TIDMFCRM

RNS Number : 6090J

Fulcrum Utility Services Ltd

14 December 2022

14 December 2022

FULCRUM UTILITY SERVICES LIMITED

("Fulcrum" or "the Group")

Unaudited interim results for the six months ended 30 September 2022

Fulcrum Utility Services Limited, a leading independent provider of essential utility services including multi-utility connections and renewable energy infrastructure, provides its interim results for the six-month period ended 30 September 2022.

The first half of FY23 has been challenging for the Group, as it has continued to experience the impact of the significant, ongoing demands presented by a turbulent energy market and wider difficult economic conditions.

The Group's legacy operational issues have also been deeper and more longstanding than anticipated. This, together with challenges with historical projects and the unprecedented cost increases impacting much of the Group's supply chain, has continued to erode sales margins and weighed heavily on the Group's performance.

The Group's progress in the period was also further hampered by a cyber security incident, which impaired managerial and system information, and the ability to fully invoice customers, for up to three weeks.

Financial headlines:

   -- Revenues for the six months to 30 September 2022 decreased by 16% on the previous year to GBP23.9 million (H122: 
      GBP28.6 million) 
 
   -- Adjusted EBITDA(1) of GBP(3.3) million (H122: Adjusted EBITDA(1) of GBP1 million) 
 
   -- Net cash(2) position as at 30 September 2022 of GBP4.8 million (30 September 2021: net debt(2) of GBP3.3 millio 
      n) 

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

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

Strategic and operational headlines:

   -- New Executive team implemented critical improvement actions to protect and improve margins and to refocus the 
      Group on its core utility infrastructure and asset ownership growth strategy 
 
   -- Despite challenging market conditions, the Group is pleased to have won a series of major utility contract awards 
      in the period including: 
 
   -- 
 
          -- a GBP4.1m contract to design and deliver the high voltage electrical infrastructure that will power a new 
             158-acre solar farm and battery storage facility; 
 
          -- a GBP2m multi-utility infrastructure project to power a leisure resort in the south of England for a 
             leading brand of family resorts; 
 
          -- a GBP2m contract to deliver High Voltage electrical infrastructure that will power a new Battery Energy 
             Storage System in the north of England; and 
 
          -- a GBP1.2 million project to support the energisation High Voltage infrastructure for a new 50MW solar 
             farm. 
 
   -- Importantly, these contracts have been tendered on in line with the Group's improved margin strategy and have 
      been secured under enhanced contractual terms which better protect the Group and its margins in the current 
      economic conditions 
 
   -- Inclusive of the contract wins, the order book at 30 September 2022 was GBP50.2 million, an increase of 3% (31 
      March 2022: GBP48.7 million) 

Domestic Asset Sale update

   -- In the period, the Group successfully completed tranche five of the domestic gas assets transfer to ESP for a 
      total consideration of GBP2.2 million on 31 May 2022. GBP2.1 million of this was received in cash on 1 June 
      22 with a further  GBP0.1 million in cash received in respect of the previous tranches of assets transferred. 

Post Period end

   -- The Group is pleased to confirm that it has continued to win a strong succession of new contract wins and 
      continues to build a healthy pipeline of new opportunities; 
 
   -- Tranche six of the domestic gas assets transfer to ESP was also successfully completed for a total consideration 
      of GBP1.6 million. GBP1.5 million of this was received in cash on 1 December 2022; 
 
   -- The Company entered into an arrangement with Bayford & Co Ltd ("Bayford") and funds managed by the Harwood 
      Capital Management Limited Group ("Harwood") in respect of the provision of funding of up to GBP6 million (the 
      "Facility") by way of a convertible loan; and 
 
   -- Review initiated to consider all the various strategic options available to the Group in order to maximise value 
      for all shareholders 
 
   -- The Group confirms that Antony Collins, Interim CEO, will leave the business on 31 December 2022 following the 
      completion of his 12-month assignment. The Board would like to thank Antony for his contribution to Fulcrum 
      during his tenure 
 
   -- Lindsay Austin, Managing Director of The Bayford Group, will take over day-to-day responsibility from Antony 
      Collins as Interim CEO. A handover process is currently underway. 

Current trading and Outlook

The Executive team's continuing priority is to protect and improve margins in the current turbulent market conditions. New critical measures, including controls and procedures to ensure optimal performance and to improve and protect the Group's margins, have been implemented and, whilst the benefits of these actions are yet to be fully realised and will take longer than expected to positively impact the Group's results, the Board is pleased that the series of multi-utility contracts won in the period have been under these revised contractual terms.

In conjunction with these management improvements, and supported by the new Facility, the Group has initiated a review of the various strategic options available to it to maximise value for all shareholders and to ensure it continues to have adequate working capital.

Medium to long-term market fundamentals remain strong and the Group's experience and capabilities mean it remains well positioned to benefit from the UK's transition to a low carbon economy and a net-zero future.

Jennifer Babington, Chair, said:

"The Board and I are disappointed in these results but remain confident that the business is taking the necessary actions to turn the Group's performance around. This is a challenging task, taking longer than anticipated, as improvements are being implemented alongside turbulent and difficult economic conditions. Despite these challenges, the medium to long-term growth opportunities for the Group remain clear and are underpinned by strong market drivers and government stimulus. We are also very pleased to be supported by our major shareholders as we move the business forward. The recent Facility will support the Group's strategy review, which will underpin its turnaround. I also believe the new Facility is another positive demonstration of the future potential that our major shareholders see in Fulcrum."

This announcement contains inside information.

Enquiries:

 
Fulcrum Utility Services Limited                        +44 (0)114 280 
 Jonathan Jager, Chief Financial Officer                 4150 
 
 Cenkos Securities plc (Nominated adviser and broker) 
 Camilla Hume / Callum Davidson (Nomad) / Michael        +44 (0)20 7397 
 Johnson (Sales)                                         8900 
 
 

Notes to Editors:

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

Financial performance

Group revenue for the first six months of the financial year was GBP23.9 million, GBP4.7 million, 16% behind the first half of last year (H1 2022: GBP28.6 million). This decline was seen across a number of our Infrastructure: Design and Build activities, as we exited a number of loss making Smart Metering Services contracts, as well as seeing fewer large gas contracting projects than in the previous year.

Gross margin, excluding the impact of exceptional items, was 11% in the first half of the financial year, down 10.9% compared to the first half of FY22, as a consequence of unprecedented increases in material and labour costs, as well as unfavourable contractual terms impeding the Group's ability to recover adverse cost impacts. These issues have since been addressed with revised and more rigorous controls being introduced with the Group anticipating the benefits will begin to be seen in the future trading periods.

The Group is reporting an adjusted EBITDA(1) of GBP(3.3) million, versus a GBP1 million adjusted EBITDA(1) in the first half of last year (H1 2022) and a loss before tax of GBP20.3 million (H1 2022: loss before tax of GBP1.3 million).

As a result of the increasing cost of capital and challenging trading conditions, the Group has felt it necessary to recognise a significant impairment of GBP12.1 million on its intangible assets, with a further GBP2.3 million being provided for additional loss making contracts identified within the Infrastructure: Design and Build operations. Consequently, the Group is reporting an Operating Loss of GBP20.2 million for the first six months of the financial year (GBP19.1 million adverse to the same period in FY22).

Pleasingly the order book has improved since 31 March 2022 and we are seeing encouraging signs of new contract wins with better target margins. At 30 September 2022 the order book was GBP50.2 million, an increase of 3% from GBP48.7 million, at 31 March 2022.

Over the six months to 30 September 2022, net asset value reduced to GBP25.5 million (FY 2022: GBP45.9 million) primarily as a result of the GBP12.1 million impairment of intangible assets, which represents a full write down of the intangibles previously carried for the Dunamis and Fulcrum businesses, and a significant impairment to the goodwill in the Maintech business. The Group is therefore reporting a GBP20.7 million loss after tax (H1 2022: loss of GBP1.1 million) and a reduction in net assets per share to 6.4p per share from 11.5p per share at 31 March 2022.

At 30 September 2022, the Group had cash and cash equivalents of GBP4.8 million, a decrease of GBP6.4 million from 31 March 2022 (FY 2022: cash and cash equivalents of GBP11.2 million).

Delivering contracts safely, efficiently, and profitably

Maintaining the highest standards of health and safety remains our highest priority. 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.

In the period, the Executive team has implemented critical improvements to protect and improve margins in the current difficult economic conditions. New contracts won, have been tendered on in line with the Group's revised margin strategy and secured under enhanced contractual terms which better protect the Group and its margins in the current economic conditions. This includes, for example, additional mechanisms to protect and recover margin considering the wider and unprecedent market issues of supply chain pressure and cost inflation in materials and labour.

Consolidated Interim Statement of Comprehensive Income

For the six months ended 30 September 2022 (unaudited)

 
 
                                                           Unaudited                      Unaudited 
                                                 Six months ended 30            Six months ended 30        Audited 
                                                      September 2022                 September 2021     Year ended 
                                                                                                          31 March 
                                                                                                              2022 
                                 Note                        GBP'000                        GBP'000        GBP'000 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 Revenue                            2                         23,939                         28,552         61,846 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 Cost of sales - underlying                                 (21,316)                       (22,306)       (50,149) 
 Cost of sales - exceptional 
  items                             4                        (2,091)                              -        (5,422) 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 Total cost of sales                                        (23,407)                       (22,306)       (55,571) 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 Gross profit                                                    532                          6,246          6,275 
 Administrative expenses - 
  underlying                                                 (7,477)                        (7,063)       (15,094) 
 Administrative expenses - 
  exceptional items                 4                       (12,694)                          (184)        (5,202) 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 Total administrative expenses                              (20,171)                        (7,247)       (20,296) 
 Other net (losses)/gains           5                          (513)                           (34)            330 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 Operating loss                                             (20,152)                        (1,035)       (13,691) 
 Net finance expense                                           (159)                          (256)          (496) 
 Loss before tax                                            (20,311)                        (1,291)       (14,187) 
 Taxation                           7                          (382)                            187            765 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 Loss for the financial 
  period/year                                               (20,693)                        (1,104)       (13,422) 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 
   Other comprehensive income 
 Items that will never be 
 reclassified to profit or 
 loss: 
 Revaluation of utility assets                                     -                              -          4,252 
 Surplus arising on utility 
  assets internally adopted in 
  the period/year                                                 29                            119             57 
 Reversal of prior increase of                                     -                           (83)              - 
 utility assets 
 Additional costs allocated to 
  previously revalued assets                                     (3)                           (37)              - 
 Impairment of previously 
  revalued utility assets                                          -                              -          (477) 
 Deferred tax on items that 
  will never be reclassified 
  to profit or loss                                              246                          (380)        (1,083) 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 Total comprehensive expense 
  for the period/year                                       (20,421)                        (1,485)       (10,673) 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 
   Loss per share attributable to the owners of the business 
                                                                                                     ------------- 
 Basic                              6                         (5.2)p                         (0.5)p         (5.2)p 
 Diluted                            6                         (5.2)p                         (0.5)p         (5.1)p 
------------------------------  -----  -----------------------------  -----------------------------  ------------- 
 
 

Adjusted EBITDA

Adjusted EBITDA 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.

 
 
                                                 Unaudited             Unaudited       Audited 
                                                Six months            Six months    Year ended 
                                        ended 30 September    ended 30 September      31 March 
                                                      2022                  2021          2022 
                                      --------------------  -------------------- 
                                                   GBP'000               GBP'000       GBP'000 
Operating loss                                    (20,152)               (1,035)      (13,691) 
Equity-settled share-based payment 
 charge                                                 27                   216           639 
Other net losses/(gains)                               513                    34         (330) 
Exceptional items within operating 
 loss                                               14,785                   184        10,624 
Depreciation and amortisation                        1,528                 1,598         3,257 
------------------------------------  --------------------  --------------------  ------------ 
Adjusted EBITDA                                    (3,299)                   997           499 
(Loss)/surplus arising on sale 
 of domestic utility assets and 
 enhanced payments                                   (513)                  (34)           330 
------------------------------------  --------------------  --------------------  ------------ 
Adjusted EBITDA including sale 
 of domestic utility assets                        (3,812)                   963           829 
------------------------------------  --------------------  --------------------  ------------ 
 

Consolidated Interim Statement of Changes in Equity

For the six months ended 30 September 2022 (unaudited)

 
                   Share capital   Share premium       Revaluation   Merger reserve          Retained   Total equity 
                                                           reserve                           earnings 
                         GBP'000         GBP'000           GBP'000          GBP'000           GBP'000        GBP'000 
----------------  --------------  --------------  ----------------  ---------------  ----------------  ------------- 
 Balance at 1 
  April 2022 
  (audited)                  399          20,777             9,969           11,347             3,383         45,875 
 Loss for the 
  period                       -               -                 -                -          (20,693)       (20,693) 
 Surplus arising 
  on utility 
  assets 
  internally 
  adopted in the 
  period                       -               -                29                -                 -             29 
 Disposal of 
  previously 
  revalued 
  assets                       -               -             (873)                -               873              - 
 Depreciation on 
  previously 
  revalued 
  assets                       -               -             (137)                -               137              - 
 Additional 
  costs 
  allocated to 
  previously 
  revalued 
  assets                       -               -               (3)                -                 -            (3) 
 Deferred tax in 
  respect of 
  items that 
  will never be 
  reclassified 
  to profit and 
  loss                         -               -               246                -                 -            246 
 Transactions 
 with equity 
 shareholders: 
 Equity settled 
  share-based 
  payments                     -               -                 -                -                27             27 
 Balance at 30 
  September 2022 
  (unaudited)                399          20,777             9,231           11,347          (16,273)         25,481 
 For the six 
 months ended 30 
 September 2021 
 Restated 
  balance at 1 
  April 2021 
  (audited)                  222             389             9,552           11,347            13,871         35,381 
 Loss for the 
  period                       -               -                 -                -           (1,104)        (1,104) 
 Surplus arising 
  on utility 
  assets 
  internally 
  adopted in the 
  period                       -               -               119                -                 -            119 
 Disposal of 
  previously 
  revalued 
  assets                       -               -           (1,179)                -             1,179              - 
 Depreciation on 
  previously 
  revalued 
  assets                       -               -             (129)                -               129              - 
 Reversal of 
  prior increase 
  of utility 
  assets                       -               -              (83)                -                 -           (83) 
 Additional 
  costs 
  allocated to 
  previously 
  revalued 
  assets                       -               -              (37)                -                 -           (37) 
 Deferred tax in 
  respect of 
  items that 
  will never be 
  reclassified 
  to profit and 
  loss                         -               -             (380)                -                 -          (380) 
 Transactions 
 with equity 
 shareholders: 
 Equity settled 
  share-based 
  payments                     -               -                 -                -               216            216 
----------------  --------------  --------------  ----------------  ---------------  ----------------  ------------- 
 Balance at 30 
  September 2021 
  (unaudited)                222             389             7,863           11,347            14,291         34,112 
----------------  --------------  --------------  ----------------  ---------------  ----------------  ------------- 
 
 

Consolidated Interim Balance Sheet

At 30 September 2022

 
                                                    Unaudited            Unaudited          Audited 
                                            30 September 2022    30 September 2021    31 March 2022 
                                    Note              GBP'000              GBP'000          GBP'000 
--------------------------------  ------  -------------------  -------------------  --------------- 
 Non-current assets 
 Property, plant and equipment         9               36,088               35,071           37,151 
 Intangible assets                    10                3,245               18,240           15,597 
 Right-of-use assets                                    2,082                2,732            2,323 
 Deferred tax assets                                    2,331                3,645            3,495 
--------------------------------  ------  -------------------  -------------------  --------------- 
                                                       43,746               59,688           58,566 
--------------------------------  ------  -------------------  -------------------  --------------- 
 Current assets 
 Contract assets                                       21,175               21,241           20,177 
 Inventories                                              421                  462              433 
 Trade and other receivables          11               10,005                7,927            9,620 
 Cash and cash equivalents            14                4,774                1,035           11,176 
--------------------------------  ------  -------------------  -------------------  --------------- 
                                                       36,375               30,665           41,406 
--------------------------------  ------  -------------------  -------------------  --------------- 
 Total assets                                          80,121               90,353           99,972 
--------------------------------  ------  -------------------  -------------------  --------------- 
 
   Current liabilities 
 Trade and other payables             12             (14,922)             (12,570)         (15,825) 
 Contract liabilities                                (27,107)             (30,636)         (25,272) 
 Current lease liability                                (808)                (913)            (802) 
 Current provisions                   15              (3,161)                 (34)          (3,035) 
--------------------------------  ------  -------------------  -------------------  --------------- 
                                                     (45,998)             (44,153)         (44,934) 
--------------------------------  ------  -------------------  -------------------  --------------- 
 Non-current liabilities 
 Non-current lease liability                          (1,643)              (2,152)          (1,873) 
 Borrowings                           13                    -              (4,296)                - 
 Non-current provisions               15              (2,031)                    -          (1,296) 
 Deferred tax liabilities                             (4,968)              (5,640)          (5,994) 
--------------------------------  ------  -------------------  -------------------  --------------- 
                                                      (8,642)             (12,088)          (9,163) 
--------------------------------  ------  -------------------  -------------------  --------------- 
 Total liabilities                                   (54,640)             (56,241)         (54,097) 
--------------------------------  ------  -------------------  -------------------  --------------- 
 Net assets                                            25,481               34,112           45,875 
--------------------------------  ------  -------------------  -------------------  --------------- 
 
   Equity 
 Share capital                                            399                  222              399 
 Share premium                                         20,777                  389           20,777 
 Revaluation reserve                                    9,231                7,863            9,969 
 Merger reserve                                        11,347               11,347           11,347 
 Retained earnings                                   (16,273)               14,291            3,383 
--------------------------------   --------------------------  -------------------  --------------- 
 Total equity                                          25,481               34,112           45,875 
--------------------------------   --------------------------  -------------------  --------------- 
 
 

Consolidated Interim Cash Flow Statement

For the six months ended 30 September 2022

 
                                                  Unaudited                   Unaudited                     Audited 
                                        Six months ended 30         Six months ended 30    Year ended 31 March 2022 
                                             September 2022              September 2021 
                                                    GBP'000                     GBP'000                     GBP'000 
----------------------------  -----------------------------  --------------------------  -------------------------- 
 Cash flows from operating 
 activities 
 Loss for the period/year 
  after tax                                        (20,693)                     (1,104)                    (13,422) 
 Tax charge/(credit)                                    382                       (187)                       (765) 
---------------------------  ---  -------------------------  --------------------------  -------------------------- 
 Loss before tax for the 
  period/year                                      (20,311)                     (1,291)                    (14,187) 
 Adjustments for: 
 Depreciation                                           892                         874                       1,832 
 Amortisation of intangible 
  assets                                                636                         724                       1,425 
 Exceptional items - fixed 
  asset impairment                                        -                           -                       1,920 
 Exceptional items - 
  intangible asset 
  impairment                                         12,059                           -                       2,309 
 Net finance expense                                    159                         256                         496 
 Equity settled share-based 
  payment charges                                        27                         216                         639 
 Loss on disposal of 
  utility assets                                        560                         119                          75 
 Gain on IFRS 16 lease 
  modification                                            -                           -                        (16) 
 Additional consideration 
  receivable from previous 
  utility asset sales                                     -                           -                       (259) 
 Increase in c ontract 
  assets                                              (998)                     (5,197)                     (4,537) 
 Increase in trade and 
  other receivables                                   (589)                     (1,903)                     (3,154) 
 Decrease/(increase) in 
  inventories                                            12                        (24)                           5 
 (Decrease)/increase in 
  trade and other payables                          (1,077)                        (94)                       3,370 
 Increase/(decrease) in 
  contract liabilities                                1,835                       3,538                     (1,826) 
 Decrease/(increase) in 
  provisions                                            861                        (20)                       4,277 
 Cash outflow from 
  operating activities                              (5,934)                     (2,802)                     (7,631) 
 Tax received                                            22                           -                          12 
 Net cash outflow from 
  operating activities                              (5,912)                     (2,802)                     (7,619) 
---------------------------  ---  -------------------------  --------------------------  -------------------------- 
 Cash flows from investing 
 activities 
 Acquisition of external 
  utility assets                                    (1,558)                     (1,166)                     (2,468) 
 #Utility assets internally 
  adopted                                             (344)                     (1,097)                     (2,475) 
 Acquisition of property, 
  plant and equipment                                  (68)                       (216)                       (242) 
 Acquisition of intangible 
  assets                                              (343)                        (57)                       (424) 
 Proceeds on disposal of 
  utility assets                                      2,082                       3,725                       6,487 
 Receipt of deferred 
  consideration on disposal 
  of utility assets                                       -                         642                         642 
 Costs paid in relation to 
  disposal of utility assets                            (4)                        (28)                       (141) 
 Additional consideration 
  received from previous 
  utility asset sales                                   210                           -                          49 
 Net cash (outflow)/inflow 
  from investing activities                            (25)                       1,803                       1,428 
---------------------------  ---  -------------------------  --------------------------  -------------------------- 
 Cash flows from financing 
 activities 
 Proceeds from issue of ordinary 
  shares                                                  -                           -                      21,263 
 Share issue transaction costs                            -                           -                       (698) 
 Borrowings received                                      -                       2,000                       5,250 
 Borrowings repaid                                        -                     (3,250)                    (10,950) 
 Prepaid arrangement fees                                 -                         (3)                        (11) 
 Interest paid and banking 
  charges (non-IFRS 16)                                (42)                       (137)                       (297) 
 IFRS 16 - principal payments                         (377)                       (453)                     (1,022) 
 IFRS 16 - interest payments                           (46)                        (57)                       (121) 
 IFRS 16 - proceeds received on 
  disposal of leased vehicle                              -                           -                          19 
 Net cash (outflow)/inflow from 
  financing activities                                (465)                     (1,900)                      13,433 
--------------------------------  -------------------------  --------------------------  -------------------------- 
 Net (decrease)/increase in cash 
  and cash equivalents                              (6,402)                     (2,899)                       7,242 
 Cash and cash equivalents at 
  beginning of period/year                           11,176                       3,934                       3,934 
--------------------------------  -------------------------  --------------------------  -------------------------- 
 Cash and cash equivalents at 
  end of period/year                                  4,774                       1,035                      11,176 
--------------------------------  -------------------------  --------------------------  -------------------------- 
 
 

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 2022 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 2022 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 2022 is derived from the non-statutory accounts for that financial year. The non-statutory accounts for the year ended 31 March 2022 were approved on 1 August 2022. 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 13 December 2022.

Basis of preparation

The condensed consolidated interim financial information for the six month period ended 30 September 2022 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 2022, 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 but with material uncertainties currently in evidence. 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 2022 the Group had net assets of GBP25.5 million (31 March 2022: GBP45.9 million) including net cash of GBP4.8 million (31 March 2022: GBP11.2 million). In the six months to 30 September 2022 the Group's net cash outflow from operations before tax was GBP6.0 million (31 March 2022: GBP7.6 million).

Following the period in question, the Company entered into an arrangement with Bayford & Co Ltd ("Bayford") and funds managed by the Harwood Capital Management Limited Group ("Harwood") in respect of the provision of funding of up to GBP6 million (the "Facility") by way of a convertible loan. This Facility is expected to support the Group to initiate a review of the various strategic options available to it to maximise value for all shareholders and to ensure the Group continues to have adequate working capital, however it is anticipated that additional funding will be required to support its future trading in FY24.

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 2022.

   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.

 
                                     Six months to 30 September 2022                   Six months to 30 September 2021 
                                                         (unaudited)                                       (unaudited) 
 
                      Infrastructure:   Utility assets:                 Infrastructure:   Utility assets: 
                     Design and Build   Own and Operate  Total Group   Design and Build   Own and Operate  Total Group 
                              GBP'000           GBP'000      GBP'000            GBP'000           GBP'000      GBP'000 
------------------  -----------------  ----------------  -----------  -----------------  ----------------  ----------- 
Reportable segment 
 revenue                       21,942             1,997       23,939             26,665             1,887       28,552 
Adjusted EBITDA*              (4,152)               853      (3,299)                213               784          997 
Other net 
 gains/(losses)                    47             (560)        (513)                 85             (119)         (34) 
Share based 
 payment charge                  (27)                 -         (27)              (216)                 -        (216) 
Depreciation and 
 amortisation                 (1,105)             (423)      (1,528)            (1,326)             (272)      (1,598) 
------------------  -----------------  ----------------  -----------  -----------------  ----------------  ----------- 
Reportable segment 
 operating 
 (loss)/profit 
 before 
 exceptional items            (5,237)             (130)      (5,367)            (1,244)               393        (851) 
Cost of sales - 
 exceptional items            (2,091)                 -      (2,091)                  -                 -            - 
Administrative 
 expenses 
 -exceptional 
 items                       (12,694)                 -     (12,694)              (184)                 -        (184) 
------------------  -----------------  ----------------  -----------  -----------------  ----------------  ----------- 
Reporting segment 
 operating 
 (loss)/profit               (20,022)             (130)     (20,152)            (1,428)               393      (1,035) 
Net finance 
 expense                         (22)             (137)        (159)               (45)             (211)        (256) 
------------------  -----------------  ----------------  -----------  -----------------  ----------------  ----------- 
(Loss)/profit 
 before tax                  (20,044)             (267)     (20,311)            (1,473)               182      (1,291) 
------------------  -----------------  ----------------  -----------  -----------------  ----------------  ----------- 
 
 
                                                                                    Year ended 31 March 2022 (audited) 
 
                                                                     Infrastructure:    Utility assets: 
                                                                    Design and Build    Own and Operate    Total Group 
                                                                             GBP'000            GBP'000        GBP'000 
----------------------------------------------------------------  ------------------  -----------------  ------------- 
Reportable segment revenue                                                    57,631              4,215         61,846 
Adjusted EBITDA*                                                             (1,557)              2,056            499 
Other net gains                                                                  146                184            330 
Share based payment charge                                                     (639)                  -          (639) 
Depreciation and amortisation                                                (2,606)              (651)        (3,257) 
----------------------------------------------------------------  ------------------  -----------------  ------------- 
Reportable segment operating (loss)/profit before exceptional 
 items                                                                       (4,656)              1,589        (3,067) 
Cost of sales - exceptional items                                            (3,502)            (1,920)        (5,422) 
Administrative expenses - exceptional items                                  (5,202)                  -        (5,202) 
----------------------------------------------------------------  ------------------  -----------------  ------------- 
Reporting segment operating loss                                            (13,360)              (331)       (13,691) 
Net finance expense                                                            (107)              (389)          (496) 
----------------------------------------------------------------  ------------------  -----------------  ------------- 
Loss before tax                                                             (13,467)              (720)       (14,187) 
----------------------------------------------------------------  ------------------  -----------------  ------------- 
 

*Adjusted EBITDA is operating (loss) / profit excluding the impact of exceptional items, other net losses/gains, depreciation, amortisation and equity-settled share-based payment charges. Full reconciliation of Alternative Performance Measures (APMs) is 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.

 
Alternative Performance 
 Measure                                           Definition 
-----------------------------  -------------------------------------------------- 
Adjusted EBITDA                  Operating profit/loss excluding exceptional 
                                  items, other net losses/gains, amortisation 
                                  and depreciation and equity-settled share-based 
                                  payments 
Adjusted loss before taxation    Loss before taxation excluding amortisation 
                                  of acquired intangibles and exceptional 
                                  items included within cost of sales and 
                                  administrative expenses 
Net assets per share             Net assets divided by the number of shares 
                                  in issue at the financial reporting date 
-------------------------------  ------------------------------------------------ 
 
 

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

(a) Reconciliation of operating loss to "adjusted EBITDA"

 
                                                          Unaudited                       Unaudited       Audited 
                                      Six months ended 30 September   Six months ended 30 September    Year ended 
                                                               2022                            2021      31 March 
                                                                                                             2022 
                                                            GBP'000                         GBP'000       GBP'000 
-----------------------------------  ------------------------------  ------------------------------  ------------ 
Operating loss                                             (20,152)                         (1,035)      (13,691) 
Adjusted for: 
Exceptional items within operating 
 loss (note 4)                                               14,785                             184        10,624 
Other net losses/(gains) (note 
 5)                                                             513                              34         (330) 
Amortisation and depreciation                                 1,528                           1,598         3,257 
Equity-settled share-based 
 payments                                                        27                             216           639 
-----------------------------------  ------------------------------  ------------------------------  ------------ 
Adjusted EBITDA                                             (3,299)                             997           499 
-----------------------------------  ------------------------------  ------------------------------  ------------ 
 

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

 
                                                 Unaudited            Unaudited       Audited 
                                                Six months           Six months    Year ended 
                                        ended 30 September   ended 30 September      31 March 
                                                      2022                 2021          2022 
                                                   GBP'000              GBP'000       GBP'000 
-------------------------------------  -------------------  -------------------  ------------ 
Loss before tax                                   (20,311)              (1,291)      (14,187) 
Adjusted for: 
Exceptional items included 
 in cost of sales                                    2,091                    -         5,422 
Exceptional items included 
 in administrative expenses                         12,694                  184         5,202 
Amortisation of acquired intangibles                   624                  624         1,248 
-------------------------------------  -------------------  -------------------  ------------ 
Adjusted loss before taxation                      (4,902)                (483)       (2,315) 
-------------------------------------  -------------------  -------------------  ------------ 
 

(c) Net assets per share

 
 
                                           Unaudited       Unaudited     Audited 
                                        30 September    30 September    31 March 
                                                2022            2021        2022 
------------------------------------  --------------  --------------  ---------- 
Net assets at end of period/year 
 (GBP`000)                                    25,481          34,112      45,875 
Issued shares at end of period/year 
 (000`s)                                     399,313         222,118     399,313 
Net assets per share (p)                        6.4p           15.4p       11.5p 
------------------------------------  --------------  --------------  ---------- 
 
   4.         Exceptional items 
 
                                                             Unaudited                        Unaudited        Audited 
                                         Six months ended 30 September    Six months ended 30 September     Year ended 
                                                                  2022                             2021       31 March 
                                                                                                                  2022 
                                                               GBP'000                          GBP'000        GBP'000 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
 Exceptional items included in cost 
  of sales                                                       2,091                                -          5,422 
 Exceptional items included in 
  administrative expenses                                       12,694                              184          5,202 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
                                                                14,785                              184         10,624 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
 
   (a)   Exceptional items included in cost of sales 
 
                                                Unaudited                        Unaudited        Audited 
                            Six months ended 30 September    Six months ended 30 September     Year ended 
                                                     2022                             2021       31 March 
                                                                                                     2022 
                                                  GBP'000                          GBP'000        GBP'000 
------------------------  -------------------------------  -------------------------------  ------------- 
 Fixed asset impairment                                 -                                -          1,920 
 Onerous contracts                                  2,091                                -          3,502 
------------------------  -------------------------------  -------------------------------  ------------- 
                                                    2,091                                -          5,422 
------------------------  -------------------------------  -------------------------------  ------------- 
 
   (b)   Exceptional items included in administrative expenses 
 
                                                         Unaudited                        Unaudited        Audited 
                                     Six months ended 30 September    Six months ended 30 September     Year ended 
                                                              2022                             2021       31 March 
                                                                                                              2022 
                                                           GBP'000                          GBP'000        GBP'000 
---------------------------------  -------------------------------  -------------------------------  ------------- 
 Restructuring costs                                           291                               74            575 
 One-off legal and advisor costs                               174                              110            242 
 Intangible asset impairment                                12,059                                -          2,309 
 Onerous contracts                                             170                                -          2,076 
---------------------------------  -------------------------------  -------------------------------  ------------- 
                                                            12,694                              184          5,202 
---------------------------------  -------------------------------  -------------------------------  ------------- 
 

In the six month period to 30 September 2022, the Group recognised an impairment of GBP11.9 million for goodwill and brands and customer relationships. See note 10 for further detail.

   5.     Other net (losses)/gains 

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

 
                                                             Unaudited                        Unaudited        Audited 
                                         Six months ended 30 September    Six months ended 30 September     Year ended 
                                                                  2022                             2021       31 March 
                                                                                                                  2022 
                                                               GBP'000                          GBP'000        GBP'000 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
 Loss on disposal of assets                                      (560)                            (119)           (75) 
 Additional consideration receivable 
  from utility asset sales in 
  previous years                                                     -                                -            259 
 Enhanced payments received                                         47                               85            146 
                                                                 (513)                             (34)            330 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
 

Additional consideration receivable from utility asset sales in previous years is amounts due to the Group for utility assets sold in previous years that were non-metered when sold and became metered in the year ended 31 March 2022.

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 on disposal of assets represents the loss 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 outlined below is the result of assets transferred in the current and previous financial period/year.

 
                                                             Unaudited                        Unaudited        Audited 
                                         Six months ended 30 September    Six months ended 30 September     Year ended 
                                                                  2022                             2021       31 March 
                                                                                                                  2022 
                                                               GBP'000                          GBP'000        GBP'000 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
 Consideration - proceeds received                               2,082                            3,725          6,487 
 Consideration - proceeds receivable                                10                                -              - 
 Consideration - retention receivable                               64                              115            201 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
 Total consideration                                             2,156                            3,840          6,688 
 Net book value of assets sold 
  (including the effect of previous 
  revaluations)                                                (2,631)                          (3,931)        (6,580) 
 Legal and other costs relating to 
  the transactions                                                (81)                             (28)          (173) 
 Discounting of retention 
  consideration due in more than one 
  year                                                             (4)                                -           (10) 
 Loss on disposal of assets                                      (560)                            (119)           (75) 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
 

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 GBP873,000 (year ended 31 March 2022: GBP1,445,000).

   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:

 
                                                             Unaudited                        Unaudited        Audited 
                                         Six months ended 30 September    Six months ended 30 September     Year ended 
                                                                  2022                             2021       31 March 
                                                                                                                  2022 
                                                               GBP'000                          GBP'000        GBP'000 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
 Loss for the period/year used for 
  the calculation of basic EPS                                (20,693)                          (1,104)       (13,422) 
 Exceptional items included in cost 
  of sales                                                       2,091                                -          5,422 
 Exceptional items included in 
  administrative expenses                                       12,694                              184          5,202 
 Remove tax relief on exceptional 
  items                                                        (2,809)                             (35)        (2,019) 
 Amortisation of brands and customer 
  relationships                                                    624                              624          1,248 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
 Loss for the period/year used for 
  the calculation of adjusted EPS                              (8,093)                            (331)        (3,569) 
-------------------------------------  -------------------------------  -------------------------------  ------------- 
 

Number of shares:

 
 
                                              Unaudited      Unaudited        Audited 
                                             Six months     Six months     Year ended 
                                     ended 30 September       ended 30       31 March 
                                                   2022      September           2022 
                                                                  2021 
                                                   '000           '000           '000 
--------------------------------  ---------------------  -------------  ------------- 
 Weighted average number 
  of ordinary shares for 
  the purpose of basic EPS                      399,313        222,118        260,169 
 Effect of potentially dilutive 
  ordinary shares                                 1,437          4,219          1,739 
--------------------------------  ---------------------  -------------  ------------- 
 Weighted average number 
  of ordinary shares for 
  the purpose of diluted 
  EPS                                           400,750        226,337        261,908 
--------------------------------  ---------------------  -------------  ------------- 
 
 
 
                                           Unaudited                         Unaudited        Audited 
                       Six months ended 30 September     Six months ended 30 September     Year ended 
                                                2022                              2021       31 March 
   EPS                                                                                           2022 
------------------  --------------------------------  --------------------------------  ------------- 
 Basic                                        (5.2)p                            (0.5)p         (5.2)p 
 Diluted basic                                (5.2)p                            (0.5)p         (5.1)p 
 Adjusted basic                               (2.0)p                            (0.1)p         (1.4)p 
 Adjusted diluted                             (2.0)p                            (0.1)p         (1.4)p 
------------------  --------------------------------  --------------------------------  ------------- 
 
   7.         Taxation 
 
 
                                                   Unaudited                        Unaudited       Audited 
                               Six months ended 30 September    Six months ended 30 September    Year ended 
                                                        2022                             2021      31 March 
                                                                                                       2022 
                                                     GBP'000                          GBP'000       GBP'000 
---------------------------  -------------------------------  -------------------------------  ------------ 
 Current tax                                               -                                -           380 
 Deferred tax                                          (382)                              187           385 
---------------------------  -------------------------------  -------------------------------  ------------ 
 Total tax (charge)/credit                             (382)                              187           765 
---------------------------  -------------------------------  -------------------------------  ------------ 
 

At Budget 2020, the government announced that the corporation tax main rate (for all profits except ring-fence profits) for the years starting 1 April 2021 and 2022 would be 19%. At Spring Budget 2021, the government announced that the corporation tax main rate would rise to 25% for companies with profits over GBP250,000 together with the introduction of a small profits rate of 19% with effect from 1 April 2023. The increase in the tax rate to 25% is considered to be substantively enacted, and accordingly the deferred tax balances expected to unwind after 1 April 2023 have been calculated using the 25% tax rate.

The Group has GBP7.9 million (31 March 2022: GBP12.5 million) of tax losses for which deferred tax assets of GBP2.0 million (31 March 2022: GBP3.1 million) have been recognised. The deferred tax asset is expected to be recovered over five years. The Group also has unrecognised tax losses of GBP22.1 million (31 March 2022: GBP9.7 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 2022 the Group had entered into contracts to purchase property, plant and equipment in the form of utility assets for the amount of GBP5.5 million. The capital commitments at 31 March 2022 were GBP5.5 million and at 30 September 2021 were GBP8.9 million .

   9.         Property, plant and equipment 
 
                                                                  Fixtures and fittings  Computer equipment 
                                                  Utility assets                GBP'000             GBP'000      Total 
                                                         GBP'000                                               GBP'000 
Cost 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 1 April 2021 (audited)                                 71,380                  1,069               1,344     73,793 
Externally acquired assets                                 1,161                      -                 216      1,377 
Internally adopted assets                                    578                      -                   -        578 
Surplus arising on internally adopted assets                 119                      -                   -        119 
Disposals                                                (3,951)                      -                   -    (3,951) 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 30 September 2021 (unaudited)                          69,287                  1,069               1,560     71,916 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
Externally acquired assets                                 1,516                     22                   4      1,542 
Internally adopted assets                                  1,846                      -                   -      1,846 
Additional costs allocated to internally 
 adopted assets on which a surplus previously 
 arose                                                      (62)                      -                   -       (62) 
Revaluation                                                4,252                      -                   -      4,252 
Disposals                                                (2,712)                      -                   -    (2,712) 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 31 March 2022 (audited)                                74,127                  1,091               1,564     76,782 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
Externally acquired assets                                 1,630                     44                  24      1,698 
Internally adopted assets                                    340                      -                   -        340 
Surplus arising on internally adopted assets                  29                      -                   -         29 
Disposals                                                (2,636)                      -                   -    (2,636) 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 30 September 2022 (unaudited)                          73,490                  1,135               1,588     76,213 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
Accumulated depreciation 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 1 April 2021 (audited)                               (34,353)                  (856)             (1,270)   (36,479) 
Depreciation charge for the period                         (254)                   (30)               (102)      (386) 
Disposals                                                     20                      -                   -         20 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 30 September 2021 (unaudited)                        (34,587)                  (886)             (1,372)   (36,845) 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
Depreciation charge for the period                         (359)                   (50)                (43)      (452) 
Impairment from external revaluation                     (2,397)                      -                   -    (2,397) 
Disposals                                                     63                      -                   -         63 
At 31 March 2022 (audited)                              (37,280)                  (936)             (1,415)   (39,631) 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
Depreciation charge for the period                         (410)                   (19)                (70)      (499) 
Disposals                                                      5                      -                   -          5 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 30 September 2022 (unaudited)                        (37,685)                  (955)             (1,485)   (40,125) 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
Net book value 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 30 September 2022 (unaudited)                          35,805                    180                 103     36,088 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 31 March 2022 (audited)                                36,847                    155                 149     37,151 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 30 September 2021 (unaudited)                          34,700                    183                 188     35,071 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
At 31 March 2021 (audited)                                37,027                    213                  74     37,314 
----------------------------------------------  ----------------  ---------------------  ------------------  --------- 
 

Additions of internally adopted assets within utility assets in the six months ended 30 September 2022 are stated at the full cost of construction of GBP0.7 million (year ended 31 March 2022: GBP3.7 million) less the deficit arising on internally adopted assets of GBP0.4 million (year ended 31 March 2022: GBP1.3 million).

   10.       Intangible assets 
 
                                   Goodwill  Brands & customer relationships  Software     Total 
                                                                     GBP'000 
                                    GBP'000                                    GBP'000   GBP'000 
At 1 April 2021 (audited)             9,757                            8,115     1,035    18,907 
Additions                                 -                                -        57        57 
Amortisation for the period               -                            (624)     (100)     (724) 
---------------------------------  --------  -------------------------------  --------  -------- 
At 30 September 2021 (unaudited)      9,757                            7,491       992    18,240 
---------------------------------  --------  -------------------------------  --------  -------- 
Additions                                 -                                -       367       367 
Amortisation for the period               -                            (624)      (77)     (701) 
Impairment for the period           (2,149)                                -     (160)   (2,309) 
---------------------------------  --------  -------------------------------  --------  -------- 
At 31 March 2022 (audited)            7,608                            6,867     1,122    15,597 
---------------------------------  --------  -------------------------------  --------  -------- 
Additions                                 -                                -       343       343 
Amortisation for the period               -                            (624)      (12)     (636) 
Impairment for the period           (7,608)                          (4,255)     (196)  (12,059) 
---------------------------------  --------  -------------------------------  --------  -------- 
At 30 September 2022 (unaudited)          -                            1,988     1,257     3,245 
---------------------------------  --------  -------------------------------  --------  -------- 
 

Given a number of internal and external factors, management believes that indications for possible impairment exist for goodwill and brands and customer relationships. Accordingly, an impairment test has been carried out in relation to both goodwill and brands and customer relationships. Where an impairment is indicated, goodwill would be impaired first, followed by brands and customer relationships on a pro-rata basis.

Goodwill and brands and customer relationships are tested for impairment by comparing the carrying amount of each CGU with the recoverable amount. The recoverable amount is the higher of fair value less costs to sell and the value in use.

Goodwill brought forward at the start of the period relates to the acquisition of Fulcrum Group Holdings Limited on 8 July 2010 and the acquisition of The Dunamis Group Limited on 5 February 2018. The carrying amount of the goodwill is allocated across cash-generating units (CGUs). The goodwill held by the Group relates to either the Fulcrum Infrastructure Services CGU or Dunamis, which has two CGUs. The brands and customer relationships also relate to the same CGUs.

In the impairment tests, the recoverable amounts are determined based on value in use calculations which require assumptions. The fair value measurement was categorised as a Level 3 fair value based on the inputs in the valuation technique used.

The recoverable amounts of the CGUs have been determined from value in use calculations which have been predicated on discounted cash flow projections from financial plans approved by the Board. The values assigned to the key assumptions represent management's assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources, together with the Group's views on the future achievable growth and the impact of committed cash flows. Cash flows beyond this are extrapolated using the estimated long-term growth rates as summarised in the following paragraph.

The pre-tax cash flows that these projections produced were discounted at pre-tax discount rates based on the Group's beta adjusted cost of capital reflecting management's assessment of specific risks related to each cash-generating unit. Pre-tax discount rates of between 11.3% and 13.1% (31 March 2022: between 8.1% and 9.8%) have been used in the impairment calculations which the directors believe fairly reflect the risks inherent in each of the CGUs. The terminal cash flows are extrapolated in perpetuity using a growth rate of 2.0% (31 March 2022: 2.0%). This is not considered to be higher than the long-term industry growth rate.

Following the review, the carrying value of the intangible assets exceeded the associated value in use for all of the CGUs. Consequently, an impairment of GBP2.2 million was made to the carrying value of goodwill in the Fulcrum CGU, and impairments of GBP5.4 million and GBP4.3 million were made to the carrying values of goodwill and brands and customer relationships, respectively, in the Dunamis CGUs.

A segment-level summary of the acquired intangible assets allocation is presented below:

 
                                     Fulcrum   Dunamis     Total 
                                     GBP'000   GBP'000   GBP'000 
----------------------------------  --------  --------  -------- 
Goodwill                                   -         -         - 
Brands and customer relationships          -     1,988     1,988 
----------------------------------  --------  --------  -------- 
 
   11.       Trade and other receivables 
 
                                               Unaudited            Unaudited          Audited 
                                       30 September 2022    30 September 2021    31 March 2022 
                                                 GBP'000              GBP'000          GBP'000 
-----------------------------------  -------------------  -------------------  --------------- 
 Trade receivables                                 7,362                4,392            7,326 
 Other receivables and prepayments                 2,643                3,535            2,294 
-----------------------------------  -------------------  -------------------  --------------- 
                                                  10,005                7,927            9,620 
-----------------------------------  -------------------  -------------------  --------------- 
 
   12.       Trade and other payables 
 
                            Unaudited            Unaudited          Audited 
                    30 September 2022    30 September 2021    31 March 2022 
                              GBP'000              GBP'000          GBP'000 
----------------  -------------------  -------------------  --------------- 
 Trade payables                 6,553                6,830            7,472 
 Other payables                 8,369                5,740            8,353 
----------------  -------------------  -------------------  --------------- 
                               14,922               12,570           15,825 
----------------  -------------------  -------------------  --------------- 
 
   13.       Interest-bearing loans and borrowings 

Changes in liabilities arising from financing activities are shown below:

 
                                                      Unaudited           Unaudited         Audited 
                                              30 September 2022   30 September 2021   31 March 2022 
                                                        GBP'000             GBP'000         GBP'000 
-------------------------------------------  ------------------  ------------------  -------------- 
At the beginning of the period                             (94)               5,483           5,483 
Repaid                                                        -             (3,250)        (10,950) 
New borrowings                                                -               2,000           5,250 
Capitalised borrowing fees                                    -                 (3)            (11) 
Amortisation of capitalised borrowing fees                   71                  66             134 
-------------------------------------------  ------------------  ------------------  -------------- 
At the end of the period                                   (23)               4,296            (94) 
-------------------------------------------  ------------------  ------------------  -------------- 
 

As no borrowings are outstanding as at 30 September 2022, the capitalised borrowing fees have been included within trade and other receivables.

   14.       Reconciliation to net cash/(debt) 
 
                                     Unaudited           Unaudited         Audited 
                             30 September 2022   30 September 2021   31 March 2022 
                                       GBP'000             GBP'000         GBP'000 
--------------------------  ------------------  ------------------  -------------- 
Cash and cash equivalents                4,774               1,035          11,176 
Borrowings                                   -             (4,296)               - 
--------------------------  ------------------  ------------------  -------------- 
Net cash/(debt)                          4,774             (3,261)          11,176 
--------------------------  ------------------  ------------------  -------------- 
 

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

   15.       Provisions 
 
 
                                           Provision 
                                           for costs 
                                           to settle     Provision 
                                             ongoing   for onerous         Other 
                                        legal claims     contracts    provisions      Total 
                                             GBP'000       GBP'000       GBP'000    GBP'000 
-------------------------------------  -------------  ------------  ------------  --------- 
At 31 March 2021(audited)                         54             -             -         54 
Provision created during the period             (20)             -             -       (20) 
-------------------------------------  -------------  ------------  ------------  --------- 
At 30 September 2021 (unaudited)                  34             -             -         34 
Provision released during the period            (34)             -             -       (34) 
Provision created during the period                -         5,578           121      5,699 
Provision utilised during the period               -       (1,368)             -    (1,368) 
At 31 March 2022 (audited)                         -         4,210           121      4,331 
Provision created during the period                -         2,261             -      2,261 
Provision utilised during the period               -       (1,279)         (121)    (1,400) 
-------------------------------------  -------------  ------------  ------------  --------- 
At 30 September 2022 (unaudited)                   -         5,192             -      5,192 
-------------------------------------  -------------  ------------  ------------  --------- 
 

The provision for onerous contracts relates to future losses expected to be incurred on contracts deemed to be onerous. The amount and timing of the outflows related to these provisions are uncertain, but a reliable estimate has been made.

Of the GBP5.2 million provision for onerous contracts, GBP2.0 million is expected to be settled in more than 12 months. All other provisions are expected to be settled within 12 months.

16. 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 25 of the Annual Report and Accounts 2022, 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 2022 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.

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