TIDMNTQ
RNS Number : 8833B
Enteq Upstream PLC
12 June 2019
Enteq Upstream plc
("Enteq", the "Company" or the "Group")
Final results for the year ended 31 March 2019
AIM traded Enteq Upstream plc, the oil and gas drilling
technology company, today announces its financial results for the
year ended 31 March 2019.
Key features
-- Significant growth in revenue (57%) and adjusted EBITDA(1)
-- Adjusted EBITDA(1) margin at 24%
-- Positive adjusted earnings(2)
-- Growth in both North American and International markets
-- Increased investment in new technologies and rental fleet
Financial metrics
Years ended 31 March:
2019 2018
* Revenue $10.2m $6.5m
* Adjusted EBITDA(1) $2.5m $0.2m
* Post tax loss for the period $0.1m $0.6m
* Adjusted earnings(2) $0.0m $(0.5)m
0.2 cents 1.0 cents
* Post tax loss per share
* Cash balance $11.9m $15.5m
Outlook
-- Current market stability and oil price encourages cautious optimism
-- On-going investment in new technology and rental fleet
continues to create new opportunities in North America
-- New customers poised for increased activity in international markets
-- Strong balance sheet enables further investment opportunities
Martin Perry, CEO of Enteq Upstream plc, commented:
"As a result of the Board's prudent strategy of cash management,
combined with focused investment, Enteq has seen substantial
positive growth and a return to real profitability in the last
year.
The company now has a strong base from which to introduce new
products, build technology partnerships, maintain and grow customer
partnerships and broaden its addressable market.
Enteq is well-placed to find and take advantage of incremental
opportunities in what will remain an essential market sector for
the foreseeable future."
For further information, please contact:
Enteq Upstream plc +44 (0) 1494 618739
Martin Perry, Chief Executive Officer
David Steel, Finance Director
Investec Bank plc (Nomad and Broker) +44 (0) 20 7597 5970
Chris Treneman, Patrick Robb, David Anderson
(1) Adjusted EBITDA is reported profit before tax adjusted for
interest, depreciation, amortisation, foreign exchange movements,
Performance Share Plan charges and exceptional items. See note
3.
(2) Adjusted earnings is reported earnings adjusted for
amortisation, foreign exchange movements and exceptional items. The
March 2019 result is $19k -see note 3.
Combined Chief Executive and Chairman's report
Review of the Year
This year's financial results show improved trading across the
business, with the post tax result now at a breakeven level. There
has been significant growth in both revenue and adjusted EBITDA and
there is a return to a positive adjusted earnings per share.
Revenue increased by 57% from $6.5m in the year to 31 March 2018 to
this year's figure of $10.2m, primarily from increased rental
revenue. Adjusted EBITDA has risen to $2.5m (March 2018: $0.2m) and
represents a margin of 24%. The decrease in cash of $3.6m during
the year is accounted for, primarily, through targeted investment
in technology, engineering and rental assets. This investment has
underpinned this year's growth and will support future growth
opportunities.
The global oil and gas markets have had a relatively stable
year, despite various political pressures and changing
international dynamics. Enteq strives to maintain and increase
market share in this market whilst continuing to invest in
technology and business development to significantly increase the
Group's market presence.
The previous year's transition of all US operations, without any
business interruption, to the facility owned by Enteq in South
Houston, has enabled the management team to focus on refining both
the manufacturing and sales processes.
Investment has continued in the engineering team, both those
based in-house and through the targeted use of industry expert
sub-contractors. A new 'game changing' product line, PowerHop,
which includes patented technology, was launched at the global oil
industry technology show, OTC, in May 2019 and garnered significant
industry interest. PowerHop field trials are expected to commence
later this year.
A UK government backed 'Innovate UK' sponsored project is close
to completion, on time and on budget. This will result in the
launch of a unique, patented, sensor which fulfils the project's
initial brief and enables Enteq to offer increased functionality to
its current and future customer base.
In addition to internal technology development, Enteq has been
successful in negotiating two new technology partnerships during
the year under review. An agreement was put in place with the US
based Well Resolution Technologies Ltd. for integrating their
'At-Bit' Logging While Drilling solution into our existing data
telemetry product. In addition, agreement has been reached with a
Houston based partner, QDC, for an integrated sensor, incorporating
Enteq firmware into a competitive new generation MWD tool. Both
these collaborations and the new products were announced at OTC, in
May 2019.
In North America, Enteq has responded to market conditions by
significantly expanding the size of its kit rental fleet, rising
during the year from 14 to 32 kits. This has enabled capital
constrained service companies to grow their fleet of equipment and
thus establish themselves as strong regional players. This model
has also allowed a number of strong regional directional drilling
companies to re-establish themselves, with Enteq as their primary
MWD technology partner.
Drilling activity in North America has traditionally been highly
focused around the Permian basin in Texas, but during the year
significant growth has also come from new shale oil opportunities,
such as in the Rockies region of Colorado. Enteq's business model
allows regional drilling companies to become active quickly and
successfully in these new shale plays.
The Group's rental model, with the option for the customer to
ultimately purchase the equipment, cements a long-term relationship
between these service companies and Enteq. To date, all equipment
supplied on this basis has remained with the customer, with no
returns, and this model is expected to create on-going demand for
further Enteq technology.
Outside North America, Enteq has accelerated its international
market presence with revenue of approximately $0.9m, up from
approximately $0.5m last year. Contracts for equipment have been
delivered and operations completed in the Far East, Middle East and
in Europe. A number of these operations have been for Geothermal
energy development, a new market sector for Enteq.
During the year a new position of Director of International
Business was created, with the appointee starting in January 2019.
A new international strategic direction has been established to
better promote the Enteq opportunities in the largest potential
markets, China, Saudi Arabia and elsewhere.
Prospects
Subject to any unforeseen macro-economic disruptions, the global
market for oil & gas drilling appears to be in a period of
relative stability, which can only be beneficial to the prospects
for growth for all those operating in this sector.
Enteq is well positioned with both their current and evolving
technologies to support drilling opportunities, wherever they may
be.
Strong business management, protection of the balance sheet in
difficult times, yet willingness to invest in growth potential
gives us confidence that Enteq is well positioned to benefit from
this market stability.
Financial Review
Income Statement
Year to 31 March: 2019 2018
$ million $ million
Revenue 10.2 6.5
Cost of Sales (3.5) (2.2)
Gross profit 6.7 4.3
Overheads (4.2) (4.1)
----------------------------- ---------- ----------
Adjusted EBITDA 2.5 0.2
Depreciation & amortisation (2.7) (0.8)
Other charges (0.2) (0.1)
Ongoing operating loss (0.4) (0.7)
Other exceptional items - (0.1)
Interest 0.2 0.2
----------------------------- ---------- ----------
Loss before tax (0.2) (0.6)
Tax 0.1 -
----------------------------- ---------- ----------
Loss after tax (0.1) (0.6)
============================= ========== ==========
The improvement in the Group's financial results for the year
ended 31 March 2019 arise from the stabilization in both the North
American and International markets. The price of a barrel of West
Texas Intermediate ("WTI") was $65 at the start of April 2018 and
$60 as at 31 March 2019, with an average of $63. In addition, the
price has not dropped below $47 in this 12-month period. This
relative price stability has resulted in the North American rig
count rising from 1,003 at the start of the financial year to 1,025
at the end, with an average of 1,052. There was a steady increase
to 1,083 rigs working at the end of December 2018, with a decline
thereafter to the year end position. As Enteq's revenue is derived
from both rigs being added to customers' fleets and on-going
replacement of equipment during rig operation, the North American
market stability resulted in turnover rising from $6.0m last year
to $9.3m this year. Internationally, the market conditions eased as
more projects were commissioned, resulting in revenue rising from
$0.5m to $0.9m.
The full year gross margin at 65%, was down slightly on last
year's figure of 67% due to a drop in the high margin electronic
component revenue from 55% of last year's total revenue to only 40%
this year. This was combined with an increase in the lower margin
mechanical component revenue from 19% last year to 21% this year.
These effects were countered, to some extent, by a rise in the high
margin rental business (36% of this year's revenue, as opposed to
only 15% last year).
Total overheads, at $4.2m, were virtually unchanged from last
year's figure. This reflected the stability in the headcount
numbers during the year, both starting and finishing the year at 33
posts. Both the size and structure of the manufacturing/engineering
centre, at South Houston, and the UK based head office/engineering
team were unchanged during the year.
The combined depreciation and amortisation charge was
significantly up on the previous year due to the number of kits in
the rental fleet increasing from 14 last year end to 32 this year.
This increase was reflected in the carrying value of the rental
fleet, growing from $2.1m as at 31 March 2018 to $3.4m at the end
of this year.
The "Other charges" shown above relate, primarily, to the
non-cash cost associated with the Performance Share Plan.
Statement of Financial Position
Enteq's net assets at the financial year-end comprised of the
following items:
As at 31 March: 2019 2018
$million $million
Intangible assets 2.4 1.2
Property, plant & equipment 2.3 2.3
Rental fleet 3.4 2.1
Net working capital 4.0 2.5
Cash 11.9 15.5
----------------------------- ---------- ----------
Net assets 24.0 23.6
============================= ========== ==========
The "Intangible assets" represent the value of the on-going
R&D work, carried out by the engineering team and capitalised
to date, less the amortisation relating to the products fully
commercialised (primarily software releases). The increase during
the year to $2.4m relates to the ongoing development of various new
products, including the connection-free communication
controller.
The net book value of property, plant & equipment has
remained at $2.3m due to the increase of $0.1m relating to the
investment in replacing production equipment at South Houston,
being offset by a similar depreciation charge.
The increase in the net book value of the rental fleet reflects
the number of kits rising from 14, as at 1 April 2018, to 32 at the
year-end, as previously mentioned.
The $1.5m increase in net working capital is due, primarily, to
the management's decision to invest $0.7m in inventory relating to
a collaborative development of a seamless "At-Bit" solution, which
is now commercially available; underlying inventory rose by $0.5m
and trade creditors reduced by $0.3m. Trade debtors were virtually
unchanged.
Cash flows
Year to 31 March: 2019 2018
$ million $ million
Adjusted EBITDA 2.5 0.2
Change in net working capital (1.5) 2.6
------------------------------- ------------ -----------
Operational cash generated 1.0 2.8
Investment in rental fleet (3.8) (2.2)
Investment in R&D (1.3) (0.7)
CAPEX (0.2) (0.2)
Equipment disposal proceeds - 0.1
Interest and share issues 0.7 0.4
Net cash movement (3.6) 0.2
Opening cash balances 15.5 15.3
Closing cash balances 11.9 15.5
=============================== ============ ===========
Whilst the Group delivered a much-improved adjusted EBITDA for
the period, the investment in working capital during the period
meant that operational cash generated decreased to $1.0m from $2.8m
as reported last year.
The continuing robustness of the balance sheet enabled further
expansion of our market share through further investment to
increase the number of kits in our rental fleet.
The increase in R&D spend reflects the expansion of the
number of engineering projects. These now include the previously
mentioned development of a new connection-free communication
controller, in addition to the next software upgrade and a number
of other future revenue enhancing projects.
The CAPEX relates to the replacing of various production related
equipment.
Overall, the Group saw a net cash outflow of $3.6m (2018: $0.2m
inflow) reducing the Group's closing cash balance as at 31 March
2019 to $11.9m.
Financial Capital Management
Enteq's financial position continues to be robust. Enteq had no
bank borrowings, or other debt, and had a closing cash position of
$11.9m as at 31 March 2019.
Enteq monitors its cash balances daily and operates under
treasury policies and procedures which are set by the Board.
The financial statements are presented in US dollars as the
Company's primary economic environment, in which it operates and
generates cash flows, is one of US dollars. Apart from its UK based
overhead costs, substantially all other transactions are transacted
in US dollars.
Enteq is subject to the foreign exchange rate fluctuations to
the extent that it holds non-US Dollar cash deposits. The year end
GBP denominated holdings are approximately 1% of total cash
holdings, the same level as last year's.
Annual Report and Accounts
The 2019 Annual Report and Accounts has today been sent to
shareholders and is available on the Company's website,
www.enteq.com.
Annual General Meeting
The Company's Annual General Meeting will be held on 25
September 2019 at 12.00 noon at the offices of Investec Bank plc,
30 Gresham Street, London EC2V 7QP.
Copies of these documents can also be obtained during normal
business hours at the registered office of the company:
The Courtyard
High Street
Ascot
Berks SL5 7HP
David Steel
Finance Director
Enteq Upstream Plc
Consolidated Income Statement
Year to
31 March Year to 31
2019 March 2018
Notes $ 000's $ 000's
Total Total
Revenue 2 10,204 6,460
Cost of Sales (3,546) (2,141)
Gross Profit 6,658 4,319
Administrative expenses before
amortisation (6,952) (4,994)
Amortisation of acquired intangibles 6b (116) (92)
Other exceptional items 3 (7) (57)
Foreign exchange profit on operating
activities 6 48
---------- ------------
Total Administrative expenses (7,069) (5,095)
Operating loss (411) (776)
Finance income 246 175
Loss before tax (165) (601)
Tax 4 67 (3)
Loss for the period (98) (604)
========== ============
Loss attributable to:
---------- ------------
Owners of the parent (98) (604)
========== ============
Loss per share (in US cents): 5
Basic (0.2) (1.0)
Diluted (0.2) (1.0)
Adjusted loss per share (in
US cents): 5
Basic - (0.8)
Diluted - (0.8)
Enteq Upstream Plc
Year to Year to
31 31 March
Consolidated Statement of Comprehensive March 2018
Income 2019
$ 000's $ 000's
Loss for the year (98) (604)
Other comprehensive income for the year:
Items that will not be reclassified subsequently
to profit and loss - -
Items that will be reclassified subsequently
to profit and loss - -
-------------------------------------------------------- ---------- -----------
Total comprehensive income for the period (98) (604)
======================================================== ========== ===========
Total comprehensive income attributable
to:
Owners of the parent (98) (604)
======================================================== ========== ===========
Enteq Upstream Plc
Consolidated Statement of Financial Position
As at 31 As at 31
March 2019 March 2018
Notes $ 000's $ 000's
Assets
Non-current
Goodwill 6a - -
Intangible assets 6b 2,394 1,222
Property, plant and equipment 5,895 4,503
Trade and other receivables 334 238
Non-current assets 8,623 5,963
------------ ------------
Current
Trade and other receivables 2,020 2,104
Inventories 4,512 3,302
Cash and cash equivalents 11,930 15,501
Current assets 18,462 20,907
------------ ------------
Total assets 27,085 26,870
============ ============
Equity and liabilities
Equity
Share capital 1,005 982
Share premium 91,398 91,031
Share based payment reserve 750 910
Retained earnings (69,105) (69,351)
Total equity 24,048 23,572
------------ ------------
Liabilities
Current
Trade and other payables 3,037 3,298
Total liabilities 3,037 3,298
------------ ------------
Total equity and liabilities 27,085 26,870
============ ============
Enteq Upstream Plc
Consolidated Statement of Changes in Equity
Called Share
up based
share Retained Share payment Total
capital earnings premium reserve equity
$ 000's $ 000's $ 000's $ 000's $ 000's
As at 1 April 2018 982 (69,351) 91,031 910 23,572
Issue of share capital 23 - 367 - 390
Share based payment charge - - - 184 184
Transfer of reserves - 344 (344) -
Transactions with owners 23 344 367 (160) 574
Loss for the year - (98) - - (98)
Other comprehensive income
for the year - - - - -
Total comprehensive income - (98) - - (98)
-------- --------- -------- -------- --------
Total movement 23 246 367 (160) 476
As at 31 March 2019 1,005 (69,105) 91,398 750 24,048
======== ========= ======== ======== ========
Called Share
up based
share Retained Share payment Total
capital earnings premium reserve equity
$ 000's $ 000's $ 000's $ 000's $ 000's
As at 1 April 2017 963 (68,747) 90,718 806 23,740
Issue of share capital 19 - 313 - 332
Share based payment charge - - - 104 104
Transactions with owners 19 - 313 104 436
Loss for the year - (604) - - (604)
Other comprehensive income
for the year - - - - -
Total comprehensive income - (604) - - (604)
-------- --------- -------- -------- --------
Total movement 19 (604) 313 104 (168)
As at 31 March 2018 982 (69,351) 91,031 910 23,572
======== ========= ======== ======== ========
Enteq Upstream Plc
Consolidated Statement of Cash Flows
Year to 31 Year to 31
March 2019 March 2018
$ 000's $ 000's
Cash flows from operating activities
Loss for the year (98) (604)
Tax (credit)/charge (67) 3
Net finance income (246) (175)
Gain on disposal of fixed assets (9) (82)
Share-based payment non-cash charges 186 104
Foreign exchange charge (6) (48)
Depreciation and Amortisation
charges 2,691 853
2,451 51
Tax paid - (1)
(Increase)/decrease in inventory (1,210) 64
(Increase)/decrease in trade and
other receivables (14) 1,582
(Decrease)/increase in trade and
other payables (197) 910
Net cash from operating activities 1,030 2,781
------------ ------------
Investing activities
Purchase of Property Plant and
Equipment (213) (236)
Increase in rental fleet assets (3,754) (2,222)
Disposal proceeds of tangible
fixed assets 9 133
Purchase of intangible fixed assets (1,286) (670)
Interest received 246 175
Net cash from investing activities (4,998) (2,995)
------------ ------------
Financing activities
Share issue 391 332
Net cash from financing activities 391 332
------------ ------------
Decrease/(increase) in cash and
cash equivalents (3,577) 118
Non-cash movements - foreign exchange 6 48
Cash and cash equivalents at beginning
of period 15,501 15,335
Cash and cash equivalents at end
of period 11,930 15,501
============ ============
1. BASIS OF PREPARATION
The results for the year ended 31 March 2019 have been prepared
using the accounting policies and methods of computation consistent
with those used in the Group's annual report for the year ended 31
March 2018. The results have also been presented and prepared in a
form consistent with that which will be adopted in the Group's
annual report for the year ended 31 March 2019 and in accordance
with the recognition and measurement requirements of the
International Financial Reporting Standards as adopted by the
European Union.
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 March 2019 and
the year ended 31 March 2018, but is derived from those accounts.
Statutory accounts for 2018 have been delivered to Companies House.
Those for the year ended 31 March 2019 will be delivered following
the Company's Annual General Meeting on 25 September 2019.
The financial information has been extracted from the Group's
Annual Report for the year ended 31 March 2019. The auditors have
reported on these accounts; their reports were unqualified, did not
draw attention to any matters by way of emphasis without qualifying
their report and did not contain statements under s498(2) or (3)
Companies Act 2006. The Group intends to publish its 2019 Annual
Report and Accounts in June 2019.
2. SEGMENTAL REPORTING
For management purposes, the Group is currently organised into a
single business unit, the Drilling Tools
division, which is currently based solely in the USA.
The principal activities of the Drilling Tools division are the
design, manufacture and selling of specialised parts and products
for Directional Drilling and Measurement While Drilling operations
for use in the energy exploration and services sector of the Oil
and Gas industry.
At present, there is only one operating segment and the
information presented to the board is consistent with
the consolidated income statement and the consolidated statement
of financial position. A key measurement used by the board is
Adjusted EBITDA. This reconciliation is included in note 3,
below.
The revenues, net assets and non-current assets of the Group can
be analysed by geographic location (post-consolidation adjustments)
as follows:
Revenues
31 March 31 March
2019 2018
$ 000's $ 000's
North America 9,251 6,017
Rest of the world 953 443
Total Group revenue 10,204 6,460
--------- -------------------
Net Assets
31 March 31 March
2019 2018
$ 000's $ 000's
Europe (UK) 10,315 13,673
United States 13,733 9,899
Total Group net assets 24,048 23,572
--------- ---------------------
Non-current Assets
31 March 31 March
2019 2018
$ 000's $ 000's
Europe (UK) - -
United States 8,623 5,963
Total Group non-current
assets 8,623 5,963
--------- ---------
All of the Group's revenue arises from the sale and rental of
specialised parts and products for Directional Drilling and
Measurement While Drilling operations. The Group had 3 customers
that contributed in excess of 10% of the Group's total sales for
the year (2018: 3). These customers contributed $2,617k, $1,286k
and $1,122k respectively. (2018: $1,371k, $927k and $881k). No
revenue relates to customers based in the UK (2018: none).
3. PROFIT AND LOSS ANALYSIS
The following analysis illustrates the performance of the
Group's activities, and reconciles the Group's loss for the period,
as shown in the consolidated income statement, to adjusted earnings
and adjusted EBITDA.
Adjusted earnings and adjusted EBITDA are presented to provide a
better indication of overall financial performance and to reflect
how the business is managed and measured on a day-to-day basis.
31 March 31 March
2019 2018
$ 000's $ 000's
Loss attributable to ordinary
shareholders (98) (604)
Exceptional items 7 57
Amortisation of acquired intangible
assets (note 6b) 116 92
Foreign exchange movements (6) (48)
--------- ---------
Adjusted earnings 19 (503)
Depreciation charge 2,575 760
Finance income (246) (175)
Performance Share Plan charge 173 138
Tax (credit)/charge (note 4) (67) 3
Adjusted EBITDA 2,454 223
========= =========
The exceptional items can be analysed as follows:
31 March 31 March
2019 2018
$ 000's $ 000's
Severance payments and other
plant closure costs 16 143
Gain on sale of fixed assets (9) (82)
Other - (4)
--------- ---------
Total exceptional items 7 57
========= =========
4. INCOME TAX
Analysis of tax expense
No liability to UK corporation tax arose on ordinary activities
for the period.
Factors affecting the tax charge
The tax assessed for the period is different from the standard
rate of corporation tax in the UK. The difference is explained
below:
31 March 31 March
2019 2018
$ 000's $ 000's
Loss on ordinary activities before tax (165) (601)
--------- ---------
Loss on ordinary activities multiplied
by the
standard rate of corporation tax in
the UK of 19% (2018: 19%): (31) (114)
Effects of:
Items not subject to corporation tax 511 170
Tax losses to carry forward (480) (56)
Texas State Franchise Tax 5 3
Release of previous year over accrual (72) -
for Texas State Franchise Tax
Total income tax (67) 3
========= =========
There has been no deferred taxation recognised in these
financial statements due to the uncertainty surrounding the timing
of the recovery of these amounts. The total losses available to the
Group in the relevant tax jurisdictions are as follows: UK $0.7m;
United States $15.7m (2018: UK $1.7m; United States $15.9m). There
were no significant deferred tax liabilities.
5. EARNINGS PER SHARE AND DIVIDS
Basic earnings per share
Basic earnings per share is calculated by dividing the loss
attributable to ordinary shareholders for the year of $98k (31
March 2018: loss of $604k) by the weighted average number of
ordinary shares in issue during the year of 63,297k (31 March 2018:
61,616k).
Adjusted earnings per share
Adjusted earnings per share is calculated by dividing the
earnings attributable to ordinary shareholders, excluding
exceptional items, amortisation of intangible assets and foreign
exchange profits or losses for the year of a profit of $19k (31
March 2018: loss of $503k), by the weighted average number of
ordinary shares in issue during the year of 63,297k (31 March 2018:
61,616k).
As the Group is loss making, any potential ordinary shares have
the effect of being anti-dilutive. Therefore, the diluted EPS is
the same as the basic EPS. As the year end share price is below the
weighted average option price of all the options issued, the
adjusted diluted EPS is the same as adjusted EPS.
The adjusted diluted earnings per share information are
considered to provide a fairer representation of the Group's
trading performance. A reconciliation between basic earnings and
adjusted earnings is shown below.
March 2019: EPS Weighted
average number Per-share
Earnings of shares amount
$ 000's 000's US cents
Loss attributable to ordinary
shareholders (98) 63,297 (0.2)
Exceptional items 7
Amortisation of acquired intangible
assets 116
Foreign exchange movements (6)
Adjusted profit attributable
to ordinary shareholders 19 63,297 -
========== =============== =========
March 2018: EPS Weighted
average number Per-share
Earnings of shares amount
$ 000's 000's US cents
Loss attributable to ordinary
shareholders (604) 61,616 (1.0)
Exceptional items 57
Amortisation of acquired intangible
assets 92
Foreign exchange movements (48)
Adjusted loss attributable to
ordinary shareholders (503) 61,616 (0.8)
========== =============== =========
During the year Enteq Upstream Plc did not pay any dividends
(2018: nil).
6. INTANGIBLE ASSETS
a) Goodwill
$ 000's
Cost:
As at 1 April 2018 and as
at 31 March 2019 19,619
--------
Impairment:
As at 1 April 2018 and as
at 31 March 2019 19,619
--------
Net Book Value:
--------
As at 1 April 2018 and as -
at 31 March 2019
========
b) Other Intangible Assets
Developed IPR&D Brand Customer Non- compete Total
technology technology names relationships agreements
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
Cost:
As at 1 April 2018 12,676 8,164 1,240 20,586 5,931 48,597
Capitalised in
period 147 1,141 - - - 1,288
------------ ------------ -------- --------------- ------------- --------
As at 31 March
2019 12,823 9,305 1,240 20,586 5,931 49,885
------------ ------------ --------
Amortisation/Impairment:
As at 1 April 2018 12,510 7,108 1,240 20,586 5,931 47,375
Charge for the
year 116 - - - - 116
As at 31 March
2019 12,626 7,108 1,240 20,586 5,931 47,491
------------ ------------ -------- --------------- ------------- --------
Net Book Value:
------------ ------------ -------- --------------- ------------- --------
As at 1 April 2018 165 1,057 - - - 1,222
============ ============ ======== =============== ============= ========
As at 31 March
2019 197 2,197 - - - 2,394
============ ============ ======== =============== ============= ========
Developed IPR&D Brand Customer Non- compete Total
technology technology names relationships agreements
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
Cost:
As at 1 April 2017 12,676 7,495 1,240 20,586 5,931 47,928
Capitalised in
period - 669 - - - 6,769
------------ ------------ -------- --------------- ------------- --------
As at 31 March
2018 12,676 8,164 1,240 20,586 5,931 48,597
------------ ------------ --------
Amortisation/Impairment:
As at 1 April 2016 12,418 7,108 1,240 20,586 5,931 47,283
Charge for the
year 92 - - - - 92
As at 31 March
2018 12,510 7,108 1,240 20,586 5,931 47,375
------------ ------------ -------- --------------- ------------- --------
Net Book Value:
------------ ------------ -------- --------------- ------------- --------
As at 1 April 2017 258 387 - - - 645
============ ============ ======== =============== ============= ========
As at 31 March
2018 165 1,057 - - - 1,222
============ ============ ======== =============== ============= ========
The main categories of Intangible Assets are as follows:
Developed technology:
This is technology which is currently commercialised and
embedded within the current product offering.
IPR&D technology:
This is technology which is in the final stages of field
testing, has demonstrable commercial value and is expected to be
launched within the foreseeable future.
Brand names:
The value associated with the various trading names used within
the Group.
Customer relationships:
The value associated with the on-going trading relationships
with the key customers acquired.
Non-compete agreements:
The value associated with the agreements signed by the Vendors
of the acquired businesses not to compete in the markets of the
businesses acquired.
Goodwill and Impairment
The Group tests goodwill and other intangible assets annually
for impairment. The impairment test carried out on the balances as
at 31 March 2019 indicated that there was no impairment of the full
carrying value of both goodwill and intangible assets.
There is deemed to be just one cash generating unit ("CGU")
within the Company. In previous years there were deemed to be two,
but from a financial & operational perspective both US
locations are now being run as one unit.
The recoverable amount of the CGU is determined from value in
use calculations. The key assumptions for the value in use
calculations are those regarding the future revenues, discount
rates, growth rates and expected changes to selling prices and
direct costs during the period. Management estimates discount rates
using pre-tax rates that reflect current market assessment of the
time value of money and the risks specific to the CGU. The growth
rates are based on management forecasts for the five years to March
2024. Cash flow forecasts are prepared from the most recent
financial plans approved by the Board.
The forecasts assume annual growth rates between 1% and 20%
until 2024 and 3% thereafter in the long term. These long-term
growth rates do not exceed the long-term average growth rates for
the industry as a whole.
The pre-tax rate used to discount cash flow forecasts is 13.5%
(2018: 13.6%). Management have based this rate on the following
factors: a Risk Free Rate of 3.0%; a levered equity beta of 1.5; a
market risk premium of 5.5%; a small cap premium of 3.8% and an
implied cost of debt of 4.5%.
Intangible assets
Any intangible assets acquired during the year represents their
fair value at the date of acquisition.
Amortisation
All categories of intangible assets, apart from the Goodwill and
the IPR&D technology, are being amortised over their respective
useful lives, on a straight-line basis. The remaining amortisation
period of the intangible assets is between 26 and 34 months.
7. GOING CONCERN
After considering the current financial projections of the Group
and taking into account the cash needs of the business and
availability of funds, the Directors have a reasonable expectation
that the group has adequate resources to continue its operations
for the foreseeable future. For this reason, they continue to adopt
a "going concern" basis in preparing the Annual Report.
8. RESPONSIBILITY STATEMENT OF THE DIRECTORS
To the best of the knowledge of the Directors (whose names and
functions are set out below), the preliminary announcement has been
prepared using accounting policies and methods of computation
consistent with those used in the Group's annual report for the
year ended 31 March 2018 and adopted for the financial year ended
31 March 2019, gives a true and fair view of the assets,
liabilities, financial position and profit for the Company and the
undertakings included in the consolidation taken as a whole;
and
Pursuant to Disclosure and Transparency Rules, Chapter 4, the
Directors' Report of the Company's annual report will include a
fair review of the development and performance of the business
taken, together with a description of the principal risks and
uncertainties faced by the business.
Executive Directors
Martin Perry Chief Executive Officer
David Steel Finance Director
Non-Executive Directors
Iain Paterson Chairman
Robin Pinchbeck
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
FR LLFFDRSILLIA
(END) Dow Jones Newswires
June 12, 2019 02:00 ET (06:00 GMT)
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