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Fulcrum Utility Srvc (FCRM)

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Friday 24 September, 2010

Fulcrum Utility Srvc

Final Results

RNS Number : 2369T
Fulcrum Utility Services Ld
24 September 2010
 



FULCRUM UTILITY SERVICES LIMITED (the "Company")

Trading update and results for the year ending 31 March 2010

 

Fulcrum Utility Services Limited ("Fulcrum" or "the Company", previously Marwyn Capital I Limited) acquired Fulcrum Group Holdings Limited, the UK based energy solutions company, on 8 July 2010 from National Grid plc. The Company today provides an update on progress since completion of the acquisition.

Following Completion, management remains encouraged by the quality of the underlying opportunities that exist to improve future performance. Management has launched a series of initiatives aimed at improving the operational efficiency of the business, including a comprehensive appraisal of business processes and contract profitability. Management has also met with a number of key suppliers and customers in order to reinforce existing relationships and develop new business opportunities.

There have been a number of new additions to the senior management team, in line with the intentions set out in the Admission Document dated 17 June 2010. The Board would like to welcome the following new members to the operational management team:

·     Chris Dwyer, Operations Director - Chris has more than 25 years experience in the gas connections industry, having been head of business energy connections at E.On since 2006 and previously worked as technical director at Fulcrum and Corona Energy;

·      Richard Atkinson, Sales Director - Since 2007 Richard has been sales and marketing director at CNG, an independent business gas supplier and previously corporate sales manager at Corona Energy;

·     Gerard Egan, Performance Director - Gerard has significant experience in delivering operational performance improvement having spent over 20 years as a business consultant, most recently as an executive consultant at Capgemini;

·      Paul Below, Interim Finance Director - Paul is a highly experienced interim finance director who has held a large number of short term positions at UK listed and privately held businesses, typically with a focus on turnaround  situations; and

·      Ray Jardine, HR Director - having held permanent human resources positions at Shell Oil, Argos and Somerfields, Ray has been an interim HR director since 1998, with a number of short term positions including general HR management, business improvement and change management roles.

Management remains confident of delivering the turnaround of the Group and is focussed on taking advantage of revenue growth opportunities and improving operational efficiency, as set out on the Admission Document dated 17 June 2010.

In addition, the Company today publishes the audited consolidated accounts for Fulcrum Group Holdings Limited and its subsidiaries (the "Target") for the year ended 31 March 2010 (the "Accounts"). The Accounts are for a period when the Target was still a wholly owned and managed subsidiary of National Grid plc and therefore are not consolidated with the Company.

The Company will publish its interim accounts for the period ended 30 September 2010 (the "Interim Accounts") by 31 December 2010. The Interim Accounts will be for the period from incorporation of the Company on 4 December 2010 to 30 September 2010 and will include trading of the Target from acquisition on 8 July 2010.

John Spellman, CEO of Fulcrum, said:

"I am pleased to report that, having been in control of the Fulcrum business for just over two months, we are encouraged by the scale of the opportunities available and, as anticipated, there are a number of inefficiencies within the business that we will aim to improve upon. I am also pleased to welcome the new members of the senior management team and am convinced that we now have a first class team with the experience required to deliver on our strategy to turnaround the business. We will continue to update the market on our progress as appropriate."

Enquiries:

Cenkos Securities plc    (nominated adviser and broker)                +44 (0)20 7397 8900

Beth McKiernan/Stephen Keys

 

Merlin PR                                                                                  +44 (0)20 7726 8400

Toby Bates / Delwyn Jones

 

Consolidated Income Statement
for the year ended 31 March 2010

 

Note

2010 

2009

Continuing operations

 

£000

£000

Revenue

1,3

37,619

54,280

Cost of sales

 

(29,667)

(35,317)

Gross profit

 

7,952

18,963

Administrative expenses - before exceptional items

 

(21,925)

(26,680)

Exceptional administrative items

4

(2,751)

(1,144)

Total administrative expenses

 

(24,676)

(27,824)

Operating loss and loss before tax

5

(16,724)

(8,861)

Taxation

7

4,591

2,236

Loss for the year attributable to equity holders of the parent

 

(12,133)

(6,625)

 

Consolidated Balance Sheet
at 31 March 2010

 

Note

2010

2009

 

 

£000

£000

Non-current assets

 

 

 

Property, plant and equipment

8

6,006

5,442

Intangible assets

10

437

789

Deferred tax assets

11

346

682

 

 

6,789

6,913

Current assets

 

 

 

Inventories

12

2,515

1,937

Current tax assets

 

5,242

2,998

Trade and other receivables

13

6,743

20,168

Cash and cash equivalents

14

323

184

 

 

14,823

25,287

Total assets

 

21,612

32,200

Current liabilities

 

 

 

Inter-company loans and borrowings

15

(13,073)

(8,207)

Trade and other payables

16

(24,921)

(27,561)

Provisions

18

(33)

(962)

Total liabilities

 

(38,027)

(36,730)

Net liabilities

 

(16,415)

(4,530)

Equity attributable to equity holders of the parent

 

 

 

Share capital

19

10,000

10,000

Retained earnings

 

(26,415)

(14,530)

Deficiency in total equity

 

(16,415)

(4,530)

Consolidated Statement of Changes in Equity

 

Share
capital

Retained
earnings

Total
equity

 

£000

£000

£000

Balance at 1 April 2008

10,000

(8,193)

1,807

Total Comprehensive Income - Loss for the year ended 31 March 2009

-

(6,625)

(6,625)

Transactions with equity shareholders:

 

 

 

Equity-settled share based payment transactions

-

288

288

Balance at 31 March 2009

10,000

(14,530)

(4,530)

Total Comprehensive Income - Loss for the year ended 31 March 2010

-

(12,133)

(12,133)

Transactions with equity shareholders:

 

 

 

Equity-settled share based payment transactions

-

248

248

Balance at 31 March 2010

10,000

(26,415)

(16,415)

Consolidated Cash Flow Statement

 

Note

2010 

2009 

 

 

£000

£000

Cash flows from operating activities

 

 

 

Loss for the year

 

(12,133)

(6,625)

Adjustments for:

 

 

 

Depreciation

8

612

674

Amortisation of intangible assets

10

495

637

Loss on sale of property, plant and equipment

5

2

42

Equity settled share-based payment expenses

6

248

288

Taxation credit

7

(4,591)

(2,236)

Decrease / (increase) in trade and other receivables

 

7,937

(6,155)

Increase in inventories

 

(578)

(5)

(Decrease)/increase in trade and other payables

 

(2,640)

897

Decrease in provisions

 

(929)

(1,415)

Cash from operating activities

 

(11,577)

(13,898)

 Taxation received

 

2,683

2,102

Net cash from operating activities

 

(8,894)

(11,796)

Cash flows from investing activities

 

 

 

Proceeds from sale of property, plant and equipment

 

-

92

Acquisition of property, plant and equipment

8

(1,178)

(4,068)

Acquisition of intangibles

10

(143)

(230)

Net cash used in investing activities

 

(1,321)

(4,206)

Cash flows from financing activities

 

 

 

Proceeds from loans due to related parties

 

4,866

8,207

Proceeds from repayment of loans due from related parties

 

5,488

6,950

Net cash from financing activities

 

10,354

15,157

Net increase / (decrease) in cash and cash equivalents

 

139

(845)

Cash and cash equivalents at 1 April 2008 / 2009

 

184

1,029

Cash and cash equivalents at 31 March

14

323

184

Notes to the group financial statements
for the year ended 31 March 2010

1  Accounting policies

Overview

Fulcrum Group Holdings is a company incorporated and domiciled in the UK.

Basis of accounting

The consolidated financial statements have been prepared and approved by the directors in accordance with the Companies Act 2006 and International Financial Reporting Standards (IFRSs) as adopted by the European Union in response to the IAS regulation (EC 1606/2002) effective as of 1 April 2009.  The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in the financial statements and in preparing an opening IFRS balance sheet at 1 April 2007 for the purposes of the transition to adopted IFRSs.

Transition to adopted IFRSs

The Group has prepared the consolidated financial statements in accordance with adopted IFRS and consequently has applied IFRS 1.  The Group's first IFRS financial statements were included in the admission document dated 17 June 2010.

Going concern

The directors have prepared the accounts on the going concern basis.  Due to the Group's net liabilities position, the directors have received confirmation from Fulcrum Utility Services Limited, of its intention to financially support the Group such that the Group can meet its obligations as they fall due for a period of at least twelve months from the date of the directors' approval of these Group financial statements.

Measurement convention

The consolidated financial statements are prepared on the historical cost basis.

Functional and presentation currency

The consolidated financial statements are presented in GBP, which is the functional currency of the Group's operations. All financial information presented in GBP has been rounded to the nearest thousand pounds.

Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Company takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial information of subsidiaries is included in the consolidated financial statements from the date that control commences until the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.


Classification of financial instruments

Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

·      they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company (or Group); and

·      where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability.  Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in the financial statements for called up share capital and share premium account exclude amounts in relation to those shares. 

Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, bank overdraft, other loans and borrowings, and trade and other payables.

Trade and other receivables

Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses.

Cash and cash equivalents / bank overdraft

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement.

Inter-company loans and borrowings

Inter-company loans and borrowings are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.

Trade and other payables

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method


Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. Where land and buildings are held under leases the accounting treatment of the land is considered separately from that of the buildings. Leased assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and less accumulated impairment losses.  Lease payments are accounted for as described below.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:

Pipelines                                               20 years
buildings                                               up to 50 years
vehicles, plant and equipment                 5 years
office furniture and fittings                       5 years
computer equipment                               3-5 years

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

Intangible assets

Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and less accumulated impairment losses.

Amortisation

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use. The estimated useful lives are as follows:

Software                                                3 years

Inventories

Work in progress balances reflect direct works costs including direct labour, materials and other attributable variable costs relating to jobs classed as incomplete and therefore cannot be taken to sales.  Work in progress is valued at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business less applicable costs to complete and variable selling expenses.

Impairment excluding inventories and deferred tax assets

Financial assets (including receivables)

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate.  Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Non-financial assets

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit") or ("CGU"). CGU's have been determined to correspond with operating segments.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated to reduce the carrying amounts of the assets in the unit (group of units) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Employee benefits

Defined benefit plans

Substantially all the Group's employees are members of the National Grid UK Pension Scheme.  the Group's share of the underlying assets and liabilities of the defined benefit section of the scheme cannot be identified separately.  Consequently, the Group accounts for the scheme as if it were a defined contribution scheme, recognising a charge equivalent to cash paid or payable to the scheme and to the scheme's sponsoring company, Lattice Group plc, a fellow subsidiary undertaking of National Grid plc.

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.  A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. 

Share-based payment transactions

Where the Group's parent grants rights to its equity instruments to the Group's employees, which are accounted for as equity-settled in the consolidated accounts of the parent, the Group accounts for these share-based payments as equity-settled.

These equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on an estimate of the number of shares that will eventually vest, with a corresponding entry to profit and loss account reserves.

The Group took advantage of the option available in IFRS 1 to apply IFRS 2 only to equity instruments that were granted after 7 November 2002 and that had not vested by 1 April 2008.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Restructuring provisions are recognised when management have an approved plan which has been communicated as appropriate within the business. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

Revenue

Utility infrastructure and gas connection activities are recognised as "services revenue". The majority of projects are completed in a short time frame, and as such revenue is recognised on completion. For longer projects, the stage of completion of the works is assessed when considering recognition of revenue. Services revenue is recognised excluding VAT and other indirect taxes. An accrual is made for services revenue in respect of work where invoices are yet to be generated. When payment is received in advance of the provision of services, these receipts are recorded as deferred income.

Meter sales are recognised as "sale of goods" at the fair value of the consideration received or receivable. Revenue is recognised when meters have been installed and recovery of the consideration is probable.

Conveyance of gas and meter rental revenue is recognised as "revenue from pipeline assets" from the date the meter is connected and made available for use and is based on gas volumes.

Expenses

Operating lease payments

Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.        

Exceptional items

Exceptional items are those that in management's judgement need to be disclosed by virtue of their size or incidence in order to provide greater visibility of the underlying results of the business and which management believes provide additional meaningful information in relation to ongoing operational performance.

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.

Operating segments

The Group determines its operating segments in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, which is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Board.

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components and for which discrete financial information is available. An operating segment's operating results are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the segment and assess its performance.

The Group's primary format for segment reporting is based on business segments. The business segments are determined based on the Group's management and internal reporting structure and the aggregation criteria set out in IFRS 8.

Segment results that are reported to the Board of Directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets and liabilities (primarily the Group's headquarters), and other assets and liabilities held centrally. Unallocated items include Property, plant and equipment, Intangible assets, Amounts due from related parties, Cash and cash equivalents, Trade payables, Amounts due to related parties, Accruals and deferred income, and Deferred tax assets.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment and intangible assets other than as acquired through business combinations.     


Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group.

The following adopted IFRSs have been issued but have not been applied by the Group in the financial statements. Their adoption is not expected to have a material affect on the financial statements unless otherwise indicated:

·      Revised IAS 27 "Consolidated and Separate Financial Statements" (mandatory for the year commencing on or after 1 July 2009) requires that when a transaction occurs with non-controlling interests in Group entities that do not result in a change in control, the difference between the consideration paid or received and the recorded non-controlling interest should be recognised in equity. In cases where control is lost, any retained interest should be re-measured to fair value with the difference between fair value and the previous carrying value being recognised immediately in the consolidated income statement. The Group has not historically entered into such transactions (although it may do so in the future) and so it is not expected to have a material impact on the Group's financial statements.

·      Improvement to IAS 36 "Impairment of Assets" (effective prospectively for periods beginning on or after 1 January 2010). This improvement clarified that each unit or group of units to which goodwill is allocated should not be larger than an operating unit as defined by paragraph 5 of IFRS 8 "Operating Segments" before aggregation.  The standard is only applicable prospectively.  The improvement will not result in a material impact on the Group's financial statements.

·      IAS 38 (amendment), "Intangible Assets". The amendment is part of the IASB's annual improvements project published in April 2009 and the Group will apply IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. The amendment will not result in a material impact on the Group's financial statements.

·      IFRS 2 (amendments), "Group cash-settled share-based payment transaction" (effective from 1 January 2010). In addition to incorporating IFRIC 8 "Scope of IFRS 2", and IFRIC 11 "IFRS 2 - Group and treasury share transactions", the amendments expand on the guidance in IFRIC 11 to address the classification of Group arrangements that were not covered by that interpretation. The new guidance is not expected to have a material impact on the Group's financial statements.

·      Revised IFRS 3 "Business Combinations" (mandatory for the year commencing on or after 1 July 2009) will apply to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The revised standard introduces a number of changes in the accounting for business combinations that will impact the amount of goodwill recognised, the reported results in the period that a business acquisition occurs and future reported results. This standard is unlikely to have a significant impact on the Group's accounting for business acquisitions post adoption that will first be reported by the Group from the year ending 31 March 2011.  As the standard is only applicable prospectively it is not expected to have an impact on the amounts currently recognised in the Group's financial statements.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group (continued)

·      IFRS 5 (amendment), "Non-current assets held for sale and discontinued operations". The amendment is part of the IASB's annual improvements project published in April 2009. The amendment provides clarification that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. The Group will apply IFRS 5 (amendment) from 1 January 2010. It is not expected to have a material impact on the Group's financial statements.

·      IFRS 9 "Financial Instruments" (effective for periods beginning on or after 1 January 2013; no effective date has yet been given by the EU).  IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the many different impairment methods in IAS 39. Thus IFRS 9 improves comparability and makes financial information easier to understand for investors and other users. The Group is assessing the impact of this new standard.

·      IFRIC 17, "Distribution of non-cash assets to owners" (effective on or after 1 July 2009). The interpretation was published in November 2008. This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. The Group will apply IFRIC 17 from 1 March 2011. It is not expected to have a material impact on the Group's financial statements.

2  Operating segments

The determination of the Group's operating segments is based on the business units for which information is reported to the Group's Chief Operating Decision Maker, being the Executive Board. The Group has three reportable segments, as described below.

Fulcrum's infrastructure services operating segment provides utility infrastructure and connections services to external customers.

Fulcrum's gas services operating segment provides domestic and non-domestic gas connection activities solely in the capacity as agent for National Grid Gas plc.

Fulcrum's pipeline business is involved in gas meter sales, meter rentals, and the safe and efficient conveyance of gas through its gas transportation networks.  Gas transportation services are provided under the independent gas transporter licence granted from Ofgem during June 2007.

The accounting policies of all of the reportable segments are as described in Note 1.

Information regarding the operations of each reportable segment is included in the following tables.  Performance is measured based on operating profit / (loss).  Segment operating profit / (loss) is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.  Inter-segment pricing is determined on an arm's length basis. Information regarding segments is reviewed by management using UK GAAP.  This includes management accounts comprising profit or loss for each segment and balance sheets and cash flows and other financial and non financial information used to manage the business on a consolidated basis.

Adjustments in the following tables comprise the following items:

·      Corporate assets and liabilities and other assets and liabilities held centrally

·      Elimination of inter-segmental transactions and balances

Segment information - 2010

 

Infra-structure
services

Gas
services

Pipeline

Total of
reportable
segments

  Adjust-ments

Amount in
financial
statements

 

£000

£000

£000

£000

£000

£000

Reportable segment revenue

33,133

3,925

1,674

38,732

(1,113)

37,619

Reportable segment operating loss

(7,006)

(6,542)

(2,540)

(16,088)

(636)

(16,724)

Depreciation and amortisation

-

-

(191)

(191)

(916)

(1,107)

Exceptional items

-

-

-

-

(2,751)

(2,751)

Reportable segment assets

14,587

1,981

6,143

22,571

(1,099)

21,612

Reportable segment liabilities

(28,946)

(10,348)

(10,995)

(50,289)

12,262

(38,027)

Segment information - 2009

 

Infra-structure
services

Gas
services

Pipeline

Total of
reportable
segments

  Adjust-ments

Amount in
financial
statements

 

£000

£000

£000

£000

£000

£000

Reportable segment revenue

38,886

19,326

945

59,157

(4,877)

54,280

Reportable segment operating loss

(2,076)

(4,316)

(1,976)

(8,368)

(493)

(8,861)

Depreciation and amortisation

-

-

(85)

(85)

(1,226)

(1,311)

Exceptional items

 

 

 

 

(1,144)

(1,144)

Reportable segment assets

18,679

5,216

5,514

29,409

2,791

32,200

Reportable segment liabilities

(8,201)

(3,657)

(7,095)

(18,953)

(17,777)

(36,730)

Major items in the adjustments column comprise:

·      Reportable segment revenues: the elimination of inter-segmental revenues for sales from Fulcrum infrastructure services to Fulcrum pipelines £329,000 (2009: £4,593,000).

·      Reportable segment assets largely comprise corporate assets and other assets held centrally, including Property, plant and equipment £1,091,000 (2009: £1,379,000); Intangible assets £437,000 (2009: £789,000); Loans due from related parties £38,553,000 (2009: £30,609,000); and Cash and cash equivalents £323,000 (2009: £184,000).

·      Reportable segment liabilities largely comprise corporate liabilities and other liabilities held centrally, including Trade payables £4,488,000 (2009: £2,052,000); Loans due to related parties £13,073,000 (2009: £8,207,000); Amounts due to related parties £6,198,000 (2009: £6,711,000); and Accruals and deferred income £7,601,000,000 (2009: £9,730,000).

Geographic segments

The Group derives all of its revenue from the UK and all of the Group's customers are based in the UK.

Major customer

Revenues from one customer of the Group's gas services segment represent £2,887,000 (2009: £19,326,000) of the Group's total revenues.

For analysis of impairment by segment, refer to Note 9.

3  Revenue

 

2010

2009

 

£000

£000

Services revenue

35,654

53,335

Sale of goods 

1,043

688

Revenue from pipeline assets

922

257

Total revenues

37,619

54,280

4  Exceptional items

 

2010

2009

 

£000

£000

Exceptional administrative expenses - restructuring costs

2,751

1,144

These costs relate entirely to the severance costs required to reduce headcount. This results from the group strategy to re-align its cost base.

 

5  Expenses and auditors' remuneration

Included in operating loss are the following:

 

2010

2009 

 

£000

£000

Amortisation of intangible assets

495

637

Depreciation of property, plant and equipment: owned

612

670

Depreciation of property, plant and equipment: leased

-

4

Operating leases - plant and machinery

690

930

Operating leases - land and buildings

621

823

Loss on disposal of property, plant and equipment

2

42

Restructuring costs - included in administrative expenses

2,751

1,144

Auditors' remuneration:

 

2010

2009 

 

£000

£000

Audit of parent company and group financial statements

62

27

Amounts receivable by auditors and their associates in respect of:

 

 

Audit of financial statements of subsidiaries pursuant to legislation

46

46

Other services pursuant to such legislation - regulatory work

16

16

6  Staff numbers and costs

The average monthly number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:

 

Number of employees

 

2010

2009

Administration

303

360

The aggregate payroll costs of these persons were as follows:

 

£000

£000

Wages and salaries

9,315

10,848

Social security costs

929

1,027

Other pension costs

2,096

2,134

Share based payments

248

288

 

12,588

14,297

7  Taxation

Recognised in the income statement

 

2010

2009 

 

£000

£000

Current tax credit

 

 

Current year

(4,864)

(2,737)

Adjustment in respect of prior years

(63)

25

Current tax credit

(4,927)

(2,712)

Deferred tax expense

 

 

Origination and reversal of temporary differences

213

221

Adjustment in respect of prior years

123

255

Deferred tax expense

336

476

Total tax credit

(4,591)

(2,236)

The current tax credit arises from group relief within the National Grid Plc Group.


Reconciliation of effective tax rate

 

2010

2009 

 

£000

£000

Loss for the year

(12,133)

(6,625)

Total tax revenue

(4,591)

(2,236)

Loss excluding taxation

(16,724)

(8,861)

Tax using the UK corporation tax rate of 28% (2009: 28%)

(4,683)

(2,481)

Non-deductible expenses

32

107

Tax exempt revenues

-

(145)

Under provided in prior years

60

280

Other

-

3

Total tax credit

(4,591)

(2,236)

The tax position is not necessarily indicative of the tax charge for future periods since the historical taxation structure does not reflect the future taxation structure.

8  Property, plant and equipment

 

Pipelines

Land and
 buildings

Vehicles, plant and
equipment

Fixtures
and
 fittings

Computer
equipment

Total

 

£000

£000

£000

£000

£000

£000

Cost

 

 

 

 

 

 

Balance at 1 April 2008 

369

405

852

1,239

7,498

10,363

Additions

3,780

-

-

-

288

4,068

Disposals

-

-

(17)

(5)

(129)

(151)

Balance at 31 March 2009

4,149

405

835

1,234

7,657

14,280

Additions

1,042

-

-

48

88

1,178

Disposals

-

-

(835)

-

(245)

(1,080)

Balance at 31 March 2010

5,191

405

-

1,282

7,500

14,378

Depreciation

 

 

 

 

 

 

Balance at 1 April 2008 

(1)

(51)

(843)

(1,061)

(6,225)

(8,181)

Depreciation charge for the year

(85)

(8)

(7)

(68)

(506)

(674)

Disposals

-

-

17

-

-

17

Balance at 31 March 2009

(86)

(59)

(833)

(1,129)

(6,731)

(8,838)

Depreciation charge for the year

(190)

(8)

-

(59)

(355)

(612)

Disposals

-

-

833

-

245

1,078

Balance at 31 March 2010

(276)

(67)

-

(1,188)

(6,841)

(8,372)

Net book value

 

 

 

 

 

 

At 1 April 2008

368

354

9

178

1,273

2,182

At 31 March 2009

4,063

346

2

105

926

5,442

At 31 March 2010

4,915

338

-

94

659

6,006

9  Impairment testing

Given the losses for the year, management has performed an impairment test of its property, plant and equipment and intangible assets.

For the assets within the pipeline operating segment, the recoverable amount of these assets has been calculated with reference to their value in use.  The key features of this calculation are shown below:

 

2010

2009

Period on which management approved forecasts are based

20 years

20 years

Discount rate      

9.0%

9.0%

Conversion of domestic customers for existing assets

99%

99%

Conversion of non-domestic customers for existing assets

50%

50%

The forecasts include assumptions about reductions in network income as imposed by Ofgem, and also assume that cash flows will stop after 20 years. A forecast period of 20 years has been used as the business has contracted cash flows for this period through the Regulatory Price Control mechanism.

Conversion percentage is an assumption on pipeline assets becoming cash generating on connection.

To ensure that central assets (comprising predominately of IT assets and other office equipment) are considered, an impairment review is undertaken for the business as a whole, which includes all assets of the business. The recoverable amount of these assets has been calculated with reference to their value in use.  The key features of this calculation are shown below:

 

2010

2009

Period on which management approved forecasts are based

 5 years

5 years

Growth rate applied beyond approved forecast period

1.5%

1.5%

Discount rate      

10.0%

10.0%

The forecasts include assumptions about reductions in network income as imposed by Ofgem.

The discount rate for both impairment reviews is based upon the pre-tax weighted average cost of capital of the Group as at each respective period end. A 2% increase in the discount rate does not have a significant impact on impairment.

Whilst it is conceivable that a key assumption in the calculations could change, no reasonably foreseeable change to key assumptions is considered to result in an impairment.

Following the acquisition of the group by Fulcrum Utility Services Limited a full review of operations and strategic plans is being undertaken and the intention is to return the group to profitability as this plan comes to fruition. This intention and improvements in trading performance is a key judgement underpinning the impairment review of the business.

10           Intangible assets

 

 

Software

 

 

£000

Cost

 

 

Balance at 1 April 2008

 

5,267

Additions

 

230

Balance at 31 March 2009

 

5,497

Additions

 

143

Balance at 31 March 2010

 

5,640

Amortisation and impairment

 

 

Balance at 1 April 2008

 

(4,071)

Amortisation for the year

 

(637)

Balance at 31 March 2009

 

(4,708)

Amortisation for the year

 

(495)

Balance at 31 March 2010

 

(5,203)

Net book value

 

 

At 1 April 2008

 

1,196

At 31 March 2009

 

789

At 31 March 2010

 

437

Amortisation charge

The amortisation charge is recognised in administrative expenses in the income statement.


11           Deferred tax assets

Recognised deferred tax assets

Deferred tax assets are attributable to the following:

 

2010

2009

 

£000

£000

Property, plant and equipment

340

413

Provisions

6

269

Net tax assets

346

682

Movement in deferred tax asset during the year

 

1 April
2008

Recognised
in income

31 March
2009 

Recognised
in income

31 March
2010 

 

£000

£000

£000

£000

£000

Property, plant and equipment

392

21

413

(73)

340

Provisions

666

(397)

269

(263)

6

Other items

100

(100)

-

-

 

 

1,158

(476)

682

(336)

346

There are no unrecognised deferred tax assets because all corporation tax losses have been recovered in cash in return for surrendering these losses to other National Grid companies.

 

12           Inventories

 

2010 

2009 

 

£000

£000

Work in progress

2,515

1,937

Inventories recognised as cost of sales in the year amounted to £29,667,000 (2009: £35,317,000).  The write-down of inventories to net realisable value amounted to £29,000 (2009: £64,000).  The write-down is included in cost of sales in the income statement.

13           Trade and other receivables

 

2010 

2009 

 

£000

£000

Current

 

 

Trade receivables

3,719

2,411

Amounts due from related parties

-

6,693

Loans due from related parties

-

5,488

Other receivables

2,085

1,400

Prepayments and accrued income

939

4,176

 

6,743

20,168

There is no security in place against "Amounts due from related parties" or "loans due from related parties".

Credit quality of financial assets and impairment losses

The ageing of trade and other receivables at the consolidated balance sheet date was:

 

Trade receivables

Amounts due from
related parties

Loans due from
related parties

Other receivables

 

Gross

Impair-ment

Gross

Impair-ment

Gross

Impair-ment

Gross

Impair-ment

 

2010 

2010

2010

2010

2010

2010

2010

2010

Not past due           

2,599

-

-

-

-

-

1,957

-

Past due less than 1 month           

389

-

-

-

-

-

29

-

Past due 1-2 months

131

-

-

-

-

-

22

-

More than 2 months past due

952

(352)

-

-

-

-

77

-

 

4,071

(352)

-

-

-

-

2,085

 

 

Trade receivables

Amounts due from
related parties

Loans due from
related parties

Other receivables

 

Gross

Impair-ment

Gross

Impair-ment

Gross

Impair-ment

Gross

Impair-ment

 

2009

2009

2009

2009

2009

2009

2009

2009

Not past due

1,608

-

120

-

5,488

-

1,376

-

Past due less than 1 month           

160

-

1,841

-

-

-

2

-

Past due 1-2 months

487

-

2,202

-

-

-

20

-

More than 2 months past due

395

(239)

2,530

-

-

-

2

-

 

2,650

(239)

6,693

-

5,488

-

1,400

-

 

The accounts receivable not yet due as at the reporting date are deemed to be collectible on the basis of established credit management processes such as regular analyses of the credit worthiness of existing customers and external credit checks where appropriate for new credit customers (see note 20).  At 31 March 2010 and 2009 there were no significant trade, related party or other receivable balances not past due that were subsequently impaired.

Due to the activities and diversified customer structure of the Group, there is no significant concentration of credit risk other than with British Gas plc which represents approximately 60% of trade receivables.  The concentration of credit risk arises due to the number of commercial agreements that the Group has with British Gas plc.  The credit risk associated with these receivables is managed through the Group's standard credit processes (see note 20).  

During 2010 and 2009 there were no significant trade, related party or other receivable balances that were subject to renegotiation of terms. 

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

 

2010

2009

 

£000

£000

Balance at start of year

239

110

Net impairment losses recognised

113

129

Balance at 31 March

352

239

The allowance account for trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the amounts considered irrecoverable are written off against the trade receivables directly.

During the year the Group has not experienced a significant deterioration in the quality of receivable balances due to the current economic conditions. 

There were no allowances made against amounts due from related parties or other receivables during the years ended 31 March 2010 and 2009.

14           Cash and cash equivalents

 

2010

2009 

 

£000

£000

Cash and cash equivalents per balance sheet and per cash flow statement

323

184

15           Inter-company loans and borrowings

 

2010

2009 

 

£000

£000

Current

 

 

Loan due to related parties

13,073

8,207

Loans due to related parties represents a treasury loan account and is repayable on demand and is not interest bearing. See note 24 for non-adjusting subsequent event.

16           Trade and other payables

 

2010

2009 

 

£000

£000

Current

 

 

Trade payables

4,492

2,052

Amounts due to related parties

2,677

1,307

Other payables

232

322

Accruals and deferred income

17,520

23,880

 

24,921

27,561

17           Employee benefits

Pension plans

Substantially all the Company's employees are members of the National Grid UK Pension Scheme (the 'Scheme').  The Scheme ceased to offer final salary defined benefits for new hires from 31 March 2002.  A defined contribution arrangement was offered for employees joining from 1 April 2002. 

The defined benefit scheme is funded with assets held in a separate trustee administered fund. It is subject to independent valuations at least every three years, on the basis of which the qualified actuary certifies the rate of employers' contribution, which, together with the specified contributions payable by the employees and proceeds from the Scheme's assets, are expected to be sufficient to fund the benefits payable under the Scheme.

The latest full actuarial valuation was carried out by Towers Watson as at 31 March 2007. The market value of the Scheme's assets was £12,923m and the value of the assets represented approximately 97% of the actuarial value of benefits due to members, calculated on the basis of pensionable earnings and service at 31 March 2007 on an ongoing basis and allowing for projected increases in pensionable earnings. There was a funding deficit of £442m (£318m net of tax) on the valuation date in light of which the Group's parent company agreed a recovery plan with the trustees. 

The actuarial valuation showed that, based on long-term financial assumptions, the contribution rate required to meet future benefit accrual was 32.4% of pensionable earnings (29.4% employers and 3% employees).  In addition, the employers pay an allowance for administration expenses, which was 3.2% of pensionable earnings for 2009/10, giving a total Company rate of 32.6% of pensionable earnings.  The employer contribution rate will be reviewed at the next valuation on 31 March 2010, while the administration rate is reviewed annually.

In accordance with the recovery plan agreed with the trustees at the 2007 valuation, the National Grid group paid its final contribution of £59m (£42m net of tax) during the year which ensured that the deficit reported at the 2007 valuation is paid in full.  Contributions to the Scheme during the year to 31 March 2011 are expected to comprise ongoing normal contributions only.

Fulcrum Group Holdings accounts for the Scheme as if it were a defined contribution scheme, as its share of the underlying assets and liabilities of the Scheme's defined benefit section cannot be identified separately. The total charge for the year ended 31 March 2010 was £2,096,000 (2009: £2,134,000) excluding pension interest of £24k (2009 excluding pension interest of £30,000).  Outstanding pension contributions at 31 March 2010 were £nil (2009: £nil ). Fulcrum Group Holdings expects to contribute approximately £1,600,000 to the scheme in the next financial year.

The fair value of liabilities and assets of the whole scheme are recognised in the consolidated financial statements of National Grid plc (Fulcrum's ultimate parent company) in accordance with International Accounting Standard 19 'Employee Benefits'.  The fair value of liabilities and assets of the whole scheme at 31 March 2010 and 2009, calculated in accordance with International Accounting Standard 19 "Employee Benefits", are set out below:

 

2010

2009

 

£m

£m

Present value of defined benefit obligations

(13,418)

(10,746)

Fair value of plan assets

13,352

11,040

(Deficit) / surplus in the plan

(66)

294

Under the terms of the acquisition of the Group by Fulcrum Utility Services limited, it was agreed that all employees of the Group would continue as current members of the National Grid pension schemes for a period of 18 months from the date of the acquisition. During this period both the Group and the employees will make contributions as normal. Thereafter it is the intention of the Group to establish a suitable Fulcrum Group pension scheme.

Share based payments - Share options and award scheme

Fulcrum Group Holdings Limited participated in an employee Sharesave scheme and a Performance Share Plan (PSP) operated by National Grid plc.

In any 10-year period, the maximum number of shares that may be issued or issuable pursuant to these and other National Grid plc share plans may not exceed the number of shares representing 10% of the issued ordinary share capital.

The Sharesave scheme is savings-related where, under normal circumstances, share options are exercisable on completion of a three and/or five year Save-As-You-Earn contract. The exercise price of options granted represents 80% of the market price at the date the option was granted.

Under the PSP, awards have been made to Executive Directors and approximately 400 senior employees of National Grid plc, including four directors of Fulcrum Group Holdings Limited. Awards made in 2005, have a criteria of 50% based on National Grid's total shareholder return (TSR) performance when compared to the FTSE 100 and 50% is based on the annualised growth of the Company's EPS compared to the growth in RPI (the general index of retail prices for all items). Awards are delivered in National Grid plc shares (ADSs for US participants).

Under the terms of the acquisition of the Group by Fulcrum Utility Services Limited, it was agreed that  on acquisition, all employees of the Group who were members of the National Grid Sharesave scheme and a Performance Share Plan (PSP) would become "good leavers" under the terms of the scheme and remain members of the schemes for six months. Thereafter their eligibility will cease.

 


17  Provisions

 

Restructuring provisions

 

 

£000

Balance at 1 April 2009 

 

962

Provisions made during the year

 

2,751

Provisions used during the year

 

(3,680)

Balance at 31 March 2010 

 

33

The restructuring provision is classified as current as at each balance sheet date as it is expected to be fully utilised within 12 months of the balance sheet date.

18  Capital

Share capital  

 

2010

2009

 

£000

£000

Authorised

 

 

300,000,000 Ordinary shares of £1.00 each

300,000

300,000

Issued, allotted, called up and fully paid

 

 

10,000,000 Ordinary shares of £ 1.00 each

10,000

10,000

19  Financial instruments

Fair values of financial instruments

Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.

Inter-company loans and borrowings

The fair value of Inter-company loans and borrowings is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.

Trade and other payables

The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.

Cash and cash equivalents

The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand.  Where it is not repayable on demand then the fair value is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.

Carrying values and fair values

The carrying amounts of all financial assets and financial liabilities by class shown in the balance sheets at 31 March 2010, and 31 March 2008 are the same as their fair values.

Fair value hierarchy

The Group does not have any financial instruments that are measured at fair value on a recurring basis.

Credit risk

Financial risk management

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers and deposits with financial institutions.

The Group's treasury policy and objectives in relation to credit risk is to minimise the likelihood that the Group will experience financial loss due to counter party failure and to ensure that in the event of a single loss, the failure of any single counter party would not materially impact the financial wellbeing of the Group.

Trade, other receivables and accrued income

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer.  However, management also considers the demographics of the Group's customer base.  Management considers that there is no geographical concentration of credit risk other than the UK where all customers are based.

The Group has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group's standard payment and delivery terms and conditions are offered / terms are adjusted accordingly.  Purchase limits are established for each customer, which represents the maximum open amount without requiring approval.

In accordance with the Group's revenue policy, an accrual is estimated for services revenue in respect of work where invoices are yet to be issued to customers. These arrangements are included within the Group's credit policies.

Cash and cash equivalents

Surplus cash was swept on a daily basis to the Group's ultimate parent undertaking, National Grid plc.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. Therefore, the maximum exposure to credit risk at the balance sheet date was the carrying amount of financial assets. Further details on the Group's exposure to credit risk are given in Note 13.

Liquidity risk

Financial risk management

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group.  The Group's exposure to liquidity risk is limited by the fact that it operates with cash resources which are available from the Group's ultimate parent. This was National Grid plc until 8th July 2010 and thereafter, an AIM listed company - Fulcrum Utility Services Limited.

The Group is reliant on committed funding from a variety of sources at parent undertaking level to meet the anticipated needs of the Group for the period covered by the Group's budget.


 

Financial risk management (continued)

The Group forecasts on a regular basis the expected cash flows that will occur on a daily, weekly and monthly basis.  This information is used in conjunction with the weekly reporting of actual cash balances at bank in order to calculate the level of funding that will be required in the short and medium term.

The carrying amount of all non-derivative financial liabilities shown in the balance sheets at 31 March 2010 and 31 March 2009 is the same as the contractual cash flows.  All contractual cash flows are due within one year.

Cash flow hedges

Cash flow hedges

The Group does not have any cash flow hedges.

Market risk

Financial risk management

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments.

Market risk - Foreign currency risk

The Group has no exposure to foreign currency risk as all the Group's trading transactions and its assets and liabilities are denominated in Sterling.

Market risk - Interest rate risk

Profile

At the balance sheet date the Group had no interest-bearing financial instruments.

Market risk - Equity price risk

The Group has no equity investments and therefore has no exposure to equity price risk.

Capital management

The Group's objectives for managing capital were aligned with that of National Grid plc, safeguarding the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital for National Grid plc.

20  Operating leases

Non-cancellable operating lease rentals are payable as follows:    

 

2010

2009

 

£000

£000

Less than one year

758

1,121

Between one and five years

896

2,267

More than five years

-

131

 

1,654

3,519

Operating lease rentals relate to property rents on long term commitments and short term plant hire.

21  Related parties

Transactions with key management personnel

The compensation of key management personnel is as follows:

 

2010

2009

 

£000

£000

Short-term employee benefits

268

398

Post-employment benefits

136

125

Termination benefits

88

185

Share related awards

205

71

 

697

779

Transactions with other related parties

 

Services rendered

Purchases

Lease expenses

Other      administrative
expenses

 

2010

2009

2010

2009

2010

2009

2010

2009

 

£000

£000

£000

£000

£000

£000

£000

£000

Other related parties

5,650

19,878

(4,880)

(2,972)

(361)

(605)

(975)

(1,333)

 

 

Amounts due
from related
parties    

Amounts due
to related   
parties     

Loans due
from related
parties   

Current tax
assets   

Other loans
and borrowings

 

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

Other related parties

-

6,693

(2,677)

(1,307)

-

5,488

5,242

2,998

(13,073)

(8,207)

Other related parties comprise companies under common control of the ultimate parent of the National Grid plc Group.

The Group provides domestic and non-domestic gas connection activities on an arms length basis solely in the capacity as agent for National Grid Gas plc, an entity under the common control of National Grid plc.

The Group purchases raw materials and leases operational sites on arms length bases from entities under the common control of National Grid plc.

The Group incurs administrative costs from entities under common control of National Grid plc to cover the cost of key staff and centrally organised services.

"Amounts due from related parties" comprise amounts receivable on trading accounts. "Amounts due to related parties" comprise amounts owing on trading accounts. Trading accounts are settled on a quarterly basis, the net amount being allocated to "Loans due from related parties". No security is held for amounts due from related parties, and no security has been provided for amounts due to related parties. Loans due to/from related parties are interest free and repayable on demand.

"Current tax assets" comprise amounts receivable with respect to group relief within the National Grid Plc Group.

"Other loans and borrowings" comprise a facility provided by an entity under the common control of National Grid plc. The facility is provided on an interest fee basis and is repayable on demand. No security has been provided for the loan outstanding.

22   Accounting estimates and judgements

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Information about such judgements and estimations is contained in the accounting policies or the notes to the financial statements, and the key areas are summarised below.

Areas of judgement that have the most significant effect on the amounts recognised in the financial statements are as follows:

·      The categorisation of certain items as exceptional items - Note 4.

Key sources of estimation uncertainty that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:

·      Impairment reviews of tangible and intangible fixed assets - accounting policies and Notes 8, 9 and 10.

·      Revenue recognition - accounting policies.

·      Recoverability of deferred tax assets - accounting policies and Note 11.

·      Recoverability of trade receivables - accounting policies and Note 13.

·      Provision for restructuring - accounting policies, Note 4 and Note 18.

23   Subsequent events

On 17 June 2010 Marwyn Capital Investments I Limited, a subsidiary of an AIM listed company, Fulcrum Utility Services Limited (formerly known as Marwyn Capital I Limited), entered into an acquisition agreement for the purposes of acquiring the entire issued share capital of Fulcrum Group Holdings Limited for a nominal consideration and a post-completion working capital adjustment expected to be in favour of Fulcrum Group Holdings Limited to ensure adequate working capital for the enlarged group. Fulcrum Utility Services Limited also announced on 17 June 2010 that it had conditionally raised approximately £11.0 million (before expenses) by issuing 91,666,667 new shares used to fund the costs associated with the acquisition, the ongoing working capital requirements of the enlarged group and to finance the proposed turnaround strategy of the Group. In view of the size of the Group, the acquisition constituted a reverse takeover pursuant to Rule 14 of the AIM Rules for companies. The acquisition completed on 8 July 2010 with the new shares being listed on AIM, raising the £11.0 million mentioned above.

As part of the acquisition process, loans owed by the Group to National Grid Commercial Holdings Limited, a subsidiary of National Grid plc, amounting to £15.7 million were waived under a loan waiver deed dated 8 July 2010.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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