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Vulcan Industries Plc (VULC)

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Thursday 21 October, 2021

Vulcan Industries Plc

Audited Results

21 October 2021

Vulcan Industries plc
(“Vulcan” or the “Company”)

Audited Results

Vulcan Industries plc (AQSE: VULC) is pleased to announce its audited results for the year ended 31 March 2021. During the year the Company’s entire share capital was admitted to trading on the AQSE Growth market, on 1st June 2020.

Trading in the Company’s shares will resume following the publication of this announcement.

The full audited financial statements will be uploaded to the Company website. A further announcement will be made when the financial statements are sent to shareholders together with a notice of the Annual General Meeting.

Principal activity

The Company was established to develop a precision engineering group of companies, manufacturing and fabricating products for a global client base. The acquisition strategy is based on establishing targets that represent opportunities for synergies, helping to streamline existing operations and contributing to centralised purchasing, supply chain and operational savings.

Review of business and future developments

On 1 June 2020, the share capital of the Company was admitted to trading on the Aquis Stock Exchange Growth Market (“AQSE”). This enables the Company to raise additional equity to fund its growth and acquisition strategy. In conjunction with the Admission, the Company raised £746,500 gross, £508,000 after expenses relating to the admission. In the previous period from incorporation on 28 October 2018 to 31 March 2020, the Company made four acquisitions. In the year to 31 March 2021, the focus has been to restructure the existing businesses to recover from the financial impact of COVID-19 and lay the foundations to develop the Group going forward. On 21 October 2020 the Group acquired the business and assets of Romar Process Engineering Limited (“RPE”). The acquisition extended the Group’s fabrication capabilities and enabled Time Rainham Limited to move its operation into the RPE facility, demonstrating the operating efficiencies that can be generated in line with the Group’s strategy.

COVID-19 has had a significant impact on the financial results for the year. Activity in the first quarter of the financial year was severely impacted by the initial Covid 19 lockdown. M&G Olympic Products Limited (“M&G”) operated, albeit at reduced levels, throughout the period with the remaining operations locked down from the end of March 2020 and resuming activity towards the end of June 2020. By the end of the second quarter, activity levels were ahead of internal forecasts made at the time of admission to AQSE. This progress continued into the third quarter with further improvement in the final quarter despite further lock down measures.

The financial results for the Group for the year ending 31 March 2021 show revenue of £5,225,000 (2020 17 months: £5,670,000) and loss before interest, tax depreciation and amortization £2,184,000 (2020: £2,011,000). After depreciation and amortization of £644,000 (2020: £561,000) and finance costs of £595,000 (2020: £622,000) the Group is reporting a loss after taxation of £3,423,000 (2020: £3,194,000). Of this £1,651,000 (2020: £1,459,000) relates to central costs, including professional fees of £486,000 (2020: £399,000) in respect of listing expenses and acquisition costs and £404,000 (2020: £431,000) of central finance costs. Cash balances at 31 March 2021 were £86,000 (2020: £54,000) and net debt was £4,355,000 (2020: £3,668,000). 

At 31 March 2021, the Group balance sheet shows net liabilities of £2,559,000 (2020: £1,302,000). Since the year end to the date of this report, the Company has raised new equity of £1,091,000 before expenses.

Outlook

After taking the impact of COVID-19 into account, the Group’s overall performance in the year ending 31 March 2021 was an improvement over the previous 17-month period. Trading in the first half of the year has remained difficult; however order books across the Group have picked up since the end of the last lock down. The Company is now focused on strengthening the balance sheet and raising new equity to enable the Group to take advantage of the improved demand outlook for the remainder of the current financial year.

Consolidated Statement of Comprehensive Income
Year ending 31 March 2021 17months to
31 March 2020
Note £000 £000
Revenue 5,225 5,670
Cost of sales  (4,375) (4,627)
Gross profit 850 1,043
Operating expenses (3,082) (3,007)
Other gains and losses 5 (446) (608)
Impairment charge 8 (150) -
Finance costs 6 (595) (622)
Loss before tax  (3,423) (3,194)
Income tax - -
Loss for the period attributable to owners of the Company  (3,423) (3,194)
Other Comprehensive Income for the period - -
Total Comprehensive Income for the period attributable to owners of the Company  (3,423) (3,194)
Earnings per share
-  Basic and Diluted earnings per share (pence) 7 (1.39) (1.82)

   

Consolidated Statement of Financial Position
Note At
31 March
2021
At
31 March
2020
£000 £000
Non - current assets
Goodwill 8 1,571 1,271
Other intangible assets 8 825 841
Property, plant and equipment 409 484
Right of use assets 842 1,086
Total non-current assets 3,647 3,682
Current assets
Inventories 628 357
Trade and other receivables 1,927 1,457
Cash and bank balances 86 54
Total current assets 2,641 1,868
Total assets 6,288 5,550
Current liabilities
Trade and other payables 11  (4,305) (3,092)
Lease liabilities 10  (263) (317)
Borrowings 9  (433) (832)
Provisions 14  (62) -
Total current liabilities  (5,063) (4,241)
Non ? current liabilities
Lease liabilities 10  (526) (748)
Borrowings 9 (3,220) (1,825)
Deferred tax liabilities  (38) (38)
Total non-current liabilities  (3,784) (2,611)
Total liabilities  (8,847) (6,852)
Net liabilities  (2,559) (1,302)

Equity
Share capital 12 112 80
Share premium account 3,946 1,812
Retained earnings  (6,617) (3,194)
Total equity attributable to the owners of the company  (2,559) (1,302)

   

Consolidated statement of changes in equity Share
Capital
Share Premium Retained earnings Total Equity
£000 £000 £000 £000
At 24 October 2018 - - - -
Loss for the period - - (3,194) (3,194)
Other comprehensive income for the period - - - -
Total Comprehensive income for the period - - (3,194) (3,194)
Transactions with shareholders
Issue of shares 80 1,812 - 1,892
Total transactions with shareholders for the period 80 1,812 - 1,892
At 1 April 2020 80 1,812 (3,194) (1,302)
Loss for the period - -  (3,423)  (3,423)
Other comprehensive income for the period - - - -
Total Comprehensive income for the period - -  (6,617)  (4,725)
Transactions with shareholders
Issue of shares 32 2,134 - 2,166
Total transactions with shareholders for the period 32 2,134 - 2,166
At 31 March 2021 112 3,946  (6,617)  (2,559)

   

Consolidated Statement of Cash Flows Year ending 31 March 2021 17months to
31 March 2020
£000 £000
Loss for the period (3,423) (3,194)
Adjusted for:
Finance costs 595 622
Depreciation of property, plant and equipment 117 153
Depreciation of right of use assets 244 281
Amortisation of intangible assets 116 126
Impairment of Goodwill 150 -
Increase in provisions 62 -
Share based payment 34 -
(Profit) / loss on disposal of property plant and equipment - 12
Operating cash flows before movements in working capital  (2,105) (2,000)
(Increase) / decrease in inventories (272) 134
Increase in trade and other receivables (470) (237)
Increase in trade and other payables 1,367 1,777
Cash used in operating activities  (1,480) (326)
Investing activities
Proceeds on disposal of property, plant and equipment - 4
Purchases of property, plant and equipment (42) (36)
Acquisition of subsidiary net of cash acquired (350) (908)
Net cash used in investing activities  (392) (940)
Financing activities
Interest paid (595) (622)
Proceeds from loans and borrowings 1,083 2,414
Repayment of loans and borrowings (116) (240)
Repayment of lease liabilities (275) (324)
Proceeds on issue of shares 1,807 92
Net cash from financing activities 1,904 1,320
Net increase in cash and cash equivalents 32 54
Cash and cash equivalents at beginning of year 54 -
Effect of foreign exchange rate changes - -
Cash and cash equivalents at end of year 86 54

1.  General information

Vulcan Industries PLC is incorporated in England and Wales as a public company with registered number 11640409.

On 1 June 2020, the entire issued share capital of the Company was admitted to trading on the Aquis Stock Exchange Growth Market (AQSE Growth market).

These financial statements are extracted from the audited financial statements which have been posted on the Company’s web site and do not constitute statutory accounts.

These financial statements are presented in Sterling and are rounded to the nearest £000. which is also the currency of the primary economic environment in which the Company and Group operate (their functional currency).

2.  Adoption of new and revised Standards

New and amended IFRS Standards that are effective for the .

In the current year, the Group has applied a number of amendments to IFRS Standards and Interpretations issued by the IASB that are effective for an annual period that begins on or after 1 January 2020. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.

3.  Significant accounting policies

Going concern

The Group has prepared forecasts covering the period of 12 months from the date of approval of these financial statements. These forecasts are based on assumptions including, inter alia, that there are no further significant disruptions due to COVID-19 to the supply of input materials or the ability to maintain operating capability in order to meet its projected sales volumes and that key assumptions are achieved, such as forecast volumes, selling prices and budgeted cost reductions. They further take into account working capital requirements and currently available borrowing facilities.

These forecasts show that the Group is projected, in the short term, to continue to experience net cash outflows rather than inflows and is contingent on securing additional funding either through additional loan facilities or through raising cash through capital transactions to remain a going concern.

The Group’s focus is on continued improvements to operational performance of the acquisitions made to date with an emphasis on volume growth to increase gross margins and synergies resulting in cost reductions. On 1 June 2020 the Company was admitted to trading on the AQSE Growth Market. This has already facilitated the ability of the Company to raise new equity, with £3,550,000 raised before expenses from admission to the date of this report.

COVID-19: The Group does not anticipate any planned closures of sites or cessation of revenues. However, the future impacts of COVID-19 are inherently unknown and therefore a sensitised version of the Group’s forecasts have been prepared which both increases the shortfall against pre-existing facilities and shortens the timing before a shortfall arises.

As set out in note 9, the Group is currently funded by a combination of short and long-term borrowing facilities. Loans of £2,327,000 fall due for repayment between April and July 2022. The factoring facility, of which £321,000 (2020: £243,000) was fully drawn at 31 March 2021, may be withdrawn with 6 months’ notice.

Based on the above, whilst there are no contractual guarantees, the directors are confident that the existing financing will remain available to the Group and as demonstrated by equity raised since the period end that additional sources of finance will be available. The directors, with the operating initiatives already in place and funding options available are confident that the Group will achieve its cash flow forecasts. Therefore, the directors have prepared the financial statements on a going concern basis.

Nonetheless, the forecasts show that the Group requires further funding to meet its commitments as they fall due and in addition to this the Group is reliant on maintaining its existing borrowings. If the Group’s forecasts are adversely impacted by COVID 19 or other factors, then the Group may require further funding earlier than expected. These conditions and events indicate the existence of material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern and the Group may therefore be unable to realise their assets and discharge their liabilities in the ordinary course of business. These financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

The auditors have made reference to going concern by way of a material uncertainty within their audit report.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up for the period ended 31 March 2021.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the period are included in profit or loss from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation.

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets (both tangible and intangible) acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 and IAS 19 respectively.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. In the case of asset acquisition, it is the excess of the sum of the consideration transferred over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

Goodwill

Goodwill is initially recognised and measured as set out above.

Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of discounts, value added taxes and other sales related taxes.

Performance obligations and timing of revenue recognition:

All of the Group’s revenue is derived from selling goods with revenue recognised at a point in time when control of the goods has transferred to the customer. This is generally when the goods are collected or delivered to the customer, or in the case of fabrication project work, when the project has been accepted by the customer. There is limited judgement needed in identifying the point control passes: once physical delivery of the products to the agreed location has occurred, the Group no longer has physical possession, usually it will have a present right to payment. Consideration is received in accordance with agreed terms of sale.

Determining the contract price:

The Group’s revenue is derived from:

a)  sale of goods with fixed price lists and therefore the amount of revenue to be earned from each transaction is determined by reference to those fixed prices; or

b)  individual identifiable contracts, where the price is defined

Allocating amounts to performance obligations:

For most sales, there is a fixed unit price for each product sold. Therefore, there is no judgement involved in allocating the price to each unit ordered.

There are no long-term or service contracts in place. Sales commissions are expensed as incurred. No practical expedients are used.

Government grants

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets (including property, plant and equipment) are recognised as deferred income in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Furlough claims under the Job Retention Scheme, have been disclosed as other income and not netted against the related salary expense.

Leases

The Group as a lessee

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.

The lease liability is presented as a separate line in the consolidated statement of financial position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).

A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

The Group did not make any such adjustments during the period presented.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

The right-of-use assets are presented as a separate line in the consolidated statement of financial position.

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the ‘Property, Plant and Equipment’ policy.

Property, plant and equipment

Plant, machinery, fixtures and fittings are stated at cost less accumulated depreciation and accumulated impairment loss.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method or reducing balance methods, on the following bases:

Leasehold improvements Over the life of the lease
Plant and machinery 10 per cent – 25 per cent per annum
Fixtures and fittings 10 per cent – 30 per cent per annum
Motor Vehicles 20 per cent – 25 percent per annum

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.

Impairment of property, plant and equipment and intangible assets excluding goodwill

At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease and to the extent that the impairment loss is greater than the related revaluation surplus, the excess impairment loss is recognised in profit or loss.

Trade and other receivables

Trade receivables are accounted for at amortised cost. Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate expected credit loss allowances for estimated recoverable amounts as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material. Other receivables are accounted for at amortised cost and are stated at their nominal value as reduced by appropriate expected credit loss allowances.

Borrowings

Borrowings are included as financial liabilities on the Group balance sheet at the amounts drawn on the particular facilities net of the unamortised cost of financing. Interest payable on those facilities is expensed as finance cost in the period to which it relates.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

4.  Critical accounting judgements and key sources of estimation uncertainty

In applying the Group’s accounting policies, which are described in note 3, the directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Identified intangible assets

Identified intangible assets arising on acquisition are disclosed in note 8 and comprise; marketing related assets such as brands and domain names; customer related assets such as customer relationships, lists and existing order books. Their existence is established in a post-acquisition review which also estimates their value and the period over which they are amortised;

Carrying value of goodwill, other intangible assets and property plant and equipment

Impairment reviews for non-current assets are carried out at each balance sheet date in accordance with IAS 36, Impairment of assets. Reported losses in the subsidiary companies, were considered to be indications of impairment and a formal impairment review was undertaken.  The review uses a discounted cash flow model to estimate the net present value of each cash generating unit. Management consider each operating subsidiary to be a separately identifiable cash generating unit.

The impairment reviews are sensitive to various assumptions, including the expected sales forecasts, cost assumptions, capital requirements, and discount rates among others. The forecasts of future cash flows for each subsidiary were derived from the operational plans in place. Real prices were assumed to remain constant at current levels.

Receivables

In applying IFRS 9 the directors make a judgement in assessing the Group’s exposure to credit risk. The Group has recognised a loss allowance of 100 per cent against all receivables over 120 days past due where historical experience has indicated that these receivables are generally not recoverable. Certain contracts are subject to contractual retentions with terms up to 2 years that are expected to be recoverable. Provision for expected losses on retentions are made on a contract by contract basis. The allowance for expected credit losses follows an internal assessment of customer credit worthiness and an estimate as to the timing of settlement and is disclosed in note 16. In addition, the directors have assessed the recoverability of other receivables on a case by case basis.

Provisions

As set out in note 14, a legal claim has been brought against the Company in respect of professional fees. Notwithstanding the merits of the Company’s defence, the inherent uncertainties within any legal action and the associated costs, have led the directors to assessing the likely outcome and a provision of £62k has been made.

5.  Other gains and losses

Year ending 31 March 2021 17 months to
31 March 2020
£000 £000
Listing expenses 486 243
Acquisition costs 5 156
Loss allowance on trade receivables 69 157
Job Retention Scheme Furlough grants (233) -
Other expenses 119 52
446 608

6.  Finance costs

Year ending 31 March 2021 17 months to
31 March 2020
£000
Interest on bank overdrafts and loans 434 444
Interest on lease liabilities 69 54
Loan arrangement fees and other finance costs 92 124
595 622

7.  Earnings per share

Year ending 31 March 2021 17 months to
31 March 2020
£000 £000
The calculation of the basic earnings per share is based on the following data:
Loss for the year for the purposes of basic loss per share attributable to equity holders of the Company (3,423) (3,194)
Weighted average number of Ordinary Shares for the purposes of basic loss per share 246,159,692 175,835,336
Basic earnings per share(pence)  (1.39p) (1.82p)

At 31 March 2021 and 31 March 2020, there were no options or warrants in issue and therefore no potential dilution.

8.  Goodwill and other intangible assets

Goodwill
£000
Cost
At 24 October 2018 -
Recognised on acquisition 1,271
At 31 March 2020 1,271
Recognised on acquisition 450
At 31 March 2021 1,721
Accumulated Impairment Losses
At 24 October 2018 and 31 March 2020 -
Impairment charge 150
At 31 March 2021 150
Carrying value at 31 March 2021 1,571
Carrying value at 31 March 2020 1,271

Goodwill arising on acquisition comprises the expected synergies to be realised form the benefits of being a member of a group rather than stand-alone company. These include shared services, economies from pooled procurement, leveraging skillsets across the group and other intangible assets, such as the workforce knowledge, experience and competences across the group that cannot be recognised separately as intangible assets.

Identified intangible assets
£000
Cost
At 24 October 2018 -
Recognised on acquisition 967
At 31 March 2020 967
Recognised on acquisition 100
At 31 March 2021 1,067
Amortisation
At 24 October 2018 -
Charge for the period 126
At 31 March 2020 126
Charge for the period 116
At 31 March 2021 242
Carrying value at 31 March 2021 825
Carrying value at 31 March 2020 841

Identified intangible assets arising on acquisition comprise; marketing related assets such as brands and domain names; customer related assets such as customer relationships, lists and existing order books. These are amortised, depending upon the nature of the asset and the business acquired over 1 to 10 years on a straight-line basis.

The Group tests goodwill and identified intangible assets annually for impairment, or more frequently if there are indications that they might be impaired.

In reviewing the goodwill attributable to the acquisition of Romar Process Engineering (“RPE”), the impairment review base case showed marginal headroom with the DCF, at a 10% discount rate. Application of the sensitivities outlined below indicated an impairment, and a charge of £150,000 has been made;

9.  Borrowings

At 31
March
 2021
At 31 March 2020
Non-current liabilities £000 £000
Secured
Other Loans 1,854 1,825
Corona virus business interruption loan (CBIL) 799 -
Unsecured
Bounce back loans (BBL) 94 -
Convertible loan note 473 -
3,220 1,825
Current liabilities
Secured
Factoring facility 321 243
Other loans - 548
Corona virus business interruption loan 106 -
427 791
Unsecured
Bounce back loans 6 -
Bank Overdraft - 41
433 832
3,653 2,657

During the year the other loans falling due in less than one year were consolidated and replaced by a convertible loan note with a coupon of 5%. The lender has the right to convert the outstanding principal into ordinary share of the Company at a price of 3p per share. In the event that the lender does not exercise its conversion rights by 31 March 2022, the loan shall become immediately repayable by the Company.

Other loans falling due after more than one year of £1,854,000 (2020: £1,825,000) are secured by means of a debenture, chattels mortgage and cross guarantee entered into by the Company and each of its subsidiaries. During the year the Company extended term, capitalised some interest outstanding and the principal now falls due for repayment between April and July 2022.

The factoring facility is secured on the trade receivables amounting to £610,000 (2020: £377,000).  There is a factoring charge of 1% of the Gross debt and a discount rate of 5% above Lloyds bank base rate on net advances. The agreement provides for 6 months’ notice by either party and certain minimum fee levels.

During the year the Group drew down on a CBIL of £905,000. The loan is repayable over 6 years, with no repayments of principal or interest until the first anniversary of draw down. The CBIL is secured by means of a debenture and cross guarantee entered into by the Company and certain of its subsidiaries. The coupon is 4;25%.

10.  Lease liabilities



Maturity Analysis
At 31 March 2021 At 31 March 2020
£000 £000
Year 1 7 14
Year 2 42 317
Year 3 243 35
Year 4 - 111
Year 5 497 588
789 1,065
Analysed as:
Current 263 317
Non-current 526 748
789 1,065

The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within the Group’s treasury function.

11.  Trade and other payables

At 31 March 2021 At 31 March 2020
£000 £000
Trade payables 1,065 1,025
Other taxation and social security 2,316 1,171
Other payables 323 403
Accruals and deferred income 601 493
4,305 3,092

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 86 days (2020: 50 days). For most suppliers no interest is charged on the trade payables for the first 30 days from the date of the invoice. Thereafter, interest is chargeable on the outstanding balances at various interest rates. The Group has financial risk management policies in place to ensure that all payables do not incur interest penalties.

The directors consider that the carrying amount of trade payables approximates to their fair value.

12.  Share capital

Number £000
Issued and fully paid:
At 24 October 2018 - -
Issued during the period 198,900,000 80
At 31 March 2020 198,900,000 80
Issued during the period 81,886,938 32
At 31 March 2021 280,786,938 112

The Company has one class of ordinary shares which carry no right to fixed income.

The company was incorporated on 24 October 2018 with an initial share capital £50,000, being 5 million ordinary shares with a par value of 1p. On 26 February 2019, the share capital was subdivided into shares with a nominal value of 0.04p. All disclosures referring to the number of shares in issue reflect this subdivision.

On 11 May 2020, the Company issued 6,666,667 shares at 3p for cash.

On 1 June 2020 the entire share capital of the Company was admitted trading on the Aquis Exchange Growth Market.  In conjunction with the admission, the Company issued 21,408,331 new shares by way of a placing and subscription, raising £577,500 before expenses. The Company also issued 5,633,333 fee shares at 3p in respect of fees amounting to £169,000.

On 17 June 2020, the Company issued 3,250,000 shares at 2p to employees for cash and 166,667 shares at 3p for cash in respect of a late subscription. In addition, 5,833,333 shares were issued at 3p in settlement of outstanding fees.

On 17 June 2020 the Company issued 2,564,706 shares at 4.25p for cash.

On 8 July 2020 the company issued 1,570,178 shares at 4.5p for cash.

On 21 October 2020, the Group acquired the business and assets of Romar Process Engineering Limited for £550,000 comprising the issue of 2,500,000 shares at 6p per share, initial cash consideration of £350,000 and deferred consideration of £50,000.

On 21 October 2020, 83,333 shares were issued at 6p and 714,286 shares at 4,2p in settlement of consultancy fees.

On 25 November 2020 the Company issued 5,567,316 shares at 5p and 1,036,364 shares at 5.5pfor cash

On 16 December 2020 the Company issued 6,636,363 shares at 5.5p for cash.

On 8 January 2021 the Company issued 2,650,000 shares at 5p and 272,727 shares at 5.5p for cash.

On 14 January 2021 the Company issued 2,222,222 shares at 4.5p for cash.

On 9 February 2021 the Company issued 4;583,333 shares at 4p for cash.

On 17 February 2021 the Company issued 8,250,000 shares at 4p for cash.

13.  Acquisition of subsidiaries

In the year to 31 March 2021, the Company completed one acquisition:

Romar Process Engineering Limited

On 21 October 2020, the Group purchased the business and assets of Romar Process Engineering Limited (“Romar”) for £550,000 which was satisfied by the issue and allotment by the Company of 2,500,000 Shares at an issue price of 6p per share, £350,000 in cash and £50,000 of deferred consideration. The acquisition has been treated as a business combination. Romar specialises in all arears of metal fabrication and complements other business within the group. The amounts recognised in respect of the identifiable assets acquired and liabilities assumed in the acquisition is as set out in the table below.

Total
£000
Identifiable intangible assets:
- Marketing related 20
- Customer related 80
Fair value at acquisition 100
Goodwill 450
550
Consideration
Issue of equity 150
Cash 350
Deferred cash consideration 50
Total consideration 550

14.  Provisions

In December 2019, the Company entered into a professional services agreement which could not be terminated before 18 September 2021. The agreement provided an annual retainer of £25,000 payable quarterly in advance. The agreement was informally terminated by both parties in April 2020. In January 2021, some 13 months after the original agreement, the Company received an invoice for £31,250 plus VAT. Two further quarterly invoices for £6,250 plus VAT have been received. In July 2021 the Company was notified of a claim for £106,000. The Company intends to defend its claim robustly and has requested that the claimant deposit security for costs with the court. A provision for £62,000 has been made.


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