Vulcan Industries Plc - Interim Results for the 6 Months ended 30 September 2023

22 December 2023

Vulcan Industries plc

(“Vulcan” or the “Company”)

Interim Results for the 6 Months ended 30 September 2023

Vulcan Industries plc (AQSE: VULC) is pleased to announce its unaudited interim results for the 6-month period ended 30 September 2023.

Principal activity

Vulcan seeks to acquire and consolidate industrial and renewable SMEs and projects for value and to enhance performance in part through group synergies, but primarily by unlocking growth which is not being achieved as a standalone private company.

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. On 6 March 2023, the Company broadened its activities into the energy sector with the acquisition of the entire share capital of Forepower Lincoln (250) Limited (“FPL(250)”). FPL(250) is a 248 MW Battery Energy Storage System (“BESS”) project, currently seeking formal planning consent.

During the period under review, early stage project planning was progressed, and funding alternatives explored.

COVID-19 had a significant impact on the financial performance of the Group since admission. The results for the years ended 31 March 2021 and 31 March 2022, reflected the impact of various lock downs and the subsequent challenging market conditions. A strategic review, lead the board to conclude that, in order to lay firm foundations for future growth, it was necessary to dispose of the loss making businesses. M&G Olympic Products Limited was disposed of in March 2022 and both Orca Doors Limited (“Orca”) and IVI Metallics Limited (“IVI”) were disposed of in July 2022. Time Rainham Limited (“TRR”) was disposed of in November 2022.

Consequently, the results for Orca, IVI and TRR are disclosed as discontinued activities and the comparatives  have been restated accordingly. The financial results for the Group for the six months ending 30 September 2023, show a fall in continuing revenue to £562,000 (2022: £695,000) and a fall in the continuing loss before interest, tax, depreciation and amortisation to £178,000 (2022: £215,000). After continuing depreciation and amortization of £19,000 (2022: £21,000) and continuing finance costs of £178,000 (2022: £217,000), the Group is reporting a reduced loss before taxation on continuing activities of £375,000 (2022: £453,000). The disposals of Orca, IVI and TRR generated a profit on discontinued activities of £nil (2022: profit £1,177,000) after reporting a loss after tax to the date of disposal of £nil (2022: £196,000). The reported loss after tax for the Group is £375,000 (2022: Profit £724,000).

At 30 September 2023, the Group balance sheet shows net assets of £153,000 (2022: net liabilities £2,089,000).

Outlook

The disposals of the loss making legacy businesses of Orca, IVI and TRR during the year ended 31 March 2023 added significant benefit to the Group balance sheet and stemmed continued cash outflows. During the period, the Group has continued to lay the foundations for its future development. The acquisition of the FPL(250) project has broadened the sectors of Group activities. As announced on 25 October 2023, the Company has disposed of 49.9% of its holding in FPL (250) in order to fund the development of the project. Progress has been made in the planning process and further announcements will be made once expected milestones are achieved. The development phase of the project offers potential to expand the fabrication activities of Aftech. In addition there is a strong pipeline of further BESS and other opportunities which the Company will seek to bring into the Group in due course.

*

Notes to the unaudited consolidated financial statements

for the 6-month period ended 30 September 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 6 months ended 30 September 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 2023 (available at www.vulcanplc.com). The Group does not anticipate any significant change in these accounting policies for the year ended 31 March 2024.

This interim 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 2023 is based on the statutory accounts for the year then ended. The Auditors reported on those accounts.

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 period ended 30 September 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 financing set out in note 7 will remain available to the Group and 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.        Finance costs

4.        Discontinued activities

The Company disposed of Orca Doors Limited on 18 July 2022, IVI Metallics Limited on 31 July 2023 and Time Rainham Limited on 8 November 2022.

5.        Earnings per share

The Company has issued options and warrants 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.

6.        Other intangible assets

Identified intangible assets arising on acquisition comprise; marketing related assets such as brands and domain names; customer related assets such as customer relationships, lists and existing order books. These are amortised, depending upon the nature of the asset and the business acquired over 1 to 10 years on a straight-line basis.

Forepower Lincoln (250) Limited is a 248MW Battery Energy Storage System Project (“BESS”) which was acquired on 6 March 2023. The value at 31 March 2023 represents the project costs incurred by FPL(250) together with a fair value adjustment on acquisition of £2.6 million, being the consideration paid by the company. The fair valuation adjustment reflects a discount from comparable market values for similar projects to take into account the early stage of development of the project. On 25 October 2023, the Company disposed of 49.9% of its holding in FPL (250) in order to fund the development of the project and value is expected to be generated as the project moves through the planning process and obtains a firm connection date to the national grid. Further uplifts in value are expected as project mile-stones are achieved.

7.        Borrowings

The convertible loan note has a coupon of 5%. The lender has the right to convert the outstanding principal into ordinary share of the Company at a price of 1p per share. In the event that the lender does not exercise its conversion rights by 30 June 2025, the loan shall become immediately repayable by the Company.

Other loans falling due in more than one year of £1,854,000 (HY22 £1,854,000) are secured by means of a debenture and chattels mortgage. The loans mature in April and July 2025. The loans bear an interest rate of 18% per annum.

Following the disposal of IVI Metallics Limited and its subsequent administration, pursuant to the cross guarantee, HSBC issued a final demand for repayment for the outstanding principal under its CBIL. The Company is in negotiations with the bank to reschedule the loan. Pending the outcome, the outstanding capital is classified as falling due within one year.

The factoring facilities are secured on certain trade receivables. There is a factoring charge of 1% of the Gross debt and a discount rate of 5% above bank base rate on net advances. The agreement provides for 3 months’ notice by either party and certain minimum fee levels.

Other loans falling due in less than one year of £45,000 (HY22 £nil) are secured by means of a debenture over the assets of Forepower Lincoln (250) Limited.  The Loan is interest free.

Reconciliation to cash flow statement

8.      Share capital

9. Post balance sheet events

On 25 October 2023, the Company disposed of 49.9% of its holding in FPL (250) in order to fund the development of the BESS project.