Enteq Technologies - Final Results and Investor Presentation
06/07/2022 07:00
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RNS Number : 4358R Enteq Technologies PLC 06 July 2022
Enteq Technologies plc
("Enteq" or the "Company" or the "Group")
Final results for the year ended 31 March 2022
and
IMC Investor Presentation
Enteq (AIM: NTQ.L), the energy services technology supplier, today announces
its final results for the year ended 31 March 2022
Key features
· Total revenue up from $5.1m to $7.3m due to strengthening North
American market, offsetting reduced activity in China:
o North America revenue up from $1.9m to $6.2m
o International revenue down from $3.2m to $1.1m
· Adjusted EBITDA(2) up from $0.1m to $0.3m
· Gross profit margin down from 53% to 36% due to change in product mix
from new strategic distribution partnerships
· Administrative expenses before amortisation reduced from $3.9m to
$3.2m:
o Underlying overheads(1) reduced from $2.6m to $2.3m
o Depreciation on rental fleet down from $0.9m to $0.5m
o Depreciation on other fixed assets steady at $0.2m
· Loss attributable to shareholders reduced from $1.1m to $0.8m
· The SABER project has progressed well:
o Key test objectives achieved
o Extensive industry and customer engagement has demonstrated market
potential
Financial metrics
Years ended 31 March ($m):
2022 2021
· Revenue 7.3 5.1
· Gross profit margin 36% 53%
· Underlying overheads(1) 2.3 2.6
· Adjusted EBITDA(2) 0.3 0.1
· Exceptional items - 0.1
· Total post tax loss 0.8 1.1
· Post tax loss per share (cents) 1.1 1.7
· Cash balance(3) 4.8 8.1
· Investment in engineering projects 2.7 1.6
Outlook
· Continued US rig count growth gives optimism regarding US market
· Focus on international opportunities as markets recover
· Ongoing investment in the development and deployment of new
market-led technologies
· Emphasis on maintaining a strong balance sheet
Andrew Law, CEO of Enteq Technologies plc, commented:
"Enteq has continued investment in the SABER RSS project development,
resulting in an enhanced, simplified design with a wider range of operation
and a low cost to operate. Sustained testing has confirmed the system has
performed to the design criteria and met all requirements to date, thereby
further reducing technical risk. Extensive industry engagement with
existing and new customers both internationally and across North America, has
confirmed that SABER is on-track to meeting the market requirements.
Enteq's core MWD business has benefitted from the continued growth in the US
market, new customers in the US, new customers internationally and from access
to selected technology distribution agreements. Additionally, the core
existing customer base will be the initial target market for SABER.
As with the core MWD technology, SABER has applications in geothermal and
methane capture operations as well as conventional oil and gas, giving the
Board grounds for optimism for the short, medium and long term outlook."
Investor Presentation
Please note that Andrew Law and David Steel, Chief Financial Officer, will be
providing a live presentation relating to these results via the Investor Meet
Company platform on 8th July 2022 at 10:30am BST.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via the Investor Meet Company dashboard up until
9.00am the day before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and attend this
presentation via the following link:
https://www.investormeetcompany.com/enteq-technologies-plc/register-investor
(https://www.investormeetcompany.com/enteq-technologies-plc/register-investor)
Investors who already follow Enteq on the Investor Meet Company platform will
automatically be invited.
( )
(1) The reconciliation between Underlying overheads and Administrative
expenses before amortisation is follows:
Year to 31 March
2022 Year to 31 March 2021
$m
$m
Total underlying overheads
2.3
2.6
Depreciation - fixed assets
0.2
0.2
Depreciation - rental fleet
0.5
0.9
PSP Share charge
0.2
0.2
Administrative expenses before amortisation (including
bad debt charge) 3.2
3.9
(2) The reconciliation between Loss attributable to shareholders and Adjusted
EBITDA is follows:
Year to 31
March 2022 Year to 31 March 2021
$m
$m
Loss attributable to shareholders
(0.8)
(1.1)
Exceptional
items
-
0.1
Amortisation
0.2
-
Depreciation - fixed assets
0.2
0.2
Depreciation - rental fleet
0.5
0.9
PSP Share charge
0.2
0.2
Interest
- (0.1)
Adjusted EBITDA
0.3 0.1
Both the above alternative performance measures are shown as the Board
consider these to be key to the management of the business as a whole.
(3) The cash balance includes:
Year to 31 March 2022 Year to 31 March 2021
$m
$m
Cash and cash
equivalents
3.3
8.1
Bank
deposits
1.5
-
Cash
balance
4.8
8.1
For further information, please contact:
Enteq Technologies
plc
+44 (0)1494 618739
www.enteq.com
(http://www.enteq.com)
Andrew Law, Chief Executive Officer
David Steel, Chief Financial Officer
finnCap Ltd (NOMAD and
Broker)
+44 (0)20 7220 0500
Ed Frisby, Emily Watts, Tim Harper (Corporate Finance)
Andrew Burdis, Barney Hayward (ECM)
Combined Chief Executive and Chairman's report
Review of the Year
This year has been one of capturing North American market recovery coupled
with a concentrated effort on the SABER development project.
In North America, Enteq has expanded the offering of innovative solutions to
customers through a number of exclusive distributor agreements that were
signed during the year. These agreements cover technologies such as improved
signal detection; MEMS (micro-electro-mechanical systems) directional sensors;
gamma logging and depth tracking.
To capture North American market growth, a VP of sales for the MWD division
was recruited as a replacement for a vacant senior operational post.
The improving market conditions seen throughout the year resulted in an
increasing demand for equipment. The contracts have been predominantly sale
compared to rental, with the proportion of revenue from the rental fleet this
year at 13% compared to the 23% seen in the year to 31 March 2021 (44% in the
year to 31 March 2020). As at 31 March 2022 there were 3 kits on rental .
The international market showed signs of recovery during the latter part of
the financial year, lagging the US recovery as expected. International
revenue was $1.1m this financial year, with $0.6m from two new customers and
entry into two new geographical markets. The market slowdown in China
inevitably drove the reduction in this year's international revenue, compared
to $3.2m in the year to 31 March 2021 .
The SABER development project has progressed during the year with the most
important milestone being that the tool has demonstrated that this novel
method of steering can generate ample steering forces during flow loop
tests. Extensive customer and industry engagement about the SABER project
confirmed there is a high degree of appetite for this technology. SABER
remains on-track for commercialisation during 2022, with existing resources in
place to complete the remaining phase of the development project.
Overall year-on-year a further $0.3m was removed from overheads through a
focus of incremental cost savings rather than major reduction programs.
Staff
There was a total of 16 employees at the end of the year, up from the 15 at
the previous year end. The Board would like to recognise the on-going
loyalty, dedication and support of the staff as Enteq continues with its
excellent reputation for the reliability of equipment and commitment to
customer support.
Prospects
Enteq has continued investment in the SABER RSS project development, resulting
in an enhanced, simplified design with a wider range of operation and a low
cost to operate. Sustained testing has confirmed the system has performed to
the design criteria and met all requirements to date, thereby further reducing
technical risk. Extensive industry engagement with existing and new
customers both internationally and across North America, has confirmed that
SABER is on-track to meeting the market requirements.
Enteq's core MWD business has benefitted from the continued growth in the US
market, new customers in the US, new customers internationally and from access
to selected technology distribution agreements. Additionally, the core
existing customer base will be the initial target market for SABER.
As with the core MWD technology, SABER has applications in geothermal and
methane capture operations as well as conventional oil and gas, giving the
Board grounds for optimism for the short, medium and long term outlook.
Financial Review
This review contains pro-forma statements which are different in presentation
to the statutory format shown on the following pages.
Income Statement
Year to 31 March:
2022 2021
$ million $ million
Revenue 7.3 5.1
Cost of Sales (4.7) (2.4)
Gross profit 2.6 2.7
Overheads (2.3) (2.6)
Adjusted EBITDA 0.3 0.1
Depreciation & amortisation (0.8) (1.1)
Other charges (0.3) (0.1)
Ongoing operating loss (0.8) (1.1)
Exceptional items - (0.1)
Operating Loss (0.8) (1.2)
Interest - 0.1
Loss before tax (0.8) (1.1)
Tax - -
Loss after tax (0.8) (1.1)
The North American market saw a dramatic improvement during the year with the
rig count rising from 430 as at 31 March 2021 to 673 as at 31 March 2022, an
increase of 243 (57%). The majority of this increase was seen in the second
half of the financial year when 145 rigs were added which represented 60% of
the full year additional rigs. This improvement was directly related to the
price of a barrel of WTI which rose from $61 at 31 March 2021 to $104 at the
end of March 2022, an increase of 71%. Again, the majority of this
increase was seen in the second half of the financial year when WTI rose from
$72, representing a 52% increase in this six month period. The impact of the
above was that North American revenue rose to US$6.2m this year from $1.9m
last year. The international market appeared to take longer to recover from
the COVID impact with international revenue at $1.1m down from the $3.2m
reported last year. As previously mentioned, pleasingly, US$0.6m of this
revenue came from two new customers based in geographical markets where Enteq
had not sold before.
The full year gross margin was 36%, down from last year's 53%, due to an
increasing proportion of revenue coming from the integration of third-party
components into the total product range.
Total underlying overheads, at $2.3m, was down $0.3m on last year's figure.
This reflected the concentration on reducing all levels of overheads were
possible without impacting the level of customer support given.
The combined depreciation and amortisation charge was significantly down on
the previous year due to the reduced level of rental income this financial
year. This reflected the market dynamics whereby customers were more
inclined to buy rather than rent due to their increased level of activity.
The "Other charges" shown above relate, primarily, to the non-cash cost
associated with the Performance Share Plan.
Statement of Financial Position
Enteq's net assets at the financial year-end comprised of the following items:
As at 31 March: 2022 2021
$million $million
Intangible assets 4.1 1.7
Property, plant & equipment 2.2 2.3
Rental fleet 0.3 -
Net working capital 4.1 3.9
Cash balance 4.8 8.1
Net assets 15.5 16.0
Both the closing balance and the increase in the year in the intangible assets
relate to the on-going spend on all the engineering projects, predominately
the SABER rotary steerable system.
The net book value of property, plant & equipment at $2.2m is $0.1m down
primarily due to the depreciation charge as only minimal additions were made
during the year.
The net book value of the rental fleet reflects the 3 kits on hire at the end
of the year, whereas there were only a small number of components on hire as
at March 2021.
The net working capital of $4.1m has increased $0.2m during the year. This is
primarily due to an increase in debtors ($1.0m) being countered by an increase
in creditors ($0.4m) and a decrease of inventory ($0.5m). All these movements
relate to the impact of the higher level of trading seen in the last quarter
of the financial year.
Cash flows
Overall, the Group saw a net cash outflow of $3.3m (2021: $2.1m) reducing the
Group's closing cash balance as at 31 March 2022 to $4.8m. The majority of
this reduction ($2.7m) related to the on-going investment in the engineering
projects, primarily the SABER tool.
Year to 31 March: 2022 2021
$ million $ million
Adjusted EBITDA 0.3 0.1
Change in net operational working capital (0.2) (0.9)
Operational cash generated 0.1 (0.8)
Net investment in rental fleet (0.8) -
Investment in engineering projects (2.7) (1.6)
Investment in fixed assets (0.1) -
Interest and share issues 0.2 0.3
Disposal of fixed assets - 0.5
Severance and transaction costs - (0.5)
Net cash movement (3.3) (2.1)
Opening cash balances 8.1 10.2
Closing cash balances 4.8 8.1
Financial Capital Management
Enteq's financial position continues to be robust. Enteq had no bank
borrowings, or other debt, and had a closing cash position of $4.8m as at 31
March 2022. In addition, the Company has in place an undrawn $1m overdraft
facility, offering additional flexibility should an accelerated introduction
to the marketplace of SABER RSS be appropriate in future.
Enteq monitors its cash balances daily and operates under treasury policies
and procedures which are set by the Board.
The financial statements are presented in US dollars as the Company's primary
economic environment, in which it operates and generates cash flows, is one of
US dollars. Apart from its UK based overhead costs, substantially all other
transactions are transacted in US dollars.
Enteq is subject to foreign exchange rate fluctuations to the extent that it
holds non-US Dollar cash deposits. The year-end GBP denominated holdings are
approximately 5% of total cash holdings, up from the 3% of last year's
balance.
Annual Report and Accounts
The 2022 Annual Report and Accounts, together with the notice of Annual
General Meeting, have today been sent to shareholders and are available on the
Company's website, www.enteq.com (http://www.enteq.com) .
Annual General Meeting
The Company's Annual General Meeting will be held on 21 September 2022 at
12:00 noon at the offices of finnCap, 1 Bartholomew Close, London, EC1A 7BL.
David Steel
CFO & Company Secretary
Enteq Technologies Plc
Consolidated Income Statement
Year to 31 March 2022 Year to 31 March 2021
Notes $ 000's $ 000's
Revenue 2 7,306 5,078
Cost of Sales (4,678) (2,367)
Gross Profit 2,629 2,711
Administrative expenses before amortisation (3,185) (3,851)
Bad debt provision charge to income statement - (56)
Amortisation of acquired intangibles 6 (199) (19)
Other exceptional items 3 (7) (85)
Foreign exchange profit on operating activities (40) 78
Total Administrative expenses (3,431) (3,933)
Operating loss (802) (1,222)
Finance income 16 67
Loss before tax (787) (1,155)
Tax 4 - 46
Loss for the period (787) (1,109)
Loss attributable to:
Owners of the parent (787) (1,109)
Loss per share (in US cents): 5
Basic (1.1) (1.7)
Diluted (1.1) (1.7)
There are no other items requiring disclosure as comprehensive income.
Enteq Technologies Plc
Consolidated Statement of Financial Position
As at 31 As at 31
March 2022 March 2021
Notes $ 000's $ 000's
Assets
Non-current
Intangible assets 6 4,143 1,728
Property, plant and equipment 2,506 2,272
Trade and other receivables - 168
Non-current assets 6,649 4,168
Current
Trade and other receivables 3,537 2,405
Inventories 2,410 2,888
Cash and cash equivalents 3,296 8,059
Bank deposits 1,500 -
Current assets 10,743 13,352
Total assets 17,392 17,520
Equity and liabilities
Equity
Share capital 1,072 1,056
Share premium 91,919 91,789
Share based payment reserve 432 455
Retained earnings (77,894) (77,324)
Total equity 15,529 15,976
Liabilities
Current
Trade and other payables 1,863 1,544
Total liabilities 1,863 1,544
Total equity and liabilities 17,392 17,520
Enteq Technologies Plc
Consolidated Statement of Changes in Equity
Share
Called up based
share Retained Share payment Total
capital earnings premium reserve equity
$ 000's $ 000's $ 000's $ 000's $ 000's
As at 1 April 2021 1,056 (77,324) 91,789 455 15,976
Issue of share capital 16 - 130 - 146
Transfers between reserves - 217 - (217) -
Share based payment charge - - - 194 194
Transactions with owners 16 217 130 (23) 340
Loss for the year - (787) - - (787)
Other comprehensive income for the year - - - - -
Total comprehensive income - (787) - - (787)
Total movement 16 (570) 130 (23) (447)
As at 31 March 2022 1,072 (77,894) 91,919 432 15,529
As at 1 April 2020 1,027 (76,943) 91,579 1,048 16,711
Issue of share capital 29 - 210 - 239
Transfers between reserves - 728 - (728) -
Share based payment charge - - - 135 135
Transactions with owners 29 728 210 (593) 374
Loss for the year - (1,109) - - (1,109)
Other comprehensive income for the year - - - - -
Total comprehensive income - (1,109) - - (1,109)
Total movement 29 (381) 210 (593) (735)
As at 31 March 2021 1,056 (77,324) 91,789 455 15,976
Enteq Technologies Plc
Consolidated Statement of Cash Flows
Year to 31 March 2022 Year to 31 March 2021
$ 000's $ 000's
Cash flows from operating activities
Loss for the year (787) (1,109)
Net finance income (16) (67)
Gain on disposal of fixed assets (30) (455)
Share-based payment non-cash items 194 135
Foreign exchange charge (40) 78
Depreciation and Amortisation charges 840 1,130
161 (288)
Tax received - 46
Decrease in inventory 478 222
(Increase)/decrease in trade and other receivables (964) (554)
Decrease in trade and other payables 320 (820)
Increase in rental fleet assets (817) (17)
Net cash from operating activities (822) (1,411)
Investing activities
Purchase of Property Plant and Equipment (58) (29)
Disposal proceeds of tangible fixed assets 30 511
Increase in intangible fixed assets (2,614) (1,423)
Funds placed on interest bearing deposit (1,500) -
Interest received 16 67
Net cash from investing activities (4,126) (874)
Financing activities
Share issue 145 239
Net cash from financing activities 145 239
Decrease in cash and cash equivalents (4,803) (2,046)
Non-cash movements - foreign exchange 40 (78)
Cash and cash equivalents at beginning of period 8,059 10,183
Cash and cash equivalents at end of period 3,296 8,059
1. BASIS OF PREPARATION
The results for the year ended 31 March 2022 have been prepared using the
accounting policies and methods of computation consistent with those used in
the Group's annual report for the year ended 31 March 2021. The results
have also been presented and prepared in a form consistent with that which
will be adopted in the Group's annual report for the year ended 31 March 2022
and in accordance with the recognition and measurement requirements of the
International Financial Reporting Standards as adopted by the European Union.
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 March 2022 and the year ended 31
March 2021, but is derived from those accounts. Statutory accounts for
2021 have been delivered to Companies House. Those for the year ended 31
March 2022 will be delivered following the Company's Annual General Meeting on
21 September 2022.
The financial information has been extracted from the Group's Annual Report
for the year ended 31 March 2022. The auditors have reported on these
accounts; their reports were unqualified and did not contain statements under
s498(2) or (3) Companies Act 2006. The Group published its 2022 Annual Report
and Accounts on 6 July 2022.
2. SEGMENTAL REPORTING
For management purposes, the Group is currently organised into a single
business unit, the Drilling Tools division, which is currently based solely in
the USA.
The principal activities of the group is the design, manufacture and selling
of specialised parts and products for Directional Drilling and Measurement
While Drilling operations for use in the energy exploration and services
sector. Revenue is only generated by the selling activity.
At present, there is only one operating segment and the information presented
to the board is consistent with the consolidated profit and loss statement and
the consolidated statement of financial position.
The revenues, net assets and non-current assets of the Group can be analysed
by geographic location (post-consolidation adjustments) as follows:
Revenues
31 March 2022 31 March 2021
$ 000's $ 000's
United States of America 6,201 1,939
Central Asia 396 -
Australasia 243 -
China 187 2,735
Europe 51 323
Rest of the world 228 81
Total Group revenue 7,306 5,078
31 March 2022 31 March 2021
$ 000's $ 000's
Contracts with customers 6,364 3,930
Operating lease income 942 1,148
Total Group revenue 7,306 5,078
Net Assets
31 March 2022 31 March 2021
$ 000's $ 000's
Europe (UK) 3,649 6,674
United States 11,880 9,302
Total Group net assets 15,529 15,976
Non-current Assets
31 March 2022 31 March 2021
$ 000's $ 000's
Europe (UK) - -
United States 6,649 4,168
Total Group non-current assets 6,649 4,168
All of the Group's revenue arises from the sale and rental of specialised
parts and products for Directional Drilling and Measurement While Drilling
operations. The Group had 2 customers that contributed in excess of 10% of
the Group's total sales for the year (2021: 3). These customers contributed
$4,0868k and $1,014k respectively. (2021: $ 2,088k, $1,020k and $572k). No
revenue relates to customers based in the UK (2021: none).
3. EXCEPTIONAL ITEMS
The exceptional items can be analysed as follows:
31 March 2022 31 March 2021
$ 000's $ 000's
Severance payments and other plant closure costs 37 397
Gain on sale of fixed assets (30) (455)
Aborted project costs incurred - 147
Other - (4)
Total exceptional items 7 85
4. INCOME TAX
Analysis of tax expense
No liability to UK corporation tax arose on ordinary activities for the
period.
Factors affecting the tax charge
The tax assessed for the period is different from the standard rate of
corporation tax in the UK. The difference is explained below:
31 March 2022 31 March 2021
$ 000's $ 000's
Loss on ordinary activities before tax (787) (1,109)
Loss on ordinary activities multiplied by the
standard rate of corporation tax in the UK of 19% (2021: 19%): (149) (211)
Effects of:
Items not subject to corporation tax (31) 136
Tax losses to carry forward 181 75
R&D tax credit - 46
Total income tax - 46
There has been no deferred taxation recognised in these financial statements
due to the uncertainty surrounding the timing of the recovery of these
amounts. The total losses available to the Group in the relevant tax
jurisdictions are as follows: UK $0.5m; United States $22.2m (2021: UK $1.4m;
United States $20.3m). There were no significant deferred tax liabilities.
These tax losses have no expiry date.
5. EARNINGS PER SHARE AND DIVIDENDS
Basic earnings per share
Basic earnings per share is calculated by dividing the loss attributable to
ordinary shareholders for the year of $787k (31 March 2021: loss of $1,109k)
by the weighted average number of ordinary shares in issue during the year of
68,604k (31 March 2021: 67,065k).
As the Group is loss making, any potential ordinary shares have the effect of
being anti-dilutive. Therefore, the diluted EPS is the same as the basic
EPS. As the year end share price is below the weighted average option price
of all the options issued, the adjusted diluted EPS is the same as adjusted
EPS.
The number of outstanding share options, including senior managers, that are
not included in the above figures are as follows:
31 March 2022 31 March 2021
000's 000's
EMI plan 233 398
PSP plan 3,670 3,825
Total 3,903 4,223
March 2022: EPS Weighted average number of shares Per-share amount
Earnings
$ 000's 000's US cents
Loss attributable to ordinary shareholders (787) 68,604 (1.1)
March 2021: EPS Weighted average number of shares Per-share amount
Earnings
$ 000's 000's US cents
Loss attributable to ordinary shareholders (1,109) 67,065 (1.7)
During the year Enteq Technologies Plc did not pay any dividends (2021: nil).
6. INTANGIBLE ASSETS
Other Intangible Assets
Developed technology IPR&D technology Brand names Customer relationships Total
$ 000's $ 000's $ 000's $ 000's $ 000's
Developed technology IPR&D technology Brand names Customer relationships Total
$ 000's $ 000's $ 000's $ 000's $ 000's
Cost:
As at 1 April 2021 12,842 13,048 1,240 20,586 47,716
Transfers 275 (275) - - -
Disposal - - - (20,586) (20,586)
Capitalised in period 120 2,494 - - 2,614
As at 31 March 2022 13,237 15,267 1,240 - 29,744
Amortisation/Impairment:
As at 1 April 2021 12,842 11,320 1,240 20,586 45,988
Disposal - - - (20,586) (20,586)
Charge for the year 199 - - - 199
As at 31 March 2022 13,041 11,320 1,240 - 25,601
Net Book Value:
As at 1 April 2021 - 1,728 - - 1,728
As at 31 March 2022 196 3,947 - - 4,143
Developed technology IPR&D technology Brand names Customer relationships Total
$ 000's $ 000's $ 000's $ 000's $ 000's
Cost:
As at 1 April 2020 12,823 11,454 1,240 20,586 46,103
Capitalised in period 19 1,594 - - 1,613
As at 31 March 2021 12,842 13,048 1,240 20,586 47,716
Amortisation/Impairment:
As at 1 April 2020 12,823 11,320 1,240 20,586 45,969
Charge for the year 19 - - - 19
As at 31 March 2021 12,842 11,320 1,240 20,586 45,988
Net Book Value:
As at 1 April 2020 - 134 - - 134
As at 31 March 2021 - 1,728 - - 1,728
The main categories of Intangible Assets are as follows:
Developed technology:
This is technology which is currently commercialised and embedded within the
current product offering.
IPR&D technology:
This is technology which is in the final stages of field testing, has
demonstrable commercial value and is expected to be launched within the
foreseeable future.
Brand names:
The value associated with the various trading names used within the Group.
Customer relationships:
The value associated with the on-going trading relationships with the key
customers acquired.
Impairment
Due to the volatility seen in the price of oil seen since the start of March
2020, all intangible assets were assessed as to their future commercial
viability.
There are now considered to be two cash generating units ("CGU") - see the
accounting policy note on page 48.
The recoverable amount of each CGU is determined from value in use
calculations both where the asset is currently in use or will be in the
future. The key assumptions for the value in use calculations are those
regarding the future revenues, discount rates, growth rates and expected
changes to selling prices and direct costs during the period. Management
estimates discount rates using pre-tax rates that reflect current market
assessment of the time value of money and the risks specific to the CGU. The
growth rates are based on management forecasts for the five years to March
2026. Cash flow forecasts are prepared from the most recent financial plans
approved by the Board.
Currently the SABER project is in the development phase and has not generated
any revenue. On the assumption that the SABER project is launched
successfully, the longer-term forecast assumes annual growth rates between 5%
and 3%. The impairment test assumes annual growth rates of 123% in the
year to March 2023, 103% in the year to March 2024, 85% in the year to March
2025, 10% in the years to March 2026, and March 2027, followed by 3%
thereafter. The high growth rates are due to the introduction of the SABER
product line in the years under review.
The pre-tax rate used to discount both cash flow forecasts is 13.4% (2021:
12.8%). Management have based this rate on the following factors: a Risk
Free Rate of 2.9%; a levered equity beta of 1.5; a market risk premium of
5.5%; a small cap premium of 3.8% and an implied cost of debt of 4.5%.
Intangible assets
The intangible assets acquired during the year comprise both externally
procured services from specialist suppliers, which is shown at the purchase
cost, and internally generated costs which is shown at the cash cost of the
items acquired, primarily payroll related costs.
Amortisation
All categories of intangible assets, apart from the IPR&D technology, are
being amortised over their respective useful lives, on a straight-line basis.
The rotary steerable project will have its useful life assessed once the field
trials have been completed which will give a better estimate of the usefulness
of this asset.
7. RESPONSIBILITY STATEMENT OF THE DIRECTORS
To the best of the knowledge of the Directors (whose names and functions are
set out below), the final results announcement has been prepared using
accounting policies and methods of computation consistent with those used in
the Group's annual report for the year ended 31 March 2021 and adopted for the
financial year ended 31 March 2022, gives a true and fair view of the assets,
liabilities, financial position and profits and losses for the Company and the
undertakings included in the consolidation taken as a whole.
Executive Directors
Andrew
Law
Chief Executive Officer
David
Steel
Chief Financial
Officer
Non-Executive Directors
Martin
Perry
Chairman
Iain
Paterson
Neil Hartley
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. END FR GZGGNGKKGZZZ
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