REG - Fulcrum Utility Srvc - Interim Results
14/12/2022 07:00
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RNS Number : 6090J Fulcrum Utility Services Ltd 14 December 2022
14 December 2022
FULCRUM UTILITY SERVICES LIMITED
("Fulcrum" or "the Group")
Unaudited interim results for the six months ended 30 September 2022
Fulcrum Utility Services Limited, a leading independent provider of essential
utility services including multi-utility connections and renewable energy
infrastructure, provides its interim results for the six-month period ended 30
September 2022.
The first half of FY23 has been challenging for the Group, as it has continued
to experience the impact of the significant, ongoing demands presented by a
turbulent energy market and wider difficult economic conditions.
The Group's legacy operational issues have also been deeper and more
longstanding than anticipated. This, together with challenges with
historical projects and the unprecedented cost increases impacting much of the
Group's supply chain, has continued to erode sales margins and weighed heavily
on the Group's performance.
The Group's progress in the period was also further hampered by a cyber
security incident, which impaired managerial and system information, and the
ability to fully invoice customers, for up to three weeks.
Financial headlines:
* Revenues for the six months to 30 September 2022 decreased by 16% on the
previous year to £23.9 million (H122: £28.6 million)
* Adjusted EBITDA((1)) of £(3.3) million (H122: Adjusted EBITDA((1)) of £1
million)
* Net cash((2)) position as at 30 September 2022 of £4.8 million (30 September
2021: net debt((2)) of £3.3 million)
(1)Adjusted EBITDA is operating (loss) / profit excluding the impact of
exceptional items, other net gains, depreciation, amortisation and
equity-settled share-based payment charges.
(2)Net cash / debt is defined as cash and cash equivalents less loans and
borrowings, excluding lease liabilities.
Strategic and operational headlines:
* New Executive team implemented critical improvement actions to protect and
improve margins and to refocus the Group on its core utility infrastructure
and asset ownership growth strategy
* Despite challenging market conditions, the Group is pleased to have won a
series of major utility contract awards in the period including:
* * a £4.1m contract to design and deliver the high voltage electrical
infrastructure that will power a new 158-acre solar farm and battery storage
facility;
* a £2m multi-utility infrastructure project to power a leisure resort in the
south of England for a leading brand of family resorts;
* a £2m contract to deliver High Voltage electrical infrastructure that will
power a new Battery Energy Storage System in the north of England; and
* a £1.2 million project to support the energisation High Voltage
infrastructure for a new 50MW solar farm.
* Importantly, these contracts have been tendered on in line with the Group's
improved margin strategy and have been secured under enhanced contractual
terms which better protect the Group and its margins in the current economic
conditions
* Inclusive of the contract wins, the order book at 30 September 2022 was £50.2
million, an increase of 3% (31 March 2022: £48.7 million)
Domestic Asset Sale update
* In the period, the Group successfully completed tranche five of the domestic
gas assets transfer to ESP for a total consideration of £2.2 million on 31
May 2022. £2.1 million of this was received in cash on 1 June 22 with a
further £0.1 million in cash received in respect of the previous tranches of
assets transferred.
Post Period end
* The Group is pleased to confirm that it has continued to win a strong
succession of new contract wins and continues to build a healthy pipeline of
new opportunities;
* Tranche six of the domestic gas assets transfer to ESP was also successfully
completed for a total consideration of £1.6 million. £1.5 million of this
was received in cash on 1 December 2022;
* The Company entered into an arrangement with Bayford & Co Ltd ("Bayford")
and funds managed by the Harwood Capital Management Limited Group ("Harwood")
in respect of the provision of funding of up to £6 million (the "Facility")
by way of a convertible loan; and
* Review initiated to consider all the various strategic options available to
the Group in order to maximise value for all shareholders
* The Group confirms that Antony Collins, Interim CEO, will leave the business
on 31 December 2022 following the completion of his 12-month assignment. The
Board would like to thank Antony for his contribution to Fulcrum during his
tenure
* Lindsay Austin, Managing Director of The Bayford Group, will take over
day-to-day responsibility from Antony Collins as Interim CEO. A handover
process is currently underway.
Current trading and Outlook
The Executive team's continuing priority is to protect and improve margins in
the current turbulent market conditions. New critical measures, including
controls and procedures to ensure optimal performance and to improve and
protect the Group's margins, have been implemented and, whilst the benefits of
these actions are yet to be fully realised and will take longer than expected
to positively impact the Group's results, the Board is pleased that the series
of multi-utility contracts won in the period have been under these revised
contractual terms.
In conjunction with these management improvements, and supported by the new
Facility, the Group has initiated a review of the various strategic options
available to it to maximise value for all shareholders and to ensure it
continues to have adequate working capital.
Medium to long-term market fundamentals remain strong and the Group's
experience and capabilities mean it remains well positioned to benefit from
the UK's transition to a low carbon economy and a net-zero future.
Jennifer Babington, Chair, said:
"The Board and I are disappointed in these results but remain confident that
the business is taking the necessary actions to turn the Group's performance
around. This is a challenging task, taking longer than anticipated, as
improvements are being implemented alongside turbulent and difficult economic
conditions. Despite these challenges, the medium to long-term growth
opportunities for the Group remain clear and are underpinned by strong market
drivers and government stimulus. We are also very pleased to be supported by
our major shareholders as we move the business forward. The recent Facility
will support the Group's strategy review, which will underpin its turnaround.
I also believe the new Facility is another positive demonstration of the
future potential that our major shareholders see in Fulcrum."
This announcement contains inside information.
Enquiries:
Fulcrum Utility Services Limited +44 (0)114 280 4150
Jonathan Jager, Chief Financial 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
Financial performance
Group revenue for the first six months of the financial year was £23.9
million, £4.7 million, 16% behind the first half of last year (H1 2022:
£28.6 million). This decline was seen across a number of our Infrastructure:
Design and Build activities, as we exited a number of loss making Smart
Metering Services contracts, as well as seeing fewer large gas contracting
projects than in the previous year.
Gross margin, excluding the impact of exceptional items, was 11% in the first
half of the financial year, down 10.9% compared to the first half of FY22, as
a consequence of unprecedented increases in material and labour costs, as well
as unfavourable contractual terms impeding the Group's ability to recover
adverse cost impacts. These issues have since been addressed with revised
and more rigorous controls being introduced with the Group anticipating the
benefits will begin to be seen in the future trading periods.
The Group is reporting an adjusted EBITDA((1)) of £(3.3) million, versus a
£1 million adjusted EBITDA((1)) in the first half of last year (H1 2022)
and a loss before tax of £20.3 million (H1 2022: loss before tax of £1.3
million).
As a result of the increasing cost of capital and challenging trading
conditions, the Group has felt it necessary to recognise a significant
impairment of £12.1 million on its intangible assets, with a further £2.3
million being provided for additional loss making contracts identified within
the Infrastructure: Design and Build operations. Consequently, the Group is
reporting an Operating Loss of £20.2 million for the first six months of the
financial year (£19.1 million adverse to the same period in FY22).
Pleasingly the order book has improved since 31 March 2022 and we are seeing
encouraging signs of new contract wins with better target margins. At 30
September 2022 the order book was £50.2 million, an increase of 3% from
£48.7 million, at 31 March 2022.
Over the six months to 30 September 2022, net asset value reduced to £25.5
million (FY 2022: £45.9 million) primarily as a result of the £12.1 million
impairment of intangible assets, which represents a full write down of the
intangibles previously carried for the Dunamis and Fulcrum businesses, and a
significant impairment to the goodwill in the Maintech business. The Group is
therefore reporting a £20.7 million loss after tax (H1 2022: loss of £1.1
million) and a reduction in net assets per share to 6.4p per share from 11.5p
per share at 31 March 2022.
At 30 September 2022, the Group had cash and cash equivalents of £4.8
million, a decrease of £6.4 million from 31 March 2022 (FY 2022: cash and
cash equivalents of £11.2 million).
Delivering contracts safely, efficiently, and profitably
Maintaining the highest standards of health and safety remains our highest
priority. A safety-first strategy is in place to ensure zero harm and,
although this is well embedded into our culture and operations, we are never
complacent and are committed to continuous improvement in health and safety
performance.
In the period, the Executive team has implemented critical improvements to
protect and improve margins in the current difficult economic conditions. New
contracts won, have been tendered on in line with the Group's revised margin
strategy and secured under enhanced contractual terms which better protect the
Group and its margins in the current economic conditions. This includes, for
example, additional mechanisms to protect and recover margin considering the
wider and unprecedent market issues of supply chain pressure and cost
inflation in materials and labour.
Consolidated Interim Statement of Comprehensive Income
For the six months ended 30 September 2022 (unaudited)
Unaudited Unaudited
Six months ended 30 September 2022 Six months ended 30 September 2021 Audited
Year ended
31 March
2022
Note £'000 £'000 £'000
Revenue 2 23,939 28,552 61,846
Cost of sales - underlying (21,316) (22,306) (50,149)
Cost of sales - exceptional items 4 (2,091) - (5,422)
Total cost of sales (23,407) (22,306) (55,571)
Gross profit 532 6,246 6,275
Administrative expenses - underlying (7,477) (7,063) (15,094)
Administrative expenses - exceptional items 4 (12,694) (184) (5,202)
Total administrative expenses (20,171) (7,247) (20,296)
Other net (losses)/gains 5 (513) (34) 330
Operating loss (20,152) (1,035) (13,691)
Net finance expense (159) (256) (496)
Loss before tax (20,311) (1,291) (14,187)
Taxation 7 (382) 187 765
Loss for the financial period/year (20,693) (1,104) (13,422)
Other comprehensive income
Items that will never be reclassified to profit or loss:
Revaluation of utility assets - - 4,252
Surplus arising on utility assets internally adopted in the period/year 29 119 57
Reversal of prior increase of utility assets - (83) -
Additional costs allocated to previously revalued assets (3) (37) -
Impairment of previously revalued utility assets - - (477)
Deferred tax on items that will never be reclassified to profit or loss 246 (380) (1,083)
Total comprehensive expense for the period/year (20,421) (1,485) (10,673)
Loss per share attributable to the owners of the business
Basic 6 (5.2)p (0.5)p (5.2)p
Diluted 6 (5.2)p (0.5)p (5.1)p
Adjusted EBITDA
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 the Alternative
Performance Measures are included in note 3.
Unaudited Unaudited Audited
Six months ended 30 September 2022 Six months ended 30 September Year ended
2021 31 March
2022
£'000 £'000 £'000
Operating loss (20,152) (1,035) (13,691)
Equity-settled share-based payment charge 27 216 639
Other net losses/(gains) 513 34 (330)
Exceptional items within operating loss 14,785 184 10,624
Depreciation and amortisation 1,528 1,598 3,257
Adjusted EBITDA (3,299) 997 499
(Loss)/surplus arising on sale of domestic utility assets and enhanced (513) (34) 330
payments
Adjusted EBITDA including sale of domestic utility assets (3,812) 963 829
Consolidated Interim Statement of Changes in Equity
For the six months ended 30 September 2022 (unaudited)
Share capital Share premium Revaluation reserve Merger reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2022 (audited) 399 20,777 9,969 11,347 3,383 45,875
Loss for the period - - - - (20,693) (20,693)
Surplus arising on utility assets internally adopted in the period - - 29 - - 29
Disposal of previously revalued assets - - (873) - 873 -
Depreciation on previously revalued assets - - (137) - 137 -
Additional costs allocated to previously revalued assets - - (3) - - (3)
Deferred tax in respect of items that will never be reclassified to profit and - - 246 - - 246
loss
Transactions with equity shareholders:
Equity settled share-based payments - - - - 27 27
Balance at 30 September 2022 (unaudited) 399 20,777 9,231 11,347 (16,273) 25,481
For the six months ended 30 September 2021
Restated balance at 1 April 2021 (audited) 222 389 9,552 11,347 13,871 35,381
Loss for the period - - - - (1,104) (1,104)
Surplus arising on utility assets internally adopted in the period - - 119 - - 119
Disposal of previously revalued assets - - (1,179) - 1,179 -
Depreciation on previously revalued assets - - (129) - 129 -
Reversal of prior increase of utility assets - - (83) - - (83)
Additional costs allocated to previously revalued assets - - (37) - - (37)
Deferred tax in respect of items that will never be reclassified to profit and - - (380) - - (380)
loss
Transactions with equity shareholders:
Equity settled share-based payments - - - - 216 216
Balance at 30 September 2021 (unaudited) 222 389 7,863 11,347 14,291 34,112
Consolidated Interim Balance Sheet
At 30 September 2022
Unaudited Unaudited Audited
30 September 2022 30 September 2021 31 March 2022
Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 9 36,088 35,071 37,151
Intangible assets 10 3,245 18,240 15,597
Right-of-use assets 2,082 2,732 2,323
Deferred tax assets 2,331 3,645 3,495
43,746 59,688 58,566
Current assets
Contract assets 21,175 21,241 20,177
Inventories 421 462 433
Trade and other receivables 11 10,005 7,927 9,620
Cash and cash equivalents 14 4,774 1,035 11,176
36,375 30,665 41,406
Total assets 80,121 90,353 99,972
Current liabilities
Trade and other payables 12 (14,922) (12,570) (15,825)
Contract liabilities (27,107) (30,636) (25,272)
Current lease liability (808) (913) (802)
Current provisions 15 (3,161) (34) (3,035)
(45,998) (44,153) (44,934)
Non-current liabilities
Non-current lease liability (1,643) (2,152) (1,873)
Borrowings 13 - (4,296) -
Non-current provisions 15 (2,031) - (1,296)
Deferred tax liabilities (4,968) (5,640) (5,994)
(8,642) (12,088) (9,163)
Total liabilities (54,640) (56,241) (54,097)
Net assets 25,481 34,112 45,875
Equity
Share capital 399 222 399
Share premium 20,777 389 20,777
Revaluation reserve 9,231 7,863 9,969
Merger reserve 11,347 11,347 11,347
Retained earnings (16,273) 14,291 3,383
Total equity 25,481 34,112 45,875
Consolidated Interim Cash Flow Statement
For the six months ended 30 September 2022
Unaudited Unaudited Audited
Six months ended 30 September 2022 Six months ended 30 September 2021 Year ended 31 March 2022
£'000 £'000 £'000
Cash flows from operating activities
Loss for the period/year after tax (20,693) (1,104) (13,422)
Tax charge/(credit) 382 (187) (765)
Loss before tax for the period/year (20,311) (1,291) (14,187)
Adjustments for:
Depreciation 892 874 1,832
Amortisation of intangible assets 636 724 1,425
Exceptional items - fixed asset impairment - - 1,920
Exceptional items - intangible asset impairment 12,059 - 2,309
Net finance expense 159 256 496
Equity settled share-based payment charges 27 216 639
Loss on disposal of utility assets 560 119 75
Gain on IFRS 16 lease modification - - (16)
Additional consideration receivable from previous utility asset sales (259)
- -
Increase in contract assets (998) (5,197) (4,537)
Increase in trade and other receivables (589) (1,903) (3,154)
Decrease/(increase) in inventories 12 (24) 5
(Decrease)/increase in trade and other payables (1,077) (94) 3,370
Increase/(decrease) in contract liabilities 1,835 3,538 (1,826)
Decrease/(increase) in provisions 861 (20) 4,277
Cash outflow from operating activities (5,934) (2,802) (7,631)
Tax received 22 - 12
Net cash outflow from operating activities (5,912) (2,802) (7,619)
Cash flows from investing activities
Acquisition of external utility assets (1,558) (1,166) (2,468)
#Utility assets internally adopted (344) (1,097) (2,475)
Acquisition of property, plant and equipment (68) (216) (242)
Acquisition of intangible assets (343) (57) (424)
Proceeds on disposal of utility assets 2,082 3,725 6,487
Receipt of deferred consideration on disposal of utility assets 642
- 642
Costs paid in relation to disposal of utility assets (4) (28) (141)
Additional consideration received from previous utility asset sales 49
210 -
Net cash (outflow)/inflow from investing activities (25) 1,803 1,428
Cash flows from financing activities
Proceeds from issue of ordinary shares - - 21,263
Share issue transaction costs - - (698)
Borrowings received - 2,000 5,250
Borrowings repaid - (3,250) (10,950)
Prepaid arrangement fees - (3) (11)
Interest paid and banking charges (non-IFRS 16) (42) (137) (297)
IFRS 16 - principal payments (377) (453) (1,022)
IFRS 16 - interest payments (46) (57) (121)
IFRS 16 - proceeds received on disposal of leased vehicle 19
- -
Net cash (outflow)/inflow from financing activities 13,433
(465) (1,900)
Net (decrease)/increase in cash and cash equivalents 7,242
(6,402) (2,899)
Cash and cash equivalents at beginning of period/year 3,934
11,176 3,934
Cash and cash equivalents at end of period/year 4,774 1,035 11,176
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1. Basis of preparation of the condensed consolidated interim
financial information
General information
Fulcrum Utility Services Limited (the "Company") is a limited company
incorporated in the Cayman Islands and domiciled in the UK. The ordinary
shares are traded on AIM on the London Stock Exchange. The address of its
registered office is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman
Islands.
The condensed consolidated interim financial information for the six months
ended 30 September 2022 comprise the Company and its subsidiaries (together
referred to as the "Group").
The condensed consolidated interim financial information, including the
financial information for the year ended 31 March 2022 set out in this interim
financial information, does not comprise statutory accounts within the meaning
of section 434 of the Companies Act 2006. The information for the year ended
31 March 2022 is derived from the non-statutory accounts for that financial
year. The non-statutory accounts for the year ended 31 March 2022 were
approved on 1 August 2022. The Auditor's report on those accounts was
unqualified.
These condensed consolidated interim financial statements have not been
audited or reviewed. They were approved by the Board on 13 December 2022.
Basis of preparation
The condensed consolidated interim financial information for the six month
period ended 30 September 2022 has been prepared in accordance with IAS 34,
'Interim Financial Reporting' as adopted by the United Kingdom. The condensed
consolidated interim financial information should be read in conjunction with
the Annual Report and Accounts for the year ended 31 March 2022, which have
been prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the United Kingdom.
Going-concern basis
The condensed consolidated interim financial information is prepared on the
basis that the Group is a going concern but with material uncertainties
currently in evidence. In assessing going concern and determining whether
there are material uncertainties, the Directors consider the Group`s business
activities, together with factors that are likely to affect its future
development and position.
A review of the Group`s cash flows, solvency, liquidity position and borrowing
facilities has taken place. At 30 September 2022 the Group had net assets of
£25.5 million (31 March 2022: £45.9 million) including net cash of £4.8
million (31 March 2022: £11.2 million). In the six months to 30 September
2022 the Group's net cash outflow from operations before tax was £6.0 million
(31 March 2022: £7.6 million).
Following the period in question, the Company entered into an arrangement with
Bayford & Co Ltd ("Bayford") and funds managed by the Harwood Capital
Management Limited Group ("Harwood") in respect of the provision of funding of
up to £6 million (the "Facility") by way of a convertible loan. This
Facility is expected to support the Group to initiate a review of the various
strategic options available to it to maximise value for all shareholders and
to ensure the Group continues to have adequate working capital, however it is
anticipated that additional funding will be required to support its future
trading in FY24.
Accounting policies
The same accounting policies are followed in this condensed consolidated
interim financial information as were applied in the Group`s latest audited
financial statements to 31 March 2022.
2. Segmental analysis
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.
Six months to 30 September 2022 Six months to 30 September 2021
(unaudited) (unaudited)
Utility assets: Total Group Utility assets: Total Group
Infrastructure: Own and Operate £'000 Infrastructure: Own and Operate £'000
Design and Build £'000 Design and Build £'000
£'000 £'000
Reportable segment revenue 21,942 1,997 23,939 26,665 1,887 28,552
Adjusted EBITDA* (4,152) 853 (3,299) 213 784 997
Other net gains/(losses) 47 (560) (513) 85 (119) (34)
Share based payment charge (27) - (27) (216) - (216)
Depreciation and amortisation (1,105) (423) (1,528) (1,326) (272) (1,598)
Reportable segment operating (loss)/profit before exceptional items (5,367) (1,244) 393 (851)
(5,237) (130)
Cost of sales - exceptional items (2,091) - (2,091) - - -
Administrative expenses -exceptional items - (12,694) (184) - (184)
(12,694)
Reporting segment operating (loss)/profit (20,022) (130) (20,152) (1,428) 393 (1,035)
Net finance expense (22) (137) (159) (45) (211) (256)
(Loss)/profit before tax (20,044) (267) (20,311) (1,473) 182 (1,291)
Year ended 31 March 2022 (audited)
Infrastructure: Utility assets:
Design and Build Own and Operate Total Group
£'000 £'000 £'000
Reportable segment revenue 57,631 4,215 61,846
Adjusted EBITDA* (1,557) 2,056 499
Other net gains 146 184 330
Share based payment charge (639) - (639)
Depreciation and amortisation (2,606) (651) (3,257)
Reportable segment operating (loss)/profit before exceptional items (4,656) 1,589 (3,067)
Cost of sales - exceptional items (3,502) (1,920) (5,422)
Administrative expenses - exceptional items (5,202) - (5,202)
Reporting segment operating loss (13,360) (331) (13,691)
Net finance expense (107) (389) (496)
Loss before tax (13,467) (720) (14,187)
*Adjusted EBITDA is operating (loss) / profit excluding the impact of
exceptional items, other net losses/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 ("APMs")
The Group uses APMs, as listed below, to present users of the accounts with a
clear view of what the Group considers to be the results of its underlying,
sustainable business operations, thereby enabling consistent period-on-period
comparisons and making it easier for users of the accounts to identify trends.
APMs are not defined by IFRS and therefore may not be directly comparable with
other companies` APMs. APMs should be considered in addition to, and are not
intended to be a substitute for, or superior to, IFRS measurements.
Alternative Performance Measure Definition
Adjusted EBITDA Operating profit/loss excluding exceptional items, other net losses/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 APMs to statutory measures is disclosed in the tables
below:
(a) Reconciliation of operating loss to "adjusted EBITDA"
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
2022
£'000 £'000 £'000
Operating loss (20,152) (1,035) (13,691)
Adjusted for:
Exceptional items within operating loss (note 4) 14,785 184 10,624
Other net losses/(gains) (note 5) 513 34 (330)
Amortisation and depreciation 1,528 1,598 3,257
Equity-settled share-based payments 27 216 639
Adjusted EBITDA (3,299) 997 499
(b) Reconciliation of loss before tax to "adjusted loss before taxation"
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
2022
£'000 £'000 £'000
Loss before tax (20,311) (1,291) (14,187)
Adjusted for:
Exceptional items included in cost of sales 2,091 - 5,422
Exceptional items included in administrative expenses 12,694 184 5,202
Amortisation of acquired intangibles 624 624 1,248
Adjusted loss before taxation (4,902) (483) (2,315)
(c) Net assets per share
Unaudited Unaudited Audited
30 September 30 September 31 March
2022 2021 2022
Net assets at end of period/year (£`000) 25,481 34,112 45,875
Issued shares at end of period/year (000`s) 399,313 222,118 399,313
Net assets per share (p) 6.4p 15.4p 11.5p
4. Exceptional items
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
2022
£'000 £'000 £'000
Exceptional items included in cost of sales 2,091 - 5,422
Exceptional items included in administrative expenses 5,202
12,694 184
14,785 184 10,624
(a) Exceptional items included in cost of sales
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
2022
£'000 £'000 £'000
Fixed asset impairment - - 1,920
Onerous contracts 2,091 - 3,502
2,091 - 5,422
(b) Exceptional items included in administrative expenses
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
2022
£'000 £'000 £'000
Restructuring costs 291 74 575
One-off legal and advisor costs 174 110 242
Intangible asset impairment 12,059 - 2,309
Onerous contracts 170 - 2,076
12,694 184 5,202
In the six month period to 30 September 2022, the Group recognised an
impairment of £11.9 million for goodwill and brands and customer
relationships. See note 10 for further detail.
5. Other net (losses)/gains
Included within other net (losses)/gains are the following amounts:
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
2022
£'000 £'000 £'000
Loss on disposal of assets (560) (119) (75)
Additional consideration receivable from utility asset sales in previous years 259
- -
Enhanced payments received 47 85 146
(513) (34) 330
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. The loss outlined below is the result of assets
transferred in the current and previous financial period/year.
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
2022
£'000 £'000 £'000
Consideration - proceeds received 2,082 3,725 6,487
Consideration - proceeds receivable 10 - -
Consideration - retention receivable 64 115 201
Total consideration 2,156 3,840 6,688
Net book value of assets sold (including the effect of previous revaluations) (6,580)
(2,631) (3,931)
Legal and other costs relating to the transactions (173)
(81) (28)
Discounting of retention consideration due in more than one year (10)
(4) -
Loss on disposal of assets (560) (119) (75)
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 £873,000 (year ended 31 March
2022: £1,445,000).
6. Earnings per share (EPS)
The calculation of the adjusted basic and diluted earnings per share is based
upon the following loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding:
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
2022
£'000 £'000 £'000
Loss for the period/year used for the calculation of basic EPS (20,693) (1,104) (13,422)
Exceptional items included in cost of sales 2,091 - 5,422
Exceptional items included in administrative expenses 12,694 184 5,202
Remove tax relief on exceptional items (2,809) (35) (2,019)
Amortisation of brands and customer relationships 624 624 1,248
Loss for the period/year used for the calculation of adjusted EPS (8,093) (331) (3,569)
Number of shares:
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
2022
'000 '000 '000
Weighted average number of ordinary shares for the purpose of basic EPS 399,313 222,118 260,169
Effect of potentially dilutive ordinary shares 1,437 4,219 1,739
Weighted average number of ordinary shares for the purpose of diluted EPS 400,750 226,337 261,908
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
EPS 2022
Basic (5.2)p (0.5)p (5.2)p
Diluted basic (5.2)p (0.5)p (5.1)p
Adjusted basic (2.0)p (0.1)p (1.4)p
Adjusted diluted (2.0)p (0.1)p (1.4)p
7. Taxation
Unaudited Unaudited Audited
Six months ended 30 September Six months ended 30 September Year ended
2022 2021 31 March
2022
£'000 £'000 £'000
Current tax - - 380
Deferred tax (382) 187 385
Total tax (charge)/credit (382) 187 765
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 £7.9 million (31 March 2022: £12.5 million) of tax losses for
which deferred tax assets of £2.0 million (31 March 2022: £3.1 million) have
been recognised. The deferred tax asset is expected to be recovered over five
years. The Group also has unrecognised tax losses of £22.1 million (31 March
2022: £9.7 million) for which no deferred tax asset has been recognised as
there is insufficient certainty over whether those losses will reverse.
8. Capital commitments
At 30 September 2022 the Group had entered into contracts to purchase
property, plant and equipment in the form of utility assets for the amount of
£5.5 million. The capital commitments at 31 March 2022 were £5.5 million and
at 30 September 2021 were £8.9 million.
9. Property, plant and equipment
Fixtures and fittings Computer equipment
Utility assets £'000 £'000 Total
£'000 £'000
Cost
At 1 April 2021 (audited) 71,380 1,069 1,344 73,793
Externally acquired assets 1,161 - 216 1,377
Internally adopted assets 578 - - 578
Surplus arising on internally adopted assets 119 - - 119
Disposals (3,951) - - (3,951)
At 30 September 2021 (unaudited) 69,287 1,069 1,560 71,916
Externally acquired assets 1,516 22 4 1,542
Internally adopted assets 1,846 - - 1,846
Additional costs allocated to internally adopted assets on which a surplus (62) - - (62)
previously arose
Revaluation 4,252 - - 4,252
Disposals (2,712) - - (2,712)
At 31 March 2022 (audited) 74,127 1,091 1,564 76,782
Externally acquired assets 1,630 44 24 1,698
Internally adopted assets 340 - - 340
Surplus arising on internally adopted assets 29 - - 29
Disposals (2,636) - - (2,636)
At 30 September 2022 (unaudited) 73,490 1,135 1,588 76,213
Accumulated depreciation
At 1 April 2021 (audited) (34,353) (856) (1,270) (36,479)
Depreciation charge for the period (254) (30) (102) (386)
Disposals 20 - - 20
At 30 September 2021 (unaudited) (34,587) (886) (1,372) (36,845)
Depreciation charge for the period (359) (50) (43) (452)
Impairment from external revaluation (2,397) - - (2,397)
Disposals 63 - - 63
At 31 March 2022 (audited) (37,280) (936) (1,415) (39,631)
Depreciation charge for the period (410) (19) (70) (499)
Disposals 5 - - 5
At 30 September 2022 (unaudited) (37,685) (955) (1,485) (40,125)
Net book value
At 30 September 2022 (unaudited) 35,805 180 103 36,088
At 31 March 2022 (audited) 36,847 155 149 37,151
At 30 September 2021 (unaudited) 34,700 183 188 35,071
At 31 March 2021 (audited) 37,027 213 74 37,314
Additions of internally adopted assets within utility assets in the six months
ended 30 September 2022 are stated at the full cost of construction of £0.7
million (year ended 31 March 2022: £3.7 million) less the deficit arising on
internally adopted assets of £0.4 million (year ended 31 March 2022: £1.3
million).
10. Intangible assets
Goodwill Brands & customer relationships Software Total
£'000
£'000 £'000 £'000
At 1 April 2021 (audited) 9,757 8,115 1,035 18,907
Additions - - 57 57
Amortisation for the period - (624) (100) (724)
At 30 September 2021 (unaudited) 9,757 7,491 992 18,240
Additions - - 367 367
Amortisation for the period - (624) (77) (701)
Impairment for the period (2,149) - (160) (2,309)
At 31 March 2022 (audited) 7,608 6,867 1,122 15,597
Additions - - 343 343
Amortisation for the period - (624) (12) (636)
Impairment for the period (7,608) (4,255) (196) (12,059)
At 30 September 2022 (unaudited) - 1,988 1,257 3,245
Given a number of internal and external factors, management believes that
indications for possible impairment exist for goodwill and brands and customer
relationships. Accordingly, an impairment test has been carried out in
relation to both goodwill and brands and customer relationships. Where an
impairment is indicated, goodwill would be impaired first, followed by brands
and customer relationships on a pro-rata basis.
Goodwill and 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 period 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 11.3% and 13.1% (31
March 2022: between 8.1% and 9.8%) 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% (31 March 2022: 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 all of the CGUs. Consequently, an impairment of
£2.2 million was made to the carrying value of goodwill in the Fulcrum CGU,
and impairments of £5.4 million and £4.3 million were made to the carrying
values of goodwill and brands and customer relationships, respectively, in the
Dunamis CGUs.
A segment-level summary of the acquired intangible assets allocation is
presented below:
Fulcrum Dunamis Total
£'000 £'000 £'000
Goodwill - - -
Brands and customer relationships - 1,988 1,988
11. Trade and other receivables
Unaudited Unaudited Audited
30 September 2022 30 September 2021 31 March 2022
£'000 £'000 £'000
Trade receivables 7,362 4,392 7,326
Other receivables and prepayments 2,643 3,535 2,294
10,005 7,927 9,620
12. Trade and other payables
Unaudited Unaudited Audited
30 September 2022 30 September 2021 31 March 2022
£'000 £'000 £'000
Trade payables 6,553 6,830 7,472
Other payables 8,369 5,740 8,353
14,922 12,570 15,825
13. Interest-bearing loans and borrowings
Changes in liabilities arising from financing activities are shown below:
Unaudited Unaudited Audited
30 September 2022 30 September 2021 31 March 2022
£'000 £'000 £'000
At the beginning of the period (94) 5,483 5,483
Repaid - (3,250) (10,950)
New borrowings - 2,000 5,250
Capitalised borrowing fees - (3) (11)
Amortisation of capitalised borrowing fees 71 66 134
At the end of the period (23) 4,296 (94)
As no borrowings are outstanding as at 30 September 2022, the capitalised
borrowing fees have been included within trade and other receivables.
14. Reconciliation to net cash/(debt)
Unaudited Unaudited Audited
30 September 2022 30 September 2021 31 March 2022
£'000 £'000 £'000
Cash and cash equivalents 4,774 1,035 11,176
Borrowings - (4,296) -
Net cash/(debt) 4,774 (3,261) 11,176
Net cash/(debt) is defined as cash and cash equivalents less loans and
borrowings, excluding lease liabilities.
15. Provisions
Provision for costs to settle ongoing legal claims Provision for onerous contracts
£'000 £'000
Other provisions
£'000 Total
£'000
At 31 March 2021(audited) 54 - - 54
Provision created during the period (20) - - (20)
At 30 September 2021 (unaudited) 34 - - 34
Provision released during the period (34) - - (34)
Provision created during the period - 5,578 121 5,699
Provision utilised during the period - (1,368) - (1,368)
At 31 March 2022 (audited) - 4,210 121 4,331
Provision created during the period - 2,261 - 2,261
Provision utilised during the period - (1,279) (121) (1,400)
At 30 September 2022 (unaudited) - 5,192 - 5,192
The provision for onerous contracts relates to future losses expected to be
incurred on contracts deemed to be onerous. The amount and timing of the
outflows related to these provisions are uncertain, but a reliable estimate
has been made.
Of the £5.2 million provision for onerous contracts, £2.0 million is
expected to be settled in more than 12 months. All other provisions are
expected to be settled within 12 months.
16. Related parties
The Group has related party relationships with its subsidiaries, directors and
key management personnel. Details of the remuneration, share options and
pension entitlement of the directors are included in the Remuneration Report
on page 25 of the Annual Report and Accounts 2022, which are available on the
Fulcrum Utility Services Limited website at https://investors.fulcrum.co.uk
(https://investors.fulcrum.co.uk/) .
Principal risks
The Board have assessed the Principal Risks as disclosed in the 2022 Annual
Report and Accounts and have determined that there has been no change in the
risks faced or the risk rating of the risks detailed.
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