TIDMNTQ
RNS Number : 1625R
Enteq Upstream PLC
13 June 2018
Enteq Upstream plc
("Enteq", the "Company" or the "Group")
Final results for the year ended 31 March 2018
AIM traded Enteq Upstream plc, the oil and gas drilling
technology company, today announces its financial results for the
year ended 31 March 2018.
Key features
-- Return to positive EBITDA
-- North American market stabilised at new oil price and rig count
-- Re-built production capacity
-- Investment in new technologies
-- Maintained cash reserves for future investment
Financial metrics
Years ended 31 March:
2018 2017
* Revenue $6.5m $4.8m
* Adjusted EBITDA(1) $0.2m $(0.5)m
* Loss before tax $0.6m $1.1m
0.8 cents 1.7 cents
* Adjusted loss per share(2)
1.0 cents 2.0 cents
* Loss per share
* Cash balance $15.5m $15.3m
Outlook
-- Core market of USA land drilling expected to remain near current levels
-- International markets show further promise although cash constrained
-- Enteq market share maintained or improved
-- New products, technologies and partnerships will increase available market
Martin Perry, CEO of Enteq Upstream plc, commented:
"Enteq has managed the business through difficult market
conditions. Cash has been preserved, there has been a return to
profitability and strategic investment has been maintained.
Core competencies are in place, technical differentiation is
being improved and market share maintained. The business is poised
for growth opportunities."
For further information, please contact:
Enteq Upstream plc +44 (0) 1494 618739
Martin Perry, Chief Executive Officer
David Steel, Finance Director
Investec Bank plc (Nomad and Broker) +44 (0) 20 7597 5970
Chris Treneman, Patrick Robb, David Anderson
(1) Adjusted EBITDA is reported profit before tax adjusted for
interest, depreciation, amortisation, foreign exchange movements,
Performance Share Plan charges and exceptional items.
(2) Adjusted loss per share is reported loss per share adjusted
for amortisation, foreign exchange movements and exceptional
items,
Chairman's Statement
Review of the Year
This year's financial results have been encouraging. Revenue has
increased and, importantly, there has been a return to
profitability at the EBITDA level. Cash reserves during the year
have increased once again even though investment in Engineering,
Product Development and increases in the rental fleet have
continued. This has been achieved as a result of prudent and
decisive management initiatives taken throughout the down-turn and
which have continued into this current period.
The global oil and gas market has found a new, more stable,
level of activity during the year. Following a number of years of
turbulence, with a dropping oil price and unpredictable rig
utilisation creating difficulties for the entire sector, a year of
relative stability has allowed for some more organised and rational
planning.
Enteq remains heavily dependent on the North American
directional oil drilling market but has established further
in-roads into the markets in the Far East and Middle East. The rig
count in North America is now approximately 1,000, up from 840 in
April 2017 and 420 in April 2016, but still significantly below the
2,000 plus in 2014.
Enteq's electronic and sensor equipment is sold as a capital,
re-useable, asset and consequently it was feared that some
significant over capacity would remain in the market even during a
recovery period. However, through a pro-active scheme of upgrading
and replacing older equipment, Enteq has effectively re-established
a secure customer base.
Several technical advances were made during the year. Utilising
a grant received from Innovate UK, a funding body of the UK
government, Enteq has made good progress in the development of an
innovative inclination sensor which will be applicable to both
existing and new markets. Patents have been filed in relation to a
novel power and data communication system for Logging While
Drilling and IP with potential for improving "in-well" data
transmission rates has been purchased.
During the year, the electronic and sensor manufacturing was
successfully relocated from leased premises in California to a
newly re-furbished facility within the existing Enteq freehold site
in Houston. As Enteq's US customer base is largely within the
greater Houston area, this move improves both support and repair
responsiveness as well as enhancing the critical mass at the
Houston operations, where headcount is now growing again.
The core staff have remained very loyal to Enteq during a
difficult few years and the Board thanks them for their
support.
Prospects
The recent oil price stability has allowed greater certainty to
be placed on medium-term planning throughout the industry. North
American drilling is again delivering good returns from shale
producing oil. Outside North America there are increasingly more
initiatives to exploit shale-based oil and gas and also further
investment in conventional drilling and production.
Enteq is well positioned with both their current and evolving
technologies to support all new drilling opportunities.
Iain Paterson
Chairman
Chief Executive's Operating and Strategic Review
Market Overview
Enteq supplies Measurement While Drilling (MWD) equipment to the
oil and gas industry world-wide to enable directional drilling.
Directional drilling is carried out by oilfield service
companies who either purchase equipment from third parties such as
Enteq or develop the equipment themselves. Measurement While
Drilling equipment is used on every rig which drills directional
wells.
A sharp reduction in the price of crude oil in 2015 gave rise to
an uncertain period in the market for the last 3 years, however,
coming in to 2018, the price of oil has stabilised and the key
market indicator of the North American rig count has continued to
increase to the current level in excess of 1,000 compared to 840 in
April 2017 and 420 in April 2016. However, this remains
significantly below the 2,000 plus level of 2014. Although activity
levels have improved, the pricing in the market generally remains
under pressure with margins for operators, service companies (Enteq
customers) and suppliers continuing to be squeezed.
The directional drilling market is divided between the 'major'
service companies who are vertically integrated using their own
equipment, and the 'independents' who need to acquire equipment,
such as the Measurement While Drilling equipment provided by Enteq,
from third parties. Enteq supplies a competitive solution with an
excellent record of reliability and also offers good financial
terms on rental and purchase options. Enteq has maintained good
relationships with the independent service companies and maintained
market share.
Outside North America, Enteq equipment continues to prove its
capability in China, Russia, Saudi Arabia, Oman and Indonesia.
Despite local competition, Enteq has significant further
opportunities.
Product development
Enteq has invested further in its core disciplines within
engineering and software development.
New development and patent applications related to Logging While
Drilling connectivity have been progressed, a purchase of IP
related to a potential new downhole communication has been
completed, and the funded programme of development of additional
sensors for potential Geothermal wells is on-track.
Sales & Marketing
Regular contact is maintained with the customer base from the
Group's operational hub in Houston and by the Chief Operations
Officer in North America. International opportunities and sales are
generated from the UK office and by a representative in China.
Business development trips are made as and when required.
Future strategic direction
Enteq is operating a strong, profitable, cash generative
business in a sector which is in recovery, is sustainable long
term, and is expected to grow. Enteq has a strong balance sheet,
and also has the ability to raise further funds, should incremental
opportunities be available. Through investment in technology, both
in-house and through partnerships, the market being addressed can
be enlarged. The current customer base, and therefore market share,
remains strong. Additional growth outside North America is
expected.
Conclusion
Enteq has managed the business through difficult market
conditions. Cash has been preserved, there has been a return to
profitability and strategic investment has been maintained.
Core competencies are in place, technical differentiation is
being improved and market share maintained. The business is poised
for growth opportunities.
Martin Perry
Chief Executive Officer
Financial Review
Income Statement
Year to 31 March: 2018 2017
$ million $ million
Revenue 6.5 4.8
Cost of Sales (2.2) (1.7)
Gross profit 4.3 3.1
Overheads (4.1) (3.6)
----------------------------- ---------- ----------
Adjusted EBITDA 0.2 (0.5)
Depreciation & amortisation (0.8) (0.5)
Other charges (0.1) (0.2)
Ongoing operating loss (0.7) (1.2)
Other exceptional items (0.1) -
Interest 0.2 0.1
----------------------------- ---------- ----------
Loss before tax (0.6) (1.1)
Tax - (0.1)
----------------------------- ---------- ----------
Loss after tax (0.6) (1.2)
============================= ========== ==========
The improvement in the results for the year ended 31 March 2018
arise from the stabilization of the North American market. The
price of a barrel of West Texas Intermediate ("WTI") has risen from
$49 at the start of April 2017 to $65 as at 31 March 2018; in
addition, the price has not dropped below $55 since mid-November
2017.
This price progression has resulted in the North American rig
count rising from approximately 840 at the start of the financial
year to just over 1,000 at the end. As Enteq's revenue is derived
from both rigs being added to customers' fleets and on-going
replacement of equipment during rig operation, the North American
derived turnover rose from $3.4m to this year's $6.0m.
Internationally, the market continues to be both cashflow
constrained and subject to the uncertain timing of big ticket
projects. Enteq's international revenue is down from $1.4m to
$0.5m.
The full year gross margin was 67%, up on the 65% of the
previous year. This is primarily due to the increasing level of
rental revenue as a result in the investment in the rental fleet
(up from 10% of revenue in the year to 31 March 2017 to 15% of
revenue this year).
Total overheads, at $4.1m, were up $0.5m on last year's figure.
This reflected the increased costs in the second half of the year,
primarily due to:
-- the increase in non-production and development costs of
expanding the engineering and mechanical component teams, including
recruitment costs;
-- the increase in activity related general overheads, such as subsistence and travel; and
-- the "ramp up" costs associated with setting up the new
electronic component production facility at South Houston (the
leased Santa Clara facility being closed in Mid-March 2018).
Note that the actual relocation cost of the electronic component
production move of $0.1m is shown within the exceptional items.
The combined depreciation and amortisation charge was up due to
the deprecation charge relating to the rental fleet increasing from
$0.2m last year to $0.6m this year. This reflects the carrying
value of the rental fleet growing from $0.5m as at 31 March 2017 to
$2.1m at the end of this year.
The "Other charges" included in the ongoing operating loss for
the year primarily relate to the non-cash charge associated with
the Performance Share Plan.
Statement of Financial Position
Enteq's net assets at the year-end comprised of the following
items:
As at 31 March: 2018 2017
$million $million
Other intangible assets 1.2 0.6
Property, plant & equipment 2.3 2.3
Rental fleet 2.1 0.5
Net working capital 2.5 5.0
Cash 15.5 15.3
----------------------------- ---------- ----------
Net assets 23.6 23.7
============================= ========== ==========
The "Other intangible assets" represent the value of the
on-going R&D work, carried out by the engineering team,
capitalised to date, less the amortisation relating to the products
fully commercialised (primarily software releases).
The net book value of property, plant & equipment has
remained at $2.3m due to the increase of $0.1m relating to the
investment in constructing the new electronic component facility at
South Houston being offset by a similar depreciation charge.
The increase in the net book value of the rental fleet reflects
the number of kits rising from 6, as at 1 April 2017, to 14 at the
year-end combined with the increasing value of components included
in the new kits.
The $2.5m decrease in net working capital is due to the
management's focus on the cash impact of this item. During the year
there was a reduction in trade debtors ($1.6m) and increase in
trade creditors and accruals ($0.9m).
Cash flows
Year to 31 March: 2018 2017
$ million $ million
Adjusted EBITDA 0.2 (0.5)
Change in net working capital 2.6 1.2
------------------------------- ------------ -----------
Operational cash generated 2.8 0.7
Investment in R&D (0.7) (0.4)
Investment in rental fleet (2.2) (0.4)
CAPEX (0.2) -
Equipment disposal proceeds 0.1 -
Interest and share issues 0.4 0.3
Net cash movement 0.2 0.2
Opening cash balances 15.3 15.1
Closing cash balances 15.5 15.3
=============================== ============ ===========
The increase in R&D spend reflects the expansion of the
engineering team during the second half of the year plus the legal
fees regarding filing patent applications in order to protect
intellectual property being created.
The robustness of the balance sheet enabled Enteq to expand its
customer base by continuing to offer rental terms, with the number
of kits rising from 6 as at 1 April 2017 to 14 at the year end.
The CAPEX relates to the cost of constructing the new electronic
component facility at the South Houston site.
Financial Capital Management
Enteq's financial position continues to be robust. Enteq had no
bank borrowings or other debt and had a closing cash position of
$15.5m as at 31 March 2018.
Enteq monitors its cash balances daily and operates under
treasury policies and procedures which are set by the Board.
The financial statements are presented in US dollars as the
Company's primary economic environment, in which it operates and
generates cash flows, is one of US dollars. Apart from its UK based
overhead costs, substantially all other transactions are transacted
in US dollars.
Enteq is subject to the foreign exchange rate fluctuations to
the extent that it holds non-US Dollar cash deposits. These GBP
denominated holdings are now approximately 1% of total cash
holdings, down from last year's 6% due to timing differences in
converting USD to GBP.
Annual Report and Accounts
The 2018 Annual Report and Accounts has today been sent to
shareholders and is available on the Company's website,
www.enteq.com.
Annual General Meeting
The Company's Annual General Meeting will be held on 26
September 2018 at 12.00 noon at the offices of Investec Bank plc,
30 Gresham Street, London EC2V 7QP.
Copies of these documents can also be obtained during normal
business hours at the registered office of the company:
The Courtyard
High Street
Ascot
Berks SL5 7HP
David Steel
Finance Director
Enteq Upstream Plc
Consolidated Income Statement
Year to
31 March
Year to 31 March 2018 2017
Notes $ 000's $ 000's $ 000's $ 000's
Ongoing Exceptional
operations items Total Total
Revenue 2 6,460 - 6,460 4,762
Cost of Sales (2,141) - (2,141) (1,661)
Gross Profit 4,319 - 4,319 3,101
Administrative expenses before
amortisation (4,994) - (4,994) (4,235)
Amortisation of acquired intangibles 6 (92) - (92) (68)
Other exceptional items 3 - (57) (57) (54)
Foreign exchange profit on operating
activities 48 - 48 (8)
------------ ------------ --------- ----------
Total Administrative expenses (5,038) (57) (5,095) (4,365)
Operating loss (719) (57) (776) (1,264)
Finance income 175 - 175 127
Loss before tax (544) (57) (601) (1,137)
Tax expense 4 (3) - (3) (48)
Loss for the period (547) (57) (604) (1,185)
============ ============ ========= ==========
Loss attributable to:
------------ ------------ --------- ----------
Owners of the parent (547) (57) (604) (1,185)
============ ============ ========= ----------
Loss per share (in US cents): 5
Basic (1.0) (2.0)
Diluted (1.0) (2.0)
Adjusted loss per share (in US
cents): 5
Basic (0.8) (1.7)
Diluted (0.8) (1.7)
Enteq Upstream Plc
Year to 31 Year to 31
Consolidated Statement of Comprehensive Income March 2018 March 2017
$ 000's $ 000's
Loss for the year (604) (1,185)
Other comprehensive income for the year:
Items that will not be reclassified subsequently
to profit and loss - -
Items that will be reclassified subsequently
to profit and loss - -
-------------------------------------------------------- ------------- -------------
Total comprehensive income for the period (604) (1,185)
======================================================== ============= =============
Total comprehensive income attributable to:
Owners of the parent (604) (1,185)
======================================================== ============= =============
Enteq Upstream Plc
Consolidated Statement of Financial Position
As at 31 As at 31
March 2018 March 2017
Notes $ 000's $ 000's
Assets
Non-current
Goodwill 6a - -
Intangible assets 6b 1,222 645
Property, plant and equipment 4,503 2,858
Trade and other receivables 238 -
Non-current assets 5,963 3,503
------------ ------------
Current
Trade and other receivables 2,104 3,924
Inventories 3,302 3,366
Cash and cash equivalents 15,501 15,335
Current assets 20,907 22,625
------------ ------------
Total assets 26,870 26,128
============ ============
Equity and liabilities
Equity
Share capital 982 963
Share premium 91,031 90,718
Share based payment reserve 910 806
Retained earnings (69,351) (68,747)
Total equity 23,572 23,740
------------ ------------
Liabilities
Current
Trade and other payables 3,298 2,388
Total liabilities 3,298 2,388
------------ ------------
Total equity and liabilities 26,870 26,128
============ ============
Enteq Upstream Plc
Consolidated Statement of Changes in Equity
Share
Called
up based
share Retained Share payment Total
capital earnings premium reserve equity
$ 000's $ 000's $ 000's $ 000's $ 000's
Issue of share capital 19 - 313 - 332
Share based payment charge - - - 104 104
Transactions with owners 19 - 313 104 436
Loss for the year - (604) - - (604)
Other comprehensive income
for the year - - - - -
Total comprehensive income - (604) - - (604)
-------- --------- -------- -------- --------
Total movement 19 (604) 313 104 (168)
As at 1 April 2017 963 (68,747) 90,718 806 23,740
======== ========= ======== ======== ========
As at 31 March 2018 982 (69,351) 91,031 910 23,572
======== ========= ======== ======== ========
Called
up based
share Retained Share payment Total
capital earnings premium reserve equity
$ 000's $ 000's $ 000's $ 000's $ 000's
Issue of share capital 13 - 160 - 173
Share based payment charge - - - 257 257
Transactions with owners 13 - 160 257 430
-------- --------- -------- -------- --------
Loss for the year - (1,185) - - (1,185)
Other comprehensive income - - - - -
for the year
Total comprehensive income - (1,185) - - (1,185)
Total movement 13 (1,185) 160 257 (755)
As at 1 April 2016 950 (67,562) 90,558 549 24,495
As at 31 March 2017 963 (68,747) 90,718 806 23,740
======== ========= ======== ======== ========
Enteq Upstream Plc
Consolidated Statement of Cash Flows
Year to 31 Year to 31
March 2018 March 2017
$ 000's $ 000's
Cash flows from operating activities
Loss for the year (604) (1,185)
Tax charge 3 48
Net finance income (175) (127)
(Gain)/loss on disposal of fixed
assets (82) 25
Share-based payment non-cash charges 104 257
Foreign exchange difference (48) 8
Depreciation and Amortisation
charges 853 494
51 (480)
Interest received 175 127
Tax paid (1) (4)
Decrease in inventory 64 440
Decrease/(increase) in trade and
other receivables 1,582 (498)
Increase in trade and other payables 910 910
Net cash from operating activities 2,781 495
------------ ------------
Investing activities
Purchase of tangible fixed assets (236) -
Increase in rental fleet assets (2,222) -
Disposal proceeds of tangible
fixed assets 133 -
Purchase of intangible fixed assets (670) (446)
Net cash from investing activities (2,995) (446)
------------ ------------
Financing activities
Share issue 332 173
Net cash from financing activities 332 173
------------ ------------
Increase in cash and cash equivalents 118 222
Non-cash movements - foreign exchange 48 (8)
Cash and cash equivalents at beginning
of period 15,335 15,121
Cash and cash equivalents at end
of period 15,501 15,335
============ ============
Enteq Upstream plc
1. BASIS OF PREPARATION
The results for the year ended 31 March 2018 have been prepared
using the accounting policies and methods of computation consistent
with those used in the Group's annual report for the year ended 31
March 2017. The results have also been presented and prepared in a
form consistent with that which will be adopted in the Group's
annual report for the year ended 31 March 2018 and in accordance
with the recognition and measurement requirements of the
International Financial Reporting Standards as adopted by the
European Union.
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 March 2018 and
the year ended 31 March 2017, but is derived from those accounts.
Statutory accounts for 2017 have been delivered to Companies House.
Those for the year ended 31 March 2018 will be delivered following
the Company's Annual General Meeting on 26 September 2018.
The financial information has been extracted from the Group's
Annual Report for the year ended 31 March 2018. The auditors have
reported on these accounts; their reports were unqualified, did not
draw attention to any matters by way of emphasis without qualifying
their report and did not contain statements under s498(2) or (3)
Companies Act 2006. The Group intends to publish its 2018 Annual
Report and Accounts in June 2018.
2. SEGMENTAL REPORTING
For management purposes, the Group is currently organised into a
single business unit, the Drilling Tools
division, which is currently based solely in the USA.
The principal activities of the Drilling Tools division are the
design, manufacture and selling of specialised parts and products
for Directional Drilling and Measurement While Drilling operations
for use in the energy exploration and services sector of the Oil
and Gas industry.
At present, there is only one operating segment and the
information presented to the board is consistent with
the consolidated income statement and the consolidated statement
of financial position. A key measurement used by the board is
Adjusted EBITDA. This reconciliation is included in note 6,
below.
The revenues, net assets and non-current assets of the Group can
be analysed by geographic location (post-consolidation adjustments)
as follows:
Revenues
31 March 31 March
2018 2017
USD 000's USD 000's
North America 6,017 3,325
Rest of the world 443 1,437
Total Group revenue 6,460 4,762
------------------- ---------------------
Net Assets
31 March 31 March
2018 2017
USD 000's USD 000's
Europe (UK) 13,673 13,985
United States 9,899 9,755
Total Group net assets 23,572 23,740
--------------------- ---------------------
Non-current Assets
31 March 31 March
2018 2017
USD 000's USD 000's
Europe (UK) - -
United States 5,958 3,503
Total Group non-current
assets 5,958 3,503
---------- ---------------------
All of the Group's revenue arises from the sale and rental of
specialised parts and products for Directional Drilling and
Measurement While Drilling operations.
The Group had 3 customers that contributed in excess of 10% of
the Group's total sales for the year (2017: 4). These customers
contributed $1,371k, $927k and $881k. (2017: $1,222k, $1,030k,
$853k and $513k). No revenue relates to customers based in the UK
(2017: none).
3. PROFIT AND LOSS ANALYSIS
The following analysis illustrates the performance of the
Group's activities, and reconciles the Group's loss for the period,
as shown in the consolidated income statement, to adjusted earnings
and adjusted EBITDA.
Adjusted earnings and adjusted EBITDA are presented to provide a
better indication of overall financial performance and to reflect
how the business is managed and measured on a day-to-day basis.
31 March 31 March
2018 2017
USD 000's USD 000's
Loss attributable to ordinary
shareholders (604) (1,185)
Other exceptional items 57 54
Amortisation of acquired intangible
assets 92 68
Foreign exchange movements (48) 8
---------- ----------
Adjusted earnings (503) (1,055)
Depreciation charge 760 426
Finance income (175) (127)
Performance Share Plan charge 138 252
Tax charge (note 4) 3 48
Adjusted EBITDA 223 (456)
========== ==========
The other exceptional items result from non-recurring costs. The
total can be analysed as follows:
31 March 31 March
2018 2017
USD 000's USD 000's
Severance payments and other
plant closure costs 143 43
Gain on sale of fixed assets (82) -
Other (4) 11
---------- ----------
Total exceptional items 57 54
========== ==========
4. INCOME TAX
Analysis of tax expense
No liability to UK corporation tax arose on ordinary activities
for the period.
Factors affecting the tax charge
The tax assessed for the period is different from the standard
rate of corporation tax in the UK. The difference is explained
below:
31 March 31 March
2018 2017
USD 000's USD 000's
Loss on ordinary activities before
tax (601) (1,137)
---------- ----------
Loss on ordinary activities multiplied
by the
standard rate of corporation tax in
the UK of 19% (2017: 20%): (114) (227)
Effects of:
Items not subject to corporation tax 170 99
Tax losses to carry forward (56) 128
Texas State Franchise Tax 3 48
Total income tax 3 48
========== ==========
There has been no deferred taxation recognised in these
financial statements due to the uncertainty surrounding the timing
of the recovery of these amounts. The total losses available to the
Group in the relevant tax jurisdictions are as follows: UK $1.7m;
United States $15.9m (2017: UK $2.6m; United States $14.1m). There
were no significant deferred tax liabilities.
5. EARNINGS PER SHARE AND DIVIDS
Basic earnings per share
Basic earnings per share is calculated by dividing the loss
attributable to ordinary shareholders for the year of $604k (31
March 2017: loss of $1,185k) by the weighted average number of
ordinary shares in issue during the year of 61,616k (31 March 2017:
60,351k).
Adjusted earnings per share
Adjusted earnings per share is calculated by dividing the
earnings attributable to ordinary shareholders, excluding
exceptional items, amortisation of intangible assets and foreign
exchange profits or losses for the year of a loss of $503k (31
March 2017: loss of $1,055k), by the weighted average number of
ordinary shares in issue during the year of 61,616k (31 March 2017:
60,351k).
As the Group is loss making, any potential ordinary shares have
the effect of being anti-dilutive. Therefore, the diluted EPS is
the same as the basic EPS. As the year end share price is below the
weighted average option price of all the options issued, the
adjusted diluted EPS is the same as adjusted EPS.
The adjusted diluted earnings per share information are
considered to provide a fairer representation of the Group's
trading performance. A reconciliation between basic earnings and
adjusted earnings is shown below.
March 2018: EPS Weighted
average number Per-share
Earnings of shares amount
USD 000's 000's US cents
Loss attributable to ordinary
shareholders (604) 61,616 (1.0)
Exceptional items 57
Amortisation of acquired intangible
assets 92
Foreign exchange movements (48)
Adjusted loss attributable to
ordinary shareholders (503) 61,616 (0.8)
========== =============== =========
March 2017: EPS Weighted
average number Per-share
Earnings of shares amount
USD 000's 000's US cents
Loss attributable to ordinary
shareholders (1,185) 60,351 (2.0)
Exceptional items 54
Amortisation of acquired intangible
assets 68
Foreign exchange movements 8
---------- --------------- ---------
Adjusted loss attributable to
ordinary shareholders (1,055) 60,351 (1.7)
========== =============== =========
During the year Enteq Upstream Plc did not pay any dividends
(2017: nil).
6. INTANGIBLE ASSETS
a) Goodwill
USD 000's
Cost:
As at 1 April 2017 and as
at 31 March 2018 19,619
----------
Impairment:
As at 1 April 2017 and as
at 31 March 2018 19,619
----------
Net Book Value:
----------
As at 1 April 2017 and as -
at 31 March 2018
==========
b) Other Intangible Assets
Developed IPR&D Brand Customer Non- compete Total
technology technology names relationships agreements
USD 000's USD 000's USD 000's USD 000's USD 000's USD 000's
Cost:
As at 1 April 2017 12,676 7,495 1,240 20,586 5,931 47,928
Capitalised in
period - 669 - - - 6769
------------ ------------ ---------- --------------- ------------- ----------
As at 31 March
2018 12,676 8,164 1,240 20,586 5,931 48,597
------------ ------------ ----------
Amortisation/Impairment:
As at 1 April 2017 12,418 7,108 1,240 20,586 5,931 47,283
Charge for the
year 92 - - - - 92
As at 31 March
2018 12,510 7,108 1,240 20,586 5,931 47,375
------------ ------------ ---------- --------------- ------------- ----------
Net Book Value:
------------ ------------ ---------- --------------- ------------- ----------
As at 1 April 2017 258 387 - - - 645
============ ============ ========== =============== ============= ==========
As at 31 March
2018 165 1,057 - - - 1,222
============ ============ ========== =============== ============= ==========
Developed IPR&D Brand Customer Non- compete Total
technology technology names relationships agreements
USD 000's USD 000's USD 000's USD 000's USD 000's USD 000's
Cost:
As at 1 April 2016 12,500 7,225 1,240 20,586 5,931 47,482
Transfers 176 (176) - - - -
Capitalised in
period - 446 - - - 446
------------ ------------ ---------- --------------- ------------- ----------
As at 31 March
2017 12,676 7,495 1,240 20,586 5,931 47,928
------------ ------------ ----------
Amortisation/Impairment:
As at 1 April 2016 12,350 7,108 1,240 20,586 5,931 47,215
Charge for the
year 68 - - - - 68
As at 31 March
2017 12,418 7,108 1,240 20,586 5,931 47,283
------------ ------------ ---------- --------------- ------------- ----------
Net Book Value:
------------ ------------ ---------- --------------- ------------- ----------
As at 1 April 2016 150 117 - - - 267
============ ============ ========== =============== ============= ==========
As at 31 March
2017 258 387 - - - 645
============ ============ ========== =============== ============= ==========
The main categories of Intangible Assets are as follows:
Developed technology:
This is technology which is currently commercialised and
embedded within the current product offering.
IPR&D technology:
This is technology which is in the final stages of field
testing, has demonstrable commercial value and is expected to be
launched within the next 12 months.
Brand names:
The value associated with the various trading names used within
the Group.
Customer relationships:
The value associated with the on-going trading relationships
with the key customers acquired.
Non-compete agreements:
The value associated with the agreements signed by the Vendors
of the acquired businesses not to compete in the markets of the
businesses acquired.
Goodwill and Impairment
The Group tests goodwill and other intangible assets annually
for impairment. The impairment test carried out on the balances as
at 31 March 2018 indicated that there was no impairment of the full
carrying value of both goodwill and intangible assets.
There is deemed to be just one cash generating unit ("CGU")
within the Company. In previous years there were deemed to be two,
but from a financial & operational perspective both US
locations are now being run as one unit.
The recoverable amount of the CGU is determined from value in
use calculations. The key assumptions for the value in use
calculations are those regarding the future revenues, discount
rates, growth rates and expected changes to selling prices and
direct costs during the period. Management estimates discount rates
using pre-tax rates that reflect current market assessment of the
time value of money and the risks specific to the CGU. The growth
rates are based on management forecasts for the five years to March
2021. Cash flow forecasts are prepared from the most recent
financial plans approved by the Board.
The forecasts assume annual growth rates between 1% and 20%
until 2023 and 3% thereafter in the long term. These long-term
growth rates do not exceed the long-term average growth rates for
the industry as a whole.
The pre-tax rate used to discount cash flow forecasts is 13.6%
(2017: 13.5%). Management have based this rate on the following
factors: a Risk Free Rate of 3.2%; a levered equity beta of 1.5; a
market risk premium of 5.5%; a small cap premium of 3.8% and an
implied cost of debt of 4.5%.
Intangible assets
The intangible assets acquired during the year represent their
fair value at the date of acquisition.
Amortisation
All categories of intangible assets, apart from the Goodwill and
the IPR&D technology, are being amortised over their respective
useful lives, on a straight-line basis. The remaining amortisation
period of the intangible assets is between 10 and 46 months.
7. GOING CONCERN
After considering the current financial projections of the Group
and taking into account the cash needs of the business and
availability of funds, the Directors have a reasonable expectation
that the group has adequate resources to continue its operations
for the foreseeable future. For this reason, they continue to adopt
a "going concern" basis in preparing the Annual Report.
8. RESPONSIBILITY STATEMENT OF THE DIRECTORS
To the best of the knowledge of the Directors (whose names and
functions are set out below), the preliminary announcement has been
prepared using accounting policies and methods of computation
consistent with those used in the Group's annual report for the
year ended 31 March 2017 and adopted for the financial year ended
31 March 2018, gives a true and fair view of the assets,
liabilities, financial position and profit for the Company and the
undertakings included in the consolidation taken as a whole;
and
Pursuant to Disclosure and Transparency Rules, Chapter 4, the
Directors' Report of the Company's annual report will include a
fair review of the development and performance of the business
taken, together with a description of the principal risks and
uncertainties faced by the business.
Executive Directors
Martin Perry Chief Executive Officer
David Steel Finance Director
Non-Executive Directors
Iain Paterson Chairman
Robin Pinchbeck
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
FR LLFVSRRIFLIT
(END) Dow Jones Newswires
June 13, 2018 02:00 ET (06:00 GMT)
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