Fulcrum upbeat on changes to sale agreement with ES Pipelines

The AIM-traded firm had initially announced the sale on 23 December 2019.

It said the agreement with ESP originally provided that future asset transfers would occur when the value of the completed assets exceeded £6.5m, or at 12-monthly intervals, whichever is the earlier.

On Monday, it said that given the delays to house building caused by the Covid-19 lockdown, it had now been agreed that future asset transfers would instead occur on fixed dates, being 30 November and 31 May each year.

The first subsequent transfer, being the second tranche of assets transferred, would now occur on 30 November, with a total estimated consideration of £4.7m, of which £4.4m would be received in cash on that date, with the balance expected to be received on 31 May 2022.

Fulcrum said the revised arrangements gave it greater certainty of cash inflows, and would support its cash planning.

Its board said that, in the current economic climate, the amounts would be retained in the business in the short to medium term to provide liquidity to support its operations and growth strategy.

Fulcrum said the arrangements also provided for it to receive additional payments if certain milestones were achieved for new domestic connections won in the period to 31 March 2025.

The group confirmed on Monday that the first milestone had been achieved, which would result in an additional payment for the first tranche of assets transferred, which completed on 31 March, of £0.4m, which would be received on or around 30 November.

Reflecting that milestone, the company said the total gross consideration receivable by Fulcrum was now expected to increase by around £1m to £49m.

A total of £17.4m had been received to date, and £4.4m would be received on 30 November, leaving around £27m to be received over the next five years.

The firm said the arrangement with ESP included further milestone targets which, if achieved, would trigger additional enhanced payments of up to £4m over the remaining term of the contract.

“I am very pleased to today confirm the achievement of the first enhanced payment milestone, resulting from a strong series of new housing contract wins, and the amended arrangements with ESP which will provide certainty of the timing of cash inflows and thus enhance our cash planning,” said chief executive officer Daren Harris.

“The asset sale has significantly strengthened the group's balance sheet and aids our strategic growth ambitions, and the enhancement to payments will further support this.

“Our relationship with ESP also continues to progress strongly and is delivering improvements in the group's capabilities across all segments of the market.”

At 0929 GMT, shares in Fulcrum Utility Services were down 0.61% at 40.5p.