CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 September 2021

	Share capital	Share premium account	Share-based payment reserve	Own shares	Merger reserve	Retained earnings		Total equity
	£'000	£'000	£'000	£'000	£'000	£'000		£'000
At 1 October 2019	15,895	25,318	538	(290)	20,067	(17,237)		44,291
Profit for the year	-	-	-	-	-	6,310		6,310
Dividends paid (Note 12)	-	-	-	-	-	(795)		(795)
Issue of shares (exercise of options)	39	90	-	-	-	-		129
Share-based payments	-	-	171	-	-	-		171
Reserve transfer	-	-	(59)	-	-	59		-
At 30 September 2020	15,934	25,408	650	(290)	20,067	(11,663)		50,106
Profit for the year	-	-	-	-	-	11,352		11,352
Dividends paid (Note 12)	-	-	-	-	-	(1,595)		(1,595)
Issue of shares (exercise of options)	188	212	-	-	-	(105)		295
Equity settled share based payments, net of tax	-	-	168	-	-	-		168
Reserve transfer	-	-	(469)	290	-	179		-
At 30 September 2021	16,122	25,620	349	-	20,067	(1,832)		60,326

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 September 2021

			2021		2020
	Notes		£'000		£'000
Cash flows from operating activities
Cash generated from operations	32		17,492		23,869
Interest paid			(901)		(957)
Income taxes paid			(2,421)		(736)
Net cash generated from operating activities			14,170		22,176
Cash flows from investing activities
Purchase of shares in subsidiary, net of cash acquired			(200)		-
Receipt of deferred consideration from disposals in prior years			-		930
Purchase of property, plant and equipment			(1,570)		(621)
Purchase of intangible assets			(545)		(539)
Sale of property and equipment			18		31
Net cash used in investing activities			(2,297)		(199)
Cash flows from financing activities
Proceeds from issue of shares			295		129
Dividend paid to shareholders			(1,595)		(795)
Repayment of bank borrowings			-		(10,000)
Repayment of lease liabilities			(3,808)		(4,084)
Net cash used in financing activities			(5,108)		(14,750)
Net increase in cash and cash equivalents			6,765		7,227
Cash and cash equivalents at beginning of year			9,679		2,452
Cash and cash equivalents at end of year			16,444		9,679

  

The accompanying notes are an integral part of this consolidated statement of cash flows.

Cash and cash equivalents shown above excludes capitalised loan arrangement fees.

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 30 September 2021

 

General Information

Sureserve Group plc is a company incorporated in England and Wales under the Companies Act.  The address of the registered office is Crossways Point 15, Victory Way, Crossways Business Park, Dartford, Kent, DA2 6DT.

 

These results for the year ended 30 September 2021 are an excerpt from the Annual Report & Accounts 2021 and do not constitute the Group's statutory accounts for 2021 or 2020. Statutory accounts for Sureserve Group plc for the year to 30 September 2020 have been delivered to the Registrar of Companies, and the Sureserve Group plc statutory accounts for the year to 30 September 2021 will be delivered by 31 March 2022. The Auditor has reported on both those accounts; their reports were unqualified, did not draw attention on to any matters by way of emphasis and did not contain statements under Sections 498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation. Whilst the financial information included in this Annual Results Release has been prepared in accordance with International Financial Reporting Standards (IFRS) in conformity with the requirements of the Companies Act 2006, this announcement does not itself contain sufficient information to comply with IFRS. Full financial statements that comply with IFRS are included in the Annual Report & Accounts 2021 which will be available at www.sureservegroup.co.uk.

 

The consolidated Financial Statements are presented in Pounds Sterling because that is the currency of the primary economic environment in which the Group operates.  The principal activities are discussed in the operational review of the annual report.

 

1.    Basis of preparation

 

Basis of accounting

The Consolidated Financial Statements have been prepared on a historical cost basis. The Consolidated Financial Statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

 

The principal accounting policies adopted are set out below.

 

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group's Financial Statements except as noted below.

 

Adoption of new and revised standards

The accounting policies adopted are consistent with those of the previous financial year.

 

New standards and interpretations not applied

The International Accounting Standards Board and the International Financial Reporting Interpretations Committee (IFRIC) have issued the following standards and interpretations for annual periods beginning on or after the effective dates as noted below:  The adoption of IFRS 17 is not expected to have a significant impact on the financial statements.

 

IAS/IFRS standards		Effective for accounting periods starting on or after
IFRS 17	Insurance Contracts	1 January 2023

 

Basis of consolidation

The consolidated Financial Statements incorporate the assets, liabilities, income and expenses of the Group.  The Financial Statements of the subsidiaries are prepared for the same financial reporting period as the Company.  Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used into line with those used by the Group.  Intercompany transactions, balances and unrealised gains and losses transitions between Group companies are eliminated on consolidation.

 

As a consolidated statement of comprehensive income is published, a separate profit and loss account for the parent company is omitted from the Financial Statements by virtue of section 408 of the Companies Act 2006.

 

Going concern

The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.  The Directors regard the foreseeable future as no less than 12 months following publication of its annual Financial Statements, so in practical terms, 16 months from the reporting date.  The Directors review and approve the annual budget, three-year plan and a rolling 12 month forecast, including forecasts of cash flows, borrowing requirements and covenant headroom, taking account of reasonably possible changes in trading performance and the current state of its operating market, including the impact of Covid 19, and are satisfied that the Group should be able to operate within the level of its current facilities and in compliance with the covenants arising from those facilities. In December 2021, the Group renewed its bank facilities to provide an overdraft facility of £5,000,000 together with a revolving credit facility of £15,000,000 which runs to 31 January 2025. At 24 January 2022, the revolving cash facility remained undrawn. Accordingly, the directors have adopted the going concern basis in preparing the financial information. Please see further statement in the strategic report.

 

2.    Significant accounting policies

 

Operating segments

The Directors regard the Group's reportable segments of business to be Compliance and Energy Services.  Costs are allocated to the appropriate segment as they arise with central overheads apportioned on a reasonable basis.  Operating segments are presented in a manner consistent with internal reporting, with inter-segment revenue and expenditure eliminated on consolidation.

 

Business combinations

Acquisitions of subsidiaries 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 acquired company and the equity interest issued by the Group in exchange for control of the acquired company.  Acquisition-related costs are recognised as non-trading exceptional costs in profit or loss as incurred.

 

At the acquisition date, the identifiable assets acquired and liabilities assumed are recognised at their fair value.  Goodwill is measured as the excess of the sum of the consideration transferred over the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed.  If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the excess is recognised immediately in profit or loss as a bargain purchase gain.

 

When the consideration transferred by the Group in a business combination includes an asset or liability resulting from 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.

 

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified.  Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity.  Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with IFRS 9 or IAS 37 as appropriate, with the corresponding gain or loss being recognised in profit or loss.

 

Acquisition costs

Management believe that acquisition costs are exceptional in nature and they are presented as such in the income statement, so as not to distort presentation of the underlying performance of the Group.

 

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 expected to benefit from the synergies of the combination.  Cash-generating units to which the 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 subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

 

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses.  Amortisation is recognised on a straight line basis over their useful lives.  The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

 

The estimated useful life for each asset type is set out below.

 

Computer software and capitalised development costs                   -               three to five years

 

Development costs are capitalised when the asset is identifiable, the value can be measured reliably and it is probable that economic benefits will flow to the Group.

 

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost).  Intangible assets are recognised if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using suitable valuation techniques.

 

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

 

The estimated useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

 

Intangible asset                                       Useful economic life                                                Valuation method

Contracted customer order book        Remaining period of the contract       Expected cash flows receivable

Customer relationships                        Five years                                              Expected cash flows receivable

Non-compete agreements                    Five years                                              With or without method

 

Derecognition of intangible assets

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. The gain or loss from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset; is recognised in profit or loss when the asset is derecognised.

 

Property, plant and equipment, and right of use assets

Property, plant and equipment, and right of use assets are stated at cost less accumulated depreciation and any recognised impairment loss.

 

Depreciation is calculated so as to write off the cost of a tangible asset, less its estimated residual value, over the estimated useful economic life of that asset on the following bases:

 

Leasehold improvements                     -               over the period of the lease

Plant & equipment                                 -               15% to 33.33% per annum on a straight line basis

Fixtures & fittings                                  -               20% to 33.33% per annum on a straight line basis

Motor vehicles                                       -               25% per annum on a straight line basis

Right of use assets                                                               over the period of the lease

 

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 their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

 

An item of property, plant and equipment is derecognised upon disposal, or when no future economic benefits are expected to arise from the continued use of the asset.  The gains or loss arising on the disposal or scrappage of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

 

Impairment of tangible and intangible assets excluding goodwill

At each reporting date, the Group reviews the carrying amounts of tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss.  If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any).  Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.  When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

 

An intangible asset with an indefinite useful life is tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

 

Recoverable amount is the higher of fair value less costs to sell and value in use.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years.  A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

 

Exceptional items

Items which are significant by their size and/or nature require separate disclosure and are reported separately in the statement of comprehensive income.  Details of exceptional items are explained in Note 7.

 

Revenue

Revenue recognition is determined according to the requirements of IFRS 15 "Revenue from contracts with customers". All revenue is considered revenue from contracts with customers as defined by IFRS 15.  IFRS 15 prescribes a five-step model of accounting for revenue recognition which includes identifying the contract, identifying performance obligations, determining the transaction price, allocating the transaction price to different performance obligations and the timing of recognition of revenue in connection with different performance obligations.

 

For contracts with multiple components to be delivered such as lift maintenance, servicing and repairs, management applies judgement to consider whether those promised goods and services are: (i) distinct - to be accounted for as separate performance obligations; (ii) not distinct - to be combined with other promised goods or services until a bundle is identified that is distinct; or (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer.

 

At contract inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has rights to under the present contract. This includes the fixed price stated in the contract and an assessment of any variable consideration resulting from variation orders, discounts, rebates, refunds, performance bonuses, penalties, service credits. Variable consideration is estimated based on the expected value or the most likely outcome method and is only recognised to the extent that it is highly probable that a subsequent change in its estimate would not result in a significant revenue reversal.

Once the total transaction price is determined, the Group allocates this to the identified performance obligations in proportion to their relative stand-alone selling prices and recognises revenue when (or as) those performance obligations are satisfied.

 

For each performance obligation identified in the contract, the Group determines if revenue will be recognised over time or at a point in time.

 

Performance obligations satisfied over time

The Group recognises revenue over time on contracts where any of the following criteria is met;

·      The customer simultaneously receives and consumes the benefits provided by the Group's performance as the Group performs it; or

·      The services provided creates or enhances an asset that the customer controls; or

·      The services provided do not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

 

The Group typically recognises revenue on an over time basis for the following:

·      Certain energy services

·      Gas services

·      Fire services

·      Water and air hygiene services

·      Lift services

 

For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group's performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer. The Group applies the relevant output or input method consistently to similar performance obligations in other contracts.

 

Performance obligations satisfied at a point in time

If the criteria for satisfying a performance obligation over time are not met, revenue is recognised at the point in time when control of the goods or services transfers to the customer. This will be at the point when the jobs are completed and there is a right to invoice.

 

The Group typically recognises revenue on a point in time basis for the following:

 

·      Smart metering

·      Certain energy services

 

(i)    Schedule of Rates ("SOR") contracts

SOR contracts are set based on predetermined rates for a list of services and duties required by the customer. 

 

For short term jobs usually completed within a few days, the right to consideration is considered to correspond directly with the value of performance completed to date as measured by the amounts specified for each job set out on the rate card. Revenue is recognised when the jobs are completed or invoiced. Where deemed appropriate, the Group will utilise the practical expedient within IFRS 15 and recognises revenue in line with amounts invoiced. Contract fulfilment costs are expensed as incurred.

 

For longer term jobs, the Group applies the relevant output or input revenue recognition method for measuring progress that depicts the Group's performance in transferring control of the goods or services to the customer.  Contract fulfilment costs are expensed as incurred.

 

Certain longer term jobs use the output method based upon surveys of performance completed or milestones reached which allow the Group to recognise revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services under the contract.

 

Under the input method, revenue is recognised in direct proportion to costs incurred where the transfer of control is most closely aligned to the Group's efforts in delivering the service.

 

(ii)   Fixed price (or lump sum) service contracts

Certain contracts, in particular for gas servicing and maintenance, are procured on a fixed price basis.  Revenue qualifies for recognition over time as the customer receives and consumes the benefits from the service as it is being provided. Revenue for maintenance/reactive activities is recognised on a straight line basis over the term of the contract. Where servicing and maintenance activity is expected to take place evenly throughout the performance period, revenue is recognised on a straight-line basis over the contract term.  Where activity is more aligned to periodic service events, then revenue is allocated to those events and recognised over the contract term when those events take place. Contract fulfilment costs are expensed as incurred.

 

(iii)  Accrued income and deferred income

The Group's customer contracts include a diverse range of payment schedules which are often agreed at the inception of longer term jobs under which it receives payments throughout the term of the contracts.

 

Where revenue recognised at the period end date is more than amounts invoiced, the Group recognises an accrued income contract asset for this difference. Where revenue recognised at the period end date is less than amounts invoiced, the Group recognises a deferred income contract liability for this difference.

 

Employee benefits

 

Retirement benefit costs

The Group contributes to the personal pension plans of certain employees of the Group.  The assets of these schemes are held in independently administered funds.  The pension cost charged in the Financial Statements represents the contributions payable by the Group in accordance with IAS 19.           

 

Share-based payments

The Company has issued equity-settled share-based awards and free shares to certain employees.  The fair value of share-based awards with non-market performance conditions is determined at the date of the grant using a bi-nominal model.  The fair value of share-based awards with market related performance conditions is determined at the date of grant using the Monte Carlo model.  Share-based awards are recognised as expenses based on the Company's estimate of the shares that will eventually vest, on a straight line basis over the vesting period, with a corresponding increase in the share option reserve.

 

At each reporting date the Company revises its estimates of the number of options that are expected to vest based on service and non-market performance conditions.  The amount expensed is adjusted over the vesting period for changes in the estimate of the number of shares that will eventually vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.  Options with market-related performance conditions will vest based on total shareholder return against a selected group of quoted market comparators. Following the initial valuation, no adjustments are made in respect of market based conditions at the reporting date.

 

Employee Benefit Trust

The Company established an Employee Benefit Trust upon its IPO, whose remit is to hold Sureserve Group plc shares on behalf of its employees.  The trust is wholly funded by the Group and although legally independent is deemed to be controlled by the Group as the Trust relies on it for funding and the Company is able to remove and appoint the trustees.  The assets and liabilities of the Trust are therefore consolidated with those of the Group.

 

Finance income and costs

Interest receivable and payable on bank balances is credited or charged to the statement of comprehensive income as incurred.

Finance arrangement fees and issue costs are capitalised and netted off against borrowings. All other borrowing costs are written off to the statement of comprehensive income as incurred.

 

Notional interest payable, representing the amortisation of loan arrangement fees, is charged to finance costs.  

 

Costs incurred in raising finance

Costs incurred in raising finance are capitalised and amortised through the profit and loss account over the term of the funding.   In the event that the associated finance product is refinanced prior to its expiring, the unamortised costs are treated as an "Other Item" on the face of the statement of comprehensive income, to the extent that they are replaced with fees and costs associated with raising the new finance.

 

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

 

The current tax payable is based on taxable profit for the year.  Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The Group's asset for current tax is calculated using tax rates prevailing at the year end.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method.  Deferred tax liabilities are generally recognised for all taxable temporary differences; deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

 

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the tax rates that have been enacted or substantively enacted at the statement of financial position date.  Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

 

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.  Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

 

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.  When current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

 

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where appropriate, labour and overheads which have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Provision is made, where appropriate, to reduce the value of inventory to its net realisable value.

 

Government grants

The Group recognises a government grant when it is receivable. Government grants are offset against applicable costs where appropriate, as opposed to other income.

 

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, and where it is probable that the Group will be required to settle that obligation and the amount can be reliably estimated.   The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation.  Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the time value of money is material). Details of material provisions are disclosed unless it is not practicable to do so or where it could be expected to prejudice seriously the position of the entity.

 

Contingent liabilities

Where a provision or accrual is deemed to be required it has been included within the consolidated statement of financial position. For contingent liabilities where an economic outflow is possible, it is often not practicable to estimate the financial effect due to the range of estimation uncertainty. For contingent liabilities where the possibility of economic outflow is remote, disclosure of the estimated financial effect is not required.

 

Contingent liabilities acquired in a business combination are initially valued at fair value at the acquisition date.  At the end of subsequent reporting periods, such contingent liabilities are measured at the higher of the amount that would be recognised in accordance with IAS 37 and the amount initially recognised.

 

Joint ventures

Under IFRS 11 joint ventures are accounted for under the equity method of accounting. A joint venture is a joint arrangement whereby the parties have joint control of the arrangement and have rights to the net assets of the arrangement. Loans receivable from joint ventures and investments in joint venture entities are reviewed for impairment at each year end.

 

Financial instruments

Financial assets and financial liabilities are recognised on the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument.  The principal financial assets and liabilities of the Group are as follows:

 

(a)   Trade and other receivables

Trade and other receivables are recognised initially at fair value and measured subsequently at amortised cost less any provision for impairment losses including expected credit losses. In accordance with IFRS 9 the Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and accrued income contract assets, estimated using a combination of historical experience and forward-looking information.

 

(b)   Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with a maturity of three months or less.  Bank overdrafts are presented as current liabilities to the extent that there is no right of offset with cash balances.

 

(c)   Trade and other payables

Trade and other payables are not interest bearing and are stated initially at fair value and subsequently held at amortised cost.

 

(d)   Bank and other borrowings

Interest-bearing bank and other loans are recorded at the fair value of the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for at amortised cost and on an accruals basis in the statement of comprehensive income using the effective interest method. Interest is added to the carrying value of the instrument to the extent that they are not settled in the period in which they arise.

 

(e)   Financial liabilities and equity

Financial liabilities and equity are classified according to the substance of the financial instrument's contractual obligations rather than the financial instrument's legal form.  An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

 

(f)    Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

 

Leases

The Group assesses whether a contract is a lease at inception of the contract. A lease conveys the right to direct the use and obtain substantially all of the economic benefits of an identified asset for a period of time in exchange for consideration.

 

A right of use asset and corresponding lease liability are recognised at commencement of the lease. The lease liability is measured at the present value of the lease payments, discounted at the rate implicit in the lease, or if that cannot be readily determined, at the group's incremental borrowing rate specific to the type of asset. The lease liability is subsequently measured at amortised cost using the effective interest rate method. It is remeasured, with a corresponding adjustment to the right of use asset, when there is a change in future lease payments resulting from a rent review, or change in the Group's assessment of whether it is reasonably certain to exercise a purchase, extension or break option. The right of use asset is initially measured at cost, comprising: the initial lease liability and any dilapidation or restoration costs. The right of use asset is subsequently depreciated on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset. The right of use asset is tested for impairment if there are any indicators of impairment. Leases of low value assets and short-term leases of 12 months or less are expensed to the Group income statement over the lease term.

 

Nature and purpose of each reserve in equity

Share capital is determined using the nominal value of shares that have been issued.

 

Share premium represents the difference between the nominal value of shares issued and the fair value of the total consideration receivable at the issue date.

 

Equity-settled share-based employee remuneration is credited to the share-based payment reserve until the related share options are exercised.  Upon exercise the share-based payment reserve is transferred to retained earnings.

 

The merger reserve was created in relation to the Group reorganisation under IFRS 3, in which Sureserve Group plc replaced Sureserve Holdings Limited as the Group's ultimate parent company.

 

 

3.    Critical accounting judgements and key sources of uncertainty

 

In the application of the Group's accounting policies, which are described in Note 2, the Directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. These 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 the period of the revision and future periods if the revision affects both current and future periods.

 

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that may have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

 

Revenue recognition

Revenue is recognised based on the stage of completion of job or contract activity.  Certain types of service provision pricing mechanisms require minimal estimation and judgement; however service provision lump sum and longer term contracts do require judgements and estimates to be made to determine the stage of completion and the expected outcome for the individual contract. A sum will be recognised in relation to accrued income on the statement of financial position, details of which are described in Note 20. The accrued income balance at 30 September 2021 was £17.9m (2020: £17.3m). These assessments include a degree of uncertainty and therefore if the key judgements and estimates change, further adjustments of recoverable amounts may be necessary. Revenue is generated from a large number of contracts with customers, such that there is limited sensitivity to material revisions arising from changes in estimates on individual contracts.

 

Provisions for legal and other claims

The Group continues to manage a number of potential risks and uncertainties, including claims and disputes, which are common to other similar businesses and which could have a material impact on short and longer term performance. The Board remains focused on the outcome of a number of contract settlements on which there is a range of outcomes for the Group in terms of both cash flow and impact on the statement of comprehensive income.

In quantifying the likely outturn for the Group, the key judgements and estimates will typically include:

 

·      The scope of the Group's assessed responsibility

·      An assessment of the potential likelihood of economic outflow

·      An estimation of economic outflow (including potential likelihood)

·      A commercial assessment of potential further liabilities

 

Estimates of amounts provided take account of legal advice where sought. Details of specific cases are not disclosed due to potential commercial sensitivity. Provisions at 30 September 2021 includes £1.1m (2020: £0.8m) in respect of the disposal of Lakehouse Contracts Limited and Foster Property Maintenance Limited - see Notes 7 and 24 for details of the basis of estimation used.

 

The total carrying value of provisions at 30 September 2021 was £2.0m (2020: £4.0m) - see Note 24 for further details.

 

Impairment of intangible assets and goodwill

The Group assess whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill is tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.

 

When value-in-use calculations are undertaken, management must estimate the expected future cash flows from the cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. These cash flows are based on the Board approved annual budget and three year plan. Further details are given in Note 14.

 

4.    Operating segments

The Group's chief operating decision maker is considered to be the Board of Directors. The Group's operating segments are determined with reference to the information provided to the Board of Directors in order for it to allocate the Group's resources and to monitor the performance of the Group.

 

The Board of Directors has determined an operating management structure aligned around the two core activities of the Group, with the following operating segments applicable:

 

·      Compliance: focused on gas, fire, electrics, air, water and lifts where we contract predominantly under framework agreements.  Services comprise the following:

-      Installation, maintenance and repair-on-demand of gas appliances and central heating systems

-      Compliance services in the areas of fire protection and building electrics

-      Air and water hygiene solutions

-      Service, repair and installation of lifts

 

·      Energy Services: we offer a range of services in the energy efficiency sector, including external, internal and cavity wall insulation, loft insulation, gas central heating, boiler upgrades and other renewable technologies.  The services are offered under various energy saving initiatives including Energy Company Obligations ("ECO"), Green Deal and the Scottish Government's HEEPs ("Home Energy Efficiency Programme") Affordable Warmth programme. Clients include housing associations, social landlords, local authorities and private householders and we have trading relationships with all of the large utility suppliers and many of the leading smaller suppliers.  We also provide metering services involving the installation, servicing and administration of devices and associated data. _-

 

The accounting policies of the reportable segments are the same as those described in the accounting policies section.

 

All revenue and profit is derived from operations in the United Kingdom only. 

 

The profit measure the Board used to evaluate performance is operating profit before exceptionals and amortisation of acquisition intangibles. Operating profit before exceptionals and amortisation of acquisition intangibles is defined as operating profit before deduction of exceptional items and amortisation of acquisition intangibles, as outlined in Note 7 and on the face of the income statement. 

 

The Group accounts for inter-segment trading on an arm's length basis.  All inter-segment trading is eliminated on consolidation.

The following is an analysis of the Group's revenue and Operating profit before exceptional and amortisation of acquisition intangibles by reportable segment:

 

		2021		2020
		£'000		£'000
Revenue
Compliance		162,429		137,155
Energy Services		84,563		60,363
Total segment revenue		246,992		197,518
Inter-segment elimination		(2,978)		(1,812)
Total revenue		244,014		195,706

 

 

		Revenue recognised
Revenue		Over time	At a point in time		Total
2021		£'000	£'000		£'000
Gas services		127,405	-		127,405
Fire and electrical services		18,965	-		18,965
Water and hygiene services		7,588	-		7,588
Lift services		8,471	-		8,471
Compliance segment revenue		162,429	-		162,429
Energy services		41,491	14,817		56,308
Smart metering		-	28,255		28,255
Energy segment revenue		41,491	43,072		84,563
Inter-segment elimination		(2,978)	-		(2,978)
Total revenue		200,942	43,072		244,014
		Revenue recognised
Revenue		Over time	At a point in time		Total
2020		£'000	£'000		£'000
Gas services		102,014	-		102,014
Fire and electrical services		17,419	-		17,419
Water and hygiene services		7,031	-		7,031
Lift services		10,691	-		10,691
Compliance segment revenue		137,155	-		137,155
Energy services		33,112	10,043		43,155
Smart metering		-	17,208		17,208
Energy segment revenue		33,112	27,251		60,363
Inter-segment elimination		(1,812)	-		(1,812)
Total revenue		168,455	27,251		195,706

 

Reconciliation of Operating profit before exceptional and other items to profit before taxation
		2021		2020
		£'000		£'000
Operating profit before exceptional and other items by segment
Compliance		13,896		11,813
Energy Services		3,447		788
Central Costs		(2,749)		(2,197)
Total operating profit before exceptional and other items		14,594		10,404
Amortisation of acquisition intangibles		-		(1,600)
Exceptional items		387		-
Impairment of goodwill		(188)		-
Finance income		4		39
Finance costs		(1,020)		(1,047)
Profit before taxation		13,777		7,796

 

Only the Group consolidated statement of financial position is regularly reviewed by the chief operating decision maker and consequently no segment assets or liabilities are disclosed here under IFRS 8.

 

None of the Group's major clients account for more than 10% of Group revenue for 2021 or 2020.

 

5.    Profit before taxation

	2021		2020
	£'000		£'000
Profit before taxation is stated after charging/(crediting):
Amount of inventories recognised as an expense (Note 19)	63,289		50,615
Depreciation of property, plant and equipment (Note 16)	681		682
Depreciation of right of use assets (Note 17)	4,403		4,111
Amortisation of intangible assets (Note 15)	451		1,984
Staff costs (Note 9)	92,800		75,632
Profit on disposal of property, plant and equipment	(208)		(10)

 

6.    Auditor's remuneration

	2021		2020
	£'000		£'000
The analysis of the auditor's remuneration is as follows:
Fees payable to the Company's auditor and their associates for audit services to the Group:
-   The audit of the Company's and Group's annual accounts	100		90
-   The audit of the Company's subsidiaries	250		215
Total audit fees	350		305
Fees payable to the Company's auditor and their associates for other services to the Group:
-   Agreed upon procedures on interim results	35		28
Total non-audit fees	35		28

 

7.    Exceptional and other items

	2021		2020
	£'000		£'000
Profit on disposal of Orchard (Holdings) UK Limited	-		303
Release of provision for potential legal settlement costs	1,187		-
Costs on disposal of Lakehouse Contracts Limited and Foster Property Maintenance Limited	(800)		(303)
	387		-

 

Exceptional items are considered non-trading because they are not part of the underlying trade of the Group.

 

The Group's Construction and Property Services divisions which were sold on 17 August 2018 and Orchard (Holdings) UK Limited which was sold in September 2017 were previously disclosed as discontinued operations. The Board has reviewed the nature and time elapsed in classifying these and determined they are exceptional items.

 

The result for the year of exceptional items comprises:

 

·      £0.8m (2020: £0.3m) of additional costs provided for in the year, relating to legacy transactions

·      £1.2m (2020: £nil) release of provisions for potential legal settlement costs, (see further details in note 30)

·      £nil (2020: £0.3m) profit on sale of Orchard (Holdings) UK Limited from reassessment of the fair value of consideration receivable

 

On 20 December 2019, Mapps Group Limited, the acquirer of Lakehouse Contracts Limited and Foster Property Maintenance Limited, went into liquidation. We held meetings during the year with the Liquidators and advisers to both Mapps Group Limited and Lakehouse Contracts Limited in an effort to progress and resolve any outstanding claims. We are still awaiting the provision of necessary information from the Liquidators in order to progress matters. £0.8m of additional costs have been provided for during the year. At 30 September 2021, the group has provisions for liabilities relating to the disposal of £1.1m (2020: £0.8m). In addition to the amounts provided for above, there are a number of potential contingent liabilities arising from the disposal including:

 

• Potential claims under parent company guarantees and bonds for projects. The value of bonds and guarantees is disclosed in Note 30

 

• Potential claims under clauses in the sale and purchase agreement including working capital adjustments and warranties/indemnities. Resolution of these outstanding claims is in the hands of the Liquidators of Mapps Group Limited and Lakehouse Contracts Limited

 

Whilst a claim has been received from the Liquidators of Lakehouse Contracts Limited, the Group has claims against Lakehouse Contracts Limited and Mapps Group Limited for amounts that exceed their best estimate of any amounts that may potentially be due to Lakehouse Contracts Limited and Mapps Group Limited under clauses in the sale and purchase agreement. The Board are in continuing dialogue with all parties.

 

Further details are not disclosed on the basis that such disclosure would be seriously prejudicial.  

 

8.    Finance income and finance expenses

 

	2021		2020
	£'000		£'000
Finance income
Other interest receivable	4		39
Finance expenses
Interest payable on bank overdrafts and loans	378		652
Loan arrangement fee amortisation	109		109
Interest on lease agreements (Note 26)	475		258
Other interest payable	58		28
	1,020		1,047

 

9.    Information relating to employees

The average number of employees, including Directors, employed by the Group during the year was:

	2021		2020
	Number		Number
Direct labour and contract management	1,641		1,487
Administration and support	713		573
	2,354		2,060
	2021		2020
The aggregate remuneration was as follows:	£'000		£'000
Wages and salaries	81,981		66,932
Social security	8,517		6,811
Pension costs - defined contribution plans	2,017		1,718
Equity-settled share-based payments	285		171
	92,800		75,632

 

10.    Retirement benefit obligations

The Group contributes to the personal pension plans of certain employees of the Group.  The assets of these schemes are held in independently administered funds.  From 1 February 2014, the Group contributes to a new workplace pension scheme for all employees in compliance with the automatic enrolment legislation.  The Group paid £2,008,000 in the year ended 30 September 2021 (2020: £1,718,000). At the reporting date, £442,000 of contributions were payable to the funds (2020: £341,000).

 

 

11.    Tax on profit on ordinary activities

 

	2021		2020
	£'000		£'000
Current tax
Current year	2,268		1,637
Current tax - prior year	101		(101)
Total current tax	2,369		1,536
Deferred tax (Note 25)	56		(50)
Total tax on profit on ordinary activities	2,425		1,486
The tax assessed for the year differs from the standard rate of corporation tax in the UK.  The differences are explained below:
	2021		2020
	£'000		£'000
Profit before tax	13,777		7,796
Effective rate of corporation tax in the UK	19%		19%
Profit before tax at the effective rate of corporation tax	2,618		1,481
Effects of:
Expenses not deductible for tax purposes	(174)		(15)
Adjustment of deferred tax to closing tax rate	(102)		(34)
Current tax - prior year	101		(101)
Deferred tax - prior year	(18)		155
Tax charge for the year	2,425		1,486

Factors that may affect future charges

The closing deferred tax provision has been calculated at 25% in accordance with the rate enacted at the statement of financial position date.

In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate would increase to 25%. This new law was substantively enacted on 24 May 2021.

 

12.    Dividends

 

The Board did not recommend the payment of a dividend for the year ended 30 September 2021.

 

The final dividend for the year ended 30 September 2020 of 1 pence per share amounting to £1.6m was paid in the year.

 

13.    Earnings per share

 

The calculation of the basic and diluted earnings per share is based on the following data:

	2021		2020
	Number		Number
Weighted average number of ordinary shares for the purposes of basic earnings per share	160,267,970		159,025,339
Diluted
Effect of dilutive potential ordinary shares:
Share options	2,910,442		3,200,981
Weighted average number of ordinary shares for the purposes of diluted earnings per share	163,178,412		162,226,320
Earnings for the purpose of basic and diluted earnings per share being net profit after tax attributable to the owners of the Company (£'000's)	11,352		6,310
Basic earnings per share	7.1p		4.0p
Diluted earnings per share	7.0p		3.9p
Adjusted earnings for the purpose of basic and diluted earnings per share being net profit after tax adjusted for share based payments and amortisation of acquisition related intangibles attributable to the owners of the Company (£'000's)	11,583		7,745
Basic earnings per share	7.2p		4.9p
Diluted earnings per share	7.1p		4.8p
The number of shares in issue at 30 September 2021 was 161,213,788 (2020: 159,335,259).

The weighted average number of ordinary shares in issue during the year excludes those accounted for in the own shares reserve (Note 29).

 

 

14.    Goodwill

				£'000
At 1 October 2019 and 30 September 2020				42,357
Acquisition of Vinshire Gas Services Limited				310
Other adjustments to goodwill - Just Energy Solutions Limited				(188)
At 30 September 2021				42,479

 

Goodwill arising on consolidation represents the excess of the fair value of the consideration transferred over the fair value of the Group's share of the net assets of the acquired subsidiary at the date of acquisition.

 

Goodwill is not amortised but is reviewed for impairment on an annual basis or more frequently if there is an indication that goodwill may be impaired.  Goodwill acquired in a business combination is allocated to cash-generating units ("CGUs") according to the level at which management monitors that goodwill. 

 

Goodwill is carried at cost less accumulated impairment losses.

The carrying value of goodwill is allocated to the following CGUs:

		2021		2020
CGU	Segment	£'000		£'000
K&T Heating Services Limited	Compliance	3,774		3,774
Sureserve Fire and Electrical Limited	Compliance	3,717		3,717
Everwarm Limited	Energy services	17,476		17,476
H2O Nationwide Limited	Compliance	2,209		2,209
Providor Limited	Energy services	3,037		3,037
Sure Maintenance Limited	Compliance	4,225		4,225
Aaron Services Limited	Compliance	3,977		3,667
Precision Lifts Limited	Compliance	4,064		4,064
Just Energy Solutions Limited	Compliance	-		188
		42,479		42,357

 

An asset is impaired if its carrying value exceeds the unit's recoverable amount which is based upon value in use. At each reporting date impairment reviews are performed by comparing the carrying value of the CGU to its value in use.  At 30 September 2021 the value in use for each CGU was calculated based upon the cash flow projections of the latest Board approved three-year forecasts together with a further two years estimated and an appropriate terminal value to perpetuity.

 

Future forecasted profits are estimated by reference to the average operating margins achieved in the period immediately before the start of the forecast period.

 

The estimated growth rates are based on past experience and knowledge of the individual sector's markets. The Directors believe that the compliance and energy service markets will continue to present strong growth opportunities for the CGUs outlined above. Management believe that future growth in these markets is underpinned by a number of factors including:

 

·      A pipeline of new tenders

·      Further opportunities to work with other Group companies

·      Client demand for safe buildings

·      Adjacent market opportunities

 

The assumptions used in the impairment reviews are outlined below.

 

The growth rate applied to the cash flows in years four and five of the impairment review performed at 30 September 2021 was 4% (2020: 4%). A terminal growth rate of 2% (2020: 2%) was applied. The pre-tax discount rate applied was 7.3% (2020: 7.2%). Three different types of sensitivity analysis have been performed on entities that showed potential indicators of impairment, including a 20% reduction in revenue, a reduction in the operating profit margin of between 1% and 2% and an increase in the discount rate by between 1.5% and 3%. Additional sensitivity has been completed regarding the potential effect of Covid-19 in 2022 and 2023 for the Energy Services division. The Directors consider that any reasonable possible change in the key assumptions would not cause the carrying amount to exceed its recoverable amount.

 

The goodwill in Just Energy Solutions has been written down to zero as it is no longer a trading CGU.

 

15.    Other intangible assets

		Acquisition intangibles
	Computer software	Contracted customer order book	Customer relationships	Non-compete agreements		Total
	£'000	£'000	£'000	£'000		£'000
Cost
At 1 October 2019	1,349	18,606	14,655	1,670		36,280
Additions	539	-	-	-		539
Disposals	(15)	-	-	-		(15)
At 30 September 2020	1,873	18,606	14,655	1,670		36,804
Additions	545	-	-	-		545
Disposals	(272)	-	-	-		(272)
At 30 September 2021	2,146	18,606	14,655	1,670		37,077
Amortisation
At 1 October 2019	778	18,522	13,139	1,670		34,109
Amortisation charge	384	84	1,516	-		1,984
Disposals	(15)	-	-	-		(15)
At 30 September 2020	1,147	18,606	14,655	1,670		36,078
Amortisation charge	451	-	-	-		451
Disposals	(272)	-	-	-		(272)
At 30 September 2021	1,326	18,606	14,655	1,670		36,257
Carrying value
At 30 September 2021	820	-	-	-		820
At 30 September 2020	726	-	-	-		726

 

Contracted customer order book

The value placed on the order book was based upon the cash flow projections over the contracts in place when a business is acquired.  Due to uncertainties with trying to forecast revenues beyond the contract term, the Directors have valued contracts over the contractual term only.  The value of the order book was amortised over the remaining life of each contract which typically range from one to five years.

 

Customer relationships

The values placed on the customer relationships were based upon the non-contractual expected cash inflows forecast on the base business over and above contracted revenues.  The value of customer relationships was amortised over five years.

 

Non-compete agreements

The value placed on the non-compete agreements was based upon the non-compete clause and knowledge and know-how of the former owners of the acquired businesses.  The value of non-compete was amortised over five years.

 

16.    Property, plant and equipment

	Leasehold improvements	Plant & equipment	Fixtures and fittings	Motor vehicles		Total
	£'000	£'000	£'000	£'000		£'000
Cost
At 1 October 2019	686	1,224	1,640	379		3,929
Additions	10	373	238	-		621
Disposals	(20)	(208)	(118)	(203)		(549)
At 30 September 2020	676	1,389	1,760	176		4,001
Additions	635	586	349	-		1,570
Disposals	(71)	(223)	(307)	(61)		(662)
At 30 September 2021	1,240	1,752	1,802	115		4,909
Depreciation
At 1 October 2019	272	737	1,275	301		2,585
Charge for the year	207	236	228	11		682
Disposals	(19)	(208)	(107)	(144)		(478)
At 30 September 2020	460	765	1,396	168		2,789
Charge for the year	99	355	227	-		681
Disposals	(2)	(208)	(307)	(53)		(570)
At 30 September 2021	557	912	1,316	115		2,900
Net book value
At 30 September 2021	683	840	486	-		2,009
At 30 September 2020	216	624	364	8		1,212

 

17.    Right of use assets

			Leasehold property	Commercial Vehicles		Total
			£'000	£'000		£'000
Cost
At 1 October 2019			2,989	5,171		8,160
Additions			246	2,750		2,996
Disposals			-	(887)		(887)
At 30 September 2020			3,235	7,034		10,269
Acquisition of Vinshire Gas Services Limited			-	283		283
Additions			3,325	6,025		9,350
Disposals			(130)	(1,006)		(1,136)
At 30 September 2021			6,430	12,336		18,766
Depreciation
At 1 October 2019			-	-		-
Charge for the year			1,111	3,000		4,111
Disposals			-	(599)		(599)
At 30 September 2020			1,111	2,401		3,512
Charge for the year			1,074	3,329		4,403
Disposals			(130)	(583)		(713)
At 30 September 2021			2,055	5,147		7,202
Net book value
At 30 September 2021			4,375	7,189		11,564
At 30 September 2020			2,124	4,633		6,757

 

18.    Group entities

 

Subsidiaries

The Group's subsidiary undertakings are;

	Country of incorporation	Class of capital	%	Principal activity
Aaron Services Limited	England	Ordinary	100	Maintenance and installation of domestic gas heating systems
Sureserve Fire and Electrical Limited	England	Ordinary	100	Fire alarm engineers
Bury Metering Services Limited	England	Ordinary	100	Non-trading
Everwarm Limited	Scotland	Ordinary	100	Energy and insulation services
H20 Nationwide Limited	England	Ordinary	100	Water hygiene
Just Energy Solutions Limited	England	Ordinary	100	Non-trading
K & T Heating Services Limited	England	Ordinary	100	Plumbing and heating engineers
Precision Lift Services Limited	England	Ordinary	100	Lift installation, modernisation and maintenance services
Providor Limited	England	Ordinary	100	Smart Metering
Smart Metering Limited	England	Ordinary	100	Non-trading
Sure Maintenance Limited	England	Ordinary	100	Maintenance and installation of domestic gas heating systems
Sureserve Compliance Services Limited	England	Ordinary	100	Intermediate holding company
Sureserve VGS Limited (formerly known as Sureserve Construction Services Limited)	England	Ordinary	100	Intermediate holding company
Sureserve Design and Build Limited	England	Ordinary	100	Non-trading
Sureserve Energy Services Limited	England	Ordinary	100	Intermediate holding company
Sureserve Holdings Limited (*)	England	Ordinary	100	Intermediate holding company
Vinshire Gas Services Limited	England	Ordinary	100	Maintenance and installation of domestic gas heating systems
* Directly held investment
The registered office of all entities above is Crossways Point 15, Victory Way, Crossways Business Park, Dartford, Kent, DA2 6DT except for Everwarm Limited whose registered office is 3 Inchcorse Place, Whitehill Industrial Estate, Bathgate, Scotland, EH48 2EE.

Joint ventures

The Group's joint ventures are:

	Country of incorporation	Class of capital	%	Principal activity
Warmworks Scotland LLP	Scotland	Ordinary	33.33	Energy and insulation services
Arbed am Byth	Wales	Ordinary	50	Energy and insulation services

 

Details of joint ventures

	2021		2020
	£'000		£'000
Carrying value of investment in Arbed am Byth	536		390
Carrying value of investment in Warmworks Scotland LLP	1,124		111
	1,660		501

 

Warmworks, a joint venture with Changeworks Resources for Life and the Energy Saving Trust Enterprises Limited, commenced trading in September 2015, and the profit for 2021 was £1,013,000 (2020: loss of £62,000). The registered office of Warmworks Scotland LLP is 1 Carmichael Place, Leith, Edinburgh, Midlothian, EH6 5PH.

 

Arbed am Byth, a joint venture with the Energy Saving Trust Enterprises Limited, commenced trading in August 2018, and the profit for 2021 was £146,000 (2020: £161,000). The registered office of Arbed am Byth is Unit 2 Cefn Coed, Nantgarw, Cardiff, Wales, CF15 7QQ. 

 

19.    Inventories

	2021		2020
	£'000		£'000
Raw materials and consumables	4,199		3,022

 

There are no inventories at 30 September 2021 or 30 September 2020 carried at fair value less costs to sell.  The Directors consider that the replacement value of inventories is not materially different from their carrying value.  There was no specific security held at either reporting date over inventory.

 

£63,289,000 (2020: £50,615,000) of inventories were recognised as an expense in the year.

 

20.    Trade and other receivables

	2021		2020
	£'000		£'000
Current
Trade receivables	18,414		16,667
Social security and other taxes	-		7
Other receivables	3,698		3,708
Prepayments	3,219		2,336
Accrued income	17,918		17,336
	43,249		40,054
Other receivables include sales retentions of £2,920,000 (2020: £2,461,000), rebates receivable of £516,000 (2020: £714,000), and finance issue costs of £27,000 (2020: £136,000).
	2021		2020
	£'000		£'000
Trade receivables
Trade receivables not due	16,386		15,231
Trade receivables past due 1-30 days	1,666		1,088
Trade receivables past due 31-60 days	84		255
Trade receivables past due 61-90 days	93		64
Trade receivables past due over 90 days	433		475
Gross trade receivables	18,662		17,113
Provision for credit losses brought forward	(446)		(619)
Amounts written off	208		312
Provision charged to profit or loss in the year	(10)		(139)
Provision for credit losses carried forward	(248)		(446)
Net trade receivables	18,414		16,667

The provision for credit losses of £248,000 (2020: £446,000) includes £148,000 (2020: £446,000) of trade receivables over 90 days past their due date.

 

The Directors consider that the carrying amount of trade receivables approximates to their fair value. Debts provided for and written off are determined on an individual basis and included in other operating expenses in the financial statements. The Directors believe the credit risk is low due to the majority of the Group's customer base being either public sector or regulated bodies. The Group's maximum exposure on credit risk is fair value on trade receivables as presented above. The Group has not pledged any trade receivables as security.

 

At the end of the year one client represented over 5% of the total balance of trade receivables (2020:one client).

 

21.    Trade and other payables

	2021		2020
	£'000		£'000
Current
Trade payables	24,937		19,547
Sub-contract retentions	727		833
Accruals	11,727		9,918
Deferred income	980		920
Social security and other taxes	7,524		10,508
Other payables	1,502		1,038
	47,397		42,764

The Directors consider that the carrying amount of trade payables approximates to their fair value for each reported period.  Trade payables are non-interesting bearing.  Average settlement days are 68 days (2020: 65 days).

 

22.    Borrowings

 

In December 2021, the Group renewed its bank facilities to provide an overdraft facility of £5,000,000 together with a revolving credit facility of £15,000,000 which runs to 31 January 2025.

 

23.    Net cash

	2021		2020
	£'000		£'000
Cash and cash equivalents	16,444		9,679
Unamortised finance costs (included in other receivables)	27		136
Net cash pre lease liabilities	16,471		9,815
Lease liabilities	(12,043)		(6,836)
Total net cash	4,428		2,979

 

24.    Provisions

							Legal and other
							£'000
At 1 October 2019							3,610
Additional provision							632
Utilised in the year							(196)
At 30 September 2020							4,046
Additional provision							746
Released during the year							(1,187)
Utilised in the year							(1,606)
At 30 September 2021							1,999
Current provisions							403
Non-current provisions							1,596

Legal and other

 

Provisions relate to property dilapidation obligations, potential contract settlement costs and other potential legal settlement costs. 

 

These are expected to result in an outflow of economic benefit over the next one to five years. See notes 7 and 30 for further details.

 

25.    Deferred taxation

	Accelerated capital allowances	Short term timing differences	Share based payments	Acquisition intangibles	Unutilised losses	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Asset / (provision) bought forward as at 1 October 2019	233	290	92	(272)	124	467
Credit / (debit) to P&L	(140)	(61)	(36)	272	15	50
Asset / (provision) carried forward as at 30 September 2020	93	229	56	-	139	517
Credit / (debit) to P&L	(260)	72	89	-	43	(56)
Deferred tax on share- based payments recognised in equity	-	-	(117)	-	-	(117)
(Liability) / asset carried forward as at 30 September 2021	(167)	301	28	-	182	344
At 30 September 2021
Non-current asset	-	301	28	-	182	511
Non-current liability	(167)	-	-	-	-	(167)
Net deferred tax (liability) / asset	(167)	301	28	-	182	344
At 30 September 2020
Non-current asset	93	229	56	-	139	517
Non-current liability	-	-	-	-	-	-
Net deferred tax asset	93	229	56	-	139	517

 

Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so.

 

26.    Lease liabilities

							Present value of minimum lease payments
							£'000
At 1 October 2019							8,160
Repayments							(4,289)
Interest							258
New obligations							2,996
Obligations cancelled							(289)
At 30 September 2020							6,836
Repayments							(4,283)
Interest							475
New obligations on acquisition							283
Variation in terms							18
New obligations							9,332
Obligations cancelled							(618)
At 30 September 2021							12,043
Future lease payments are due as follows:
							Present value of minimum lease payments
							£'000
Less than one year							4,071
Between two and five years							7,972
At 30 September 2021							12,043
Less than one year							3,167
Between two and five years							3,669
At 30 September 2020							6,836

 

27.    Called up share capital

Allotted, called-up and fully paid;

2021		2020		2021		2020
Number		Number		£		£
161,213,788		159,335,259	Ordinary shares of £0.10 each	16,121,379		15,933,526

 

Details of options granted under the Group's share scheme are contained in Note 28.

 

Voting rights

 

The holders of ordinary shares are entitled to receive notice of, attend or participate in any general meeting of the Company and to receive any notice of a written resolution proposed to be passed by the Company.

 

On a show of hands at a meeting the holders of any such shares shall be entitled to one vote for all such shares held.

 

On a poll at a meeting, for a written resolution, the holder of such shares shall be entitled to such number of votes as corresponds to the nominal value (in pence) or the relevant shares held.

 

28.    Share-based payments

 

The Company has established a Share Incentive Plan (SIP), Sharesave Scheme (SAYE), Company Share Option Plan (CSOP), Performance Share Plan (PSP) and a Special Incentive Award Plan (SIAP).

 

The charge recognised for share based payments in the year was £285,000 (2020: £171,000) gross of tax.

 

Share Incentive Plan (SIP)

 

The SIP is an HMRC-approved scheme plan open to all UK employees at the date of the IPO, 23 March 2015. Each employee was given £200 of free shares; there were no performance conditions apart from remaining in employment for three years from the date of award. Shares totalling 325,842 were transferred directly to the SIP trust and on 29 April 2015, 236,213 share allotted in relation to the initial award of shares under the SIP.  No further awards have been made under the SIP.

 

Sharesave Scheme (SAYE)

 

The SAYE is open to all employees who satisfy certain criteria, particularly relating to period of employment. The exercise price is equal to the average of the closing quoted market price for the preceding three days less a discretionary discount approved by the Board of not less than 80% of the market value of a share. The Scheme is for three years, during which the holder must remain in the employment of the Group. The shares can be exercised within six months from the maturity of the Scheme.

 

Company Share Option Plan (CSOP)

 

The CSOP is open to all employees at the discretion of the Remuneration Committee. The exercise price is equal to the average of the closing quoted market price at the date of grant. The vesting period is for three years, during which the holder must remain in the employment of the Group and is conditional on the achievement of a mix of market and non-market performance conditions from the date of granting the option to the date of potential exercise.

 

Performance Share Plan (PSP)

 

The PSP is open to certain employees at the discretion of the Remuneration Committee at a limit not exceeding 150% of the individual's base salary at the date of grant. The exercise price is £nil. The vesting period is for three years, during which the holder must remain in the employment of the Group and is conditional on the achievement of a mix of market and non-market performance conditions from the date of granting the option to the date of potential exercise.

 

Special Incentive Award Plan (SIAP)

 

Awards granted under the SIAP take the form of options to acquire Sureserve Shares for nil consideration.  The awards will have no beneficial tax status.  Only employees who are also Directors of the Company may be granted an award under the SIAP.  The Remuneration Committee will have absolute discretion to select the persons to whom awards may be granted and in determining the number of shares to be subject to each award. 

 

	SIP	SAYE	CSOP	PSP	SIAP
Number
At 1 October 2019	65,867	2,963,436	1,248,153	160,000	800,000
Granted	-	1,818,896	1,880,000	680,000	-
Lapsed	-	(583,656)	(15,000)	-	-
Exercised	(65,867)	(387,792)	-	-	-
At 30 September 2020	-	3,810,884	3,113,153	840,000	800,000
Granted	-	-	-	-	180,000
Lapsed	-	(769,129)	(137,870)	-	-
Exercised	-	(551,336)	(272,643)	-	(980,000)
At 30 September 2021	-	2,490,419	2,702,640	840,000	-
Weighted average exercise price (p)
At 1 October 2020	0.00p	30.22p	42.71p	0.00p	0.00p
Granted	-	-	-	-	0.00p
Lapsed	-	30.72p	44.00p	-	-
Exercised	0.00p	33.24p	40.75p	-	0.00p
Outstanding at 30 September 2021	0.00p	29.40p	42.84p	0.00p	0.00p
Outstanding value at 30 September 2020	0.00p	30.22p	42.71p	0.00p	0.00p
Fair value of options granted
Weighted fair value of one option	-	8.32p	17.85p	39.42p	6.00p
Assumptions used in estimating the fair value (weighted average)
Share price at date of grant	-	31.17p	42.58p	43.24p	27.10p
Exercise price	-	29.40p	42.84p	0.00p	0.00p
Expected dividend yield	-	2.18%	3.81%	2.90%	1.00%
Risk free rate	-	0.39%	0.04%	(0.03%)	0.71%
Expected volatility	-	40.45%	56.76%	57.10%	34.90%
Expected life	-	3.42 years	5.26 years	3.00 years	1.50 years

 

In the year ended 30 September 2021, options were granted in respect of the SIAP schemes.

 

The weighted average remaining contractual life of outstanding options at 30 September 2021 was 1.2 years (2020: 1.7 years).

The SAYE, CSOP and PSP options were valued under the binomial methodology.

 

The SIAP options were valued using a Monte Carlo model.

 

The inputs into the Binomial model are as follows:				2021	2020
Share price (p)				-	32.00 - 44.00
Exercise price (p)				-	0.00 - 44.00
Expected volatility (%)				-	35.00 - 58.00
Expected life (years)				-	3 - 6.5
Risk-free rate (%)				-	(0.05) - 0.20
Expected dividend yield (%)				-	1.75 - 1.85
The inputs into the Monte Carlo model are as follows:				2021	2020
Share price (p)				27.1	-
Exercise price (p)				0.00	-
Expected volatility (%)				34.90	-
Expected life (years)				1.50	-
Risk-free rate (%)				0.71	-
Expected dividend yield (%)				1.00	-

 

Expected volatility was based upon the historical volatility over the expected life of the schemes.  The expected life is based upon scheme rules and reflect management's best estimates for the effects of non-transferability, exercise restrictions and behavioral considerations.

 

29.    Reserves

 

Share premium reserve

 

The share premium account represents amounts received in excess of the nominal value of shares on issue of new shares, net of the direct costs associated with issuing those shares.

 

Own shares reserve

 

At IPO, each employee was given £200 of free shares, to be held for their benefit in an Employee Benefit Trust. Shares totalling 325,842 were transferred directly to the Employee Benefit Trust on 23 March 2015.  The own shares reserve at 30 September 2020 represented the cost of 325,842 shares in Sureserve Group plc. At 30 September 2021, the shares had been transferred to employees and the reserve balance was £nil.

 

Merger reserve

 

On 23 March 2015 Sureserve Group plc (then Lakehouse plc) was listed on the Premium Listing segment of the Official List and trading on the Main Market of the London Stock Exchange.  As part of a restructuring accompanying the Initial Public Offering ("IPO") of the Group on 23 March 2015, Sureserve Group plc replaced Sureserve Holdings Limited as the Group's ultimate parent company by way of a share exchange agreement.  Under IFRS 3 this has been accounted for as a group reconstruction under merger accounting. 

 

Merger accounting principles for this combination gave rise to a merger reserve of £20,067,000.

 

Share based payment reserve

 

See note 28 for further details.

 

30.    Guarantees and contingent liabilities

 

The Company and certain subsidiaries have, in the normal course of business, given guarantees and performance bonds relating to the Group's contracts totalling £5,463,000 (2020: £4,621,000). A subsidiary of the Group has provided a guarantee of £750,000 (2020: £750,000) to the Warmworks Scotland LLP joint venture.

 

Contingent liabilities in respect of the disposal of Lakehouse Contracts Limited and Foster Property Maintenance Limited are disclosed in Note 7.

 

The £1.2m provisions release (note 24) relates to a past event which in the directors' judgement has a lower risk likelihood and is now considered possible rather than probable, and hence is disclosed as a contingent liability in the current year.

 

31.    Financial instruments

 

Financial instruments comprise both financial assets and financial liabilities. The carrying value of these financial assets and liabilities are assumed to approximate their fair values.

 

The principal financial assets in the Group comprise trade, loans and other receivables and cash and cash equivalents. The principal financial liabilities in the Group comprise borrowings which are categorised as debt at amortised cost, together with trade and other payables, other long-term liabilities, which are classified as other financial liabilities.

 

Financial risk management

 

The Group's objectives when managing finance and capital are to safeguard the Group's ability to continue as a going concern in order to provide returns to shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.  The Group is not subject to any externally imposed capital requirements.

 

The main financial risks faced by the Group are liquidity risk, credit risk and market risk (which includes interest rate risk).  Currently the Group only operates in the UK and only transacts in Sterling.  It is therefore not exposed to any foreign currency exchange risk.  The Board regularly reviews and agrees policies for managing each of these risks.

 

Categories of financial instruments

			Financial assets measured at amortised cost
			2021		2020
Financial assets			£'000		£'000
Current financial assets
Trade receivables, loans and other receivables			40,030		37,711
Cash and cash equivalents			16,444		9,679
			56,474		47,390

 

 

			Financial liabilities measured at amortised cost
			2021		2020
Financial liabilities			£'000		£'000
Current financial liabilities
Trade and other payables			38,027		31,336
Lease liabilities			4,071		3,167
Total current financial liabilities			42,098		34,503
Non-current financial liabilities
Lease liabilities			7,972		3,669
			50,070		38,172

 

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

 

Credit risk

 

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.  The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults.  The Group does not enter into derivatives to manage its credit risk.

 

The maximum exposure to credit risk at the reporting date is represented by the carrying value of the financial assets in the statement of financial position.  The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics.

 

There has been a minimal history of bad debts as the majority of its sales are to local government councils or housing trust partnerships and as a consequence the Directors do not consider that the Group has a material exposure to credit risk.

 

Market risk

 

As the Group only operates in the UK and only transacts in Sterling, the Group's activities expose it primarily to the financial risks of changes in interest rates only and as a consequence of being debt free the Directors do not consider that the Group has a material exposure to interest rate risk.

 

Liquidity risk

 

Ultimate responsibility for liquidity risk management rests with the Board, which has established an appropriate liquidity risk management framework for the management of the Group's short,medium and long term funding and liquidity management requirements.  The Group's policy on liquidity is to ensure that there are sufficient committed borrowing facilities to meet the Group's long to medium-term funding requirements.

 

The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

 

(a)   Interest rate risk

Due to the floating rate of interest on the Group's principal borrowings, the Group is exposed to interest rate risk. The Group's average interest rate was 3.3% (2020: 3.7%) which included LIBOR and margin.

 

(b)   Interest rate sensitivity analysis

The Group's principal borrowings attract floating rate interest.  On a weighted average of £nil (2020: £6.4m) of debt in the year, a half per cent increase in the floating interest rate would have increased annual interest payable by £nil (2020: 32,000). 

 

32.    Cash generated from operations

	2021		2020
	£'000		£'000
Operating profit	14,793		8,805
Adjustments for:
Depreciation	5,084		4,793
Share-based payments	285		171
Amortisation of intangible related assets	451		1,984
Impairment of goodwill and acquisition intangibles	188		-
Profit on disposal of property, plant and equipment	(208)		(10)
Changes in working capital:
Inventories	(1,158)		37
Trade and other receivables	(3,661)		1,618
Trade and other payables	3,765		6,035
Provisions	(2,047)		436
Cash generated from operations	17,492		23,869

 

33.    Business combinations

 

Vinshire Gas Service Limited

On 3 December 2020 the Group acquired certain trade and other assets of Vinshire Plumbing and Heating Limited, which included the entire share capital of Vinshire Gas Services Limited, for consideration as detailed below. Vinshire Gas Services Limited's principal activity is that of installation and maintenance of plumbing and heating systems.  The effect of the acquisition on the Group's assets and liabilities were as follows:

 

					£'000
Assets
Non-current
Property, plant and equipment					283
Current
Inventories					19
Trade and other receivables					693
Cash					-
Total assets					995
Liabilities
Current
Provisions					(20)
Trade and other payables					(1,085)
Total liabilities					(1,105)
Net liabilities acquired					(110)
Satisfied by:
Cash consideration					200
Goodwill					310

 

The Directors consider the value assigned to goodwill represents the workforce acquired, expected synergies to be generated, and access to additional geographical areas in the UK as a result of this acquisition.  It is not expected that any goodwill will be deductible for tax purposes.

 

Post-Acquisition results

 

The results for Vinshire Gas Services Limited since the acquisition date, included within the consolidated Statement of Comprehensive Income for the period ended 30 September 2021, are:

 

	£'000
Revenue	4,278
Operating profit	154
Interest payable	(6)
Profit before tax	148
Taxation	(29)
Profit for the period	119

 

There is no difference between the revenue and profit for the period and for the period starting 1 October 2020

 

34.    Related party transactions

 

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this Note.

 

Trading transactions

 

The Company's subsidiary, Everwarm Limited, provides services to Warmworks Scotland LLP, a joint venture with Changeworks Resources for Life and Energy Saving Trust Enterprises Limited. £9,609,000 of services were provided in 2021 (2020: £5,285,000). £848,000 was charged to Everwarm Limited from Warmworks Scotland LLP for services provided in 2021 (2020: £484,000).

 

At 30 September 2021 Everwarm Limited had a receivable owing from Warmworks amounting to £1,601,000 (2020: £1,166,000), and a payable of £138,000 (2020: £23,000).

 

The Company's subsidiary, Everwarm Limited, provides services to Arbed am Byth, a joint venture with Energy Saving Trust Enterprises Limited. As at 30 September 2021 Everwarm Limited had a receivable owing from Arbed am Byth amounting to £3,000 (2020: £18,000). £243,000 was charged by Everwarm Limited to Arbed am Byth for services provided in 2021 (2020: £359,000).

 

Bob Holt provided consultancy services via a company of which he is a shareholder. The daily fee payable for such consultancy services was £1,595 plus VAT. Such services were provided at a total cost of £150,000 (2020: £285,000)(plus VAT). A further £150,000 compensation for loss of office (2020:£nil), was also paid. Sureserve group plc had an amount owing to the company of £nil (2020: £nil).

 

Remuneration of key management personnel

 

The remuneration of the Directors and members of the Board, together with other key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 - Related Party Disclosures. The key management personnel are the members of the Executive Management Team.  Further information about the remuneration of individual Group Directors is provided in the audited part of the remuneration report;

	2021		2020
	Number		Number
Number of members of the Executive Management Team at each year end	15		15
	2021		2020
	£'000		£'000
Short-term employee benefits	2,766		2,383
Share-based payment charge	113		-
Post-employment benefits	211		142
Compensation for loss of office	187		-
	3,277		2,525

 

In addition to the above dividends were paid to directors of £1,000 (2020: £7,000). Gains on exercise of share options were £860,000 (2020: £nil).

 

35.    Events after the reporting date

 

On 4 November 2021, Peter Smith was appointed as the new CEO.

 

Arbed am Byth

 

The Arbed 3 programme for the Welsh Government is delivered via our joint venture with the Energy Saving Trust. The original three-year contract term had seen a six-month extension to November 2021 as previously announced. While we are disappointed the scheme has now concluded, we were satisfied with the delivery volumes achieved despite the challenges Covid-19 has presented during the term. The Welsh Government has not yet announced details of any successor scheme. We will monitor this alongside other appropriate opportunities. The joint venture has now concluded the installation programme and is currently undertaking remaining post installation obligations. We are delighted the Group continues to install energy efficiency measures in Wales through our recently awarded energy refrofit scheme with Pobl Group in Swansea. Other Group works in Wales include our fire business SS F&E is undertaking ongoing sprinkler installations in Newport.

 

CorEnergy Limited

 

On 7 December 2021, the Group, acquired the entire issued share capital of CorEnergy Limited, a business focused on delivering sustainable energy solutions for public and private sector organisations.

 

The maximum total consideration payable for CorEnergy is £7.5 million, plus any working capital adjustments with an initial £5.9 million payable on completion, satisfied through £2.9m in cash and the issue of 3,281,879 new ordinary shares of 10p each in Sureserve. The Consideration Shares were issued at an effective price of 89.4p each. Further deferred consideration of up to a maximum of £1.6 million may be payable, split equally between cash and shares, depending on CorEnergy's full year results to December 2021. The transaction is to be achieved on a debt free / cash free basis.

 

The provisional effect of the acquisition on the Group's assets and liabilities were as follows:

 

					Provisional fair value
					£'000
Assets
Non-current
Deferred tax asset					91
Current
Trade and other receivables					671
Cash					1,651
Total current assets					2,322
Total assets					2,413
Liabilities
Current
Provisions					(40)
Trade and other payables					(1,258)
Total liabilities					(1,298)
Net assets acquired					1,115
Goodwill and intangible assets acquired					6,494
					7,609
Satisfied by:
Cash consideration					2,934
Deferred cash consideration					300
Share consideration					2,934
Deferred share consideration					300
Working capital adjustment (paid in cash)					1,141
					7,609

 

Contingent deferred consideration has been calculated based on the expectations of future performance of the entity compared to the calculation methodology set out in the Share Purchase Agreement.  The contingent deferred consideration may vary depending on the underlying trading performance of the business.

 

The CorEnergy Limited intangible assets and goodwill represent the expected value to be derived from the acquired customer-related contracts and acquired customer relationships. The value of the customer-related contracts and customer relationships will be based on expected post-tax cash inflows over the estimated remaining life of the contract. The estimated life for customer contracts is assumed to be the remaining life of the contract, and the customer relationships are expected to have a life of up to three years.

 

The Directors consider the value assigned to goodwill will represent the workforce acquired, expected synergies to be generated, and access to additional geographical areas in the UK as a result of this acquisition.  It is not expected that any goodwill will be deductible for tax purposes.