21 August 2023
FULCRUM UTILITY SERVICES LIMITED
(“Fulcrum”, the “Company” or “the Group”)
Final results for the year ended 31 March 2023 (“FY23”)
Financial performance in line with management’s expectations:
• Revenue down 18% to £50.6 million (2022: £61.8 million)
• Adjusted EBITDA1 of £(6.2) million (2022: £0.5 million)
• Loss before tax of £25.7 million (2022: £14.2 million)2
• Cash outflow from operating activities of £12.5 million (2022: £7.6 million)
• Adjusted earnings per share of (3)p (2022: (1.4)p) and basic earnings per share of (6.3)p (2022: (5.2)p)
• Net debt3 of £2.6 million as at 31 March 2023 (2022: £11.2 million net cash)
• Net assets of £20.7 million (2022: £45.9 million)
1Adjusted EBITDA is operating loss excluding the impact of exceptional items, other net gains, fair value gains on derivatives, depreciation, amortisation and equity-settled share-based payment charges.
2Includes £17.8 million of exceptional items (2022: £10.6 million) including £12.2 million for impairment of intangible assets (2022: £2.3 million) and £2.2 million for onerous contracts (2022: £5.6 million).
3 Net debt includes £6m (2022: £nil) of borrowings that has been accounted for as an embedded derivative.
Laying a path back to profitability
In the year we acted to protect the Group in uncertain market conditions and initiated a review of various strategic options in order to maximise value for shareholders.
The review identified several opportunities and operational improvements, leading to the divestment in Smart metering, the implementation of a leaner operating model, the formation of a streamlined Senior Leadership Team and the development of a more targeted sales strategy.
Facility extension
Further to the Company’s announcement on 6 April 2023, with regards to an amendment to the Group’s convertible loan facility, the Board is pleased to confirm that the Company’s major shareholders have agreed to extend the term of the existing Facility Agreement (“Facility Extension”) from 1 November 2023 to 31 December 2024. All other terms and conditions of the Facility Agreement are unchanged.
The Facility Extension will ensure the Group continues to have adequate working capital and is expected to provide the Group with the funding required for the trading year ahead and will support the continued execution of the Group’s strategy and Fulcrum’s journey back to profitability.
The agreement to extend the term of the Facility Agreement by Bayford and Harwood, each being a substantial shareholder of the Company, constitutes a related party transaction with each Lender under rule 13 of the AIM Rules. Accordingly, the directors who are independent of the Facility, being Jennifer Babington and Dominic Lavelle, (the “Independent Directors”) consider, having consulted with Cenkos Securities plc, acting in its capacity as the Company’s nominated adviser and broker, that the Facility Extension is fair and reasonable insofar as the Company’s shareholders are concerned.
Recommendation to delist
An outcome of the Group’s ongoing strategic review is the Board’s recommendation to seek to cancel the Company’s admission to trading on AIM (the “Cancellation”). A separate announcement has been made with regards to the Cancellation, but it is the Board’s considered view that the Cancellation will support the Group’s return to profitability by removing significant ongoing costs associated with the Company’s shares being admitted to trading on AIM. Cancellation is also expected help to simplify the business and improve its agility.
Annual Report and AGM notice
The Company’s Annual Report and Accounts for the year ended 31 March 2023 and the Notice of the 2023 Annual General Meeting (‘AGM’) will be available on the Company’s website later today at https://investors.fulcrum.co.uk/
Commenting on the full year results, Lindsay Austin, Interim Chief Executive Officer, said:
Our FY23 results reflect the legacy issues and the difficult conditions that the Group has operated in, however we are now in a stronger position and laser focused on our path back to profitability as we continue to make improvements at pace.
I believe that the opportunities for the Group and its Fulcrum, Dunamis and Maintech Power businesses are significant and reinforced by strong market fundamentals.
We are confident in the Group’s potential and its return to success.
This announcement contains inside information.
Enquiries:
| Fulcrum Utility Services LimitedJonathan Jager, Chief Financial Officer Cenkos Securities plc (Nominated adviser and broker)Camilla Hume / Callum Davidson (Nomad) / Michael Johnson (Sales) | +44 (0)114 280 4150 +44 (0)20 7397 8900 |
Notes to Editors:
Fulcrum is a multi-utility infrastructure and services provider. The Group operates nationally with its head office in Sheffield, UK. It designs, builds, owns, and maintains utility infrastructure. https://investors.fulcrum.co.uk/
Chair’s statement
This year we reset, refocused, restructured and refinanced the business to lay better foundations to support our return to profitability. This focused on addressing identified issues, implementing improvements, and developing a clear strategy.
We are now in a stronger position, and I would like to share my personal thanks to all our team for their hard work and ongoing efforts in achieving this.
Results
The challenges faced by the business during the financial year ending 31 March 2023 are reflected in our full year results. However, encouragingly, the Group’s full year performance was in line with the expectations set out in our Trading Update, published on 24 October 2022.
Dividend
Considering the full year performance, the Board will not be recommending the payment of a dividend in respect of the financial year ended 31 March 2023 but will continue to keep its dividend policy under review.
Outlook
Turning the Group’s performance around has been a challenging task and is ongoing, but we are making good progress, at pace. The Board is pleased that the Group is on a path back to profitability, that its foundations are being continually strengthened to deliver a successful future, and that the Group is currently trading in line with management’s expectations.
Medium to long-term market fundamentals are supported by the UK’s transition to a low carbon economy and also continue to be very strong. Considering all of this, I am confident that the Group is well positioned to take advantage of the many and significant opportunities available to it as we move forward.
Jennifer Babington
Non-executive Chair
18 August 2023
Chief Executive Officer’s statement
Positioning the Group for future profitability
Since joining Fulcrum as Interim CEO in January 2023 my priority has been to ensure the Group is positioned to capitalise on its core strengths and return to profitability.
Improvements have been made and positive outcomes were delivered in the year. We secured a healthy flow of new contracts, won under enhanced contractual terms to better protect margin and took action to mitigate loss making contracts.
Strong progress has continued to be made post year end and our focus continues to be on reducing costs, reducing overheads, improving efficiency and simplifying the business. The Group is now in a much-improved position, and we are pleased to have ongoing financial support from our major shareholders as we move forward.
Our recommendation to delist the business proactively supports the Group’s path to profitability by significantly reducing costs in this financial year and on an enduring basis. It will also help us to simplify the business, its operations, and will improve the speed of decision making.
Financial performance and results
Total revenue decreased year on year by £11.3 million to £50.6 million (2022: £61.8 million). Infrastructure revenues were 19% lower than the previous year at £46.4 million (2022: £57.6 million). Utility asset ownership revenues remained at the same level as the previous year, at £4.2 million (2022: £4.2 million).
The Group had an operating loss of £24.6 million for the year (2022: £13.7 million). This loss includes exceptional costs of £17.8 million (2022: £10.6 million), depreciation and amortisation of £2.6 million (2022: £3.3 million), and a share-based payment charge of £0.1 million (2022: £0.6 million), offset by fair value gain on derivatives of £2 million (2022: £nil). Exceptional costs include the income statement impact of the impairment of our utility asset portfolio of £2.6 million (2022: £1.9 million) as a result of an independent, external valuation of those assets at year end, £12.2 million impairment of intangible assets, including £7.6 million for goodwill write down, £4.3 million of other intangibles and £0.3 million software (2022: £2.3 million) and £2.2 million of onerous contract losses (2022: £5.6 million) relating to forecast losses (net of provisions released) to be incurred on several complex high voltage infrastructure projects and losses incurred from 1 October 2022 and forecast to be incurred in respect of a number of onerous infrastructure projects, following a strategic review by the Board.
Adjusted EBITDA1 for the year fell to £(6.2) million from £0.5 million in the prior year. Adjusted EBITDA was affected by a dilution of the gross margin, particularly as cost of materials were impacted by inflationary effects, and the impact of the uncertain energy sector making trading conditions more challenging. Administrative expenses (excluding exceptional items) reduced by 7%, as the business applied greater cost controls on discretionary spending.
The Group’s network of utility assets, valued over £31 million as at 31 March 2023, generate recurring income and provide attractive and predictable long-term returns. We continued to adopt additional utility assets in the year, adding them to our income generating portfolio. The Group will continue to selectively adopt utility assets. All tranches of the asset sale to ESP were also successfully delivered during the year.
1Adjusted EBITDA is operating loss excluding the impact of exceptional items, other net gains, fair value gain on derivatives, depreciation, amortisation, and equity-settled share-based payment charges.
Liquidity and net cash
The Group’s trading performance for the year has resulted in a cash outflow from operating activities of £12.5 million (2022: £7.6 million). As at 31 March 2023, the Group had net debt of £2.6 million (2022: £11.2 million net cash).
Net cash inflow from investing activities was £0.4 million (2022: £1.4 million), benefiting from £3.7 million of net receipts (£3.6 million received for planned tranche sales and £0.2 million received for additional consideration from tranche sales in previous years, less £0.1 million of transaction costs), from the disposal of utility assets (2022: £7 million), offset by investment in utility and other assets of £3.3 million (2022: £5.6 million).
Net cash inflow from financing activities of £4.3 million (2022: £13.4 million) was predominantly due to the draw down on the Facility Agreement of £6 million, less transaction costs related to the convertible debt facility of £0.5 million, and £1.1 million in lease and interest payments (2022: £1.4 million). Net cash outflows in the year ended 31 March 2023 for exceptional items in cost of sales and administrative expenses were £2.5 million (2022: £1.6 million).
Reserves and net assets
Net assets decreased by £25.2 million during the year to £20.7 million (2022: £45.9 million), primarily resulting from the decrease in intangible assets to £3 million (2022: £15.6 million) and a decreased cash balance of £3.4 million (2022: £11.2 million). The Group suffered a net revaluation impairment on the utility asset portfolio of £3.3 million (2022: £1.9 million net revaluation gain). Net assets per share at 31 March 2023 were 5.2p per share (2022: 11.5p).
As at 31 March 2023, the issued share capital of the Company was 399,313,458 ordinary shares (2022: 399,313,458) with a nominal value of £339,313 (2022: £339,313). At the end of the year, the Group operated one Save As You Earn (SAYE) scheme.
Lindsay Austin
Interim Chief Executive Officer
18 August 2023