Martin Harrison, Chief Financial Officer

Financial Review

Significant improvement in profitability and cash generation

In conjunction with the Chairman’s Statement and the Strategic Report, this report provides further information on key aspects of the financial position of the Group.

The financial results for the year to 31 March 2016 reflect another excellent year for our business. We successfully integrated an end-to-end, fully branded operating model and delivered associated operational efficiencies; secured the new British Gas contract to 2018; continued to challenge and reduce the overhead levels and simultaneously generated a positive cash inflow. These actions combined to improve the profit before tax by £3.7 million to £4.3 million (2015: £0.6 million).


Revenue improved by £0.8 million or 2.3% to £34.5 million (2015: £33.7 million) including £4.0 million for the Speyside distillery project. Revenues from infrastructure services amounted to £33.4 million (2015: £32.9 million), and £1.1 million (2015: £0.8 million) from pipeline operations.

Profit and performance

Gross profit is up by £3.3 million to £13.0 million (2015: £9.7 million), with the gross profit margin increasing by 8.8% to 37.6% (2015: 28.8%) benefiting from the efficiencies gained by changing the project delivery operating model and ongoing selective bidding.

A sustained focus on continuous improvement and changes to the operating model have delivered incremental overhead savings over the period, whilst simultaneously investing in our work-winning approach.

Share based payment charges of £0.3 million (2015: £0.1 million) associated with the Group’s equity based option schemes were booked in the year. During FY2016, the previous schemes in operation achieved the performance criteria and the full scheme charges were accelerated to reflect this fact. New schemes were introduced in March 2016 and had minimal impact on the FY2016 charge.

There was a minimal exceptional charge in the year compared to £0.5 million in the prior year. Exceptional items relate to the costs associated with changing the operating model and reassessment of dilapidations costs.

Underlying EBITDA for the period has more than doubled to £5.3 million (2015: £2.2 million) and profit before tax has increased by £3.7 million to £4.3 million (2015: £0.6 million), a record for the Group. 

Earnings per share

Basic earnings per share from continuing operations, before charging exceptional items, was 3.1p (2015: 1.8p), significantly up on the prior year. On a statutory basis, the diluted basic profit per ordinary share from continuing operations was 2.7p (2015: 1.6p).


During the year, the Company paid a maiden dividend for the full financial year 2015 of 0.4p per share and a FY2016 interim dividend of 0.3p per share. Total cash outflow in respect of dividends was £1.1 million (2015: £nil).

The Board remains confident in the ongoing cash generation for the business and has proposed a final dividend, subject to shareholder approval at the Annual General Meeting, of 0.6p per share (2015: 0.4p per share) producing a total dividend for the year of 0.9p per share (2015: 0.4p per share).

This final dividend is expected to be paid on 28 October 2016 to shareholders on the register on 30 September 2016 with an ex-dividend date of 29 September 2016.
Cash generated by infrastructure services, combined with the financial security of a growing pipeline asset base, provides confidence in the sustainability and growth of future dividends.


Deferred tax assets totalling £3.2 million have been recognised at 31 March 2016 (2015: £2.7 million). £0.7 million was utilised against the Group’s taxable profits of £3.6 million and an additional £0.5 million of deferred tax asset was recognised, after consideration of future levels of profitability. The total accumulated losses brought forward from prior periods amounted to approximately £21.4 million.

Deferred tax liabilities totalling £0.7 million have been recognised at 31 March 2016 (2015: £0.6 million) in respect of the revaluation.

Tangible assets

Capital expenditure for the period amounted to £2.0 million (2015: £1.7 million), principally in respect of the addition to pipeline assets, £1.9 million (2015: £1.6 million).

Cash generation

With the move to the direct delivery model during the year, a new supply chain function was swiftly established and successfully integrated. Working capital has been tightly managed throughout the period and produced a positive operating cash flow from trading activities of £3.8 million (2015: £0.8 million).
At 31 March 2016, the Group had net funds of £8.3 million (2015: £5.6 million), a £2.7 million increase against the prior period, after the addtions to our pipeline estate and supply chain integration.

Bank facilities

In November 2015, the Group agreed a new (undrawn) three year revolving credit facility for £4.0 million with the Group’s bankers, Lloyds Banking Group, to replace the previous (undrawn) invoice discounting facility. The cash at bank and added financial security with the revolving credit facility both position the Group with sufficient funds to facilitate our growth plans and adequate access to cash to cover its contractual obligations.
The revolving credit facility remains undrawn and the Group has complied with all of the associated financial covenants.

Balance sheet

Total net assets at 31 March 2016 were £5.8 million (2015: £1.1 million) and included intangible assets of £2.6 million (2015: £2.8 million).

Financial risks

The main financial risks faced by the Group are credit risk and liquidity risk. The Directors regularly review and agree policies for managing these risks.
Credit risk arises from cash and cash equivalents and credit exposure to the Group’s customers. Over half of the Group’s customers pay in advance of works commencing, with the remaining profile consisting of established large businesses. It is considered that the failure of any single counterparty would not materially impact the financial wellbeing of the Group, other than one customer, for which the risk of failure is considered to be minimal based on current market conditions and performance.

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Board is responsible for ensuring that the Group has sufficient liquidity to meet its financial liabilities as they fall due without incurring unacceptable losses or risking damage to the Group and does so by monitoring cash flow forecasts and budgets. The Group holds a combination of short and medium-term deposits and a £4.0 million revolving credit facility committed to November 2018. These cash deposits and committed facilities are deemed to be sufficient to meet projected liquidity requirements.

Martin Harrison
Chief Financial Officer
2 June 2015

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