15 January 2021
Vulcan Industries plc
(“Vulcan” or the “Company”)
Audited Results
Vulcan Industries plc (AQSE: VULC) is pleased to announce its audited results for the period from its incorporation on 24 October 2018 to 31 March 2020. These results supersede the unaudited preliminary results announced on 29 December 2020. Reported revenue is £5,670,000 and the reported loss after tax is £3,194,000 following final audit adjustments as compared to the preliminary results which reported revenue of £5,742,000 and a loss of £2,962,000.
This period pre-dates the company listing on Aquis on 1st June 2020. The preparations for, and audit of the financial statements have been severely impacted by a series of local and regional lockdowns due to COVID-19.
The full annual report is available on the Company’s website. A further announcement will be made when the annual report together with a notice for the Annual General Meeting is sent to shareholders.
The Company will issue its interim results for the 6 months to 30 September 2020 on 18 January 2021.
Principal activity
The Company was established to develop a precision engineering group of companies, manufacturing and fabricating products for a global client base. The acquisition strategy is based on establishing targets that represent opportunities for synergies, helping to streamline existing operations and contributing to centralised purchasing, supply chain and operational savings.
Review of business and future developments
In the period under review the Company completed four acquisitions and a fifth acquisition was announced on 21 October 2020. In line with the Company’s buy and build strategy, these acquisitions have been accounted for under IFRS 3 ‘Business Combinations’, using acquisition accounting.
On 1 June 2020, the entire share capital of the Company was admitted to trading on the Aquis Exchange Growth Market (“AQSE”). In conjunction with the Admission, the Company raised £746,500 gross, £508,000 after expenses relating to the admission.
The financial results for the Group for the 18-month period from incorporation to 31 March 2020, show revenue of £5,670,000 and loss before interest, tax depreciation and amortization £2,011,000. After depreciation and amortization of £561,000 and finance costs of £622,000 the Group is reporting a loss after taxation of £3,194,000. Of this £1,459,000 relates to central costs, including professional fees of £399,000 in respect of listing expenses and acquisition costs, and £431,000 of finance costs. Cash balances at 31 March 2020 were £54,000 and net debt was £3,668,000.
At 31 March 2020, the Group balance sheet shows net liabilities of £1,302,000. Since the period end to the date of this report, the Company has raised new equity of £2,507,000 before expenses and drawn down on a CBIL facility of £905,000.
Outlook
Activity in the first quarter of the current financial year was severely impacted by the initial Covid 19 lockdown. Nonetheless M&G Olympic Products Limited (“M&G”) operated, albeit at reduced levels, throughout the period and the remaining operations resumed activity towards the end of June 2020. By the end of the second quarter, activity levels were ahead of internal forecasts made at the time of admission to AQSE. This progress has continued into the third quarter.
The acquisition of Romar Process Engineering Limited, on 21st October 2020, is the first since admission. It brings additional breadth to our fabrication capabilities and offers opportunities for manufacturing synergies and overhead efficiencies.
The Company has identified potential further acquisition opportunities and will make further announcements as any negotiations progress. The board are now focused on raising additional equity to strengthen the balance sheet and to fund the cash component of future acquisition consideration.
| Consolidated Statement of Comprehensive Income | |||||
|
Period 24 October 2018 to 31 March 2020 | |||||
| Note | £’000 | ||||
| Revenue | 5,670 | ||||
| Cost of sales | (4,627) | ||||
| Gross profit | 1,043 | ||||
| Operating expenses | (3,007) | ||||
| Other gains and losses | 5 | (608) | |||
| Finance costs | 6 | (622) | |||
| Loss before tax | (3,194) | ||||
| Income tax | - | ||||
| Loss for the period attributable to owners of the Company | (3,194) | ||||
| Other Comprehensive Income for the period | - | ||||
| Total Comprehensive Income for the period attributable to owners of the Company | (3,194) | ||||
| Earnings per share | |||||
| - Basic and Diluted earnings per share (pence) | 7 | (1.82) | |||
| Consolidated Statement of Financial Position | ||||||
| Note | At 31 March 2020 | |||||
| £’000 | ||||||
| Non-current assets | ||||||
| Goodwill | 8 | 1,271 | ||||
| Other intangible assets | 8 | 841 | ||||
| Property, plant and equipment | 9 | 484 | ||||
| Right of use assets | 10 | 1,086 | ||||
| Total non-current assets | 3,682 | |||||
| Current assets | ||||||
| Inventories | 357 | |||||
| Trade and other receivables | 1,457 | |||||
| Cash and bank balances | 54 | |||||
| Total current assets | 1,868 | |||||
| Total assets | 5,550 | |||||
| Current liabilities | ||||||
| Trade and other payables | (3,092) | |||||
| Lease liabilities | (317) | |||||
| Borrowings | 11 | (832) | ||||
| Total current liabilities | (4,241 | |||||
| Non-current liabilities | ||||||
| Lease liabilities | (748) | |||||
| Borrowings | 11 | (1,825) | ||||
| Deferred tax liabilities | (38) | |||||
| Total non-current liabilities | (2,611) | |||||
| Total liabilities | (6,852) | |||||
| Net liabilities | (1,302) | |||||
Equity | ||||||
| Share capital | 12 | 80 | ||||
| Share premium account | 12 | 1,812 | ||||
| Retained earnings | (3,194) | |||||
| Total equity attributable to the owners of the company | (1,302) | |||||
| Consolidated statement of changes in equity |
Share Capital | Share Premium | Retained earnings | Total Equity | |
| £’000 | £’000 | £’000 | £’000 | ||
| At 24 October 2018 | - | - | - | - | |
| Loss for the period | - | - | (3,194) | (3,194) | |
| Other comprehensive income for the period | - | - | - | - | |
| Total Comprehensive income for the period | - | - | (3,194) | (3,194) | |
| Transactions with shareholders | |||||
| Issue of shares | 80 | 1,812 | - | 1,892 | |
| Total transactions with shareholders for the period | 80 | 1,812 | - | 1,892 | |
| At 31 March 2020 | 80 | 1,812 | (3,194) | (1,302) |
| Consolidated Statement of Cash Flows | Period 24 October 2018 to 31 March 2020 | ||||
| Note | £’000 | ||||
| Loss for the period | (3,194) | ||||
| Adjusted for: | |||||
| Finance costs | 622 | ||||
| Depreciation of property, plant and equipment | 153 | ||||
| Depreciation of right of use assets | 281 | ||||
| Amortisation of intangible assets | 126 | ||||
| Loss on disposal of property plant and equipment | 12 | ||||
Operating cash flows before movements in working capital | (2,000) | ||||
| Decrease in inventories | 134 | ||||
| Increase in trade and other receivables | (237) | ||||
| Increase in trade and other payables | 1,777 | ||||
| Cash used in operating activities | (326) | ||||
| Investing activities | |||||
| Proceeds on disposal of property, plant and equipment | 4 | ||||
| Purchases of property, plant and equipment | (36) | ||||
| Acquisition of subsidiary net of cash acquired | 13 | (908) | |||
| Net cash used in investing activities | (940) | ||||
| Financing activities | |||||
| Interest paid | (622) | ||||
| Proceeds from loans and borrowings | 2,414 | ||||
| Repayment of loans and borrowings | (240) | ||||
| Repayment of lease liabilities | (324) | ||||
| Proceeds on issue of shares | 92 | ||||
| Net cash from financing activities | 1,320 | ||||
| Net increase in cash and cash equivalents | 54 | ||||
| Cash and cash equivalents at beginning of year | - | ||||
| Effect of foreign exchange rate changes | - | ||||
| Cash and cash equivalents at end of year | 54 | ||||
Notes to the unaudited consolidated financial statements
for the period ended 31 March 2020
1. General information
Vulcan Industries PLC was incorporated in England and Wales as a public company on 24 October 2018 with registered number 11640409. The address of the Company’s registered office is 8th Floor, The Broadgate Tower, 20 Primrose Street, London, EC2A 2EW
On 1 June 2020, the entire issued share capital of the Company was admitted to trading on the Aquis Stock Exchange Growth Market (AQSE Growth market).
These financial statements are extracted from the audited financial statements which have been posted on the Company’s web site and do not constitute statutory accounts.
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).
2. Adoption of new and revised Standards
New and amended IFRS Standards that are effective for the current year
Impact of initial application of IFRS 16 Leases
In the current period, the Group has applied IFRS 16 Leases (as issued by the IASB in January 2016) that is effective for annual periods that begin on or after 1 January 2019.
The Company was incorporated on 24 October 2018 and has no leases. The first acquisition was on 6 February 2019. In preparing the Company accounts IFRS 16 was adopted on incorporation and in preparing the Group accounts the impact of the adoption of IFRS 16 was reflected in the statement of financial position of each subsidiary at the date of acquisition. Consequently, there is no impact on the Group financial statements from the adoption of IFRS 16. Details of the Group’s accounting policy for leases are set out in note 3.
3. Significant accounting policies
Going concern
The Group has prepared forecasts covering the period of 12 months from the date of approval of these financial statements. These forecasts are based on assumptions including, inter alia, that there are no further significant disruptions due to COVID-19 to the supply of input materials or the ability to maintain operating capability in order to meet its projected sales volumes and that key assumptions are achieved, such as forecast volumes, selling prices and budgeted cost reductions. They further take into account working capital requirements and currently available borrowing facilities.
These forecasts show that the Group is projected, in the short term, to continue to experience net cash outflows rather than inflows and is contingent on securing additional funding either through additional loan facilities or through raising cash through capital transactions to remain a going concern.
The Group’s focus is on continued improvements to operational performance of the acquisitions made during the period with an emphasis on volume growth to increase gross margins and synergies resulting in cost reductions. As disclosed in note 14, on 1 June 2020 the Company was admitted to trading on the AQSE Growth Market. This has already facilitated the ability of the Company to raise new equity. The acquisition of Romar Process Engineering Limited is expected to immediately contribute positively to the Group’s cashflow. Additional acquisitions are under review.
COVID-19: The Group does not anticipate any planned closures of sites or cessation of revenues. However, the future impacts of COVID-19 are inherently unknown and therefore a sensitised version of the Group’s forecasts have been prepared which both increases the shortfall against pre-existing facilities and shortens the timing before a shortfall arises.
As set out in notes 11, the Group is funded by a combination of short and long-term borrowing facilities. Following the period end, the loans falling due within one year were consolidated into a convertible loan note that now falls due in March 2022. The factoring facility, of which £243,000 was fully drawn at 31 March 2020, may be withdrawn with 6 months’ notice.
Based on the above, whilst there are no contractual guarantees, the directors are confident that the existing financing 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.
Nonetheless, the forecasts show that the Group requires further funding to meet its commitments as they fall due and in addition to this the Group is reliant on maintaining its existing borrowings. If the Group’s forecasts are adversely impacted by COVID 19 or other factors then the Group may require further funding earlier than expected. These conditions and events indicate the existence of material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern and the Group may therefore be unable to realise their assets and discharge their liabilities in the ordinary course of business. These financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.
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 31 March 2020. 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 period 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 (both tangible and intangible) 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.
When the consideration transferred by the Group in a business combination includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.
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.
Leases
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
• The amount expected to be payable by the lessee under residual value guarantees;
• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
• Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.
The Group did not make any such adjustments during the period presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37 ‘Provisions, Contingent liabilities and Contingent assets’. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the ‘Property, Plant and Equipment’ policy.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs.
The Group has applied IFRS 16 using the cumulative catch-up approach. As the Company has no leases and it is the first period since incorporation that Company and Group accounts are being presented, any impact of the initial adoption of IFRS 16 is included in the pre-acquisition reserves of the relevant subsidiary and in the goodwill arising on acquisition.
Property, plant and equipment
Plant, machinery, fixtures and fittings are stated at cost less accumulated depreciation and accumulated impairment loss.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method or reducing balance methods, on the following bases:
| Plant and machinery | 10 per cent – 25 per cent per annum |
| Fixtures and fittings | 10 per cent – 30 per cent per annum |
| Motor Vehicles | 20 per cent – 25 percent per annum |
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average cost method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
4. Critical accounting judgements and key sources of estimation uncertainty
In applying the Group’s accounting policies, which are described in note 3, 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.
Other intangible assets
Identified intangible assets arising on acquisition are disclosed in note 8 and comprise; marketing related assets such as brands and domain names; customer related assets such as customer relationships, lists and existing order books.
Carrying value of goodwill, other intangible assets and property plant and equipment
Impairment reviews for non-current assets are carried out at each balance sheet date in accordance with IAS 36, Impairment of assets. Reported losses in the subsidiary companies, for the period since acquisition, were considered to be indications of impairment and a formal impairment review was undertaken.
The impairment reviews are sensitive to various assumptions, including the expected sales forecasts, cost assumptions, capital requirements, and discount rates among others. The forecasts of future cash flows for each subsidiary were derived from the operational plans in place. Real prices were assumed to remain constant at current levels.
Discount rate: The Group’s borrowings have a current nominal rate of interest ranging from 5% to 18% per annum. It is intended to refinance the loan at 18% at more reasonable long-term rates. The real rate assumed in these forecasts is estimated to be 10%, a blended rate, taking into account the timing required to arrange the refinancing.
Sensitivities were applied to each forecast. In order for a potential impairment to arise, either to goodwill and identifiable intangible assets arising on acquisition or to non-current assets in the subsidiaries, forecast sales volumes would have to fall by 4% to 15%. The forecasts did not indicate an impairment when a discount rate of 18% was applied.
Receivables
In applying IFRS 9 the directors make a judgement in assessing the Group’s exposure to credit risk. As it is the first year of trading for certain subsidiaries, there is no history on which to base the allowance for expected credit losses on trade receivables. The Group has recognised a loss allowance of 100 per cent against all receivables over 120 days past duewhere historical experience has indicated that these receivables are generally not recoverable. Certain contracts are subject to contractual retentions with terms up to 2 years that are expected to be recoverable. Provision for expected losses on retentions are made on a contract by contract basis. The allowance for expected credit losses follows an internal assessment of customer credit worthiness and an estimate as to the timing of settlement. In addition, the directors have assessed the recoverability of other receivables on a case by case basis.
5. Other gains and losses
| Period 24 October 2018 to 31 March 2020 | ||||||
| £’000 | ||||||
| Listing expenses | 243 | |||||
| Acquisition costs | 156 | |||||
| Loss allowance on trade receivables | 157 | |||||
| Other | 52 | |||||
| 608 | ||||||
6. Finance costs
| Period 24 October 2018 to 31 March 2020 | ||||||
| £’000 | ||||||
| Interest on bank overdrafts and loans | 444 | |||||
| Interest on lease liabilities | 54 | |||||
| Loan arrangement fees and other finance costs | 124 | |||||
| 622 | ||||||
7. Loss per share
| Period 24 October 2018 to 31 March 2020 | |||||||
| The calculation of the basic loss per share is based on the following data | £’000 | ||||||
| Loss for the year for the purposes of basic loss per share attributable to equity holders of the Company | (3,194) | ||||||
| Weighted average number of Ordinary Shares for the purposes of basic loss per share | 175,835,336 | ||||||
| Basic loss per share | (1.82p) | ||||||
At 31 March 2020, there were no options or warrants in issue and therefore no potential dilution.
8. Goodwill and other intangible assets
| Goodwill | ||||||
| £’000 | ||||||
| Cost | ||||||
| At 24 October 2018 | - | |||||
| Recognised on acquisition of subsidiaries | 1,271 | |||||
| At 31 March 2020 | 1,271 | |||||
| Accumulated Impairment Losses | ||||||
| At 24 October 2018 and 31 March 2020 | 0 | |||||
| Carrying value at 31 March 2020 | 1,271 | |||||
| Carrying value at 24 October 2018 | 0 | |||||
Goodwill arising on acquisition comprises the expected synergies to be realised form the benefits of being a member of a group rather than stand-alone company. These include shared services, economies from pooled procurement, leveraging skillsets across the group and other intangible assets, such as the workforce knowledge, experience and competences across the group that cannot be recognised separately as intangible assets.
| Other intangible assets | ||||||
| £’000 | ||||||
| Cost | ||||||
| At 24 October 2018 | - | |||||
| Recognised on acquisition of subsidiaries | 967 | |||||
| At 31 March 2020 | 967 | |||||
| Amortisation | ||||||
| At 24 October 2018 | - | |||||
| Charge for the period | 126 | |||||
| 31 March 2020 | 126 | |||||
| Carrying value at 31 March 2020 | 841 | |||||
| Carrying value at 24 October 2018 | 0 | |||||
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.
The Group tests goodwill and identified intangible assets annually for impairment, or more frequently if there are indications that they might be impaired
The recoverable amount of the goodwill is determined based on a value in use calculation which uses cash flow projections based on financial budgets approved by the directors covering a six-year period, and a discount rate of 10% per cent per annum
Where cash flows have been extrapolated beyond that six-year period, no further growth has been assumed.
Sensitivity analysis
The Group has conducted an analysis of the sensitivity of the impairment test to changes in the key assumptions used to determine the recoverable amount of goodwill and the identified intangible assets (see note 4)
No impairment provisions in respect of goodwill or other identifiable intangible assets have been made.
9. Property, plant and equipment
| Leasehold improvements | Plant and machinery | Motor vehicles | Fixtures and Equipment | Total | |
| Cost | £’000 | £’000 | £’000 | £’000 | £’000 |
| At 24 October 2018 | - | - | - | - | - |
| On acquisition of Subsidiary | 173 | 1,110 | 60 | 122 | 1,465 |
| Additions | - | 16 | 7 | 13 | 36 |
| Disposals | - | - | (40) | - | (40) |
| At 31 March 2020 | 173 | 1,126 | 27 | 135 | 1,461 |
| Accumulated depreciation | |||||
| At 24 October 2018 | - | - | - | - | - |
| On acquisition of Subsidiary | 173 | 543 | 44 | 88 | 848 |
| Charge for the period | - | 134 | 4 | 15 | 153 |
| Disposals | - | - | (24) | - | (24) |
| At 31 March 2020 | 173 | 677 | 24 | 103 | 977 |
| Net book value at 31 March 2020 | - | 449 | 3 | 32 | 484 |
| Net book value at 24 October 2018 | - | - | - | - | - |
A charge over all the group’s property plant and equipment is held as security for borrowings falling due after more than one year (see note 11).
10. Right of use assets
| Buildings | Plant and machinery | Motor vehicles | Fixtures and Equipment | Total | |
| Cost | £’000 | £’000 | £’000 | £’000 | £’000 |
| At 24 October 2018 | - | - | - | - | - |
| On acquisition of Subsidiary | 451 | 61 | 351 | 18 | 881 |
| Additions | 617 | - | 23 | - | 640 |
| Disposals | (124) | - | (8) | - | (132) |
| At 31 March 2020 | 944 | 61 | 366 | 18 | 1,389 |
| Accumulated depreciation | |||||
| At 24 October 2018 | - | - | - | - | - |
| On acquisition of Subsidiary | 29 | 24 | 83 | 12 | 148 |
| Charge for the period | 204 | 5 | 67 | 5 | 281 |
| Disposals | (124) | - | (2) | - | (126) |
| At 31 March 2020 | 109 | 29 | 148 | 17 | 303 |
| Net book value at 31 March 2020 | 835 | 32 | 218 | 1 | 1,086 |
| Net book value at 24 October 2018 | |||||
The Group leases several assets including buildings, plant, vehicles and IT equipment. The average lease term is 4 years.
The Group has options to purchase certain manufacturing equipment for a nominal amount at the end of the lease term. The Group’s obligations are secured by the lessors’ title to the leased assets for such leases.
Amounts recognised in profit and loss |
Period 24th October 2018 to 31March 2020 | |||||
| £’000 | ||||||
| Depreciation expense on right-of-use assets | 281 | |||||
| Interest expense on lease liabilities | 30 | |||||
| Expense relating to short-term leases and low value assets | 29 | |||||
| 340 | ||||||
The total cash outflow for leases (principal and interest) amounts to £ 347,000.
11. Borrowings
| At 31 March 2020 | ||||||
| Non-current liabilities | £’000 | |||||
| Secured | ||||||
| Other Loans | 1,825 | |||||
| Current liabilities | ||||||
| Secured | ||||||
| Factoring facility | 243 | |||||
| Other loans | 548 | |||||
| 791 | ||||||
| Unsecured | ||||||
| Bank Overdraft | 41 | |||||
| 832 | ||||||
| 2,657 | ||||||
Other loans falling due after more than one year of £1,825,000 are secured by means of a debenture, chattels mortgage and cross guarantee entered into by the Company and each of its subsidiaries. At 31 March 2020, the principal falls due for repayment between April and July 2021. Subsequent to the period end, the lender has agreed to waive the maturity date, so long as the other terms of the agreement continue to be adhered to. The loans bear an interest rate of 18% per annum.
The factoring facility is secured on the trade receivables amounting to £377,000. There is a factoring charge of 1% of the Gross debt and a discount rate of 5% above Lloyds bank base rate on net advances. The agreement provides for 6 months’ notice by either party and certain minimum fee levels.
The other loans falling due in less than one year are secured by means of a cross guarantee given by the Company and all subsidiaries. It is repayable on demand. Subsequent to the period end, it has been replaced by a convertible loan note with a coupon of 5%. The lender has the right to convert the outstanding principal into ordinary share of the Company at a price of 3p per share. In the event that the lender does not exercise its conversion rights by 31 March 2022, the loan shall become immediately repayable by the Company.
12. Share capital
|
At 31 March 2020 | At 31 March 2020 | |||||
| Issued and fully paid: | Number | £’000 | ||||
| At 24 October 2018 | - | - | ||||
| Issued during the period | 198,900,000 | 80 | ||||
| At 31 March 2020 | 198,900,000 | 80 | ||||
The Company has one class of ordinary shares which carry no right to fixed income.
The company was incorporated on 24 October 2018 with an initial share capital £50,000, being 5 million ordinary shares with a par value of 1p. On 26 February 2019, the share capital was subdivided into shares with a nominal value of 0.04p. All disclosures referring to the number of shares in issue reflect this subdivision.
On 6 February 2019, the Company issued 12,500,625 ordinary shares in respect of the consideration of the acquisition of the entire share capital of IVI Metallics Limited at a price of 12p per ordinary share.
On 26 February 2019 37,500,000 ordinary shares were issued for cash at a price of 0.04p.
On 26 February 2019 5,000,000 ordinary shares were issued for cash at a price of 0.04p.
On 29 April 2019 3,000,000 ordinary shares were issued in respect of the consideration of the acquisition of the entire share capital of Orca Doors Limited at a price of 10p per ordinary share.
On 4 July 2019 3,000,000 ordinary shares were issued as consideration for the acquisition of the entire share capital of Time DMG Steelworks Limited. These were subsequently cancelled on 7 August 2019 when the acquisition agreement was rescinded.
On 4 July 2019 300,000 ordinary shares were issued at a price of 6.67p on conversion of a loan note for £20,000.
On 16 September 2019 15,600,000 ordinary shares were issued for cash at a price of 0.04p.
Share premium
| At 31 March 2020 | ||||||
| £’000 | ||||||
| At 24 October 2018 | - | |||||
| Premium arising on issue of new equity during the period | 1,812 | |||||
| At 31 March 2020 | 1,812 | |||||
13. Acquisition of subsidiaries
Vulcan Industries PLC was incorporated to build a group of UK companies providing products and services to the, manufacturing and engineering sectors, particularly focussed on metal fabrication and precision engineering, which have underlying profitability and growth potential and can benefit from being part of a larger group focussed on similar or complementary sectors to the target. In the period to 31 March 2020, the Company has completed four acquisitions.
IVI Metallics Limited
On 6 February 2019, the Company purchased the entire issued share capital of IVI Metallics Limited (“IVI”) for £1,500,000 which was satisfied by the issue and allotment by the Company of 12,500,000 Shares at an issue price of 12p per Share. IVI manufactures precision quality tacks and nails, (including threaded, hardened and plated products) both for the footwear, and other industries requiring the highest quality standards.
Time Rainham Limited
On 25 February 2019, IVI Metallics purchased the entire issued share capital of Time Rainham Limited (“Time Rainham”). The consideration was the assignment of a debt with a book value of £1,300,000. The directors consider that the fair value of this debt was £400,000 and impaired the carrying value of the investment in Time Rainham accordingly. Time Rainham manufactures range of components including selector forks, levers, valve housings, manifolds and blocks as well as complex gearbox transmission cases. The effective date of the acquisition was 6 February 2019.
M & G Olympic Products Limited
On 16 April 2019, the Company purchased the entire issued share capital of M&G Olympics Products Limited (“M&G”) for the sum of £950,000 which was satisfied by £820,000 in cash on completion and £130,000 as deferred consideration. The deferred consideration will become payable on the receipt by M&G of certain debtors of the business on a pound for pound basis. M&G design, manufacture, and install custom-built architectural metalwork. Products include staircases, balustrades and handrails
Orca Doors Limited
On 29 April 2019 the Company purchased the entire issued share capital of Orca Doors Limited (“Orca”) for of £300,000 which was satisfied by the issue and allotment by the Company 3,000,000 Shares at an issue price of 10p per Share. Orca manufactures high-quality doors and frames for the healthcare and education markets. The effective date of the acquisition was 20 February 2019.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed in these acquisitions are as set out in the table below.
| IVI | Time Rainham | M&G | Orca | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | |
| Property, plant and equipment | 374 | 20 | 115 | 107 | 616 |
| Right of use assets | 261 | - | 471 | - | 732 |
| Identifiable intangible assets: | |||||
| - Marketing related | 200 | - | 40 | 240 | |
| - Customer related | 500 | 80 | 127 | 20 | 727 |
| Inventory | 173 | 79 | 213 | 20 | 485 |
| Financial assets | 532 | 232 | 1,162 | 2 | 1,928 |
| Financial liabilities | (1,090) | (237) | (1,340) | (143) | (2,810) |
| Deferred tax liabilities | - | - | (39) | - | (39) |
| Fair value at acquisition | 950 | 174 | 749 | 6 | 1,879 |
| Goodwill | 550 | 226 | 201 | 294 | 1,271 |
| 1,500 | 400 | 950 | 300 | 3,150 | |
| Consideration | |||||
| Issue of equity | 1,500 | - | - | 300 | 1,800 |
| Assignment of assets | - | 400 | - | - | 400 |
| Cash | - | - | 950 | - | 950 |
| Total consideration | 1,500 | 400 | 950 | 300 | 3,150 |
Acquisition costs of £157,000 have been included in other gains and losses in the consolidated statement of profit and loss and comprehensive income.
Romar Process Engineering Limited
On 21 October 2020, the Group acquired the business and assets of Romar Process Engineering Limited for £550,000 comprising the issue of 2,500,000 shares at 6p per share, initial cash consideration of £350,000 and deferred consideration of £50,000. An initial assessment of the fair value of assets acquired is £200,000 including identifiable intangible assets of £160,000.
14. Post balance sheet events
On 11 May 2020, the Company issued 6,666,667 shares at 3p for cash.
On 1 June 2020 the entire share capital of the Company was admitted trading on the Aquis Exchange Growth Market. In conjunction with the admission, the Company issued 21,408,331 new shares by way of a placing and subscription, raising £577,500 before expenses. The Company also issued 5,633,333 fee shares at 3p in respect of fees amounting to £169,000.
On 17 June 2020, the Company issued 3,250,000 shares at 2p to employees for cash and 166,667 shares at 3p for cash in respect of a late subscription. In addition, 5,833,333 shares were issued at 3p in settlement of outstanding fees.
On 17 June 2020 the Company issued 2,564,706 shares at 4.25p for cash.
On 8 July 2020 the company issued 1,570,178 shares at 4.5p for cash.
On 21 October 2020, the Group acquired the business and assets of Romar Process Engineering Limited for £550,000 comprising the issue of 2,500,000 shares at 6p per share, initial cash consideration of £350,000 and deferred consideration of £50,000.
On 21 October 2020, 83,333 shares were issued at 6p and 714,286 shares at 4,2p in settlement of consultancy fees.
On 25 November 2020 the Company issued 5,567,316 shares at 5p and 1,036,364 shares at 5.5pfor cash
On 16 December 2020 the Company issued 6,636,363 shares at 5.5p for cash.
On 8 January 2021 the Company issued 2,650,000 shares at 5p and 272,727 shares at 5.5p for cash.
On 14 January 2021 the Company issued 2,222,222 shares at 4.5p for cash.
