TIDMFCRM
RNS Number : 2864V
Fulcrum Utility Services Ltd
06 August 2020
6 August 2020
MAR
The information contained within the announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
FULCRUM UTILITY SERVICES LIMITED
("Fulcrum" or "the Group")
Final results for the year ended 31 March 2020
"Repositioning to capitalise on the UK's transition to a
net-zero economy"
Financial performance
-- Revenue down 5.8% to GBP46.1 million (2019: GBP48.9 million)
-- Adjusted EBITDA from continuing operations* GBP4.5 million (2019: GBP10.9 million**)
-- Profit before tax of GBP1.3 million (2019: GBP6.0 million**)
-- Free cash flows*** of GBP6.5 million (2019: (GBP0.4) million)
-- Adjusted earnings per share of 2.3p (2019: 3.4p**) and basic
earnings per share of 0.7p (2019: 2.3p**)
-- Net cash of GBP6.0 million as at 31 March 2020 (2019: GBP3.8 million)
-- Net assets per share up 1.5% to 20.8p
-- The Group will not pay a dividend in respect of the financial
year ended 31 March 2020 in order to maintain a strong balance
sheet and cash reserves given the ongoing unquantifiable impact of
COVID-19
Operational highlights
-- Sustained growth in the Group order book, up 9% since March
2019 to GBP66.2 million (2019: GBP60.5 million)
-- Growth in the housing order book, up 24% to GBP25 million
-- Strengthened smart metering operations, with 22% growth in the order book
-- Sustained improvement in H2 (despite the impact of COVID-19)
with revenues up 36% (H2: GBP26.6 million vs. H1 GBP19.5 million)
and Adjusted EBITDA from continuing operations* up 115% (H2: GBP3.1
million vs. H1 GBP1.4 million).
-- Expanded the Group's direct delivery model into South East England and London
-- Executed the sale of its domestic asset portfolio and order
book for a gross consideration of GBP48 million, supporting a
strong balance sheet and the generation of surplus cash in the
future. The first tranche of assets was sold on 31 March 2020 for a
gross consideration of GBP17.9 million, enabling the Group to
become debt-free
-- Established a strategic relationship with E.S Pipelines
Limited (ESP), opening the opportunity to compete on larger housing
and I&C schemes, including Electric Vehicle (EV) charging
infrastructure
-- Continued to manage the business through COVID-19 well,
providing essential works whilst putting the safety and wellbeing
of our people, our customers and the communities we work in first
and foremost
Outlook
-- Despite the impact of COVID-19, trading in the new financial
year has seen continual improvement month on month and is expected
to return to pre-COVID-19 levels in Q2 of FY21
-- Given the ongoing market uncertainties resulting from
COVID-19, the Board will not be issuing guidance for the Group's
2021 financial year at this time
-- In the longer term, the Group is well placed to execute its
strategy and capitalise on the UK's net-zero and smart energy
revolution
*Adjusted EBITDA from continuing operations is operating profit
excluding the impact of exceptional items, depreciation,
amortisation and equity settled share-based payment charges.
**Restated for IFRS16
***Free cash flow is operating cash flow less net capital
expenditure
Commenting on the full year results, Daren Harris, Chief
Executive Officer said:
"2020 has been a year of repositioning to focus the business on
its strategic aim of capitalising on the UK's transition to a
net-zero economy. Fulcrum already has established market positions
and a strong service reputation across strategically important
markets and has the critical capabilities needed to execute its
strategy. Although 2020 presented short term market challenges,
there is a substantial long-term opportunity for the Group to
significantly grow its revenues across markets that have attractive
long-term drivers given the UK's net-zero and smart energy
revolution."
Annual report and AGM notice
Copies of the annual report and accounts for the year ended 31
March 2020 will be posted to shareholders on 18 August 2020 and
will be available at the registered office of the Company. An
electronic copy of the annual report and accounts is available now
from the Company's website: https://investors.fulcrum.co.uk/
Shareholders will also receive notice of the Annual General
Meeting of the Company, which will be held at 12.00pm on Wednesday
23 September 2020 at the offices of the Company, 2 Europa View,
Sheffield, S9 1XH.
Impact of implementation of IFRS 16 "Leases"
The Group adopted IFRS 16 "Leases" for the first time in FY2020
and applied it retrospectively, restating prior year comparatives.
Under the previous accounting standard for leases, IAS 17, lease
costs were recognised on a straight-line basis over the term of the
lease. However, adoption of IFRS 16 has given rise to the
recognition of right-of-use assets and lease liabilities, which
represent the Group's contractual right to access identified assets
under the terms of the lease and their contractual obligations to
minimum lease payments respectively. Consequently, lease costs no
longer go through the Statement of Comprehensive Income on a
straight-line basis, but rather are replaced by depreciation and
finance charges.
The impact of IFRS 16 on the 2020 financial results is as shown
in the table below - the pro-forma column shows the financial
results on the previously adopted accounting basis.
Pro-forma Adjustments As reported
GBPm GBPm GBPm
------------------------ --------------------- ------------ ------------
Adjusted EBITDA from
continuing operations 3.6 0.9 4.5
Depreciation (1.4) (0.8) (2.2)
Finance expense (0.4) (0.1) (0.5)
------------------------ --------------------- ------------ ------------
The 2019 financial results have been restated for the adoption
of IFRS 16 as follows:
As previously IFRS 16 As restated
reported adjustments GBPm
GBPm GBPm
------------------------ ------------------------- ------------- ------------
Adjusted EBITDA from
continuing operations 10.0 0.9 10.9
Depreciation (1.0) (0.8) (1.8)
Finance expense (0.1) (0.1) (0.2)
------------------------ ------------------------- ------------- ------------
Enquiries:
+44 (0)114 280
4102
Fulcrum Utility Services Limited
Daren Harris, Chief Executive Officer
+44 (0)20 7397
Cenkos Securities plc (Nominated adviser and broker) 8900
Max Hartley (Nomad) / Michael Johnson (Sales)
N+1 Singer (Joint Corporate Broker) +44 (0)20 7496
Sandy Fraser / Rachel Hayes / Carlo Spingardi 3000
Camarco (Financial PR advisers)
Ginny Pulbrook / Tom Huddart +44(0)203 757 4992
Notes to Editors:
Fulcrum is a multi-utility infrastructure and services provider
based in Sheffield, UK. The Company's primary business is the
provision of utility infrastructure services to the residential,
commercial and industrial markets throughout the mainland UK. These
range from the design, installation or alteration of utility
services for single site properties to large complex multi-site
projects. Through its subsidiaries, Fulcrum Pipelines Limited and
Fulcrum Electricity Assets Limited, Fulcrum is also licensed as an
Independent Gas Transporter and Independent Distribution Network
Operator, owning and operating gas and electrical assets that
connect properties to the main UK gas and electricity networks.
Fulcrum is also a meter asset manager, owning and operating meter
assets across mainland UK.
http://www.fulcrum.co.uk/
Chairman's statement
"A year of strategic repositioning"
Results
The 2020 financial year was a period of refocusing and
repositioning the business to create stronger foundations that will
enable the Group to capitalise on the utility infrastructure needs
of a net-zero future. Net zero means that the UK's total greenhouse
gas emissions would be equal to or less than the emissions the UK
has removed from the environment. Achieving this means a
significant change for the country and presents several significant
opportunities for the Group.
This strategic repositioning was undertaken against a backdrop
of uncertain and challenging market conditions which is reflected
in a disappointing financial performance.
Reported revenue was GBP46.1 million, down 5.8% on FY19. Profit
before tax was GBP1.3 million and adjusted EBITDA from continuing
operations was GBP4.5 million.
Business performance was impacted in the first half of the year
due to uncertain market conditions, the ongoing Capacity Market
suspension and certain inefficiencies within the business.
These inefficiencies and the action taken to improve
productivity are explained later in the Operational Review. Despite
a substantial improvement in the second half of the year in a more
certain market, the impact of COVID-19 impeded business operations
towards the end of the financial year.
Although market conditions affected business performance, there
is a substantial long-term opportunity for the Group to grow its
revenues across markets that have attractive long-term drivers
given the UK's net-zero and smart energy revolution. This
significant opportunity is clear and recently reinforced by, for
example, Ofgem's proposal for a five-year investment programme of
GBP25 billion, with potential for an additional GBP10 billion or
more, to transform Britain's energy networks to deliver
emissions-free green energy.
The Group is well positioned to support the UK's infrastructure
requirements in an evolving energy landscape, with strategically
critical capabilities and the Group will continue to focus its
capabilities on enabling the UK to transition to a net-zero
economy. This includes delivering services and solutions that are
contributing to a greener future, such as designing and building
utility infrastructure solutions to power and maintain renewable
energy generating infrastructure, including battery storage sites,
wind farms, solar farms and Electric Vehicle (EV) charging
infrastructure.
The growth in electric vehicles in the UK is particularly
exciting and I believe the Group has the specialist capabilities,
skills and expertise needed to secure a significant share of this
market as the country rapidly expands its EV charging network.
Delivering smart meter exchange programmes is another vital
element of the net-zero and smart energy revolution and progress
was made on developing our smart metering business in the year,
positioning the Group well to take a share of the 30 million meters
to exchange in the UK by mid-2025.
Equally, there is a highly attractive opportunity for growth in
the UK housing market, as evidenced by the UK Government's
commitment to build an average of 300,000 new homes each year by
the mid-2020s. Although the Group delivered sustained growth in its
housing order book, up 24% in the year to GBP25 million, we are a
relatively small player and a substantial share of the market is
still available to us.
Asset sale
The sale of the Group's existing and contracted domestic gas
assets, announced in the year realises substantial value for the
Company, with total gross consideration currently expected to be
approximately GBP48 million in cash. The successful completion of
the first tranche of the sale significantly strengthened our
balance sheet and is now complete, with total proceeds of GBP17.9
million against an original cost to the Group of GBP10.7 million,
which has subsequently been revalued at GBP12.8 million. This has
resulted in a total gain, before expenses of disposal, of GBP5.1
million. The cash proceeds from the asset sale, coupled with robust
financial discipline, will support a strong balance sheet and the
generation of surplus cash in the future.
The Group's core growth strategy is now focussed on our design
and build activities in support of a net-zero revolution, as well
as selectively adopting asset infrastructure where desirable. Our
relationship with ESP also enhances the Company's capabilities and
competitiveness in strategically important sectors.
Dividend
Given the current economic uncertainty and the ongoing
unquantifiable impact of COVID-19 on the short-to-medium-term
trading environment, the Group is prioritising maintaining a strong
balance sheet and cash reserves. As a result, the Group will not
pay a dividend in respect of the financial year ended 31 March
2020. The Board will continue to keep its dividend policy under
review.
Board and corporate governance
In October 2019, we announced the departure of Chief Executive,
Martin Harrison, who stepped down with immediate effect.
Daren Harris joined the Company and its Board as Chief Financial
Officer in June 2019 and was appointed as Chief Executive Officer
in January 2020. Daren was joined on the Board in January 2020 by
Terry Dugdale, Group Chief Operating Officer, who has been with the
business since March 2019. The combined and complementary expertise
that both Daren and Terry have across the independent
multi-utility, contracting and energy services sectors is
significant and will be invaluable in the delivery of the Group's
refocused strategy and long-term growth.
Our Non-Executive Board was also enhanced after the year end,
and now includes substantial shareholder representation. Wayne
Hayes, Non-Executive Director, retired from the Board post year end
and I would like to thank him for the contribution he made to the
Group. Jennifer Babington was appointed as a Non-Executive Director
in May 2020 and her specialist knowledge in green investments will
assist the Group to capitalise on decarbonisation opportunities.
Jonathan Turner and Jeremy Brade were appointed as Non-Executive
Directors in June 2020 following the establishment of Relationship
Agreements with Harwood Capital LLP and The Bayford Group. Jonathan
and Jeremy are, or represent organisations which are, the two
largest single investors in the business and the Group is delighted
to have access to their insight, experience and skills on the
Board.
Fulcrum remains committed to the highest standards of corporate
governance as it connects the UK on its journey to a net-zero
future. The Board plays an active role in guiding the Group and
leading its strategy and we are determined to ensure that we have a
diverse mix of skills, capabilities and experience to steer the
Group forward in an evolving energy landscape.
Current Trading and Outlook
Despite the impact of COVID-19, trading in the new financial
year has seen a continual improvement month on month and is
expected to return to pre-COVID-19 levels in Q2 of FY21.
As at 31 March 2020, the Group recorded its highest ever order
book, up 9% year-on-year to GBP66.2 million, and has seen continued
growth, reaching GBP68 million at 30 June 2020. The Board believes
that, despite the current economic conditions and uncertainty
created by COVID-19, the political and legal commitment to
decarbonise the UK to achieve a net-zero future, the substantial
opportunity to design and build electrical networks to power the
nation's electric vehicles, the commitment to build an average of
300,000 new homes each year by the mid-2020s and the obligation to
exchange 30 million domestic meters by mid-2025, present
significant tailwinds and offer some very exciting growth
opportunities for the Group. The Board is confident that the Group
has a robust plan in place to capitalise on the UK's energy
infrastructure revolution and is strongly positioned to grow as it
executes its strategy to play an essential part in the UK's
net-zero and smart energy revolution. However, given the ongoing
market uncertainties resulting from COVID-19, the Board will not be
issuing guidance for the Group's 2021 financial year at this
time.
Philip Holder
Non-Executive Chairman
6 August 2020
CEO Statement
"A year of refocus for a net-zero future"
2020 review
Since joining the business in the year, I have been impressed by
its growth potential in an evolving and exciting market. The UK is
now on a journey to net-zero by 2050 and the Group will play an
important supporting role in the achievement of this.
FY20 was a year of strategic refocusing as we developed our
in-house capabilities, including the expansion of the Group's
direct delivery model into South East England and London and the
strengthening of its smart metering, electrical and multi-utility
operations. These have been delivered with a focus on operational
excellence and improved efficiency to enhance our capacity and
optimise future profitability. Additional focus on processes,
systems and management information is still needed and this will be
implemented in an effective and balanced way, whilst we expand and
grow the business sustainably.
This strategic refocusing has been undertaken against the
backdrop of difficult market conditions, a lower margin project mix
and underperformance in the business. Performance in the first half
of the year was impacted by a period of ongoing economic
uncertainty, created by Brexit and the suspension of the UK
Capacity Market. With better economic conditions, performance in
the second half of the year improved, with a substantial increase
in order inflow resulting in the Group's trading performance for
the financial year being broadly in line with more recent
expectations. However, the impact of COVID-19 hindered our ability
to complete work due to site suspensions and to close out a number
of potential contracts because of disagreement on who should bear
the (at the time, emerging) COVID-19 risk. This is also reflected
in the Group's results.
Positively, at the year end, the Group recorded its highest
value order book, up 9% to GBP66.2 million, demonstrating the
Group's work-winning ability in difficult market conditions.
Significant orders in the year included a GBP3.2 million contract
to install new high-voltage electrical infrastructure for two 50MW
gas peaking plants in North East England; a GBP2.4 million contract
to provide over 6km of new gas, water and electrical infrastructure
to a new sustainable mixed-use residential, retail and commercial
development in the East Midlands; and a GBP1.8 million contract to
install new electrical infrastructure as part of a major
regeneration scheme in South East London.
Strategy
The market for the design, installation and ownership of utility
infrastructure has evolved significantly in the last few years and
continues to develop.
Importantly, there are several crucial government obligations
that will support our growth and we have developed a strategy to
ensure we are well positioned to capitalise on these. A key driver
of the Group's strategy is the UK government's target to achieve
net-zero by 2050, and the associated need for increased
electrification and renewable energy generation in a decarbonised
energy system. Furthermore, the need for a significantly expanded
EV charging network to power the UK's electric vehicles and the
Government's commitment to build an average of 300,000 new homes
each year by the mid-2020s presents a significant growth
opportunity and the Group is focusing its strategy on capturing
further market share in these sectors. In addition, the Group seeks
to expand its foothold within the smart metering market,
capitalising on the obligations on energy suppliers to exchange
approximately 30 million meters by mid-2025. The strategy for FY21
has been approved and supported by the renewed Board and we
continue to monitor developments in a market evolving at pace to
inform our strategic priorities.
We continue to be in regular engagement with industry bodies and
are an active member of the Independent Networks Association (INA),
to proactively lobby government and regulators and to identify
changes in policy or legislation that may influence our future
activity.
Financial performance and results
Total revenue decreased by GBP2.8 million to GBP46.1 million
(2019: GBP48.9 million) predominantly due to the impact of
COVID-19, as described above. Infrastructure revenues were
particularly impacted falling GBP4.1 million to GBP41.8 million
(2019: GBP45.9 million). This, however, was offset by utility asset
ownership revenues which delivered a GBP1.2 million increase to
GBP4.2 million (2019: GBP3.0 million).
Adjusted EBITDA from continuing operations* for the period
decreased to GBP4.5 million, broadly in line with management
expectations (2019: GBP10.9 million**).This reduction was due to a
combination of lower revenues, a dilution of the gross margin as a
result of the mix of work and investment in the overheads to
deliver improvements and lay the foundations for future growth.
Basic earnings per share reduced to 0.7p compared to 2.3p** in
2019. Adjusted basic earnings per share, before charging
exceptional items, have decreased to 2.3p from 3.4p** in 2019.
Sale of assets to ESP
The asset sale yields substantial value for our existing and
contracted domestic gas assets and has significantly strengthened
our balance sheet. The Group used the proceeds from the first
tranche of the sale to repay its existing debt of GBP10 million in
full, leaving the business debt free as at 1 April 2020, other than
lease obligations, and with net cash balances of GBP6.0 million at
close of business on 31 March 2020.
Liquidity and net cash
The Group has always placed a high priority on cash generation
and the active management of working capital, resulting in a
positive operating cash flow from trading activities of GBP1.7
million. As at 31 March 2020, the Group had net cash of GBP6.0
million (2019: GBP3.8 million), a GBP2.2 million increase against
the prior period. Net cash inflow from investing activities was
GBP4.8 million, benefiting from the GBP16.8 million of receipts
from the disposal of utility assets, offset by investment in
utility assets of GBP11.5 million.
Net cash inflow from financing activities of GBP2.7 million was
predominantly due to increased borrowings of GBP7 million, offset
by GBP3.3 million in dividend payments and GBP1 million in lease
and interest payments relating to IFRS 16. The GBP10 million
revolving credit facility with Lloyds Banking Group was fully paid
off on 1 April 2020 from the proceeds of the asset sale. The cash
proceeds from the asset sale, coupled with robust financial
discipline, will enable Fulcrum to maintain a strong balance sheet
and will support the generation of surplus cash in the future.
We are also in advanced discussions around a further facility
that will improve the Group's liquidity position and a further
announcement will be made in due course.
Reserves and net assets
Net assets increased by GBP0.9 million during the year,
reflecting the utility asset net revaluation increase of GBP2.8
million and retained profit for the period of GBP1.5 million,
offset by the final 2019 dividend totalling GBP3.3 million. Net
assets per share at 31 March 2020 were 20.8p per share (2019:
20.5p).
As at 31 March 2020, the issued share capital of the Company was
221,117,945 ordinary shares (2019: 221,303,106) with a nominal
value of GBP221,118. At the end of the year, the Group operated a
Growth Share Scheme (GSS) plan and three SAYE schemes. The
principal terms of the remaining share option scheme are summarised
in note 19 on page 72 of the annual report and accounts.
Summary
Despite a challenging year, the Group continued to make progress
in positioning itself for future growth and success and, whilst
there is still more to do to develop and improve the business and
its operations, I am confident that Fulcrum will benefit from the
UK's net-zero and smart energy revolution.
Despite the impact of COVID-19, trading in the new financial
year has seen continual improvement month on month and is expected
to return to pre-COVID-19 levels in Q2 of FY21 and, as at 31 March
2020, the Group recorded its highest ever order book, up 9%
year-on-year to GBP66.2 million, and has seen continued growth,
reaching GBP68 million at 30 June 2020.
The successful execution of our strategy is now supported with
our strongest ever order book, greater balance sheet strength, new
strategic relationships, improved capabilities and an enhanced
management team. We are strongly positioned to grow and to provide
long-term, sustainable value for shareholders.
Daren Harris
Chief Executive Officer
6 August 2020
Operational review
"Building a stronger platform for future growth"
Operational performance
In the year, we placed significant emphasis on improving our
operational capabilities, processes and management information to
drive efficiencies and deliver better performance. This included
the expansion of the Group's direct delivery model into South East
England and London, bolstering our smart metering operations and
increasing our in-house multi-utility capabilities. This was all
done with a sustained focus on better operational productivity to
improve our capacity and overall efficiency.
Despite the UK economic uncertainty in the period, the Group saw
a substantial increase in order inflow in the second half of the
year, securing a variety of large contracts and demonstrating the
Group's competitiveness in difficult market conditions.
Delivering contracts safely, efficiently and profitably
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.
In the period, we received the Royal Society for the Prevention
of Accidents (RoSPA) Order of Distinction, which recognises 17
years of health and safety excellence and demonstrates our
commitment to the health and safety of our people, our customers
and the communities we work in.
We also remain committed to using customer feedback to improve,
innovate and differentiate the business as customer needs and
expectations evolve, and we have seen sustained improvements in the
percentage of customers who rated our service as "great" (9 or 10
out of 10), reaching 89% this year (2019: 80%). We continue to push
for ever higher levels of customer satisfaction and we will be
implementing new ways of measuring customer satisfaction during
this year.
The Group continues to look for ways to improve operational
capacity and drive efficiencies that will improve customer
experience and support the optimisation of profits in the long
term. This is underpinned by a culture of continuous improvement
and our aim to simplify, standardise and ensure that we always
deliver the best and most competitive service. During the year we
improved resource management, scheduling efficiency and stock
management, following investment in our planning and operational
delivery functions. We also recruited some of the industry's best
talent to lead our operational improvement initiatives and are
already seeing the positive outcomes of their contribution.
Housing
Fulcrum both designs and builds the utility networks on new
housing sites and connects them to the local distribution network,
and these networks are now adopted by ESP as part of the adoption
relationship we have with them. The size of our housing
opportunities varies from 10 plots to over 1,000 plots and it is
the higher end of this market that our relationship with ESP will
help unlock for the Group.
Despite challenging economic conditions, our housing order book
increased by 24%, to GBP25 million in the year and there is a clear
and significant opportunity for further growth. In addition to the
UK government's commitment to build an average of 300,000 new homes
each year by the mid-2020s, we have a low market share, estimated
at under 5%, with limited presence in some parts of the UK and
therefore the opportunity to increase our presence in this market
is clear.
To ensure we maximise our share in this strategically important
market, we have been bolstering our sales team and operations in
support of our future expansion. This has included more
multi-skilled direct delivery resources, and improved planning and
delivery processes which are focused on building in efficiency
whilst ensuring we deliver customer service excellence. There
remains uncertainty for many homebuilders following the
announcement that the Future Homes Standard is expected to mandate
the end of fossil fuel heating systems in all new houses from 2025
and we continue to monitor developments closely. Using electricity
to heat homes instead of gas has an economic impact on developers
and homeowners, with the cost of energy from electricity being
higher than the cost of energy from gas. Gas Goes Green is the UK
network operators' new gas network plan to deliver net-zero and its
aim is to ensure that homes and businesses across the UK are
connected to the world's first net-zero gas network, utilising
hydrogen and biomethane instead of natural gas. We are working
closely with various industry stakeholders to ensure we stay
informed and involved in how this initiative develops. Using this
insight, we are working collaboratively with developers to help
them navigate the utility needs of their projects now, and in the
future, by providing support and advice on their obligations and
long-term heating options as we move towards net-zero.
Industrial and commercial
Fulcrum designs and builds a complete range of I&C gas and
electricity networks from small commercial connections to EV
charging infrastructure and highly specialist gas and high-voltage
(132kV) electricity supplies through the Group's established
Dunamis and CDS brands. In the year, the Group secured a variety of
significant I&C contracts and we continued to invest in our
in-house electrical capabilities and expertise to maximise
cross-selling opportunities and enhance our competitiveness.
Fulcrum's I&C electrical capability includes design and
build directly to and from the national transmission network. This
includes sites that reinforce the network by generating electricity
where needed such as solar farms and battery storage sites. We also
provide gas infrastructure to sites that generate electricity. As
the UK decarbonises its energy, there will be growth in renewable
energy generation, a move to distributed generation and battery
powered sites and growth in electric vehicle demand. Our diverse
electrical capabilities and experience place us in a very strong
position to grow our share in this sector.
In terms of EV charging infrastructure, we have prioritised the
targeting of specialist, high-powered and complex EV charging
customers and have been selectively tendering on the most
attractive opportunities in a rapidly developing market. The
continued growth of EVs in the UK is exciting and the Group is well
positioned to capitalise on this. Fulcrum has been building a
strong presence in the EV charging infrastructure sector and I am
confident that we have the specialist capabilities and expertise
needed to secure a significant share in the substantial
opportunities available to deliver the UK's future EV charging
network.
Smart metering
Smart meters are an integral part of a decarbonised energy
system and will play an important part in achieving net-zero in the
UK by enabling demand-side energy management. The smart meter
rollout deadline for the UK is expected to be 1 July 2025 and there
are an estimated 30 million domestic meters that need to be
exchanged by then.
The Group's smart metering business made progress in the year,
establishing several additional Meter Asset Manager (MAM) and Meter
Operator (MOP) agreements with a variety of energy suppliers, and
the business grew its order book of meters to be exchanged to
110,000. Fulcrum has quickly established a reputation in the market
for responsiveness, flexibility and service excellence and this is
supporting our ability to identify and successfully secure
incremental supplier agreements.
Operationally, we focused on creating a strong platform for our
smart metering growth by establishing a robust and scalable smart
metering team and infrastructure, and by implementing industry
leading smart metering IT systems to support this. Our focus for
FY21 is to diversify the business and its
service offering, in particular exploring the opportunity to
become a Meter Asset Provider (MAP) and to further execute our
smart metering growth plans.
Maintenance and ownership
The expected growth in electrical infrastructure in a
decarbonised energy system presents another attractive growth
opportunity for the Group. The electrical systems and networks that
will power the nation will require maintaining and, via our
established Maintech Power brand, we have the specialist
capabilities to do this.
Maintech has focused on delivering reliability and customer
excellence and has supplied proactive maintenance and emergency
response services to essential sites throughout COVID-19. Maintech
has limited market share and currently operates in specific
regional markets, presenting an opportunity for future geographic
expansion.
Summary
Whilst many improvements have been implemented in the year,
there remains more to do to ensure that the Group is well
positioned to take full advantage of the future opportunities that
are available to us. We will continue to focus on improving
operational efficiency and expanding our sales and operational
capabilities, systems, processes and capacity to support this.
These improvements will be implemented sustainably and with strong
governance to ensure that we maintain a culture of zero harm,
deliver customer excellence and can guarantee we are able to offer
the complete range of utility infrastructure solutions essential to
achieving the UK's net-zero future.
Terry Dugdale
Group Chief Operating Officer
6 August 2020
Consolidated statement of comprehensive income
for the year ended 31 March 2020
Year
Year ended
ended 31 March
31 March 2019
2020 Restated
Notes GBP'000 GBP'000
------------------------------------------------------ ----- --------- ---------
Revenue 2 46,101 48,905
------------------------------------------------------ ----- --------- ---------
Cost of sales - underlying (31,955) (29,653)
Cost of sales - exceptional items 4 (1,766) (883)
------------------------------------------------------ ----- --------- ---------
Total cost of sales (33,721) (30,536)
------------------------------------------------------ ----- --------- ---------
Gross profit 12,380 18,369
Administrative expenses - underlying (13,611) (11,831)
Administrative expenses - exceptional items 4 (870) (411)
------------------------------------------------------ ----- --------- ---------
Total administrative expenses (14,481) (12,242)
------------------------------------------------------ ----- --------- ---------
Operating (loss)/profit 5 (2,101) 6,127
Profit on sale of subsidiary - exceptional items 4 3,886 -
Net finance (expense)/income (472) (173)
------------------------------------------------------ ----- --------- ---------
Profit before taxation 1,313 5,954
Taxation 6 243 (1,042)
------------------------------------------------------ ----- --------- ---------
Profit for the period attributable to equity holders
of the parent 1,556 4,912
Other comprehensive income
Items that will never be reclassified to profit:
Revaluation of utility assets 9 3,036 11,380
Surplus arising on utility assets internally adopted
in the year 9 951 1,100
Reversal of prior increase of utility assets (1,086) (2,544)
Deferred tax on items that will never be reclassified
to profit or loss 6 (321) (1,848)
------------------------------------------------------ ----- --------- ---------
Total comprehensive income for the year 4,136 13,000
------------------------------------------------------ ----- --------- ---------
Profit per share attributable to the owners of the
business
Basic 8 0.7p 2.3p
Diluted 8 0.7p 2.2p
------------------------------------------------------ ----- --------- ---------
Adjusted EBITDA from continuing operations is the basis that the
Board uses to measure and monitor the Group's financial performance
as it is a more accurate reflection of the commercial reality of
the Group's business. Further details of Alternative Performance
Measures are included in note 3.
Operating (loss)/profit (2,101) 6,127
Equity-settled share based payment charges (6) 115
Exceptional items within operating (loss)/profit 4 2,636 1,294
Depreciation and amortisation 9,11,12 4,019 3,388
--------------------------------------------------- ------- ------- ------
Adjusted EBITDA from continuing operations 4,548 10,924
Surplus arising on sale of domestic utility assets 4 3,886 -
--------------------------------------------------- ------- ------- ------
Adjusted EBITDA including sale of domestic utility
assets 8,434 10,924
--------------------------------------------------- ------- ------- ------
The consolidated statement of comprehensive income and profit
per share for year ended 31 March 2019 have been restated to
reflect the impact of IFRS 16 "Leases". Refer to notes 1 and
17.
Consolidated statement of changes in equity
for the year ended 31 March 2020
Retained Total
Share Share Revaluation Merger earnings equity
capital premium reserve reserve Restated Restated
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ----- -------- -------- ----------- -------- --------- ---------
Balance at 31 March 2018 17 211 21,042 4,649 11,347 (819) 36,430
Total comprehensive income for
the period
Profit for the year - - - - 4,912 4,912
Revaluation surplus on independent
valuation - - 11,380 - - 11,380
Surplus arising on utility assets
internally adopted in the year - - 1,100 - - 1,100
Exceptional items - fixed asset
impairment - - (2,544) - - (2,544)
Deferred tax liability 6 - - (1,848) - - (1,848)
Transactions with equity shareholders
Equity-settled share based payment - - - - 115 115
Dividends 7 - (4,738) - - - (4,738)
Capital transfer - (16,605) - - 16,605 -
Issue of new shares 13 10 511 - - - 521
-------------------------------------- ----- -------- -------- ----------- -------- --------- ---------
Balance at 31 March 2019 17 221 210 12,737 11,347 20,813 45,328
Total comprehensive income for
the period
Profit for the year - - - - 1,556 1,556
Revaluation surplus on internal
revaluation - - 3,036 - - 3,036
Surplus arising on utility assets
internally adopted in the year - - 951 - - 951
Disposal of previously revalued
assets 4 - - (3,071) - 3,071 -
Depreciation on previously revalued
assets - - (307) - 307 -
Exceptional items - fixed asset
impairment - - (1,086) - - (1,086)
Deferred tax liability 6 - - (321) - - (321)
Transactions with equity shareholders
Equity-settled share based payment - - - - (6) (6)
Dividends 7 - - - - (3,331) (3,331)
Capital transfer - - - - - -
Issue of new shares 13 1 179 - - - 180
-------------------------------------- ----- -------- -------- ----------- -------- --------- ---------
Balance at 31 March 2020 222 389 11,939 11,347 22,410 46,307
-------------------------------------- ----- -------- -------- ----------- -------- --------- ---------
Consolidated balance sheet
as at 31 March 2020
31 March
31 March 2019
2020 Restated
Notes GBP'000 GBP'000
------------------------------ ----- -------- ---------
Non-current assets
Property, plant and equipment 9 38,820 39,314
Intangible assets 11 25,522 27,069
Right-of-use asset 12 2,720 2,591
Deferred tax assets 6 1,784 1,729
------------------------------ ----- -------- ---------
68,846 70,703
------------------------------ ----- -------- ---------
Current assets
Contract assets 12,279 9,132
Inventories 446 607
Trade and other receivables 6,826 6,392
Cash and cash equivalents 15 15,973 6,824
------------------------------ ----- -------- ---------
35,524 22,955
------------------------------ ----- -------- ---------
Total assets 104,370 93,658
------------------------------ ----- -------- ---------
Current liabilities
Trade and other payables (11,909) (10,848)
Contract liabilities (27,905) (26,343)
Borrowings 14 (10,000) (3,000)
Current lease liability 12 (772) (754)
Provisions (58) (96)
------------------------------ ----- -------- ---------
(50,644) (41,042)
------------------------------ ----- -------- ---------
Non-current liabilities
Non-current lease liability 12 (2,226) (2,102)
Deferred tax liabilities 6 (5,193) (5,186)
------------------------------ ----- -------- ---------
(7,419) (7,288)
------------------------------ ----- -------- ---------
Total liabilities (58,063) (48,330)
------------------------------ ----- -------- ---------
Net assets 46,307 45,328
------------------------------ ----- -------- ---------
Equity
Share capital 13 222 221
Share premium 389 210
Revaluation reserve 11,939 12,737
Merger reserve 11,347 11,347
Retained earnings 22,410 20,813
------------------------------ ----- -------- ---------
Total equity 46,307 45,328
------------------------------ ----- -------- ---------
The financial statements were approved by the Board of Directors
on 6 August 2020 and were signed on its behalf by:
Daren Harris
Chief Executive Officer
Company number FC030006
Consolidated cash flow statement
for the year ended 31 March 2020
Year
Year ended
ended 31 March
31 March 2019
2020 Restated
Notes GBP'000 GBP'000
------------------------------------------------------ ----- --------- ---------
Cash flows from operating activities
Profit for the period after tax 1,556 4,912
Tax (credit)/charge (243) 1,042
------------------------------------------------------ ----- --------- ---------
Profit for the period before tax 1,313 5,954
Adjustments for:
Depreciation 9,12 2,228 1,776
Amortisation of intangible assets 11 1,791 1,612
Exceptional items - fixed asset impairment 4 1,766 883
Net finance expense 472 173
Equity-settled share based payment charges (6) 115
Profit on disposal of utility assets (3,886) -
Loss on disposal of assets - other 3 -
(Increase)/decrease in contract assets (3,147) 1,245
Decrease in trade and other receivables 916 385
Decrease/(increase) in inventories 162 (399)
Decrease in trade and other payables (1,072) (376)
Increase in contract liabilities 1,562 443
Decrease in provisions (38) (2)
------------------------------------------------------ ----- --------- ---------
Cash inflow from operating activities 2,064 11,809
Tax paid (410) (42)
------------------------------------------------------ ----- --------- ---------
Net cash inflow from operating activities 1,654 11,767
------------------------------------------------------ ----- --------- ---------
Cash flows from investing activities
Acquisition of external utility assets (5,030) (3,566)
Utility assets internally adopted (gross construction
cost less impairment) (6,475) (7,374)
Acquisition of plant and equipment 9 (98) (376)
Acquisition of intangibles 11 (326) (884)
Proceeds on disposal of utility assets 4 16,756 -
Proceeds on disposal of assets - other 5 -
Finance income received 3 13
------------------------------------------------------ ----- --------- ---------
Net cash inflow/(outflow) from investing activities 4,835 (12,187)
------------------------------------------------------ ----- --------- ---------
Cash flows from financing activities
Dividends paid 7 (3,331) (4,738)
Borrowings 14 7,000 3,000
Interest paid and banking charges (non-IFRS 16) (273) (73)
IFRS 16 - principal payments 12 (797) (784)
IFRS 16 - interest payments 12 (119) (113)
Proceeds from issue of share capital 180 521
------------------------------------------------------ ----- --------- ---------
Net cash inflow/(outflow) from financing activities 2,660 (2,187)
------------------------------------------------------ ----- --------- ---------
Increase/(decrease) in net cash and cash equivalents 9,149 (2,607)
Cash and cash equivalents at beginning of year 6,824 9,431
------------------------------------------------------ ----- --------- ---------
Cash and cash equivalents at end of year 15 15,973 6,824
------------------------------------------------------ ----- --------- ---------
Notes to the consolidated financial statements
1. Accounting policies
The principal accounting policies adopted in the preparation of
these financial statements are set out below.
Basis of preparation
This preliminary announcement does not comprise statutory
accounts within the meaning of Section 434 of the Companies Act
2006. 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 2020 and 31 March
2019. The auditors have reported on those financial statements.
Their reports were unqualified. The audit report in relation to the
financial statements for the year ended 31 March 2020 includes an
emphasis of matter paragraph drawing attention to note 1 which
refers to the global Coronavirus pandemic.
The financial statements have not yet been delivered to the
Registrar of Companies but will be in due course. Whilst the
financial information included in this preliminary announcement has
been prepared on the basis of the requirements of IFRSs in issue,
as adopted by the European Union and effective at 31 March 2020,
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
The Group's business activities, together with the factors
likely to affect future development, performance and position, are
set out in the Strategic Report on pages 2 to 33 of the annual
report. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the
Chief Executive's Statement on pages 15 and 16 of the annual
report. In addition, note 30 to the financial statements includes
the Group's processes for managing its capital and its exposure to
credit and liquidity risks.
At 31 March 2020 the Group had net assets of GBP46.3 million
(2019 restated: GBP45.3 million), including net cash of GBP6.0
million (2018: GBP3.8 million) as set out in the consolidated
balance sheet on page 52 and note 28 of the annual report. In the
year ended 31 March 2020, the Group generated a profit after tax of
GBP1.5 million and had net cash inflows of GBP9.1 million after
investing GBP5.0 million in external utility assets, GBP3.3 million
paid in dividends and receiving GBP7.0 million of borrowings.
The Group's forecasts and projections, after taking account of
sensitivity analysis of changes in trading performance and
corresponding mitigating actions, show that the Group has adequate
cash resources for the foreseeable future.
COVID-19 was declared a global pandemic on 11 March 2020 by the
World Health Organization, and on 19 March 2020 the Coronavirus Act
was introduced in the UK, with unprecedented restrictive measures
being put in place nationally to help prevent the spread of
COVID-19, ensure safety and wellbeing, protect health services and
try and stabilise the economy.
The Group has played a key part in ensuring that key utility
infrastructure continues to operate during this difficult period,
however, the continuing spread of the virus and the associated
restrictions on public life are expected to impact trading
performance in 2020/21 with the timing of the return to normality
and growth uncertain.
Therefore, considering the impact of COVID-19 on the business, a
range of potential downside planning scenarios have been developed,
including a significant reduction to 2020/21 revenues across the
Group, reflecting a protracted period of lockdown and a further
severe but plausible downside scenario of a second lockdown later
in the same financial year. Reverse stress testing has been
conducted to identify the theoretical loss of revenue and liquidity
that the Group could manage without impacting its viability which
would in turn impact upon the Company.
The Directors have been very proactive in their response to
COVID-19 and have introduced significant measures to preserve cash
and minimise costs, for example utilising the Coronavirus Job
Retention Scheme (CJRS) whilst still allowing the business to
function.
This approach provides the Directors with reasonable comfort
that the Group's going concern has been assessed to a severity
level which more than accommodates the current assessment of the
shape and scale of the economic impact of the COVID-19 pandemic,
and, having undertaken this review, the Directors have a reasonable
expectation that the Company has adequate resources to fund its
operations for a period of 12 months from the date of approval of
these financial statements. For this reason, they continue to adopt
the going concern basis in preparing the accounts.
Adoption of new and revised International Financial Reporting
Standards (IFRSs) and IFRIC interpretations
In the year ended 31 March 2020, the Group adopted IFRS 16
"Leases" for the first time, the impact of which is shown
below.
IFRS 16 "Leases"
IFRS 16 is effective for all accounting periods beginning on or
after 1 January 2019. The Group applied IFRS 16 retrospectively,
restating prior year comparatives. Practical expedients were
applied to take the recognition exemption for both short-term and
low value leases, as well as to account for any lease and
associated non-lease components as a single arrangement.
Impact on financial statements
Upon transition to IFRS 16 at 31 March 2018, the Group
recognised an opening right-of-use asset of GBP2.9 million and a
lease liability of GBP3.1 million. Including adjustments for
related balances that existed under IAS 17, the retained earnings
of the Group on transition reduced by GBP0.1 million.
The Group's lease liabilities relate to properties and vehicles.
The lease liability under IFRS 16 is lower than that shown in the
operating lease commitment note previously presented (in accordance
with IAS 17) primarily due to the discounting of the future
payments.
The opening right-of-use asset is lower than the opening lease
liability as it reflects the higher depreciation of the
right-of-use asset compared to the reduction on the lease liability
over the same period of time. Upon transition to IFRS 16 the
weighted average incremental borrowing rate applied to the lease
liabilities was 3.15%.
The impact on the consolidated statement of comprehensive income
was a decrease in profit before taxation for the year ending 31
March 2020 of GBP10,000 (2019: decrease of GBP15,000). Operating
profit increased by GBP109,000 in the year ended 31 March 2020
(2019: increase of GBP98,000) as the depreciation on right-of-use
assets was lower than the IAS 17 rental charge. Interest costs
charged to the income statement increased by GBP119,000 in the year
ended 31 March 2020 (2019: increase of GBP113,000) with the
addition of higher finance costs on the newly recognised lease
liability.
The Group's adjusted EBITDA from continuing operations increased
by GBP916,000 in the year ended 31 March 2020 (2019: increase of
GBP897,000) as a result of the IAS 17 rental charges no longer
being shown in the consolidated statement of comprehensive
income.
There was no impact on net cash flows, although the presentation
of the consolidated cash flow statement changed, with an increase
in cash inflows from operating activities in the year ended 31
March 2020 of GBP916,000 (2019: GBP897,000) being offset by a
corresponding increase in net cash outflows from financing
activities.
The adoption of IFRS 16 did not have a significant impact on the
Group's effective tax rate.
Full details of the transitional impact on adoption of IFRS 16
are presented in note 17.
Other new amendments and interpretations that became mandatory
for the first time during the year ended 31 March 2020 are listed
below, none of which had a significant impact on the Group's
results.
-- Amendments to IFRS 9 "Financial Instruments" - Prepayment features with negative compensation
-- Annual improvements to IFRS standards 2015-2017 cycle
-- IFRIC 23 "Uncertainty over Income Tax"
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 (loss)/profit 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
2020 2019 Restated
--------------------------------- -----------------------------------
Infrastructure: Utility Infrastructure: Utility
Design assets: Design assets:
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 41,848 4,253 46,101 45,921 2,984 48,905
Adjusted EBITDA from continuing
operations* 2,341 2,207 4,548 9,131 1,793 10,924
Share based payment charge 6 - 6 (115) - (115)
Depreciation and amortisation (2,887) (1,132) (4,019) (2,687) (701) (3,388)
------------------------------------------ ------------- -------- -------- ---------------- -------- --------
Reportable segment operating (loss)/profit
before exceptional items (540) 1,075 535 6,329 1,092 7,421
Cost of sales - exceptional items - (1,766) (1,766) - (883) (883)
Administrative expenses - exceptional
items (832) (38) (870) (396) (15) (411)
------------------------------------------ ------------- -------- -------- ---------------- -------- --------
Reporting segment operating (loss)/profit (1,372) (729) (2,101) 5,933 194 6,127
Profit on sale of subsidiary -
exceptional items - 3,886 3,886 - - -
Net finance expense (219) (253) (472) - (173) (173)
------------------------------------------ ------------- -------- -------- ---------------- -------- --------
(Loss)/profit before tax (1,591) 2,904 1,313 5,933 21 5,954
------------------------------------------ ------------- -------- -------- ---------------- -------- --------
* Adjusted EBITDA from continuing operations is operating
(loss)/profit excluding the impact of exceptional items,
depreciation, amortisation and equity-settled share based payment
charges. Full reconciliation of Alternative Performance Measures
(APMs) are 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
As detailed in the Chief Financial Officer's Statement, 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
period-on-period comparisons and making it easier for users of the
accounts to identify trends.
Alternative Performance
Measure Definition
----------------------- ----------------------------------------------------
Adjusted revenue Adjusted revenue is Group revenue after adding asset
value revenue previously credited to revenue, now
credited to cost of sales under IFRS 15.
Adjusted EBITDA from Operating (loss)/profit excluding exceptional items,
continuing operations amortisation and depreciation and equity-settled
share based payments.
Adjusted profit before Profit before taxation excluding amortisation of
taxation acquired intangibles and exceptional items 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) Adjusted revenue
31 March 31 March
2020 2019
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Revenue 46,101 48,905
Adjusted for:
Asset value revenue previously credited to revenue prior
to adoption of IFRS 15, now credited to cost of sales
(see note 1) 6,707 8,151
--------------------------------------------------------- -------- --------
Like-for-like adjusted revenue 52,808 57,056
--------------------------------------------------------- -------- --------
(b) Reconciliation of operating (loss)/profit to "adjusted
EBITDA from continuing operations"
31 March
31 March 2019
2020 Restated
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Operating (loss)/profit (2,101) 6,127
Adjusted for:
Exceptional items within operating (loss)/profit (note
4) 2,636 1,294
Amortisation and depreciation 4,019 3,388
Equity-settled share based payments (6) 115
------------------------------------------------------- -------- --------
Adjusted EBITDA from continuing operations 4,548 10,924
------------------------------------------------------- -------- --------
(c) Reconciliation of profit before tax to "adjusted profit
before tax"
31 March
31 March 2019
2020 Restated
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Profit before tax 1,313 5,954
Adjusted for:
Exceptional items included in cost of sales 1,766 883
Exceptional items included in administrative expenses 870 411
Amortisation of acquired intangibles 1,356 1,354
------------------------------------------------------ -------- --------
Adjusted profit before tax 5,305 8,602
------------------------------------------------------ -------- --------
(d) Net assets per share
31 March
31 March 2019
2020 Restated
GBP'000 GBP'000
------------------------------- -------- --------
Net assets at end of period 46,307 45,328
Issued shares at end of period 222,118 221,303
Net assets per share 20.8p 20.5p
------------------------------- -------- --------
4. Exceptional items
Year Year
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Exceptional items included in cost of sales 1,766 883
Exceptional items included in administrative expenses 870 411
Profit on sale of subsidiary - exceptional items (3,886) -
------------------------------------------------------ --------- ---------
(1,250) 1,294
------------------------------------------------------ --------- ---------
(a) Exceptional items included in cost of sales
Year Year
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
----------------------- --------- ---------
Fixed asset impairment 1,766 883
----------------------- --------- ---------
1,766 883
----------------------- --------- ---------
Fixed asset impairment relates to the impairment of utility
assets not previously revalued upwards.
(b) Exceptional items included in administrative expenses
Year Year
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
-------------------------------- --------- ---------
Restructuring costs 641 276
One-off legal and adviser costs 229 135
-------------------------------- --------- ---------
870 411
-------------------------------- --------- ---------
Restructuring costs relate to employee exit and severance
costs.
(c) Profit on sale of subsidiary
Year Year
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
----------------------------- --------- ---------
Profit on sale of subsidiary (3,886) -
----------------------------- --------- ---------
(3,886) -
----------------------------- --------- ---------
On 27 January 2020, utility assets belonging to one of the
Group's subsidiaries, Fulcrum Pipelines Limited, were transferred
to a fellow Group subsidiary, Gas Newco 1 Limited. On 31 March
2020, the Group disposed of its 100% equity interest in Gas Newco 1
Limited. The transaction gave rise to the following profit on
disposal:
Year
ended
31 March
2020
GBP'000
--------------------------------------------------------- ---------
Consideration - proceeds received (16,756)
Consideration - retention (receivable in September 2021) (500)
Consideration - deferred (received 30 June 2020) (670)
--------------------------------------------------------- ---------
Total consideration (17,926)
Net book value of assets acquired 9,724
Revaluation in prior periods 3,071
Legal costs relating to the transaction 1,245
--------------------------------------------------------- ---------
(3,886)
--------------------------------------------------------- ---------
Some of the disposed utility assets had previously been revalued
in accordance with the Group policy. Upon disposal, this gave rise
to a transfer between the revaluation reserve and retained earnings
of GBP3,071,000.
5. Operating (loss)/profit
Included in operating (loss)/profit are the following
charges:
Year
Year ended
ended 31 March
31 March 2019
2020 Restated
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Amortisation of intangible assets 1,791 1,612
Depreciation of property, plant and equipment 1,419 975
Depreciation of right-of-use asset 809 801
---------------------------------------------- --------- ---------
6. Taxation
Year
Year ended
ended 31 March
31 March 2019
2020 Restated
GBP'000 GBP'000
----------------- --------- ---------
Current tax 128 620
Deferred tax (371) 422
----------------- --------- ---------
Total tax charge (243) 1,042
----------------- --------- ---------
A change to the main UK corporation tax rate, announced in the
Budget on 11 March 2020, was substantively enacted on 17 March
2020. The rate applicable from 1 April 2020 now remains at 19.0%.
Deferred tax balances have been adjusted accordingly and are
calculated on the basis that they will unwind at 19.0%.
The Group has GBP9.3 million (2019: GBP10.0 million) of tax
losses for which deferred tax assets of GBP1.8 million (2019:
GBP1.7 million) have been recognised. During the period GBP0.1
million of the deferred tax asset was utilised against taxable
profits. The deferred tax asset is expected to be recovered over 12
years. The Group also has unrecognised tax losses of GBP1.8 million
(2019: GBP1.4 million), for which no deferred tax asset is
recognised as there is insufficent certainty over whether the
losses will reverse.
Reconciliation of effective tax rate
Year
Year ended
ended 31 March
31 March 2019
2020 Restated
GBP'000 GBP'000
------------------------------------------------------- --------- ---------
Profit before taxation 1,313 5,954
------------------------------------------------------- --------- ---------
Tax using the UK corporation tax rate of 19.0% (2019:
19.0%) (249) (1,131)
Non-taxable items 535 (37)
Capital allowances in excess of depreciation - -
Effect of change in rate of corporation tax (62) (109)
Tax deductions for share options exercised 16 788
Adjustment to tax charge in respect of previous year's
corporation tax (128) (122)
Adjustment to tax charge in respect of previous year's
deferred tax 219 (431)
Release of previously recognised losses (88) -
------------------------------------------------------- --------- ---------
Total tax charge 243 (1,042)
------------------------------------------------------- --------- ---------
Movement in deferred tax balances
31 March 2020 31 March 2019
----------------------------- -----------------------------
Deferred Deferred Deferred
tax assets tax liabilities tax assets Deferred
Restated tax liabilities
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------- ----------- ---------------- ----------- ----------------
At beginning of period 1,729 (5,186) 2,223 (3,411)
Recognised in profit or loss
Adjustment in respect of previous years - 219 (203) (228)
Tax losses utilised (49) - (258) -
Effect of change in rate of corporation tax 200 (263) (26) (54)
Newly recognised deferred tax liability - - - 98
Origination/reversal of other timing differences (7) 358 (7) -
Released tax liability - - - 257
Release of previously recognised losses (89) - - -
Recognised in other comprehensive income
Revaluation of property, plant and equipment - (321) - (1,848)
------------------------------------------------- ----------- ---------------- ----------- ----------------
At the end of the period 1,784 (5,193) 1,729 (5,186)
------------------------------------------------- ----------- ---------------- ----------- ----------------
7. Dividends
In the year ended 31 March 2020, the following dividends were
paid:
Year Year
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
----------------------------------------------------- --------- ---------
Equity dividend
Paid during the year:
Final dividend in respect of 2018: 1.4p per share - 3,085
Interim dividend in respect of 2019: 0.75p per share - 1,653
Final dividend in respect of 2019: 1.5p per share 3,331 -
----------------------------------------------------- --------- ---------
Total dividends 3,331 4,738
----------------------------------------------------- --------- ---------
No interim dividends were declared and no final dividends are
proposed relating to the year ended 31 March 2020.
8. Earnings per share (EPS)
(a) Basic earnings per share
The calculation of basic and diluted earnings per share has been
based on the following profit attributable to ordinary shareholders
and weighted average number of ordinary shares outstanding:
Year
Year ended
ended 31 March
31 March 2019
2020 Restated
GBP'000 GBP'000
--------------------------------------------------------- --------- ---------
Profit for the year used for calculation of basic EPS 1,556 4,912
Exceptional items included in cost of sales 1,766 883
Exceptional items included in administration expenses 870 411
Remove tax relief on exceptional items (501) (246)
Amortisation of intangibles 1,356 1,354
--------------------------------------------------------- --------- ---------
Profit for the year used for calculation of adjusted EPS 5,047 7,315
--------------------------------------------------------- --------- ---------
Number of shares ('000):
31 March 31 March
2020 2019
Number Number
of shares of shares
----------------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares for the purpose
of basic EPS 221,907 217,205
Effect of potentially dilutive ordinary shares 4,901 9,838
----------------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares for the purpose
of diluted EPS 226,808 227,043
----------------------------------------------------------- ---------- ----------
EPS
Basic 0.7p 2.3p
Diluted basic 0.7p 2.2p
----------------------------------------------------------- ---------- ----------
Adjusted basic 2.3p 3.4p
Adjusted diluted basic 2.2p 3.2p
----------------------------------------------------------- ---------- ----------
9. Property, plant and equipment
(a) Reconciliation of carrying amount
Utility
assets Fixtures
Utility under and Computer
assets construction fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- ------------- --------- ---------- --------
Cost
At 1 April 2018 25,042 9,524 821 1,077 36,464
Additions 3,566 17,343 234 142 21,285
Assets completed in period 19,922 (19,922) - - -
Asset uplift to revaluation reserve - 1,100 - - 1,100
Revaluation 11,380 - - - 11,380
------------------------------------- -------- ------------- --------- ---------- --------
At 31 March 2019 59,910 8,045 1,055 1,219 70,229
Additions 6,019 17,672 10 88 23,789
Assets completed in period 18,338 (18,338) - - -
Asset uplift to revaluation reserve - 951 - - 951
Revaluation 3,036 - - - 3,036
Disposals (13,721) - - (31) (13,752)
------------------------------------- -------- ------------- --------- ---------- --------
At 31 March 2020 73,582 8,330 1,065 1,276 84,253
------------------------------------- -------- ------------- --------- ---------- --------
Accumulated depreciation
At 1 April 2018 (8,332) (6,938) (426) (847) (16,543)
Depreciation charge for the period (694) - (165) (116) (975)
Hickman Shearer impairment (3,428) - - - (3,428)
Impairment - (9,969) - - (9,969)
Assets completed in period (12,780) 12,780 - - -
------------------------------------- -------- ------------- --------- ---------- --------
At 31 March 2019 (25,234) (4,127) (591) (963) (30,915)
Depreciation charge for the period (1,112) - (126) (181) (1,419)
Impairment from internal revaluation (2,852) - - - (2,852)
Impairment - (11,197) - - (11,197)
Assets completed in period (11,749) 11,749 - - -
Disposals 927 - - 23 950
------------------------------------- -------- ------------- --------- ---------- --------
At 31 March 2020 (40,020) (3,575) (717) (1,121) (45,433)
------------------------------------- -------- ------------- --------- ---------- --------
Net book value
At 31 March 2020 33,562 4,755 348 155 38,820
------------------------------------- -------- ------------- --------- ---------- --------
At 31 March 2019 34,676 3,918 464 256 39,314
------------------------------------- -------- ------------- --------- ---------- --------
At 1 April 2018 16,710 2,586 395 230 19,921
------------------------------------- -------- ------------- --------- ---------- --------
Utility assets include GBP0.5 million (2019: GBP1.2 million) of
meter assets valued at cost less depreciation to date.
Disposals include utility assets with a net book value of
GBP12,795,000 owned by one of the Group's former subsidiaries, Gas
Newco 1 Ltd. The Group's equity holding in the subsidiary was
disposed of on 31 March 2020. See note 4.
(b) Measurement of fair values
The fair value of utility assets (excluding meters) at 31 March
2020 was determined internally and was based upon the same
principles as the external valuation, which was last performed by
independent specialist valuers at 31 March 2019. When performing
its valuation, management has used judgement in assessing the key
assumptions used in the valuation model including asset life and
occupancy rates. The valuation technique used is classified as a
Level 3 fair value (based on unobservable inputs) under IFRS 13.
The utility assets and utility assets under construction are the
only financial assets that are held at fair value in the financial
statements.
10. 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 2020 the balance was GBP14.0 million (2019: GBP18.7
million).
11. 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 2018 14,251 12,607 3,556 30,414
Additions - - 884 884
------------------------------------------ -------- -------------- ------------ --------
At 31 March 2019 14,251 12,607 4,440 31,298
Additions - - 326 326
Disposals - - (91) (91)
------------------------------------------ -------- -------------- ------------ --------
At 31 March 2020 14,251 12,607 4,675 31,533
------------------------------------------ -------- -------------- ------------ --------
Accumulated amortisation and impairment
At 31 March 2018 - (208) (2,409) (2,617)
Amortisation for the period - (1,354) (258) (1,612)
------------------------------------------ -------- -------------- ------------ --------
At 31 March 2019 - (1,562) (2,667) (4,229)
Amortisation for the period - (1,356) (435) (1,791)
Disposals - - 9 9
------------------------------------------ -------- -------------- ------------ --------
At 31 March 2020 - (2,918) (3,093) (6,011)
------------------------------------------ -------- -------------- ------------ --------
Net book value
At 31 March 2020 14,251 9,689 1,582 25,522
------------------------------------------ -------- -------------- ------------ --------
At 31 March 2019 14,251 11,045 1,773 27,069
------------------------------------------ -------- -------------- ------------ --------
At 31 March 2018 14,251 12,399 1,147 27,797
------------------------------------------ -------- -------------- ------------ --------
(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 intangibles might be
impaired. Goodwill is tested for impairment by comparing the
carrying amount of each CGU with the recoverable amount. Goodwill
brought forward at the start of the year relates to the acquisition
of Fulcrum Group Holdings Limited on 8 July 2010, the acquisition
of The Dunamis Group Limited on 5 February 2018 and the acquisition
of CDS PSL Holdings Limited on 27 March 2018. The carrying amount
of the intangible asset is allocated across cash-generating units
(CGUs). The goodwill held by the Group relates to either the
infrastructure services CGU; Dunamis, which has two CGUs; or the
CDS CGU.
A segment-level summary of the goodwill allocation is presented
below:
Fulcrum Dunamis CDS Total
As at 31 March 2019 and 31 March 2020 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- -------- -------- -------- --------
Goodwill 2,225 11,331 695 14,251
-------------------------------------- -------- -------- -------- --------
The recoverable amounts are determined based on value in use
calculations which require assumptions. The annual impairment test
was performed for the four CGUs identified above that have goodwill
allocated to them. 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 above CGUs have been determined
from value in use calculations which have been predicated on
discounted cash flow projections from financial budgets approved by
the Board covering a one year period, together with management
forecasts for a further four year period. The values assigned to
the key assumptions represent management's assessment of future
trends in the relevant industries and have been based on historical
data from both external and internal sources, together with the
Group's views on the future achievable growth and the impact of
committed cash flows. Cash flows beyond this are extrapolated using
the estimated long-term growth rates summarised in the paragraph
below.
The pre-tax cash flows that these projections produced were
discounted at pre-tax discount rates based on the Group's beta
adjusted cost of capital reflecting management's assessment of
specific risks related to each cash-generating unit. Pre-tax
discount rates of between 7.2% and 9.0% (2019: between 8.2% and
13.3%) 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% (2019: 2.0%). This is prudently aligned with
the inflation rate and is not considered to be higher than the
long-term industry growth rate.
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, no reasonably possible changes to these assumptions
resulted in an impairment charge being required.
12. 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
2020 2019
Right-of-use assets GBP'000 GBP'000
-------------------- -------- --------
Land and buildings 1,234 1,481
Plant and machinery 1,486 1,110
-------------------- -------- --------
Total 2,720 2,591
-------------------- -------- --------
31 March 31 March
2020 2019
GBP'000 GBP'000
--------------------------------- -------- --------
Additions to right-of-use assets 938 508
--------------------------------- -------- --------
Additions to right-of-use assets include new leases and
extensions to existing lease agreements.
31 March 31 March
2020 2019
Depreciation on right-of-use assets GBP'000 GBP'000
------------------------------------ -------- --------
Land and buildings 247 236
Plant and machinery 562 565
------------------------------------ -------- --------
Total 809 801
------------------------------------ -------- --------
Land and buildings Plant and machinery
-------------------- ---------------------
31 March 31 March 31 March 31 March
2020 2019 2020 2019
Maturity of lease liabilities GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ --------- --------- ---------- ---------
Less than one year 212 236 560 518
Between one and five years 943 914 971 634
In more than five years 312 554 - -
------------------------------ --------- --------- ---------- ---------
Total 1,467 1,704 1,531 1,152
------------------------------ --------- --------- ---------- ---------
31 March 31 March
2020 2019
Other impact on profit and loss GBP'000 GBP'000
------------------------------------------- -------- --------
Finance costs on leases 119 113
Expense on short-term and low value leases 97 127
------------------------------------------- -------- --------
Total 216 240
------------------------------------------- -------- --------
31 March 31 March
2020 2019
Cash flows in respect of leases GBP'000 GBP'000
---------------------------------------------------------- -------- --------
IFRS 16 - principal payments 797 784
IFRS 16 - interest payments 119 113
Cash outflows relating to short-term and low value leases 97 127
---------------------------------------------------------- -------- --------
Total 1,013 1,024
---------------------------------------------------------- -------- --------
13. Share capital
31 March 31 March
2020 2019
GBP'000 GBP'000
------------------------------------------------------------ -------- --------
Authorised
500,000,000 ordinary shares of GBP0.001 each 500 500
------------------------------------------------------------ -------- --------
Allotted, issued and fully paid
222,117,945 (2019: 221,303,106) ordinary shares of GBP0.001
each 222 221
------------------------------------------------------------ -------- --------
Ordinary shareholders are entitled to dividends as declared.
During the year 814,839 ordinary shares (2019: 10.6 million
ordinary shares) were issued with a nominal value of GBP815 (2019:
GBP10,647) to employees exercising vested share options. The shares
issued in the year had a nominal value of GBP0.001 each and were
issued at GBP0.221 each.
14. Interest-bearing loans and borrowings
On 4 June 2018, the Group entered into a three year revolving
credit facility agreement with Lloyds Banking Group for up to GBP20
million. The facility supported the forecast growth in utility
asset ownership of gas and electricity assets by the Group, with
drawdowns secured against the acquired utility assets. The facility
was structured as an "accordion" facility, with GBP10.0 million
committed at 31 March 2020. The facility was subsequently settled
in full on 1 April 2020.
(a) Changes in liabilities arising from financing activities
31 March 31 March
2020 2019
GBP'000 GBP'000
------------------------------- -------- --------
At the beginning of the period 3,000 -
New borrowings 7,000 3,000
------------------------------- -------- --------
At the end of the period 10,000 3,000
------------------------------- -------- --------
(b) Terms and repayment schedule
Nominal Year 31 March 31 March
interest of 2020 2019
Currency rate maturity GBP'000 GBP'000
----------- --------- ---------- ---------- -------- --------
LIBOR +
Borrowings GBP 2.0% 2021 10,000 3,000
----------- --------- ---------- ---------- -------- --------
The Group has complied with the financial covenants (interest
cover and leverage covenants) relating to the above facilities.
15. Reconciliation to net funds
31 March 31 March
2020 2019
GBP'000 GBP'000
-------------------------- -------- --------
Cash and cash equivalents 15,973 6,824
Borrowings (10,000) (3,000)
-------------------------- -------- --------
Net funds 5,973 3,824
-------------------------- -------- --------
16. 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 on page 44 of the
annual report.
In the year, purchases totalling GBP60,817 were made by the
Group to companies in which key management personnel held
significant interests. The purchases were for equipment hire and
sub-contracting services used in the ordinary course of
business.
17. Impact of transition to IFRS 16
Year
ended
31 March
2020 Year
Excluding IFRS ended
IFRS 16 31 March
Impact on profit for the year ended 31 March 16 adjustments 2020
2020 Notes GBP'000 GBP'000 GBP'000
--------------------------------------------- ------ ---------- ------------ ---------
Revenue 46,101 - 46,101
----------------------------------------------------- ---------- ------------ ---------
Cost of sales - underlying (i) (32,020) 65 (31,955)
Cost of sales - exceptional items (1,766) - (1,766)
----------------------------------------------------- ---------- ------------ ---------
Total cost of sales (33,786) 65 (33,721)
----------------------------------------------------- ---------- ------------ ---------
Gross profit 12,315 65 12,380
----------------------------------------------------- ---------- ------------ ---------
Administrative expenses - underlying (i) (13,655) 44 (13,611)
Administrative expenses - exceptional items (870) - (870)
----------------------------------------------------- ---------- ------------ ---------
Total administrative expenses (14,525) 44 (14,481)
----------------------------------------------------- ---------- ------------ ---------
Operating loss (2,210) 109 (2,101)
Profit on sale of subsidiary - exceptional
items 3,886 - 3,886
Net finance expense (i) (353) (119) (472)
--------------------------------------------- ------ ---------- ------------ ---------
Profit before taxation 1,323 (10) 1,313
Taxation 250 (7) 243
----------------------------------------------------- ---------- ------------ ---------
Profit for the period attributable to equity
holders of the parent 1,573 (17) 1,556
----------------------------------------------------- ---------- ------------ ---------
Year
ended
31 March Year
2019 ended
Excluding IFRS 31 March
IFRS 16 2019
Impact on profit for the year ended 31 March 16 adjustments Restated
2019 Notes GBP'000 GBP'000 GBP'000
--------------------------------------------- ------ ---------- ------------ ---------
Revenue 48,905 - 48,905
----------------------------------------------------- ---------- ------------ ---------
Cost of sales - underlying (i) (29,708) 55 (29,653)
Cost of sales - exceptional items (883) - (883)
----------------------------------------------------- ---------- ------------ ---------
Total cost of sales (30,591) 55 (30,536)
----------------------------------------------------- ---------- ------------ ---------
Gross profit 18,314 55 18,369
----------------------------------------------------- ---------- ------------ ---------
Administrative expenses - underlying (i) (11,874) 43 (11,831)
Administrative expenses - exceptional items (411) - (411)
----------------------------------------------------- ---------- ------------ ---------
Total administrative expenses (12,285) 43 (12,242)
----------------------------------------------------- ---------- ------------ ---------
Operating profit 6,029 98 6,127
Net finance expense (i) (60) (113) (173)
--------------------------------------------- ------ ---------- ------------ ---------
Profit before taxation 5,969 (15) 5,954
Taxation (1,035) (7) (1,042)
----------------------------------------------------- ---------- ------------ ---------
Profit for the period attributable to equity
holders of the parent 4,934 (22) 4,912
----------------------------------------------------- ---------- ------------ ---------
31 March IFRS
2020 16 31 March
Excluding adjustments 2020
IFRS
16
Balance sheet impact at 31 March 2020 Notes GBP'000 GBP'000 GBP'000
---------------------------------------- ------- ---------- ------------ --------
Non-current assets
Property, plant and equipment 38,820 - 38,820
Intangible assets 25,522 - 25,522
Right-of-use asset (ii) - 2,720 2,720
Deferred tax assets 1,769 15 1,784
------------------------------------------------- ---------- ------------ --------
66,111 2,735 68,846
------------------------------------------------ ---------- ------------ --------
Current assets
Contract assets 12,279 - 12,279
Inventories 446 - 446
Trade and other receivables 6,826 - 6,826
Cash and cash equivalents 15,973 - 15,973
------------------------------------------------- ---------- ------------ --------
35,524 - 35,524
------------------------------------------------ ---------- ------------ --------
Total assets 101,635 2,735 104,370
------------------------------------------------- ---------- ------------ --------
Current liabilities
Trade and other payables (iv) (12,009) 100 (11,909)
Contract liabilities (27,905) - (27,905)
Borrowings (10,000) - (10,000)
Current lease liability (iii) - (772) (772)
Provisions (58) - (58)
------------------------------------------------- ---------- ------------ --------
(49,972) (672) (50,644)
------------------------------------------------ ---------- ------------ --------
Non-current liabilities
Non-current lease liability (iii) - (2,226) (2,226)
Deferred tax liabilities (5,193) - (5,193)
------------------------------------------------- ---------- ------------ --------
(5,193) (2,226) (7,419)
------------------------------------------------ ---------- ------------ --------
Total liabilities (55,165) (2,898) (58,063)
------------------------------------------------- ---------- ------------ --------
Net assets 46,470 (163) 46,307
------------------------------------------------- ---------- ------------ --------
Equity
Share capital 222 - 222
Share premium 389 - 389
Revaluation reserve 11,939 - 11,939
Merger reserve 11,347 - 11,347
Retained earnings 22,573 (163) 22,410
------------------------------------------------- ---------- ------------ --------
Total equity 46,470 (163) 46,307
------------------------------------------------- ---------- ------------ --------
31 March
2019
Excluding IFRS 31 March
IFRS 16 2019
16 adjustments Restated
Balance sheet impact at 31 March 2019 Notes GBP'000 GBP'000 GBP'000
-------------------------------------- ------ ---------- ------------ ---------
Non-current assets
Property, plant and equipment 39,314 - 39,314
Intangible assets 27,069 - 27,069
Right-of-use asset (ii) - 2,591 2,591
Deferred tax assets 1,707 22 1,729
---------------------------------------------- ---------- ------------ ---------
68,090 2,613 70,703
--------------------------------------------- ---------- ------------ ---------
Current assets
Contract assets 9,132 - 9,132
Inventories 607 - 607
Trade and other receivables 6,392 - 6,392
Cash and cash equivalents 6,824 - 6,824
---------------------------------------------- ---------- ------------ ---------
22,955 - 22,955
--------------------------------------------- ---------- ------------ ---------
Total assets 91,045 2,613 93,658
---------------------------------------------- ---------- ------------ ---------
Current liabilities
Trade and other payables (iv) (10,946) 98 (10,848)
Contract liabilities (26,343) - (26,343)
Borrowings (3,000) - (3,000)
Current lease liability (iii) - (754) (754)
Provisions (96) - (96)
---------------------------------------------- ---------- ------------ ---------
(40,385) (657) (41,042)
--------------------------------------------- ---------- ------------ ---------
Non-current liabilities
Non-current lease liability (iii) - (2,102) (2,102)
Deferred tax liabilities (5,186) - (5,186)
---------------------------------------------- ---------- ------------ ---------
(5,186) (2,102) (7,288)
--------------------------------------------- ---------- ------------ ---------
Total liabilities (45,571) (2,759) (48,330)
---------------------------------------------- ---------- ------------ ---------
Net assets 45,474 (146) 45,328
---------------------------------------------- ---------- ------------ ---------
Equity
Share capital 221 - 221
Share premium 210 - 210
Revaluation reserve 12,737 - 12,737
Merger reserve 11,347 - 11,347
Retained earnings 20,959 (146) 20,813
---------------------------------------------- ---------- ------------ ---------
Total equity 45,474 (146) 45,328
---------------------------------------------- ---------- ------------ ---------
31 March
2018
Excluding IFRS 31 March
IFRS 16 2018
16 adjustments Restated
Balance sheet impact at 31 March 2018 Notes GBP'000 GBP'000 GBP'000
-------------------------------------- ------ ---------- ------------ ---------
Non-current assets
Property, plant and equipment 19,921 - 19,921
Intangible assets 27,797 - 27,797
Right-of-use asset (ii) - 2,883 2,883
Deferred tax assets 2,194 29 2,223
---------------------------------------------- ---------- ------------ ---------
49,912 2,912 52,824
--------------------------------------------- ---------- ------------ ---------
Current assets
Contract assets 10,377 - 10,377
Inventories 209 - 209
Trade and other receivables 6,777 - 6,777
Cash and cash equivalents 9,431 - 9,431
---------------------------------------------- ---------- ------------ ---------
26,794 - 26,794
--------------------------------------------- ---------- ------------ ---------
Total assets 76,706 2,912 79,618
---------------------------------------------- ---------- ------------ ---------
Current liabilities
Trade and other payables (iv) (10,743) 96 (10,647)
Contract liabilities (25,900) - (25,900)
Borrowings - - -
Current lease liability (iii) - (716) (716)
Provisions (98) - (98)
---------------------------------------------- ---------- ------------ ---------
(36,741) (620) (37,361)
--------------------------------------------- ---------- ------------ ---------
Non-current liabilities
Non-current lease liability (iii) - (2,416) (2,416)
Deferred tax liabilities (3,411) - (3,411)
---------------------------------------------- ---------- ------------ ---------
(3,411) (2,416) (5,827)
--------------------------------------------- ---------- ------------ ---------
Total liabilities (40,152) (3,036) (43,188)
---------------------------------------------- ---------- ------------ ---------
Net assets 36,554 (124) 36,430
---------------------------------------------- ---------- ------------ ---------
Equity
Share capital 211 - 211
Share premium 21,042 - 21,042
Revaluation reserve 4,649 - 4,649
Merger reserve 11,347 - 11,347
Retained earnings (695) (124) (819)
---------------------------------------------- ---------- ------------ ---------
Total equity 36,554 (124) 36,430
---------------------------------------------- ---------- ------------ ---------
(i) Statement of comprehensive income
Under the previous accounting standard for leases, IAS 17, lease
costs were recognised on a straight-line basis over the term of the
lease. The Group recognised these costs within cost of sales and
administrative expenses. On adoption of IFRS 16 these lease costs
have been removed and replaced with depreciation and finance
charges.
The impact of removing the lease costs in the year ended 31
March 2020 was a credit to cost of sales of GBP632,000 (2019:
GBP628,000) and a credit to administrative expenses of GBP284,000
(2019: GBP269,000). Under IFRS 16 the right-of-use asset is
depreciated over the lease term, and consequently a depreciation
charge of GBP567,000 was incurred within cost of sales in the year
ended 31 March 2020 (2019: GBP573,000) alongside a further
depreciation charge of GBP242,000 in administrative expenses (2019:
GBP228,000).
In addition, debits that had previously been taken through the
statement of comprehensive income relating to lease incentives were
reversed, leading to a GBP2,000 decrease to administrative expenses
in the year ended 31 March 2020 (2019: GBP2,000 decrease).
Under IFRS 16, finance costs are charged on the lease liability,
which resulted in a finance charge in the year ended 31 March 2020
of GBP119,000 (2019: GBP113,000).
The net impact of the above adjustments to profit before tax for
the year ended 31 March 2020 was a charge of GBP10,000 (2019:
GBP15,000).
(ii) Right-of-use asset
IFRS 16 has resulted in the recognition of a right-of-use asset.
This asset represents the Group's contractual right to access an
identified asset under the terms of the lease contract.
(iii) Lease liability
IFRS 16 has resulted in the recognition of a lease liability.
This liability represents the Group's contractual obligation to
minimum lease payments during the lease term. The element of the
liability payable in the next 12 months is recognised as a current
liability with the balance recognised in non-current
liabilities.
(iv) Working capital
Under IAS 17, the Group held a balance within working capital
that related to certain lease incentives. The balance of GBP100,000
at 31 March 2020 (2019: GBP98,000) is no longer recognised under
IFRS 16 as all payments, lease incentives and related costs are
reflected in either the right-of-use asset or the lease
liability.
(v) Taxation
A deferred tax asset of GBP29,000 was recognised on transition
to IFRS 16 representing the timing difference on the amounts taken
to reserves. The deferred tax asset created at the point of
transition will unwind over the average life of the leases held at
the date of transition.
(vi) Cash flow statement
The impact of transition to IFRS 16 had no impact on net cash
flows. However, the presentation of the consolidated cash flow
statement changed, with an increase in cash inflows from operating
activities in the year ended 31 March 2020 of GBP916,000 (2019:
GBP897,000) being offset by a corresponding increase in net cash
outflows from financing activities.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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