Fulcrum Utility Services Limited - Update on publication of preliminary results
Fulcrum Utility Services Limited, the UK's market leading independent multi-utility infrastructure and services provider, announces that as part of finalising the preliminary results for year ended 31 March 2019, the Group, following extensive discussions with its auditors and taking into account developing guidance on its interpretation, is changing its accounting policy following the adoption of IFRS15: Revenue from Contracts with Customers. This change is in relation to infrastructure assets constructed and subsequently retained in the Group's licensed asset owning companies (as opposed to assets constructed for third parties).
The Group's decision three years ago to retain more assets was in order to enhance shareholder value over time as assets grow in value. Also, during the same period the Group has successfully extended its customer base into the housing market. In this market, in particular, the asset value can exceed the costs of construction and where the value of the asset is greater than the construction cost this element of profit is now taken directly to reserves through Other Comprehensive Income rather than via the profit and loss account. Further, and again only in relation to assets retained by the Group, the value of internally adopted assets which was previously included in turnover is now effectively included as a reduction in cost of sales. These two accounting adjustments represent no change in the Group's underlying financial performance or cash generation.
As a result of the above accounting changes, the reported EBITDA of the Group is expected to reduce and there will be a corresponding additional increase in balance sheet reserves. Further, turnover is expected to reduce with a similar reduction in cost of sales. These changes remain subject to final audit but the Board currently estimates this to be in the order of approximately £1.1 million reduction in EBITDA and corresponding increase to balance sheet reserves and £8.1 million reduction in turnover and cost of sales. It is emphasised that these accounting changes only relate to assets constructed and retained by the Group. As at 31 March 2019, the Group's five yearly independent asset revaluation shows the value of infrastructure assets increasing by approximately £9 million.
As stated above, there is no change to the Group's underlying performance or cash resources and the Group remains committed to paying an increased dividend for the full year in line with the Group's previously stated dividend policy.
The Group has had to undertake significant work to determine the above changes and is now in the final stages of audit.
All figures above are subject to final audit confirmation.