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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bilby Plc | LSE:BILB | London | Ordinary Share | GB00BV9GHQ09 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 39.00 | 38.00 | 40.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMBILB
RNS Number : 0863U
Bilby PLC
27 July 2020
27 July 2020
Bilby Plc
("Bilby" or the "Group")
Final results for the year ended 31 March 2020
Bilby Plc (AIM:BILB), a leading gas heating, electrical and building services provider, announces its full year results for the twelve months ended 31 March 2020.
Financial highlights
-- Revenues of GBP65.4 million (2019 underlying revenues: GBP69.6 million). -- Adjusted EBITDA(1) increased 48% to GBP4.7 million (2019: GBP3.2 million). -- Strong adjusted operating cash generation(2) of GBP5.0 million. -- Net debt reduced by GBP3.7 million (34%) to GBP7.2 million (2019: GBP10.9 million). -- Basic earnings per share 2.93 pence per share (2019: loss of 21.29 pence per share).
-- Adjusted earnings per share(3) increased 11% to 7.10 pence per share (2019: 6.38 pence per share).
-- Raised GBP1.8 million (net of costs) by way of an equity placing.
-- Secured restructuring of GBP9.8 million debt facility post year-end, rebalancing short and medium term debt, including setting new covenants.
Operating highlights
-- Retained all major customers, achieved contract revenue uplifts and won new contracts totalling GBP49.1 million.
-- 3 year visible revenues(4) totalling GBP172.1 million (2019: GBP162.3 million).
-- Strong progress across all strategic priorities, stemming losses and providing the Group a platform to profitable growth.
-- Resolved claim proceedings with East Kent Housing and Carillion Amey with nil settlement to all parties.
-- Centralised back-office services includes health and safety, quality, HR, finance, fleet management and IT to introduce efficiencies and build greater cohesion between each subsidiary and Group level.
-- Introduced Group-wide policies, improved systems of governance and reporting between subsidiaries and the Group.
-- Improved financial reporting systems between subsidiaries and the Group.
Covid-19 and post-year end
-- Responded positively to Covid-19 challenges and worked closely with customers to continue providing regulatory compliance, critical repairs and maintenance and specific planned works, whilst facilitating return to normality.
-- Work conducted only where social distancing and other protective measures are in place in a safe and compliant environment.
-- The Group has demonstrated its resilience in the first quarter of the fiscal year during the impact of Covid-19, with unaudited Revenues and Adjusted EBITDA running at 62% and 75% respectively, compared to previous year.
-- Continue to capture new and deferred opportunities from the fallout of Covid-19. -- Net debt at 30 June 2020 comparable to the year-end position at GBP7.3 million.
1. Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation and excluding non-underlying items and before the effect of the implementation of IFRS 16 "Leases", as set out in note 7.
2. Adjusted operating cash generated is stated before the effect of IFRS 16 and after adding back GBP1.9 million cash payments incurred in the year ended 31 March 2020 relating to exceptional costs reported in the prior year.
3. Adjusted earnings per share is the profit, before deducting non-underlying items, after tax divided by the weighted average number of ordinary shares which is set out in note 13.
4. 3 year visible revenues are the minimum identifiable revenues, over the following 3 year period; being contracted or anticipated spend as well as historical run rates.
Commenting on the results and prospects, David Bullen, Chief Executive Officer, said:
"I am pleased with the progress that was made last year in addressing the loss-making divisions and implementing the organisational changes required within the Group. Our strong financial recovery reflects the extent of what has been achieved at an operational level, building a solid foundation upon which to grow the business and create long-term sustainable value for all stakeholders.
In addition to addressing the immediate challenges presented by Covid-19, the focus for this current year is to build upon the foundations we have started. This will pave the strategic growth path for the organisation; strengthening our focus on our environmental, social and governance responsibilities whilst underpinning the organisation with continued solid operational and financial performance.
We are resetting our compass and having tackled the legacies of the past, we are now fully focused on the positive potential of the future.
The Group is in a far stronger position than it was a year ago, and I am confident that our collaborative culture and focus on high-quality customer service will ensure Bilby emerges in a strong position to deliver sustainable, profitable growth that creates value for our investors, customers and stakeholders alike."
This announcement contains information which, prior to its disclosure by this announcement, was inside information for the purposes of the Market Abuse Regulation
For further information please contact: Bilby Plc Sangita Shah, Chair +44 (0)20 7796 4133 David Bullen, Chief Executive (via Hudson Sandler) Officer Canaccord Genuity Limited (Nominated Adviser and Sole Broker) +44 (0)20 7523 8000 Corporate Broking: Bobbie Hilliam Andrew Potts Georgina McCooke Sales: Jonathan Barr Hudson Sandler (Financial PR) +44 (0)20 7796 4133 Charlie Jack Bertie Berger
Notes to Editors:
Bilby is a leading provider of essential electrical, gas and building services to communities across London and the South East.
The Group was formed in 2014 with a strategy of acquiring businesses to meet the continued demand for high-quality improvement and maintenance services in public sector and affordable housing. Bilby's reputation for operational excellence is underpinned by its disciplined focus on customer service.
There are four subsidiaries within the Bilby Group:
-- Purdy, an award-winning contractor in electrical, mechanical and property services; -- DCB (Kent), a high-quality building, refurbishment and maintenance services provider; -- Spokemead, a specialist in electrical installation, repairs and maintenance services; and -- R. Dunham, a provider of electrical installation and maintenance services.
Bilby Plc is listed on the AIM market of the London Stock Exchange
Chair's statement
Focusing on long-term value
This year has been pivotal for the Group and resulted in several significant changes that have successfully restored the stability of the Group for all stakeholders. Out of necessity, the year was marked by substantial structural reorganisation, a strengthening of the Board and a significant focus on improving operational efficiencies and bolstering governance. These changes have enabled Bilby to return to profitable growth and underpinned the foundation for a successful future.
Integral to restoring this road to recovery, at the start of the financial year, I was delighted to welcome David Bullen to the Board as Chief Executive. David's hugely impressive turn-around track record has been invaluable in ensuring Bilby's future of stable profitable growth. Expeditiously, David accelerated an operational and financial review, highlighting the organisational changes required, addressing the loss-making divisions within the Group, and, with the management team, building a solid foundation upon which to grow the business and continue to create value for all stakeholders.
Restructuring
At the start of the fiscal year, I was disappointed to report that we had entered the period with several significant challenges and operational failings. During these challenging times, we aimed to update shareholders on all our activities as far as we were able.
The Board took action to restructure the loss-making subsidiary P&R, where historical governance failings had led to the Group's poor financial performance in the previous year. Residual profitable services within P&R were successfully integrated into our profitable subsidiary Purdy. The review also established the need for investment in critical financial and accounting systems to ensure the Group's reporting functions were robust, integrated and scalable. Underpinning these systems, the review identified the need to streamline, align and centralise several intergroup processes.
I am pleased to report that following this investment and the implementation of these changes during the second half of the year, Bilby operates consistent processes with appropriate robustness in transparency and governance.
The Board
The Board was strengthened further with the appointment of a new Non-Executive Director, David Guest, to the Board, who now also chairs the Audit Committee. The Board now consists of three independent Non-Executive Directors who, with a breadth of knowledge and experience, provide oversight and support to the executive management team.
As part of a focus to strengthen the balance sheet the Group raised GBP2 million from existing shareholders and certain Directors and senior managers in November 2019. As a result of the raise, the Group significantly improved its working capital position and agreed temporary amendments to the financial covenants associated with the existing debt facilities that were in place with HSBC UK Bank plc. Post year-end, the Group secured a restructuring of its GBP9.8 million debt facility, rebalancing short and medium term debt, including setting new covenants.
Covid-19
Unsurprisingly, the outbreak of the Covid-19 pandemic has presented immense challenges to Bilby reflecting the extraordinary challenges that we all face. At this stage, whilst it is difficult to forecast the medium to long-term impact of the pandemic on the business, with the strengthened Board and the measures taken in our underlying business processes, we continue to build in resilience and agility to ensure that impacts are mitigated.
Summary
The Group continues to service its long-term customers, has taken significant action in strengthening the balance sheet and has hugely enhanced governance. Critically we have taken the right steps to ensure the safety and wellbeing of our employees and customers, while assisting the communities we serve.
On behalf of the Board, I would like to thank each and every one of the spirited, dedicated staff for their tremendous hard work and commitment during what was a highly challenging, testing year. I would like to further extend my gratitude to the Board, which has shown unfailing perseverance and dedication in ensuring Bilby's road to recovery and profitability. With the collective efforts of all employees, I can confidently predict that the future for Bilby will be brighter, and that we are well positioned to achieve long-term sustainable growth.
Sangita Shah
Non-Executive Chair
24 July 2020
Chief Executive Officer's review
Strong progress with our strategic priorities
On my arrival as CEO in April 2019, it was evident that Bilby had significant strengths and competitive advantages, despite the difficulties it had faced the previous year.
The first half of the financial year was marked by efforts to stabilise the Group. We put in place the essential measures needed to stem the losses and began the work that would return the business to profit, including centralising certain functions and improving governance. Meanwhile, we placed an unerring focus on servicing and building our existing customer base and maintaining the long-standing relationships we have with our customers. Our strategic priorities for the year to 31 March 2020 are set out below, along with our progress and goals for the current year. I am pleased to report that our efforts resulted in a strong recovery and have returned the Group to profitability.
Financial results
The Group delivered profit before tax of GBP1.7 million (2019: loss of GBP10.4 million) on revenues of GBP65.4 million (2019 underlying: GBP69.6 million). This performance was supported by strong adjusted operating cash generation of GBP5.0 million and reduction of net debt by GBP3.7 million.
Adjusted EBITDA increased 47.5% to GBP4.7 million (2019: GBP3.2 million) and adjusted earnings per share increased 11.3% to 7.10 pence per share (2019: 6.38 pence per share).
Hot Features
Premium
Strategic priorities
Priorities for 2019/2020 Progress Priorities for 2020/2021
------------------------------ -----------------------------
Stem losses and return Returned the Group Continue to drive
the business to profitability. to EBITDA growth with efficiencies through
positive free cash the business.
flow. Maintain gross margin
Resolved claim proceedings percentage.
with East Kent Housing
and Carillion Amey.
Closed the loss-making
sections of P&R and
novated profitable
contracts under Purdy
management.
Restructured R. Dunham.
Improved gross margins
to 25.4% (2019: 21.7%).
------------------------------ -----------------------------
Strengthen the balance GBP2.0 million fundraise Continue to manage
sheet and reduce gearing has provided additional the cost base rigourously
levels. resources to improve in Covid-19 environment.
working capital. Secured new debt facilities
Temporary amendments totalling GBP9.8 million.
to Bilby's financial Continue to improve
covenants with HSBC cash generation.
UK Bank plc under Further reduce gearing
the previous debt levels.
facility.
Adjusted cash generation
of GBP5.0 million
from operating activities.
Net debt reduction
of GBP3.7 million.
------------------------------ -----------------------------
Maintain high service Retained all major Retain contracts due
levels and retain customers. for renewal.
existing customers. Improved staff productivity Maintain and improve
and efficiency. customer relationships
Achieved contract to anticipate potential
revenue uplifts. service requirements.
Won new contracts Continue to improve
totalling GBP49.1 staff productivity
million. and efficiency.
Maintain high service
levels during Covid-19
social distancing
measures.
------------------------------ -----------------------------
Instil greater cohesion Carried out a staff Complete exercise
between the Bilby engagement survey. to create a distinct
Group and its subsidiaries. Senior management Group purpose, identity
engaged with staff and values.
at all levels to understand Strengthen engagement
their concerns, priorities with employees and
and aspirations. stakeholders.
Began laying the foundations Provide greater clarity
towards building greater on career progression,
collaboration and including the introduction
cohesion between each of a talent development
subsidiary and Group programme.
level. Introduce clear pay
Introduced Group-wide and reward structures
policies, and improved and align bonus schemes
systems of governance with performance.
and reporting between Introduce a Group-wide
subsidiaries and the share based incentive
Group. programme.
Appointed a Group
Head of HR.
------------------------------ -----------------------------
Introduce efficiencies Centralised Group Continue to improve
across the Group by HR and fleet management financial management
streamlining and centralising (with the exception systems and financial
certain internal functions of DCB (Kent)). reporting systems.
to reduce duplication. Improved financial
reporting systems
between subsidiaries
and the Group.
------------------------------ -----------------------------
Strengthen governance Appointed an independent Greater focus on embedding
and oversight. Company Secretary. our Environmental,
Appointed a Non-Executive Social and Governance
Director. (ESG) functions and
performance within
the business.
------------------------------ -----------------------------
Group restructuring
We have reported extensively on the restructuring of the Group throughout the year and more detail can be found in the Operating Review below.
One of our strategic priorities was to centralise and standardise certain functions in order to introduce efficiencies into the business, but also to create greater cohesion between the Group and the subsidiaries.
The Group has recently appointed a new Head of HR, Dawn Kemp, who has set about making considerable changes to the way we manage our staff and attract new talent. With HR centralised, we will be able to identify any skills gaps, nurture talent for future leadership roles, and provide universal and individual training and development plans. We will also be able to benchmark performance to offer and allocate reward and incentive schemes fairly.
Our fleet, with the exception of DCB (Kent), is now managed centrally which will allow us to introduce greater efficiencies, whilst monitoring the impact we have on the environment. Although managed separately, DCB (Kent) employs similar fleet systems.
In addition, we have made real progress in improving our financial management and reporting systems, centralising our SHEQ function and standardising our customer relationship management with the introduction of a Group-wide IT system, which has increased the transparency of our performance measurement and management. As a result, this has driven improvements in our productivity and efficiency, enabling us to streamline elements of our cost base without affecting our level of service.
Setting our purpose, identity and values
During the year I have spent considerable time engaging with the management and operational staff. These sessions were spent listening to our employees' concerns, priorities and aspirations, and laying the foundations towards building greater collaboration and cohesion between each subsidiary and Group level.
The resounding impression I have from my meetings with employees is the importance they place on making a positive difference to the people and communities they serve.
It is with this in mind that we started work on setting our strategy for the future, to create a more unified business whilst maintaining the identity of our four subsidiaries. We also recognise the need to rebalance our historical strategic focus of financial and operational performance towards the increased expectations among investors, customers and other stakeholders around environmental, social and governance (ESG) criteria and sustainability measures.
Bilby's four operating companies have always had a strong sense of environmental and social responsibility, and we need to bring this to the fore to reflect the enhanced role it will play going forward. This year we have expanded the Sustainability section of our Annual Report to showcase the work we already do, but to also explain what we have done to formalise and expand our work in this area.
We were due to undertake a Group-wide exercise in the fourth quarter that would reset our compass through developing a distinct purpose, identity and set of values.
Our efforts were unfortunately cut short by Covid-19, with resources redeployed in managing the immediate crisis. That said, one of my priorities for this year is to complete this initiative. My aim is to bring about a culture that moves away from an overwhelming focus on short-term operational and financial matters, to one that places long-term sustainability and value for all our stakeholders at its core.
Our response to Covid-19
We started preparing for significant business interruption in advance of the Government initiated lockdown. As a result, we were prepared to deliver a first class customer service at this time while meeting our duty of care towards our employees and the customers and residents we serve.
The Government recognises our work as an essential service and therefore our employees are categorised as key workers. We put in place a range of initiatives including working from home, alternate shift patterns and implementing the Government's measures relating to workforce protection through the furlough scheme as well as taking advantage of VAT and NI/PAYE deferment. The Board and senior management took a 40% reduction in salary and remuneration to provide further support to the Group's cost management objectives and to demonstrate our unified commitment and solidarity with our employees and wider stakeholders.
At the start of lockdown, and at the request of our customers, there was an immediate stoppage of works whilst the required health and safety protocols were put in place and arrangements were made for their own staff to work remotely.
During this time, we ensured our availability, resuming works as soon as we were allowed. However, we continued to experience challenges in accessing certain residential and communal properties with some residents, understandably, reluctant to allow us entry into their homes. We have worked closely with our customers to draw up revised work plans and engage directly with residents where necessary. All essential services are being completed as quickly as possible, and any non-essential works will be brought forward when we can gain access to properties.
Although the lockdown has impacted our non-financial KPIs for the full year, our customers are well aware of the challenges we have faced, having faced the same themselves. We remain in close dialogue with our customers, doing all we can to support them in delivering on their own targets as well as our own, although there is clear recognition from all parties that these are extraordinary times.
I am pleased to confirm that we had been exceeding our performance targets, as set by our customers, until the Covid-19 related "lockdown" severely disrupted our normal workflow, including limiting our access to properties. Despite the challenges, our employees have gone above and beyond to deliver critical and necessary work, whilst also providing vital voluntary services to our customers and assisting the wider community wherever they can. Their efforts highlight the strong culture that exists within our organisation to support and make a positive difference to the people that we serve.
Outlook
As with most other businesses, Covid-19 presents real challenges for the Group, though Bilby is now in a stronger position to tackle these head on. The Group's subsidiary structure, aligned systems, operational control and balance sheet are in a far stronger position as a result of the decisive actions resulting from the operational and financial review. Our collaborative culture and focus on high-quality customer service will ensure that Bilby emerges in a strong position committed to delivering sustainable, profitable growth.
Post year-end, in the period to 30 June 2020, the Group has demonstrated its resilience during the impact of Covid-19, with unaudited Revenues and Adjusted EBITDA running at 62% and 75% respectively, compared to previous year.
Net debt at 30 June 2020 was comparable to the year-end position at GBP7.3 million.
The Board has again concluded that the level of uncertainty created by the Covid-19 pandemic is such that it is difficult to provide guidance on the financial performance for the current year until a clearer outlook emerges. We will provide further updates to the market as the situation evolves.
David Bullen
Chief Executive Officer
24 July 2020
Operational review
During the period, the Group, through its subsidiaries, retained all key contracts and successfully secured new contracts totalling GBP49.1 million. As a result the Group boasts three year visible revenues* of GBP172.1 million (2019: GBP162.3 million) providing significant forward earnings visibility.
As previously stated, we have reported extensively on the restructuring of the Group throughout the year. The key outcome was the restructure of the subsidiary P&R with its profitable building services contracts transferred under the management of Purdy. This quickly stemmed the Group losses that had been driven by two severely loss-making contracts with East Kent Housing and Carillion Amey. Discussions with these organisations continued throughout the first half of the year, and the resolution proceedings completed in December 2019 with nil settlement to all parties.
Purdy
Visible revenues over next three years: GBP91.7m ( 2019: GBP104.9m).
Employees: 226
Purdy continued to perform well during the year with the former P&R contracts now fully integrated within the company. The visible revenues have reduced to reflect the completion of various one-off projects and long-term contract renewals now falling within the three year timeframe.
Mitigating these reductions, there has been a renewal of our current contract with the London Borough of Waltham Forest for GBP4.0 million over a two-year term, a GBP1.1 million contract win with Enfield Council to carry out electrical work and boiler installations, and a GBP1.0 million project with Peabody. Purdy was also pleased to place first on a framework worth GBP10 million over five years with the London Borough of Barking and Dagenham.
DCB
Visible revenues over next three years: GBP71.3m (2019: GBP46.7m) of which GBP51.4 million (2019: GBP29.9 million) relates to long term construction projects.
Employees: 87
DCB achieved a significant uplift in forward revenues with a number of contracts won in H2 totalling GBP32.4 million including projects for 30 shared ownership homes for Inland Homes, 28 for Hexagon Housing, 24 for MHS Homes and 7 for Newlon Housing.
Some contract starts were slow to begin resulting from delays in planning consent discharges as well as uncertainty surrounding Brexit. The Covid-19 pandemic also delayed existing building works towards the end of the year. This combination contributed to further increase a strong forward order book for the company with a large amount of works now due to be delivered in 2020-21.
Spokemead
Visible revenues over next three years: GBP6.0m (2019: GBP6.0m).
Employees: 9
Spokemead continues to provide its electrical testing and remedial works for the London Borough of Southwark through its long-term contract to 2024. The business secured new emergency lighting instalments which commenced in Q4, providing some short-term revenue uplifts.
R. Dunham
Visible revenues over next three years: GBP3.1m (2019: GBP4.7m).
Employees: 13
In the second half of the year, the Group worked to stabilise R. Dunham, making management changes and increasing the efficiency of the business, which improved productivity. The business has merged its offices and systems with Purdy's electrical business, transforming its reporting from an entirely paper based system to the Group's centralised management systems. Staffing levels were streamlined, reducing reliance on contract workers and also to reflect the new structure and size of the business.
The decrease in visible revenues reflects the number of new contracts that are due for renewal in 2020/2021.
Summary
Overall, considering the significant headwinds faced by the Group during the year, we are pleased with the performance of Purdy, DCB (Kent) and Spokemead, and are satisfied that the issues relating to P&R and R. Dunham have now been finally resolved.
I would like to thank all our staff for their commitment and dedication, particularly as there have been a lot of changes to the Group during the year, as we sought to reset our compass.
The coronavirus outbreak has brought about a new set of challenges, and I have been impressed by the continuing focus our employees have had on the business as well as the people and communities they serve.
With a new Group HR function we can now co-ordinate our investment in our employees and identify talent for future management roles. This priority, coupled with new efficiencies within the Group, a focus on providing the highest quality services and strong forward revenues, means we have a solid platform on which to deliver long-term value and a sustainable, profitable business.
* Three year visible revenues represents the minimum identifiable revenues, over the following three year period; being contracted or anticipated spend as well as historical run rates.
Financial review
Trading review
The Group made a strong recovery in the year, delivering a profit before tax of GBP1.7 million (2019: loss of GBP10.4 million), generating robust adjusted operating cash flow of GBP5.0 million and reducing net debt by GBP3.7 million.
In the year, the Group also exited from the loss-making gas division of P&R, restructured the ongoing activities at this business and completed an equity fundraise to improve working capital.
After the period end, the Group finalised the restructure of the Group bank facilities and covenants, providing the stability, support and flexibility to manage the Group operations.
Group revenues were GBP65.4 million (2019 underlying: GBP69.6 million). The reduction in revenue in the period resulted from the exit from the loss-making gas contracts in P&R which was partly offset by the full year effect of R. Dunham which was acquired in late November 2018.
Gross profit of GBP16.6 million (2019 underlying: GBP15.1 million) was achieved at a margin of 25.4% (2019 underlying: 21.7%). Underlying administrative expenses of GBP12.3 million are in line with the prior period (2019 underlying: GBP12.3 million).
Underlying operating profit, excluding non-underlying items, increased by 52.6% to GBP4.3 million (2019: GBP2.8 million). Non-underlying items were GBP2.0 million (2019: GBP12.9 million).
Group adjusted EBITDA (as defined below) increased by 47.5% to GBP4.7 million (2019: GBP3.2 million).
Adjusted EBITDA is considered by the Board to be a key Alternative Performance Measure ("APM") as it is comparable to the prior period and is the basis upon which the underlying management information is prepared and the performance of the business assessed by the Board. It is also the measure for the covenants under our banking arrangements.
Profit after tax was GBP1.4 million (2019: loss of GBP8.6 million). The loss in 2019 principally resulted from legacy issues in P&R. This included the impact of underlying trading losses together with significant non-underlying items comprising costs and impairment resulting from the exit from loss-making contracts, impairment of financial assets and restructuring costs.
Financial position and key indicators
Following the impact, in the year ended 31 March 2019, of the increased debt, the underlying losses and exceptional costs in P&R, the Group's overall financial position has significantly improved during the course of the year.
Group total assets were GBP36.7 million at 31 March 2020 (2019: GBP35.1 million). The Group net assets as at 31 March 2020 were GBP10.6 million (2019: GBP7.4 million).
We focus on a range of key indicators to assess our performance. Our performance indicators are both financial and non-financial and ensure that the Group targets its resources around its customers, operations and finance. Collectively they form an integral part of the way that we manage the business to deliver our strategic goals. The key financial performance indicators are set out below.
Year ended Year ended
31 March 31 March
2020 2019
GBP 000 GBP 000
-------------------------------------------------- ---------- ----------
Income statement
Revenue1 65,392 69,588
Gross profit1 16,597 15,131
Gross margin1 25.4% 21.7%
EBITDA2 (including effect of IFRS 16 in the year) 5,508 3,164
Adjusted EBITDA3 (excluding effect of IFRS 16
in the year) 4,668 3,164
Underlying operating profit1 4,256 2,789
Underlying profit before taxation4 3,691 2,501
Profit/(loss) after taxation 1,379 (8,596)
Basic earnings/(loss) per share5 2.93p (21.29)p
Adjusted earnings per share6 7.10p 6.38p
-------------------------------------------------- ---------- ----------
Financial position
Overdraft 3,351 5,219
Term and other loans 3,882 5,660
Net debt7 7,214 10,858
-------------------------------------------------- ---------- ----------
Trade receivables 7,383 8,112
Accrued income 9,968 7,327
Trade payables 12,885 10,605
Net assets 10,624 7,388
-------------------------------------------------- ---------- ----------
1. The 2019 results are stated before non-underlying items as set out in the Consolidated Statement of Comprehensive Income and note 8.
2. Earnings before interest, taxation, depreciation and amortisation ("EBITDA") and excluding non-underlying items, as set out in note 7.
3. EBITDA, excluding non-underlying items and before the effect of the implementation of IFRS 16 "Leases", as set out in note 7.
4. Underlying profit before taxation is stated after finance costs and before charging the non-underlying items as set out in note 8.
5. Basic earnings/(loss) per share is the profit/(loss) after tax divided by the weighted average number of ordinary shares.
6. Adjusted earnings per share is the profit before deducting non-underlying items after tax divided by the weighted average number of ordinary shares.
7. Includes term and other loans, and overdraft net of cash, and excludes lease obligations under IFRS 16 and deferred consideration.
IFRS 16 "Leases"
In the year ended 31 March 2020, the Group adopted IFRS 16 "Leases" using the modified retrospective approach which means that comparatives are not required to be restated.
Under IFRS 16, a lessee recognises its right to use a leased asset and a lease liability representing its obligation to make lease payments. The depreciation cost of the newly recognised "right of use" asset is charged to profit within administrative expenses, whilst the interest cost of the newly recognised lease liability is charged to finance costs. On the basis that depreciation is charged on a straight line basis, whilst the interest element is charged on a reducing balance basis, this results in a higher charge being applied to the income statement in the early years of a lease, with this impact reversing over the later years.
The impact on the income statement and EBITDA are noted in the table below with comparability to the prior year.
Whilst Group revenue and cash are unaffected by the adoption of IFRS 16, the following areas are impacted:
-- Operating profit has increased by GBP44,000 with lease costs decreasing by GBP840,000 and, conversely, depreciation charges increasing by GBP796,000.
-- Finance costs increased by GBP71,000.
-- The overall effect on profit before tax of adopting IFRS 16 has been a decrease of GBP27,000.
-- The Consolidated Statement of Financial Position recognises GBP2.1 million of right of use assets and GBP2.1 million of lease liabilities.
-- Lease payments are now reflected as a reduction in lease liabilities which, although not impacting cash, does affect the presentation of the Consolidated Statement of Cash Flows (see cash flow performance below).
A reconciliation of EBITDA* (including the effect of IFRS 16) and adjusted EBITDA* (stated pre-IFRS 16) to operating profit and profit before tax for the year is set out below.
2020
2020 Adjusted
EBITDA EBITDA
(including (before
2020 effect effect
Statutory of of 2019
result IFRS 16) IFRS 16) Underlying
EBITDA reconciliation GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- ----------- --------- -----------
Operating profit/(loss) 2,292 2,292 2,292 (10,100)
IFRS 16 adjustments:
Reinstate operating lease payments - - (840) -
Remove right of use depreciation charge - - 796 -
-------------------------------------------------- ---------- ----------- --------- -----------
Adjusted operating profit/(loss) 2,292 2,292 2,292 (10,100)
Finance costs (565) (565) (494) (288)
-------------------------------------------------- ---------- ----------- --------- -----------
Profit/(loss) before tax 1,727 1,727 1,754 (10,388)
Add back non underlying items:
Amortisation of customer relationships 1,925 1,925 1,836
Impairment of customer relationships - - 1,802
Share based payment charge 39 39 128
Acquisition costs - - 120
Exceptional items - - 9,003
-------------------------------------------------- ---------- ----------- --------- -----------
Underlying profit before tax 3,691 3,718 2,501
EBITDA adjustments:
Finance costs 565 494 288
Depreciation of property, plant and equipment 258 263 256
Depreciation of right of use assets 801 - -
Amortisation of software costs 31 31 44
Loss on disposal of property, plant and
equipment 162 162 75
-------------------------------------------------- ---------- ----------- --------- -----------
EBITDA 5,508 4,668 3,164
-------------------------------------------------- ---------- ----------- --------- -----------
* EBITDA and adjusted EBITDA exclude items classified as non-underlying as set out below.
Non-underlying items
Non-underlying items are considered by the Board to be either exceptional in size, one-off in nature or non-trading related items and are represented by the following:
2020 2019
GBP'000 GBP 000
--------------------------------------- -------- --------
Amortisation of customer relationships 1,925 1,836
Impairment of customer relationships - 1,802
Share based payment charge 39 128
Acquisition costs - 120
Restructuring costs - 975
Loss on exit of contracts/gas division - 7,604
Impairment of accrued income - 424
--------------------------------------- -------- --------
Total 1,964 12,889
--------------------------------------- -------- --------
Finance costs
Finance expenses were GBP565,000 (2019: GBP288,000) which includes an incremental charge of GBP71,000 (2019: GBPnil) in relation to the implementation of IFRS 16 "Leases". Other finance costs are represented by interest on bank borrowing and loans, other interest costs and other finance costs, being the amortisation of debt issue costs. There was no finance income in the year.
Tax
The tax charge on the profit before tax was GBP348,000 (2019: credit of GBP1.8 million) representing the net movement on deferred tax assets and liabilities at an overall rate of 20.2% (2019: credit of 17.3%). No tax was paid in the year (2019: GBP1.1 million) due to the tax losses resulting from the prior year loss.
The net deferred tax liability at 31 March 2020 was GBP779,000 (2019: GBP431,000) comprising a deferred tax liability of GBP1.5 million (2019: GBP1.4 million) relating to the acquisition of intangible assets, right-to-use assets and short-term timing differences and deferred tax asset of GBP694,000 (2019: GBP1.0 million) relating to unused tax losses and lease liabilities.
Earnings per share
Basic earnings per share was 2.93 pence (2019: loss of 21.29 pence), based on profit after tax of GBP1.4 million (2019: loss of GBP8.6 million). The weighted average number of shares in issue was adjusted for the fundraise in November 2019 (see below).
Adjusted earnings per share, excluding non-underlying items, was 7.10 pence (2019: 6.38 pence), an increase of 11.3%.
There was no earnings per share dilution (2019: none) as the outstanding share options granted are priced above the share price at 31 March 2020. There was no dilution in the prior year as the Group was loss making.
Cash flow performance
In 2019, the Group was impacted by significant losses and impairments relating to its subsidiary P&R and incurred exceptional costs of GBP9.0 million. Cash payments in the year ended 31 March 2020 relating to the 2019 exceptional costs amounted to GBP1.9 million (2019: GBP581,000).
Adjusted cash generated from operating activities was GBP5.0 million (2019: cash absorbed of GBP1.4 million) resulting in an adjusted operating cash conversion of 107% (2019: N/A).
Adjusted operating cash conversion is calculated as cash generated from operations of GBP3.0 million (2019: cash absorbed of GBP2.0 million), after adding back the cash payments made in the year ended 31 March 2020, relating to the 2019 exceptional items, of GBP1.9 million (2019: GBP581,000) and before the effect of IFRS 16 divided by adjusted EBITDA (pre-IFRS 16).
Cash conversion including the effect of IFRS 16 was 106%.
Adjusted
2020 2020
(excluding (including
effect effect
of of
IFRS 16) IFRS 16) 2019
Cash conversion analysis GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ----------- ----------- --------
Statutory cash generated/(absorbed) by operations
(see note 24) 3,886 3,886 (2,026)
Less operating lease payments eliminated in IFRS
16 Leases (840) N/A N/A
---------------------------------------------------------- ----------- ----------- --------
3,046 3,886 (2,026)
Add back: exceptional payments in the period 1,935 1,935 581
---------------------------------------------------------- ----------- ----------- --------
Adjusted cash generated/(absorbed) by operations 4,981 5,821 (1,445)
---------------------------------------------------------- ----------- ----------- --------
EBITDA (see above and note 7) 4,668 5,508 2,501
---------------------------------------------------------- ----------- ----------- --------
Adjusted cash conversion (adjusted operating cash/EBITDA) 107% 106% N/A
---------------------------------------------------------- ----------- ----------- --------
The result reflects the working capital management improvements undertaken by the management teams in the business, following the issues in 2019, together with Covid-19 related, HMRC approved, deferral of PAYE/NI in March 2020 amounting to GBP377,000.
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.
Net debt
Net debt reduced by GBP3.7 million in the period (2019: increased by GBP5.6 million). At 31 March 2020, net debt amounted to GBP7.2 million (2019: GBP10.9 million) comprising term loans of GBP3.6 million (2019: GBP5.3 million), a mortgage loan of GBP314,000 (2019: GBP371,000) and an overdraft of GBP3.4 million (2019: GBP5.2 million) set off by cash of GBP19,000 (2019: GBP21,000). See note 20 for full details of borrowings.
Fundraise
In November 2019, the Group undertook an equity fundraise. The Group issued 18,118,818 ordinary shares of 10 pence each, at a price of 11 pence, including the purchase of 3,318,603 shares by Directors and senior managers of the Group.
The issue of share capital raised net proceeds of GBP1.8 million which was used to improve the working capital position to mitigate the impact of the exceptional payments in the period and provide headroom on the overdraft facility.
Banking arrangements
By undertaking the equity fundraise, the Group was granted temporary amendments to its financial covenants with its banking partner, HSBC UK Bank plc, until June 2020, which provided additional time and flexibility for the Group to agree new debt facilities with rebased financial covenants.
At 31 March 2020 the Group was in ongoing discussions with the bank.
On 22 May 2020 the Group secured the restructuring of GBP9.8 million debt facilities. The Group's previous debt facility was in the form of a GBP3.3 million term loan and a GBP6.5 million overdraft facility. This debt facility has been restructured and now represents a GBP7.3 million term loan facility and a GBP2.5 million overdraft facility.
The Group has prudently fully drawn down on this increased additional term loan facility to increase cash balances by GBP4.0 million. The term loan expires in September 2022 and there will be GBP0.5 million quarterly repayments starting in August 2020.
In addition, Bilby has agreed with HSBC UK Bank plc that the first covenant test for the Group will be to achieve a minimum EBITDA of GBP1.1 million for the year ending 31 March 2021, meeting the mandatory requirement for a covenant to be in place against the facilities.
The covenants for the period beyond 31 March 2021 will be tested quarterly and they are: (i) achievement of minimum levels of EBITDA; (ii) debt service cover; and (iii) interest cover.
The new facility and changes to the covenants provide maximum flexibility for the Group.
As the agreement had not been finalised as at 31 March 2020, HSBC UK Bank plc term loans have been classified as current borrowings at the balance sheet date.
Acquisitions
There were no acquisitions in the year. On 29 November 2018, Bilby acquired R. Dunham and a deferred cash consideration of GBP476,000 was paid in June 2019 based on the results of the company for the year ended 31 December 2018.
Dividends
The Group continues the recovery from the impact of prior year performance and therefore the Board does not recommend a final dividend. No interim dividend was paid. Whilst it remains the priority to continue to reduce the level of net debt, it is the Board's intention to resume the payment of a dividend as soon as conditions allow.
Going concern
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described above.
In assessing the Group's ability to continue as a going concern, the Board reviews and approves the annual budget and longer-term strategic plan, including forecasts of cash flows.
The Board also reviews the Group's sources of available funds and the level of headroom available against its committed borrowing facilities and associated covenants.
After taking into account the above factors and taking into account possible sensitivities in trading performance, 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.
In reaching these conclusions, the Board has considered the impact of Covid-19 on the trading of the Group. Whilst the impact of Covid-19 has been felt strongly within the building divisions such as DCB, other areas of the Group have been less affected due to the nature of the gas and electrical contracts with customers including local councils. For this reason, the Board continues to adopt the going concern basis in preparing the consolidated financial statements.
Clive Lovett
Group Finance Director
24 July 2020
Consolidated statement of comprehensive income
for the financial year ended 31 March 2020
12 months to 31 March 12 months to 31 March
2020 2019
--------------------------------- ---------------------------------
Non- Non-
underlying underlying
items items
Underlying (note Underlying (note
items 8) Total items 8) Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ----- ---------- ----------- -------- ---------- ----------- --------
Revenue 5 65,392 - 65,392 69,588 (3,060) 66,528
Cost of sales (48,795) - (48,795) (54,457) (2,618) (57,075)
---------------------------- ----- ---------- ----------- -------- ---------- ----------- --------
Gross profit 16,597 - 16,597 15,131 (5,678) 9,453
Administrative expenses (12,341) (1,964) (14,305) (12,342) (7,211) (19,553)
---------------------------- ----- ---------- ----------- -------- ---------- ----------- --------
Operating profit/(loss) 6 4,256 (1,964) 2,292 2,789 (12,889) (10,100)
Finance cost 10 (565) - (565) (288) - (288)
---------------------------- ----- ---------- ----------- -------- ---------- ----------- --------
Profit/(loss) before
tax 3,691 (1,964) 1,727 2,501 (12,889) (10,388)
Income tax (expense)/credit 12 (348) 1,792
---------------------------- ----- ---------- ----------- -------- ---------- ----------- --------
Profit/(loss) for the
year attributable to
the equity holders
of the parent company 1,379 (8,596)
---------------------------- ----- ---------- ----------- -------- ---------- ----------- --------
Total comprehensive
income/(loss) for the
year attributable to
the equity holders
of the parent company 1,379 (8,596)
---------------------------- ----- ---------- ----------- -------- ---------- ----------- --------
Basic earnings/(loss)
per share (pence) 13 2.93 (21.29)
Diluted earnings/(loss)
per share (pence) 13 2.93 (21.29)
---------------------------- ----- ---------- ----------- -------- ---------- ----------- --------
Consolidated statement of financial position
as at 31 March 2020
2020 2019
Notes GBP'000 GBP'000
------------------------------------------------------ ----- -------- --------
Assets
Non-current assets
Intangible assets 14 9,937 11,750
Property, plant and equipment 15 1,418 1,661
Right-of-use assets 16 2,079 --
------------------------------------------------------ ----- -------- --------
Total non-current assets 13,434 13,411
------------------------------------------------------ ----- -------- --------
Current assets
Inventories 17 3,781 3,134
Trade and other receivables 18 19,451 18,548
Cash and cash equivalents 19 19 21
------------------------------------------------------ ----- -------- --------
Total current assets 23,251 21,703
------------------------------------------------------ ----- -------- --------
Total assets 36,685 35,114
------------------------------------------------------ ----- -------- --------
Equity and liabilities attributable to equity holders
of the parent company
Issued capital and reserves
Share capital 23.1 5,872 4,054
Share premium 23.2 8,609 8,609
Share-based payment reserve 26 612 827
Merger reserve 23.3 (248) (248)
Retained earnings (4,221) (5,854)
------------------------------------------------------ ----- -------- --------
Total equity 10,624 7,388
------------------------------------------------------ ----- -------- --------
Non-current liabilities
Borrowings 20 176 236
Lease liabilities 21 1,486 -
Deferred tax liabilities 27 779 431
------------------------------------------------------ ----- -------- --------
Total non-current liabilities 2,441 667 ------------------------------------------------------ ----- -------- -------- Current liabilities Borrowings 20 7,057 10,643 Obligations under finance leases - 10 Lease liabilities 21 620 - Deferred consideration 28.2 - 476 Trade and other payables 22 15,943 15,930 ------------------------------------------------------ ----- -------- -------- Total current liabilities 23,620 27,059 ------------------------------------------------------ ----- -------- -------- Total equity and liabilities 36,685 35,114 ------------------------------------------------------ ----- -------- --------
Approved by the Board on 24 July 2020.
Clive Lovett
Group Finance Director
Company registration number: 09095860
Consolidated statement of changes in equity
for the financial year ended 31 March 2020
Issued Share-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 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
Profit and total comprehensive
income for the year - - - - 1,379 1,379
Issue of share capital (Note
23.1) (net of issue costs) 1,818 - - - - 1,818
Transfer to retained earnings
for share options cancelled - - (254) - 254 -
Share-based payment charge - - 39 - - 39
Total transactions with owners
recognised directly in equity 1,818 - (215) - 254 1,857
------------------------------- -------- -------- ----------- -------- --------- --------
Balance at 31 March 2020 5,872 8,609 612 (248) (4,221) 10,624
------------------------------- -------- -------- ----------- -------- --------- --------
Consolidated statement of cash flows
for the financial year ended 31 March 2020
12 months 12 months
ended ended
31 March 31 March
2020 2019
Notes GBP'000 GBP'000
------------------------------------------------------- ----- --------- ---------
Net cash generated from/(used in) operating activities 24 3,886 (2,026)
------------------------------------------------------- ----- --------- ---------
Cash flow from investing activities
Acquisition of subsidiaries (including deferred
consideration paid) 28 (476) (1,750)
Net cash acquired on acquisition 28.1 - 79
Purchase of property, plant and equipment (282) (158)
Purchase of intangible assets (44) (9)
Proceeds on disposal of property, plant and equipment 99 9
------------------------------------------------------- ----- --------- ---------
Net cash used in investing activities (703) (1,829)
------------------------------------------------------- ----- --------- ---------
Cash flow from financing activities
Proceeds from borrowings - 6,100
Issue of new share capital (net of share issue
costs) 23.1 1,818 -
Repayment of borrowing (1,776) (5,193)
Interest paid (565) (288)
Principal payments of leases (794) (71)
Dividends paid - (1,009)
------------------------------------------------------- ----- --------- ---------
Net cash used in financing activities (1,317) (461)
------------------------------------------------------- ----- --------- ---------
Net increase/(decrease) in cash and cash equivalents 1,866 (4,316)
Cash and cash equivalents at beginning of year (5,198) (882)
------------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at end of year (3,332) (5,198)
------------------------------------------------------- ----- --------- ---------
The cash and cash equivalents at the year ended 31 March 2020 represented the net of overdrafts of GBP3,351,000 (2019: GBP5,219,000) (see note 20) together with the cash and cash equivalents shown in the Consolidated Statement of Financial Position of GBP19,000 (2019: GBP21,000) (see note 19).
Notes to the consolidated financial statements
for the financial year ended 31 March 2020
1. Basis of preparation
Bilby Plc and its subsidiaries (together the "Group") operate in the gas heating, electrical and general building services industries. The Company is a public company operating on The Alternative Investment Market of the London Stock Exchange (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 Group's financial statements have been prepared on a going concern basis under the historical cost convention, and in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union, the International Financial Reporting Interpretations Committee ("IFRIC") interpretations issued by the International Accounting Standards Boards ("IASB") that are effective or issued and early adopted as at the time of preparing these financial statements and in accordance with the provisions of the Companies Act 2006.
The Group has adopted all of the new and revised standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB, as they have been adopted by the European Union, that are relevant to its operations and effective for accounting periods beginning on 1 April 2019.
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 4. 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 Chief Executive Officer's Statement. Since the approval of the financial statements for the previous year end which included a material uncertainty in the audit report in relation to going concern, the Board have been successful in significantly improving the Group's financial position. In particular the following notable events have occurred:
-- GBP2 million of equity was raised in November 2019 which enabled working capital to be normalised;
-- The Group has achieved strong cash generation from operating activities;
-- A close working relationship with the Group's bank has enabled the debt to be restructured and a new suite of covenants issued that are currently being met;
-- The contractual issues within P&R have been finalised which has enabled restructuring of the company;
-- The Group has returned to profitability both before and after non-underlying items.
After taking into account the above factors and reviewing the Group budget and strategic plans and taking into account possible sensitivities in trading performance, 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. In reaching these conclusions, the Board has considered the impact of Covid-19 on the trading of the Group. Whilst the impact of Covid-19 has been felt strongly within the building divisions such as DCB, other areas of the Group have been less affected due to the nature of the gas and electrical contracts with customers including local councils. For this reason, the Board continues to adopt the going concern basis in preparing the consolidated financial statements.
2.2. Basis of consolidation
The consolidated financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 31 March each year. Subsidiaries are entities 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. All intra-group transactions, balances, income and expense are eliminated on consolidation.
2.3. Business combinations and goodwill
Business combinations are accounted for using the acquisition method, with the exception of the acquisition of P&R Installation Company Limited. The acquisition method involves the recognition at fair value of all identifiable assets, liabilities and contingent liabilities of the subsidiary at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the Consolidated Statement of Financial Position at their fair values, which are also used as the bases of subsequent measurement in accordance with the Group accounting policies.
The acquisition of P&R installation Company Limited 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. 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 Installation Company Limited by the Company has therefore been accounted for in accordance with the principles of merger accounting as set out in Section 19 of FRS 102. Costs relating to acquisitions in the year are expensed and are included in administrative expenses.
Goodwill arising on acquisitions is recognised for an acquisition as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.
Where applicable, the consideration for an acquisition includes any assets or liabilities resulting from a contingent consideration arrangement, measured at fair value at the acquisition date. Subsequent changes in such fair values are adjusted against the cost of acquisition where they result in additional information, obtained within one year from the acquisition date, about facts and circumstances that existed at the acquisition date. All other subsequent changes in fair value of contingent consideration classified as an asset or liability are recognised in accordance with IAS 39, either in profit or loss or as a change to other comprehensive income. Changes in fair value of contingent consideration classified as equity are not recognised.
2.4. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable for the provision of the Group's services. Revenue is recognised by the Group, net of value added tax, based upon the following:
-- Gas maintenance - Gas services are supplied under a term contract or framework agreement with both local authority and corporate customers that usually span three or more years. These contracts will outline a number of services that the Group is retained to provide to the customer ranging from boiler servicing and meter connections to installing central heating solutions. These services will be provided on request from the customer, and work will be charged based on the customer rate card. Each service is considered to have a single performance obligation, and generally take less than a day to complete. Revenue is only recognised at the point that the service is complete. Invoicing only occurs once the customer has agreed that the relevant service has been received and completed. The invoice is subsequently settled on average within 34 days of issue. Any costs incurred in advance of the performance obligation being completed are recognised as work in progress. Any work completed but not yet agreed with the customer/invoiced is recognised as accrued income.
-- Building services - Building Services contracts typically range between one to six years, and can range from ad-hoc maintenance work to long-term construction contracts:
-- Long-term construction contracts: During the course of a project an independent surveyor will conduct a monthly valuation of the work done and issue a certification of the stage of completion, which is the trigger for an invoice to be generated and a stage payment to be made as per the terms of the contract. Payment occurs on average within 34 days of the invoice being issued. These monthly valuations are seen to represent the performance obligations that have been satisfied under the terms of the contract, as they reflect the benefit that has been transferred to the customer. The Group thus recognises the revenue in-line with the certified stage of completion. If there is a delay in receiving the certification of work, revenue will be recognised based on management's estimate of the value of the performance obligation fulfilled. Any costs incurred in advance of the performance obligation being completed are recognised as work in progress. Revenue recognisable in relation to work completed is recognised as accrued income until invoiced.
A twelve year warranty is issued on any new build developments completed. Any claims made within the first two years of the warranty are the responsibility of the Group to rectify. The subsequent ten years are then covered by a third party warranty provider. No warranty claims have previously been made against the Group, and therefore no provision for potential warranty claims are made within these financial statements.
-- Maintenance work: Maintenances work is supplied under a term contract or framework agreement which sets out the range of services the Group is retained to provide to the customer including refurbishments, replacements of kitchens and bathrooms, window installs and painting and decorating. These services will be provided on request from the customer, and work will be charged based on the customer rate card. Each service is considered to have a single performance obligation, and generally take less than a day to complete. Revenue is only recognised at the point that the service is complete. Invoicing only occurs once the customer has agreed that the relevant service has been received and completed. The invoice is subsequently settled on average within 34 days of issue. Any costs incurred in advance of the performance obligation being completed are recognised as work in progress. Any work completed but not yet agreed with the customer/invoiced is recognised as accrued income.
-- Electrical services - Electrical services are supplied under a term contract or framework agreement with both local authority and corporate customers that usually span three or more years. These contracts will outline a number of services that the Group is retained to provide to the customer including servicing, maintenance, emergency call-outs and re-wires. These services will be provided on request from the customer, and work will be charged based on the customer rate card. Each service is considered to have a single performance obligation, and generally take less than a day to complete. Revenue is only recognised at the point that the service is complete. Invoicing only occurs once the customer has agreed that the relevant service has been received and completed. The invoice is subsequently settled on average within 34 days of issue. Any costs incurred in advance of the performance obligation being completed are recognised as work in progress. Any work completed but not yet agreed with the customer/invoiced is recognised as accrued income.
It is considered by management that the above revenue recognition policies are suitable for recognising revenue arising from the Group's key market verticals. All revenue streams are wholly attributable to the principal activity of the Group and arise solely within the United Kingdom. Note 5 gives further detail of any work in progress and accrued income balances recognised in relation to contracts with customers.
2.5. Operating profit/(loss) and non-underlying items
Operating profit/(loss) comprises the Group's revenue for the provision of services, less the costs of providing those services and administrative overheads, including depreciation of the Group's non-current assets.
Underlying operating profit before the deduction of exceptional costs and other adjusting items is one of the key measures used by the Board to monitor the Group's performance. Exceptional costs are disclosed on the face of the Consolidated Statement of Comprehensive Income as "non-underlying items".
These non-underlying items comprise costs that are considered by the Board to not relate to the underlying financial performance of the Group and are separately analysed so that the users of the accounts can compare trading performance on a like-for-like basis. Costs falling within this category will have one or more of the following attributes:
-- One-off transactions not relating to current or future trading;
-- Non-cash items such as amortisation and impairment of financial assets and share based payment charges;
-- Exceptional in size such that they distort the understanding of underlying trading activities.
2.6. Dividends
The Group has a policy of paying dividends to shareholders in accordance with the amount recommended by the Directors. If the Directors believe the dividends are justified by the profits of the Group available for distribution, they also pay interim dividends. Dividends are recognised when they become legally payable. In the case of interim dividends, this is when dividends are paid. In the case of final dividends, this is when the dividends are approved by the shareholders at the Annual General Meeting. No interim dividend was paid for the year ended 31 March 2020 and no final dividend is recommended by the Directors.
2.7. Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting to the chief operating decision-maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Bilby Plc. The CODM reviews the results of each company in the group which includes a further analysis of the three main revenue streams within each group company: gas maintenance, building services and electrical services by revenue and by gross profit margin in aggregate. The Directors consider that these three revenue streams have similar economic characteristics and would, in any event, be aggregated as one reporting segment. The Board are currently reviewing their internal reporting in light of the future expected growth of the construction services within DCB which may lead to future changes to segmental reporting.
2.8. Intangible assets
In accordance with IFRS 3, an intangible asset acquired in a business combination is deemed to have a cost to the Group of its fair value at the acquisition date. The fair value of the intangible asset reflects market expectations about the probability that future economic benefits embodied in the asset will flow to the Group.
Software expenditure is capitalised as an intangible asset if the asset created can be identified, if it is probable that the asset created will generate future economic benefits and if the development cost of the asset can be measured reliably.
Following initial recognition, the carrying amount of an intangible asset is its cost less any accumulated amortisation and any accumulated impairment losses. Amortisation expense is charged to administrative expenses in the income statement on a straight line basis over its useful life.
The identifiable intangible assets and associated periods of amortisation are as follows:
-- Customer relationships over the period expected to benefit, typically seven years
-- Software and development costs over four years
2.9. Impairment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows: cash-generating units ("CGUs"). As a result, some assets are tested individually for impairment and some are tested at CGU level. Goodwill is allocated to CGUs that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows.
Goodwill or CGUs that include goodwill and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or CGUs are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised in the Statement of Comprehensive Income for the amount by which the asset or CGU's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for CGUs to which goodwill has been allocated are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro-rata to the other assets in the CGU. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.
2.10. Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Depreciation is calculated to write off the cost of the assets, net of anticipated disposal proceeds, over the expected useful lives of the assets concerned as follows:
- 2% on freehold building
-- Freehold property cost
-- Long leasehold improvements
* 5% on long leasehold improvements cost
-- Office and computer
equipment - 25% reducing balance
-- Fixtures and fittings - 25% reducing balance
-- Motor vehicles - 25% reducing balance
Freehold land is not depreciated.
Subsequent expenditure is included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the Statement of Comprehensive Income.
The residual values and economic lives of assets are reviewed by the Directors on at least an annual basis and are amended as appropriate.
2.11. Impairment of property, plant and equipment
At each Statement of Financial Position date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. For assets other than goodwill, where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the Statement of Comprehensive Income, net of any depreciation or amortisation that would have been charged since the impairment.
2.12. Inventories
Raw materials and consumables are measured at the lower of cost and net realisable value. Net realisable value is based on estimated selling price less additional costs to completion and disposal.
Work in progress is measured at the lower of cost and net realisable value. Cost comprises direct materials and direct labour costs that have been incurred in advance of the performance obligations on contracts being completed.
2.13. Financial instruments
Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired.
(a) Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. Appropriate provisions for estimated irrecoverable amounts are recognised in the Statement of Comprehensive Income when there is objective evidence that the assets are impaired. Interest income is recognised by applying the effective interest rate, except for short-term trade and other receivables when the recognition of interest would be immaterial.
The Group incurs costs in advance of new contracts commencing in association with preparatory work to ensure the contract can be delivered from day one. These costs are included within work in progress and released over the life of the contract.
(b) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand deposits and other short-term highly liquid investments that have maturities of three months or less from inception, are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
(c) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
(d) Trade and other payables
Trade payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective interest rate method; this method allocates interest expense over the relevant period by applying the "effective interest rate" to the carrying amount of the liability.
(e) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Statement of Comprehensive Income over the period of the borrowings using the effective interest method.
2.14. Current and deferred tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
a) Current tax
Tax payable is based on taxable profit for the year. Taxable profit differs from net profit reported in the Statement of Comprehensive Income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date. As the Group has brought forward tax losses available for utilisation there is no tax payable for the year to 31 March 2020.
(b) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying value of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax is charged or credited to the Statement of Comprehensive Income except when it relates to items credited or charged directly in equity, in which case the deferred tax is also dealt with in equity.
Deferred tax is calculated at the tax rates and laws that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
2.15. Leases
The Group leases various premises, vehicles and equipment. Rental contracts are typically made for fixed periods of six months to 20 years, but may have extension options. Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has elected not to separate the lease and non-lease components and instead accounts for these as a single lease component.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
As explained in note 2.18, the Group has changed its accounting policy for leases during the year to meet the requirements of IFRS 16 "Leases", which has been adopted from1 April 2019.
Until 31 March 2019
Leases were classified as finance leases whenever the terms of the lease transferred substantially all of the risks and rewards of ownership to the lessee. All other leases were classified as operating leases.
Assets held under finance leases were recognised as assets of the Group at their fair value or, if lower, at the present value of minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor was included in the Statement of Financial Position as a finance lease obligation.
Lease payments were apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses were recognised immediately in profit or loss, unless they were directly attributable to qualifying assets, in which case they were capitalised.
Rentals applicable to operating leases were charged to profit or loss on a straight line basis over the lease term. Rent free periods or other incentives received for entering into a lease were accounted for over the lease term.
From 1 April 2019
In applying IFRS 16, the Group has adopted the modified retrospective approach. Under this approach, comparative information has not been restated. Leases are recognised as a right-of-use asset and a corresponding liability at the date which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
-- fixed payments (including in-substance fixed payments), less any lease incentives receivable;
-- variable lease payments that are based on an index or a rate, initially measured using the index or rate as at commencement date;
-- amounts expected to be payable by the Group under residual value guarantees;
-- the exercise price or a purchase option if the Group is reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in the financing conditions since the third-party financing was received.
Lease payments are allocated between principal and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date less any lease incentives received;
-- any initial direct costs; and -- restoration costs.
Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying assets useful life.
On transition at 1 April 2019 the Group recognised the lease liabilities as the net present value of the future payments outstanding as at that point. The right-of-use asset was recognised at a value equal to the lease liability, which is allowed under the transition provision set out in IFRS 16. Therefore at the point of transition no adjustment was required to be made to retained earnings.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight line basis as an expense in profit or loss. Short-term leases are leases with a lease term of twelve months or less. Low-value assets comprise small items of office equipment and IT.
2.16. Employee benefits
The Group operates defined contribution pension schemes for certain employees of the Group. The assets of the schemes are held separately from those of the Group in an independently administered fund. The pension costs charged to profit or loss are the contributions payable to the scheme in respect of the accounting period.
All Group companies are in compliance with their pension obligations and have auto-enrolled, offering all employees the opportunity to participate.
2.17. Share-based payments
The Company issues equity-settled share based payment transactions to certain employees. Equity-settled share based payment transactions are measured at fair value at the date of grant. The calculation of fair value at the date of grant requires the use of management's best estimate of volatility, risk free rate and expected time to exercise the options. Details regarding the determination of the fair value of equity-settled transactions are set out in note 26.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of the number of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves.
Equity-settled share based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
For cash-settled share based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At each reporting date until the liability is settled, and at the date of settlement, the fair value of the liability is re-measured, with any changes in fair value recognised in profit or loss for the year.
2.18. New standards and interpretations
The Group has applied the following standards and amendments for the first time for the annual reporting period commencing on 1 April 2019:
-- IFRS 16 "Leases"; -- Prepayment Features with Negative Compensation - Amendments to IFRS 9; -- Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28; -- Annual Improvements to IFRS Standards 2015-2017 Cycle; -- Plan Amendment, Curtailment or Settlement - Amendments to IAS 19; and -- Interpretation 23 "Uncertainty over Income Tax Treatments".
The Group has also elected to adopt the following amendments early:
-- Definition of Material - Amendments to IAS 1 and IAS 8.
The Group had to change its accounting policies as a result of adopting IFRS 16. The Group elected to adopt the new rules retrospectively but recognised the cumulative effect of initially applying the new standard on 1 April 2019. This is disclosed in note 29. The other amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
2.19. New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2020 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
3. Financial risk management
3.1. Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.
3.2. Market risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange and security prices.
(a) Interest rate risk
The Group has exposure to interest rate risk by virtue of its borrowings with HSBC UK Bank Plc, which attract a variable rate of interest at a mark up to the base rate. No hedging arrangements are currently in place but the Board keeps this under constant review.
3.3. Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises principally from the Group's cash balances and trade receivables balances. The Group's customers are primarily local authorities and housing associations with high credit ratings.
3.4. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. This risk relates to the Group's prudent liquidity risk management and implies maintaining sufficient cash reserves to meet the Group's working capital requirements. Management monitors rolling forecasts of the Group's liquidity and cash and cash equivalents on the basis of expected cash flow.
At the 31 March 2020 the Group was in ongoing discussions with its bank, HSBC UK Bank Plc in regards the restructuring of the debt facility and related covenants. Subsequent to year end the new facility arrangement has been agreed, as set out in note 31 to these accounts. However as the agreement was still in negotiation as at the balance sheet date, all term loans have been classified as current borrowings.
3.5. Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern whilst maximising the return to shareholders. The Group funds its expenditures on commitments from existing cash and cash equivalent balances.
4. Critical accounting estimates and judgements
The preparation of financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenditure during year. The estimates and associated judgements are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
The estimates and underlying judgements are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
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.
4.1. Critical judgements in applying the Groups accounting policies
(a) Valuation of accrued income
Work completed under either a framework agreement or term contract for gas/electrical/building services is recognised as accrued income until it has been billed to the client. A level of judgement is involved in determining whether the Group has met all of the required performance obligations necessary in order to recognise the revenue. Accrued income of GBP10.0 million was recognised within the Statement of Financial Position at 31 March 2020 (2019: GBP7.3 million).
(b) Valuation of amounts due from long term contracts
Work completed under long term construction contracts is recognised as amounts due from long term contracts until billed to the client, and similar to accrued income requires judgement on whether the Group has met all its performance obligations to recognise the revenue. Amounts due from long term contracts of GBP0.8 million was recognised within the Statement of Financial Position at 31 March 2020 (2019: GBP2.1 million).
(c) Share-based payment charge
The Group issued share options to Directors and employees of the Group in previous years. None were issued in the year ended 31 March 2020. 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 judgements to establish the appropriate inputs to be entered into the model, covering areas such as exercise restrictions and behavioural considerations of scheme members. Full details of judgements used within the calculation to derive the charge are given within note 26. Underlying estimates and a full sensitivity analysis have not been disclosed as management do not feel that any reasonable change would materially influence the interpretation of the charge.
(d) Recoverability of trade receivable balances
Provisions for trade debtors were previously considered to be an area of key judgement for the Group, given the underlying materiality of the associated trade receivable balances. However, given that a large proportion of the customer base are local councils with little risk of default and minimal historic levels of write-off, bad debt provisions are no longer considered an area of key judgement.
4.2. Key sources of estimation uncertainty
(a) Customer relationships
Customer relationship assets recognised on acquisition are consider to have the following key areas of estimate:
-- Determining the useful economic life of customer relationships and the corresponding rate of amortisation is considered a critical estimate. Management are required to predict the future timeframe over which customer relationships will continue to generate a positive contribution to Group cash flow. This estimate is made on a case-by-case basis and will reflect management's latest plans and long term forecasts for the related contracts. Amortisation of customer relationships has resulted in a charge to the Statement of Comprehensive Income of GBP1.9 million during the year (2019: GBP1.8 million).
-- The valuation of customer relationships requires the use of estimates, as the valuation model utilises assessments of both future cash flows and appropriate discount factors. The valuation of customer relationship assets held within the Statement of Financial Position was GBP4.3 million (2019: GBP6.2 million).
No acquisitions have been made in the current year. See note 14.1 for full details on the estimates applied by management in valuing customer relationships arising on past acquisitions.
(b) Impairment of goodwill
Determining whether goodwill is impaired requires an estimate of the value in use of the Cash Generating Units (CGUs) to which goodwill has been allocated. The value in use calculation involves an estimate of the future cash flows of the CGUs and also the selection of appropriate discount rates to calculate present values. Future cash flows are estimated based on contract 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. See note 14.2 for details on the key estimates used within the impairment test for goodwill, along with the Groups sensitivity analysis.
(c) Right-of-use assets
Management are required to make a number of estimates in recognising right-of-use assets. These key estimates are considered to be:
-- Estimation of the lease term, which is done on a lease by lease basis;
-- Determination of the appropriate rate to discount the lease payments. This is set with reference to the Groups incremental cost of borrowing. The incremental rate was 3.4% in the current year (2019: 3.4%) and
-- Assessment of whether a right-of-use asset is impaired. An impairment is considered to be present where the net present value of future cash benefit of utilising the asset within the business, or if applicable potential sub lease income if the asset is no longer required, is less than the net present value of future lease payments.
Management considers all facts and circumstances including its past practice and business plans in making this estimate on a lease-by-lease basis.
At the 31 March 2020 the Group holds GBP2.1 million of right-of-use assets (2019: GBPnil). Management have reviewed the future benefit and costs of the underlying assets and have not identified the need to recognise any impairment.
5. Revenue
Underlying revenue can be analysed as follows:
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
-------------------- --------- ---------
Gas maintenance 11,872 9,831
Building services 31,039 39,234
Electrical services 22,481 17,463
-------------------- --------- ---------
65,392 66,528
-------------------- --------- ---------
All results in the current and prior period derive from continuing operations and all revenues arose in the UK. Non-underlying items in the year to 31 March 2020 reduce gas maintenance revenue by GBPnil (2019: GBP1,362,000) and building services revenue by GBPnil (2019: GBP1,698,000).
6. Operating profit/(loss)
Operating profit/(loss) is stated after charging all costs including non-underlying items which are detailed in note 8.
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
---------------------------------------------------- --------- ---------
Inventory recognised as an expense in cost of sales 13,049 12,463
Staff costs 14,214 16,040
Depreciation 258 256
Depreciation of right-of-use asset 801 -
Amortisation of software costs 31 44
Loss on disposal of property, plant and equipment 162 75
Auditor's remuneration 149 182
Non-audit remuneration 3 49
Operating lease rentals - 999
---------------------------------------------------- --------- ---------
The depreciation and amortisation charges as stated in the table above are included within administrative expenses in the Consolidated Statement of Comprehensive Income.
7. EBITDA
Earnings before interest, taxation, depreciation and amortisation ("EBITDA")
EBITDA is calculated as follows:
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
--------------------------------------------------------- --------- ---------
Underlying profit before tax 3,691 2,501
Adjustments for items not included in underlying EBITDA:
Finance costs 565 288
Depreciation property, plant and equipment 258 256
Depreciation of right-of-use assets 801 -
Amortisation of software costs 31 44
Loss on disposal of property, plant and equipment 162 75
--------------------------------------------------------- --------- ---------
EBITDA (including the effect of adopting IFRS 16 during
2020 financial year) 5,508 3,164
Eliminate effect of adopting IFRS 16 (840) -
--------------------------------------------------------- --------- ---------
Adjusted EBITDA (excluding the effect of adopting IFRS
16 during 2020 financial year) 4,668 3,164
--------------------------------------------------------- --------- ---------
As outlined in note 29, the Group has adopted IFRS 16 "Leases" in the current year. As adoption of the standard has led to a change in how leases are recognised in the income statement, it has impacted the comparability of the EBITDA figure year on year. Therefore, management has decided to adjust the current year EBITDA result to eliminate the effect of adopting IFRS 16, to ensure that the performance measure is disclosed on a like-for-like basis.
8. Non-underlying items
Operating profit/(loss) includes the following items which are considered by the Board to be either exceptional in size, one-off in nature or non-trading related items as defined in note 2.5.
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
-------------------------------------------------------- --------- ---------
Amortisation of customer relationships (a) 1,925 1,836
Impairment of customer relationships (a) - 1,802
Share-based payment charge (b) 39 128
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
-------------------------------------------------------- --------- ---------
1,964 12,889
-------------------------------------------------------- --------- ---------
(a) Amortisation and impairment of customer relationships
Amortisation of acquisition intangibles was GBP1,925,000 for the year (2019: GBP1,836,000) 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 relationships of GBP1,802,000 in 2019 relates to Spokemead.
(b) Share based payment charge
A Group share option scheme is in place. No options were granted during the year (as stated in note 26). The share based payment charge has been separately identified as it is a non-cash expense for the Group.
(c) Acquisition costs
Acquisition costs in 2019 comprise legal, professional and other expenditure in relation to the acquisition of R. Dunham during the year and are included in administrative expenses. No such costs have been incurred in 2020. This is considered to be a one-off expense for the Group.
(d) Restructuring costs
Costs for 2019 comprise redundancy, legal and professional fees and other related costs of GBP975,000 and are one-off and non-recurring. No such costs have been incurred in 2020.
(e) Loss on exit from onerous contracts and gas division of P&R
Of the loss recognised in 2019 GBP3,573,000 relates to the exit from the contract in P&R for the provision of services to the Ministry of Defence properties (of which GBP432,000 relates to trading losses, GBP140,000 relates 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 relates to provision for claims against P&R, GBP507,000 relates to provision for post-contract termination trading losses and GBP288,000 relates to legal and professional fees). All relevant provisions have been unwound in 2020, and no further costs have been incurred. These are considered to be one-off in nature.
(f) Impairment of accrued income
Impairment recognised in 2019 relates to non-recoverable accrued income and write down of inventory following detailed review undertaken by the Directors. No impairments have been required in 2020. These impairments are considered one-off in nature.
9. Employee expenses
The average number of employees (including Directors) employed during the year was:
12 months 12 months
ended ended
31 March 31 March
2020 2019
No No
--------------- --------- ---------
Management 44 57
Administration 73 84
Engineers 236 345
--------------- --------- ---------
353 486
--------------- --------- ---------
The aggregate remuneration of the above employees (including Directors) comprised:
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
---------------------- --------- ---------
Wages and salaries 12,664 14,332
Social security costs 1,264 1,471
Pension costs 286 237
---------------------- --------- ---------
14,214 16,040
---------------------- --------- ---------
10. Finance costs and finance income
The Group received no finance income in either the current or prior period.
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Interest payable on bank borrowings and loans 416 286
Interest payable on hire purchase agreements - 2
Interest payable on lease liabilities 77 -
Other interest costs 28 -
Other finance costs 44 -
---------------------------------------------- --------- ---------
565 288
---------------------------------------------- --------- ---------
11. Dividends
The Directors do not recommend a final dividend for the year ended 31 March 2020. The final dividend paid in the year ended 31 March 2019 relating to the prior year was 2.00 pence per ordinary share and the interim dividend paid in January 2019 was 0.50 pence per share making a total dividend paid in the year ended 31 March 2019 of 2.50 pence per ordinary share.
12 months ended 12 months ended
31 March 2020 31 March 2019
------------------
Total Total
Per share paid Per share paid
(p) GBP'000 (p) GBP'000
--------------------------------------------- --------- ------- --------- -------
Dividend paid during the year relating to
final dividend declared for previous period - - 2.00 806
Interim dividend paid during the year - - 0.50 203
--------------------------------------------- --------- ------- --------- -------
- - 2.50 1,009
--------------------------------------------- --------- ------- --------- -------
12. Income tax
12.1. Components of income tax (credit)/expense
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
--------------------------------------------------------------- --------- ---------
Current income tax expense/(credit)
Current income tax expense/(credit) - (129)
--------------------------------------------------------------- --------- ---------
Total current tax - (129)
--------------------------------------------------------------- --------- ---------
Deferred tax
Credit in connection with intangible assets acquired (347) (331)
Credit in connection with impairment of customer relationships - (324)
Charge in relation to use of brought forward tax losses 699 -
Credit for lease liabilities recognised on adoption of
IFRS 16 (385) -
Charge for right-of-use asset recognised on adoption of
IFRS 16 381 -
Credit in connection with unused tax losses - (1,008)
--------------------------------------------------------------- --------- ---------
Total deferred tax 348 (1,663)
--------------------------------------------------------------- --------- ---------
Income tax expense/(credit) reported in income statement 348 (1,792)
--------------------------------------------------------------- --------- ---------
12.2. Tax reconciliation
The tax assessed in each period is higher than the standard rate of corporation tax in the UK. The differences are explained below.
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
---------------------------------------------------------------- --------- ---------
Profit/(loss) on ordinary activities before taxation 1,727 (10,388)
Profit/(loss) on ordinary activities before taxation multiplied
by standard rate of UK corporation tax
of 19% (2019: 19%) 328 (1,974)
Effects of:
Non-deductible expenses 666 123
Utilisation of brought forward tax losses (699) -
Other tax adjustments 53 59
---------------------------------------------------------------- --------- ---------
348 (1,792)
---------------------------------------------------------------- --------- ---------
13. Earnings per share
13.1 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
2020 2019
GBP'000 GBP'000
----------------------------------------------------- ---------- ----------
Profit/(loss) used in calculating basic and diluted
earnings per share 1,379 (8,596)
Number of shares
Weighted average number of shares for the purpose of
basic earnings per share 47,105,684 40,373,589
Weighted average number of shares for the purpose of
diluted earnings per share 47,105,684 40,373,589
Basic earnings/(loss) per share (pence) 2.93 (21.29)
Diluted earnings/(loss) per share (pence) 2.93 (21.29)
----------------------------------------------------- ---------- ----------
Options over 750,000 ordinary shares remained outstanding as at 31 March 2020 (2019: 1,548,103). These have been excluded in calculating the diluted earnings per share on the basis that all share option schemes have an exercise price in excess of the current share price, and therefore it is not expected that these will be exercised.
13.2 Adjusted earnings per share
Profit/(loss) after tax is stated after deducting non-underlying items totalling GBP1,964,000 (2019: GBP12,889,000) as set out in note 8 and the impact of these items on corporation tax. Non-underlying items are either exceptional in size, one-off in nature or non-trading related items. 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
2020 2019
GBP'000 GBP'000
----------------------------------------------------- ---------- ----------
Profit/(loss) after tax 1,379 (8,596)
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 1,925 1,836
Impairment of customer relationships - 1,802
Share based payment charge 39 128
Acquisition costs - 120
Impact of above adjustments on corporation tax - (1,716)
----------------------------------------------------- ---------- ----------
Adjusted profit after tax 3,343 2,577
----------------------------------------------------- ---------- ----------
Number of shares
Weighted average number of shares for the purpose of
adjusted earnings per share 47,105,684 40,373,589
Weighted average number of shares for the purpose of
diluted adjusted earnings per share 47,105,684 40,509,079
Adjusted earnings per share (pence) 7.10 6.38
Diluted adjusted earnings per share (pence) 7.10 6.36
----------------------------------------------------- ---------- ----------
14. Intangible assets
Software Customer
costs relationships Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- ------------- -------- -------
Cost
At 1 April 2019 202 14,032 5,443 19,677
Additions in the year 44 - 100 144
Disposals (29) - - (29)
---------------------- -------- ------------- -------- -------
At 31 March 2020 217 14,032 5,543 19,792
---------------------- -------- ------------- -------- -------
Amortisation
At 1 April 2019 123 7,804 - 7,927
Charge for the year 31 1,925 - 1,956
Disposals (28) - - (28)
---------------------- -------- ------------- -------- -------
At 31 March 2020 126 9,729 - 9,855
---------------------- -------- ------------- -------- -------
Net book value
At 31 March 2019 79 6,228 5,443 11,750
---------------------- -------- ------------- -------- -------
At 31 March 2020 91 4,303 5,543 9,937
---------------------- -------- ------------- -------- -------
14.1. 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%
Estimated life of relationship 1 to 8
at date of acquisition 7 years 7.5 years years 1.5 years
Remaining life of intangible 2.5 years 1.2 years 6 years 0.2 years
Fair value of customer relationships
at date of acquisition GBP5,586,000 GBP5,922,000 GBP2,324,000 GBP200,000 GBP14,032,000
Current carrying value of customer
relationships GBP1,924,000 GBP960,000 GBP1,396,000 GBP23,000 GBP4,303,000
------------------------------------- ------------ ------------ ------------ ---------- -------------
14.2. 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 28).
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 goodwill allocated to each subsidiary entity is presented below:
Purdy Spokemead DCB (Kent) R. Dunham Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- --------- ---------- --------- --------
Allocation of goodwill 1,719 1,186 1,351 1,287 5,543
----------------------- -------- --------- ---------- --------- --------
During the year the goodwill in relation to R. Dunham has been increased by GBP100,000. This is due to a revision to the fair value of accrued income that was recognised as an estimate in the Statement of Financial Position in the prior year. The increase in goodwill is not considered material to restate the prior year Statement of Financial Position, and therefore is shown as a current year movement.
The Group tests whether goodwill has suffered any impairment on an annual basis. For the 2020 and 2019 reporting periods, the recoverable amount of the cash-generating units (CGUs) was determined based on the value-in-use calculations which require the use of key assumptions. The calculations use cash flow projections based on the level of recurring revenue from secured contracts, plus an estimate of revenue generated from long-term construction contracts which have already been won and are expected to be won in the future. Cash flows beyond five years are extrapolated using the estimated growth rates stated below. These growth rates are consistent with forecasts included in industry reports specific to the industry in which the CGU operates.
The following table sets out the key assumptions for those CGUs that have significant goodwill allocated to them. The same assumptions have been used across the CGUs as they are all considered to operate in markets with similar characteristics.
2020 key assumptions 2020 2019 ------------------------------------------- ----- ----- Long-term growth rate (used after 5 years) 1% 2% 3 to 5 year growth rate 2% 2% Pre-tax discount rate 14.2% 12.8% ------------------------------------------- ----- -----
Cash flows in year one have been adjusted to account for the potential impact of the Covid-19 pandemic on performance for the 2021 financial year, but have been shown to recover within the medium term in line with management's expectations.
14.3 Sensitivity review
Management have performed a range of sensitivity analysis around movements in both the discount rates and future growth rates used within the model. The discount rate would need to increase by 3% to 17.2% or future growth would have to be reduced to zero in both the medium and long term before the CGU reaches breakeven point.
15. Property, plant and equipment
At 31 March 2020
Office
Long Fixtures and
Freehold Freehold leasehold Motor and computer
land property improvements vehicles fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- --------- ------------- --------- --------- ---------- --------
Cost
At 1 April 2019 300 523 398 489 87 1,111 2,908
Additions - - - - 50 226 276
Disposals - - (200) (198) (46) (174) (618)
-------------------- -------- --------- ------------- --------- --------- ---------- --------
At 31 March 2020 300 523 198 291 91 1,163 2,566
-------------------- -------- --------- ------------- --------- --------- ---------- --------
Depreciation
At 1 April 2019 - 78 141 246 61 721 1,247
Charge for the year - 22 34 51 33 118 258
Disposals - - (80) (125) (41) (111) (357)
-------------------- -------- --------- ------------- --------- --------- ---------- --------
At 31 March 2020 - 100 95 172 53 728 1,148
-------------------- -------- --------- ------------- --------- --------- ---------- --------
Net book value
At 1 April 2019 300 445 257 243 26 390 1,661
-------------------- -------- --------- ------------- --------- --------- ---------- --------
At 31 March 2020 300 423 103 119 38 435 1,418
-------------------- -------- --------- ------------- --------- --------- ---------- --------
At 31 March 2019
Office
Long Fixtures and
Freehold Freehold leasehold Motor and computer
land property improvements vehicles fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- --------- ------------- --------- --------- ---------- --------
Cost
At 1 April 2018 300 484 394 744 85 641 2,648
Additions - 39 4 18 12 85 158
Additions on acquisition
of subsidiary - - - 179 - 569 748
Disposals - - - (452) (10) (184) (646)
------------------------- -------- --------- ------------- --------- --------- ---------- --------
At 31 March 2019 300 523 398 489 87 1,111 2,908
------------------------- -------- --------- ------------- --------- --------- ---------- --------
Depreciation
At 1 April 2018 - 57 110 430 61 352 1,010
Additions on acquisition
of subsidiary - - - 98 - 445 543
Charge for the year - 21 31 100 9 95 256
Disposals - - - (382) (9) (171) (562)
------------------------- -------- --------- ------------- --------- --------- ---------- --------
At 31 March 2019 - 78 141 246 61 721 1,247
------------------------- -------- --------- ------------- --------- --------- ---------- --------
Net book value
At 1 April 2018 300 427 284 314 24 289 1,638
------------------------- -------- --------- ------------- --------- --------- ---------- --------
At 31 March 2019 300 445 257 243 26 390 1,661
------------------------- -------- --------- ------------- --------- --------- ---------- --------
Freehold land and building property was included at its net book value of GBP784,000 at the date of acquisition, being the fair value of the land and buildings at GBP815,000, less accumulated depreciation of GBP31,000. The property was valued by an independent valuer with a recognised and relevant professional qualification and with recent experience in the location and category of investment property being valued, Savills (UK) Limited, as at 22 May 2015 on the existing use value basis in accordance with the Appraisal and Valuation Manual of The Royal Institution of Chartered Surveyors. The critical assumptions made relating to its valuation are the market rent at GBP65,000 per annum and the yield at 8.00%.
The net book value of property, plant and equipment at 31 March 2020 includes GBPnil (2019: GBP146,000) in respect of assets held under finance lease contracts which relate to the acquisition of motor vehicles.
The bank loans detailed in note 20 are secured on the property, plant and equipment of the Group. The bank facility does not impose any restrictions of use on the assets.
16. Right-of-use assets
Office
and
Leasehold Motor computer
property vehicles equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- ---------- --------
Cost
At 1 April 2019 - - - -
Recognised on transition to IFRS 16 1,320 852 201 2,373
Additions - 507 - 507
Disposals - (84) - (84)
------------------------------------ --------- --------- ---------- --------
At 31 March 2020 1,320 1,275 201 2,796
------------------------------------ --------- --------- ---------- --------
Depreciation
At 1 April 2019 - - - -
Charge for the year 202 533 66 801
Disposals - (84) - (84)
------------------------------------ --------- --------- ---------- --------
At 31 March 2020 202 449 66 717
------------------------------------ --------- --------- ---------- --------
Net book value
At 1 April 2019 - - - -
------------------------------------ --------- --------- ---------- --------
At 31 March 2020 1,118 826 135 2,079
------------------------------------ --------- --------- ---------- --------
17. Inventories
2020 2019
GBP'000 GBP'000
----------------- -------- --------
Raw materials 907 1,058
Work in progress 2,874 2,076
----------------- -------- --------
3,781 3,134
----------------- -------- --------
18. Trade and other receivables
2020 2019
GBP'000 GBP'000
------------------------------------- -------- --------
Current
Trade receivables 7,383 8,112
Other receivables 463 590
Prepayments 805 440
Accrued income 9,968 7,327
Amounts due from long-term contracts 832 2,079
------------------------------------- -------- --------
19,451 18,548
------------------------------------- -------- --------
19. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank. The Group's cash and cash equivalents are held at floating interest rates and are primarily held at HSBC UK Bank Plc which has an A+ credit rating as assessed by Fitch ratings. The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.
2020 2019
GBP'000 GBP'000
----------------------- -------- --------
Cash and bank balances 19 21
----------------------- -------- --------
19 21
----------------------- -------- --------
20. Borrowings
The maturity analysis of borrowings, inclusive of finance charges, is included below. All of the loans are denominated in Pounds Sterling.
2020 2019
GBP'000 GBP'000
----------------------------- -------- --------
Non-current borrowings
Bank and other borrowings:
Other loans 176 236
----------------------------- -------- --------
Total non-current borrowings 176 236
----------------------------- -------- --------
Current borrowings:
Bank and other borrowings:
Term loans 3,333 5,000
Other loans 59 53
Mortgage loan 314 371
Overdraft 3,351 5,219
----------------------------- -------- --------
Total current borrowings 7,057 10,643
----------------------------- -------- --------
Bank and other borrowings:
Term loans 3,333 5,000
Other loans 235 289
Mortgage loans 314 371
Overdraft 3,351 5,219
----------------------------- -------- --------
Total borrowings 7,233 10,879
----------------------------- -------- --------
At 31 March 2020 the Group was in ongoing discussions with its bank, HSBC UK Bank Plc, in regard to the restructuring of the debt facility and related covenants. Subsequent to year end, the new facility arrangement has been agreed, as set out in note 31 to these accounts. However, as the agreement was still in negotiation as at the balance sheet date, all term loans have been classified as current borrowings consistent with the treatment of the debt as at 31 March 2019.
21. Lease liabilities
As explained in note 2.18, the Group has changed its accounting policy for leases during the year to meet the requirements of IFRS 16, which has been adopted for the first time from 1 April 2019. Note 2.15 gives full details of the Group's accounting policy for leases, and note 29 gives full explanation of the financial impact arising from the change in accounting policy.
From 1 April 2019 the Group accounts for all leases as right-of-use assets, recognising a corresponding lease liability in the balance sheet at the point of inception.
As at 31 March 2020 the following amounts are included in the Statement of Financial Position in relation to non-cancellable leases:
2020 2019
GBP'000 GBP'000
------------------ -------- --------
Lease liabilities
Current 620 -
Non-current 1,486 -
------------------ -------- --------
2,106 -
------------------ -------- --------
The maturity analysis of obligations under non-cancellable leases is shown in the following table:
2020 2019
GBP'000 GBP'000
-------------------------------------------- -------- --------
No later than 1 year 620 -
Later than 1 year and no later than 5 years 955 -
After 5 years 531 -
-------------------------------------------- -------- --------
2,106 -
-------------------------------------------- -------- --------
22. Trade and other payables
2020 2019
GBP'000 GBP'000
----------------------------------- -------- --------
Trade payables 12,885 10,605
Other payables 134 1,191
Other taxation and social security 1,651 1,464
Accruals 1,273 2,670
----------------------------------- -------- --------
15,943 15,930
----------------------------------- -------- --------
23. Share capital and reserves
23.1. Ordinary shares
2020 2019
Ordinary shares of GBP0.10 each GBP'000 GBP'000
------------------------------------------------- --- ---------- ----------
At the beginning of the year 4,054 4,029
Issued in the year 1,818 25
------------------------------------------------------ ---------- ----------
At the end of the year 5,872 4,054
------------------------------------------------------ ---------- ----------
Number of shares
At the beginning of the year 40,540,027 40,290,027
Issue of consideration shares in connection with
R. Dunham a) - 250,000
Issued in the year b) 18,181,818 -
------------------------------------------------- --- ---------- ----------
At the end of the year 58,721,845 40,540,027
------------------------------------------------------ ---------- ----------
(a) R. Dunham (UK) Limited initial consideration
On 29 November 2018, Bilby Plc acquired the entire share capital of R. Dunham (UK) Limited. The initial consideration for R. Dunham (UK) Limited 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").
(b) Issued in the year
On 15 November 2019 the Company successfully completed a fundraise which generated GBP2,000,000 gross of issue costs from the issue of 18,181,818 new shares at 11 pence per share. Share issue costs of GBP181,000 (2019: GBPnil) have been offset against the share premium account.
23.2. Share premium
2020 2019
GBP'000 GBP'000
---------------------------------------------- -------- --------
At the beginning of the year 8,609 8,392
Issued in the year (net of share issue costs) - 217
---------------------------------------------- -------- --------
At the end of the year 8,609 8,609
---------------------------------------------- -------- --------
23.3. Merger reserve
2020 2019
GBP'000 GBP'000
----------------------- -------- --------
At the end of the year (248) (248)
----------------------- -------- --------
24. Note to the consolidated statement of cash flows
12 months 12 months
ended ended
31 March 31 March
2020 2019
GBP'000 GBP'000
-------------------------------------------------- --------- ---------
Cash flow from operating activities
Profit/(loss) before income tax 1,727 (10,388)
Adjustments for:
Net finance cost 565 288
Loss on disposal of property, plant and equipment 162 75
Depreciation 1,059 256
Amortisation of intangible assets 1,956 1,880
Impairment of intangible assets - 1,802
Share-based payments 39 128
Fair value adjustment (100) -
Movement in receivables (759) 2,980
Movement in payables (116) 1,870
Movement in inventories (647) 186
Tax paid - (1,103)
-------------------------------------------------- --------- ---------
3,886 (2,026)
-------------------------------------------------- --------- ---------
25. Related party transactions
During the year the Group entered into an agreement with Ellingham Holdings Limited for consulting services and paid a total of GBP65,000 (excluding VAT). David Ellingham, a former Director of the Group, is a director of Ellingham Holdings Limited.
Chris Webster, a Director of the Group, made a personal loan of GBP20,000 during the year to DCB (Kent) Limited, a subsidiary of the Group. The amount was subsequently repaid in full during the year.
25.1. Key management compensation
The Group's key management are considered to comprise the Directors of Bilby Plc and three Non-Executive Directors of Bilby Plc. The aggregate remuneration of the Directors is as follows:
2020 2019
GBP'000 GBP'000
-------------------------------------- -------- --------
The aggregate remuneration comprised:
Aggregate emoluments 905 669
Consultancy fees - 117
-------------------------------------- -------- --------
905 786
Share-based payments 3 17
-------------------------------------- -------- --------
Total remuneration 908 803
-------------------------------------- -------- --------
The remuneration of the highest paid Director during the year was GBP259,000 (2019: GBP296,000).
There were no other transactions with Directors or key personnel to disclose.
26. Share-based payments
The Group has a share option scheme for certain Directors and employees. Options are generally exercisable at a price equal to the market price of the Bilby Plc shares on the day immediately prior to the date of the grant. Options are forfeited if the employee leaves the Group before the options vest.
The Share Option Plan provides for the grant of both tax-approved Enterprise Management Incentive ("EMI") options and unapproved options.
The Black Scholes model is used to calculate the appropriate charge for the share 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. The total charge to the Consolidated Statement of Comprehensive Income for the year to 31 March 2020 was GBP39,000 (2019: GBP128,000).
Details of the share options outstanding during the year are as follows. There are no share options exercisable at the year end date.
2020 2019
-------------------- ----------------------
Weighted Weighted
average average
exercise exercise
price price
Number (p) Number (p)
----------------------------------------- --------- --------- ----------- ---------
Outstanding at the beginning of the year 1,548,103 0.97 2,757,412 0.82
Granted during the year - - - -
Forfeited during the year (798,103) (0.88) (1,209,309) (0.65)
Exercised during the year - - - -
----------------------------------------- --------- --------- ----------- ---------
Outstanding at the end of the year 750,000 1.06 1,548,103 0.97
----------------------------------------- --------- --------- ----------- ---------
No of options
---------------------------------------
Exercise date Exercise
price
in
GBP per Issued
Grant date share 2019 in year Forfeited 2020
-------------- -------------- -------- --------- -------- --------- -------
March 2015 March 2018 0.58 293,103 - (293,103) -
July 2015 July 2018 0.95 510,000 - (150,000) 360,000
December 2015 December 2018 1.19 240,000 - (240,000) -
July 2016 July 2019 1.26 360,000 - (45,000) 315,000
July 2017 July 2020 0.73 145,000 - (70,000) 75,000
-------------- -------------- -------- --------- -------- --------- -------
1,548,103 - (798,103) 750,000
----------------------------- -------- --------- -------- --------- -------
The Group recognised the following expenses related to share-based payments.
2020 2019
Date granted GBP'000 GBP'000
-------------- -------- --------
July 2015 - 14
December 2015 - 22
January 2016 - 9
July 2016 18 60
July 2017 21 23
-------------- -------- --------
39 128
-------------- -------- --------
27. Deferred tax
The following are the significant deferred tax liabilities and assets recognised by the Group and the movements thereon during the current and prior reporting period.
Intangible Short-term
assets Unused timing Right-of-use Lease
acquired tax losses differences assets liabilities Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ----------- ------------ ------------ ------------ --------
At 1 April 2018 (1,738) - (145) - - (1,883)
Credit to income statement
and other comprehensive income 655 1,008 - - - 1,663
Acquisition of subsidiary (211) - - - - (211)
------------------------------------ ---------- ----------- ------------ ------------ ------------ --------
At 31 March 2019 (1,294) 1,008 (145) - - (431)
Credit/(charge) to income statement
and other comprehensive income 347 (699) - (381) 385 (348)
------------------------------------ ---------- ----------- ------------ ------------ ------------ --------
At 31 March 2020 (947) 309 (145) (381) 385 (779)
------------------------------------ ---------- ----------- ------------ ------------ ------------ --------
2020 2019
GBP'000 GBP'000
--------------------------- -------- --------
Deferred tax asset 694 1,008
Deferred tax liability (1,473) (1,439)
--------------------------- -------- --------
Net deferred tax liability (779) (431)
--------------------------- -------- --------
28. 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.
28.1 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 1,287
Customer relationships 200
Tangible assets 205
Inventories 165
Trade and other receivables 710
Cash and cash equivalents 79
Current liabilities (662)
Non-current liabilities (305)
Deferred tax (211)
---------------------------- -------
1,468
---------------------------- -------
The above analysis includes a GBP100,000 adjustment to the fair value of trade and other receivables in the year ended 31 March 2020.
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 (December 2018 results) - paid during
2020 476
------------------------------------------------------------------ -------
1,468
------------------------------------------------------------------ -------
28.2 Deferred consideration
Deferred consideration disclosed in the Consolidated Statement of Financial Position consists of the following:
2020 2019
Current liabilities GBP'000 GBP'000
---------------------------- -------- --------
On acquisition of R. Dunham - 476
---------------------------- -------- --------
- 476
---------------------------- -------- --------
29. Changes in accounting policies
As detailed in note 2.18, the Group has adopted IFRS 16 "Leases" retrospectively from 1 April 2019, but has not restated comparatives for the 2019 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 April 2019. The new accounting policies are disclosed in note 2.18.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as "operating leases" under the principles of IAS 17 "Leases". These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate at 1 April 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 April 2019 was 3.4%.
For leases previously classified as finance leases the entity recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date.
On applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
-- applying a single discount rate to a portfolio of leases with reasonably similar characteristics;
-- relying on previous assessments of whether leases are onerous as an alternative to performing an impairment review - there were no onerous contracts as at 1 April 2019;
-- accounting for operating leases with a remaining lease term of less than twelve months as at 1 April 2019 as short-term leases;
-- excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
-- using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and Interpretation 4 "Determining Whether an Arrangement Contains a Lease".
The change in accounting policy affected the following items in the Consolidated Statement of Financial Position on 1 April 2019:
Adjustments
to financial
position
GBP'000
---------------------------------- -------------
Right-of-use asset 2,371
Lease liability (2,372)
---------------------------------- -------------
De-recognition of finance leases:
Fixed assets (10)
Finance lease liability 10
---------------------------------- -------------
30. Ultimate controlling party
The directors consider that there is no ultimate controlling party of Bilby Plc.
31. Events after the balance sheet date
At 31 March 2020 the Group was in ongoing discussions with its bank, HSBC UK Bank Plc, in regard to the restructuring of the debt facility and related covenants. On 22 May the Group secured new debt facilities totalling GBP9.8 million. The Group's previous debt facility was in the form of a GBP3.3 million term loan and a GBP6.5 million overdraft facility. This new debt facility consists of a GBP7.3 million term loan facility and a GBP2.5 million overdraft facility. The facility expires in September 2022 and there will be GBP0.5 million quarterly repayments starting in August 2020.
The first covenant test for the new facility will be to achieve a minimum EBITDA of GBP1.1 million for the year ending 31 March 2021. The covenants for the period beyond 31 March 2021 will be tested quarterly and they are (i) achievement of minimum levels of EBITDA; (ii) debt service cover; and (iii) interest cover.
As the agreement was still in negotiation as at the balance sheet date, all term loans have been classified as current borrowings within the balance sheet at 31 March 2020.
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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