Utilities equity research

Explore the most viewed and latest equity research and media content for companies within the Utilities sector. Companies within this sector provide services including electricity generation, water, gas and multiservice utilities.

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Strategically important asset sale and partnership with ESP

Fulcrum has entered into a conditional sale and purchase agreement to sell its domestic customer gas connection assets, including the order book and associated meters, to ESP (backed by 3i Infrastructure). The net consideration is £33m in cash, representing more than half of the market cap. £17m will be paid as an initial consideration, with the remainder paid in tranches as assets are built out and exchanged over the next four years. This is a strategically important deal for the Group, realising significant value in the utility asset portfolio (average premium to book value of c.25%-30%) and significantly strengthening the balance sheet. Fulcrum will also partner with ESP as an asset adopter in certain future tenders under similar terms to the sale (improving as certain milestones relating to the number of connections are met). The proceeds of the sale will be used to reduce debt and to undertake a share buyback programme to return up to £4m to shareholders (this is expected to track sales proceeds). The FY20 interim dividend will be deferred until completion (expected Q1 cal. ‘20). Separately, Fulcrum has announced its interim results which highlight a difficult H1 trading period. H1 was impacted by economic and political uncertainty as well as the Capacity market suspension (now lifted) and a lower level of smart meter installation activity. This is in line with commentary from other listed peers exposed to construction activity. Adj. EBITDA was £1.4m and adj. PBT was £0.3m in H1. Whilst this is disappointing, the second half of the year has started well, with average monthly sales order intake in H2 to date up around 40% vs. H1. We will update our forecasts and valuation in due course, but expect to decrease our current year EBITDA forecast to c.£5.0m (-26%) and PBT to c.£2.5m. The utility asset sale will generate significant cash for the Group, which should allay any concerns about the balance sheet and allow investors to focus on earnings recovery potential. We believe a strong recovery in FY21 and beyond is achievable.

Fulcrum Utility Services

  • 23 Dec 19
  • -
Strategically important asset sale and partnership with ESP

Fulcrum has entered into a conditional sale and purchase agreement to sell its domestic customer gas connection assets, including the order book and associated meters, to ESP (backed by 3i Infrastructure). The net consideration is £33m in cash, representing more than half of the market cap. £17m will be paid as an initial consideration, with the remainder paid in tranches as assets are built out and exchanged over the next four years. This is a strategically important deal for the Group, realising significant value in the utility asset portfolio (average premium to book value of c.25%-30%) and significantly strengthening the balance sheet. Fulcrum will also partner with ESP as an asset adopter in certain future tenders under similar terms to the sale (improving as certain milestones relating to the number of connections are met). The proceeds of the sale will be used to reduce debt and to undertake a share buyback programme to return up to £4m to shareholders (this is expected to track sales proceeds). The FY20 interim dividend will be deferred until completion (expected Q1 cal. ‘20). Separately, Fulcrum has announced its interim results which highlight a difficult H1 trading period. H1 was impacted by economic and political uncertainty as well as the Capacity market suspension (now lifted) and a lower level of smart meter installation activity. This is in line with commentary from other listed peers exposed to construction activity. Adj. EBITDA was £1.4m and adj. PBT was £0.3m in H1. Whilst this is disappointing, the second half of the year has started well, with average monthly sales order intake in H2 to date up around 40% vs. H1. We will update our forecasts and valuation in due course, but expect to decrease our current year EBITDA forecast to c.£5.0m (-26%) and PBT to c.£2.5m. The utility asset sale will generate significant cash for the Group, which should allay any concerns about the balance sheet and allow investors to focus on earnings recovery potential. We believe a strong recovery in FY21 and beyond is achievable.

Fulcrum Utility Services

  • 23 Dec 19
  • -