24 October 2022

FULCRUM UTILITY SERVICES LIMITED

("Fulcrum" or "the Group")

Trading Update

Fulcrum Utility Services Limited, a leading independent provider of essential utility services including multi-utility connections and renewable energy infrastructure, provides a trading update for the six months ending 30 September 2022.

The Group is pleased to have won a series of major utility contract awards in the first half of the financial year ending 31 March 2023 ("FY23"), notably:

·      a £4.1m contract to design and deliver the high voltage electrical infrastructure that will power a new 158-acre solar farm and battery storage facility;

·      a £2m multi-utility infrastructure project to power a leisure resort in the south of England for a leading brand of family resorts;

·      a £2m contract to deliver High Voltage electrical infrastructure that will power a new Battery Energy Storage System in the north of England; and

·      a £1.2 million project to support the energisation High Voltage infrastructure for a new 50MW solar farm.

During the first half of FY23, the Group has continued to experience the impact of significant challenges of ongoing adverse energy and wider market conditions.  In addition, the critical measures put in place by the new executive team in order to turn around the business's operating performance, and the impact of the recently notified cyber security incident, are being felt by the Group.

The Group expects to report revenue of approximately £24.0 million for the first half of FY23 (H1 22: £28.6 million). Ongoing challenges with the legacy and closure of historic projects, and the unprecedented cost increases impacting much of the Group's supply chain, have continued to erode sales margins.  The Group now expects to report an interim half year adjusted(1) EBITDA loss of approximately £3.0 million (H1 22: £1.0 million profit) with a corresponding impact on the Group's full year results.  As a result the Group now expects revenue for full year FY 2023 will be approximately £49.0 million (FY22: £61.8 million) and that the Group adjusted EBITDA loss will be approximately £6.0m (FY22: £0.5 million profit) subject to audit review.

Whilst the new executive team's continuing priority is to protect and improve margins and refocus the Group on its core utility infrastructure and asset ownership growth strategy, the Group's challenges are historic in origin, have been longstanding and are widespread.  As such, the benefits of the business improvements introduced to date and currently underway are taking longer than anticipated to realise.

The executive team has put in place a number of new controls and procedures improving the project costing and tracking processes and enforcement of contract variations to protect the Group's margins. The full implementation of these new controls and procedures has been hampered by the cyber security incident and so their benefits will take longer than expected to impact the Group's results.

Although the Group's field operations were unaffected by the cyber security incident, it did impair managerial and system information, and the ability to fully invoice customers for up to three weeks.  Hence the Group's net cash position as at 30 September 2022 was £4.8 million.  Whilst the Group continues to actively manage its working capital, it is in discussions with its substantial shareholders to ensure that the Group remains adequately funded.

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

Antony Collins, CEO, said:

"Clearly the Board and I are disappointed in these results but I am confident that the steps needed to turn Fulcrum around are well underway.  I always knew the task of turning Fulcrum around would be a hard one and the challenges that the Group has faced are much deeper and wider spread than anyone previously anticipated.  However, I believe the major issues have now been identified and measures and ameliorations put in place to improve performance. 

The Group's medium to long-term growth continues to be underpinned by strong market drivers and government stimulus. With the executive team identifying improvement opportunities and ensuring optimal performance I believe, that Fulcrum will be well positioned to benefit from the UK's transition to a low carbon economy and a net-zero future"

This announcement contains inside information.

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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. https://investors.fulcrum.co.uk/