Martin Donnachie, Chief Executive Officer

CEO's Statement

Strategic report for the year ended 31 March 2016

Principal activities

The Group’s principal activities are the provision of unregulated utility connections and independent gas transportation services in the UK.

The Group designs and project manages utility connections for customers seeking either new connections or the alteration or refurbishment of existing connections. These connections range from simple, single-site alterations to large, complex multi-utility, multi-site new connections. For all projects, the Group’s team of skilled design and engineering staff are required to design the connections to detailed specifications and to ensure the connections are appropriate and comply with extensive health and safety requirements.

The Group comprises two trading subsidiaries:

  • Fulcrum Infrastructure Services Limited (providing utility infrastructure and connection services); and
  • Fulcrum Pipelines Limited (the licensed asset owner for new gas connections and the gas transporter).

 Chief Executive’s review

In 2016, we successfully delivered on our objectives to drive customer service excellence, improve operational efficiency to reduce costs and grow our pipeline estate. This hard work has delivered a record underlying EBITDA at £5.3 million (2015: £2.2 million) and positive cash generation of £3.8 million before financing activities.

The Group achieved an 8.8% improvement in gross profit margin at 37.6% (2015: 28.8%) in the period. Further to the move to the direct delivery model from 1 April 2015, we have quickly made efficiency improvements in the way our contracts are set up and run. In addition, continued progress has been made in reducing the cost base of the business to ensure that our competitive rates can be sustained in the long term. All costs are subject to rigorous reviews and efficiency savings are continually sought. Overall, overhead levels (excluding exceptional items) have reduced by an incremental £1.0 million (2015: £1.6 million) during the course of the last 12 months. In total, fixed costs of sales plus overheads have reduced from approximately £17 million to £10 million over the past three years.

Safety is paramount in our organisation. Our goal remains for everyone who works with us to return home unharmed at the end of each day, including customers, contractors, employees and the general public. We have improved our recording and investigation of near-misses to ensure that learnings are shared - our employees and contractors are fully empowered to ensure that work is delivered safely.

Trading update

In FY2016, year-on-year revenue increased by £0.8 million or 2.3% to £34.5 million. With the profitable operating platform now established, our focus turns to sales growth. During the period, we simplified our sales approach, combining the sales and design functions into dedicated teams to cover our routes to market: key accounts (including British Gas), major projects, housing and technical sales.

Key accounts

Fulcrum’s sustained emphasis on customer service excellence and listening to what our customers require have improved our customers’ satisfaction ratings and ensured that we have strong levels of repeat revenues. 64% of our business was generated from customers who have used Fulcrum previously. We have set up a dedicated team to support those customers that provide us with high volumes of repeat business. This team is working with our customers to provide tailored services that meet their specific needs.

In November 2015, we announced a 26 month extension to our framework contract with British Gas, a long standing and valuable client of the Group. The framework contract, to provide gas and now electricity connections and metering services to customers in England, Scotland and Wales, runs until January 2018. This underlines Fulcrum’s reputation as a trusted utility services provider.

Major projects

Our ability to deliver significant projects was endorsed with the award of a second prestigious contract with Scotland’s whisky industry. The £4.0 million project to install a 13 kilometre pipeline to link four Speyside distilleries to Scotland’s main gas network has delivered a sustainable, efficient and environmentally friendly energy supply for our clients. Despite the complexity of the project, our dedicated teams completed the work one month ahead of schedule.

Fulcrum has continued to win an array of major new gas, electricity and multi-utility contracts, which include:

  • a £1.0 million electricity contract to install 4 kilometres of high voltage electricity cabling to a new hospital. The award of this contract follows on from the successful delivery of a £0.2 million contract to install the temporary electricity infrastructure into the hospital, on behalf of British Gas Business;
  • the Group’s first contract to deliver infrastructure to a Short Term Operating Reserve (STOR) site. The £0.2 million project was quickly followed by another £0.3 million STOR site contract;
  • the Group’s first biogas connection, the installation of a 1.3 kilometre pipeline to connect a £12.0 million biogas plant to the UK distribution network;
  • a £0.4 million gas infrastructure project for the new development at Royal Albert Dock for London’s third business district; and
  • a £0.2 million dual fuel contract to deliver gas and electricity infrastructure to a new energy centre in Glasgow.

We are confident that major projects present a significant opportunity to grow our sales. Therefore, over the past year, we have doubled the number of business development managers and created two new analyst support roles concentrating on the targeting of large opportunities, all designed to increase our work-winning capability.


Our activity in the housing market has been somewhat limited historically. To penetrate this attractive market, we have created a more cost-effective delivery model for housing and set up a new dedicated team, headed up by an experienced housing sector professional with multi-utility knowledge. We have already secured several significant, multi-utility housing schemes, including:

  • a £0.3 million contract on behalf of Lend Lease to deliver the gas infrastructure to a new residential development in Deptford; and
  • a £0.2 million gas, electricity and water project for a leading housing developer in the North West.

Technical sales

The multi-skilled technical sales team have the expertise to take sales leads from a myriad of sources and convert the opportunities into customer led projects, with their knowledgeable and joined up design and sales approach.

Within this route to market, our web initiated sales continue to gather momentum, increasing by 38% year-on-year to £5.9 million, now 17% of our total Group revenue. In early 2015, we launched FirstGas, a second online brand, aimed at new and less technically experienced customers. Sales have proven to be positive and incremental to the existing offering. Therefore, in line with the Group’s previously stated aim of growing its electricity and dual fuel offering, the Group launched its third online brand, FirstElectricity, in March 2016. Early enquiries and sales are encouraging.

With our established customer base, clearly focused work-winning teams, trusted delivery and market opportunity, we have a robust platform from which to leverage sales growth.


The Group has benefited from the positive impact of an in-house operational delivery model following the transfer in of 99 employees under TUPE on 1 April 2015. We now have direct control of the full operational process from design through to installation across England and Wales. We have successfully transitioned to this branded direct delivery model which has underpinned notable operational efficiencies, benefitting both the customers’ experience and our profitability. The introduction of tablet devices to all teams has enabled field engineers and operatives to maintain real-time project records and offer a more responsive delivery.

Low cost mobile applications have been developed by Fulcrum’s IT team to share work instructions and site surveys, as well as upload health and safety audits directly into the core system. After engaging with our teams and listening to their suggestions, several more tailored applications are planned in the months ahead.

We have also delivered on our strategy to build our multi-utility capability and we now have several in-house teams trained to deliver the recently won electric contracts. This end-to-end, fully branded operating model creates an agile and responsive platform to deliver continued growth through a multi-skilled workforce and customer-focused operation. This model is a key differentiator and further enhances our customer service led, national, broad offering.

The challenge to continuously improve the way we do things has reduced our cost base by an incremental £1.0 million year-on-year which, together with turnaround/transition activities completed in previous financial years, represents a combined cost reduction of £7.0 million over the past three years. In order to maintain competitive advantage, we will continually challenge existing working practices and resources to ensure that the business model is efficient and lean. Our cost of delivery across all functions (direct, indirect and support) will be rigorously and continually tested to drive improved levels of sales orders won and sustainable profitability.


We continue to build our estate of pipeline assets, increasing our owned portfolio of domestic, industrial and commercial assets by £1.9 million in FY2016 to a total net book value of £9.4 million at 31 March 2016. The annualised gas transportation income has grown to £1.2 million and, with the low costs to serve, this annuity income stream represents a secure and profitable element of the Group’s future financial stability.

To accelerate the growth of our asset base and hence increase shareholder value, we have created an Asset Growth Manager role. In addition to Fulcrum owning and operating the assets built by our infrastructure services division, the Asset Growth Manager is approaching other utility infrastructure providers without independent gas transportation licences to acquire the pipelines that they build for a cash consideration. Also, the expansion of housing activity will grow the pipeline estate by using cash to unlock significant domestic asset values on larger sites. We will pursue both of these incremental routes as part of our strategy to further enhance this valuable, long-term future income stream.


The talent and dedication of our employees and co-operation with our customers are our key success factors. It is our people who win new contracts and are responsible for delivering on stakeholders’ expectations. They are also the ones whose behaviour and actions demonstrate our values in practice.

Our enduring commitment to workforce development has been recognised at the prestigious Gas Industry Awards with our Operations Director, Ian Foster, winning Manager of the Year for the role he has played in Fulcrum’s transformation. Training and development continue at pace across the Group – our field engineers have joined the “Leading The Way” leadership development programme; the senior team have received leadership training focused on driving superior performance; and teams are now trained to design electrical installations and install electric cable. Sustained investment will continue to be made to underpin employee engagement and continuous learning. We also actively review and manage our succession plans.

The introduction of Fulcrum’s first Save As You Earn share scheme had a 60% participation rate; our employees are clearly keen to be part of the future value creation.

Going concern

As highlighted in the Financial Review, the Group had net funds at 31 March 2016 of £8.3 million (2015: 5.6 million). Also, the Group has an undrawn revolving credit facility of £4.0 million.

As a matter of course, financial forecasts are regularly prepared and these are reviewed and adopted by the Board. These forecasts are subject to “stress testing” with appropriate sensitivity analysis and scenario planning to ensure that any adverse impact can be managed and mitigated such that the business can continue to operate within its existing financing facilities.

The Group’s forecasts and projections, after taking account of sensitivity analysis of changes in trading performance and corresponding mitigating actions, show that the Group has adequate cash resources for the foreseeable future.

Therefore, after making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.


Fulcrum continues to deliver on its strategy and has made excellent progress over the period. The talent of our people, together with the scalable and profitable operating platform that has been created, have enabled significant and diverse contract wins. We are now striving for sales growth across all of our routes to both the gas and electricity markets and driving a continuous improvement ethos to deliver incremental operating efficiencies. This approach will combine to enhance long-term future profitability and cash generation.
We continue to move forward at pace with confidence for the future as we remain on course to deliver value to all our stakeholders by being the UK’s most trusted utility services partner.


Martin Donnachie
Chief Executive Officer
7 June 2015

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