March
2022 2021 Restated(1)
Notes GBP'000 GBP'000
Non-current assets
Property, plant and equipment 10 37,151 37,314
Intangible assets 12 15,597 18,907
Right-of-use assets 13 2,323 3,081
Deferred tax assets 7 3,495 2,710
58,566 62,012
Current assets
Contract assets 20,177 15,640
Inventories 433 438
Trade and other receivables 9,620 6,550
Cash and cash equivalents 16 11,176 3,934
41,406 26,562
Total assets 99,972 88,574
Current liabilities
Trade and other payables (15,825) (12,669)
Contract liabilities (25,272) (27,098)
Current lease liability 13 (802) (996)
Current provisions 17 (3,035) (54)
(44,934) (40,817)
Non-current liabilities
Non-current lease liability 13 (1,873) (2,382)
Borrowings 15 -- (5,483)
Non-current provisions 17 (1,296) --
Deferred tax liabilities 7 (5,994) (4,511)
(9,163) (12,376)
Total liabilities (54,097) (53,193)
Net assets 45,875 35,381
Equity
Share capital 14 399 222
Share premium 20,777 389
Revaluation reserve 9,969 8,881
Merger reserve 11,347 11,347
Retained earnings 3,383 14,542
Total equity 45,875 35,381
(1)The balance sheet has been restated to reflect a reallocation
between the revaluation reserve and retained earnings. There is no
impact on net assets.
The financial statements were approved by the Board of Directors
on 1 August 2022 and were signed on its behalf by:
Jennifer Babington
Non-executive Chair
Company number FC030006
Consolidated cash flow statement
for the year ended 31 March 2022
Year ended Year ended
31 March 31 March
2022 2021
Notes GBP'000 GBP'000
Cash flows from operating activities
Loss for the year after tax (13,422) (10,281)
Tax credit 7 (765) (1,178)
Loss for the year before tax (14,187) (11,459)
Adjustments for:
Depreciation 10, 13 1,832 1,919
Amortisation of intangible assets 12 1,425 1,820
Exceptional items -- fixed asset impairment 4 1,920 1,857
Exceptional items -- intangible asset impairment 4, 12 2,309 4,935
Net finance expense 496 293
Equity-settled share-based payment charge 639 436
Loss/(profit) on disposal of utility assets 5 75 (873)
Gain on IFRS 16 lease modification 13 (16) --
Additional consideration receivable from previous utility asset sales 5 (259) --
Increase in contract assets (4,537) (3,361)
Increase in trade and other receivables (3,154) (201)
Decrease in inventories 5 8
Increase in trade and other payables 3,370 2,995
Decrease in contract liabilities (1,826) (807)
Increase/(decrease) in provisions 17 4,277 (4)
Cash outflow from operating activities (7,631) (2,442)
Tax repaid/(paid) 12 (108)
Net cash outflow from operating activities (7,619) (2,550)
Cash flows from investing activities
Acquisition of external utility assets (2,468) (3,958)
Utility assets internally adopted (2,475) (3,503)
Acquisition of plant and equipment 10 (242) (87)
Acquisition of intangibles 12 (424) (140)
Proceeds on disposal of utility assets 5 6,487 4,578
Receipt of deferred consideration on disposal of utility assets 642 670
Costs paid in relation to disposal of subsidiary -- (1,245)
Costs paid in relation to disposal of utility assets (141) (102)
Proceeds on disposal of assets -- other -- 9
Additional consideration received from previous utility asset sales 49 --
Net cash inflow/(outflow) from investing activities 1,428 (3,778)
Cash flows from financing activities
Proceeds from issue of ordinary shares 14 21,263 --
Share issue transaction costs (698) --
Borrowings received 15 5,250 5,700
Borrowings repaid 15 (10,950) (10,000)
Prepaid arrangement fees (11) (247)
Interest paid and banking charges (non-IFRS 16) (297) (153)
IFRS 16 -- principal payments 13 (1,022) (861)
IFRS 16 -- deposit payments -- (11)
IFRS 16 -- interest payments 13 (121) (139)
IFRS 16 -- proceeds received on disposal of leased vehicle 13 19 --
---------------------------------------------------------------------- ------ ---------- ----------
Net cash inflow/(outflow) from financing activities 13,433 (5,711)
Increase/(decrease) in net cash and cash equivalents 7,242 (12,039)
Cash and cash equivalents at the beginning of the year 3,934 15,973
Cash and cash equivalents at the end of the year 16 11,176 3,934
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 2022 and 31 March
2021. The audited financial information included in this
preliminary results announcement for the year ended 31 March 2022
and audited information for the year ended 31 March 2021 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 2022 which will be delivered to the Registrar of Companies in
due course. Non statutory financial statements for the year ended
31 March 2021 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 2022 and 2021
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
International Financial Reporting Standards as adopted by the
United Kingdom, 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 2022 the Group had net assets of GBP45.9 million
(2021: GBP35.4 million), net current liabilities of GBP3.5 million
(2021: GBP14.3 million), cash of GBP11.2 million (2021: GBP3.9
million) and borrowings of GBPnil (2021: GBP5.5 million) as set out
in the consolidated balance sheet. In the year ended 31 March 2022,
the Group suffered a loss after tax of GBP13.4 million (2021:
GBP10.3 million) and had net cash inflows of GBP7.2 million (2021:
net cash outflows of GBP12.0 million) after investing GBP4.9
million in utility assets (2021: GBP7.5 million) and repaying a net
GBP5.7 million of borrowings (2021: GBPnil).
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 has prepared cash flow forecasts based upon its
assumptions with particular consideration of the key risks and
uncertainties, as well as taking into account available borrowing
facilities. The going concern period assessed is until 30 September
2023 which has been selected as it can be projected with a good
degree of expected accuracy.
The Group successfully completed a share placing in December
2021 generating gross proceeds of GBP21.3 million to help fund the
Group's continued growth strategy. Consequently the Group re-paid
its Revolving Credit Facility (RCF) in full on 1 January 2022. The
RCF of GBP10 million remains available up to 30 November 2022,
although the Group currently has no plans to utilise this facility.
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 continued
sector growth 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 40%. Even under the downside scenario, the Group
continues to project sufficient cash reserves, continues to operate
with headroom on borrowing facilities and associated covenants, and
has additional mitigation measures within management's control, for
example accelerating cash receipts and reducing operating costs,
that could be deployed to create further cash. To further test the
sensitivity, the Group also considered a more severe downside
scenario that reflected even further deterioration in operational
and commercial performance. Under this scenario, the Group forecast
a cash low point in the second half of 2023, but the management
team are confident that it has various immediate mitigating levers
that would avoid, and sufficiently alleviate, this position.
Based on these considerations, together with the Directors'
knowledge and experience of the markets in which the Group
operates, the Directors considered it appropriate to adopt the
going concern basis of accounting in the preparation of the Group's
financial statements.
Adoption of new and revised International Financial Reporting
Standards (IFRSs) and IFRIC interpretations
The Group has applied the following standards and amendments for
the first time for its annual reporting period commencing 1 April
2021:
-- Amendments to IAS 1 "Presentation of Financial Statements";
-- Amendments to IFRS 3 "Business Combinations";
-- Amendments to IFRS Practice Statement 2 "Making Materiality Judgements";
-- Amendments to IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors"; and
-- Amendments to IAS 12 "Income Taxes".
Their adoption has not had any material impact on the
disclosures or on the amounts reported. Certain new accounting
standards and interpretations have been published that are not
mandatory for 31 March 2022 reporting periods and have not been
early adopted by the Group. These standards are not expected to
have a material impact on the entity in the current or future
reporting periods and on foreseeable future transactions.
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 2022 2021
----------------------------------- -----------------------------------
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 57,631 4,215 61,846 43,400 3,654 47,054
Adjusted EBITDA* (1,557) 2,056 499 (969) 1,075 106
Other net gains 146 184 330 480 873 1,353
Share-based payment charge (639) - (639) (436) - (436)
Depreciation and amortisation (2,606) (651) (3,257) (2,979) (760) (3,739)
-------------------------------------------- --------------- -------- -------- --------------- -------- --------
Reportable segment operating (loss)/profit
before exceptional items (4,656) 1,589 (3,067) (3,904) 1,188 (2,716)
Cost of sales - exceptional items (3,502) (1,920) (5,422) - (2,050) (2,050)
Administrative expenses - exceptional items (5,202) - (5,202) (6,400) - (6,400)
-------------------------------------------- --------------- -------- -------- --------------- -------- --------
Reporting segment operating loss (13,360) (331) (13,691) (10,304) (862) (11,166)
Net finance expense (107) (389) (496) (171) (122) (293)
-------------------------------------------- --------------- -------- -------- --------------- -------- --------
Loss before tax (13,467) (720) (14,187) (10,475) (984) (11,459)
-------------------------------------------- --------------- -------- -------- --------------- -------- --------
* Adjusted EBITDA is operating loss excluding the impact of
exceptional items, other net 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
----------------------- ------------------------------------------------------------------------------------------
Operating loss excluding exceptional items, other net gains, amortisation and depreciation
Adjusted EBITDA and equity-settled share-based payments.
Adjusted loss Loss before taxation excluding amortisation of acquired intangibles and exceptional items
before taxation included within cost of sales and administrative expenses.
Net assets per
share Net assets divided by the number of shares in 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"
31 March 31 March
2022 2021
GBP'000 GBP'000
---------------------------------------- -------- --------
Operating loss (13,691) (11,166)
Adjusted for:
Exceptional items within operating loss 10,624 8,450
Other net gains (330) (1,353)
Amortisation and depreciation 3,257 3,739
Equity-settled share-based payments 639 436
---------------------------------------- -------- --------
Adjusted EBITDA 499 106
---------------------------------------- -------- --------
(b) Reconciliation of loss before tax to "adjusted loss before
tax"
31 March 31 March
2022 2021
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Loss before tax (14,187) (11,459)
Adjusted for:
Exceptional items included in cost of sales 5,422 2,050
Exceptional items included in administrative expenses 5,202 6,400
Amortisation of acquired intangibles 1,248 1,356
------------------------------------------------------ -------- --------
Adjusted loss before tax (2,315) (1,653)
------------------------------------------------------ -------- --------
(c) Net assets per share
31 March 31 March
2022 2021
GBP'000 GBP'000
------------------------------------- -------- --------
Net assets at the end of the year 45,875 35,381
Issued shares at the end of the year 399,313 222,118
Net assets per share 11.5p 15.9p
------------------------------------- -------- --------
4. Exceptional items
Year Year
ended ended
31 March 31 March
2022 2021
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Exceptional items included in cost of sales 5,422 2,050
Exceptional items included in administrative expenses 5,202 6,400
------------------------------------------------------ --------- ---------
10,624 8,450
------------------------------------------------------ --------- ---------
(a) Exceptional items included in cost of sales
Year Year
ended ended
31 March 31 March
2022 2021
GBP'000 GBP'000
--------------------------------- --------- ---------
Fixed asset impairment 1,920 1,857
Remedial works to utility assets - 193
Onerous contracts 3,502 -
--------------------------------- --------- ---------
5,422 2,050
--------------------------------- --------- ---------
Fixed asset impairment relates to the impairment of utility
assets not previously revalued upwards. Onerous contracts costs
relate to losses from the Group's smart meter exchange and
management contracts with energy suppliers and the loss for a
complex, high voltage infrastructure project.
(b) Exceptional items included in administrative expenses
Year Year
ended ended
31 March 31 March
2022 2021
GBP'000 GBP'000
-------------------------------- --------- ---------
Restructuring costs 575 569
One-off legal and adviser costs 242 896
Intangible asset impairment 2,309 4,935
Onerous contracts 2,076 -
-------------------------------- --------- ---------
5,202 6,400
-------------------------------- --------- ---------
Restructuring costs relate to employee exit and severance costs.
Intangible asset impairment relates to the impairment of goodwill
and software and development costs. Onerous contracts costs relate
to losses from the Group's smart meter exchange and management
contracts with energy suppliers.
Net cash outflows in the year ended 31 March 2022 for
exceptional items in cost of sales and administrative expenses were
GBP1.6 million (2021: GBP1.2 million).
5. Other net gains
Included within other net gains are the following amounts:
Year Year
ended ended
31 March 31 March
2022 2021
GBP'000 GBP'000
------------------------------------------------------- --------- ---------
(Loss)/profit on disposal of assets (75) 873
Additional consideration receivable from utility asset
sales in previous years 259 -
Enhanced payments received 146 480
------------------------------------------------------- --------- ---------
330 1,353
------------------------------------------------------- --------- ---------
Additional consideration receivable from utility asset sales in
previous years is amounts due to the Group for utility assets sold
in previous years that were non-metered when sold and became
metered in the year ended 31 March 2022.
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 loss on disposal of assets represents the loss 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.
Year
Year ended ended
31 March 31 March
2022 2021
GBP'000 GBP'000
-------------------------------------------------- ---------- ---------
Consideration - proceeds received 6,487 4,578
Consideration - retention receivable 201 142
-------------------------------------------------- ---------- ---------
Total consideration 6,688 4,720
Net book value of assets sold (including the
effect of previous revaluations) (6,580) (3,712)
Legal and other costs relating to the transaction (173) (102)
Discounting of retention consideration due
in more than one year (10) (33)
-------------------------------------------------- ---------- ---------
(Loss)/profit on disposal of assets (75) 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 GBP1,445,000 (2021: GBP574,000).
6. Operating loss
Included in operating loss are the following charges:
Year Year
ended ended
31 March 31 March
2022 2021
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Amortisation of intangible assets 1,425 1,820
Depreciation of property, plant and equipment 838 1,027
Depreciation of right-of-use asset 994 892
---------------------------------------------- --------- ---------
7. Taxation
Year Year
ended ended
31 March 31 March
2022 2021
GBP'000 GBP'000
----------------- --------- ---------
Current tax (380) (130)
Deferred tax (385) (1,048)
----------------- --------- ---------
Total tax credit (765) (1,178)
----------------- --------- ---------
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 Spring Budget
2021, the government announced that the corporation tax main rate
would rise to 25% for companies with profits over GBP250,000
together with the introduction of a small profits rate of 19% with
effect from 1 April 2023. The increase in the tax rate to 25% is
considered to be substantively enacted, and accordingly the
deferred tax balances expected to unwind after 1 April 2023 have
been calculated using the 25% tax rate.
The Group has GBP12.5 million (31 March 2021: GBP12.1 million)
of tax losses for which deferred tax assets of GBP3.1 million (31
March 2021: GBP2.3 million) have been recognised. The deferred tax
asset is expected to be recovered over five years. The Group also
has unrecognised tax losses of GBP9.7 million (31 March 2021:
GBP3.0 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
2022 2021
GBP'000 GBP'000
------------------------------------------------------- --------- ---------
Loss before taxation (14,187) (11,459)
------------------------------------------------------- --------- ---------
Tax using the UK corporation tax rate of 19.0% (2021:
19.0%) 2,696 2,177
Non-taxable items (501) (614)
Effect of change in rate of corporation tax 255 -
Tax deductions for share options exercised (121) (83)
Adjustment to tax charge in respect of previous year's
corporation tax 380 130
Adjustment to tax charge in respect of previous year's
deferred tax (382) 148
Utilisation of previously unrecognised losses - 345
Release of previously recognised losses (1,262) (579)
Chargeable gains arising (300) (346)
------------------------------------------------------- --------- ---------
Total tax credit 765 1,178
------------------------------------------------------- --------- ---------
Movement in deferred tax balances
31 March 2022 31 March 2021
----------------------------- -----------------------------
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 2,710 (4,511) 1,784 (5,193)
Recognised in profit or loss
Adjustment in respect of previous years (388) 6 106 42
Tax losses (utilised)/recognised 1,721 - 1,055 -
Effect of change in rate of corporation tax 831 (576) - -
Origination/reversal of other timing differences (117) 170 45 379
Reclassification between assets and liabilities - - 299 (299)
Release of previously recognised losses (1,262) - (579) -
Recognised in other comprehensive income
Effect of change in rate of corporation tax - (798) - -
Revaluation of property, plant and equipment - (285) - 560
------------------------------------------------- ----------- ---------------- ----------- ----------------
At the end of the year 3,495 (5,994) 2,710 (4,511)
------------------------------------------------- ----------- ---------------- ----------- ----------------
8. Dividends
No dividends were paid in the year ended 31 March 2022 or 31
March 2021.
No interim dividends were declared and no final dividends are
proposed relating to the year ended 31 March 2022.
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 Year
ended ended
31 March 31 March
2022 2021
GBP'000 GBP'000
------------------------------------------------------- --------- ---------
Loss for the year used for calculation of basic EPS (13,422) (10,281)
Exceptional items included in cost of sales 5,422 2,050
Exceptional items included in administrative expenses 5,202 6,400
Remove tax relief on exceptional items (2,019) (1,606)
Amortisation of intangibles 1,248 1,356
------------------------------------------------------- --------- ---------
Loss for the year used for calculation of adjusted EPS (3,569) (2,081)
------------------------------------------------------- --------- ---------
Number of shares
31 March 31 March
2022 2021
Number Number
of shares of shares
('000) ( ' 000)
----------------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares for the purpose
of basic EPS 260,169 222,118
Effect of potentially dilutive ordinary shares 1,739 7,434
----------------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares for the purpose
of diluted EPS 261,908 229,552
----------------------------------------------------------- ---------- ----------
EPS
Basic (5.2)p (4.6)p
Diluted basic (5.1)p (4.5)p
----------------------------------------------------------- ---------- ----------
Adjusted basic (1.4)p (0.9)p
Adjusted diluted basic (1.4)p (0.9)p
----------------------------------------------------------- ---------- ----------
10. Property, plant and equipment
(a) Reconciliation of carrying amount
Fixtures
Utility and Computer
assets fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- -------- --------- ---------- --------
Cost
At 31 March 2020 66,588 1,065 1,276 68,929
Externally acquired assets 3,485 19 68 3,572
Internally adopted assets 3,170 - - 3,170
Surplus arising on internally adopted
assets 338 - - 338
Revaluation 1,659 - - 1,659
Disposals (3,860) (15) - (3,875)
-------------------------------------- -------- --------- ---------- --------
At 31 March 2021 71,380 1,069 1,344 73,793
Externally acquired assets 2,677 22 220 2,919
Internally adopted assets 2,424 - - 2,424
Surplus arising on internally adopted
assets 57 - - 57
Revaluation 4,252 - - 4,252
Disposals (6,663) - - (6,663)
-------------------------------------- -------- --------- ---------- --------
At 31 March 2022 74,127 1,091 1,564 76,782
-------------------------------------- -------- --------- ---------- --------
Accumulated depreciation
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)
Depreciation charge for the year (613) (80) (145) (838)
Impairment from external revaluation (2,397) - - (2,397)
Disposals 83 - - 83
-------------------------------------- -------- --------- ---------- --------
At 31 March 2022 (37,280) (936) (1,415) (39,631)
-------------------------------------- -------- --------- ---------- --------
Net book value
At 31 March 2022 36,847 155 149 37,151
-------------------------------------- -------- --------- ---------- --------
At 31 March 2021 37,027 213 74 37,314
-------------------------------------- -------- --------- ---------- --------
At 31 March 2020 33,562 348 155 38,820
-------------------------------------- -------- --------- ---------- --------
Utility assets include GBP0.4 million (2021: GBP0.4 million) of
meter assets valued at cost less depreciation to date.
Internally adopted assets are stated at the full cost of
construction of GBP3.7 million (2021: GBP8.8 million) less the
deficit arising on internally adopted assets of GBP1.3 million
(2021: GBP5.6 million).
Disposals include utility assets with a net book value of
GBP6,580,000 that were disposed of as part of Tranches 3 and 4 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 2022. 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 value in use assessment is sensitive to changes in the key
assumptions used. Sensitivity analysis has been performed, with a
0.6% increase in the discount rate leading to a GBP1.0 million
reduction in the revaluation gain and a 0.6% reduction in the
discount rate leading to a GBP0.9 million increase in the
revaluation gain.
The utility assets and utility assets under construction are the
only financial assets that are held at fair value in the financial
statements.
(c) Impairment loss
Following the valuation of the utility assets estate, a net
revaluation gain of GBP1.9 million (2021: GBP3.8 million net
impairment charge) was recorded. A revaluation gain of GBP4.3
million (2021: GBP1.6 million) was recognised in the revaluation
reserve, with an impairment of GBP0.5 million (2021: GBP3.5
million) offset against the revaluation reserve and a GBP1.9
million impairment charge (2021: GBP1.9 million) 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 2022 the balance was GBP5.5 million (2021: GBP9.6
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 2020 14,251 12,607 4,675 31,533
Additions - - 140 140
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2021 14,251 12,607 4,815 31,673
Additions - - 424 424
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2022 14,251 12,607 5,239 32,097
---------------------------------------- -------- -------------- ------------ --------
Accumulated amortisation and impairment
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)
Amortisation for the year - (1,248) (177) (1,425)
Impairment (2,149) - (160) (2,309)
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2022 (6,643) (5,740) (4,117) (16,500)
---------------------------------------- -------- -------------- ------------ --------
Net book value
At 31 March 2022 7,608 6,867 1,122 15,597
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2021 9,757 8,115 1,035 18,907
---------------------------------------- -------- -------------- ------------ --------
At 31 March 2020 14,251 9,689 1,582 25,522
---------------------------------------- -------- -------------- ------------ --------
(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 and
the acquisition of The Dunamis Group Limited on 5 February 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 or
Dunamis, which has two CGUs. 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 plans approved by the Board.
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 8.1% and 9.8% (2021: between 7.6% and
9.4%) 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% (2021: 2.0%). This 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 one of the Dunamis
CGUs. Consequently, an impairment of GBP2.1 million was made to the
carrying value of goodwill. No impairment was recognised for the
Fulcrum CGU.
A segment-level summary of the acquired intangible assets
allocation is presented below:
Fulcrum Dunamis Total
GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- --------
Goodwill 2,225 5,383 7,608
Brands and customer relationships - 6,867 6,867
---------------------------------- -------- -------- --------
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
GBP0.9 million, and the change to the long-term growth rate would
increase the impairment by GBP0.7 million.
An impairment charge of GBP0.2 million (2021: GBPnil) has been
recognised for software used in the delivery of contracts deemed to
be onerous during the year ended 31 March 2022.
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
2022 2021
Right-of-use assets GBP'000 GBP'000
-------------------- -------- --------
Land and buildings 1,254 1,500
Plant and machinery 1,069 1,581
-------------------- -------- --------
Total 2,323 3,081
-------------------- -------- --------
31 March 31 March
2022 2021
GBP'000 GBP'000
--------------------------------- -------- --------
Additions to right-of-use assets 255 1,252
--------------------------------- -------- --------
Additions to right-of-use assets include new leases and
extensions to existing lease agreements.
31 March 31 March
2022 2021
Depreciation on right-of-use assets GBP'000 GBP'000
------------------------------------ -------- --------
Land and buildings 291 247
Plant and machinery 703 645
------------------------------------ -------- --------
Total 994 892
------------------------------------ -------- --------
Land and buildings Plant and machinery
-------------------- ---------------------
31 March 31 March 31 March 31 March
2022 2021 2022 2021
Maturity of lease liabilities GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ --------- --------- ---------- ---------
Less than one year 298 310 504 686
Between one and five years 1,123 1,191 605 946
In more than five years 145 245 - -
------------------------------ --------- --------- ---------- ---------
Total 1,566 1,746 1,109 1,632
------------------------------ --------- --------- ---------- ---------
31 March 31 March
2022 2021
Other impact on profit and loss GBP'000 GBP'000
------------------------------------------- -------- --------
Finance costs on leases (121) (139)
Expense on short-term and low value leases (490) (637)
Gain on lease modification 16 -
------------------------------------------- -------- --------
Total (595) (776)
------------------------------------------- -------- --------
31 March 31 March
2022 2021
Cash flows in respect of leases GBP'000 GBP'000
--------------------------------------------------- -------- --------
IFRS 16 - principal payments (1,022) (861)
IFRS 16 - interest payments (121) (139)
Cash outflows relating to short-term and low value
leases (490) (637)
Proceeds received on disposal of leased vehicle 19 -
--------------------------------------------------- -------- --------
Total (1,614) (1,637)
--------------------------------------------------- -------- --------
During the year ended 31 March 2022, the Group disposed of a
leased vehicle for proceeds of GBP19,000. This resulted in a gain
on lease modification in the statement of comprehensive income of
GBP16,000. No leases were disposed of or modified in the year ended
31 March 2021.
14. Share capital
31 March 31 March
2022 2021
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Authorised
500,000,000 ordinary shares of GBP0.001 each 500 500
--------------------------------------------------- -------- --------
Allotted, issued and fully paid
399,313,458 (2021: 222,117,945) ordinary shares of
GBP0.001 each 399 222
--------------------------------------------------- -------- --------
Ordinary shareholders are entitled to dividends as declared.
During the year ended 31 March 2022, 177,195,513 new ordinary
shares were issued. The shares issued had a nominal value of
GBP0.001 each and were issued at GBP0.12 each. No new ordinary
shares were issued during the year ended 31 March 2021.
15. Interest-bearing loans and borrowings
On 1 December 2020, the Group entered into a two year Revolving
Credit Facility agreement with Lloyds Banking Group for GBP10
million. This facility supports the financing, construction and
acquisition of pipeline assets. During the year ended 31 March
2022, net repayments of GBP5.7 million were made by the Group. At
31 March 2022, GBP10 million of this facility remained available
for future drawdowns.
(a) Changes in liabilities arising from financing activities
31 March 31 March
2022 2021
GBP'000 GBP'000
------------------------------------------- -------- --------
At the beginning of the year 5,483 10,000
Repaid in year (10,950) (10,000)
New borrowings 5,250 5,700
Capitalised borrowing fees (11) (260)
Amortisation of capitalised borrowing fees 134 43
------------------------------------------- -------- --------
At the end of the year (94) 5,483
------------------------------------------- -------- --------
As no borrowings are outstanding as at 31 March 2022, the
capitalised borrowing fees have been included within trade and
other receivables.
(b) Terms and repayment schedule
Year 31 March 31 March
Nominal of 2022 2021
Currency interest rate maturity GBP'000 GBP'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 cash/(debt)
31 March 31 March
2022 2021
GBP'000 GBP'000
-------------------------- -------- --------
Cash and cash equivalents 11,176 3,934
Borrowings - (5,483)
-------------------------- -------- --------
Net cash/(debt) 11,176 (1,549)
-------------------------- -------- --------
17. Provisions
Provision for costs to Provision for onerous Other provisions
settle ongoing legal claims contracts GBP'000
GBP'000 GBP'000 Total
----------------------------- ---------------------------- ---------------------------- ------------------ -------
At 31 March 2020 - - 58 58
Provision utilised during the
year - - (58) (58)
Provision created during the
year 54 - - 54
----------------------------- ---------------------------- ---------------------------- ------------------ -------
At 31 March 2021 54 - - 54
Provision released during the
year (54) - - (54)
Provision created during the
year - 5,578 121 5,699
Provision utilised during the
year - (1,368) - (1,368)
----------------------------- ---------------------------- ---------------------------- ------------------ -------
At 31 March 2022 - 4,210 121 4,331
----------------------------- ---------------------------- ---------------------------- ------------------ -------
The provision for onerous contracts relates to future losses
expected to be incurred on contracts deemed to be onerous. The
provision created during the year for other provisions relates to
rebates payable on the Group's smart meter exchange and management
contracts. The amount and timing of the outflows related to these
provisions are uncertain, but a reliable estimate has been
made.
Of the GBP4.2 million provision for onerous contracts, GBP1.3
million is expected to be settled in more than 12 months. All other
provisions are expected to be settled within 12 months.
18. 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 are included in the Remuneration Report of the Annual
Report and Accounts.
In the year, sales totalling GBP1,148,332 (2021: GBP23,790) were
made by the Group to companies in which key management personnel
held significant interests, of which GBP165,851 (2021: GBPnil) was
still outstanding at the year end.
In the year, purchases totalling GBP776,946 (2021: GBP347,110)
were made by the Group from companies in which key management
personnel held significant interests, of which GBPnil (2021:
GBP7,954) was still outstanding at the year end. The purchases were
for equipment hire and fuel cards used in the ordinary course of
business.
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END
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