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Bilby PLC Full Year Results

19/09/2019 7:01am

UK Regulatory (RNS & others)


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TIDMBILB

RNS Number : 8815M

Bilby PLC

19 September 2019

Bilby Plc

("Bilby" or the "Group")

Full Year Results

Bilby Plc (AIM: BILB.L), a leading gas heating, electrical and building services provider, announces its full year results for the twelve months ended 31 March 2019.

Financial Overview

 
                                                       Audited 12 
                                           Audited 12   months to 
                                            months to    31 March 
                                        31 March 2019        2018 
Group results                                 GBP 000     GBP 000 
-------------------------------------  --------------  ---------- 
Underlying revenue(1)                          69,588      78,807 
Underlying gross profit(1)                     15,131      17,692 
Underlying EBITDA(1)                            3,164       6,294 
Underlying profit before taxation(2)            2,501       5,790 
(Loss)/profit after taxation                  (8,596)       3,448 
Basic (loss)/earnings per share(3)           (21.29)p       8.61p 
Adjusted earnings per share(4)                  6.38p      12.35p 
Dividend per share paid                         2.50p       2.00p 
Net debt(5)                                    10,868       5,410 
-------------------------------------  --------------  ---------- 
 

Notes:

1. Underlying results are stated before non-underlying items of GBP12.9 million (2018: GBP1.5 million) as set out in note 7.

2. Underlying profit before taxation is stated after interest and before charging the non-underlying items.

3. Basic (loss)/earnings per share is the (loss)/profit after tax divided by the weighted average number of ordinary shares

4. Adjusted earnings per share is the profit before deducting non-underlying items after tax divided by the weighted average number of ordinary shares.

5. Net debt is the Group's bank Term loan, other loans and overdraft and obligations under finance leases less cash and cash equivalents.

Summary

-- Financial performance of the Group was negatively impacted by one subsidiary, P&R, that recorded an underlying EBITDA loss of GBP2.1million and significant non-underlying items of GBP9.0 million. This was driven by:

o Two severely loss-making contracts with Carillion Amey and East Kent Housing - both of which have been terminated and occurred as a result of failings of previous management and poor governance at the subsidiary

-- In the second half of the year, the Board initiated an operational and financial review of the Group that resulted in the following actions post-financial period:

o Exit from East Kent Housing contract on 3 July 2019 (following formal notice of termination by P&R in April 2019)

o The closure of P&R's gas servicing division on 3 July 2019

o P&R's profitable building services contracts being transferred to the management responsibility of Purdy

   --      P&R now has no day-to-day operations and accordingly minimal associated running costs 

-- In discussions with HSBC UK Bank Plc, the Group's debt provider, about restructuring the borrowing facilities and rebasing the financial covenants

-- No final dividend declared given the financial performance for the year and the overall level of indebtedness. The Board intend to reinitiate the dividend as soon as it is feasible

-- Excluding the performance of P&R, Group revenue increased by 5.3% and underlying EBITDA was maintained demonstrating the continuing robustness of the business - the comparative analysis of the full year results between P&R and the continuing Group is summarised below:

 
                            Audited       P&R to      Continuing       Audited       P&R to      Continuing 
                          12 months     31 March          Group*     12 months     31 March          Group* 
                                 to         2019     to 31 March            to         2018     to 31 March 
                           31 March                         2019      31 March                         2018 
                               2019      GBP'000         GBP'000          2018      GBP'000         GBP'000 
                            GBP'000                                    GBP'000 
---------------------  ------------  -----------  --------------  ------------  -----------  -------------- 
  Underlying revenue         69,588       10,168          59,420        78,807       22,351          56,456 
                       ------------  -----------  --------------  ------------  -----------  -------------- 
  Underlying EBITDA           3,164      (2,054)           5,218         6,294        1,002           5,292 
                       ------------  -----------  --------------  ------------  -----------  -------------- 
  Underlying PBT              2,501      (2,194)           4,695         5,790          913           4,877 
                       ------------  -----------  --------------  ------------  -----------  -------------- 
  Non-underlying 
   items                   (12,889)      (9,003)         (3,886)       (1,498)            -         (1,498) 
                       ------------  -----------  --------------  ------------  -----------  -------------- 
 

* All central costs are included within the Continuing Group

New contracts continue to drive future revenues:

   --      Current minimum revenue visibility of GBP162.3 million up to 2021 from existing contracts 

-- Purdy secured a three-year GBP6.9 million contract with British Gas to provide domestic gas servicing, repairs and installations

-- Purdy won a GBP4-6 million four-year contract with the London Borough of Waltham Forest to provide gas and electrical work to its schools and public building stock

-- DCB (Kent) secured two contracts with Richmond Housing Partnership; a GBP9.5 million contract to build 49 affordable, shared ownership apartments, and a GBP4.5m contract to build 23 retirement apartments

-- DCB (Kent) also secured a 4 year GBP10m contract with the Port of Dover to provide minor building works and maintenance services

-- Key contract between Spokemead and London Borough of Southwark extended for six years with estimated revenue of GBP10 million over six years

Post period-end & current trading

-- Continuation of the financial and operational review has established that a number of systems, policies and procedures must be created and embedded in the Group. Accordingly, the Group has launched an investment programme to:

o Ensure governance failings are not repeated at any subsidiary

o Implement a centralised support and control function which ensure that all businesses within the Group operate to both maximum efficiency and profitability

-- An update on the financial and operational programme will be provided at the Interim Results

   --      Strengthening of the Board 

o Appointment of David Bullen as Chief Executive Officer

o Appointment of a new external Company Secretary service

o Search underway for additional non-executive director

-- Group has continued to secure new contracts, drive efficiencies and has already benefited from the start of the centralisation of functions

   --      Current net debt remains comparable with year-end position 

-- The Group is trading in line with management expectations. In the year ending 31 March 2020, and in addition to the required investment programme, the Board is confident of at least maintaining underlying revenues of GBP59 million with an adjusted EBITDA of not less than GBP4.5 million.

Commenting on the results, Sangita Shah, Chair of Bilby Plc said:

"Having taken decisive action to resolve the poor performance of one subsidiary, I am confident the business has the solid operational footing to grow. The operational and financial review that has been ably spearheaded by our new Chief Executive, David Bullen, and backed up by the Board, has already ensured we are operating more efficiently, and each subsidiary is benefitting from being a more closely integrated part of the Group.

Bilby is in a market with strong fundamentals. With a strengthened Board in place coupled with continuing operational improvements, the Group is well positioned to drive profitable and sustainable growth."

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

Enquiries

 
 Bilby Plc                                C/O Hudson Sandler 
 Sangita Shah, Non-Executive 
  Chair 
 David Bullen, Chief Executive 
  Officer 
  Clive Lovett, Group Finance 
  Director 
 
 Canaccord Genuity Limited                     020 7523 8000 
 (Nominated Adviser and Joint 
  Broker) 
         Corporate Broking: 
          Bobbie Hilliam 
          Georgina McCooke 
 
          Sales: 
          Jonathan Barr 
 
 Stanford Capital Partners 
  (Joint Broker) 
  John Howes                                   0203 815 8882 
  Bob Pountney                                 0203 815 8883 
 
   Hudson Sandler 
   (PR advisers) 
 Charlie Jack 
  Bertie Berger                                020 7796 4133 
 

Chair's statement

The year ended 31 March 2019 (the "Period") was a particularly challenging one for the Group and resulted in the Board taking decisive action - sadly too late to avert a very disappointing outcome for the year.

In the Period, Group underlying revenue decreased 12% to GBP69.6 million (2018: GBP78.8 million) with underlying EBITDA decreasing 48% to GBP3.2 million (2018: GBP6.3 million) and adjusted earnings per share down 48% to 6.38 pence (2018: 12.35 pence). The reduction in underlying EBITDA was due entirely to the underlying trading losses suffered by Group subsidiary company P&R, which delivered an underlying EBITDA loss of GBP2.1 million. In addition, the Group also incurred very significant contract termination costs, impairments and restructuring costs which, together with other non-underlying items totalled GBP12.9 million. This has resulted in a loss after tax for the year of GBP8.6 million.

Total borrowings at 31 March 2019 were GBP10.9 million compared to total borrowings of GBP5.4 million at 31 March 2018 reflecting the consequences of the losses, impairments and costs suffered by P&R. For the 31 March 2019 covenant tests, the Group was in breach of certain of the financial covenants set by HSBC UK Bank Plc. The Group requested a waiver of the breach of covenants which was formally approved by HSBC UK Bank Plc. The Group and HSBC UK Bank Plc are in discussions about restructuring the borrowing facilities and rebasing the financial covenants. The Board is also considering an equity fund raise in the short term to provide additional resources in order to reduce overall indebtedness.

The poor financial performance was isolated to P&R, which suffered as a result of specific failings and exposure to two materially loss-making contracts. The two loss-making contracts have been terminated and the Group initiated formal dispute resolution proceedings. During the Period, the Board undertook an operational review (the "review") of the business and decisive action has since been taken to stem these losses. Subsequently, post the Period end, the Group has restructured P&R so that all its profitable building services operations have been incorporated into other Group subsidiaries. Accordingly, P&R has no day-to-day operations and minimal cost associated with it.

These isolated performance issues are not reflective of the remainder of the Group and I am pleased to report all other subsidiaries combined delivered a robust performance. Excluding P&R, Group underlying revenue increased by 5.3% and underlying EBITDA was maintained demonstrating the underlying resilience of the Bilby offer, model and strategy.

To date, the Board has pursued a "buy and build" strategy coupled with organic growth. In the Period, we acquired R. Dunham's, an electrical services company, for an initial cash consideration of GBP750,000 and the issue of 250,000 new ordinary shares. After the Period end a further cash consideration payment of GBP476,000 was made. This complementary acquisition broadens the Group's customer base and strengthens our presence in our core markets.

On 4 September 2018, Phil Copolo, founder of P&R and Deputy Chairman of Bilby, retired from the business and at the same time Leigh Copolo, Group Operations Director, resigned from the Board and left the business. Concurrently Phil Copolo and Leigh Copolo sold their entire holdings of 12,596,896 ordinary shares of 10p each, representing 31.26% of the Group's total issued share capital, at a price of 100p. Following these disposals, Janet Copolo, the wife of Phil Copolo retains a holding of 2,886,396 ordinary shares representing 7.2% of the Group's issued share capital. At the same time, David Ellingham, formerly Group Finance Director, was appointed to the role of Chief Executive Officer and the recruitment of a new Group Finance Director commenced.

In light of the challenges faced, we strengthened the operational capability of the Executive management team to ensure we are robustly positioned to take advantage of a market that continues to present opportunities and deliver success for all stakeholders. Lee Venables was promoted to Chief Operating Officer, having been Managing Director of the Group's largest subsidiary, Purdy; Chris Webster was appointed Executive Director, having founded the Group's subsidiary DCB (Kent); and Clive Lovett was appointed Group Finance Director. In early April 2019, David Ellingham, previously CEO, stepped down from the Board and left the Group to pursue other opportunities.

Post year end, we appointed David Bullen as Chief Executive Officer, who brings significant plc experience and an impressive track record in turnaround scenarios for multi-divisional companies. David is continuing to undertake the review of the business with the support of the Executive team, which has been broadened and deepened from the operational review of P&R. Early findings show that management and governance failings at P&R were the overwhelmingly primary drivers of P&R's very disappointing performance.

Having successfully strengthened the Executive management team of the Board to further ensure robust governance throughout the Group, we shortly intend to appoint a Non-Executive Director to the Board who will also chair the Audit Committee. In addition, we have appointed an Independent Company Secretary and started to implement a number of centralised functions to ensure greater oversight of the Group and all the subsidiaries.

I am confident that the business, led by David Bullen, will ensure alignment, the implementation of robust processes, systems and infrastructure and the return of the Group to profitable and sustainable growth.

An interim dividend of 0.5p was paid in January 2019 which together with the final dividend of 2.0p paid in September 2018 represents a total dividend of 2.5p per ordinary share paid in the year ended 31 March 2019. As a result of the loss-making activities associated with P&R and the increase in the overall indebtedness of the Group and ongoing discussions with HSBC UK Bank Plc about restructuring the borrowing facilities and rebasing the financial covenants, the Board has made the decision not to pay a final dividend. Our focus is firmly on putting the issues relating to P&R in the past, returning the Group to profitable growth, and reducing overall indebtedness with a view to resuming the payment of dividends as soon as financially prudent to do so.

In what has been a particularly challenging period for the Group, I would like to thank all our stakeholders including our new and long-term shareholders and banking partners for their support. Given the organisational change during this Period, I would like to reiterate my gratitude to our employees - all of whom have continued to show an unstinting dedication and commitment to the Group. It is their hard work and commitment that has ensured Bilby customers continue to receive the exemplary service for which we are known.

Current trading is in line with management expectations. The Group has no major contracts up for renewal in the current financial year which along with the enhanced levels of governance gives the Board confidence of at least maintaining underlying revenues of GBP59 million with adjusted EBITDA of not less than GBP4.5 million. We enter the new financial period having taken decisive and conclusive action to ensure that the causes of the isolated failings are not repeated. It is in light of this that I am confident that together, with our enhanced Board and experienced management, we are well positioned to drive sustainable and profitable growth.

Sangita Shah

Non-Executive Chair

19 September 2019

Chief Executive Officer's introduction

Having joined the Group in April after the Period end, I was quickly impressed by the highly committed workforce. Bilby benefits from an excellent offer and a highly collaborative culture that underpins the Group's focus on customer satisfaction. As a result, Bilby has been rewarded with a growing roster of blue-chip organisations in London and the South East.

However, after a period of several years of growth for Bilby, it was clear that management failings in P&R had led to circumstances which were having very damaging financial consequences for the Group. Significantly, P&R had two loss-making contracts that needed to be addressed. P&R's contract to supply building maintenance services for Ministry of Defence (MOD) properties was terminated in May 2018 and led to dispute resolution proceedings. Furthermore, the major gas installation contract, with East Kent Housing, was terminated in April 2019 and has also resulted in resolution proceedings. These contracts in combination have had a material effect on the underlying profitability for the year ended 31 March 2019 as well as impacting the overall indebtedness of the Group, with the Group also reporting a number of significant associated restructuring and write off costs.

My initial review quickly determined the importance of restructuring P&R. Post the Period end, the Group closed P&R's gas servicing division and restructured all ongoing profitable building services contracts which are now being successfully serviced under the management responsibility of Purdy. This action quickly stemmed the losses and ensured P&R has no day-to-day operations and accordingly minimal associated running costs.

The review is ongoing; however, it has already established that the performance issues were isolated to P&R. With the full backing of the Executive management team, I have widened and deepened the review of the Group's operations and already implemented a number of changes to improve governance within the divisions.

Whilst other subsidiaries have grown in line with management expectations, this has often been at the cost of efficiencies that, with certain centralised functions, the Group would have benefited from. It was also apparent that all the subsidiaries were run independently and autonomously with limited central operational and financial support. This has already conclusively established that a number of operational and financial systems, positions, policies and procedures must be created and embedded into the Group. This investment has already started and the review is now focused on the implementation of these centralised support and control functions that will ensure that all businesses within the Group operate to both maximum efficiency and profitability.

In addition, the function of the PLC Board has been strengthened to include the appointment of an independent Company Secretary and we shortly intend to announce the appointment of an additional Non-Executive to Chair the Audit Committee to ensure we meet the highest governance standards.

Outlook

The Group experienced material restructuring costs and write offs as a result of the failings at P&R; the vast majority of losses associated with P&R were contained in the financial year ended 31 March 2019. The Group is now exposed to no further material losses from P&R and is in resolution proceedings regarding both terminated contracts.

Bilby has a leading position in the South East, within a market that continues to present significant opportunities. Nevertheless, the experiences within the Period reinforce the importance of operating as a collaborative and cohesive Group with rigorous centralised governance and not as a collection of subsidiaries. I am confident we are on track to ensure Bilby operates as a Group fully capable of achieving long-term sustainable growth.

I am pleased with how the Group has performed since the year end in which we have secured new contracts, driven efficiencies and already benefited from the start of centralising functions. The Group is currently trading in line with management expectations and I am confident in the operational progress of the Group.

David Bullen

Chief Executive Officer

19 September 2019

Operational review

The disappointing results were driven by a poor performance from P&R. Previous management failed to ensure appropriate controls were in place regarding two large-scale contracts with the MOD and East Kent Housing. These failings led to P&R and, ultimately, the Group experiencing significant losses during the Period and a negative impact on cash.

As previously reported, the Group decided to terminate P&R's contract with Carillion Amey to provide services to the MOD properties in May 2018. As a result of the termination, the Group was forced to incur significant write offs.

In 2017, P&R signed an eight-year contract to provide gas services to East Kent Housing that, at the time of signing, was expected to materially enhance revenues. Given the potential revenue visibility from the contract, the Group made significant cash investments to mobilise the contract as is typical in these circumstances. However, the contract proved to be loss making and, as a result, we served notice on the contract on 3 April 2019, after the Period end. As a result of the circumstances of both contracts, the Group suffered considerable losses and incurred significant write offs. However, the Group is currently in the process of resolution proceedings in regard to the monies it firmly believes it is owed.

Despite the disappointing financial results associated with the poor performance from P&R, the rest of the Group achieved profitable growth across its three core service pillars: electrical, gas and building services. Due to our committed workforce, high level of service and focus on operational excellence, we have long-standing client relationships with local authority and social housing organisations.

During the Period, we continued work on ongoing contracts secured in previous years, which are continuing to deliver profitable and recurring revenues for the Group. We are also delighted to report that we gained a number of new large-scale contracts which will provide the Group with recurring revenue over the next two years and beyond. One example of this is the three-year GBP6.9 million contract Purdy won with British Gas to provide domestic gas servicing, repairs and installations. We are also delighted with the customers who have extended the scope of work we provide them, which is testament to the high level of customer service we provide. In addition, we secured a number of one-off contracts across the Group, such as the GBP2.7 million project we undertook for Ashford County Council's affordable housing division.

The Group continued to successfully increase the level of cross-selling of our services throughout the subsidiaries. This was evident with Purdy's long-standing customer, Hackney Council, which broadened its scope of work by using R. Dunham for its electrical services.

I am delighted to report that the minimum visible revenues through our ongoing contracts across the Group for a three-year outlook to 2021 are GBP162.3 million. This figure does not include the potential contracts we could win in the current year and beyond.

Purdy

Purdy is an award-winning contractor in electrical, mechanical and property services. The subsidiary had a very positive year in which it successfully secured new contracts, providing services to a number of ongoing contracts such as British Gas. Purdy strengthened its relationship with both Peabody and Hyde Housing by providing ongoing electrical work. As a result, the two contracts are expected to bring further opportunities and work streams in the future. Furthermore, Purdy secured a new GBP4-6 million four-year contract with the London Borough of Waltham Forest to provide gas and electrical work to its schools and public building stock.

DCB (Kent)

DCB (Kent) provides high-quality building, refurbishment and maintenance services. DCB (Kent) secured two contracts with Richmond Housing Partnership; a GBP9.5 million contract to build 49 affordable, share ownership apartments, and a GBP4.5 million contract to build 23 retirement apartments. In addition, DCB (Kent) worked on a number of one-off works on affordable housing in Ashford and Golding Homes. The subsidiary continued its momentum into the beginning of this year and we were delighted with its new GBP10 million contract to provide corporate maintenance works to the Port of Dover, which the Group gains the benefit of in the current financial year.

Spokemead

Spokemead is a specialist in electrical installation, repairs and maintenance services. During the Period it renewed its electrical testing and remedial works term contract with the London Borough of Southwark. We were pleased to record that this contract has been renewed for another six years with estimated revenues of GBP10 million. As a result of the contract renewal, which formed the basis of the final deferred consideration, during the Period, the Group paid the full final acquisition consideration of GBP500,000. The scope of the new contract has been reduced but Spokemead remains in discussions with the Council regarding the potential of future additional works.

R. Dunham

On 29 November 2018, Bilby continued its buy and build strategy with the acquisition of R. Dunham. This subsidiary is a provider of electrical installation and maintenance services and provides significant synergies across the Group, which will offer the opportunity for additional costs efficiencies to be exploited.

Summary

The strong performance of these subsidiaries has provided us with confidence in the Bilby offer as well as the Group's ability to deliver sustainable growth in the future.

Bilby is fundamentally a people business and as a result it is critical it invests in training and tools to ensure we can deliver a high-quality service. The majority of the subsidiaries continue to benefit from the investment that has been made in our Customer Relations Management System, which allows us to monitor each job on multiple contracts. This ensures we are driving efficiency and offering the highest quality of service.

The Group has continued to invest in people and training. We are constantly investing in all our engineers and supporting staff to ensure they are well equipped with the necessary skill-set to deliver the best service to our customers. We currently employ over 35 apprentices across the Group in operational, administration and financial roles.

Lee Venables

Chief Operating Officer

19 September 2019

Financial review

Revenue and EBITDA

Underlying revenue of GBP69.6 million for the Period (2018: GBP78.8 million) was down GBP9.2 million principally due to the exit, as previously reported, from a material contract in P&R to supply building maintenance services for MOD properties.

Total revenues of GBP66.5 million for the Period have been reduced by GBP3.1 million, compared to underlying revenues, due to the impact at P&R of the loss on exit from contracts and gas division and impairment of accrued income which have been categorised as non-underlying items (see notes 4 and 7).

Underlying EBITDA of GBP3.2 million (2018: GBP6.3 million) in the Period has been significantly impacted by losses at the Group's P&R business which includes the impact of underlying trading losses on a significant gas maintenance and servicing contract with East Kent Housing (which comprised the majority of the gas division of P&R). Other businesses in the Group traded in line with the prior year as summarised below:

 
                                2019 
                     --------------------------- 
                          Rest 
                      of Group      P&R    Total 
                       GBP 000  GBP 000  GBP 000 
-------------------  ---------  -------  ------- 
Underlying revenue      59,420   10,168   69,588 
Underlying EBITDA        5,218  (2,054)    3,164 
-------------------  ---------  -------  ------- 
 
 
                                2018 
                     --------------------------- 
                          Rest 
                      of Group      P&R    Total 
                       GBP 000  GBP 000  GBP 000 
-------------------  ---------  -------  ------- 
Underlying revenue      56,456   22,351   78,807 
Underlying EBITDA        5,292    1,002    6,294 
-------------------  ---------  -------  ------- 
 

Loss after taxation

Loss after taxation for the Period was GBP8.6 million (2018: profit GBP3.4 million) principally resulting from the issues in P&R. This includes the impact of underlying trading losses in P&R together with significant non-underlying items comprising costs and impairment resulting from the exit from the MOD properties contract in May 2018, exit from the East Kent Housing contract and closure of the P&R gas division, provision for claims against P&R, impairment of financial assets and restructuring costs reported in the Period.

 
                                         Non-underlying 
                                                items - 
                                                    P&R 
                                                GBP 000 
---------------------------------------  -------------- 
Loss on exit of contracts/gas division            7,604 
Impairment of accrued income                        424 
Restructuring costs                                 975 
---------------------------------------  -------------- 
Total                                             9,003 
---------------------------------------  -------------- 
 

Other non-underlying items amounting to GBP3,886,000 relate to the amortisation of customer relationships, impairment of customer relationships in Spokemead (due to the reduction in the annual value of the new contract), share-based payment charge and acquisition costs (see note 7).

Our financial position

The Group's overall financial position has been impacted by the increased debt levels and the underlying losses, impairment write offs and restructuring costs at P&R. As a result the Group has been in regular dialogue with our bankers HSBC UK Bank Plc. For the 31 March 2019 covenant tests, the Group was in breach of certain of the financial covenants set by HSBC UK Bank Plc. The Group requested a waiver of the breach of covenants which was formally approved by HSBC UK Bank Plc for the year to 31 March 2019 and the Directors continue to be in detailed discussions with HSBC UK Bank Plc who remain supportive of the Group and its strategic plan to restructure the Group.

The Group and HSBC UK Bank Plc are in discussions about restructuring the borrowing facilities and rebasing the financial covenants. Whilst HSBC UK Bank Plc remain supportive of the Group there is no formal documentation in place at the date of signing these financial statements. The financial covenants are tested quarterly and based on the existing facility agreement it is expected that the Group will be in breach of certain of the financial covenants at the next covenant test. The Board is also considering an equity fund raise in the short term to provide additional resources in order to reduce overall indebtedness.

The Group overdraft facility was GBP6.5 million as at 31 March 2019. At 31 March 2018 the Group had an overdraft facility of GBP3.8m, which was increased to GBP4.25 million in July 2018, to GBP5.0 million in September 2018 and further increased to GBP7.0 million in December 2018. It was subsequently reduced to GBP6.5 million in February 2019 aligned with the consolidation of the HSBC UK Bank Plc Term loans.

At 31 March 2019 the Group Term loan was GBP5.0 million with HSBC UK Bank Plc repayable quarterly over three years. This loan was drawn down in February 2019 consolidating the balance of a five-year Term loan principally relating to prior year acquisitions of Purdy, DCB and Spokemead and a three-year Term loan of GBP1.1 million relating to the acquisition of R. Dunham in November 2018. The Group also had a GBP0.3 million, five-year loan with Funding Circle, which was acquired with R. Dunham and is repayable monthly.

Total borrowings at 31 March 2019 amounted to GBP10.9 million comprising Term loans of GBP5.3 million, a mortgage loan of GBP0.4m and an overdraft of GBP5.2 million. Total borrowings have increased by GBP5.5 million in the Period. At 31 March 2018 total borrowings were GBP5.4 million comprising Term loan of GBP4.0 million, a mortgage loan of GBP0.4 million and overdraft of GBP1.0 million.

The current financial covenant measures with HSBC UK Bank Plc reference a definition of net debt. In addition to total borrowings of GBP10.9 million at 31 March 2019 (as set out above and in note 10) the net debt definition includes deferred consideration (GBP476,000), purchasing card facility utilised (GBP2.5 million utilised of a facility of GBP3.0 million), finance lease commitments (GBP10,000) and financial guarantees provided by HSBC UK Bank Plc to subsidiary companies (GBP30,000).

Group total assets were GBP35.1 million at 31 March 2019 (2018: GBP39.5 million). The Group net assets as at 31 March 2019 were GBP7.4 million (2018: GBP16.6 million) reflecting the losses and write downs in the year to 31 March 2019.

The Group has a centralised treasury function and actively manages cash flows on both a daily and longer-term basis. The Group enjoys long-term client relationships with both its customers, being local government organisations and other housing associations, and its supply chain partners.

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

Group results and further KPIs

 
                                                       Audited 12 
                                           Audited 12   months to 
                                            months to    31 March 
                                        31 March 2019        2018 
Group results                                 GBP 000     GBP 000 
-------------------------------------  --------------  ---------- 
Underlying revenue(1)                          69,588      78,807 
Underlying gross profit(1)                     15,131      17,692 
Underlying gross margin(1)                      21.7%       22.4% 
Underlying EBITDA(1)                            3,164       6,294 
Underlying operating profit(1)                  2,789       5,982 
Underlying profit before taxation(2)            2,501       5,790 
(Loss)/profit after taxation                  (8,596)       3,448 
Basic (loss/earnings per share(3)            (21.29)p       8.61p 
Adjusted earnings per share(4)                  6.38p      12.35p 
Dividend per share paid                         2.50p       2.00p 
Cash                                               21          72 
Total assets                                   35,114      39,460 
Net working capital(5)                          5,773      10,388 
Net assets                                      7,388      16,623 
-------------------------------------  --------------  ---------- 
 

Notes

1. Underlying results are stated before non-underlying items of GBP12.9m (2018: GBP1.5m) as set out in note 7.

2. Underlying profit before taxation is stated after interest and before charging the non-underlying items.

3. Basic (loss)/earnings per share is the (loss)/profit after tax divided by the weighted average number of ordinary shares.

4. Adjusted earnings per share is the profit before deducting non-underlying items after tax divided by the weighted average number of ordinary shares.

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

Acquisitions

On 29 November 2018, Bilby continued its buy and build strategy with the acquisition of R. Dunham for an initial cash consideration of GBP750,000 and the issue of 250,000 new ordinary shares. In June 2019, after the Period end, a further cash consideration payment of GBP476,000 was made based on the results of the company for the year ended 31 December 2018. In December 2018, the final consideration of GBP500,000 was paid to Spokemead following the successful renewal of a long term contract with its major customer. Whilst the annual revenue from the contract has been reduced, resulting in an impairment of customer relationships, it still represents approximately GBP10 million over a six year period. The final consideration of GBP500,000 was also paid to DCB (Kent) in the Period.

Dividends

Due to the results in the year and the overall level of indebtedness, the Board does not recommend a final dividend. An interim dividend of 0.5 pence was paid in January 2019 which together with the final dividend of 2.0 pence paid in September 2018 represents a total dividend of 2.5 pence per ordinary share paid in the year to 31 March 2019.

Conclusion

The disappointing result was driven by significant losses at P&R, but with robust underlying results from the rest of the Group. The Board has taken various actions to eliminate the impact of P&R and is confident that the Group has been repositioned to advance in the future.

Clive Lovett

Group Finance Director

19 September 2019

Consolidated statement of comprehensive income

for the financial year ended 31 March 2019

 
                                               12 months ended 31 March           12 months ended 31 March 
                                                          2019                               2018 
----------------------------------  -----  ---------------------------------  --------------------------------- 
                                                              Non-                               Non- 
                                                        underlying                         underlying 
                                                             items                              items 
                                           Underlying        (note            Underlying        (note 
                                                items           7)     Total       items           7)     Total 
                                    Notes     GBP'000      GBP'000   GBP'000     GBP'000      GBP'000   GBP'000 
----------------------------------  -----  ----------  -----------  --------  ----------  -----------  -------- 
Revenue                                 4      69,588      (3,060)    66,528      78,807            -    78,807 
Cost of sales                                (54,457)      (2,618)  (57,075)    (61,115)            -  (61,115) 
----------------------------------  -----  ----------  -----------  --------  ----------  -----------  -------- 
Gross profit                                   15,131      (5,678)     9,453      17,692            -    17,692 
Administrative expenses                      (12,342)      (7,211)  (19,553)    (11,710)      (1,498)  (13,208) 
----------------------------------  -----  ----------  -----------  --------  ----------  -----------  -------- 
Operating (loss)/profit                 5       2,789     (12,889)  (10,100)       5,982      (1,498)     4,484 
----------------------------------  -----  ----------  -----------  --------  ----------  -----------  -------- 
Finance costs                                   (288)            -     (288)       (192)            -     (192) 
----------------------------------  -----  ----------  -----------  --------  ----------  -----------  -------- 
(Loss)/profit before 
 tax                                            2,501     (12,889)  (10,388)       5,790      (1,498)     4,292 
Income tax credit/(expense)                                            1,792                              (844) 
----------------------------------  -----  ----------  -----------  --------  ----------  -----------  -------- 
(Loss)/profit for the 
 year attributable to 
 the equity holders of 
 the parent company                                                  (8,596)                              3,448 
----------------------------------  -----  ----------  -----------  --------  ----------  -----------  -------- 
Total comprehensive (loss)/income 
 for the year attributable 
 to the equity holders 
 of the parent company                                               (8,596)                              3,448 
----------------------------------  -----  ----------  -----------  --------  ----------  -----------  -------- 
Basic (loss)/earnings 
 per share (pence)                      8                            (21.29)                               8.61 
Diluted (loss)/earnings 
 per share (pence)                      8                            (21.29)                               8.51 
----------------------------------  -----  ----------  -----------  --------  ----------  -----------  -------- 
 

Consolidated statement of financial position

as at 31 March 2019

 
                                                                   2019      2018 
                                                        Notes   GBP'000   GBP'000 
------------------------------------------------------  -----  --------  -------- 
Assets 
Non current assets 
Intangible assets                                           9    11,750    14,036 
Property, plant and equipment                                     1,661     1,638 
------------------------------------------------------  -----  --------  -------- 
                                                                 13,411    15,674 
------------------------------------------------------  -----  --------  -------- 
Current assets 
Inventories                                                       3,134     3,153 
Trade and other receivables                                      18,548    20,561 
Cash and cash equivalents                                            21        72 
------------------------------------------------------  -----  --------  -------- 
Total current assets                                             21,703    23,786 
------------------------------------------------------  -----  --------  -------- 
Total assets                                                     35,114    39,460 
------------------------------------------------------  -----  --------  -------- 
Equity and liabilities attributable to equity holders 
 of the parent company 
Issued capital and reserves 
Share capital                                            11.1     4,054     4,029 
Share premium                                            11.2     8,609     8,392 
Share-based payment reserve                                         827       699 
Merger reserve                                           11.3     (248)     (248) 
Retained earnings                                               (5,854)     3,751 
------------------------------------------------------  -----  --------  -------- 
Total equity                                                      7,388    16,623 
------------------------------------------------------  -----  --------  -------- 
Non current liabilities 
Borrowings                                                 10       236     2,949 
Obligations under finance leases                                      -        11 
Deferred tax liabilities                                            431     1,883 
------------------------------------------------------  -----  --------  -------- 
                                                                    667     4,843 
------------------------------------------------------  -----  --------  -------- 
Current liabilities 
Borrowings                                                 10    10,643     2,452 
Obligations under finance leases                                     10        70 
Current income tax liabilities                                        -     1,074 
Deferred consideration                                              476     1,000 
Trade and other payables                                         15,930    13,398 
------------------------------------------------------  -----  --------  -------- 
Total current liabilities                                        27,059    17,994 
------------------------------------------------------  -----  --------  -------- 
Total equity and liabilities                                     35,114    39,460 
------------------------------------------------------  -----  --------  -------- 
 

Approved by the Board on 19 September 2019

Clive Lovett

Group Finance Director

Company registration number: 09095860

Consolidated statement of changes in equity

for the financial year ended 31 March 2019

 
                                                        Share 
                                   Issued               based 
                                    share     Share   payment    Merger   Retained     Total 
                                  capital   premium   reserve   reserve   earnings    equity 
                                  GBP'000   GBP'000   GBP'000   GBP'000    GBP'000   GBP'000 
-------------------------------  --------  --------  --------  --------  ---------  -------- 
At 1 April 2017                     3,974     8,076       505     (248)      1,103    13,410 
Profit and total comprehensive 
 income for the year                    -         -         -         -      3,448     3,448 
Issue of share capital                 55       316         -         -          -       371 
Share-based payment charge              -         -       194         -          -       194 
Dividends paid                          -         -         -         -      (800)     (800) 
Total transactions with owners 
 recognised directly in equity         55       316       194         -      (800)     (235) 
-------------------------------  --------  --------  --------  --------  ---------  -------- 
Balance at 31 March 2018            4,029     8,392       699     (248)      3,751    16,623 
Loss and total comprehensive 
 income for the year                    -         -         -         -    (8,596)   (8,596) 
Issue of share capital                 25       217         -         -          -       242 
Share-based payment charge              -         -       128         -          -       128 
Dividends paid                          -         -         -         -    (1,009)   (1,009) 
Total transactions with owners 
 recognised directly in equity         25       217       128         -    (1,009)     (639) 
-------------------------------  --------  --------  --------  --------  ---------  -------- 
Balance at 31 March 2019            4,054     8,609       827     (248)    (5,854)     7,388 
-------------------------------  --------  --------  --------  --------  ---------  -------- 
 

Consolidated statement of cash flows

for the financial year ended 31 March 2019

 
                                                                12 months  12 months 
                                                                    ended      ended 
                                                                 31 March   31 March 
                                                                     2019       2018 
                                                         Notes    GBP'000    GBP'000 
-------------------------------------------------------  -----  ---------  --------- 
Net cash (used in)/generated from operating activities      12    (2,026)        802 
-------------------------------------------------------  -----  ---------  --------- 
Cash flow from investing activities 
Acquisition of subsidiaries (including deferred 
 consideration paid)                                              (1,750)    (1,154) 
Net cash acquired on acquisition                            14         79          - 
Purchase of property, plant and equipment                           (158)       (89) 
Purchase of intangible assets                                9        (9)       (24) 
Proceeds on disposal of property, plant and equipment                   9          - 
-------------------------------------------------------  -----  ---------  --------- 
Net cash used in investing activities                             (1,829)    (1,267) 
-------------------------------------------------------  -----  ---------  --------- 
Cash flow from financing activities 
Proceeds from borrowings                                            6,100        250 
Repayment of borrowings                                           (5,193)    (1,442) 
Interest paid                                                       (288)      (192) 
Capital element of finance lease payments                            (71)      (128) 
Dividends paid                                                    (1,009)      (800) 
-------------------------------------------------------  -----  ---------  --------- 
Net cash used in financing activities                               (461)    (2,312) 
-------------------------------------------------------  -----  ---------  --------- 
Net decrease in cash and cash equivalents                         (4,316)    (2,777) 
Cash and cash equivalents at beginning of year                      (882)      1,895 
-------------------------------------------------------  -----  ---------  --------- 
Cash and cash equivalents at end of year                          (5,198)      (882) 
-------------------------------------------------------  -----  ---------  --------- 
 

The cash and cash equivalents at the year ended 31 March 2019 represented the net of overdrafts of GBP5,219,000 (2018: GBP954,000) together with the cash and cash equivalents shown in the Consolidated Statement of Financial Position of GBP21,000 (2018: GBP72,000).

Notes to the consolidated financial statements

for the financial year ended 31 March 2019

1. Basis of preparation

Bilby Plc and its subsidiaries (together 'the Group') operate in the gas heating, electrical and general building services industries. The Company is a public company operating on AIM and is incorporated and domiciled in England and Wales (registered number 09095860). The address of its registered office is 201 Temple Chambers, 3-7 Temple Avenue, London EC4Y 0DT. The Company was incorporated on 20 June 2014.

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

The Group has adopted all of the new and revised standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB, as they have been adopted by the European Union, that are relevant to its operations and effective for accounting periods beginning on 1 April 2018.

The preparation of financial statements requires management to exercise its judgement in the process of applying accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in notes 2 and 3.

The functional and presentational currency of the Group is Pounds Sterling (GBP) rounded to the nearest thousand. The principal accounting policies adopted by the Group are set out in note 2.

2. Summary of significant accounting policies

2.1. Going concern

Accounting standards require that Directors satisfy themselves that it is reasonable for them to conclude whether it is appropriate to prepare the Financial Statements on a going concern basis. The Group's business activities together with factors that are likely to affect its future development and position are set out in the Group Chair's statement. After making enquiries, the Board has a reasonable expectation that Bilby Plc and the Group as a whole have adequate resources to continue in operational existence for the foreseeable future. For this reason, the Board continues to adopt the going concern basis in preparing the consolidated financial statements. The Board is also considering an equity fund raise in the short term to provide additional resources in order to reduce overall indebtedness.

At 31 March 2019 the Group was in breach of the financial covenants set by our bankers, HSBC UK Bank Plc, resulting from the increased debt levels and the underlying losses, impairment write offs and restructuring costs at P&R. The breach of covenants has been waived by HSBC UK Bank Plc for the Period and the Directors continue to have detailed discussions with HSBC UK Bank Plc regarding the restructure of the borrowing facilities. Whilst HSBC UK Bank Plc remain supportive of the Group there is no formal documentation in place at the date of signing these financial statements.

The breach of covenants would indicate that although a material uncertainty exists, on the basis of continued support from HSBC UK Bank Plc and a restructuring of the borrowing facilities, the Group's financial statements have been prepared on a going concern basis

2.2. Basis of consolidation

The consolidated financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 31 March each year. Subsidiaries are entities that are controlled by the Company. The definition of control involves three elements: power over the investee; exposure or rights to variable returns and the ability to use power over the investee to affect the amount of the investors' returns. The Group generally obtains power through voting rights.

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

(a) P&R

On 6 March 2015 the Company acquired the shares of P&R in exchange for its own shares. The Company issued 25,000,000 10p shares in exchange for the entire share capital of P&R. The acquisition did not meet the definition of a business combination as the Company was not a business and therefore falls outside the scope of IFRS3 (Revised) Business Combinations (IFRS 3). As IFRS does not provide specific guidance in relation to group reorganisations it defers to the next appropriate GAAP being UK GAAP. The acquisition of P&R by the Company has therefore been accounted for in accordance with the principles of merger accounting as set out in Section 19 of FRS102. Accordingly, the consolidated financial statements for the Group have been presented as if the Company throughout the current and preceding periods had owned P&R. The comparative figures for the previous year includes the results of the merged entity, the assets and liabilities at the previous balance sheet date and the shares issued by the Company as consideration as if they had always been in issue. The difference between the share capital of P&R and the nominal value of shares issued by the Company to acquire P&R is recorded as a merger reserve.

(b) Purdy

On 13 July 2015, the Company acquired the entire issued share capital of Purdy Holdings Limited and its subsidiary Purdy Contracts Limited (Purdy) for a total consideration of GBP8.1 million. The acquisition met the definition of a business combination and has been accounted for using the acquisition method in accordance with the Group's accounting policy.

(c) DCB (Kent)

On 12 April 2016, the Company acquired the entire issued share capital of DCB (Kent) Limited (DCB (Kent)) for a total consideration of GBP4.0 million. The acquisition met the definition of a business combination and has been accounted for using the acquisition method in accordance with the Group's accounting policy.

(d) Spokemead

On 12 April 2016, the Company acquired the entire issued share capital of Spokemead Maintenance Limited (Spokemead) for a total consideration of GBP8.7 million. The acquisition met the definition of a business combination and has been accounted for using the acquisition method in accordance with the Group's accounting policy.

(e) R. Dunham

On 29 November 2018, the Company acquired the entire share capital of R. Dunham (UK) Limited (R. Dunham) for an estimated consideration of GBP1.6 million. The acquisition met the definition of a business combination and has been accounted for using the acquisition method in accordance with the Group's accounting policy.

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

2.3. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the provision of the Group's services. Revenue is recognised by the Group, net of value added tax, based upon the following and in accordance with the five-step model as established in IFRS 15:

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

-- Building Services - Building Services contracts typically range between 1-6 years. During the course of a project an independent surveyor will conduct a monthly review of the work done and agree an incremental payment. The Group thus recognises the revenue of a project gradually and on a monthly basis upon the accreditation of the surveyor. The stage of completion is certified by the independent surveyor. Revenue recognisable in relation to work completed and accredited is recognised as accrued income until invoiced.

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

It is considered by management that the above revenue recognition policies are suitable for recognising revenue arising from the Group's key market verticals. Management consider that the revenue recognition policies applied are consistent with IFRS 15 and as such there has been no impact on the consolidated financial statements. Accrued income is recognised when services are provided in advance of the customer being invoiced. All revenue streams are wholly attributable to the principal activity of the Group and arise solely within the United Kingdom.

3. Critical accounting estimates and judgements

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

3.1. Recoverability of trade receivable balances

The Board of Directors has undertaken an extensive review of financial assets recoverability in the year ended 31 March 2019. This has resulted in adjustments that have been included in both the underlying results and non-underlying items relating to impairment of financial assets at P&R and are set out in more detail in note 7.

In the periods shown in these consolidated financial statements, there are a small number of customers with a significant trade receivable balance at the period end. Management have not made a provision against any of these receivable balances except as indicated above. Although this is an area of judgement, but not one of estimation, management are comfortable with this position due to the high credit ratings of the customers involved and the outcome of the review and actions undertaken by the Board of Directors.

3.2. Valuation of accrued income

Revenue recognisable in relation to work completed and accredited is recognised as accrued income until invoiced based on actual purchase order value, plus any variations or based on the estimated cost of the job using recent past performance as a basis for the price of the work. Some judgement, but no estimation, is therefore required in assessing the estimated cost but management are comfortable with their basis of estimation which has been supported by post year end invoice values.

3.3. Share-based payment charge

The Group issued share options to Directors and employees of the Group in previous years. None were issued in the Period. The Black Scholes model is used to calculate the appropriate charge for these options. The use of this model to calculate a charge involves using a number of estimates and judgements to establish the appropriate inputs to be entered into the model, covering areas such as the use of an appropriate interest rate and dividend rate, exercise restrictions and behavioural considerations. A significant element of judgement is therefore involved in the calculation of the charge.

3.4. Valuation of customer relationships

Determining the valuation of customer relationships does require use of both estimates and judgements in terms of determining the relevant cash flows and the discount factor to be applied in the valuation to calculate the present value. Future cash flows are estimated based on actual contract values and durations for contractual relationships. Average monthly run rates and estimated durations using length of current relationship, then moderated using an attrition rate, are applied to non-contractual relationships. Cash outflows are forecast using direct costs and overheads based on past performance. Change in contract values and duration, together with margins achieved and overheads applied could result in variations to the carrying value of customer relationships. In addition, an adverse movement in the discount factor due to an increased risk profile or a change in the cost of debt (increase in interest rates) would also result in a variation to the carrying value of the customer relationships. See notes 7 and 9.1 for details of the review in the year of the carrying value of the customer relationships.

3.5. Impairment of goodwill

Determining whether goodwill is impaired requires an estimate of the value in use of the CGUs to which goodwill has been allocated. The value in use calculation involves an estimate of the future cash flows of the CGUs and also the selection of appropriate discount rates to calculate present values. Future cash flows are estimated based on contract value and duration, together with margin based on past performance. Change in contract values and duration, together with margins achieved could result in variations to the carrying value of goodwill. In addition, an adverse movement in the discount factor due to an increased risk profile or a change in the cost of debt (increase in interest rates) would also result in a variation to the carrying value of goodwill. The primary sensitivity is the discount rate, however the Directors consider that there is no reason to believe it is not appropriate.

3.6. Amounts recoverable under terminated contracts

The result at P&R has been impacted by two loss-making contracts with Carillion Amey and East Kent Housing which have been terminated. Both contracts are still subject to potential dispute resolution and in particular, at the date of results, the East Kent Housing contract is in the process of Adjudication proceedings. The Board of Directors have undertaken a detailed review of the recoverability of financial assets that relate to these contracts and as set out in note 7 have identified impairments to financial assets. This is an area of judgement and estimation based on management's own investigations and third party professional advice.

4. Revenue

Revenue can be analysed as follows:

 
                      12 months  12 months 
                          ended      ended 
                       31 March   31 March 
                           2019       2018 
                        GBP'000    GBP'000 
--------------------  ---------  --------- 
Gas Maintenance           9,831     14,574 
Building Services        39,234     48,289 
Electrical Services      17,463     15,944 
--------------------  ---------  --------- 
                         66,528     78,807 
--------------------  ---------  --------- 
 

All results in the current and prior period derive from continuing operations and all revenues arose in the United Kingdom. Non-underlying items in the year to 31 March 2019 reduced Gas Maintenance revenue by GBP1,362,000 (2018: GBPNil) and Building Services revenue by GBP1,698,000 (2018: GBPNil).

There are four customers who individually contributed 12%, 8%, 7% and 5% respectively towards the revenue. (2018: four contributing 12%, 8%, 7% and 6%).

5. Operating (loss)/profit

Operating (loss)/profit is stated after charging all costs including non-underlying items which are detailed in note 7.

 
                                                      12 months  12 months 
                                                          ended      ended 
                                                       31 March   31 March 
                                                           2019       2018 
                                                        GBP'000    GBP'000 
----------------------------------------------------  ---------  --------- 
Inventory recognised as an expense in cost of sales      12,463     16,160 
Staff costs                                              16,040     13,203 
Depreciation                                                256        256 
Amortisation of software costs                               44         39 
Loss on disposal of property, plant and equipment            75         17 
Auditor's remuneration                                      182         98 
Non-audit remuneration                                       49         21 
Operating lease rentals                                     999      1,257 
----------------------------------------------------  ---------  --------- 
 

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

6. Underlying EBITDA

Earnings before interest, taxation, depreciation and amortisation ("EBITDA")

Underlying EBITDA is calculated as follows:

 
                                                    12 months  12 months 
                                                        ended      ended 
                                                     31 March   31 March 
                                                         2019       2018 
                                                      GBP'000    GBP'000 
--------------------------------------------------  ---------  --------- 
Underlying profit before taxation                       2,501      5,790 
Finance costs                                             288        192 
Depreciation                                              256        256 
Amortisation of software costs                             44         39 
Loss on disposal of property, plant and equipment          75         17 
--------------------------------------------------  ---------  --------- 
Underlying EBITDA                                       3,164      6,294 
--------------------------------------------------  ---------  --------- 
 

7. Non-underlying items

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

 
                                                            12 months  12 months 
                                                                ended      ended 
                                                             31 March   31 March 
                                                                 2019       2018 
                                                              GBP'000    GBP'000 
-----------------------------------------------------  ---  ---------  --------- 
Amortisation of customer relationships                  a)      1,836      1,792 
Impairment of customer relationships                    a)      1,802          - 
Share-based payment charge                              b)        128        194 
Acquisition costs                                       c)        120          - 
Restructuring costs                                     d)        975          - 
Loss on exit from onerous contracts and gas division 
 of P&R                                                 e)      7,604          - 
Impairment of accrued income                            f)        424          - 
Fair value adjustment                                   g)          -      (488) 
-----------------------------------------------------  ---  ---------  --------- 
                                                               12,889      1,498 
 ---------------------------------------------------------  ---------  --------- 
 

Amortisation and impairment of customer relationships, share based payment charge, acquisition costs and restructuring costs have been charged to administrative expenses. The impairment to accrued income has been charged against revenue. Of the loss on exit from onerous contracts and gas division of P&R, GBP2,636,000 has been charged against revenues, GBP2,618,000 charged to cost of sales and GBP2,350,000 charged to administrative expenses.

(a) Amortisation and impairment of customer relationships

Amortisation of acquisition intangibles was GBP1,836,000 for the year (2018: GBP1,792,000) and relates to amortisation of the customer relationships identified by the directors on the acquisition of Purdy, DCB (Kent), Spokemead and R. Dunham. Impairment of customer relationship of GBP1,802,000 (2018: Nil) relates to Spokemead (see note 9).

(b) Share-based payment charge

A Group share option scheme is in place. No options were granted during the year. The share-based payment charge has been separately identified as it is a non-cash expense.

(c) Acquisition costs

Acquisition costs comprise legal, professional and other expenditure in relation to the acquisition of R. Dunham during the year and are included in administrative costs.

(d) Restructuring costs

Comprise redundancy, costs under compromise agreements, legal and professional fees and other related costs of GBP975,000 and are one off and non-recurring.

(e) Loss on exit from onerous contracts and gas division of P&R

GBP3,573,000 relates to the exit from the contract in P&R for the provision of services to the MOD properties (of which GBP432,000 relates to trading losses, GBP140,000 to legal and professional fees and GBP3,001,000 relates to the impairment of financial assets and inventory). GBP4,031,000 relates to the exit from the contracts with four East Kent Councils (collectively "East Kent Housing") and other gas contracts in P&R (of which GBP1,971,000 relates to the impairment of financial assets and inventory, GBP1,265,000 provision for claims against P&R, GBP507,000 relates to provision for post contract termination trading losses and GBP288,000 to legal and professional fees).

(f) Impairment of accrued income

Relates to a one off adjustment to accrued income on a Building Services contract following a detailed review undertaken by the Directors.

(g) Fair value adjustment

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

8. Earnings per share

8.1 Basic and diluted earnings per share

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

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

The Group has potentially issuable shares all of which relate to the Group's share options issued to Directors and employees.

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

 
                                                       12 months   12 months 
                                                           ended       ended 
                                                        31 March    31 March 
                                                            2019        2018 
                                                         GBP'000     GBP'000 
----------------------------------------------------  ----------  ---------- 
(Loss)/profit used in calculating basic and diluted 
 earnings per share                                      (8,596)       3,448 
Number of shares 
Weighted average number of shares for the purpose 
 of basic earnings per share                          40,373,589  40,049,590 
Weighted average number of shares for the purpose 
 of diluted earnings per share                        40,373,589  40,491,051 
Basic (loss)/earnings per share (pence)                  (21.29)        8.61 
Diluted (loss)/earnings per share (pence)                (21.29)        8.51 
----------------------------------------------------  ----------  ---------- 
 

Options over 1,548,103 ordinary shares (2018: 2,757,412 ordinary shares) were in issue but have not been taken into account in calculating diluted loss per share as they are anti-dilutive.

8.2 Adjusted earnings per share

(Loss)/profit after tax is stated after deducting non-underlying items totalling GBP12,889,000 (2018: GBP1,498,000) as set out in note 7 and the impact of these items on corporation tax. Non-underlying items are either exceptional or one-off in nature, non-cash expenses or necessary elements of expenditure to derive future benefits for the Group which have not been capitalised in the Consolidated Statement of Financial Position. These are shown separately on the face of the Consolidated Statement of Comprehensive Income.

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

 
                                                        12 months   12 months 
                                                            ended       ended 
                                                         31 March    31 March 
                                                             2019        2018 
                                                          GBP'000     GBP'000 
-----------------------------------------------------  ----------  ---------- 
(Loss)/profit after tax                                   (8,596)       3,448 
Add back 
Restructuring costs                                           975           - 
Loss on exit from onerous contracts and gas division 
 of P&R                                                     7,604           - 
Impairment of accrued income                                  424           - 
Amortisation of customer relationships                      1,836       1,792 
Impairment of customer relationships                        1,802           - 
Share based payment charge                                    128         194 
Acquisition costs                                             120           - 
Fair value adjustment                                           -       (488) 
Impact of above adjustments on corporation tax            (1,716)           - 
-----------------------------------------------------  ----------  ---------- 
Adjusted profit after tax                                   2,577       4,946 
-----------------------------------------------------  ----------  ---------- 
Number of shares 
Weighted average number of shares for the purpose 
 of adjusted earnings per share                        40,373,589  40,049,590 
Weighted average number of shares for the purpose 
 of diluted adjusted earnings per share                40,509,079  40,491,051 
Adjusted earnings per share (pence)                          6.38       12.35 
Diluted adjusted earnings per share (pence)                  6.36       12.22 
-----------------------------------------------------  ----------  ---------- 
 

9. Intangible assets

 
                            Software       Customer 
                               costs  relationships  Goodwill    Total 
                             GBP'000        GBP'000   GBP'000  GBP'000 
--------------------------  --------  -------------  --------  ------- 
Cost 
At 1 April 2018                  193         13,832     4,256   18,281 
Additions in the year              9              -         -        9 
Acquisition of subsidiary          -            200     1,187    1,387 
--------------------------  --------  -------------  --------  ------- 
At 31 March 2019                 202         14,032     5,443   19,677 
--------------------------  --------  -------------  --------  ------- 
Amortisation 
At 1 April 2018                   79          4,166         -    4,245 
Charge for the year               44          1,836         -    1,880 
Impairment in year                 -          1,802         -    1,802 
--------------------------  --------  -------------  --------  ------- 
At 31 March 2019                 123          7,804         -    7,927 
--------------------------  --------  -------------  --------  ------- 
Net book value 
At 31 March 2018                 114          9,666     4,256   14,036 
--------------------------  --------  -------------  --------  ------- 
At 31 March 2019                  79          6,228     5,443   11,750 
--------------------------  --------  -------------  --------  ------- 
 

9.1. Customer relationships

The customer relationships intangible assets arise on acquisition of subsidiaries when accounted for as a business combination and relate to the expected value to be derived from contractual and non-contractual customer relationships. The value placed on the contractual customer relationship is based on the expected cash revenue inflows over the estimated remaining life of each existing contract. The value placed on the non-contractual customer relationships is based on the expected cash inflows based on past revenue performance by virtue of the customer relationship; but, using an attrition rate depending on the length of the relationship. Associated cash outflows have been based on historically achieved margins and overhead run rates per GBP1 of revenue. The net cash flows are discounted at a rate which the Directors consider is commensurate with the risks associated with capturing returns from the customer relationships.

The estimated life for customer relationships is based on the average of the contracted remaining life of contracted relationships and estimated life of the non-contractual relationships.

 
                                              Purdy     Spokemead    DCB (Kent)   R. Dunham          Total 
-------------------------------------  ------------  ------------  ------------  ----------  ------------- 
Attrition rate where relationship 
 < 5 years.                                     80%           n/a          100%         n/a 
Attrition rate where relationship 
 > 5 years.                                     50%           n/a          100%         n/a 
Discount rate                                 13.3%        12.84%        12.84%      15.79% 
                                            7 years     7.5 years        1 to 8   1.5 years 
Estimated life of relationship                                            years 
Fair value of customer relationships   GBP5,586,000  GBP5,922,000  GBP2,324,000  GBP200,000  GBP14,032,000 
-------------------------------------  ------------  ------------  ------------  ----------  ------------- 
 

During the year Spokemead renewed the contract with its major customer. The terms and scope of the works under contract were substantially amended resulting in a reduction in expected revenues and an impairment of the customer relationships intangible asset of GBP1,802,000. This impairment has been included as a non-underlying item as detailed in note 7.

9.2. Goodwill

Goodwill on consolidation arises on the excess of cost of acquisition over the fair value of the net assets acquired on purchase of the company (note 14).

Goodwill is supported by cash flows derived from contracts won in the post-acquisition period. Contracted cash inflows have been projected for the duration of the contracts. Associated costs, included in the cash flows, have been forecast based on historically achieved margins and overhead run rates per GBP1 of revenue. Net cash flows are then discounted back using a rate as indicated for customer relationships. The Directors consider that on the basis of these post acquisition contract wins goodwill is not impaired. The Directors have assessed whether the amendments to the terms and scope of Spokemead's major customer contract has impacted on the carrying value of goodwill. The Directors consider that the contract amendments do not indicate an impairment of goodwill at the year end.

Each subsidiary is its own CGU for the purposes of the goodwill calculation and impairment reviews and is monitored on an ongoing basis by the Board.

The Directors consider that there are no possible changes to the key assumptions of the impairment review that would result in impairment at the reporting date.

10. Borrowings

The maturity analysis of borrowings, inclusive of finance charges is included below. All of the loans are denominated in GBP Sterling.

 
                                   2019      2018 
                                GBP'000   GBP'000 
-----------------------------  --------  -------- 
Non-current borrowings 
Bank and other borrowings: 
Term loans                            -     2,578 
Other loan                          236         - 
Mortgage loan                         -       371 
-----------------------------  --------  -------- 
Total non-current borrowings        236     2,949 
-----------------------------  --------  -------- 
Current borrowings: 
Bank and other borrowings: 
Term loans                        5,000     1,441 
Other loan                           53         - 
Mortgage loan                       371        57 
Overdraft                         5,219       954 
-----------------------------  --------  -------- 
Total current borrowings         10,643     2,452 
-----------------------------  --------  -------- 
Bank and other borrowings 
Term loans                        5,000     4,019 
Other loan                          289         - 
Mortgage loan                       371       428 
Overdraft                         5,219       954 
-----------------------------  --------  -------- 
Total borrowings                 10,879     5,401 
-----------------------------  --------  -------- 
 

At 31 March 2019 the Group was in breach of the financial covenants set by our bankers, HSBC UK Bank Plc, resulting from the increased debt levels and the underlying losses, impairment write offs and restructuring costs at P&R. The breach of covenants has been waived by HSBC UK Bank Plc for the year to 31 March 2019 and the Directors continue to have detailed discussions with HSBC UK Bank Plc who remain supportive of the Group and the strategic plan to restructure the Group. The Group has exited from the loss making contracts in P&R, closed P&R's gas division, restructured and aligned the remaining components of the business with Purdy. The Group and HSBC UK Bank Plc intend to restructure the borrowing facilities and rebase the financial covenants. The current borrowing facilities have therefore been presented as repayable within one year.

The HSBC UK Bank Plc Term loan of GBP5.00 million is repayable quarterly over three years and therefore GBP1.67 million will be paid within 1 year, GBP1.67 million will be paid in 1-2 years and GBP1.66 million will be paid in 2-5 years from 1 April 2019.

The HSBC UK Bank Plc Mortgage loan of GBP371,000 is repayable quarterly and GBP57,000 will be paid within 1 year, GBP57,000 will be paid in 1-2 years, GBP171,000 will be paid in 2-5 years and GBP86,000 will be paid over 5 years from 1 April 2019.

(a) Working capital facilities

At 1 April 2018 the Group had a working capital facility of GBP3.75m. In July 2018 the Group extended its working capital facility to GBP4.25 million to fund the cash flow requirements of the Group. In September 2018 and December 2018 it further extended its working capital facility to GBP5.0 million and GBP7.0 million respectively. In February 2019 the working capital facility was reduced to GBP6.5 million aligned to the consolidation of the Term Bank loans.

The Bank overdraft is held at an interest rate of 2.5% above the Bank of England base rate and is repayable on demand. All cash at bank balances are denominated in GBP sterling. As at 31 March 2019, the Group had an unused overdraft facility of GBP1.28 million (2018: GBP2.80 million).

(b) Bank and other loans

Term loans

At 31 March 2018 the balance on a 5 year term loan with HSBC UK Bank Plc was GBP4.0 million. In November 2018 an additional 4-year loan of GBP1.1million, with HSBC UK Bank Plc was drawn down to fund the acquisition of R. Dunham. In February 2019 the HSBC term loans were consolidated into one 3-year term loan of GBP5.0 million repayable by quarterly instalments. Interest payable is 2.75% above the Bank of England base rate. At the same time the overdraft facility was reduced from GBP7.0 million to GBP6.5 million.

Mortgage loan

A 10-year mortgage loan of GBP570,000 with HSBC UK Bank Plc drawn down in July 2015, with interest payable at 1.9% above the Bank of England base rate. The mortgage is held over the freehold property of Purdy known as Brooklyn Lodge, Mott Street, Chingford, London E4 7RW.

Other loan

A 5-year term loan, originally drawn down in September 2018 of GBP317,000 with Funding Circle was assumed by the Group on the acquisition of R. Dunham in November 2018 and is unsecured. The loan is repayable by fixed monthly instalments of GBP7,024 and interest is at a fixed rate of 11.9%.

(c) Security

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

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

11. Share capital and reserves

11.1. Ordinary shares

 
                                                   2019        2018 
Ordinary shares of GBP0.10 each                 GBP'000     GBP'000 
--------------------------------------  ---  ----------  ---------- 
At the beginning of the year                      4,029       3,974 
Issued in the year                                   25          55 
-------------------------------------------  ----------  ---------- 
At the end of the year                            4,054       4,029 
-------------------------------------------  ----------  ---------- 
Number of shares 
At the beginning of the year                 40,290,027  39,729,731 
Issue of further consideration shares 
 in connection with DCB (Kent)          a)            -     167,113 
Issue of further consideration shares 
 in connection with Spokemead           b)            -     393,183 
Issue of initial consideration shares 
 in connection with R. Dunham           c)      250,000           - 
--------------------------------------  ---  ----------  ---------- 
At the end of the year                       40,540,027  40,290,027 
-------------------------------------------  ----------  ---------- 
 

(a) DCB (Kent) further consideration

Further consideration for DCB (Kent) was satisfied on 13 July 2017, by a cash payment of GBP375,000 together with an issue of 167,113 new Bilby ordinary shares at a price of 74.8 pence per share.

(b) Spokemead further consideration

Further consideration was paid on 27 September 2017 by way of a cash payment of GBP250,000 together with an issue of 393,183 new Bilby ordinary shares at a price of 62.85 pence per share.

(c) R. Dunham initial consideration

On 29 November 2018, Bilby Plc acquired the entire share capital of R. Dunham. The initial consideration for R. Dunham was satisfied by a cash payment of GBP750,000 together with an issue of 250,000 new Bilby ordinary shares at a price of 97.0 pence per share (the "consideration shares").

11.2. Share premium

 
                                   2019      2018 
                                GBP'000   GBP'000 
-----------------------------  --------  -------- 
At the beginning of the year      8,392     8,076 
Issued in the year                  217       316 
-----------------------------  --------  -------- 
At the end of the year            8,609     8,392 
-----------------------------  --------  -------- 
 

11.3. Merger reserve

 
                                           2019      2018 
                                        GBP'000   GBP'000 
-------------------------------------  --------  -------- 
At the beginning and end of the year      (248)     (248) 
-------------------------------------  --------  -------- 
 

12. Note to the consolidated statement of cash flows

 
                                                         12 months  12 months 
                                                             ended      ended 
                                                          31 March   31 March 
                                                              2019       2018 
                                                           GBP'000    GBP'000 
-------------------------------------------------------  ---------  --------- 
Cash flow from operating activities 
(Loss)/profit before income tax                           (10,388)      4,292 
Adjustments for: 
Net finance cost                                               288        192 
Loss on disposal of property, plant and equipment               75         17 
Depreciation                                                   256        256 
Amortisation of intangible assets                            1,880      1,831 
Impairment of intangible assets                              1,802          - 
Share-based payments                                           128        194 
Fair value adjustment                                            -      (488) 
Movement in receivables                                      2,980    (5,203) 
Movement in payables                                         1,870      1,493 
Movement in inventories                                        186    (1,160) 
Tax paid                                                   (1,103)      (622) 
-------------------------------------------------------  ---------  --------- 
Net cash (used in)/generated from operating activities     (2,026)        802 
-------------------------------------------------------  ---------  --------- 
 

13. Related party transactions

During the current and previous years, the Group operated from premises at 6-8 Powerscroft Road, Sidcup, Kent DAI4 5DT. The freehold of the property is owned by P Copolo, a former Director of the Company. A formal 20 year lease was entered into on the 6 March 2015 between P Copolo and the Company. Under the terms of the lease, the initial rent was GBP50,000 per annum, increased to GBP60,000 per annum following review, with the Company being responsible for all ongoing costs.

During the course of the year P Copolo purchased goods and services through P&R and a total of GBP471,954 (including GBP289,538 in relation to dividends of the Company foregone by P Copolo) was paid to P&R during the year in relation to the goods and services.

During the course of the year L Copolo purchased goods and services through P&R and a total of GBP15,000 was paid to P&R during the year in relation to the goods and services.

After the end of the Period, the Company entered into an agreement with Ellingham Holdings Limited, for consultancy services and paid a total of GBP65,000 (excluding VAT). David Ellingham, a former Director of the Company is a Director of Ellingham Holdings Limited.

13.1. Key management compensation

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

 
                                            2019      2018 
                                         GBP'000   GBP'000 
--------------------------------------  --------  -------- 
The aggregate remuneration comprised: 
Aggregate emoluments                         670       462 
Consultancy fees                             117        72 
--------------------------------------  --------  -------- 
                                             787       534 
Share-based payments                          17        21 
--------------------------------------  --------  -------- 
Total remuneration                           804       555 
--------------------------------------  --------  -------- 
 

The remuneration of the highest paid director during the year was GBP296,000 (2018: GBP213,755) of which GBP160,500 related to compensation for loss of office payable after the end of the Period.

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

14. Acquisitions

On 29 November 2018, the Company acquired the entire issued share capital of R. Dunham. The consideration was financed by a share placing and debt funding by way of an extension of existing debt facilities provided by HSBC UK Bank Plc.

14.1 Acquisition of R. Dunham

R. Dunham specialises in electrical installation, repairs and maintenance services primarily for local authority and Housing Association owned properties. The fair values of the assets acquired and liabilities assumed were as follows:

 
                              GBP'000 
----------------------------  ------- 
Goodwill                        1,187 
Customer relationships            200 
Tangible assets                   205 
Inventories                       165 
Trade and other receivables       810 
Cash and cash equivalents          79 
Current liabilities             (662) 
Non-current liabilities         (305) 
Deferred tax                    (211) 
----------------------------  ------- 
                                1,468 
----------------------------  ------- 
 

The consideration for the acquisition and the goodwill arising on acquisition are as follows:

 
                                                               GBP'000 
-------------------------------------------------------------  ------- 
Initial cash consideration - paid                                  750 
Initial equity consideration - paid                                242 
Deferred cash consideration (based on December 2018 results) 
 - included in liabilities and paid post year end                  476 
-------------------------------------------------------------  ------- 
                                                                 1,468 
-------------------------------------------------------------  ------- 
 

There were no fair value adjustments made to the assets acquired and liabilities assumed.

The Company acquired the entire issued share capital of R. Dunham for a maximum total consideration of GBP1.5 million. R. Dunham achieved an adjusted profit before taxation of GBP476,000 for the year ended 31 December 2018. This resulted in the payment of the deferred consideration as set out above.

Acquisition related costs amounting to GBP120,000 are not included as part of the consideration transferred and have been recognised as an administrative expense in the Consolidated Statement of Comprehensive Income as detailed in note 7.

Revenue in the four months to 31 March 2019 was GBP1.2 million and profit before tax was GBP102,000. If R. Dunham had been acquired on 1 April 2018, revenue for the Group would have increased by approximately GBP2.7 million and the Group loss before tax would have decreased by approximately GBP317,000.

14.2 Deferred consideration

Deferred consideration disclosed in the Consolidated Statement of Financial Position consists of the following:

 
                                   2019      2018 
Current liabilities             GBP'000   GBP'000 
-----------------------------  --------  -------- 
On acquisition of Spokemead           -       500 
On acquisition of DCB (Kent)          -       500 
On acquisition of R. Dunham         476         - 
-----------------------------  --------  -------- 
                                    476     1,000 
-----------------------------  --------  -------- 
 

15. Ultimate controlling party

The directors consider that there is no ultimate controlling party of Bilby Plc.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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