Vulcan Industries - Fourth Quarter Results

2 May 2023

Vulcan Industries plc

("Vulcan" or the "Company")

Fourth Quarter Results for the Year ended 31 March 2023

Vulcan Industries plc (AQSE: VULC) is pleased to announce its unaudited results for the year ended 31 March 2023.

Principal activity

The Company was established to develop an innovative platform from which to service a global client base. Vulcan's strategy is based on identifying businesses which represent opportunities for operational synergies to ensure shareholder value regardless of prevailing economic conditions."

Review of business and future developments

Since admission, the focus has been to restructure the existing businesses to recover from the financial impact of COVID-19 and lay the foundations to develop the Group going forward. The initial step in this process was the acquisition on 24 March 2022 of the entire share capital of Aftech Limited ("Aftech"). Aftech brings additional complementary areas of fabrication skills and product offering.

With continued operating losses from the legacy businesses placing significant strains on working capital, the board took the strategic decision to dispose of loss making businesses. In March 2022 the Company disposed of its interest in M&G Olympic Products Limited and in the first half of the current year has disposed of IVI Metallics Limited ("IVI") and Orca Doors Limited ("Orca").  In the third quarter the Company disposed of its interest in Time Rainham Limited ("TRR").

Accordingly, the comparative results of the Group have been restated to reflect these disposals.

The financial results for the Group for the year ended 31 March 2023 ("FY23") show continuing revenue of £1,165,000 (FY22: £46,000). The loss before interest, tax, depreciation and amortization is £522,000 (FY22: £1,025,000). After depreciation and amortization of £44,000 (FY22: £nil) and finance costs of £514,000 (FY22: £390,000) and a tax credit of £28,000 (FY22 £nil), the Group is reporting a loss after taxation on continuing activities of £1,052,000 (FY22:1,415,000). As a result of the disposals, the Group is reporting a profit on discontinued activities of £1,508,000 (FY22: loss £2,272,000)

At 31 March 2023, the Group balance sheet shows cash balances of £31,000 (FY22: £69,000) and net debt was £3,146,000 (FY22: £3,964,000). Net Assets at 31 March 2023 were £708,000 (FY22 Net liabilities £3,155,000).

Outlook

Following the disposal of its legacy businesses, Vulcan has been working to extend its portfolio of fabrication activities into the renewable energy sector. On 6 March 2023 the Company announced the acquisition of Forepower Lincoln (250) Limited a 240MW Lithium-ion Battery Storage project which holds a grid connection contract (to connect to the National Grid Infrastructure) and an option to lease a parcel of land for a minimum of 25 years. Vulcan has been engaged with the vendor over the last year to identify and develop a pipeline of Battery Storage opportunities and this acquisition is the initial project in this evolution.  Further projects are expected to be brought into the Vulcan Group in due course.

Notes to the unaudited consolidated financial statements

for the Year ended  31March  2023

1.    General information

Vulcan Industries PLC is incorporated in England and Wales as a public company with registered number 11640409. The address of the Company's registered office is 8th Floor, The Broadgate Tower, 20 Primrose Street, London, EC2A 2EW.

These summary financial statements are presented in Sterling and are rounded to the nearest £'000. which is also the currency of the primary economic environment in which the Company and Group operate (their functional currency).

Basis of accounting

The condensed consolidated financial statements of the Group for the year ended 31 March 2023. which are unaudited and have not been reviewed by the Company's Auditor, have been prepared in accordance with the International Financial Reporting Standards ('IFRS'), and accounting policies adopted by the Group as set out in the annual report for the period ended 31 March 2022 (available at www.vulcanplc.com). The Group does not anticipate any significant change in these accounting policies for the year ended 31 March 2023.

This report has been prepared to comply with the requirements of the Access Rulebook of the AQSE Growth Market. In preparing this report, the Group has adopted the guidance in the Access Rulebook for interim accounts which do not require that the interim condensed consolidated financial statements are prepared in accordance with IAS 34, 'Interim financial reporting'. Whilst the financial figures included in this report have been computed in accordance with IFRSs applicable to interim periods, this report does not contain sufficient information to constitute an interim financial report as that term is defined in IFRSs.

The financial information contained in this report also does not constitute statutory accounts under the Companies Act 2006, as amended. The financial information for the period ended 31 March 2022 is based on the statutory accounts for the year then ended and the income statement has been restated to reflect the disposal of certain subsidiaries in the current period. The Auditors reported on those accounts. Their report was qualified as follows:

Due to the disposal of some of the group's subsidiaries they were unable to obtain sufficient appropriate audit evidence on the following areas:

-       the discontinued operations in the Consolidated Statement of Comprehensive Income relating to M&G Olympic Products Limited:

-       the cut off for the revenue of IVI Metallics Limited: the sales cut off sample for which we did not receive information was £89,000, including post year end sales of £59,000

-       we were appointed subsequent to the year end and were not able to observe the counting of the physical inventory and were unable to verify by alternative means the inventory quantities held at the year end.

The auditors referred to going concern as a key audit matter. They drew attention to note 3 in the financial statements, which shows conditions which indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern. Their opinion was not modified in respect of this matter.

The financial statements have been prepared on the historical cost basis, except for the certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

The principal accounting policies adopted are set out below.

Significant accounting policies

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up for the year ended 31 March 2023. Control is achieved when the Company has the power:

•        over the investee;

•        is exposed, or has rights, to variable returns from its involvement with the investee; and

•        has the ability to use its power to affects its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in profit or loss from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group's accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation.

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 and IAS 19 respectively.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

Goodwill

Goodwill is initially recognised and measured as set out above.

Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, net of discounts, value added taxes and other sales related taxes.

Performance obligations and timing of revenue recognition:

All of the Group's revenue is derived from selling goods with revenue recognised at a point in time when control of the goods has transferred to the customer. This is generally when the goods are collected or delivered to the customer, or in the case of fabrication project work, when the project has been accepted by the customer. There is limited judgement needed in identifying the point control passes: once physical delivery of the products to the agreed location has occurred, the Group no longer has physical possession, usually it will have a present right to payment. Consideration is received in accordance with agreed terms of sale.

Determining the contract price:

The Group's revenue is derived from:

a)     sale of goods with fixed price lists and therefore the amount of revenue to be earned from each transaction is determined by reference to those fixed prices; or

b)    individual identifiable contracts, where the price is defined

Allocating amounts to performance obligations:

For most sales, there is a fixed unit price for each product sold. Therefore, there is no judgement involved in allocating the price to each unit ordered.

There are no long-term or service contracts in place. Sales commissions are expensed as incurred. No practical expedients are used.

Current and deferred tax assets and liabilities are offset when there is a legally enforceable right to set off.

2.    Critical accounting judgements and key sources of estimation uncertainty

In applying the Group's accounting policies, the directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions 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.

Going concern

The directors are confident that the existing debt finance facilities will remain available to the Group and, as demonstrated by equity raised since the period end, that additional sources of finance will be available. The directors, with the operating initiatives already in place and funding options available, are confident that the Group will achieve its cash flow forecasts. Therefore, the directors have prepared the financial statements on a going concern basis. These financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

3.     Discontinued activities

The Company disposed of M&G Olympic products Limited on 30 March 2022, Orca Doors Limited on 18 July 2022, IVI Metallics Limited on 31 July 2022 and Time Rainham Limited on 15 November 2022.

4.     Earnings per share

The Company has issued options over ordinary shares which could potentially dilute basic earnings per share in the future. There is no difference between basic loss per share and diluted loss per share as the potential ordinary shares are anti-dilutive.

5.     Investments

On 6^th March 2023, the Company acquired Forepower Lincoln (250) Limited ("FPL 250").  FPL 250 is a 240MW Lithium-ion Battery Storage project and holds a grid connection contract, and options over land leases with a 25 year term.