REG - Fulcrum Utility Srvc - Final Results
01/08/2022 07:00
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RNS Number : 3424U Fulcrum Utility Services Ltd 01 August 2022
1 August 2022
FULCRUM UTILITY SERVICES LIMITED
("Fulcrum" or "the Group")
Final results for the year ended 31 March 2022 ("FY22")
Headlines:
· Revenue up 31.2% to £61.8 million (2021: £47.1 million)
· Adjusted EBITDA(1) of £0.5 million (2021: £0.1 million)
· Loss before tax of £14.2 million (2021: £11.5 million)(2)
· Cash outflow from operating activities of £7.6 million (2021:
£2.4 million)
· Adjusted earnings per share of (1.4)p (2021: (0.9)p) and basic
earnings per share of (5.2)p (2021: (4.6)p)
· Net cash of £11.2 million as at 31 March 2022 (2021: £1.5 million
net debt)
· Debt facility headroom of £10 million as at 31 March 2022 (2021:
£4.3 million)
· Net assets of £45.9 million (2021: £35.4 million)
(1)Adjusted EBITDA is operating loss excluding the impact of exceptional
items, other net gains, depreciation, amortisation and equity-settled
share-based payment charges.
(2)( )Includes £10.6 million of exceptional items (2021: £8.5 million),
including £5.6 million for onerous contracts (2021: £nil)
Commenting on the full year results, Antony Collins, Chief Executive Officer,
said:
"I was delighted to have the opportunity to join the Group in January 2022.
Whilst, as with most businesses, Fulcrum is not without challenges, I
strongly believe the business has the essential capabilities to be successful
in an exciting and growing marketplace.
"Despite the significant challenges presented to the Group this year,
including the impact of the UK's energy crisis and wider, very difficult
trading conditions, I am confident that Fulcrum can grow and be successful in
several exciting and growing markets. At the same time, the new executive team
is identifying improvement opportunities and ensuring optimal performance to
deliver long-term, sustainable growth for the benefit of all shareholders.
"The Group's medium to long-term growth also remains underpinned by strong
market drivers and government stimulus. These, I believe, position Fulcrum
well to benefit from the UK's transition to a low carbon economy and a
net-zero future."
This announcement contains inside information.
Enquiries:
Fulcrum Utility Services Limited +44 (0)114 280 4150
Antony Collins, Chief Executive Officer
Cenkos Securities plc (Nominated adviser and broker) +44 (0)20 7397 8900
Camilla Hume / Callum Davidson (Nomad) / Michael Johnson (Sales)
Notes to Editors:
Fulcrum is a multi-utility infrastructure and services provider. The Group
operates nationally with its head office in Sheffield, UK. It designs, builds,
owns, and maintains utility infrastructure and offers smart meter exchange
programmes. https://investors.fulcrum.co.uk/
(https://investors.fulcrum.co.uk/)
Chair's statement
As has been widely reported, FY22 was a challenging year for the UK's energy
infrastructure sector and Fulcrum has not been immune to this. Whilst the
Group initially experienced a strong recovery from the impact of Covid-19 and
positive progress was made in the first half of the year, the impact of
difficult market conditions is reflected in the Group's overall performance
for the full year.
Results
It was pleasing that Fulcrum's first half financial performance was in line
with management's expectations, and significantly ahead of the first half of
the prior year. The Group also secured a strong succession of its largest ever
contract wins.
Notwithstanding this positive start to the year, with the Group's diverse
business operations initially helping to insulate it from the energy crisis,
the sustained turbulence in the energy market, coupled with wider market
issues of supply chain pressure and cost inflation in materials and labour,
along with exceptional costs, significantly affected the Group's profitability
in the final quarter of the year.
Revenue for the year ended 31 March 2022 was slightly ahead of market
expectations at £61.8 million, representing year-on-year growth of 31.2%,
with adjusted EBITDA for the same period at £0.5 million. Adjusted EBITDA is
operating loss of £13.7 million, excluding the impact of exceptional items of
£10.6 million (including £5.6 million for onerous contracts), other net
gains of £0.3 million, depreciation and amortisation of £3.3 million and an
equity-settled share-based payment charge of £0.6 million.
I would like to express my personal thanks to all of our people for their hard
work, efforts and resilience in what has been another year of difficult market
conditions.
Impact of the UK's energy crisis and challenging trading conditions
Since the Group's successful fundraise in December 2021, the UK energy market
has continued to experience considerable turbulence. Predominantly, this
affected the performance and profitability of the Group's meter exchange
operations.
Wider market issues of supply chain pressure and cost inflation in materials
and labour also weighed on the profitability of the Group's multi-utility
contracting operations, especially in its major electrical and multi-utility
projects, which are inherently complex and longer term in nature.
The Board expects that whilst the challenges in the energy market and the
difficult market conditions continue, the Group's order book will also soften,
and this is reflected in the order book value of £48 million(1) as at 31
March 2022. We have put appropriate actions and controls in place to mitigate
risk and protect the business whilst the UK's energy crisis and challenging
market conditions prevail.
(1)Orderbook value excluding metering's onerous contracts
A refocus on our core strategy
The Group has refocused its attention on its core multi-utility contracting
and asset ownership growth strategy and the Board has put in place a new
executive team to execute it.
The Board believes that there is a significant opportunity for the Group to
grow its multi-utility contracting operations across the housing and
industrial & commercial, including electric vehicle connections, sectors.
The Board further believes that the Group's essential and niche capabilities
position it well for future growth and that this belief is underpinned by the
long-term strategic tailwinds of the UK's utility and energy infrastructure
needs now, and for its net-zero future.
The Group's network of utility assets, valued in excess of £36 million as at
31 March 2022, continue to generate recurring income and provide attractive
and predictable long-term returns. The Board continues to believe that
additional asset ownership presents a significant growth opportunity for the
Group.
To support the execution of our asset growth strategy, Fulcrum announced on 15
December 2021 that it had raised gross proceeds of £20.05 million by way of a
conditional placing and subsequently raised gross proceeds of approximately
£1.2 million through an open offer. The Board is grateful for the continued
support of existing investors. We are mindful that, whilst presenting risks,
the current instability in the energy market produces opportunities for the
Group to acquire additional asset portfolios at attractive valuations and as
such the Board is continuing to identify and review potential asset
acquisition opportunities.
At the same time, the Board is mindful of maintaining balance sheet strength,
and supporting the Group's liquidity remains a priority. As such, the Group
became debt free in the year, and all planned tranches of the asset sale to
ESP were also successfully delivered.
Changes to our team
The Board appointed Antony Collins as CEO in January 2022. Antony has a
strong background in business turnaround and his focus has been to improve
business operations and refocus the Group on its core utility infrastructure
and asset ownership growth strategy and, since joining Fulcrum, he has put in
place a strong and experienced executive team to lead the Group. Stuart
Crossman joined the Group in January 2022 as COO and is a Chartered Engineer
with over 40 years in multi-utilities and has vast experience in asset
management, operational performance and health and safety and Jonathan Jager
joined the Group as CFO in February 2022. Jonathan is a highly experienced CFO
with over 20 years' experience of developing high performing finance functions
within the energy sector.
The new team is focused on executing the Group's core multi-utility and
utility asset growth strategy and the Board is pleased to report that business
improvements are being delivered that will both protect the business in the
current market climate and support the Group's long-term, sustainable growth.
ESG and sustainability
We are committed to using our capabilities to support the UK's net-zero
revolution, and to also reduce the impact of the Group's operations on climate
change. Fulcrum remains on its journey to be carbon neutral by 2030.
Dividend
Considering the full year performance and the continuing turbulence in the
Group's core markets, the Board will not be recommending the payment of a
dividend in respect of the financial year ended 31 March 2022 but will
continue to keep its dividend policy under review.
Outlook
Despite the current difficult trading conditions and the UK's energy crisis,
market fundamentals, supported by government stimulus that underpins the UK's
transition to a low carbon economy, remain strong and, the Board believes,
continue to provide significant and strategic growth opportunities for the
Group across the diverse sectors it operates in.
Whilst the Board is mindful of the ongoing volatility in the UK energy market,
we are confident that the Group remains well positioned to successfully grow
in the long term. Fulcrum has the essential experience and
capabilities needed to support the expansion of the UK's energy
infrastructure, which is needed now, and to achieve our net-zero future. The
Board remains excited by the opportunities this presents.
Jennifer Babington
Non-executive Chair
1 August 2022
Chief Executive Officer's statement
2022 review
I was delighted to have the opportunity to join the Group in January 2022.
Whilst, as with most businesses, Fulcrum is not without challenges, I
strongly believe the business has the essential capabilities to be successful
in an exciting and growing marketplace.
In the year under review, the Group began to recover from the impact of
Covid-19 and, in line with its stated growth strategy, secured several of its
largest ever contracts.
However, the sustained effects of the UK's energy crisis and wider market
issues of supply chain pressure and cost inflation presented significant
challenges to the Group's operations. This affected the profitability of the
Group's multi-utility contracting business and its meter exchange operations,
particularly in the final quarter of the year.
Since joining the business, my immediate priority has been to protect and
improve margins and refocus the Group on its core utility infrastructure and
asset ownership growth strategy. To support me in doing this, the Board and I
also appointed a new, highly experienced, executive team to lead the Group.
Acting quickly to protect the business, the executive team has identified
contracts where performance and profitability were materially affected by
adverse market conditions and agreed to mutually terminate them to protect the
business by mitigating their impact on the Group and its performance.
Delivering growth in core markets
In line with the Board's strategy, the new executive team is actively
reviewing the Group's activities to ensure it performs optimally, identifying
opportunities to improve profitability, and ensuring Fulcrum remains focused
on delivering its core strategy and achieving sustainable growth for the
benefit of all shareholders.
Despite the challenges presented by the current difficult trading conditions,
Fulcrum has, I believe, the essential capabilities required to be successful
and achieve long-term growth in what are exciting and growing markets.
In terms of its core multi-utility contracting and asset ownership growth
strategy:
1. The Group is well established and has a diverse multi-utility
contracting business. It operates across a variety of sectors, nationally, and
is one of only a few businesses that can deliver all sizes and complexity of
utility infrastructure, including high voltage electrical infrastructure,
designed, and delivered through the Group's Dunamis business. The limited
market share that the Group has in each of these markets presents a sizeable
opportunity for growth.
2. The Group's network of utility assets, valued in excess of £36 million
as at 31 March 2022, continues to generate recurring income and provide
attractive and predictable long-term returns. Additional asset ownership
presents a significant growth opportunity for the Group and, whilst presenting
risks, the current instability in the energy market produces opportunities to
acquire additional asset portfolios at attractive valuations.
To underpin the execution of our core growth strategy, in December 2021 gross
proceeds of £20.05 million were raised by way of conditional placing and
gross proceeds of approximately £1.2 million were through an open offer. We
also successfully completed the planned tranches of the asset sale to ESP for
a total consideration of £6.7 million in the year.
Progress on asset growth strategy
Further to the successful fundraise, the Group is pleased to confirm that, in
line with its asset growth strategy, it acquired an Industrial &
Commercial gas meter asset portfolio on 29 July 2022.
This acquisition, at a consideration of £0.6 million, follows a due diligence
process and provides the Group with additional assets that generate recurring
income and provide attractive and predictable returns. The Group also
continues to search for, and review, potential additional asset acquisition
opportunities and is at varying stages of discussion and due diligence with
several prospects.
Financial performance and results
Total revenue increased year on year by £14.7 million to £61.8 million
(2021: £47.1 million) as the business recovered well from the impacts of
Covid-19. Infrastructure revenues were 33% higher than the previous year at
£57.6 million (2021: £43.4 million). Utility asset ownership revenues were
14% higher than the previous year at £4.2 million (2021: £3.7 million).
The Group incurred an operating loss of £13.7 million for the year (2021:
£11.2 million). This loss includes exceptional costs of £10.6 million (2021:
£8.5 million), depreciation and amortisation of £3.3 million (2021: £3.7
million), a share-based payment charge of £0.6 million (2021: £0.4 million)
offset by other net gains of £0.3 million (2021: £1.4 million). Exceptional
costs include the income statement impact of the impairment of our utility
asset portfolio of £1.9 million (2021: £1.9 million) as a result of an
independent, external valuation of those assets at year end, £2.3 million
impairment of intangible assets (2021: £4.9 million) and £5.6 million of
onerous contracts (2021: £nil) related to losses from the Group's smart meter
exchange and management contracts with energy suppliers and the loss for a
complex, high voltage infrastructure project. Other net gains of £0.3 million
(2021: £1.4 million) relate to the profit on sale of utility assets to ESP
and related enhanced payments from ESP as the Group met certain trigger points
in respect of new domestic connection wins.
Adjusted EBITDA(1) for the year increased to £0.5 million from £0.1 million
in the prior year. Adjusted EBITDA was affected by a dilution of the gross
margin, particularly as cost of materials were impacted by significant
inflationary effects, and the impact of the turbulent energy sector making
trading conditions more challenging in the second half of the year and
predominantly in the last quarter of the year. However, mobilisation on larger
projects improved as expected as customers regained confidence post Covid-19,
resulting in increasing revenues in the year, whilst fixed operational costs
continued. Administrative expenses (excluding exceptional items) reduced by
5%, as the business applied greater cost controls on discretionary spending.
(1)Adjusted EBITDA is operating loss excluding the impact of exceptional
items, other net gains, depreciation, amortisation, and equity-settled
share-based payment charges
Liquidity and net cash
The Group's trading performance for the year has resulted in a cash outflow
from operating activities of £7.6 million (2021: £2.4 million). The Group
places a high priority on cash generation and the active management of working
capital. As at 31 March 2022, the Group had net cash of £11.2 million (2021:
£1.5 million net debt).
Net cash inflow from investing activities was £1.4 million (2021: £3.8
million outflow), benefiting from £7 million of net receipts (£6.5 million
received for planned tranche sales and an enhanced payment milestone of £0.6
million) from the disposal of utility assets (2021: £5 million), partly
offset by investment in utility and other assets of £5.6 million (2021: £8
million).
Net cash inflow from financing activities of £13.4 million (2021: £5.7
million outflow) was predominantly due to the successful share issue that
raised a net £20.6 million, less the net repayment of the Revolving Credit
Facility (RCF) totalling £5.7 million, and £1.4 million in lease and
interest payments (2021: £1.2 million). Net cash outflow from exceptional
items was £1.6 million (2021: £1.2 million). The cash proceeds from further
asset sales, along with our prudent financial discipline, will enable Fulcrum
to maintain a strong balance sheet and will support the generation of cash in
the future.
Reserves and net assets
Net assets increased by £10.5 million during the year to £45.9 million
(2021: £35.4 million), primarily resulting from increasing contract assets to
£20.2 million (2021: £15.6 million) and an improved cash balance of £11.2
million (2021: £3.9 million). The Group received a net revaluation gain on
the utility asset portfolio of £1.9 million (2021: £3.8 million net
impairment). Net assets per share at 31 March 2022 were 11.5p per share (2021:
15.9p).
As at 31 March 2022, the issued share capital of the Company was 399,313,458
ordinary shares (2021: 222,117,945) with a nominal value of £339,313 (2021:
£222,118). At the end of the year, the Group operated one Save As You Earn
(SAYE) scheme.
Housing
The Group designs, installs and delivers new electricity, gas, water and fibre
connections to provide a complete multi-utility service for homebuilders
across mainland UK. Fulcrum is a well-established brand in the housing market
and works with various UK housebuilders of all sizes, with the Group's
expertise and credibility offering added value and reassurance for
developers.
The Group's multi-utility infrastructure expertise has become increasingly
vital to homebuilders of all sizes, as we offer advice and support on how to
ensure new utility infrastructure is designed and installed to meet emerging
needs, like EV charging, powering energy generating infrastructure such as
heat pumps, and meeting regulatory requirements, like the Future Homes
Standard. The essential support we provide to homebuilders saw Fulcrum win the
"Highly Commended" title in the Subcontractor/Service Provider of the Year
category at the Housebuilder Awards 2021.
We selectively tender on new opportunities in line with our margin strategy
and, in the year, secured a healthy flow of new contract wins, including some
of the Group's largest ever new housing developments. Adversely, these larger
sites were the most affected by the ongoing difficult trading conditions of
supply chain pressure and cost inflation in materials and labour, by being
inherently more complex and more long-term in nature.
Mid to long-term market drivers remain strong in the housing sector. The UK's
current undersupply of housing remains well documented and bridging the
housing gap is supported by strong government incentives. This presents
substantial potential growth opportunities for the Group.
Industrial and commercial (I&C) including electric vehicle (EV) and high
voltage (HV) connections
The Group provides multi-utility infrastructure for all sizes and complexities
of I&C and EV projects. The Group's ability to design and build I&C
multi-utility and EV charging infrastructure of all sizes and complexities,
particularly niche high voltage (132kV) electricity infrastructure, delivered
through the Group's Dunamis business, is an important differentiator for the
Group. Fulcrum also selectively adopts and owns I&C gas and electricity
utility assets in line with our asset growth strategy.
The Group used its capabilities to secure a variety of major multi-utility and
EV charging infrastructure projects in the period, supporting projects of
national significance. These were selectively tendered on in line with the
Group's margin strategy but, like the large housing contracts secured, these
were most severely impacted by supply chain pressure and cost inflation by
being significantly complex, and longer-term contracts. As part of our ongoing
business improvement review, we identified a materially loss-making complex,
high voltage infrastructure project which has been provided for within
exceptional items in cost of sales.
The I&C market, including EV connections, presents some hugely exciting
opportunities for the Group and medium to long-term market growth drivers are
very strong. Electricity is a key enabler in decarbonising the economy cost
effectively by 2050, and demand for electrical infrastructure to power the EV
charging network, renewable energy generating equipment and battery storage
infrastructure, essential to transition to net zero, is expected to grow
rapidly.
This increased need for more electrical infrastructure is essential to
transition to net zero, and Fulcrum remains one of a limited number of
businesses in the UK with the essential capabilities required to facilitate
this.
Maintenance and ownership
The Group's ability to adopt, own and maintain the UK's essential utility
infrastructure is fundamental to our growth strategy.
The utility assets we own continue to provide a healthy recurring income and
deliver attractive and predictable long-term returns, and we continued to
adopt additional I&C utility assets in the year, adding them to our income
generating portfolio.
Additional utility asset ownership presents a significant growth opportunity
for the Group and, whilst we are cognisant that the current market conditions
present risk, the current instability in the market also presents
opportunities to acquire asset portfolios at attractive
valuations. Additionally, the current and future proceeds from the asset sale
agreement with ESP provide the Group with additional financial strength that
underpins our asset ownership growth ambitions and the execution of our
strategy.
Our high voltage electrical maintenance capabilities, delivered though our
Maintech Power business, are niche, and will be essential to maintain the
additional electrical and renewable energy generating infrastructure the UK
needs to achieve net zero.
Smart metering
The UK's energy crisis has presented considerable challenges for our smart
metering operations in the year, affecting the performance and profitability
of the Group's various smart meter exchange and management contracts.
The sustained volatility and turbulence in the market affected the performance
and profitability of the Group's smart meter exchange and management contracts
with energy suppliers. The contracts were deeply impacted in the second half
of the year, primarily resulting from the insolvency of several of the Group's
other, smaller energy supplier customers and one of the Group's labour-only
sub-contractors.
After the year end, we agreed to mutually terminate contracts affected by the
UK energy crisis to protect the business by mitigating their impact on the
Group and its performance.
Delivering contracts safely
Maintaining the highest standards of health and safety remains our highest
priority. A safety-first strategy is in place to ensure zero harm and,
although this is well embedded into our culture and operations, we are never
complacent and are committed to continuous improvement in health and safety
performance.
Antony Collins
Chief Executive Officer
1 August 2022
Consolidated statement of comprehensive income
for the year ended 31 March 2022
Notes Year ended Year ended
31 March 31 March
2022 2021
£’000 £’000
Revenue 61,846 47,054
Cost of sales – underlying (50,149) (35,211)
Cost of sales – exceptional items 4 (5,422) (2,050)
Total cost of sales (55,571) (37,261)
Gross profit 6,275 9,793
Administrative expenses – underlying (15,094) (15,912)
Administrative expenses – exceptional items 4 (5,202) (6,400)
Total administrative expenses (20,296) (22,312)
Other net gains 5 330 1,353
Operating loss 6 (13,691) (11,166)
Net finance expense (496) (293)
Loss before taxation (14,187) (11,459)
Taxation 7 765 1,178
Loss for the year attributable to equity holders of the parent (13,422) (10,281)
Other comprehensive income
Items that will never be reclassified to profit or loss:
Revaluation of utility assets 10 4,252 1,569
Surplus arising on utility assets internally adopted in the year 10 57 338
Impairment of previously revalued utility assets (477) (3,548)
Deferred tax on items that will never be reclassified to profit or loss (1,083) 560
Total comprehensive expense for the year (10,673) (11,362)
Loss per share attributable to the owners of the business
Basic 9 (5.2)p (4.6)p
Diluted 9 (5.1)p (4.5)p
Adjusted EBITDA is the basis that the Board uses to measure and monitor the
Group's financial performance as it is a more accurate reflection of the
commercial reality of the Group's business. Further details of Alternative
Performance Measures are included in note 3.
Operating loss (13,691) (11,166)
Equity-settled share-based payment charge 639 436
Other net gains 5 (330) (1,353)
Exceptional items within operating loss 4 10,624 8,450
Depreciation and amortisation 10, 12, 13 3,257 3,739
Adjusted EBITDA 499 106
Surplus arising on sale of domestic utility assets and enhanced payments 5 330 1,353
Adjusted EBITDA including sale of domestic utility assets and enhanced 829 1,459
payments
Consolidated statement of changes in equity
for the year ended 31 March 2022
Notes Share Share Revaluation Merger Retained Total
capital premium reserve Restated¹ reserve earnings Restated¹ equity
£’000 £’000 £’000 £’000 £’000 £’000
Balance at 31 March 2020 222 389 11,549 11,347 22,800 46,307
Total comprehensive income for the year
Loss for the year – – – – (10,281) (10,281)
Revaluation surplus on external valuation of utility assets – – 1,569 – – 1,569
Surplus arising on utility assets internally adopted in the year 10 – – 338 – – 338
Disposal of previously revalued assets 5 – – (574) – 574 –
Depreciation on previously revalued assets – – (342) – 342 –
Exceptional items – fixed asset impairment – – (3,548) – – (3,548)
Deferred tax in respect of items that will never be reclassified to profit and – – 560 – – 560
loss
Transactions with equity shareholders
Equity-settled share-based payment credit – – – – 436 436
Balance at 31 March 2021 222 389 9,552 11,347 13,871 35,381
Restatement of opening balances¹ – – (671) – 671 –
Balance at 31 March 2021 (restated) ¹ 222 389 8,881 11,347 14,542 35,381
Total comprehensive income for the year
Loss for the year – – – – (13,422) (13,422)
Revaluation surplus on external valuation of utility assets 10 – – 4,252 – – 4,252
Surplus arising on utility assets internally adopted in the year 10 – – 57 – – 57
Disposal of previously revalued assets 5 – – (1,445) – 1,445 –
Depreciation on previously revalued assets – – (179) – 179 –
Additional costs allocated to previously revalued assets – – (37) – – (37)
Exceptional items – fixed asset impairment – – (477) – – (477)
Deferred tax in respect of items that will never be reclassed to profit and – – (1,083) – – (1,083)
loss
Transactions with equity shareholders
Equity-settled share-based payment credit – – – – 639 639
Issue of new shares net of transaction costs
177 20,388 – – – 20,565
Balance at 31 March 2022 399 20,777 9,969 11,347 3,383 45,875
¹ The revaluation reserve and retained earnings have been restated to
reallocate fair value gains and losses between these reserves in relation to
disposals of utility assets in previous years. As such, the balance sheet as
at 31 March 2021 has been restated. There is no impact on net assets.
Consolidated balance sheet
as at 31 March 2022
Notes 31 March 31 March
2022 2021 Restated¹
£’000 £’000
Non-current assets
Property, plant and equipment 10 37,151 37,314
Intangible assets 12 15,597 18,907
Right-of-use assets 13 2,323 3,081
Deferred tax assets 7 3,495 2,710
58,566 62,012
Current assets
Contract assets 20,177 15,640
Inventories 433 438
Trade and other receivables 9,620 6,550
Cash and cash equivalents 16 11,176 3,934
41,406 26,562
Total assets 99,972 88,574
Current liabilities
Trade and other payables (15,825) (12,669)
Contract liabilities (25,272) (27,098)
Current lease liability 13 (802) (996)
Current provisions 17 (3,035) (54)
(44,934) (40,817)
Non-current liabilities
Non-current lease liability 13 (1,873) (2,382)
Borrowings 15 – (5,483)
Non-current provisions 17 (1,296) –
Deferred tax liabilities 7 (5,994) (4,511)
(9,163) (12,376)
Total liabilities (54,097) (53,193)
Net assets 45,875 35,381
Equity
Share capital 14 399 222
Share premium 20,777 389
Revaluation reserve 9,969 8,881
Merger reserve 11,347 11,347
Retained earnings 3,383 14,542
Total equity 45,875 35,381
¹The balance sheet has been restated to reflect a reallocation between the
revaluation reserve and retained earnings. There is no impact on net assets.
The financial statements were approved by the Board of Directors on 1 August
2022 and were signed on its behalf by:
Jennifer Babington
Non-executive Chair
Company number FC030006
Consolidated cash flow statement
for the year ended 31 March 2022
Notes Year ended Year ended
31 March 31 March
2022 2021
£’000 £’000
Cash flows from operating activities
Loss for the year after tax (13,422) (10,281)
Tax credit 7 (765) (1,178)
Loss for the year before tax (14,187) (11,459)
Adjustments for:
Depreciation 10, 13 1,832 1,919
Amortisation of intangible assets 12 1,425 1,820
Exceptional items – fixed asset impairment 4 1,920 1,857
Exceptional items – intangible asset impairment 4, 12 2,309 4,935
Net finance expense 496 293
Equity-settled share-based payment charge 639 436
Loss/(profit) on disposal of utility assets 5 75 (873)
Gain on IFRS 16 lease modification 13 (16) –
Additional consideration receivable from previous utility asset sales 5 (259) –
Increase in contract assets (4,537) (3,361)
Increase in trade and other receivables (3,154) (201)
Decrease in inventories 5 8
Increase in trade and other payables 3,370 2,995
Decrease in contract liabilities (1,826) (807)
Increase/(decrease) in provisions 17 4,277 (4)
Cash outflow from operating activities (7,631) (2,442)
Tax repaid/(paid) 12 (108)
Net cash outflow from operating activities (7,619) (2,550)
Cash flows from investing activities
Acquisition of external utility assets (2,468) (3,958)
Utility assets internally adopted (2,475) (3,503)
Acquisition of plant and equipment 10 (242) (87)
Acquisition of intangibles 12 (424) (140)
Proceeds on disposal of utility assets 5 6,487 4,578
Receipt of deferred consideration on disposal of utility assets 642 670
Costs paid in relation to disposal of subsidiary – (1,245)
Costs paid in relation to disposal of utility assets (141) (102)
Proceeds on disposal of assets – other – 9
Additional consideration received from previous utility asset sales 49 –
Net cash inflow/(outflow) from investing activities 1,428 (3,778)
Cash flows from financing activities
Proceeds from issue of ordinary shares 14 21,263 –
Share issue transaction costs (698) –
Borrowings received 15 5,250 5,700
Borrowings repaid 15 (10,950) (10,000)
Prepaid arrangement fees (11) (247)
Interest paid and banking charges (non-IFRS 16) (297) (153)
IFRS 16 – principal payments 13 (1,022) (861)
IFRS 16 – deposit payments – (11)
IFRS 16 – interest payments 13 (121) (139)
IFRS 16 – proceeds received on disposal of leased vehicle 13 19 –
Net cash inflow/(outflow) from financing activities 13,433 (5,711)
Increase/(decrease) in net cash and cash equivalents 7,242 (12,039)
Cash and cash equivalents at the beginning of the year 3,934 15,973
Cash and cash equivalents at the end of the year 16 11,176 3,934
1. Accounting policies
The principal accounting policies adopted in the preparation of these
financial statements are set out below.
Basis of preparation
The financial information set out in this preliminary announcement has been
derived from the Group's consolidated financial statements for the years ended
31 March 2022 and 31 March 2021. The audited financial information included in
this preliminary results announcement for the year ended 31 March 2022 and
audited information for the year ended 31 March 2021 does not comprise
statutory accounts within the meaning of section 434 Companies Act 2006. The
information has been extracted from the audited non statutory financial
statements for the year ended 31 March 2022 which will be delivered to the
Registrar of Companies in due course. Non statutory financial statements for
the year ended 31 March 2021 were approved by the Board of directors and have
been delivered to the Registrar of Companies. The report of the independent
auditors for the year ended 31 March 2022 and 2021 respectively on these
financial statements were unqualified.
Whilst the financial information included in this preliminary announcement has
been prepared on the basis of the requirements of International Financial
Reporting Standards as adopted by the United Kingdom, this announcement does
not itself contain sufficient information to comply with IFRS.
The financial statements have been prepared on the historical cost basis
except for the revaluation of certain non-current assets. Historical cost is
generally based on the fair value of the consideration given in exchange for
assets.
Going concern
At 31 March 2022 the Group had net assets of £45.9 million (2021: £35.4
million), net current liabilities of £3.5 million (2021: £14.3 million),
cash of £11.2 million (2021: £3.9 million) and borrowings of £nil (2021:
£5.5 million) as set out in the consolidated balance sheet. In the year ended
31 March 2022, the Group suffered a loss after tax of £13.4 million (2021:
£10.3 million) and had net cash inflows of £7.2 million (2021: net cash
outflows of £12.0 million) after investing £4.9 million in utility assets
(2021: £7.5 million) and repaying a net £5.7 million of borrowings (2021:
£nil).
These financial statements are prepared on the basis that the Group is a going
concern. In forming its opinion as to going concern, the Board has prepared
cash flow forecasts based upon its assumptions with particular consideration
of the key risks and uncertainties, as well as taking into account available
borrowing facilities. The going concern period assessed is until 30 September
2023 which has been selected as it can be projected with a good degree of
expected accuracy.
The Group successfully completed a share placing in December 2021 generating
gross proceeds of £21.3 million to help fund the Group's continued growth
strategy. Consequently the Group re-paid its Revolving Credit Facility (RCF)
in full on 1 January 2022. The RCF of £10 million remains available up to 30
November 2022, although the Group currently has no plans to utilise this
facility. This facility includes two financial covenants; ratio of total debt
to EBITDA and ratio of the market value of pipeline assets to total debt. The
forecasts, as approved by the Board, satisfy these financial covenants with
reasonable levels of headroom.
The forecasts prepared reflect a cautious view on continued sector growth and
include a range of sensitivities including a severe but plausible scenario
together with mitigating actions. Changes to the principal assumptions
included a reduction in EBITDA of approximately 40%. Even under the downside
scenario, the Group continues to project sufficient cash reserves, continues
to operate with headroom on borrowing facilities and associated covenants, and
has additional mitigation measures within management's control, for example
accelerating cash receipts and reducing operating costs, that could be
deployed to create further cash. To further test the sensitivity, the Group
also considered a more severe downside scenario that reflected even further
deterioration in operational and commercial performance. Under this
scenario, the Group forecast a cash low point in the second half of 2023, but
the management team are confident that it has various immediate mitigating
levers that would avoid, and sufficiently alleviate, this position.
Based on these considerations, together with the Directors' knowledge and
experience of the markets in which the Group operates, the Directors
considered it appropriate to adopt the going concern basis of accounting in
the preparation of the Group's financial statements.
Adoption of new and revised International Financial Reporting Standards
(IFRSs) and IFRIC interpretations
The Group has applied the following standards and amendments for the first
time for its annual reporting period commencing 1 April 2021:
• Amendments to IAS 1 "Presentation of Financial Statements";
• Amendments to IFRS 3 "Business Combinations";
• Amendments to IFRS Practice Statement 2 "Making Materiality
Judgements";
• Amendments to IAS 8 "Accounting Policies, Changes in Accounting
Estimates and Errors"; and
• Amendments to IAS 12 "Income Taxes".
Their adoption has not had any material impact on the disclosures or on the
amounts reported. Certain new accounting standards and interpretations have
been published that are not mandatory for 31 March 2022 reporting periods and
have not been early adopted by the Group. These standards are not expected to
have a material impact on the entity in the current or future reporting
periods and on foreseeable future transactions.
2. Operating segments
The Board has been identified as the chief operating decision-maker (CODM) as
defined under IFRS 8 "Operating Segments". The Directors consider there to be
two operating segments, Infrastructure: Design and Build and Utility assets:
Own and Operate. Fulcrum's Infrastructure: Design and Build segment provides
utility infrastructure and connections services. Utility assets: Own and
Operate comprises both the ownership of gas, electrical and meter assets and
the safe and efficient conveyance of gas and electricity through its
transportation networks. Gas transportation services are provided under the
iGT licence granted from Ofgem in June 2007 and electricity services are
provided under the iDNO licence granted from Ofgem in November 2017.
The information provided to the Board includes management accounts comprising
operating result before exceptional items for each segment and other financial
and non-financial information used to manage the business on a consolidated
basis.
Year ended 31 March 2022 Year ended 31 March 2021
Infrastructure: Utility assets: Total Group Infrastructure: Utility assets: Total Group
Design and Own and £'000 Design and Own and £'000
Build Operate Build Operate
£'000 £'000 £'000 £'000
Reportable segment revenue 57,631 4,215 61,846 43,400 3,654 47,054
Adjusted EBITDA* (1,557) 2,056 499 (969) 1,075 106
Other net gains 146 184 330 480 873 1,353
Share-based payment charge (639) - (639) (436) - (436)
Depreciation and amortisation (2,606) (651) (3,257) (2,979) (760) (3,739)
Reportable segment operating (loss)/profit before exceptional items (4,656) 1,589 (3,067) (3,904) 1,188 (2,716)
Cost of sales - exceptional items (3,502) (1,920) (5,422) - (2,050) (2,050)
Administrative expenses - exceptional items (5,202) - (5,202) (6,400) - (6,400)
Reporting segment operating loss (13,360) (331) (13,691) (10,304) (862) (11,166)
Net finance expense (107) (389) (496) (171) (122) (293)
Loss before tax (13,467) (720) (14,187) (10,475) (984) (11,459)
* Adjusted EBITDA is operating loss excluding the impact of exceptional
items, other net gains, depreciation, amortisation and equity-settled
share-based payment charges. Full reconciliation of Alternative Performance
Measures (APMs) is provided in note 3.
The Group derives all of its revenue from the UK and all of the Group's
customers are based in the UK. The Group's revenue is derived from contracts
with customers.
3. Alternative Performance Measures
The Group uses Alternative Performance Measures (APMs), as listed below, to
present users of the accounts with a clear view of what the Group considers to
be the results of its underlying, sustainable business operations, thereby
enabling consistent year-on-year comparisons and making it easier for users of
the accounts to identify trends.
Alternative Performance Measure Definition
Adjusted EBITDA Operating loss excluding exceptional items, other net gains, amortisation and
depreciation and equity-settled share-based payments.
Adjusted loss before taxation Loss before taxation excluding amortisation of 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) Reconciliation of operating loss to "adjusted EBITDA"
31 March 31 March
2022 2021
£'000 £'000
Operating loss (13,691) (11,166)
Adjusted for:
Exceptional items within operating loss 10,624 8,450
Other net gains (330) (1,353)
Amortisation and depreciation 3,257 3,739
Equity-settled share-based payments 639 436
Adjusted EBITDA 499 106
(b) Reconciliation of loss before tax to "adjusted loss before tax"
31 March 31 March
2022 2021
£'000 £'000
Loss before tax (14,187) (11,459)
Adjusted for:
Exceptional items included in cost of sales 5,422 2,050
Exceptional items included in administrative expenses 5,202 6,400
Amortisation of acquired intangibles 1,248 1,356
Adjusted loss before tax (2,315) (1,653)
(c) Net assets per share
31 March 31 March
2022 2021
£'000 £'000
Net assets at the end of the year 45,875 35,381
Issued shares at the end of the year 399,313 222,118
Net assets per share 11.5p 15.9p
4. Exceptional items
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Exceptional items included in cost of sales 5,422 2,050
Exceptional items included in administrative expenses 5,202 6,400
10,624 8,450
(a) Exceptional items included in cost of sales
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Fixed asset impairment 1,920 1,857
Remedial works to utility assets - 193
Onerous contracts 3,502 -
5,422 2,050
Fixed asset impairment relates to the impairment of utility assets not
previously revalued upwards. Onerous contracts costs relate to losses from the
Group's smart meter exchange and management contracts with energy suppliers
and the loss for a complex, high voltage infrastructure project.
(b) Exceptional items included in administrative expenses
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Restructuring costs 575 569
One-off legal and adviser costs 242 896
Intangible asset impairment 2,309 4,935
Onerous contracts 2,076 -
5,202 6,400
Restructuring costs relate to employee exit and severance costs. Intangible
asset impairment relates to the impairment of goodwill and software and
development costs. Onerous contracts costs relate to losses from the Group's
smart meter exchange and management contracts with energy suppliers.
Net cash outflows in the year ended 31 March 2022 for exceptional items in
cost of sales and administrative expenses were £1.6 million (2021: £1.2
million).
5. Other net gains
Included within other net gains are the following amounts:
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
(Loss)/profit on disposal of assets (75) 873
Additional consideration receivable from utility asset sales in previous years 259 -
Enhanced payments received 146 480
330 1,353
Additional consideration receivable from utility asset sales in previous years
is amounts due to the Group for utility assets sold in previous years that
were non-metered when sold and became metered in the year ended 31 March 2022.
Enhanced payments are amounts receivable by the Group when the number of
domestic connections introduced by the Group to a third party reaches certain
pre-agreed thresholds.
The loss on disposal of assets represents the loss arising on sale of certain
of the Group's utility assets to a third party. The Group has entered into an
agreement with the third party to sell part of its utility assets portfolio in
structured tranches.
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Consideration - proceeds received 6,487 4,578
Consideration - retention receivable 201 142
Total consideration 6,688 4,720
Net book value of assets sold (including the effect of previous revaluations) (6,580) (3,712)
Legal and other costs relating to the transaction (173) (102)
Discounting of retention consideration due in more than one year (10) (33)
(Loss)/profit on disposal of assets (75) 873
Some of the disposed utility assets had previously been revalued in accordance
with the Group policy. Upon disposal, this gave rise to a transfer between the
revaluation reserve and retained earnings of £1,445,000 (2021: £574,000).
6. Operating loss
Included in operating loss are the following charges:
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Amortisation of intangible assets 1,425 1,820
Depreciation of property, plant and equipment 838 1,027
Depreciation of right-of-use asset 994 892
7. Taxation
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Current tax (380) (130)
Deferred tax (385) (1,048)
Total tax credit (765) (1,178)
At Budget 2020, the government announced that the corporation tax main rate
(for all profits except ring-fence profits) for the years starting 1 April
2021 and 2022 would be 19%. At Spring Budget 2021, the government announced
that the corporation tax main rate would rise to 25% for companies with
profits over £250,000 together with the introduction of a small profits rate
of 19% with effect from 1 April 2023. The increase in the tax rate to 25% is
considered to be substantively enacted, and accordingly the deferred tax
balances expected to unwind after 1 April 2023 have been calculated using the
25% tax rate.
The Group has £12.5 million (31 March 2021: £12.1 million) of tax losses for
which deferred tax assets of £3.1 million (31 March 2021: £2.3 million) have
been recognised. The deferred tax asset is expected to be recovered over five
years. The Group also has unrecognised tax losses of £9.7 million (31 March
2021: £3.0 million) for which no deferred tax asset has been recognised as
there is insufficient certainty over whether those losses will reverse.
Reconciliation of effective tax rate
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Loss before taxation (14,187) (11,459)
Tax using the UK corporation tax rate of 19.0% (2021: 19.0%) 2,696 2,177
Non-taxable items (501) (614)
Effect of change in rate of corporation tax 255 -
Tax deductions for share options exercised (121) (83)
Adjustment to tax charge in respect of previous year's corporation tax 380 130
Adjustment to tax charge in respect of previous year's deferred tax (382) 148
Utilisation of previously unrecognised losses - 345
Release of previously recognised losses (1,262) (579)
Chargeable gains arising (300) (346)
Total tax credit 765 1,178
Movement in deferred tax balances
31 March 2022 31 March 2021
Deferred Deferred Deferred Deferred
tax assets tax liabilities tax assets tax liabilities
£'000 £'000 £'000 £'000
At the beginning of the year 2,710 (4,511) 1,784 (5,193)
Recognised in profit or loss
Adjustment in respect of previous years (388) 6 106 42
Tax losses (utilised)/recognised 1,721 - 1,055 -
Effect of change in rate of corporation tax 831 (576) - -
Origination/reversal of other timing differences (117) 170 45 379
Reclassification between assets and liabilities - - 299 (299)
Release of previously recognised losses (1,262) - (579) -
Recognised in other comprehensive income
Effect of change in rate of corporation tax - (798) - -
Revaluation of property, plant and equipment - (285) - 560
At the end of the year 3,495 (5,994) 2,710 (4,511)
8. Dividends
No dividends were paid in the year ended 31 March 2022 or 31 March 2021.
No interim dividends were declared and no final dividends are proposed
relating to the year ended 31 March 2022.
9. Earnings per share (EPS)
Basic earnings per share
The calculation of basic and diluted earnings per share has been based on the
following result attributable to ordinary shareholders and weighted average
number of ordinary shares outstanding:
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Loss for the year used for calculation of basic EPS (13,422) (10,281)
Exceptional items included in cost of sales 5,422 2,050
Exceptional items included in administrative expenses 5,202 6,400
Remove tax relief on exceptional items (2,019) (1,606)
Amortisation of intangibles 1,248 1,356
Loss for the year used for calculation of adjusted EPS (3,569) (2,081)
Number of shares
31 March 31 March
2022 2021
Number Number
of shares of shares
('000) ('000)
Weighted average number of ordinary shares for the purpose of basic EPS 260,169 222,118
Effect of potentially dilutive ordinary shares 1,739 7,434
Weighted average number of ordinary shares for the purpose of diluted EPS 261,908 229,552
EPS
Basic (5.2)p (4.6)p
Diluted basic (5.1)p (4.5)p
Adjusted basic (1.4)p (0.9)p
Adjusted diluted basic (1.4)p (0.9)p
10. Property, plant and equipment
(a) Reconciliation of carrying amount
Utility Fixtures and Computer Total
assets fittings equipment £'000
£'000 £'000 £'000
Cost
At 31 March 2020 66,588 1,065 1,276 68,929
Externally acquired assets 3,485 19 68 3,572
Internally adopted assets 3,170 - - 3,170
Surplus arising on internally adopted assets 338 - - 338
Revaluation 1,659 - - 1,659
Disposals (3,860) (15) - (3,875)
At 31 March 2021 71,380 1,069 1,344 73,793
Externally acquired assets 2,677 22 220 2,919
Internally adopted assets 2,424 - - 2,424
Surplus arising on internally adopted assets 57 - - 57
Revaluation 4,252 - - 4,252
Disposals (6,663) - - (6,663)
At 31 March 2022 74,127 1,091 1,564 76,782
Accumulated depreciation
At 31 March 2020 (28,271) (717) (1,121) (30,109)
Depreciation charge for the year (735) (143) (149) (1,027)
Impairment from external revaluation (5,495) - - (5,495)
Disposals 148 4 - 152
At 31 March 2021 (34,353) (856) (1,270) (36,479)
Depreciation charge for the year (613) (80) (145) (838)
Impairment from external revaluation (2,397) - - (2,397)
Disposals 83 - - 83
At 31 March 2022 (37,280) (936) (1,415) (39,631)
Net book value
At 31 March 2022 36,847 155 149 37,151
At 31 March 2021 37,027 213 74 37,314
At 31 March 2020 33,562 348 155 38,820
Utility assets include £0.4 million (2021: £0.4 million) of meter assets
valued at cost less depreciation to date.
Internally adopted assets are stated at the full cost of construction of £3.7
million (2021: £8.8 million) less the deficit arising on internally adopted
assets of £1.3 million (2021: £5.6 million).
Disposals include utility assets with a net book value of £6,580,000 that
were disposed of as part of Tranches 3 and 4 of the utility assets sale as
disclosed in note 5.
(b) Measurement of fair values
The fair value of utility assets was determined by external, independent
specialist valuers, having appropriate recognised professional qualifications
and experience in the assets being valued. The valuation established the fair
value of the assets at 31 March 2022. The key assumptions used in the
valuation model include current market prices, useful economic lives of the
assets and income generated by the assets discounted using a weighted average
cost of capital. The valuation technique used is classified as a Level 3 fair
value (based on unobservable inputs) under IFRS 13.
The value in use assessment is sensitive to changes in the key assumptions
used. Sensitivity analysis has been performed, with a 0.6% increase in the
discount rate leading to a £1.0 million reduction in the revaluation gain and
a 0.6% reduction in the discount rate leading to a £0.9 million increase in
the revaluation gain.
The utility assets and utility assets under construction are the only
financial assets that are held at fair value in the financial statements.
(c) Impairment loss
Following the valuation of the utility assets estate, a net revaluation gain
of £1.9 million (2021: £3.8 million net impairment charge) was recorded. A
revaluation gain of £4.3 million (2021: £1.6 million) was recognised in the
revaluation reserve, with an impairment of £0.5 million (2021: £3.5 million)
offset against the revaluation reserve and a £1.9 million impairment charge
(2021: £1.9 million) included within exceptional items in cost of sales in
the consolidated statement of comprehensive income.
11. Capital commitments
The Group has entered into contracts to purchase property, plant and equipment
in the form of utility assets from external parties. At 31 March 2022 the
balance was £5.5 million (2021: £9.6 million).
12. Intangible assets
Reconciliation of carrying amount Goodwill Brand and Software and Total
£'000 customer development £'000
relationships costs
£'000 £'000
Cost
At 31 March 2020 14,251 12,607 4,675 31,533
Additions - - 140 140
At 31 March 2021 14,251 12,607 4,815 31,673
Additions - - 424 424
At 31 March 2022 14,251 12,607 5,239 32,097
Accumulated amortisation and impairment
At 31 March 2020 - (2,918) (3,093) (6,011)
Amortisation for the year - (1,356) (464) (1,820)
Impairment (4,494) (218) (223) (4,935)
At 31 March 2021 (4,494) (4,492) (3,780) (12,766)
Amortisation for the year - (1,248) (177) (1,425)
Impairment (2,149) - (160) (2,309)
At 31 March 2022 (6,643) (5,740) (4,117) (16,500)
Net book value
At 31 March 2022 7,608 6,867 1,122 15,597
At 31 March 2021 9,757 8,115 1,035 18,907
At 31 March 2020 14,251 9,689 1,582 25,522
(a) Amortisation
The amortisation of brand, customer relationships and software (including
development costs) is included in administrative expenses.
(b) Impairment testing
The Group tests goodwill annually for impairment or more frequently if there
are indications that goodwill may be impaired. The Group tests other
intangible assets for impairment when there is an indication that the assets
might be impaired.
Given a number of internal and external factors, management believes that
indications for possible impairment exist for the brands and customer
relationships. Accordingly, an impairment test has been carried out in
relation to both goodwill and the brands and customer relationships. Where an
impairment is indicated, goodwill would be impaired first, followed by the
brands and customer relationships on a pro-rata basis.
Goodwill and the brands and customer relationships are tested for impairment
by comparing the carrying amount of each CGU with the recoverable amount. The
recoverable amount is the higher of fair value less costs to sell and the
value in use.
Goodwill brought forward at the start of the year relates to the acquisition
of Fulcrum Group Holdings Limited on 8 July 2010 and the acquisition of The
Dunamis Group Limited on 5 February 2018. The carrying amount of the goodwill
is allocated across cash-generating units (CGUs). The goodwill held by the
Group relates to either the Fulcrum Infrastructure Services CGU or Dunamis,
which has two CGUs. The brands and customer relationships also relate to the
same CGUs.
In the impairment tests, the recoverable amounts are determined based on value
in use calculations which require assumptions. The fair value measurement was
categorised as a Level 3 fair value based on the inputs in the valuation
technique used.
The recoverable amounts of the CGUs have been determined from value in use
calculations which have been predicated on discounted cash flow projections
from financial plans approved by the Board. The values assigned to the key
assumptions represent management's assessment of future trends in the relevant
industries and have been based on historical data from both external and
internal sources, together with the Group's views on the future achievable
growth and the impact of committed cash flows. Cash flows beyond this are
extrapolated using the estimated long-term growth rates as summarised in the
following paragraph.
The pre-tax cash flows that these projections produced were discounted at
pre-tax discount rates based on the Group's beta adjusted cost of capital
reflecting management's assessment of specific risks related to each
cash-generating unit. Pre-tax discount rates of between 8.1% and 9.8% (2021:
between 7.6% and 9.4%) have been used in the impairment calculations which the
Directors believe fairly reflect the risks inherent in each of the CGUs. The
terminal cash flows are extrapolated in perpetuity using a growth rate of 2.0%
(2021: 2.0%). This is not considered to be higher than the long-term industry
growth rate.
Following the review, the carrying value of the intangible assets exceeded the
associated value in use for one of the Dunamis CGUs. Consequently, an
impairment of £2.1 million was made to the carrying value of goodwill. No
impairment was recognised for the Fulcrum CGU.
A segment-level summary of the acquired intangible assets allocation is
presented below:
Fulcrum Dunamis Total
£'000 £'000 £'000
Goodwill 2,225 5,383 7,608
Brands and customer relationships - 6,867 6,867
The value in use assessment is sensitive to changes in the key assumptions
used. Sensitivity analysis has been performed on the individual CGUs with a
1.0% increase in the discount rate and a 1.0% reduction in the long-term
growth rate.
Based on this analysis, the reasonably possible downside scenario to the
discount rate would increase the impairment by £0.9 million, and the change
to the long-term growth rate would increase the impairment by £0.7 million.
An impairment charge of £0.2 million (2021: £nil) has been recognised for
software used in the delivery of contracts deemed to be onerous during the
year ended 31 March 2022.
13. Leases
The Group has leases for land and buildings and plant and machinery. Leases
for land and buildings relate mainly to office properties and depots, whilst
the plant and machinery leases are predominantly motor vehicles. With the
exception of short-term leases and leases of low value underlying assets, each
lease is reflected on the balance sheet as a right-of-use asset and a lease
liability.
Leases of property range from a period of three to ten years, and leases of
motor vehicles are for three or four years. Lease payments are generally
fixed. The use of extension and termination options within leases gives the
Group flexibility and such options are exercised when they align with the
Group's strategy and where economic benefits of exercising such options exceed
the expected overall costs.
Right-of-use assets 31 March 31 March
2022 2021
£'000 £'000
Land and buildings 1,254 1,500
Plant and machinery 1,069 1,581
Total 2,323 3,081
31 March 31 March
2022 2021
£'000 £'000
Additions to right-of-use assets 255 1,252
Additions to right-of-use assets include new leases and extensions to existing
lease agreements.
Depreciation on right-of-use assets 31 March 31 March
2022 2021
£'000 £'000
Land and buildings 291 247
Plant and machinery 703 645
Total 994 892
Land and buildings Plant and machinery
Maturity of lease liabilities 31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Less than one year 298 310 504 686
Between one and five years 1,123 1,191 605 946
In more than five years 145 245 - -
Total 1,566 1,746 1,109 1,632
Other impact on profit and loss 31 March 31 March
2022 2021
£'000 £'000
Finance costs on leases (121) (139)
Expense on short-term and low value leases (490) (637)
Gain on lease modification 16 -
Total (595) (776)
Cash flows in respect of leases 31 March 31 March
2022 2021
£'000 £'000
IFRS 16 - principal payments (1,022) (861)
IFRS 16 - interest payments (121) (139)
Cash outflows relating to short-term and low value leases (490) (637)
Proceeds received on disposal of leased vehicle 19 -
Total (1,614) (1,637)
During the year ended 31 March 2022, the Group disposed of a leased vehicle
for proceeds of £19,000. This resulted in a gain on lease modification in the
statement of comprehensive income of £16,000. No leases were disposed of or
modified in the year ended 31 March 2021.
14. Share capital
31 March 31 March
2022 2021
£'000 £'000
Authorised
500,000,000 ordinary shares of £0.001 each 500 500
Allotted, issued and fully paid
399,313,458 (2021: 222,117,945) ordinary shares of £0.001 each 399 222
Ordinary shareholders are entitled to dividends as declared. During the year
ended 31 March 2022, 177,195,513 new ordinary shares were issued. The shares
issued had a nominal value of £0.001 each and were issued at £0.12 each. No
new ordinary shares were issued during the year ended 31 March 2021.
15. Interest-bearing loans and borrowings
On 1 December 2020, the Group entered into a two year Revolving Credit
Facility agreement with Lloyds Banking Group for £10 million. This facility
supports the financing, construction and acquisition of pipeline assets.
During the year ended 31 March 2022, net repayments of £5.7 million were made
by the Group. At 31 March 2022, £10 million of this facility remained
available for future drawdowns.
(a) Changes in liabilities arising from financing activities
31 March 31 March
2022 2021
£'000 £'000
At the beginning of the year 5,483 10,000
Repaid in year (10,950) (10,000)
New borrowings 5,250 5,700
Capitalised borrowing fees (11) (260)
Amortisation of capitalised borrowing fees 134 43
At the end of the year (94) 5,483
As no borrowings are outstanding as at 31 March 2022, the capitalised
borrowing fees have been included within trade and other receivables.
(b) Terms and repayment schedule
Currency Nominal Year of 31 March 31 March
interest rate maturity 2022 2021
£'000 £'000
Two year Revolving Credit Facility agreement GBP Bank of England base rate + 3.5% 2022 - 5,700
The Group has complied with the financial covenants (asset cover, leverage and
EBITDA covenants) relating to the above facilities.
16. Reconciliation to net cash/(debt)
31 March 31 March
2022 2021
£'000 £'000
Cash and cash equivalents 11,176 3,934
Borrowings - (5,483)
Net cash/(debt) 11,176 (1,549)
17. Provisions
Provision for costs to settle ongoing legal claims Provision for onerous contracts
£'000 £'000
Other provisions
£'000
Total
At 31 March 2020 - - 58 58
Provision utilised during the year - - (58) (58)
Provision created during the year 54 - - 54
At 31 March 2021 54 - - 54
Provision released during the year (54) - - (54)
Provision created during the year - 5,578 121 5,699
Provision utilised during the year - (1,368) - (1,368)
At 31 March 2022 - 4,210 121 4,331
The provision for onerous contracts relates to future losses expected to be
incurred on contracts deemed to be onerous. The provision created during the
year for other provisions relates to rebates payable on the Group's smart
meter exchange and management contracts. The amount and timing of the outflows
related to these provisions are uncertain, but a reliable estimate has been
made.
Of the £4.2 million provision for onerous contracts, £1.3 million is
expected to be settled in more than 12 months. All other provisions are
expected to be settled within 12 months.
18. Related parties
The Group has related party relationships with its subsidiaries, Directors and
key management personnel. Details of the remuneration, share options and
pension entitlement of the Directors are included in the Remuneration Report
of the Annual Report and Accounts.
In the year, sales totalling £1,148,332 (2021: £23,790) were made by the
Group to companies in which key management personnel held significant
interests, of which £165,851 (2021: £nil) was still outstanding at the year
end.
In the year, purchases totalling £776,946 (2021: £347,110) were made by the
Group from companies in which key management personnel held significant
interests, of which £nil (2021: £7,954) was still outstanding at the year
end. The purchases were for equipment hire and fuel cards used in the ordinary
course of business.
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