Fulcrum offloads gas connection assets and appoints CEO

FULCRUM Utility Services today announced the disposal of substantially all of its non-core domestic-customer gas connection assets held by its subsidiary Fulcrum Pipelines (FPL) to ES Pipelines for £6.3m.

The Sheffield-based energy services business – which built and managed the systems to deliver gas to the London 2012 Olympic flame – said the consideration has been settled in cash and the net proceeds of the disposal will be around £5.9m which will be used to support the existing business and new growth opportunities.

The assets included in the disposal consist of around 31,000 domestic and mixed-use customer gas connection pipelines and associated equipment. The assets generated £1m of revenue and operating profit of £0.4m before shared overheads and central costs in the year ended March 31 2013. As at March 31, the book value of these assets was £7.5m.

Following the disposal, FPL retains a portfolio of approximately 2,000 industrial and commercial (I&C) pipeline assets which generated revenue of approximately £0.6 million in the year ended March 31.

Fulcrum’s core Infrastructure Services business provides the design and installation of gas connections for I&C and domestic customers.
The Infrastructure Services business contributed £39m or 96% of the group’s revenues in the year ended March 31.

The company said: “Proceeds from the sale significantly strengthen Fulcrum’s cash position and will be used to further develop the group’s core business, where the directors believe the greatest opportunity exists for creating shareholder value.”

Chairman Philip Holder said: “The disposal represents an excellent result for Fulcrum and allows the company to focus on its core services. The consideration received realises value which the board feels was not fully recognised in the group’s market valuation, with the net proceeds representing almost 80% of the market capitalisation of the company on the last trading day before this announcement. The board remains committed to establishing Fulcrum as a leading multi-utility connection services business in the UK.”

Law firm Pinsent Masons advised Fulcrum on the transaction.

The company also announced today the appointment of Martin Donnachie as chief executive.

Mr Donnachie was made interim chief executive in May for an initial period of six months.

The company said: “The board are pleased with the progress Martin has made over the past few months and Martin has now been appointed as permanent CEO and will join the board of the company with immediate effect.”

Mr Donnachie said: “I am very pleased that the board has offered me the opportunity to transition to the CEO position on a permanent basis. Since joining the company as interim CEO earlier this year I have been struck by the market potential for Fulcrum’s services and impressed by the quality of the people in the business. The Fulcrum team is committed to delivering excellent customer service and driving sustained growth, both of which will continue to be my focus going forwards.”

Fulcrum also said that revenue for the six months to September 30 will be in line with the second half of 2012/13.

“Gross margins will be reduced on previous periods, in line with management expectations, and reflecting the benefit in the prior year of the release of provisions for certain trading risks associated with the change in framework contractors in 2011. EBITDA for the first half will remain positive,” the company said.

“The restructuring process commenced in April 2013 was concluded in mid-June, resulting in 37 roles being made redundant. This will yield an annual saving of £1.7m which will be largely realised in the second half of this financial year.”

Lawyers from national firm Bond Dickinson, who has offices in Leeds, advised ES Pipelines on its acquisition.

The Bond Dickinson team comprised Ed Rimmell, Dan Ballard, Ronan Lowney, Carol Tricks, Gemma Alaway, Alastair Mitton, Michael Spence, Nicola Burnett, Jenny Thompson and Gareth Miles.

Fulcrum provides gas connection services to residential, commercial and industrial markets ranging from single properties to large developments.

It constructed and managed the infrastructure to deliver gas to the London 2012 Olympic flame, the Olympic Park, athletes’ village and the nearby Westfield Shopping Centre.