2 December 2021

FULCRUM UTILITY SERVICES LIMITED

("Fulcrum" or "the Group")

Unaudited interim results for the six months ended 30 September 2021

Positive H1 performance, with full year anticipated to be in line with expectations

Fulcrum Utility Services Limited, a leading independent provider of essential utility services including multi-utility connections, electric vehicle charging infrastructure, renewable energy infrastructure services and smart metering solutions, announces its interim results for the six-month period ended 30 September 2021.

The Group is pleased to announce it has made good progress in the first half of the year, as it recovers from the impact of Covid-19 and demonstrates resilience against the current volatility in the UK energy market.

Financial highlights

• H1 trading in line with management expectations;
• Trading for the full financial year is anticipated to be in line with market expectations;
• Revenues for the six months to 30 September 2021 increased by 46% on the previous year to £28.6 million (H1 2021: £19.5 million), demonstrating a strong recovery following Covid-19's impact; 
• Adjusted EBITDA⁽¹⁾ of £1.0 million (H1 2021: loss of £1.0 million) in line with management expectations;
• Loss before tax of £1.3 million (H1 2021: loss of £3.7 million) reflecting increased adjusted EBITDA⁽¹⁾ and a reduction in exceptional items; 
• Net debt⁽²⁾ of £3.3 million (31 March 2021: £1.5 million) with headroom of £5.6 million on the Group's Revolving Credit Facility at 30 September 2021.

Strategic highlights

• Achieved significant order book growth of 44%, up £24.8 million to £80.9 million at 30 September 2021 (31 March 2021: £56.1 million), driven by securing a variety of significant new contract wins;
• Successful completion of tranche three of the domestic gas assets transfer to ESP for a total consideration of £3.8 million, with £3.7 million of this received in cash on 1 June 2021;
•  The Group's refocused attention on cost discipline has delivered a 14% reduction in underlying overhead costs⁽³⁾ compared to H2 FY21. The Group expects further benefits from its actions to be realised in H2 FY22;
• The Group's broad and diverse business operations continue to demonstrate resilience within a currently volatile energy market.

Domestic Asset Sale update

The Group is pleased to confirm the successful completion of tranche four of the domestic gas assets transfer to ESP for a total consideration of £2.8 million on 30 November 2021. £2.7 million of this was received in cash on 30 November 2021 with a further £0.1 million in cash received in respect of the previous tranches of assets transferred. This additional payment was a result of the Group achieving the first enhanced payment milestone under the asset sale agreement.

In FY22 to date, the Group has successfully completed the transfers of both the third and fourth tranches of its domestic customer gas connection assets to ESP for a total consideration of £6.6 million.

The Group continues to evaluate opportunities, particularly in the smart energy infrastructure market, where strong Government stimulus and an increasing regulatory framework present significant and strategic growth opportunities to monetise all aspects of meter life.

Current trading and Outlook

The Board is satisfied with the Group's trading and performance in the first half of the year and confirms a positive outlook for the full financial year, which is anticipated to be in line with market expectations.

Fulcrum has demonstrated resilience during both the Covid-19 pandemic and the currently volatile energy market. The Board believes that this performance reflects the fundamental strength of the Group's business model with its broad and diverse operations and revenue streams.

The Group has a substantially enlarged orderbook and healthy sales pipeline, which continues to grow. Market fundamentals also remain very strong and there is a significant growth opportunity for the Group across all the diverse sectors it operates in, supported by Government stimulus that underpins the UK's transition to a low carbon economy.

The Board is excited by Fulcrum's future growth potential and remains confident that the Group's growing and healthy order book, robust business model and diverse and specialist energy infrastructure capabilities, essential to supporting the UK's energy transition, position it well to capitalise on these significant opportunities.

Terry Dugdale, CEO, said:

"We have made good progress across all areas of the business in the first half of the year. Our order book is healthy and continues to grow.

The resilience demonstrated by the Group to date in the face of ongoing turbulence in the energy market is, I believe, a testament to the robustness of the Group's business model, diverse operations and order book strength.

Our continued focus on stabilising the business and strengthening its foundations has enabled us to grow in our core markets and provides a robust platform from which to grow the business further.  The backdrop of the UK's smart energy revolution and vision for a net-zero future presents Fulcrum with significant and strategic growth opportunities and I am excited by the future prospects for the Group."

Enquiries:

Notes to Editors:

Fulcrum is a multi-utility infrastructure and services provider. The Group operates nationally with its head office in Sheffield, UK. It designs, builds, owns and maintains utility infrastructure and offers smart meter exchange programmes. https://investors.fulcrum.co.uk

Strategic and operational performance, by sector:

Fulcrum uses its specialist and broad capabilities to provide multi-utility infrastructure services and solutions to four key sectors, nationally. In the period, the Group made positive progress in all sectors, delivering a significantly enlarged order book.

The Board believes that substantial growth opportunities exist for the Group in each sector that the Group operates in, all of which are underpinned by strong regulatory and Government stimulus. 

Financial performance

The first half financial performance of the Group was in line with management's expectations and significantly ahead of the first half of last year, which was impacted by Covid-19.

Group revenue for the first six months of the financial year was £28.6 million, £9.1 million, 46% ahead of the first half of last year (H1 2021: £19.5 million). Both operating segments contributed to this growth in revenue, however the majority of the increase came from the Infrastructure: Design and Build segment (£8.9 million), reflecting increased activity on larger projects.

Gross margin, excluding the impact of exceptional items, was 21.9% in the first half of the financial year, a reduction of 2.0% compared to the first half of FY21. This reflects the Group's success in securing a variety of larger value, and typically lower margin, contracts across its core markets, which began to be delivered in the period.

An increased focus on cost discipline has resulted in a 14% reduction in underlying overhead expenses⁽³⁾ during the first half of the year compared to the second half of the financial year to 31 March 2021.

Adjusted EBITDA⁽¹⁾ was £1.0 million, a £2.0 million increase compared to the first half of last year (H1 2021: £1.0 million loss) reflecting a robust recovery from the challenges Covid-19 presented to the Group last year. The loss before tax was £1.3 million (H1 2021: loss of £3.7 million). This improvement reflects the higher adjusted EBITDA⁽¹⁾ performance and a reduction in exceptional items.

The order book has increased significantly since 31 March 2021, reflecting the larger contract wins secured following the year end. At 30 September 2021 the order book was £80.9 million, an increase of 44% from £56.1 million, at 31 March 2021.

Over the six months to 30 September 2021, net asset value reduced to £34.1 million (FY 2021: £35.4 million) primarily as a result of the £1.1 million loss after tax (H1 2021: loss of £3.1 million) and reduces net assets per share to 15.4p per share from 15.9p per share at 31 March 2021.

At 30 September 2021, the Group had net debt⁽²⁾ of £3.3 million, an increase of £1.8 million from 31 March 2021 (FY 2021: net debt of £1.5 million). This increase since year end is primarily due to the investment in utility assets of £2.3 million, essential IT infrastructure upgrades of £0.3 million, leases of £0.5 million and an outflow of £2.8 million from operating activities, reflecting the increase in revenue and the mobilisation on a number of large contracts that have recently started, offset by proceeds related to asset sales to ESP.

Delivering contracts safely, efficiently, and profitably

Maintaining the highest standards of health and safety remains our highest priority and the Group continues to operate with robust Covid-19 secure measures in place to protect all its stakeholders. A safety-first strategy is in place to ensure zero harm and, although this is well embedded into our culture and operations, we are never complacent and are committed to continuous improvement in health and safety performance.

The Group has achieved substantial order book growth in the period whilst maintaining its robust and selective tendering processes. This ensures that contracts won can be delivered in line with the Group's requirements and margin strategy.

(1)     Adjusted EBITDA from continuing operations is operating loss excluding the impact of exceptional items, other (losses) / gains, depreciation, amortisation and equity-settled share-based payment charges

(2)     Net debt is defined as cash and cash equivalents less loans and borrowings, excluding lease liabilities

(3)   Underlying overheads is administrative expenses excluding the impact of exceptional items, depreciation, amortisation and equity-settled share-based payment charge

Consolidated Interim Statement of Comprehensive Income

For the six months ended 30 September 2021 (unaudited)

Adjusted EBITDA

Adjusted EBITDA from continuing operations is the basis that the Board uses to measure and monitor the Group's financial performance as it is a more accurate reflection of the commercial reality of the Group's business. Further details of the Alternative Performance Measures are included in note 3.

Consolidated Interim Statement of Changes in Equity
For the six months ended 30 September 2021 (unaudited)

Consolidated Interim Balance Sheet
At 30 September 2021

Consolidated Interim Cash Flow Statement
For the six months ended 30 September 2021         

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

1.         Basis of preparation of the condensed consolidated interim financial information

General information

Fulcrum Utility Services Limited (the "Company") is a limited company incorporated in the Cayman Islands and domiciled in the UK. The ordinary shares are traded on AIM on the London Stock Exchange. The address of its registered office is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

The condensed consolidated interim financial information for the six months ended 30 September 2021 comprise the Company and its subsidiaries (together referred to as the "Group").

The condensed consolidated interim financial information, including the financial information for the year ended 31 March 2021 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 year ended 31 March 2021 is derived from the non-statutory accounts for that financial year. The non-statutory accounts for the year ended 31 March 2021 were approved on 30 July 2021.  The Auditor's report on those accounts was unqualified.

These condensed consolidated interim financial statements have not been audited or reviewed. They were approved by the Board on 1 December 2021.

Basis of preparation

The condensed consolidated interim financial information for the six month period ended 30 September 2021 has been prepared in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the United Kingdom. The condensed consolidated interim financial information should be read in conjunction with the Annual Report and Accounts for the year ended 31 March 2021, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom.

Going-concern basis

The condensed consolidated interim financial information is prepared on the basis that the Group is a going concern. In assessing going concern and determining whether there are material uncertainties, the Directors consider the Group`s business activities, together with factors that are likely to affect its future development and position.

A review of the Group`s cash flows, solvency, liquidity position and borrowing facilities has taken place. At 30 September 2021 the Group had net assets of £34.1 million (31 March 2021: £35.4 million) including net debt of £3.3 million (31 March 2021: net debt of £1.5 million). In the six months to 30 September 2021 the Group's net cash outflow from operations before tax was £2.8 million (FY 2021: £2.4 million).

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 has adequate cash resources for the foreseeable future. 

Accounting policies

The same accounting policies are followed in this condensed consolidated interim financial information as were applied in the Group`s latest audited financial statements to 31 March 2021.

2.         Segmental analysis

The Board has been identified as the Chief Operating Decision Maker (CODM) as defined under IFRS 8: Operating Segments. The directors consider there to be two operating segments, Infrastructure: Design and Build, and Utility assets: Own and Operate. Fulcrum's Infrastructure: Design and Build segment provides utility infrastructure and connections services. Utility assets: Own and Operate comprises both the ownership of gas, electrical and meter assets and the safe and efficient conveyance of gas and electricity through its transportation networks. Gas transportation services are provided under the iGT licence granted from Ofgem in June 2007 and electricity services are provided under the iDNO licence granted from Ofgem in November 2017.

The information provided to the Board includes management accounts comprising operating result before exceptional items for each segment and other financial and non-financial information used to manage the business on a consolidated basis.

*Adjusted EBITDA from continuing operations is operating loss excluding the impact of exceptional items, other losses/gains, depreciation, amortisation and equity-settled share based payment charges. A full reconciliation of Alternative Performance Measures are provided in note 3.

The Group derives all of its revenue from the UK and all of the Group's customers are based in the UK. The Group`s revenue is derived from contracts with customers.

3.         Alternative Performance Measures ("APMs")

The Group uses APMs, as listed below, to present users of the accounts with a clear view of what the Group considers to be the results of its underlying, sustainable business operations, thereby enabling consistent period-on-period comparisons and making it easier for users of the accounts to identify trends. APMs are not defined by IFRS and therefore may not be directly comparable with other companies` APMs. APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measurements.

A reconciliation of APMs to statutory measures is disclosed in the tables below:

(a) Reconciliation of operating loss to "adjusted EBITDA from continuing operations"

(b) Reconciliation of loss before tax to "adjusted loss before taxation"

(c) Net assets per share

4.         Exceptional items

(a)   Exceptional items included in cost of sales 

(b)   Exceptional items included in administrative expenses

5.     Other (losses)/gains

Included within other (losses)/gains are the following amounts:

Enhanced payments are amounts receivable by the Group when the number of domestic connections introduced by the Group to a third-party reaches certain pre-agreed thresholds.

The (loss)/profit on disposal of assets represents the (loss)/gain arising on sale of certain of the Group's utility assets to a third-party. The Group has entered into an agreement with the third party to sell part of its utility assets portfolio in structured tranches. The (loss)/profit outlined below is the result of assets transferred in the current and previous financial period/year.

Some of the disposed utility assets had previously been revalued in accordance with the Group policy. Upon disposal, this gave rise to a transfer between the revaluation reserve and retained earnings of £1,179,000 (year ended 31 March 2021: £574,000).

£642,000 was received in September 2021 in relation to retention amounts receivable. £500,000 related to Tranche 1 of the asset sale, and £142,000 related to Tranche 2 of the asset sale.

6.         Earnings per share (EPS)

The calculation of the adjusted basic and diluted earnings per share is based upon the following loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding:

Number of shares ('000):

7.         Taxation

At Budget 2020, the Government announced that the Corporation Tax main rate (for all profits except ring fenced profits) for the years starting 1 April 2021 and 1 April 2022 would be 19%. At Budget 2021, the Government announced that the Corporation Tax main rate would rise to 25% for the tax year starting 1 April 2023. The increase in the tax rate to 25% is considered to be substantively enacted, and accordingly the deferred tax balances that are expected to unwind after 1 April 2023 have been calculated at 25%.

The Group has £12.6 million (31 March 2021: £12.1 million) of tax losses for which deferred tax assets of £3.1 million (31 March 2021: £2.7 million) have been recognised. The deferred tax asset is expected to be recovered over 5 years. The Group also has unrecognised tax losses of £3.0 million (31 March 2021: £3.0 million) for which no deferred tax asset has been recognised as there is insufficient certainty over whether those losses will reverse.

8.     Capital commitments

At 30 September 2021 the Group had entered into contracts to purchase property, plant and equipment in the form of utility assets for the amount of £8.9 million. The capital commitments at 31 March 2021 were £9.6 million and at 30 September 2020 were £12.1 million.

9.         Property, plant and equipment

Additions of internally adopted assets within utility assets in the six months ended 30 September 2021 are stated at the full cost of construction of £0.8 million (year ended 31 March 2021: £8.8 million) less the deficit arising on internally adopted assets of £0.2 million (year ended 31 March 2021: £5.6 million).

10.       Intangible assets

11.       Trade and other receivables

12.       Trade and other payables

13.       Interest-bearing loans and borrowings

Changes in liabilities arising from financing activities are shown below:

14.       Reconciliation to net (debt)/funds

Net (debt)/funds is defined as cash and cash equivalents less loans and borrowings, excluding lease liabilities.

15.  Related parties

The Group has related party relationships with its subsidiaries, Directors and key management personnel. Details of the remuneration, share options and pension entitlement of the Directors are included in the Remuneration Report on page 44 of the Annual Report and Accounts 2021, which are available on the Fulcrum Utility Services Limited website at https://investors.fulcrum.co.uk.

Principal risks

The Board have assessed the Principal Risks as disclosed in the 2021 Annual Report and Accounts and have determined that there has been no change in the risks faced or the risk rating of the risks detailed.