Half Yearly Report

RNS Number : 0418S

Fulcrum Utility Services Ld

27 November 2012

 



FULCRUM UTILITY SERVICES LIMITED

Unaudited interim results for the six months ended 30 September 2012

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 2012.

FINANCIAL SUMMARY

	Unaudited 6 months ended	Unaudited 6 months ended
	30 September 2012	30 September 2011
	£m	£m
Revenue	19.4	19.6
Gross margin	40%	29%
Underlying EBITDA (1)	1.1	(2.4)
Operating loss before exceptional items	(0.1)	(3.1)
Loss before tax	(0.1)	(3.8)
Net funds	4.4	11.3
Earnings per share
Basic	(0.1)p	(2.4)p
Adjusted Basic (2)	(0.1)p	(2.0)p

Notes

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

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

HIGHLIGHTS

·      Year on year revenue broadly unchanged against the backdrop of continued challenging market conditions;

·      Year on year improvement in gross margin from 29% to 40%;

·      EBITDA profit of £1.1 million (2011: EBITDA loss of £2.4 million);

·      Turnaround activities completed and new IT system deployed across the business in April 2012; and

·      A material new contract for £7.6 million signed after the period end to provide gas pipelines to distilleries in Speyside.

John Spellman, CEO of Fulcrum, said:

"Performance in the first half of the current financial year marks the continued turnaround of the business. Gross margins have been strengthened from 29% last half year to 40% this half year and the positive EBITDA of £1.1 million represents a £3.5 million shift from the loss of £2.4 million in the same period last year.  Although revenue has been maintained in a subdued construction market it has not developed in the time profile anticipated. Since our trading update in early October we have seen a marked delay in converting sales as customers wait before committing to capital spend, with the result that revenue from larger projects that we expected to achieve in the current year will be delayed into future periods and as a result our financial results for the full year will be below market expectations. Our order book at 31 October 2012 stands at £20.7 million compared to £15.3 million at 31 March 2012.

The key factors for winning new business in the current market are price and customer service and these continue to be the focus of our business. The first half of the year has seen a number of important successes in developing our service offering and in opening new channels to market, evidenced at the start of the second half by our landmark contract win with Speyside distilleries. This is one of a number of large and highly complex contracts that we have recently secured which is testament to Fulcrum's engineering design and construction expertise.

The performance in the current year will mean that there will be a delay in building Fulcrum to the scale that we targeted at the original acquisition of the business in 2010. The work we have completed over the past two years has placed Fulcrum in a very strong position to exploit opportunities in the energy sector. Whilst revenue growth is likely to remain muted in the short term we have a strong new business pipeline and are very well placed to deliver growth from increased market activity in the coming years."

Enquiries:

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

Stephen Keys

College Hill                           [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 utility 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 28,000 properties to the main UK gas network. 

BUSINESS AND OPERATING REVIEW

In the first half of the year the business experienced challenging market conditions, and in particular weak activity in the housing development and smaller commercial construction sectors.  Nonetheless Fulcrum recorded revenue of £19.4 million in the first half of the financial year, a similar level to the prior year (£19.6 million), and increased gross margins from 29% to 40% as a consequence of the changes made to the business, especially the new framework contracts put in place last November. A positive EBITDA before exceptional items and share based payments charges confirms the Company's recovery with a profit for the first half of £1.1 million compared to a £2.4 million loss in the prior period.

Fulcrum's customers require a competitive price and completion of their final connection on time.  Therefore Fulcrum's primary focus continues to be to provide value for money and the delivery of customer service tailored to meet these customers needs.  During the first half of the year the operational functions of the business were re-aligned to provide customers with a single point of responsibility for delivery and an end-to-end service from sales through design, planning and fulfilment, thereby ensuring efficient service delivery. A new IT system was deployed across the business on 1 April 2012 to provide further support to improved business processes and working practices which have bedded down over the first half of the year. The streamlining of business processes will remain an ongoing area of focus for management.

Fulcrum's business spans small, medium and large projects, with smaller projects providing up to 50% of revenue historically.  Across the market, we are seeing an ongoing slowdown in the number of small projects, as smaller businesses continue to withhold spending or are unable to finance their construction projects. Alongside this, the market for medium-sized projects remains relatively flat.

Against this backdrop we are seeing attractive opportunities at the larger end of the market where the engineering demands are such that Fulcrum is able to provide existing and potential customers with the benefit of its depth and heritage of engineering design and construction. During the previous financial year and the first half of the current year, Fulcrum has demonstrated its ability to secure and deliver high value, complex engineering projects. These include:

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

·      a project for Cunnington Clark to deploy gas infrastructure to the new Centre Parcs holiday park in Bedford;

·      delivery of gas infrastructure (network reinforcement, mains, services, metering and outlet) on behalf of British Gas Business to an animal by product processing facility in Staffordshire to assist their transition from heavy fuel oil to gas; and

·      the delivery of gas infrastructure to the Westfield Shopping Centre and the Olympic Park in Stratford, East London.

The success in these areas is evident in the Company's forward order book which at 31 October 2012 stood at £20.7 million compared to £15.3 million at 31 March 2012.

Overall, our revenues in the first half have seen a 16% reduction in jobs of below £50,000 of value, set off against a 60% increase in jobs of more than £100,000.  However, these larger projects by their nature bring with them a more uneven revenue profile as they are typically characterised by a longer lead-in time and are delivered over an extended timeframe.

During October 2012, Fulcrum entered into a contract with Chivas Brothers Limited and Angus Dundee Distillers plc to provide gas infrastructure to four distilleries in the highlands of Scotland in support of their conversion from heavy fuel oil to gas. The £7.6 million contract, which has already commenced, is to be delivered by Fulcrum over an 18 month period. This breakthrough contract is in one of the key product areas where Fulcrum sees potential for additional future work.

Future success in winning higher value contracts from larger customers is likely to be accompanied by a shift in the pattern of customer payment from upfront payment from smaller one-off customers, toward staged payments and increased provision of credit terms for larger customers. Whilst this will change the working capital profile of the business the Company has sufficient resources to manage this change.

Outlook

We expect revenue performance in the second half of the year to be stronger than in the first half, although results for the full year will be below market expectations. The first half of the year has seen a marked shift in Fulcrum's business activity away from internal reorganisation and restructuring toward business development and the opening of new sales channels and we expect to see the benefits of this both in the second half of this year and future financial years. The business is now generating positive EBITDA underpinned by Fulcrum's strategy of moving much further into closely related product offerings such as electricity connections. We are well positioned to capture growth both in the larger end of the market and in the smaller market segments.

FINANCIAL REVIEW

These interim results report the financial performance of the Group for the six months ended 30 September 2012 and for the comparative period to 30 September 2011.

Results and proforma comparison with previous periods

	Unaudited		Unaudited
	6 months ended		6 months ended
	30 September 2012	Year on year	30 September 2011
	£m	movement	£m
Revenue	19.4	(1.3)%	19.6
Gross profit	7.8	37.6%	5.7
Gross margin (%)	40.4%		29.0%
Underlying EBITDA (1)	1.1		(2.4)
Operating loss before exceptional items	(0.1)		(3.1)

Notes

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

Revenue

Overall reported revenue for the period was £19.4 million against £19.6 million in the same period of the prior year. Revenue from infrastructure services was £19.2 million (2011: £19.7 million), a reduction of 3% and the Group's pipeline operations contributed revenue of £0.8 million, an increase of 19% over the prior year revenue of £0.7 million.

Infrastructure services revenue incorporates a mixed performance across Fulcrum's core markets:

·      A 19% reduction in revenue on projects with a sales value of £10,000 or less.  These projects accounted for 32% of revenue in the first half of the year, reduced from 39% in the same period of the prior year. The reduction is due to lower activity within small commercial construction projects and single connections;

·      A 61% increase in revenue on projects with a sales value of £100,000 or more, as a result of the Company's success in securing and delivering high value, complex engineering projects. This is a key area of focus for the business moving forwards;

·      A 27% reduction in revenue arising from our property developer customers, due to the difficult trading conditions seen in the construction sector;

·      A 93% increase in revenue arising from our gas shipper and broker customers reflecting the continued focus on opening new sales channels for the business.

Gross margin

Reported gross profit for the period was £7.8 million, representing an increase of more than 37% over the prior period gross profit of £5.7 million. The improvement in gross margin percentage from 29% to 40% is a significant success for the business and reflects the impact of the change in framework contractors with work completed in the first half of this year being subject to greater cost certainty and a lower cost of delivery than previous sub-contract arrangements.

Administrative expenses

Administrative expenses reported for the period totalled £7.9 million (2011: £9.4 million), a reduction of 16%, which reflects the completion of restructuring activities and the associated reduction in overall operating costs undertaken in the previous financial year.

As part of this restructuring exercise, the six months ended 30 September 2011 saw 77 people leave the business.  This restructuring process was completed in the summer of 2011 and as a result administrative expenses for the comparative period of £9.4 million included the costs of those staff that have now left the business.  Administrative expenses also include the release of surplus cost accruals of £0.3 million relating to prior periods.

Exceptional items for the period were £nil (2011: £0.6 million) reflecting the completion of our restructuring and turnaround activities.

Share based payments charges have increased to £0.5 million from £0.3 million in the prior period and include the costs of the new EMI and unapproved share schemes that commenced on 28 March 2012.  An amount of £0.2million was incurred to restructure the MPS share incentive scheme which was necessary as a result of an administrative error made when the scheme was put in place, as previously announced by the Company on 1 October 2012.

EBITDA and operating loss

Underlying EBITDA, before exceptional items and share based payments was £1.1 million for the first half (2011: loss of £2.4 million).

Operating loss for the half year was £0.1 million (2011: loss of £3.8 million, including exceptional items of £0.6 million).

The loss per ordinary share for the period was 0.1 pence (2011: loss of 2.4 pence). Adjusted earnings per share, before charging exceptional items, was a loss of 0.1 pence (2011: loss of 2.0 pence).

Financing income and expense

To preserve liquidity the Group's cash balances are placed in an interest bearing current account.

Interest expenses relating to finance leases totalled £19,000 during the period (2011: £nil).

Taxation

During the period the Group's profits chargeable to corporation tax were approximately £1 million compared to losses for corporation tax purposes of approximately £3 million in the prior period. The total sum of accumulated losses carried forward from prior periods amounts to approximately £15 million as at 30 September 2012.

No deferred tax assets have been recognised in respect of these losses due to uncertainty over the timing of their utilisation.

Cash flow and financing

Operating cash flow

Operating activities in the period absorbed cash of £2.4 million (2011: £3.7 million), and comprised the following:

·      EBITDA for the period of £1.1 million (2011: loss of £2.4 million);

·      exceptional cash costs totalling £0.1 million (2011: £1.6 million); and

·      working capital outflows of £3.4 million (2011: £0.3 million inflow), including a £2.0 million impact from the changing shift in customer mix away from prepaid terms towards larger customers requiring staged payments and credit terms.

The working capital outflow also reflects settlement during the period of amounts due to sub-contractors for work delivered in the prior year, the costs of which were accrued at 31 March 2012.

Investing activities

Capital expenditure for the period amounted to £1.5 million (2011: £1.5 million), including £0.6 million of investment in pipeline assets (2011: £0.9 million).

During the six months ended 30 September 2012 the Group entered into a lease arrangement to fund part of its recent investment in new IT infrastructure and software. As a result, IT related assets with a net book value of £0.9 million were sold during the period and leased back to the Group over a period of three years. This transaction resulted in a cash inflow during the period of £0.9 million.

Repayments of amounts due under this lease arrangement totalled £0.1 million during the first half (2011: £nil).

Cash position

As at 30 September 2012 the Group's cash position was £5.2 million (2011: £11.3 million). After deducting amounts due in respect of finance leases of £0.8 million (2011: £nil) the Group has net funds of £4.4 million at 30 September 2012.

Principal risks and uncertainties

The risks and uncertainties faced by the Group as disclosed on pages 18 and 19 of the Annual Report and Accounts to 31 March 2012 remain valid, being growth and 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.

Consolidated Interim Statement of Comprehensive Income

		Unaudited	Unaudited	Audited
	Note	Six months ended 30 September 2012	Six months ended 30 September 2011	Year ended 31 March 2012
Continuing operations		£'000	£'000	£'000
Revenue		19,354	19,600	40,993
Cost of sales		(11,528)	(13,914)	(27,011)
Gross profit		7,826	5,686	13,982
Administrative expenses		(7,919)	(9,436)	(19,707)
Operating loss		(93)	(3,750)	(5,725)
Analysed as:
EBITDA before share based payments and exceptional items		1,062	(2,436)	(2,096)
Equity settled share based payment charges	8	(515)	(294)	(588)
Depreciation and amortisation		(640)	(409)	(804)
Operating loss excluding exceptional items		(93)	(3,139)	(3,488)
Exceptional items		-	(611)	(2,237)
Operating loss		(93)	(3,750)	(5,725)
Net finance (expense)/income		(19)	-	82
Loss before tax		(112)	(3,750)	(5,643)
Taxation		-	-	-
Loss for the period attributable to equity holders of the parent		(112)	(3,750)	(5,643)

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	6	(0.1)p	(2.4)p	(3.7)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
	Note	£'000	£'000	£'000	£'000
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
Loss for the period ended 31 March 2012		-	-	(1,893)	(1,893)
Transactions with equity shareholders:
Equity-settled share based payment transactions		-	-	294	294
Balance at 31 March 2012		154	16,182	(16,458)	(122)
Loss for the period ended 30 September 2012		-	-	(112)	(112)
Transactions with equity shareholders:
Equity-settled share based payment transactions	8	-	-	364	364
Balance at 30 September 2012		154	16,182	(16,206)	130

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
		30 September 2012	30 September 2011	31 March 2012
	Note	£'000	£'000	£'000
Non-current assets
Property, plant and equipment		9,202	7,913	8,961
Intangible assets		3,848	2,783	3,548
		13,050	10,696	12,509
Current assets
Inventories		2,894	2,469	1,459
Trade and other receivables		6,297	3,873	6,019
Cash and cash equivalents		5,177	11,320	8,269
		14,368	17,662	15,747
Total assets		27,418	28,358	28,256
Current liabilities
Trade and other payables		(25,596)	(25,452)	(27,365)
Borrowings	7	(222)	-	-
Provisions		(892)	(1,429)	(1,013)
		(26,710)	(26,881)	(28,378)
Non-current liabilities
Borrowings	7	(578)	-	-
Total liabilities		(27,288)	(26,881)	(28,378)
Net assets/(liabilities)		130	1,477	(122)
Equity attributable to equity holders of the parent
Share capital		154	154	154
Share premium		16,182	16,182	16,182
Retained earnings		(16,206)	(14,859)	(16,458)
Total equity		130	1,477	(122)

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

Consolidated Interim Cash flow Statement

		Unaudited	Unaudited	Audited
		Six months ended 30 September 2012	Six months ended 30 September 2011	Year ended 31 March 2012
	Note	£'000	£'000	£'000
Cash flows from operating activities
Loss before tax for the period		(112)	(3,750)	(5,643)
Adjustments for:
Depreciation		444	318	640
Amortisation of intangible assets		196	91	164
(Profit)/loss on sale of property, plant and equipment		(35)	209	199
Net finance expense/(income)		19	-	(82)
Equity settled share-based payment expenses	8	364	294	588
(Increase)/decrease in trade and other receivables		(331)	984	(1,110)
(Increase)/decrease in inventories		(1,435)	243	1,253
(Decrease)/increase in trade and other payables		(1,394)	(917)	628
Decrease in provisions		(121)	(1,196)	(1,612)
Net cash used in operations		(2,405)	(3,724)	(4,975)
Net interest received		23	-	30
Net cash from operating activities		(2,382)	(3,724)	(4,945)
Cash flows from investing activities
Additions to property, plant and equipment		(1,075)	(1,082)	(2,218)
Additions to intangibles		(445)	(387)	(1,081)
Proceeds from sale of property, plant and equipment		863	-	-
Net cash used in investing activities		(657)	(1,469)	(3,299)
Cash flows from financing activities
Payment of finance lease liabilities		(53)	-	-
Net cash used in financing activities		(53)	-	-
Net decrease in cash and cash equivalents		(3,092)	(5,193)	(8,244)
Cash and cash equivalents at 31 March 2012		8,269	16,513	16,513
Cash and cash equivalents at 30 September 2012		5,177	11,320	8,269

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 2012 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 2012 is derived from the non-statutory accounts for that financial period. The non-statutory accounts for the period ended 31 March 2012 were approved on 30 July 2012 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 27 November 2012. 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 2012 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 2012 which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

3.      Going concern

As highlighted in the financial review the Group has net cash at 30 September 2012 of £5.2 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 and corresponding mitigating actions, 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 2012 Annual Report and Accounts, except as described below.

Leases

Finance leases, which transfer substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in the income statement. Leased assets are depreciated over the useful life of the asset.

All other leases are operating leases and the operating lease payments are recognised as an expense in the statement of comprehensive income on a straight line basis over the lease term.

The following new standards and amendments to standards are mandatory and have been adopted where applicable for the first time for the financial period beginning 1 April 2012:

·      Disclosures - Transfers of Financial Assets (Amendments to IFRS 7)

·      Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendments to IFRS 1)

·      Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)

The adoption of these standards and amendments has not had a material impact on the financial statements.

The following standards and amendments to standards, are in issue but not yet effective, and therefore have not been applied in the financial statements.  They are due for adoption on the date stated.

·      IFRS 9 'Financial Instruments' - 1 January 2015

·      IFRS 10 'Consolidated Financial Statements' - 1 January 2013

·      IFRS 11 'Joint Arrangements' - 1 January 2013

·      IFRS 12 'Disclosure of Interests in Other Entities' - 1 January 2013

·      IFRS 13 'Fair Value Measurement' - 1 January 2013

·      IAS 27 'Separate Financial Statements' - 1 January 2013

·      IAS 28 'Investments in Associates and Joint Ventures' - 1 January 2013

The Directors anticipate that the adoption of these standards and amendments in future periods will not have a material impact on the financial statements, but may give rise to additional disclosures.

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 2012.

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 two reportable segments, as described below.

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

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.

Information regarding the operations of each reportable segment is included in the following tables. Performance is measured based on operating profit / (loss) before management recharges and exceptional items. Segment operating profit / (loss) before management recharges and exceptional items 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 other financial and non financial information used to manage the business on a consolidated basis. In previous periods the operating profit/(loss) before exceptional items, but after management recharges was disclosed. The comparative information shown below has been restated to align with the information currently reviewed by the Board.

Unallocated amounts in the following tables are comprised of the elimination of inter-segmental transactions, and costs that cannot be allocated to an operating segment.

 

Six months ended 30 September 2012

	Infrastructure Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000
Reportable segment revenue	19,222	798	(666)	19,354
Underlying EBITDA	780	281	1	1,062
Share based payment charge	-	-	(515)	(515)
Depreciation and amortisation	-	(230)	(410)	(640)
Reportable segment operating profit/(loss) before exceptional items	780	51	(924)	(93)
Exceptional items	-	-	-	-
Reporting segment operating profit/(loss)	780	51	(924)	(93)
Net finance expense	-	-	(19)	(19)
Profit/(loss) before tax	780	51	(943)	(112)

5.      Segmental analysis (continued)

Six months ended 30 September 2011 - restated

	Infrastructure Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000
Reportable segment revenue	19,719	673	(792)	19,600
Underlying EBITDA	61	127	(2,624)	(2,436)
Share based payment charge	-	-	(294)	(294)
Depreciation and amortisation	-	(199)	(210)	(409)
Reportable segment operating profit/(loss) before exceptional items	61	(72)	(3,128)	(3,139)
Exceptional items	(300)	-	(311)	(611)
Reporting segment operating loss and loss before tax	(239)	(72)	(3,439)	(3,750)

Year ended 31 March 2012 - restated

	Infrastructure Services	Pipelines	Unallocated	Total Group
	£'000	£'000	£'000	£'000
Reportable segment revenue	41,051	1,356	(1,414)	40,993
Underlying EBITDA	5,236	365	(7,697)	(2,096)
Share based payment charge	-	-	(588)	(588)
Depreciation and amortisation	-	(415)	(389)	(804)
Reportable segment operating profit/(loss) before exceptional items	5,236	(50)	(8,674)	(3,488)
Exceptional items	(1,864)	-	(373)	(2,237)
Reporting segment operating profit/(loss)	3,372	(50)	(9,047)	(5,725)
Finance income	-	-	82	82
Profit/(loss) before tax	3,372	(50)	(8,965)	(5,643)

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;

5.      Segmental analysis (continued)

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 £4,729,000 (six months ended 30 September 2011: £4,198,000, year ended 31 March 2012 £9,474,000) of the Group's total revenues.

6.      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 2012	Six months ended 30 September 2011	Year ended 31 March 2012
	Number '000	Number '000	Number '000
Weighted average number of ordinary shares in issue	154,307	154,307	154,307

Loss for the period	Six months ended 30 September 2012	Six months ended 30 September 2011	Year ended 31 March 2012
	£'000	£'000	£'000
Loss for the period attributable to shareholders	(112)	(3,750)	(5,643)
Adjustment to remove exceptional items	-	611	2,237
Adjusted loss for the period attributable to shareholders	(112)	(3,139)	(3,406)

Loss per share	Six months ended 30 September 2012	Six months ended 30 September 2011	Year ended 31 March 2012
Basic	(0.1)p	(2.4)p	(3.7)p
Adjusted basic	(0.1)p	(2.0)p	(2.2)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.

7.      Borrowings (unaudited)

	30 September 2012	30 September 2011	31 March 2012
Finance lease liabilities	£'000	£'000	£'000
Current	222	-	-
Non-current	578	-	-
	800	-	-

Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

	30 September 2012	30 September 2011	31 March 2012
	£'000	£'000	£'000
Gross finance lease liabilities - minimum lease payments:
-       No later than one year	326	-	-
-       Later than one year and no later than five years	666	-	-
	992	-	-
Future finance charges on finance leases	(192)	-	-
Present value of finance lease liabilities	800	-	-

The present value of finance lease liabilities is as follows:

	30 September 2012	30 September 2011	31 March 2012
	£'000	£'000	£'000
No later than one year	222	-	-
Later than one year and no later than five years	578	-	-
	800	-	-

During the period the Group entered into a sale and finance leaseback arrangement for IT equipment and software.

8.      Share based payments (unaudited)

	Six months ended 30 September 2012	Six months ended 30 September 2011	Year ended 31 March 2012
	£'000	£'000	£'000
Management participation shares	147	147	294
Marwyn participation option	147	147	294
Fulcrum share option plan	70	-	-
	364	294	588
Costs of modification of management participation scheme	151	-	-
	515	294	588

There are currently three share based payment schemes in operation, details of which are set out in the Group's 2012 Annual Report and Accounts.

During the period ended 30 September 2012 the management participation shares were cancelled pursuant to an order of the Grand Court of the Cayman Islands in which the issue of the shares was declared void.  This occurred due to an administrative technicality regarding their original issuance under Cayman Islands law.  Following the cancellation the Company issued new management participation shares to ensure that the holders of the original shares received the same potential benefit as under the original scheme.  As the new scheme was put in place to replace the original scheme it has been treated as a modification of the original scheme in accordance with IFRS 2.  Costs were incurred in voiding and re-issuing these shares and as these costs related exclusively to share based payments they have been included in the income statement charge as set out above, but are not credited to retained earnings in the Consolidated Interim Statement of Changes in Equity.

9.      Related party transactions (unaudited)

The Company has paid Marwyn Capital LLP fees of £90,000 pursuant with the ongoing corporate finance advisory agreement and £30,000 of office rental.  An amount of £30,000 was owing to Marwyn Capital LLP at 30 September 2012.

The Company entered into an agreement with Marwyn Management Partners LP under which Marwyn Management Partners LP was granted an option to subscribe for Ordinary shares subject to growth and vesting conditions being met. Under this agreement, the value of this benefit has been recognised as £147,000 for the period ended 30 September 2012.

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

10.    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.

INDEPENDENT REVIEW REPORT TO FULCRUM UTILITY SERVICES LIMITED

Introduction

We have been engaged by the company to review the condensed set of financial statements in the interim report for the six months ended 30 September 2012 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 the related explanatory 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 set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

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.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this interim report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim report based on our review.

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 UK. 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 set of financial statements in the interim report for the six months ended 30 September 2012 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the AIM Rules.

David Morritt (Senior Statutory Auditor) 

for and on behalf of KPMG Audit Plc, Statutory Auditor 

Chartered Accountants 

1 The Embankment

Neville Street

Leeds

LS1 4DW

27 November 2012

 

END

 

 

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