Final Results

RNS Number : 4668E

Fulcrum Utility Services Ld

31 May 2012

 



FULCRUM UTILITY SERVICES LIMITED

Unaudited preliminary results for the year ended 31 March 2012

Fulcrum Utility Services Limited ("Fulcrum" or "the Group"), the UK based energy solutions company, today announces its preliminary results for the year ended 31 March 2012.

FINANCIAL SUMMARY

	Year ended	Adjusted proforma Year ended	15 month period ended
	31 March 2012	31 March 2011(1)	31 March 2011(2)
	£m	£m	£m
Revenue	41.0	37.0	28.4
Underlying EBITDA (3)	(2.1)	(9.0)	(5.6)
Operating loss before exceptional items	(3.5)	(10.4)	(6.7)
Loss before tax	(5.6)	(14.0)	(11.8)
Cash balance	8.3	16.5	16.5
Earnings per share
Basic	(3.7)p	(12.6)p	(10.7)p
Adjusted Basic (4)	(2.2)p	(9.4)p	(6.1)p

Notes

(1)   Adjusted proforma results reflect the financial performance for the year to 31 March 2011, adjusted for certain items relating to the period prior to acquisition, acquisition costs and adjustments to the opening balance sheet of FGH at 7 July 2010.

(2)   Comparative results for the 15 months from the date of incorporation to 31 March 2011 included trading results of the acquired Fulcrum Group from the date of acquisition, on 8 July 2010.

(3)   Underlying EBITDA is defined as earnings before depreciation, amortisation, interest, share based payments, exceptional items and tax.

(4)   Adjusted basic earnings per share are earnings per share before exceptional items.

FINANCIAL HIGHLIGHTS

·      Year on year revenue growth in core operations of 14%;

·      Gross margin contribution increased to 34% (2011 proforma: 25%);

·      Proforma underlying EBITDA loss reduced by 77% to £2.1 million (2011: loss £9.0 million);

·      Profitable second half;

·      Q4 underlying EBITDA of £1.1 million;

·      Transition to new framework contracts providing for lower delivery cost and certainty of margin;

·      Cash balances at 31 March 2012 of £8.3 million.

OUTLOOK

Following a year in which the majority of our turnaround objectives have been completed, Fulcrum is now well positioned to focus on a number of identified revenue growth initiatives. Whilst the conclusion of the contractor procurement process took longer than was anticipated, the business has finished the year recording a second half of profitable performance. The cash position of the business remains strong.

We believe that the new financial year will see continued revenue growth with improving profitability. After a period of significant change for Fulcrum, management look forward to the future with increasing confidence.

OPERATIONAL HIGHLIGHTS

·      Business 'rightsized' and reduction of operating cost base completed;

·      Successful conclusion of the contractor procurement process in November 2011 and transition to new service delivery model, delivering significant operational and financial benefit;

·      Restructured and refocused sales and marketing function with addition of new, experienced business development managers;

·      Launch of the new corporate brand presenting Fulcrum to our customers and stakeholders as a  revitalised energy solutions business;

·      Relocation of the business to a modern, fit for purpose office in Sheffield; and

·      Investment in new IT infrastructure and launch of the new enterprise application platform to improve quality of management information and provide a foundation for improved customer service delivery.

John Spellman, CEO of Fulcrum, said:

"This has been a transformational year for Fulcrum. We started the year with a restructuring process that saw 77 people leave the business, in the middle of the year we concluded our contractor procurement process and we closed the year with a new IT infrastructure and business wide enterprise system deployment. In amongst this we have relocated the business to Sheffield, relaunched the Fulcrum corporate brand and built a new customer focussed website.

All of this activity has resulted in improved gross margins, reduced operating costs, and a more efficient service delivery model which allows Fulcrum to build on its design and engineering heritage and deliver connections services to our customers with premium quality engineering, design and improved customer service.

In the second half of the year we recorded the first ever profitable period for Fulcrum under independent ownership. This return to profit reflects the success of our turnaround strategy. These preliminary results mark the start of a new phase for the development of the business, moving into continued profitability and a focus on revenue growth and the development of a unique energy solutions business focussed on delivering exemplary customer service.

All of the changes that have taken place throughout the year, whilst unsettling for many of our staff, have been necessary to reduce operating costs to a level that could support the long term profitability of the business. I wish to thank the employees of Fulcrum for their patience and continued support during this period of change."

Enquiries:

Cenkos Securities plc         [phone]                                          (nominated adviser and broker)

Stephen Keys

Merlin PR                              [phone]

Toby Bates / Del Jones

Notes to Editor

Fulcrum is an energy solutions group based in Sheffield, UK. The Group's primary business is the provision of unregulated gas connection services to the residential, commercial and industrial markets throughout the UK. These range from the design, installation or alteration of connections for single site properties to large complex multi-site projects. Through its subsidiary, Fulcrum Pipelines Limited, Fulcrum is also licensed as an Independent Gas Transporter, operating pipelines that connect over 16,000 properties to the main UK gas network.

BUSINESS AND OPERATING REVIEW

It is almost two years since the Fulcrum Group was acquired from National Grid and a significant amount of change has been achieved. The business has been restructured, rebranded, operating costs reduced and a customer focussed commercial organisation has emerged from the turnaround which was profitable in the fourth quarter. The legacy contract arrangements have been replaced with three new framework contracts, marking the single biggest event in terms of improving operations and service delivery. Following a thorough tender process, on 7 November 2011 Fulcrum awarded three new framework contracts to Carillion, McNicholas and Turriff. The commencement of these new framework contracts was accompanied by the introduction of a new service delivery model within the business focussed on streamlined delivery, cost certainty and improved margins.

During the year the business relocated its activities from Rotherham to a new modern office facility on the outskirts of Sheffield, closed a number of its smaller offices and depots around the country and opened a small office in Northampton ensuring proximity to its customers and other significant industry operators.

Over the period since July 2010 there has been a necessary internal focus for management. However with the conclusion of the contractor procurement process in the autumn of last year, other cost reductions and the introduction of a customer oriented and performance focussed sales team the business has concluded the majority of its restructuring activities. The focus for management has now shifted toward business development and growth.

Sales

The sales and marketing capabilities of Fulcrum were rebuilt and strengthened significantly during the year with the appointment of six new Business Development Managers, a new Head of Marketing and a Product Development Team. These individuals bring with them a level of experience and relationships in the energy sector that have enabled Fulcrum to build on its reputation for quality design and engineering and improve the experience of Fulcrum's customers.

This team made its mark in the second half of the year securing a number of high value landmark contracts, including:

·      a contract with Luton Borough Council for new gas infrastructure to 342 apartments across three tower blocks in Luton;

·      a project for Arla Foods to deliver gas infrastructure and connections to their new dairy in Aylesbury;

·      a project for Cunnington Clark to deploy over 3,250 metres of gas infrastructure to the new Centre Parcs holiday park in Bedford;

·      a contract to provide gas to circa 183 dwellings in an area of high deprivation in Blackburn, constructed on behalf of National Grid Affordable Warmth Solutions;

·      a multi-utility (gas, water and electricity) project to connect 36 properties in Northwich for Wainhomes (North West); and

·      a contract to deliver new gas infrastructure to the Commonwealth Games Offices (Tontine Buildings) for the 2014 Commonwealth Games in Glasgow on behalf of City Building Glasgow.

In addition, Fulcrum has completed a number of significant customer projects which are reflected in the revenue and gross contribution for the year. These include the Luton project above, Cobham Motorway Services on the M25, the new BBC Production Village in Cardiff, the National Indoor Sports Arena and Velodrome and the delivery of gas infrastructure to the Westfield Shopping Centre and the Olympic Park in Stratford, East London.

During September 2011 Fulcrum launched its new brand, which reinforces the business' positioning as a modern, dynamic and independent operator within the UK energy market.

In December 2011 Fulcrum launched its new website www.fulcrum.co.uk. This redeveloped site now provides existing and potential customers with a significant amount of information relating to the services Fulcrum can provide and, for the first time, the ability for customers to generate online quotes for connections services.

Our multi-utility offering was relaunched in January 2012 with a renewed focus and a dedicated service delivery team. Since this relaunch and to date we have secured orders worth £1.0 million which will be delivered over the coming months.

The process of rebuilding Fulcrum's standing in the market has started well and improving the experience of customers will be an enduring focus for management. The continued development of relationships with existing customers, along with the identification of new customers and new channels to market has resulted in a number of significant opportunities on the horizon which Fulcrum hopes to secure in the first half of the 2012/13 financial year.

Operations

The management team carried out a restructuring process in April and May 2011 which led to 77 staff leaving the business, in addition to the 24 that left the business in January 2011 following the closure of the Edinburgh office. As part of this restructuring process the management team undertook a rigorous assessment of the internal delivery processes with a focus on streamlining operational processes, improving management information, and maximising the quality of the customer experience. This activity also facilitated the launch of the new internal service delivery model in November 2011, alongside the transition to the new framework contracts.

In August 2011 the business moved its principal office from Rotherham to a new modern office building located on the outskirts of Sheffield. This new office facility has provided staff with a modern working environment and is a more suitable base from which to carry the business forward and achieve sustained growth and operational excellence.

On 7 November 2011 the three new framework contracts commenced with Carillion in the Midlands, Wales and the North of England, McNicholas in the South and South West and Turriff in Scotland. We believe these new contractors are the right partners with which to take Fulcrum forward and importantly each has the right level of skills, experience and capability to support Fulcrum in delivery of connections services across the UK. The agreement of these new framework contracts is a major step in the successful turnaround of the business.  After a short transitional period these contractors are now delivering customer projects to time and to cost, and along with improved internal processes these are key ingredients of a more competitively priced service offering, shortened delivery times and a much improved customer service. 

On 5 November 2011 the previous commercial arrangements with Enterprise were terminated and have been wound down and settled.

Fulcrum Pipelines Limited, the Group's Independent Gas Transporter (IGT), had a successful year adding 5,339 connections to its assets base, which will generate additional annual revenues of approximately £0.4 million. This follows a review of the commercial pricing policy around Fulcrum's own adopted gas connections which has reopened certain sectors of the market to the new sales team. As at 31 March 2012 the number of Fulcrum's own network connections totalled 26,630.

During September 2011 Fulcrum commenced a project to replace its ageing and fragmented IT infrastructure and to improve its IT systems and processes. The objective of this project was to provide Fulcrum with a single applications platform through which it can deliver all of its operational processes, manage business workflows and deliver associated management information. The new network infrastructure was deployed across the business in March 2012 and on 2 April 2012 the business launched its new enterprise wide ERP application, Microsoft Dynamics AX. This new application platform replaced seven existing business systems with one integrated business wide system. The first half of the 2012/13 financial year will see this new system 'bed down' and we anticipate it will bring improvements in operational efficiency and significant improvements in management information from the summer onwards.

FINANCIAL REVIEW

Results and proforma comparison with previous period

					Adjusted proforma
	Year ended		Year on		Year ended
	31 March 2012		year		31 March 2011(1)
	£m		growth		£m
Revenue
Core operations	41.0		13.6%		36.1
Regulated connections	-				0.9
	41.0		10.8%		37.0
Gross profit	14.0		52.2%		9.2
Gross margin (%)	34.1%				24.9%
Underlying EBITDA(2)	(2.1)				(9.0)
Operating loss before exceptional items	(3.5)				(10.4)

(1)   Adjusted proforma results reflect the financial performance for the year to 31 March 2011, adjusted for certain items relating to the period prior to acquisition, acquisition costs and adjustments to the opening balance sheet of FGH at 7 July 2010.

(2)   Underlying EBITDA is defined as earnings before depreciation, amortisation, interest, share based payments, exceptional items and tax.

Reported results for the period

The preliminary results report the financial performance of the Group for the twelve months ended 31 March 2012. The comparative period reported the financial results of Fulcrum Utility Services Limited for the 15 months ended 31 March 2011 but include the financial performance of the acquired businesses from 8 July 2010 to 31 March 2011 only. Unaudited proforma results for the twelve months ended 31 March 2011 have been presented above as a more meaningful comparator for the Group's performance.

Revenue

Revenue for the period was £41.0 million compared to £28.4 million in the prior period. Proforma revenues for the full year to 31 March 2011 were £37.0 million and reported revenues of £41.0 million represent an 11% increase on the prior period.

The prior period proforma revenue included an amount of £0.9 million in respect of non-core regulated gas connections, an activity which ceased in the prior year. Excluding this amount, revenues from core operations have increased by 14% from £36.1 million in the year to 31 March 2011, to £41.0 million in the year to 31 March 2012.

Gross profit

Reported gross profit for the year was £14.0 million, representing an increase of 77% over the £7.9 million reported for the period ended 31 March 2011.

On a proforma basis reported gross profit has increased by 52% from £9.2 million in the year ended 31 March 2011, with gross margins improving from 25% to 34% over the same period. This increase is the result of a number of factors, including the cessation prior to 1 April 2011 of low margin work inherited with the acquired order book, improvements in gross margin from a new commercial pricing policy introduced post acquisition and the impact of the change in contractors as a result of the new framework contracts effective from 7 November 2011.

Administrative expenses

Administrative expenses reported for the period totalled £19.7 million (2011: £19.7 million), including exceptional items of £2.2 million (2011: £5.1 million), depreciation and amortisation of £0.8 million (2011: £0.6 million) and share-based payment charges of £0.6 million (2011: £0.4 million).

Underlying administrative expenses, excluding exceptional items, depreciation and amortisation and share based payments were £16.1 million for the year to 31 March 2012, a 12% reduction on a proforma basis from £18.2 million for the year ended 31 March 2011.

As part of the restructuring exercise carried out in the first half of the year some 77 people left the business between 1 April 2011 and 30 June 2011. As a result, administrative expenses as reported include, for part of the year, costs associated with those staff that have left the business and hence include only part of the benefit associated with the reduction in headcount.

EBITDA and operating loss

The underlying EBITDA loss of £2.1 million for the year has reduced from a loss of £5.6 million in the prior period, and on a proforma basis has reduced from £9.0 million in the 12 months to 31 March 2011, representing a 77% reduction over the prior period.

Operating losses for the year were £3.5 million (2011: £6.7 million), before exceptional items relating to the ongoing turnaround of the business of £2.2 million (2011: £5.1 million). Reported operating losses of £5.7 million have reduced by 52% from £11.8 million in the prior period. On a proforma basis operating losses before exceptional items have reduced by 66% from £10.4 million in the 12 months ended 31 March 2011.

The loss per ordinary share for the year was 3.7 pence (2011: loss of 10.7 pence). Adjusted earnings per share, before charging exceptional items, was a loss of 2.2 pence (2011: loss of 6.1 pence).

Interest

The Group received finance income of £0.1 million (2011: £nil) on cash balances which are in an interest bearing current account.

The Group has no debt facilities at present and has incurred no financing costs during the year.

Taxation

The Group has suffered no charge to tax during the year (2011: nil) as a result of accumulated tax losses. During the period the Group incurred losses for corporation tax purposes of approximately £4.0 million (2011: £10.0 million).

The Group is expecting to benefit from approximately £16.0 million of accumulated losses, including £2.0 million carried forward from the pre-acquisition period and is not expecting to become tax paying in the foreseeable future. No deferred tax assets have been recognised in respect of these losses due to the current loss-making position of the Group.

Period on period financial performance

The financial performance for each of the 6 month periods from 1 April 2010 to 31 March 2012 is presented below to illustrate the progress made by the business in revenue growth, margin expansion and operating cost reduction.

	6 months 31 Mar 2012		6 months 30 Sept 2011		Proforma 6 months 31 Mar 2011		Proforma 6 months 30 Sept 2010
	£m		£m		£m		£m
Revenue
Core operations	21.4		19.6		18.5		17.6
Regulated connections	-		-		0.1		0.8
	21.4		19.6		18.6		18.4
Gross profit	8.3		5.7		4.9		4.3
Gross margin (%)	38.8%		29.1%		26.3%		23.4%
Underlying EBITDA(1)	0.3		(2.4)		(4.1)		(4.9)
Operating profit / (loss)(2)	(0.4)		(3.1)		(4.9)		(5.5)

(1)   Underlying EBITDA is defined as earnings before depreciation, amortisation, interest, share based payments, exceptional items and tax.

(2)   Before exceptional items.

Throughout the past two years the growth rate of revenue from core operations has been increasing, from 5% in the six months to 31 March 2011, to 6% in the six months to 30 September 2011, to 9% in the six months ended 31 March 2012. This increasing trend in turnover growth reflects the impact of the restructured sales team and the successes gained in new order intake in the period since acquisition.

The increasing trend in gross margin across the two years, from 23% in the six months ended 30 September 2010 to 39% in the six months ended 31 March 2012 is the result of a number of factors, principally

·      delivery prior to 1 April 2011 of low margin orders acquired with the business;

·      a new commercial pricing policy introduced post acquisition;

·      settlement of legacy contracts relating to the period prior to 5 November 2011; and

·      the impact in the second half of this financial year of the change in contractors as a result of the new framework contracts effective from 7 November 2011.

In the second half of the financial year the business has reported an underlying EBITDA profit of £0.3 million, which includes an underlying EBITDA profit of £1.1 million for the fourth quarter of the financial year.

Cash flow and financing

Operating cash flow

Operating activities in the period absorbed cash of £4.9 million (2011: £6.1 million), and comprised the following:

·      an underlying EBITDA loss for the period of £2.1 million (2011: £5.6 million);

·      exceptional cash costs totalling £3.6 million (2011: £3.0 million); and

·      working capital inflows of £0.8 million (2011: £2.5 million).

Investing activities

Capital expenditure for the period amounted to £3.3 million (2011: £1.8 million), including £1.7 million of investment in new IT infrastructure and the development of the Microsoft Dynamics AX application platform (2011: £nil).

Capital expenditure on acquisition of pipeline assets during the year amounted to £1.5 million (2011: £1.6 million).

Cash position

The Group's cash position at 31 March 2012 was £8.3 million (2011: £16.5 million).

Net Assets

As at 31 March 2012 net assets of the Group were a negative £0.1 million (2011: positive £4.9 million). This negative net assets position arises as a result of accumulated trading losses in the period since acquisition amounting to some £16.5 million. This position is in line with the original investment plan, is temporary and will reverse in future periods in line with the profitability of the Group.

31 May 2012

Consolidated Statement of Comprehensive Income

	Notes	Year ended 31 March 2012	15 month period ended 31 March 2011
		£'000	£'000
Revenue		40,993	28,431
Cost of sales		(27,011)	(20,574)
Gross profit		13,982	7,857
Administrative expenses		(19,707)	(19,701)
Operating loss		(5,725)	(11,844)
Analysed as:
EBITDA before share based payments and exceptional items		(2,096)	(5,616)
Equity-settled share based payment charges		(588)	(441)
Exceptional items	3	(2,237)	(5,139)
Depreciation and amortisation	5, 6	(804)	(648)
		(5,725)	(11,844)
Finance income		82	-
Loss before tax		(5,643)	(11,844)
Taxation		-	-
Loss for the period attributable to equity holders of the parent	9	(5,643)	(11,844)

There is no other comprehensive income for the period. The loss for the period attributable to equity holders of the parent company is total comprehensive income.

Earnings per share for loss attributable to the owners of the business

Basic and diluted	4	(3.7)p	(10.7)p

Consolidated Statement of Changes in Equity

	Notes	Share capital	Share Premium	Retained earnings	Total equity
		£'000	£'000	£'000	£'000
Balance at 4 December 2009		-	-	-	-
Loss and total comprehensive loss for the period ended 31 March 2011		-	-	(11,844)	(11,844)
Transactions with equity shareholders:
Issue of share capital net of expenses	7	154	16,182	-	16,336
Equity-settled share based payment transactions		-	-	441	441
Balance at 1 April 2011		154	16,182	(11,403)	4,933
Loss and total comprehensive loss for the year ended 31 March 2012		-	-	(5,643)	(5,643)
Transactions with equity shareholders:
Equity-settled share based payment transactions		-	-	588	588
Balance at 31 March 2012		154	16,182	(16,458)	(122)

 

Consolidated Balance Sheet

	Notes	31 March 2012	31 March 2011
		£'000	£'000
Non-current assets
Property, plant and equipment	5	8,961	7,336
Intangible assets	6	3,548	2,487
		12,509	9,823
Current assets
Inventories		1,459	2,712
Trade and other receivables		6,019	4,857
Cash and cash equivalents		8,269	16,513
		15,747	24,082
Total assets		28,256	33,905
Current liabilities
Trade and other payables		(27,365)	(26,347)
Provisions		(1,013)	(2,625)
Total liabilities		(28,378)	(28,972)
Net current liabilities		(12,631)	(4,890)
Net assets/(liabilities)		(122)	4,933
Equity attributable to equity holders of the parent
Share capital	7	154	154
Share premium	8	16,182	16,182
Retained earnings	9	(16,458)	(11,403)
Total equity		(122)	4,933

Consolidated Cash Flow Statement

	Notes	Year ended 31 March 2012	15 month period ended 31 March 2011
		£'000	£'000
Cash flows from operating activities
Loss before tax for the year		(5,643)	(11,844)
Adjustments for:
Depreciation	5	640	481
Exceptional accelerated depreciation		-	246
Amortisation of intangible assets	6	164	167
Loss on disposal of property, plant and equipment	5	199	11
Finance income		(82)	-
Equity settled share-based payment charges		588	441
(Increase)/decrease in trade and other receivables		(1,110)	1,991
Decrease/(increase) in inventories		1,253	(655)
Increase in trade and other payables		628	1,180
(Decrease)/increase in provisions		(1,612)	1,925
Net cash used in operations		(4,975)	(6,057)
Interest received		30	-
Net cash used in operating activities		(4,945)	(6,057)
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired		-	8,027
Addition to property, plant and equipment		(2,218)	(1,652)
Additions to intangibles		(1,081)	(141)
Net cash (used in)/generated from investing activities		(3,299)	6,234
Cash flows from financing activities
Proceeds from issue of shares net of expenses	7	-	16,336
Net cash generated from financing activities		-	16,336
Net (decrease)/increase in cash and cash equivalents		(8,244)	16,513
Cash and cash equivalents at 1 April 2011		16,513	-
Cash and cash equivalents at 31 March 2012		8,269	16,513

Of the operating cash flows for the period of £4.9 million, exceptional cash costs totalled £3.6 million (2011: £3.0 million).

Notes to the consolidated financial statements

1.   Accounting policies

General information

Fulcrum Utility Services Limited is a limited company incorporated in the Cayman Islands and domiciled in the UK. The address of its registered office is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

The company has its primary listing on the AIM market of the London Stock Exchange.

The principal accounting policies adopted in the preparation of these consolidated financial statements are unchanged from those applied in the preparation of, and set out in, the interim financial statements for the period ended 30 September 2011 except as set out below. They will also be set out in full in the 2012 published financial statements.

Basis of preparation

This preliminary announcement does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The financial statements have not yet been delivered to the Registrar of Companies but will be in due course once approved by the directors.

The Group's auditors have not yet reported on the 2012 financial statements. The financial statements for the period ended 31 March 2011, prepared in accordance with International Financial Reporting Standards (IFRS), have been reported on by the Group's auditors and delivered to the Registrar of Companies.  The auditors report on the 2011 financial statements was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The financial statements have been prepared using consistent accounting policies, except for the adoption of new accounting standards and interpretations noted below. Adoption of these standards and interpretations did not have a significant impact on the financial position or performance of the Group.

•              "Improvements to IFRSs". The Group adopted the Improvements to IFRSs on 1 April 2011.

•              IAS 24 "Related party disclosures". The Group adopted the amendment to IAS 24 on 1 April 2011. The amendment clarified the definition of a related party.

Employee benefits

The Group operates a defined contribution pension plan for the benefit of its employees.  From 8 January 2012 substantially all of the Group's employees have been members of this scheme.  The Group pays fixed contributions to a separate entity, and the Group has no further obligations once the contributions have been paid.  The contributions are recognised as an employment expense when they are due.

Prior to 8 January 2012 substantially all the Group's employees were members of the National Grid UK Pension Scheme.  Under the terms of the acquisition of the Fulcrum Group by the Group, it was agreed that all employees of the Fulcrum Group would continue as current members of the National Grid pension schemes for a period of 18 months from the date of the acquisition with National Grid retaining the full pension liability.  During this 18 month period, both the Group and the employees made contributions as normal to the Scheme. The Group accounted for its contributions to the National Grid UK Pension Scheme as if it were a defined contribution scheme, recognising a charge equivalent to cash paid or payable to the scheme.

Going concern

As highlighted in the financial review the Group has net cash at 31 March 2012 of £8.3 million.  Whilst the current economic conditions and the ongoing success of the turnaround strategy creates uncertainty over the demand for the Group's services, the Group's forecasts and projections, after taking account of sensitivity analysis of changes in trading performance, show that the Group has adequate cash resources for the foreseeable future.

Therefore, the Directors confirm that they have a reasonable expectation that the Group has adequate resources to enable it to continue in existence for the foreseeable future and, accordingly, the consolidated financial statements have been prepared on a going concern basis.  

2.   Operating segments

The determination of the Group's operating segments is based on the business units for which information is reported to the Board of Directors. The Group has two reportable segments, as described below.

Fulcrum's Infrastructure Services business provides utility infrastructure and connections services.  This comprises the operating segments of "Unregulated Gas connections" and "Multi-Utility connections" which have been aggregated in accordance with the criteria of IFRS 8.

Fulcrum's Pipeline business is involved in the management of pipeline assets and the safe and efficient conveyance of gas through its gas transportation networks.  Gas transportation services are provided under the IGT licence granted from Ofgem during June 2007.

In the period ended 31 March 2011 Fulcrum's Gas Services business, which carried out regulated gas connections on behalf of National Grid was a reportable operating segment.  It was noted at 31 March 2011 that Fulcrum's workload volumes in this area had declined significantly compared with those carried out prior to the acquisition of FGH by the Group and it was not expected that the segment would contribute material revenue going forward.  During the year ended 31 March 2012 no revenue was recognised relating to the Gas Services business, and it is therefore no longer a reportable operating segment.  As such, it has been included within "unallocated" in the segmental analysis presented below for the year ended 31 March 2012, and the analysis for the 15 month period ended 31 March 2011 has been restated to be consistent.

Information regarding the operations of each reportable segment is included in the following tables.  Performance is measured based on operating profit / (loss) before exceptional items.  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. The information provided to the Board comprises 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.

The "unallocated" segment comprises the corporate assets and liabilities and other assets and liabilities held centrally, the elimination of inter-segmental transactions and balances, and the results and balances relating to the Gas Services business as reported for the period ended 31 March 2011.

2.      Operating segments (continued)

 

Year ended 31 March 2012

	Infrastructure Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000
Reportable segment revenue	41,051	1,356	(1,414)	40,993
Underlying EBITDA	(689)	(246)	(1,161)	(2,096)
Share based payment charge	-	-	(588)	(588)
Depreciation and amortisation	-	(415)	(389)	(804)
Reportable segment operating loss before exceptional items	(689)	(661)	(2,138)	(3,488)
Exceptional items	(1,864)	-	(373)	(2,237)
Reporting segment operating loss	(2,553)	(661)	(2,511)	(5,725)
Finance income	-	-	82	82
Loss before tax	(2,553)	(661)	(2,429)	(5,643)

 

15 month period ended 31 March 2011

	Infrastructure Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000
Reportable segment revenue	28,869	600	(1,038)	28,431
Underlying EBITDA	(6,051)	(64)	499	(5,616)
Share based payment charge	-	-	(441)	(441)
Depreciation and amortisation	-	(245)	(403)	(648)
Reportable segment operating loss before exceptional items	(6,051)	(309)	(345)	(6,705)
Exceptional items	(535)	-	(4,604)	(5,139)
Reporting segment operating loss and loss before tax	(6,586)	(309)	(4,949)	(11,844)

2.      Operating segments (continued)

Segmental assets

	Infrastructure Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000
31 March 2012	6,461	8,712	13,083	28,256
31 March 2011	6,020	7,432	20,453	33,905

 

Segmental liabilities

	Infrastructure Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000
31 March 2012	(32,120)	(14,109)	17,851	(28,378)
31 March 2011	(29,751)	(11,609)	12,388	(28,972)

Capital expenditure

	Infrastructure Services	Pipeline	Unallocated	Total Group
	£'000	£'000	£'000	£'000
31 March 2012	-	1,489	2,200	3,689
31 March 2011	-	1,616	177	1,793

2.      Operating segments (continued)

Major items in the "unallocated" column comprise:

·      Reportable segment revenues; the elimination of inter-segmental revenues relating to pipeline assets of £1,414,000 (2011: £1,432,000, offset by £394,000 revenue arising from the Gas Services segment)

·      Underlying EBITDA; the operating loss of the central service providers

·      Depreciation and amortisation; amounts charged on all centrally held assets

·      Exceptional items; all amounts charged as exceptional excluding costs relating exclusively to the Infrastructure Services segment

·      Reportable segment assets; comprise corporate assets and other assets held centrally, including property, plant and equipment (£1,126,000, 2011: £575,000), intangible assets (£3,548,000, 2011: £2,487,000), other receivables (£140,000, 2011: £421,000) and cash and cash equivalents (£8,269,000, 2011: £16,513,000). The prior year "unallocated" reportable segmental assets also includes £457,000 of assets related to the Gas Services segment

·      Reportable segment liabilities; comprise corporate liabilities and other liabilities held centrally, including trade payables (£706,000, 2011: £3,070,000), other payables (£439,000, 2011: £316,000), accruals (£870,000, 2011: £8,737,000) and restructuring provisions (£1,013,000, 2011: £2,625,000) offset by amounts due from other group companies (£20,879,000, 2011: £33,831,000). The prior year "unallocated" reportable segmental liabilities also includes £6,695,000 of liabilities related to the Gas Services segment.

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 the largest customer of the Group's Infrastructure Services segment represent £9,474,000 (2011: £6,930,000) of the Group's total revenues for the period.

3.      Exceptional items

	Year ended 31 March 2012	15 month period ended 31 March 2011
	£'000	£'000
Relocation and property costs	301	-
Operating model transition	1,114	-
Costs of acquisition of Fulcrum Group Holdings Limited	-	1,529
Pre-acquisition costs of the Company	-	753
Accelerated depreciation	-	246
Restructuring costs and provisions	822	2,611
	2,237	5,139

Relocation and property costs have arisen as a result of moving the Group's head office from Rotherham to Sheffield.  Operating model transition costs are the costs associated with changing to new contractual arrangements as discussed in the Business Review.  Restructuring costs relate to staff severance costs.

Restructuring costs in the prior period relate to staff severance costs, one off legal costs, and the costs of unused Group properties and dilapidations.  These costs resulted from the Group strategy to realign its cost base.

These exceptional items are not expected to result in any tax impact.

4.      Earnings per share (EPS)

Earnings per share have been calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the period.  Earnings per share have been calculated as follows:

	Year ended 31 March 2012	15 month period ended 31 March 2011
	Number '000	Number '000
Weighted average number of ordinary shares in issue	154,307	110,819

Loss for the period	Year ended 31 March 2012	15 month period ended 31 March 2011
	£'000	£'000
Loss for the period attributable to shareholders	(5,643)	(11,844)
Adjustment to remove exceptional items	2,237	5,139
Adjusted loss for the period attributable to shareholders	(3,406)	(6,705)

Loss per share	Year ended 31 March 2012	15 month period ended 31 March 2011
Basic	(3.7)p	(10.7)p
Adjusted basic	(2.2)p	(6.1)p

In accordance with IAS 33 'Earnings per share' diluted earnings per share is taken as being equal to basic earnings per share as, where the Group has recorded a loss the effect of including share options is anti-dilutive.

5.      Property, plant and equipment

	Pipelines	Leasehold  buildings	Fixtures and  fittings	Computer equipment	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 4 December 2009	-	-	-	-	-
Acquisitions	5,390	336	81	615	6,422
Additions	1,616	-	36	-	1,652
Disposals	-	-	-	(11)	(11)
At 31 March 2011	7,006	336	117	604	8,063
Additions	1,489	-	150	825	2,464
Disposals	-	(336)	(35)	(209)	(580)
At 31 March 2012	8,495	-	232	1,220	9,947
Accumulated depreciation
At 4 December 2009	-	-	-	-	-
Depreciation charge for the period	(245)	(6)	(34)	(196)	(481)
Accelerated depreciation	-	(246)	-	-	(246)
Disposals	-	-	-	-	-
At 31 March 2011	(245)	(252)	(34)	(196)	(727)
Depreciation charge for the period	(415)	(3)	(48)	(174)	(640)
Disposals	-	255	4	122	381
At 31 March 2012	(660)	-	(78)	(248)	(986)
Net book value
At 31 March 2012	7,835	-	154	972	8,961
At 31 March 2011	6,761	84	83	408	7,336
At 4 December 2009	-	-	-	-	-

There were no commitments to purchase any property, plant and equipment at 31 March 2012 or 31 March 2011.

6.      Intangible assets

	Goodwill	Software	Total
	£'000	£'000	£'000
Cost
At 4 December 2009	-	-	-
Acquisitions	2,225	288	2,513
Additions	-	141	141
At 31 March 2011	2,225	429	2,654
Additions	-	1,225	1,225
At 31 March 2012	2,225	1,654	3,879
Accumulated amortisation and impairment
At 4 December 2009	-	-	-
Amortisation for the period	-	(167)	(167)
At 31 March 2011	-	(167)	(167)
Amortisation for the period	-	(164)	(164)
At 31 March 2012	-	(331)	(331)
Net book value
At 31 March 2012	2,225	1,323	3,548
At 31 March 2011	2,225	262	2,487
At 4 December 2009	-	-	-

The amortisation charge is recognised in administrative expenses in the Consolidated Statement of Comprehensive Income.

7.      Share capital

	31 March 2012	31 March 2011
	£'000	£'000
Authorised
500,000,000 ordinary shares of £0.001 each	500	500

	31 March 2012	31 March 2011
	£'000	£'000
Allotted, issued and fully paid
154,306,667 ordinary shares of £0.001 each	154	154

Ordinary shares issued

During the period to 31 March 2011, the company issued:

·      62,640,000 new shares of 0.1p each on 24 December 2009 for 10p for an aggregate consideration before expenses of £6,264,000. This represents nominal value of £63,000 with the balance of £6,201,000 as share premium; and

·      91,666,667 new shares of 0.1p each on 8 July 2010 for 12p each for an aggregate consideration of £11,000,000. This represents nominal value of £92,000 with the balance of £10,908,000 as share premium

The costs of the above issues were £928,000 and were charged to the share premium account.

8.      Share premium

	31 March 2012	31 March 2011
	£'000	£'000
At end of period	16,182	16,182

9.      Retained earnings

	31 March 2012	31 March 2011
	£'000	£'000
At start of period	(11,403)	-
Retained loss in the period	(5,643)	(11,844)
Equity settled share based payment transactions	588	441
At end of period	(16,458)	(11,403)

10.    Related parties

The Company has paid Marwyn Capital LLP a fee of £180,000 (2011: £230,000) pursuant with the ongoing corporate finance advisory agreement, and £60,000 (2011: £50,000) for office rental. An amount of £48,000 (2011: £24,000) was owed to Marwyn Capital LLP at 31 March 2012.

The company entered into an agreement with Marwyn Management Partners LP under which Marwyn Management Partners LP was granted an option to subscribe for ordinary shares subject to growth and vesting conditions being met. Under this agreement, the value of this benefit has been recognised as £294,000 (2011: £220,000) in the period.

All of the transactions above have been entered into on arms-length commercial terms, are unsecured, are expected to be settled in cash and are not covered by any guarantee.

There were no amounts due from related parties on any trading accounts at 31 March 2012 (2011: £nil).

 

END

 

 

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