Unaudited Preliminary Results

RNS Number : 7689U

Bilby PLC

16 July 2018

 

16 July 2018

Bilby Plc

("Bilby", the "Group" or the "Company")

Unaudited Preliminary Results

Record revenues and profits

Bilby Plc (AIM: BILB.L), the holding company for P&R Installation Company Limited ("P&R"), Purdy Contracts Limited ("Purdy"), Spokemead Maintenance Limited ("Spokemead"), and DCB (Kent) Limited ("DCB"), a leading gas heating and building services provider, is pleased to announce its unaudited preliminary results for the 12 months ended 31 March 2018.

Highlights 

·      Revenue up 23.2% to £78.81m (2017: £63.98m)

·      Underlying EBITDA up 61.0% to £6.29m (2017: £3.91m)

·      Underlying operating profit up 68.7% to £5.98m (2017: £3.55m)

·      Gross margin of 22.4% (2017: 17.2%)

·      Profit after taxation of £3.45m (2017: £0.18m loss)

·      Basic EPS of 8.61p (2017: 0.46p loss)

·      Proposed final dividend per share of 2p (2017: 1.5p) following interim dividend of 0.5p

·     Record revenues and profits achieved following strong trading, with a number of significant new long-term customer wins enabling excellent visibility of future earnings in excess of £275m

·      The Group is now one of the largest contractors in London and the South East providing general building, gas maintenance and electrical services to over 300,000 domestic and commercial properties

Sangita Shah, Non-Executive Chairman of Bilby Plc, said:

"Bilby has delivered a year of excellent progress achieving record revenues, profitability and shareholder returns. The growth was driven by both new customer wins and through existing customers widening the remit and scope of work undertaken by Bilby companies. This performance is testament to our reputation for delivering best in class customer service and operational excellence.

We have a clear growth strategy with a dedicated and focused management team to build on the progress we have made in the last financial year and to that end, we look to the future with confidence."

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

Enquiries

Bilby Plc	020 3968 4490
Sangita Shah, Non-Executive Chairman
Phil Copolo, Deputy Executive Chairman
David Ellingham, Finance Director
Northland Capital Partners	020 3861 6625
(Nominated Adviser and Broker)
Corporate Finance:
David Hignell / Matthew Johnson
Sales and Broking:
Rob Rees
Hudson Sandler	020 7796 4133
Charlie Jack Bertie Berger

CHAIRMAN'S REVIEW

I am delighted to report that the Group has achieved an excellent performance for the year ended 31 March 2018 with record revenues, profits and shareholder returns. This was delivered by maintaining our tight focus on operational excellence and first-class customer service. The period was characterised by companies within the Group winning many new large scale contracts.   

Our commitment to best in class service enables us to maintain a culture of long-term partnerships with our customers. Reflecting this, we take great pride in the fact that year-on-year we have consistently grown the number of properties we provide services for.

In recognition of the Company's excellent progress and confidence in the future, the Board has recommended a final dividend of 2p per ordinary share that, together with the interim dividend of 0.5p, represents a total of 2.5p per share up 42.8% from 2017. The Group's shares will be marked ex-dividend on 26 July 2018 and the final dividend will be paid, subject to shareholder approval, to those shareholders on the register at close of business on 27 July 2018 in September 2018. The Group's dividend policy will continue to be actively reviewed by the Board to ensure shareholders receive an appropriate return whilst ensuring the Group retains sufficient resource to invest for growth and expansion.

Market

Bilby operates in a market with heightened awareness and focus on compliance and safety. This has led to many housing associations and councils prioritising widescale reviews of their properties. This increased awareness, coupled with the continued growing demand for high-quality affordable homes in London and the South East, ensures that gas heating, electrical and general building services remain in high demand. In this growing market Bilby's long-term track record of delivery and reputation for the highest levels of customer satisfaction ensure it is ideally placed to meet this demand and grow and deliver value for all stakeholders.

Strategy

Bilby's strategy is to grow organically and when market conditions allow, complement this with our targeted buy and build strategy. In addition to the excellent organic growth achieved during the period through the winning of new large-scale contracts. Bilby has also had success in cross-selling services from within the Group and expanding the scope of work with existing customers. This operational momentum significantly increases the Group's visibility of future revenues which currently stands at £275 million. 

The Group listed on the AIM market in 2015 with one subsidiary and today there are four companies within the Bilby Group. We continue to benefit from the scale and the collective organisation which has enabled them to tender for larger scale contracts. These efficiencies of scale within our core London and South-East market deliver both excellent customer service levels and high margin returns. 

Growth through acquisition still remains a key focus and we continue to review a number of opportunities that could meet our strict acquisition criteria. These criteria target first class management teams providing complementary services in our target markets to ensure further high margin and sustainable growth.

Our People

On behalf of the Board I would like to thank our employees for their continued hard work, diligence and focus on providing our customers with a first-class service. They ultimately create and maintain the high reputation the business is proud of. The Group will continue to invest in the development and training of all our employees and we are fully committed to being a best in class employer.

Outlook

We are extremely well placed to exploit many of the opportunities that the market presents and build on the success of an excellent period. We have a clear, proven growth strategy of developing our presence in our core market in London and the South East. The companies within the Bilby Group will continue to benefit from the opportunities and synergies that come with increased scale, a reputation for a first-class offering and a tight geographic focus. We are excited by what the future holds and we look to it with confidence.

Sangita Shah, Non-Executive Chairman

STRATEGIC REPORT

Operational review

In the year ended 31 March 2018 Group revenue increased by 23.2% to £78.81m (2017: £63.98m) with adjusted EBITDA up 61.0% to £6.29m (2017: £3.91m). Underlying operating profit was up 68.7% to £5.98m (2017: £3.55m). Net debt at the year-end was £5.41m (2017: £3.95m). The Group was able to deliver a record performance for the year as a result of both winning new large-scale contracts with blue chip organisations as well as expanding the remit and scope of services provided for many existing customers.

The Group has continued to make significant investments during the period. These have primarily been made into operational systems that maximise the synergies and efficiencies within the Group. The Group has been able to fund this investment and the ongoing expansion of Bilby from existing working capital facilities and the re-investment of profits.

Our market

Over the last three years since IPO, the Group has expanded its offering to include gas heating, electricity and general building maintenance services. Bilby's primary customer base remains local authority and social housing organisations and it continues to operate within the geographic focus of London and the South East. This market offers a dense customer base, allowing operational efficiencies that in turn deliver industry leading margins. The Group has a long-standing reputation amongst its customers for providing first-class customer service that is underpinned by its disciplined focus on operational excellence.   

During the period there has been a heightened awareness and a greater focus on building safety, and regulatory compliance. Accordingly, many customers have initiated large-scale reviews and upgrade programmes for their properties. As a result of this, many customers of the Group have broadened the remit and scope of work for Bilby to address.

Government initiatives, such as the Decent Homes Standard and the Right to Repair scheme, continue to ensure that investment levels and maintenance spend is maintained. Alongside this, the Autumn Budget 2017 highlighted the need to build a further 300,000 homes every year to meet the demand for social housing.   

Our Companies

Today, the Bilby Group comprises four trading companies. These are P&R, the award-winning provider of gas heating and building maintenance service; Purdy, an award-winning Contractor in Electrical, Mechanical and Property Services; DCB, provider of high quality building, refurbishment and maintenance services; and, Spokemead, a specialist in in electrical installation, repairs and maintenance services. They offer complementary services and are able to maximise customer synergies and cross selling opportunities. As part of the Bilby Group, they also benefit from the centralised larger scale purchasing function. Bilby continues to leverage the collective scale of the business to win larger scale contracts where customers require a wide range of services.

Customer Progress

During the year, Bilby gained a significant number of new and large-scale contracts from both its existing customer base and new customers. This is testament to the excellent work, customer care and dedication our employees have for our customers which drives the high reputation the Bilby companies enjoy. The Board is particularly pleased that the number of projects where several Bilby companies are working together has increased. It is also pleasing to report an increase in the range of services offered by Bilby Group.

In the year, Purdy secured key large-scale new contracts with the London Borough of Barnet and Aldwych Housing. These contracts will last for five and three years respectively and this gives the Group an even greater presence in London operating in 15 out of the 33 Boroughs of London.

Purdy was successfully appointed to the Eastern Procurement Framework which consists of 24 housing associations and councils as well as being appointed to the University of Essex Electrical Framework. Purdy extended the scope of work with its existing customer Hackney Council by delivering a significant level of asset management work. The Company worked with Peabody Housing on a new separate contract to install fire alarms and emergency lighting to council blocks.

P&R had a positive year with new long term contracts signed increasing the earnings visibility. Most notably, it secured a major contract with Metropolitan Housing, to upgrade their existing commercial plant and install high efficient heat to flats. Furthermore, it won a new five-year contract with Islington Council to provide plumbing and drainage works to properties across the borough. During the period P&R undertook new work for Fulham and Hammersmith Council as well as successfully completing substantial work for two crematoriums for Wandsworth Council. P&R also signed a three-year contract extension with Hyde Housing across Kent and London to provide gas heating and maintenance services. It also started work on its eight-year contract for East Kent Housing which is the largest gas services contract in Kent and covers servicing support for over 16,700 properties. The Board are pleased to report that P&R has no major contract renewals or re-tenders for three years driving earnings visibility in the future. In order to focus on it higher margin gas services offer, recently P&R gave notice of termination of its contract to supply building maintenance services for Ministry of Defence properties.

In the period, DCB was awarded a three-year Aid and Adaptions contract with Optivo and agreed a contract with Golding Homes to refurbish 14 units as part of the Affordable Homes scheme in Maidstone. Furthermore, DCB completed Phase 1 of Ashford Borough Council Affordable Homes early and as a result was nominated for LABC Excellence Award. Alongside this, DCB successfully delivered all of the kitchen and bathroom projects for the University of Kent student accommodation.

Frameworks remain a key customer referral source for the Group. P&R's position within the South East Consortium framework enabled it to secure a five year contract providing maintenance and electricity support for Kings College Hospital. Purdy's place within the South-East Consortium enabled it to secure contracts with Local Space, B3Living, IDS, YMCA and Notting Hill Housing Group. Furthermore, Purdy was appointed to the Easter Procurement Framework that consists of 24 housing associations and councils as well as being appointed to the University of Essex Electrical Framework.

Operational Excellence

Bilby's highly regarded service offering for its blue-chip, large-scale customer base is underpinned by operational excellence and customer satisfaction. We continue to receive high advocacy levels with customer compliance levels currently running at nearly 100% and customer satisfaction at above 95%.

During the period Bilby made substantial investment in its operational software. This has delivered further efficiencies both within the Group's finance function as well as improving Bilby's engineer time-management software which is now delivering record levels of engineer productivity.

Bilby prides itself on its highly skilled, committed and collaborative workforce. The Group has worked to ensure that staff retention and development levels remain high. A critical component of this is the success of our apprenticeship scheme that now employs a record number of 34 apprentices throughout the Group.

Outlook

Bilby has made considerable progress during the year. Growth from existing customers and new large-scale customer wins have given the Group excellent future visibility of revenues and an excellent platform to capitalise on. We build our long-term customer partnerships by delivering a first-class service that remains critical to our approach. Our strict cost disciplines and geographic focus continues to ensure that we can deliver industry leading margins. Our core markets in London and the South East remain buoyant and present significant opportunities for all the companies in the Bilby Group. We look forward with confidence.

Phil Copolo, Deputy Executive Chairman

Financial Review

Revenue

We are delighted to report record revenues of £78.81 million for the year to 31 March 2018 (£63.98 million for the year to 31 March 2017).

Underlying Operating Profit

We are also pleased to report underlying operating profits of £5.98 million (2017: £3.55 million).  These are adjusted for the share based payment charge, restructuring costs, amortisation of customer relationships, acquisition costs, change in estimated accrued income and the change in value of contingent consideration. 

Our direct costs are being closely monitored on all our contracts and as a result our gross margins have improved to 22.4% (2017: 17.2%). The Group has benefited from the increased purchasing power the acquisitions and internal growth has afforded without compromising the service levels.  We now have the opportunity for each company within the Group to enjoy a flexible workforce either through our direct labour or utilisation of sub-contractors.  This flexibility and greater purchasing power has enabled the Group to gain critical mass.

Overhead costs

Our central overhead costs have remained constant and are considerably lower than comparable AIM listed companies.  We remain cost conscious, with each subsidiary requiring group approval to increase their overhead expenditure. 

Our Financial Position

We continue to strengthen our financial position with Group Total Assets of £39.4million at 31 March 2018 (2017: £36.9 million). The Group Net Assets as at 31 March 2018 were £16.6million (2017: £13.4million).  Net debt (bank loans plus lease purchase liabilities less cash) at 31 March 2018 amount to £5.41 million (2017: £3.95 million) with the majority of this balance being attributable to the 5-year term loan signed for the purpose of the acquisitions of Purdy, DCB and Spokemead.

The Group has a working capital facility of £3.75 million as at 31 March 2018.  At this date it had utilised £954,000 of the overdraft facility.

The Group has complied with all the financial covenants set by our bankers HSBC Bank Plc, during the financial year.

We are fortunate to enjoy long term client relationships with a number of local government organisations and other housing associations.  This has resulted in an improvement in cash collections.  We continue to monitor cash collection on both a long-term and daily basis.  In addition, management have focused on improving financial and operating systems and the rollout of Bilby's enhanced financial software has enabled us to become more efficient.  We have also managed to negotiate better terms with our suppliers which has enable us in some cases to take advantage of early settlement discounts.

We focus on a range of key indicators to assess our performance.  Our performance indicators are both financial and non-financial and ensure that the Group targets its resources around its customers, operations and finance.  Collectively they form an integral part of the way that we manage the business to deliver our strategic goals.

The two key business drivers which are monitored on a regular basis are as follows:

·      Customer compliancy - currently running near 100% across our largest contracts

·      Customer satisfaction - currently running at 95%+ across our largest contracts

Group Highlights	Unaudited 12 months to 31 March 2018	Audited 12 months to 31 March 2017
	£million	£million
Revenue	78.81	63.98
Gross profit	17.69	11.02
Gross margin	22.4%	17.2%
Underlying EBITDA	6.29	3.91
Underlying operating profit	5.98	3.55
Underlying profit before taxation 2	5.79	3.32
Basic EPS	8.61p	(0.46)p
EPS basic (adjusted) 1	12.3p	7.7p
Dividend per share	2.5p	2.25p
Cash	0.07	1.90
Total assets	39.46	36.91
Net working capital 3	12.11	7.02
Net assets	16.62	13.41

Notes

1.  Adjusted for amortisation of customer relationships, share based payment charges, acquisition costs, framework development costs, change in estimate of accrued income, restructuring costs and change in value of contingent consideration.

2.  Underlying profit before taxation is stated after interest and before charging the share based payment charges, acquisition costs, framework development costs, amortisation of customer relationships, change in value of contingent consideration, change in estimate of accrued income and restructuring costs.

3.  Calculated as cash, inventories, trade and other receivables less trade and other payables.

Dividends

The Board has recommended a final dividend of 2p per ordinary share which is subject to shareholder approval at the Annual General Meeting. Bilby's shares will be marked ex-dividend on 26 July 2018 and the final dividend will be paid in September 2018 to those shareholders on the register at the close of business on 27 July 2018. Together with the interim dividend of 0.5p, this represents a total dividend of 2.5p per ordinary share for the year.

Conclusion

The Group continues to make progress and is driven by a determined focus to increase shareholder value.  Management intend to achieve this by continuing to implement the following:-

·      Increasing revenues, maintaining margins and growing earnings in a sustainable and profitable manner.

·      Increasing our client base.

·      Efficient and targeted investment of cash.

·      Making full utilisation of our increased purchasing power.

·      Where and when appropriate implementing an earnings enhancing buy and build strategy.

·      Applying a dividend policy which closely tracks earnings growth.

·      Undertaking continual risk reviews during the year.

We look forward to providing our shareholders with updates regarding our key financial objectives during the course of the next financial year. We believe the Group is well placed to continue its growth objections in the expanding social housing sector in London and the South East.

David Ellingham, Finance Director     

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2018

		Unaudited 12 months ended 31 March 2018				Audited 12 months ended 31 March 2017
	Notes	Underlying items	Non-underlying items (note 6)	Total		Underlying items	Non- underlying items (note 6)	Total
		£'000	£'000	£'000		£'000	£'000	£'000
REVENUE	4	78,807	-	78,807		63,981	-	63,981
Cost of sales		(61,115)	-	(61,115)		(52,966)	-	(52,966)
		───────	───────	───────		───────	───────	───────
GROSS PROFIT		17,692	-	17,692		11,015	-	11,015
Administrative expenses		(11,710)	(1,498)	(13,208)		(7,470)	(3,254)	(10,724)
		───────	───────	───────		───────	───────	───────
OPERATING PROFIT	5	5,982	(1,498)	4,484		3,545	(3,254)	291
Finance costs		(192)	-	(192)		(227)	-	(227)
		───────	───────	───────		───────	───────	───────
Net finance costs		(192)	-	(192)		(227)	-	(227)
		───────	───────	───────		───────	───────	───────
PROFIT BEFORE TAX		5,790	(1,498)	4,292		3,318	(3,254)	64
Income tax expense				(844)				(244)
				───────				───────
PROFIT / (LOSS) FOR THE YEAR attributable to the equity holders of the parent company				3,448				(180)
				───────				───────
Total comprehensive income for the year attributable to the equity holders of the parent company				3,448				(180)
				═══════				═══════
Basic earnings / (loss) per share (pence)	7			8.61p				(0.46)p
				═════				═════
Diluted earnings / (loss) per share (pence)	7			8.51p				(0.46)p
				═════				═════

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2018

		Issued share capital		Share premium				Share based payment reserve		Merger reserve		Retained earnings		Total equity
		£'000		£'000				£'000		£'000		£'000		£'000
Balance at 1 April 2016		3,425		3,659				163		(1,624)		2,382		8,005
Audited
Loss and total comprehensive income for the year		-		-				-		-		(180)		(180)
Issue of share capital		548		4,575				-		1,376		-		6,499
Issue costs		-		(158)			-			-		-		(158)
Share-based payment charge		-		-			342			-		-		342
Tax credit relating to share option scheme		-		-			-			-		(204)		(204)
Dividends paid		-		-			-			-		(894)		(894)
Total transactions with owners recognised directly in equity		548		4,417			342			1,376		(1,098)		5,585
Balance at 31 March 2017		3,973		8,076			505			(248)		1,104		13,410
Unaudited
Profit and total comprehensive income for the year		-		-			-			-		3,448		3,448
Issue of share capital		55		316			-			-		-		371
Share-based payment charge		-		-			194			-		-		194
Dividends paid		-		-			-			-		(800)		(800)
Total transactions with owners recognised directly in equity		55		316			194			-		(800)		(235)
Balance at 31 March 2018		4,028		8,392			699			(248)		3,752		16,623

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018

Notes				Unaudited 2018	Audited 2017
				£'000	£'000
ASSETS
	NON CURRENT ASSETS
		Intangible assets	8	14,036	15,843
		Property, plant and equipment		1,638	1,821
				───────	───────
				15,674	17,664
	CURRENT ASSETS
		Inventories		3,153	1,993
		Trade and other receivables		20,561	15,358
		Cash and cash equivalents		72	1,895
				───────	───────
		TOTAL CURRENT ASSETS		23,786	19,246
				───────	───────
	TOTAL ASSETS			39,460	36,910
				═══════	═══════
EQUITY AND LIABILITIES ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY
	ISSUED CAPITAL AND RESERVES
		Share capital	11	4,028	3,973
		Share premium	11	8,392	8,076
		Share-based payment reserve		699	505
		Merger reserve	11	(248)	(248)
		Retained earnings		3,752	1,104
				───────	───────
				16,623	13,410
NON CURRENT LIABILITIES
	Borrowings		9	2,949	4,363
	Obligations under finance leases			11	78
	Deferred consideration			-	1,000
	Deferred tax liabilities			1,883	2,184
				───────	──────
				4,843	7,625
CURRENT LIABILITIES
	Borrowings		9	2,452	1,276
	Obligations under finance leases			70	131
	Current income tax liabilities			2,800	225
	Deferred consideration			1,000	2,013
	Trade and other payables			11,672	12,230
				───────	───────
	TOTAL CURRENT LIABILITIES			17,994	15,875
				───────	───────
TOTAL EQUITY AND LIABILITIES				39,460	36,910
				═══════	═══════

 

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018

		Unaudited 12 months ended 31 March 2018	Audited 12 months ended 31 March 2017
	Notes	£'000	£'000
Net cash generated from operating activities	10	802	3,357
		───────	───────
Cash flow from investing activities
Acquisition of subsidiaries including deferred consideration		(1,154)	(8,700)
Net cash acquired on acquisition		-	2,066
Purchases of property, plant and equipment		(89)	(120)
Purchase of intangible assets		(24)	(57)
Proceeds on disposal of property, plant and equipment		-	69
		───────	───────
Net cash used in investing activities		(1,267)	(6,742)
Cash flow from financing activities
Proceeds from borrowings		250	2,500
Repayment of borrowings		(1,442)	(1,182)
Interest paid		(192)	(219)
Capital element of finance lease payments		(128)	(211)
Issue of ordinary share capital		-	5,000
Issue costs		-	(158)
Dividend paid		(800)	(894)
		───────	───────
Net cash (used in) / generated from financing activities		(2,312)	4,836
Net (decrease) / increase in cash and cash equivalents		(2,777)	1,451
		───────	───────
Cash and cash equivalents at beginning of year		1,895	444
		───────	───────
Cash and cash equivalents at end of year		(882)	1,895
		═══════	═══════

Note

The cash and cash equivalents at the year-end represent the net of overdrafts of £954,000 (note 9) together with the cash and cash equivalents shown on the balance sheet of £72,000.
 

NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018

1.       BASIS OF PREPARATION

Bilby Plc and its subsidiaries (together 'the Group') operate in the gas heating, electrical and general building services industries. The Company is a public company operating on the AIM Market of the London Stock Exchange and is incorporated and domiciled in England and Wales (registered number 09095860). The address of its registered office is 6-8 Powerscroft Road, Sidcup, DA14 5DT. The Company was incorporated on 20 June 2014.

The Group's preliminary results have been prepared on a going concern basis under the historical cost convention, and in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union, the International Financial Reporting Interpretations Committee ("IFRIC") interpretations issued by the International Accounting Standards Boards ("IASB") that are effective or issued and early adopted as at the time of preparing these financial statements and in accordance with the provisions of the Companies Act 2006.

The Group has adopted all of the new and revised standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB, as they have been adopted by the European Union, that are relevant to its operations and effective for accounting periods beginning on 1 April 2017.

The preparation of financial statements requires management to exercise its judgement in the process of applying accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

The functional and presentational currency of the Group is Pounds Sterling (£).

The principal accounting policies adopted by the Group are set out in note 2.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1.      Going Concern

As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled "Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risk", issued April 2016.

The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of these consolidated financial statements. In developing these forecasts the Directors have made assumptions based upon their view of the current and future economic conditions that will prevail over the forecast period.

On the basis of the above projections, the Directors are confident that the Group has sufficient working capital to honour all of its obligations to creditors as and when they fall due. Accordingly, the Directors continue to adopt the going concern basis in preparing these consolidated financial statements.

2.2.      Basis of Consolidation

The consolidated financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 31 March each year. Subsidiaries are entities over which the Company has the power to control the financial and operating policies so as to obtain benefits from their activities. The Group generally obtains and exercises control through voting rights.

The consolidated financial statements incorporate the financial information of Bilby Plc and its subsidiaries. Subsidiary companies are consolidated from the date that control is gained.

On 6 March 2015 the Company acquired the shares of P&R in exchange for its own shares. The Company issued 25,000,000 10p shares in exchange for the entire share capital of P&R. The acquisition did not meet the definition of a business combination as the Company was not a business and therefore falls outside the scope of IFRS 3. As IFRS does not provide specific guidance in relation to group reorganisations it defers to the next appropriate GAAP being UK GAAP. The acquisition of P&R by the Company has therefore been accounted for in accordance with the principles of merger accounting as applied to group reorganisations as set out in Section 19 of FRS102. Accordingly, the consolidated financial statements for the Group have been presented as if the Company throughout the current and preceding periods has owned P&R. The comparative figures for the previous year include the results of the merged entity, the assets and liabilities at the previous balance sheet date and the shares issued by the Company as consideration as if they had always been in issue. The difference between the share capital of P&R and the nominal value of shares issued by the Company to acquire P&R is recorded as a merger reserve.

On 13 July 2015, the Company acquired the entire issued share capital of Purdy for a consideration of £8.07 million. The acquisition meets the definition of a business combination and has been accounted for using the acquisition method in accordance with the Group's accounting policy.

On 12 April 2016, the Company acquired the entire issued share capital of DCB for a consideration of £4 million. The acquisition meets the definition of a business combination and has been accounted for using the acquisition method in accordance with the Group's accounting policy.

On 12 April 2016, the Company acquired the entire issued share capital of Spokemead for an estimated consideration of £8.7 million. The acquisition meets the definition of a business combination and has been accounted for using the acquisition method in accordance with the Group's accounting policy.

All intra-group transactions, balances, income and expense are eliminated on consolidation.

2.3         Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the provision of the Group's services. Revenue is recognised by the Group, net of value added tax, based upon the following:

Gas Maintenance - Gas maintenance revenue is recognised when the services have been rendered, that is when the individual job has been completed.

Building Services - Building Services contracts range between 2-24 months. During the course of a project an independent surveyor will conduct a monthly review of the work done and agree an incremental payment. The Group thus recognises the revenue of a project gradually and on a monthly basis upon the accreditation of the surveyor. Revenue recognisable in relation to work completed and accredited is recognised as accrued income until invoiced.

Electrical services - Electrical services revenue is recognised when the services have been rendered, that is when the individual job has been completed.

Trade Counter - Revenue is recognised upon the point of sale of items sold over the trade counter.

3.       CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of these consolidated financial statements in conformity with IFRS as adopted by the European Union requires the Directors to make certain critical accounting estimates and judgements. In the process of applying the Group's accounting policies, management has decided the following estimates and assumptions have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities recognised in the consolidated financial statements.

Recoverability of trade receivable balances

In the periods shown in these consolidated financial statements, there are a small number of customers with a significant trade receivable balance at the period end. Management have not made a provision against any of these receivable balances at any date. Although this is an area of judgement, management are comfortable with this position due to the high credit ratings of the customers involved and the lack of any history of non-payment.

Valuation of accrued income

Revenue recognisable in relation to work completed and accredited is recognised as accrued income until invoiced based on actual purchase order value, plus any variations or based on the estimated cost of the job using recent past performance as a basis for the price of the work. Some judgement is therefore required in assessing the estimated cost but management are comfortable with their basis of estimation which has been supported by post year end invoice values.

Share based payment charge

The Group issued share options to Directors and employees of the Group in the year. The Black Scholes model is used to calculate the appropriate charge for these options. The use of this model to calculate a charge involves using a number of estimates and judgements to establish the appropriate inputs to be entered into the model, covering areas such as the use of an appropriate interest rate and dividend rate, exercise restrictions and behavioural considerations. A significant element of judgement is therefore involved in the calculation of the charge.

Valuation of customer relationships

Determining the valuation of customer relationships does require use of estimates and judgements in terms of determining the relevant cash flows and the discount factor to be applied in the valuation to calculate the present value. Future cash flows are estimated based on actual contract values and durations for contractual relationships. Average monthly run rates and estimated durations using length of current relationship, then moderated using an attrition rate, are applied to non-contractual relationships. Cash outflows are forecast using direct costs and overheads based on past performance. Change in contract values and duration, together with margins achieved and overheads applied could result in variations to the carrying value of customer relationships. In addition, an adverse movement in the discount factor due to an increased risk profile or a change in the cost of debt (increase in interest rates) would also result in a variation to the carrying value of the customer relationships.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimate of the value in use of the Cash Generating Units (CGUs) to which goodwill has been allocated. The value in use calculation involves an estimate of the future cash flows of the CGUs and also the selection of appropriate discount rates to calculate present values. Future cash flows are estimated based on contract values and duration, together with margin based on past performance. Change in contract values and duration, together with margins achieved could result in variations to the carrying value of goodwill. In addition, an adverse movement in the discount factor due to an increased risk profile or a change in the cost of debt (increase in interest rates) would also result in a variation to the carrying value of goodwill.

4.       REVENUE

Revenue is analysed as follows:

	Unaudited 12 months ended 31 March  2018	Audited 12 months ended 31 March 2017
	£'000	£'000
Gas Maintenance	14,574	11,563
Building Services	48,289	38,072
Electrical Services	15,944	14,183
Other	-	163
	───────	───────
	78,807	63,981
	───────	───────

All results in the current and prior year derive from continuing operations and all revenues are derived in the UK.

5.       OPERATING PROFIT AND EBITDA

Operating Profit

Operating profit is stated after charging all costs including non-underlying items.

		Unaudited 12 months ended 31 March 2018		Audited 12 months ended 31 March 2017
		£'000		£'000
Inventory recognised as an expense in cost of sales		34,955		12,625
Staff costs		10,202		13,589
Depreciation		256		310
Amortisation of software		39		32
Loss on disposal of property, plant and equipment		17		21
Auditor's remuneration		98		95
Non-audit remuneration		21		44
Operating lease rentals		1,257		547
		───────		───────

The depreciation and amortisation charges as stated in the table above are included within administrative expenses in the Consolidated Statement of Comprehensive Income.

Earnings Before Interest Taxation, Depreciation and Amortisation ("EBITDA")

EBITDA is calculated as follows:

		Unaudited 12 months ended 31 March 2018		Audited 12 months ended 31 March 2017
		£'000		£'000
Underlying profit before taxation		5,790		3,318
Finance costs		192		227
Depreciation		256		310
Amortisation		39		32
Loss on disposal of property, plant and equipment		17		21
		───────		───────
Underlying EBITDA		6,294		3,908
		───────		───────

6.       NON-UNDERLYING ITEMS

Operating profit includes the following items which are considered by the Board to be one off in nature, non-cash expenses or necessary elements of expenditure to derive future benefits for the Group which have not been capitalised in the Consolidated Statement of Financial Position.

	Unaudited 12 months ended 31 March 2018	Audited 12 months ended 31 March 2017
	£'000	£'000
Change in fair value of future contingent consideration	-	102
Restructuring costs	-	358
Amortisation of customer relationships	1,792	1,792
Share based payment charge	194	341
Acquisition costs	-	395
Change in estimate of accrued income	-	266
Fair value adjustment	(488)	-
	───────	───────
	1,498	3,254
	───────	───────

Amortisation of customer relationships was £1.79 million for the year (2017: £1.79 million).

A group share option scheme is in place and options were granted during the year. The share based payment charge has been separately identified as it is a non-cash expense.

Acquisition costs comprise legal, professional and other expenditure in relation to acquisition activity during 2017 amounted to £395,000. There were no acquisition costs in 2018.

The fair value adjustment relates to a reduction in the consideration payable on the acquisition of Spokemead.

7.       EARNINGS PER SHARE

The calculation of basic and diluted earnings per share is based on the result attributable to shareholders divided by the weighted average number of ordinary shares in issue during the year.

Basic earnings per share amounts are calculated by dividing net profit / (loss) for the year or period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

The Group has potentially issuable shares all of which relates to potential dilution from the Group's share options issued to Directors and employees in the period.

Basic and diluted profit per share from continuing operations is calculated as follows:

	Unaudited 12 months ended 31 March 2018	Audited 12 months ended 31 March 2017
	£'000	£'000
Profit / (loss) used in calculating basic and diluted earnings per share	3,448	(180)
	───────	───────

Number of shares
Weighted average number of shares for the purpose of basic earnings per share	40,049,590	39,433,083
	───────	───────

Weighted average number of shares for the purpose of diluted earnings per share	40,491,051	39,433,083
	───────	───────

Basic earnings/(loss) per share (pence)	8.61	(0.46)
	───────	───────

Diluted earnings/(loss) per share (pence)	8.51	(0.46)
	───────	───────

Adjusted EPS

Profit after tax is stated after deducting non-underlying items totalling £1.50 million (2017: £3.2 million). Non-underlying items are either one-off in nature, non-cash expenses or necessary elements of expenditure to derive future benefits for the Group which have not been capitalised in the Consolidated Statement of Financial Position. These are shown separately on the face of the Consolidated Statement of Comprehensive Income.

The calculation of adjusted basic and adjusted diluted earnings per share is based on the result attributable to shareholders, adjusted for exceptional items, divided by the weighted average number of ordinary shares in issue during the year.

	Unaudited 12 months ended 31 March 2018	Audited 12 months ended 31 March 2017
	£'000	£'000
Profit / (loss) after tax	3,448	(180)
Add back
Change in fair value of contingent consideration	-	102
Restructuring costs	-	358
Amortisation of customer relationships	1,792	1,792
Share based payment charge	194	341
Acquisition costs	-	395
Change in estimate of accrued income	-	266
Impact of above adjustments on Corporation Tax	-	(53)
Fair value adjustment	(488)	-
	───────	───────
Adjusted profit after tax	4,946	3,021
	──────	───────

Number of shares
Weighted average number of shares for the purpose of adjusted earnings per share	40,049,590	39,433,083
	───────	───────

Weighted average number of shares for the purpose of diluted adjusted earnings per share	40,491,051	40,055,023
	───────	───────

Adjusted earnings per share (pence)	12.3	7.7
	───────	───────

Diluted adjusted earnings per share (pence)	12.2	7.5
	───────	───────

 

8.       INTANGIBLE ASSETS

	Software costs £'000	Customer relationships £'000	Goodwill £'000	Total £'000
Cost
At 1 April 2017	169	13,832	4,256	18,257
Additions in the year	24	-	-	24
	───────	───────	───────	───────
At 31 March 2018 (Unaudited)	193	13,832	4,256	18,281
	═══════	═══════	═══════	═══════

Amortisation
At 1 April 2017	40	2,374	-	2,414
Charge for the year	39	1,792	-	1,831
	───────	───────	───────	───────
At 31 March 2018 (Unaudited)	79	4,166	-	4,245
	═══════	═══════	═══════	═══════

Net book value
At 31 March 2017	129	11,458	4,256	15,843
	═══════	═══════	═══════	═══════
At 31 March 2018 (Unaudited)	114	9,666	4,256	14,036
	═══════	═══════	═══════	═══════

The DCB, Spokemead and Purdy customer relationships intangible asset were originally included at cost of £2.4 million, £5.9 million and £5.6 million respectively.

These represent the expected value to be derived from contractual and non-contractual customer relationships. The value placed on the contractual customer relationship is based on the expected cash revenue inflows over the estimated remaining life of each existing contract.

Goodwill on consolidation of DCB, Spokemead and Purdy arise on the excess of cost of acquisition over the fair value of the net assets acquired on purchase of the companies.

DCB, Spokemead and Purdy are their own CGU's for the purposes of the goodwill calculation and impairment reviews carried out by the Board and monitored on an ongoing basis.

9.       BORROWINGS

	Unaudited 2018	Audited 2017
	£'000	£'000
Non-Current borrowings:
Bank borrowings:
Term loans	2,578	3,936
Mortgage loan	371	427
	───────	───────
	2,949	4,363
	───────	───────
	2,949	4,363
	═══════	═══════
Current borrowings:
Convertible loan note	-	513
Bank borrowings:
Term loans	1,441	1,219
Mortgage loan	57	57
Overdraft	954	-
	───────	───────
	2,452	1,276
	───────	───────
	2,452	1,789
	═══════	═══════
Total borrowings
Convertible loan note	-	513
Bank borrowings:
Term loans	4,019	5,154
Mortgage loan	428	485
Overdraft	954	-
	───────	───────
	5,401	5,639
	───────	───────
	5,401	6,152
	═══════	═══════

Working Capital Facilities

On 28 November 2016, the Group extended its working capital facility to £2.25 million to accommodate a transfer of DCB's banking from invoice discounting to the Group's working capital facility.

As at 31 March 2018, the Group had extended its working capital facility to £3.75 million to fund the internal growth of the Group.

Bank overdrafts are held at an interest rate of 2.5% above the Bank of England base rate. All cash at bank balances are denominated in £ sterling. As at 31 March 2018, the Group had unused overdraft facilities of £2.80 million (2017: £2.25 million).

Bank Loans and Overdrafts

The non-current proportion of bank loans amounted to £2.95 million as at 31 March 2018 (31 March 2017: £4.36 million), and current proportion of amounted to £2.45 million as at 31 March 2018 (31 March 2017: £1.28 million). Bank loans are repayable by quarterly instalments. Bank loans are held at an interest rates of 2.75% and 1.9% above the Bank of England base rate.

Security

Bank loans are secured on related property, plant and equipment and debtor books of the Group.

In respect of bank debt there is an Unlimited Composite Company Guarantee given by Bilby, Purdy, P&R, DCB and Spokemead to secure all liabilities of each borrower.

Loan Note

On 13 July 2015 Bilby issued £500,000 of loan notes to J R Horlock as part of the consideration for Purdy.

On 14 July 2017, the loan note and outstanding interest was settled from existing cash reserves.

10.     CASH FLOW FROM OPERATING ACTIVITES

	Unaudited 2018	Audited         2017
	£'000	£'000
Profit before income tax	4,292	64
Adjustments for;
Net finance cost	192	227
Loss on disposal of property, plant and equipment	17	21
Depreciation	256	310
Amortisation of intangible assets	1,831	1,824
Share based payments	194	342
Unwinding of fair value discount	-	102
Fair value adjustment	(488)	-
Movement in receivables	(5,203)	586
Movement in payables	1,493	1,649
Movement in inventories	(1,160)	(1,115)
Tax paid	(622)	(653)
Net cash generated from operating activities	802	3,357

11.     SHARE CAPITAL

Ordinary shares of £0.10 each	Unaudited 2018	Audited 2017
	£'000	£'000
At the beginning of the year	3,973	3,425
Issued in the year	55	548
	───────	───────
At the end of the year	4,028	3,973
	═══════	═══════

Number of shares	Unaudited 2018	Audited 2017
At the beginning of the year	39,729,731	34,247,845
Placing of shares on AIM in connection with the acquisitions of DCB and Spokemead	-	4,237,288
Issue of initial consideration shares - DCB	-	423,729
Issue of initial consideration shares - Spokemead	-	423,729
Issue of further consideration shares - DCB	-	397,140
Issue of further consideration shares - DCB	167,113	-
Issue of further consideration shares - Spokemead	393,183	-
	───────	───────
At the end of the year	40,290,027	39,729,731
	═══════	═══════

Share Premium	Unaudited 2018	Audited 2017
	£'000	£'000
At the beginning of the year	8,076	3,659
Issued in the year	316	4,575
Issue costs	-	(158)
	───────	───────
At the end of the year	8,392	8,076
	═══════	═══════

On 12 April 2016, the Company acquired the entire issued share capital of DCB and Spokemead.  The initial consideration for DCB was satisfied by a cash payment of £1.5million together with an issue of 423,729 new Bilby ordinary shares at a price of 118 pence per share.

The initial consideration for Spokemead was satisfied by a cash payment of £5.7 million together with an issue of 423,729 new Bilby ordinary shares at a price of 118 pence per share.

The DCB and Spokemead acquisitions were partly funded through the placing of 4,237,288 new ordinary shares at a price of 118 per share raising £5 million for the Group.

Further consideration for DCB was satisfied by a cash payment of £500,000 together with an issue of 397,140 new Bilby ordinary shares at a price of 126 pence per share.

Further consideration for Spokemead was satisfied by a cash payment of £1 million paid in August 2016.

On 13 July 2017, further consideration for DCB was satisfied by a cash payment of £375,000 form the Group's cash reserves and the balance of £125,000 being settled via the issue of 167,113 ordinary shares at an issue price of 74.8p per ordinary share.

On 27 September 2017, further consideration of Spokemead was satisfied by a cash payment of £250,000 from the Group's cash reserves and the balance of £247,115 being settled via the issue of 393,183 ordinary shares at an issue price of 62.85p per ordinary share.

Merger Reserve

	Unaudited 2018	Audited 2017
	£'000	£'000
At the beginning of the year	(248)	(1,624)
On acquisition of DCB	-	919
On acquisition of Spokemead	-	457
	───────	───────
At the end of the year	(248)	(248)
	═══════	═══════

The acquisitions of DCB and Spokemead were partly funded through a placing of 4,237,288 new ordinary shares at a price of 118 pence per share.  The difference between the nominal value of the shares issued and the placing price gives rise to a premium of £1.37 million which has been added to the merger reserve.

12.     RELATED PARTY TRANSACTIONS

During the current and previous years, the Group operated from headquarters at 6-8 Powerscroft Road, Sidcup, Kent. The freehold of the property is owned by P Copolo, the major shareholder of the Group as at 31 March 2018. A formal 20 year lease was entered into on 6 March 2015 between P Copolo and the Group. Under the terms of the lease, the initial rent is £50,000 per annum with the Group being responsible for all ongoing costs.

Key management compensation

The Group's key management are considered to comprise the directors and two non-executive directors of Bilby Plc. Their remuneration is as follows:

	Unaudited 2018	Audited 2017
	£'000	£'000
The aggregate remuneration comprised:
Aggregate emoluments	462	369
Consultancy fees	72	65
	──────	──────
	534	434
Share based payments	21	30
	──────	──────
Total remuneration	555	464
	═══════	═══════

The remuneration of the highest paid director during the year was £213,755 (12 months to 31 March 2017: £116,607).

There were no other transactions with directors or key management personnel to disclose.

13.     ULTIMATE CONTROLLING PARTY

By virtue of his majority shareholding, as at 31 March 2018, P Copolo is the ultimate controlling party of Bilby Plc.

 

END

 

 

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