Half Yearly Report

RNS Number : 9271S

Fulcrum Utility Services Ld

29 November 2011

 



29 NOVEMBER 2011

FULCRUM UTILITY SERVICES LIMITED

Unaudited interim results for the six months ended 30 September 2011

Fulcrum Utility Services Limited ("Fulcrum", "the Company" or "the Group"), the UK based energy solutions company, today announces its interim results for the six months ended 30 September 2011.

FINANCIAL SUMMARY

	Unaudited 6 months ended	Unaudited proforma 6 months ended	Unaudited 9 months ended
	30 September	30 September	30 September
	2011	2010 (2)	2010 (1)
	£m	£m	£m
Revenue	19.6	18.4	9.8
Underlying EBITDA (3)	(2.4)	(4.9)	(1.6)
Operating loss before exceptional items	(3.1)	(5.5)	(2.0)
Loss before tax	(3.8)	(7.9)	(4.1)
Cash balance	11.3	13.0	13.0
Earnings per share
Basic	(2.4)p	-	(4.9)p
Adjusted Basic (4)	(2.0)p	-	(2.3)p

Notes

(1)   Comparative results for the nine months from the date of incorporation to 30 September 2010 included trading results of the acquired Fulcrum Group from the date of acquisition, on 8 July 2010.

(2)   Proforma results reflect the financial performance of the acquired Fulcrum Group for the six months to 30 September 2010, adjusted for certain items relating to the period prior to acquisition, acquisition costs and adjustments to the opening balance sheet on acquisition.

(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 from core operations of 11%;

·      Gross margin contribution increased to 29%, principally reflecting completion of inherited lower margin contracts and underlying margin improvement in new business;

·      Proforma underlying EBITDA loss reduced by 51% to £2.4 million;

·      £11.3 million cash balance, ahead of plan and sufficient to fund the business back to profitability and cash generation.

OPERATIONAL HIGHLIGHTS

·      Further reduction in operational overheads and associated reduction in head count;

·      Significant focus on finalising new contractor arrangements (concluded after the period end) to enable improved service delivery model;

·      New sales and marketing function established with experienced new hires and a strategic focus;

·      Substantial changes in business processes undertaken alongside commencement of a systems development project to improve operational efficiency;

·      Relocation to a modern, fit for purpose office in Sheffield; and launch of the corporate brand to strengthen the position of the business within its chosen markets.

John Spellman, CEO of Fulcrum, said:

"The first half of the year has been another period of substantial change for Fulcrum.  The Company has made significant additional progress against our turnaround plan, reducing costs and improving the ability of the business to provide our customers with premium quality engineering, design and customer service. 

These results show that real progress has been made and we continue to achieve significant milestones. Since the end of the period we have concluded the transition of our contractor relationships to Carillion, McNicholas and Turriff, who we believe are the right partners with which to take Fulcrum forward.  The  conclusion of these new framework contracts is a major step in the successful turnaround of the business.  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.  It is my strong belief that this will support a level of operational and financial performance that is consistent with our original plan.

There is work still to be done.  However we have now put the foundations in place for Fulcrum to begin to realise its full potential within the UK energy connections market, moving into profitability and sustained growth".

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 company based in Sheffield, UK. The Company'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

In the 15 months since the business was acquired from National Grid significant progress has been made against the turnaround plan articulated at the time of the acquisition. In the period under review the management team have successfully reduced operating costs, relocated the business to a new modern office facility and energised its sales activity, restructuring sales and marketing operations and recruiting experienced new staff.

With the conclusion of the contractor procurement process following the period end, the business has concluded the majority of its restructuring activities. Management's focus is now centred on business development and growth, with a number of strategic actions already underway.

During April and May 2011 a number of staff left the business as part of the restructuring process. The Board thank all of Fulcrum's staff for their continued support, patience and professionalism throughout a period of transformational change.

Sales

At acquisition a core part of the turnaround strategy centred on restoring the company to growth and developing new sales opportunities in markets throughout the UK.

The process of rebuilding Fulcrum's standing in the market is ongoing. Fulcrum continues to develop relationships with existing customers and to open up new channels to market. The sales and marketing capabilities of Fulcrum have been strengthened with the appointment of six new Business Development Managers. These individuals bring with them a level of experience and reputation in the energy sector that will enable Fulcrum to target specific market sectors more effectively. In addition the recruitment of a product development team has seen the business both review its existing service offerings and identify a number of new opportunities which management are confident will provide an important source of future revenue.

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

Operations

During April and May 2011, Fulcrum concluded the restructuring and redundancy process that had been announced in March 2011, with a total of approximately 100 staff having now left the business since acquisition. This process, whilst unsettling, was necessary to reduce operating costs to a level that could support the long term profitability of the business. Given the timing of these changes, the period under review includes only part of the financial benefit associated with this process.

At the end of 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.

At the time of the acquisition, Fulcrum suffered from poor quality management information and operational inefficiency. This was a major contributor to poor customer service and weak financial performance. Since acquisition, the new management team has undertaken a rigorous assessment of the needs of the business, in terms of improving management information, streamlining operational processes and maximising the quality of the customer experience.  As a result of this exercise, during September Fulcrum commenced a project to replace and improve its IT applications infrastructure. This project will provide Fulcrum with a single applications platform through which it can manage all of its operational processes, workflows and associated management information. It is anticipated that the new systems infrastructure will be operational from Spring 2012.

Outlook

The six months to September 2011 have been a transformational period for Fulcrum, with the Company now well positioned to deliver growth, continued improvements in customer service and to move into profitability.

The conclusion of the contractor procurement process planned for the summer of 2011 took longer than was anticipated at the time of the preliminary announcement in early July 2011. As a consequence, the results for the first half of the year do not include any benefit from the new contractor relationships announced on 7 November 2011. Whilst this has had an adverse impact on the financial performance for the first half of the year, these new outsourced contractor arrangements provide Fulcrum with greater certainty of cost and a stronger commercial basis on which it can build a successful and profitable business.

The Directors believe that the second half of the financial year will see improved financial performance, as the initiatives undertaken to date flow through the business. The cash position of the business remains strong and management remain confident that the underlying financial performance in the second half will be in line with expectations.

FINANCIAL REVIEW

Results and proforma comparison with previous periods

	Unaudited				Unaudited proforma	Unaudited
	6 months ended				6 months ended	9 months ended
	30 September		Year on		30 September	30 September
	2011		year		2010 (2)	2010 (1)
	£m		growth		£m	£m
Revenue
Core operations	19.6		11.4%		17.6	9.0
Regulated connections	-				0.8	0.8
	19.6		6.5%		18.4	9.8
Gross profit	5.7		32.6%		4.3 (4)	2.5
Gross margin (%)	29.0%				23.4%	25.8%
Underlying EBITDA (3)	(2.4)				(4.9) (5)	(1.6)
Operating loss before exceptional items	(3.1)				(5.5) (6)	(2.0)

(1)   Comparative results for the nine months from the date of incorporation to 30 September 2010 included trading results of the acquired Fulcrum Group from the date of acquisition, on 8 July 2010.

(2)   Proforma results reflect the financial performance of the acquired Fulcrum Group for the six months to 30 September 2010, adjusted for certain items relating to the period prior to acquisition, acquisition costs and adjustments to the opening balance on acquisition.

(3)   Earnings before depreciation, amortisation, interest, share based payments, exceptional items and tax.

(4)   Excluding an additional £1.9 million of one-off operational costs.

(5)   Excluding an additional £2.3 million of one-off operational costs.

(6)   Excluding an exceptional credit of £15.0 million relating to the waiver of National Grid intercompany debt following Completion.

Reported results for the period

These interim results report the financial performance of the Group for the six months ended 30 September 2011. The comparative period reported the financial results of Fulcrum Utility Services Ltd for the nine months ended 30 September 2010, which only included the financial performance of the acquired businesses from 8 July 2010 to 30 September 2010. Unaudited proforma results for the six months ended 30 September 2010 have been presented above as a more meaningful comparator for the Group's performance.

Revenue

Overall reported revenue for the period was £19.6 million, this included £0.7 million of income from charges for transportation of gas through the Group's pipeline assets (2010: £0.4 million). Revenue in the period from non-core regulated gas connections was £nil (2010 proforma: £0.8 million), activities which ceased prior to the period under review.

On a proforma basis revenue from core operations increased by 11% from £17.6 million in the six months ended 30 September 2010 to £19.6 million in the six months ended 30 September 2011.

Gross margin

Reported gross profit for the period was £5.7 million. This represented an increase of more than 32% on a proforma basis, from £4.3 million, with margin improving from 23.4% to 29.0%.

The increasing trend in gross margin reflects the underlying quality of business won since acquisition and the lower margin contracts apparent in the inherited order book which have now been worked through.

Administrative expenses

Administrative expenses reported for the period totalled £9.4 million (2010: £6.6 million), including exceptional items of £0.6 million (2010: £2.1 million), depreciation and amortisation of £0.4 million (2010: £0.2 million) and share-based payment charges of £0.3 million (2010: £0.1 million).

On a proforma basis, administrative expenses (excluding exceptional items, depreciation, amortisation and share based payments) for the six months ended 30 September 2011 have fallen by 12% from £9.2 million to £8.1 million.

EBITDA and Operating Loss

Proforma underlying EBITDA loss reduced from a loss of £4.9 million to a loss of £2.4 million, representing a 51% reduction from the prior period.

Operating loss for the half year was £3.1 million (2010: £2.0 million), before exceptional items relating to the ongoing turnaround of the business of £0.6 million (2010: £2.1 million). On a proforma basis this represents a reduction of 44% over the prior period operating loss of £5.5 million.

The loss per ordinary share for the period to 30 September 2011 was 2.4 pence (2010: loss of 4.9 pence). Adjusted earnings per share, before charging exceptional items, was a loss of 2.0 pence (2010: loss of 2.3 pence).

Interest

To preserve liquidity the Group's cash balances are placed in an interest bearing current account. Interest received on these cash balances during the period was not significant.

The Group has no debt facilities and has incurred no financing costs during the period.

Taxation

During the period the Group incurred losses for corporation tax purposes of approximately £3 million (2010: £2 million). In addition the Group has the benefit of approximately £5.0 million of losses carried forward from the pre-acquisition period.

No deferred tax assets have been recognised in respect of these losses due to the current loss-making position of the Group.

Cash flow and financing

Operating cash flow

Operating activities in the period absorbed cash of £3.7 million (2010: £1.9 million), and comprised the following:

·      an underlying EBITDA loss for the period of £2.4 million (2010: £1.6 million);

·      exceptional cash costs totalling £1.6 million (2010: £2.1 million); and

·      working capital inflows of £0.3 million (2010: £1.8 million).

Investing activities

Capital expenditure for the period amounted to £1.5 million (2010: £0.3 million), including £0.9 million of investment in pipeline assets (2010: £0.3 million).

Cash position

The Group's cash position at 30 September 2011 was £11.3 million (2010: £13.0 million).

Principal Risks and Uncertainties

The risks and uncertainties faced by the Group as disclosed on pages 20 and 21 of the Annual Report and Accounts to 31 March 2011 remain valid, being turnaround strategy execution, dependence on key executives and personnel, risks relating to operating in a competitive market, risks relating to the gas connections market, reliance on key customers, reliance on key suppliers, management of financial resources including liquidity risk and capital risk management.

Forward-looking Statements

Certain statements in this interim report are forward-looking.  Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct.  Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

28 November 2011

Consolidated Interim Statement of Comprehensive Income

		Unaudited	Unaudited	Audited
	Note	Six months ended 30 September 2011	Nine months ended 30 September 2010	15 months ended 31 March 2011
Continuing operations		£'000	£'000	£'000
Revenue		19,600	9,838	28,431
Cost of sales		(13,914)	(7,298)	(20,574)
Gross profit		5,686	2,540	7,857
Administrative expenses		(9,436)	(6,638)	(19,701)
Operating loss and loss before tax		(3,750)	(4,098)	(11,844)
Analysed as:
EBITDA before share based payments and exceptional items		(2,436)	(1,645)	(5,616)
Equity settled share based payment charges		(294)	(84)	(441)
Depreciation and amortisation		(409)	(232)	(648)
Operating loss (excluding exceptional items)		(3,139)	(1,961)	(6,705)
Exceptional items	6	(611)	(2,137)	(5,139)
Operating loss and loss before tax		(3,750)	(4,098)	(11,844)
Taxation	10	-	-	-
Loss for the period attributable to equity holders of the parent		(3,750)	(4,098)	(11,844)

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

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

Basic and diluted	7	(2.4)p	(4.9)p	(10.7)p

The above consolidated interim statement of comprehensive income should be read in conjunction with the accompanying notes.

Consolidated Interim Statement of Changes in Equity

	Share capital	Share Premium	Retained earnings	Total equity
	£'000	£'000	£'000	£'000
Balance at 4 December 2009	-	-	-	-
Loss for the period ended 30 September 2010	-	-	(4,098)	(4,098)
Transactions with equity shareholders:
Issue of share capital net of expenses	154	16,182	-	16,336
Equity-settled share based payment transactions	-	-	84	84
Balance at 30 September 2010	154	16,182	(4,014)	12,322
Loss for the period ended 31 March 2011	-	-	(7,746)	(7,746)
Transactions with equity shareholders:
Equity-settled share based payment transactions	-	-	357	357
Balance at 31 March 2011	154	16,182	(11,403)	4,933
Loss for the period ended 30 September 2011	-	-	(3,750)	(3,750)
Transactions with equity shareholders:
Equity-settled share based payment transactions	-	-	294	294
Balance at 30 September 2011	154	16,182	(14,859)	1,477

The above consolidated interim statement of changes in equity should be read in conjunction with the accompanying notes.

Consolidated Interim Balance Sheet

		Unaudited	Unaudited*	Audited
	Note	30 September 2011	30 September 2010	31 March 2011
		£'000	£'000	£'000
Non-current assets
Property, plant and equipment	9	7,913	6,571	7,336
Intangible assets	8	2,783	2,452	2,487
		10,696	9,023	9,823
Current assets
Inventories		2,469	2,966	2,712
Trade and other receivables		3,873	14,212	4,857
Cash and cash equivalents		11,320	12,954	16,513
		17,662	30,132	24,082
Total assets		28,358	39,155	33,905
Current liabilities
Trade and other payables		(25,452)	(26,833)	(26,347)
Provisions		(1,429)	-	(2,625)
Total liabilities		(26,881)	(26,833)	(28,972)
Net current assets/(liabilities)		(9,219)	3,299	(4,890)
Net assets		1,477	12,322	4,933
Equity attributable to equity holders of the parent
Share capital	13	154	154	154
Share premium		16,182	16,182	16,182
Retained earnings		(14,859)	(4,014)	(11,403)
Total equity		1,477	12,322	4,933

* Restated in accordance with IFRS 3 (see note 2).

The above consolidated interim balance sheet should be read in conjunction with the accompanying notes.

Consolidated Interim Cash flow Statement

	Note	Unaudited	Unaudited*	Audited
		Six months ended 30 September 2011	Nine months ended 30 September 2010	15 months ended 31 March 2011
		£'000	£'000	£'000
Cash flows from operating activities
Loss for the period		(3,750)	(4,098)	(11,844)
Adjustments for:
Depreciation	9	318	171	481
Exceptional accelerated depreciation	9	-	-	246
Amortisation of intangible assets	8	91	61	167
Loss on sale of property, plant and equipment		209	5	11
Equity settled share-based payment expenses		294	84	441
Decrease in trade and other receivables		984	1,841	1,991
Decrease/(increase) in inventories		243	(744)	(655)
(Decrease)/increase in trade and other payables		(917)	732	1,180
(Decrease)/increase in provisions		(1,196)	-	1,925
Cash from operations		(3,724)	(1,948)	(6,057)
Taxation received		-	-	-
Net cash from operating activities		(3,724)	(1,948)	(6,057)
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired		-	(1,109)	8,027
Additions to property, plant and equipment		(1,082)	(325)	(1,652)
Additions to intangibles		(387)	-	(141)
Net cash used in investing activities		(1,469)	(1,434)	6,234
Cash flows from financing activities
Proceeds from issue of shares net of expenses		-	16,336	16,336
Net cash from financing activities		-	16,336	16,336
Net (decrease)/increase in cash and cash equivalents		(5,193)	12,954	16,513
Cash and cash equivalents at 31 March 2011		16,513	-	-
Cash and cash equivalents at 30 September 2011		11,320	12,954	16,513

* Restated in accordance with IFRS 3 (see note 2).

The above consolidated interim cash flow statement should be read in conjunction with the accompanying notes.

NOTES TO THE INTERIM FINANCIAL INFORMATION

1.    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 Alternative Investment Market (AIM) on the London Stock Exchange.

The condensed consolidated interim financial information, including the financial information for the period ended 31 March 2011 set out in this interim financial information, does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The information for the period ended 31 March 2011 is derived from the non-statutory accounts for that financial period. The non-statutory accounts for the period ended 31 March 2011 were approved on 8 July 2011 and have been delivered to the Registrar of Companies. The Auditors' report on those accounts was unqualified and did not draw attention to any matters by way of emphasis of matter.

This condensed consolidated interim financial information is unaudited and was approved for issue on 28 November 2011. The condensed interim financial information has been reviewed by the Group's auditors and their Independent Review Report is set out in this document.

2.    Basis of preparation

The condensed consolidated interim financial information for the period ended 30 September 2011 has been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union.

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the period ended 31 March 2011 which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In the period ended 31 March 2011 the Group revised the fair value of the prior period acquisition and therefore, in accordance with IFRS 3 (Revised), the balance sheet as at 30 September 2010 has been restated by increasing goodwill by £0.9 million and decreasing receivables by the same amount.

3.    Going concern

As highlighted in the financial review the Group has net cash at 30 September 2011 of £11.3 million.  Whilst the current economic conditions and the 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 is well placed to operate within this level of cash resource 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 interim financial information has been prepared on a going concern basis.

4.    Accounting policies

The principal accounting policies of the Group are consistent with those set out in the Group's 2011 Annual Report and Accounts.

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 April 2011:

·      Amendment to IAS 24 'Related party disclosures' clarifies and simplifies the definition of a related party.

·      Annual improvements 2010 is a collection of amendments to six standards and one IFRIC as part of the IASB's programme of annual improvements.

·      Amendment to IFRC 14 'Prepayments of a minimum funding requirement' applies only to entities that are required to make minimum funding contributions to a defined benefit pension plan.

·      IFRIC 19 'Extinguishing financial liabilities with equity instruments' clarifies the accounting when an entity renegotiates the terms of its debt with the result that the liability is extinguished through the debtor issuing its own equity instruments to the creditor.

The adoption of these standards and amendments is not expected to have a material impact on the financial statements.

The following standards and amendments to standards, considered relevant to the Group, are in issue but not yet effective, and therefore have not been applied in the financial statements:

·      Improvements to IFRSs (April 2011)

·      IFRS 13 'Fair value measurement'

The Directors anticipate that the adoption of these standards and amendments in future periods will not have a material impact on the financial statements.

In preparing these condensed consolidated interim financial statements the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the period ended 31 March 2011, with the exception of changes in estimates that are required in determining the disclosure of exceptional items (see note 6).

5.    Segmental analysis (unaudited)

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

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

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

Fulcrum's Gas Services business carried out work on behalf of National Grid Gas plc. However as a consequence of National Grid's agreement with the regulator to develop competition in this area, National Grid Gas plc has become the supplier of last resort. As a result Fulcrum's workload volumes via this route declined in the prior periods, are now £nil and are not expected to recover.

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 includes management accounts comprising profit or loss for each segment and balance sheets and cash flows and other financial and non financial information used to manage the business on a consolidated basis.

Unallocated amounts in the following tables comprise the corporate assets and liabilities and other assets and liabilities held centrally, the elimination of inter-segmental transactions and balances, and costs that cannot be allocated to an operating segment.

 

Six months ended 30 September 2011

	Infrastructure Services	Gas Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000	£'000
Reportable segment revenue	19,719	-	673	(792)	19,600
Underlying EBITDA	(1,587)	-	(58)	(791)	(2,436)
Share based payment charge	-	-	-	(294)	(294)
Depreciation and amortisation	-	-	(199)	(210)	(409)
Reportable segment operating loss before exceptional items	(1,587)	-	(257)	(1,295)	(3,139)
Exceptional items	(300)	-	-	(311)	(611)
Reporting segment operating loss before tax	(1,887)	-	(257)	(1,606)	(3,750)

Nine months ended 30 September 2010

	Infrastructure Services	Gas Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000	£'000
Reportable segment revenue	9,541	278	391	(372)	9,838
Underlying EBITDA	(2,322)	(99)	(293)	1,069	(1,645)
Share based payment charge	-	-	-	(84)	(84)
Depreciation and amortisation	-	-	(80)	(152)	(232)
Reportable segment operating loss before exceptional items	(2,322)	(99)	(373)	833	(1,961)
Exceptional items	-	-	-	(2,137)	(2,137)
Reporting segment operating loss before tax	(2,322)	(99)	(373)	(1,304)	(4,098)

15 months ended 31 March 2011

	Infrastructure Services	Gas Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000	£'000
Reportable segment revenue	28,869	394	600	(1,432)	28,431
Underlying EBITDA	(6,051)	162	(64)	337	(5,616)
Share based payment charge	-	-	-	(441)	(441)
Depreciation and amortisation	-	-	(245)	(403)	(648)
Reportable segment operating loss before exceptional items	(6,051)	162	(309)	(507)	(6,705)
Exceptional items	(535)	-	-	(4,604)	(5,139)
Reporting segment operating loss before tax	(6,586)	162	(309)	(5,111)	(11,844)

Segmental assets

	Infrastructure Services	Gas Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000	£'000
30 September 2011	4,795	-	8,272	15,291	28,358
30 September 2010	6,354	662	5,980	26,159	39,155
31 March 2011	6,020	457	7,432	19,996	33,905

Segmental liabilities

	Infrastructure Services	Gas Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000	£'000
30 September 2011	(29,209)	(6,200)	(13,241)	21,769	(26,881)
30 September 2010	(27,876)	(9,250)	(11,681)	21,974	(26,833)
31 March 2011	(29,751)	(6,695)	(11,609)	19,083	(28,972)

Capital expenditure

	Infrastructure Services	Gas Services	Pipeline	Unallocated	Total Group
	£'000	£'000	£'000	£'000	£'000
30 September 2011	-	-	940	551	1,491
30 September 2010	-	-	325	-	325
31 March 2011	-	-	1,616	177	1,793

Major items in the unallocated column comprise:

·      Reportable segment revenues: the elimination of inter-segmental revenues relating to pipeline assets;

·      Underlying EBITDA: the operating profit/loss of the central service providers;

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

·      Exceptional items: all amounts charged as exceptional, except for those relating exclusively to the Infrastructure Services segment;

·      Reportable segment assets: largely comprise corporate assets and other assets held centrally including property, plant and equipment, intangible assets and cash and cash equivalents;

·      Reportable segment liabilities: largely comprise corporate liabilities and other liabilities held centrally, including trade payables, accruals and restructuring provisions, offset by amounts due from other group companies.

Geographic segments

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

Major customer

Revenues from one customer of the Group's Infrastructure Services segment represent £4,198,000 (nine months ended 30 September 2010: £2,482,000, 15 months ended 31 March 2011 £6,930,000) of the Group's total revenues.

6.    Exceptional items (unaudited)

There were exceptional items in the six month period ended 30 September 2011 of £611,000. These costs are analysed as follows:

	Six months ended 30 September 2011	Nine months ended 30 September 2010	15 months ended 31 March 2011
	£'000	£'000	£'000
Relocation and property costs	311	-	-
Operating model transition	300	-	-
Costs of acquisition of Fulcrum Group Holdings Limited	-	1,427	1,529
Pre-acquisition expenses of the Company	-	710	753
Accelerated depreciation	-	-	246
Restructuring costs and provisions	-	-	2,611
	611	2,137	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 and Operating review.

Restructuring costs in the period ended 31 March 2011 related to provisions for staff severance and the costs of unused Group properties and dilapidations, which have in part flowed as cash in the period ended 30 September 2011.

7.    Earnings per share (unaudited)

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:

	Six months ended 30 September 2011	Nine months ended 30 September 2010	15 months ended 31 March 2011
	Number '000	Number '000	Number '000
Weighted average number of ordinary shares in issue	154,307	84,203	110,819

Loss for the period	Six months ended 30 September 2011	Nine months ended 30 September 2010	15 months ended 31 March 2011
	£'000	£'000	£'000
Loss for the period attributable to shareholders	(3,750)	(4,098)	(11,844)
Adjustment to remove exceptional items	611	2,137	5,139
Adjusted loss for the period attributable to shareholders	(3,139)	(1,961)	(6,705)

Loss per share	Six months ended 30 September 2011	Nine months ended 30 September 2010	15 months ended 31 March 2011
Basic	(2.4)p	(4.9)p	(10.7)p
Adjusted basic	(2.0)p	(2.3)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.

8.    Intangible assets (unaudited)

	Goodwill	Software	Total
	£'000	£'000	£'000
Cost
At 4 December 2009	-	-	-
Acquisitions	2,225	288	2,513
At 30 September 2010	2,225	288	2,513
Additions	-	141	141
At 31 March 2011	2,225	429	2,654
Additions	-	387	387
At 30 September 2011	2,225	816	3,041
Amortisation and impairment
At 4 December 2009	-	-	-
Charge for the period	-	(61)	(61)
At 30 September 2010	-	(61)	(61)
Charge for the period	-	(106)	(106)
At 31 March 2011	-	(167)	(167)
Charge for the period	-	(91)	(91)
At 30 September 2011	-	(258)	(258)
Net book value
At 30 September 2011	2,225	558	2,783
At 31 March 2011	2,225	262	2,487
At 30 September 2010	2,225	227	2,452

 

9.    Property, plant and equipment (unaudited)

	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	325	-	-	-	325
Disposals	-	-	-	(5)	(5)
At 30 September 2010	5,715	336	81	610	6,742
Additions	1,291	-	36	-	1,327
Disposals	-	-	-	(6)	(6)
At 31 March 2011	7,006	336	117	604	8,063
Additions	940	-	124	40	1,104
Disposals	-	(336)	(45)	(209)	(590)
At 30 September 2011	7,946	-	196	435	8,577
Depreciation
At 4 December 2009	-	-	-	-	-
Charge for the period	(80)	(2)	(13)	(76)	(171)
At 30 September 2010	(80)	(2)	(13)	(76)	(171)
Charge for the period	(165)	(4)	(21)	(120)	(310)
Accelerated depreciation	-	(246)	-	-	(246)
At 31 March 2011	(245)	(252)	(34)	(196)	(727)
Charge for the period	(199)	(3)	(19)	(97)	(318)
Eliminated on disposals	-	255	4	122	381
At 30 September 2011	(444)	-	(49)	(171)	(664)
Net book value
At 30 September 2011	7,502	-	147	264	7,913
At 31 March 2011	6,761	84	83	408	7,336
At 30 September 2010	5,635	334	68	534	6,571

There were no commitments to purchase property, plant and equipment at any of the above period ends.

10.   Taxation (unaudited)

Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The group incurred corporation tax losses in the period of approximately £3 million. No deferred tax has been recognised on these losses due to the current loss-making position of the Group.

11.   Related party transactions (unaudited)

The company has paid Marwyn Capital LLP a fee of £90,000 pursuant with the ongoing corporate finance advisory agreement and £30,000 of office rental.  An amount of £24,000 was owing to Marwyn Capital LLP at 30 September 2011.

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 £147,000 for the period ended 30 September 2011.

There are no amounts due from related parties on any trading accounts.

12.   Seasonality (unaudited)

Gas connections sales are subject to seasonal variations with peak demand in the third and fourth quarters of the calendar year. This is due to seasonal weather conditions and holiday periods.

13.   Share capital (unaudited)

Authorised		£0.001 ordinary shares	£0.001 ordinary shares
		Number	£'000
At 30 September 2010, 31 March 2011 and 30 September 2011		500,000,000	500

Allotted, issued and fully paid		£0.001 ordinary shares	£0.001 ordinary shares
		Number	£'000
At 4 December 2009		-	-
Issue of 0.1p ordinary shares - 24 December 2009		62,640,000	62
Issue of 0.1p ordinary shares - 8 July 2010		91,666,667	92
At 30 September 2010, 31 March 2011 and 30 September 2011		154,306,667	154

Ordinary shares issued

During the period to 30 September 2010 the Company issued:

·      62,640,000 new shares of 0.1p each on 24 December 2009 for 10p each for an aggregate consideration before expenses of £6,264,000. This represents nominal value of £62,000, with the balance of £6,202,000 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.

14.   Post balance sheet events (unaudited)

On 7 November 2011 Fulcrum announced the conclusion of its contractor procurement process which resulted in the award of three new framework contracts to Carillion Utility Services Limited, McNicholas Construction Services Limited, and Turriff Contractors Limited with these suppliers becoming the new providers of these services to Fulcrum across the UK.  The contracts took effect from 5 November 2011 and have replaced the Company's previous outsourced contractor relationships that dated back to Fulcrum's ownership by National Grid.

The legacy commercial arrangements with Enterprise PLC were terminated at the same time and Enterprise ceased work on 5 November 2011.

INDEPENDENT REVIEW REPORT TO FULCRUM UTILITY SERVICES LIMITED

Introduction

We have been engaged by the Company to review the condensed consolidated interim financial information for the six months ended 30 September 2011, which comprises the consolidated interim statement of comprehensive income, consolidated interim statement of changes in equity, consolidated interim balance sheet, consolidated interim cash flow statement and related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial information.

Directors' responsibilities

The interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial information included in this interim report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial information in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial information in the interim report for the six months ended 30 September 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.

PricewaterhouseCoopers LLP
Chartered Accountants
28 November 2011
Birmingham

The maintenance and integrity of the Fulcrum Utility Services Limited website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

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