BILB.L Regulatory News (BILB)

26 June 2017

Bilby Plc

("Bilby", the "Group" or the "Company")

Preliminary Results

Bilby Plc (AIM: BILB.L), the holding company for P&R Installation Company Limited ("P&R"), Purdy Contracts Limited ("Purdy"), Spokemead Maintenance Limited ("Spokemead"), and DCB (Kent) Limited ("DCB"), a leading gas heating and building services provider, is pleased to announce its preliminary unaudited results for the 12 months ended 31 March 2017.

Financial Highlights

*after non underlying items which include: Amortisation of customer relationships, restructuring costs, change in value of contingent consideration, share based payment charge, acquisition costs and change in estimate of accrued income.

Operational Highlights

· Acquired DCB for a maximum consideration of £4.0 million and Spokemead for a maximum consideration of £8.7 million. The acquisitions have enabled Bilby to expand the range of services that it offers as well as broadening its customer base and geographical reach. Both acquired businesses have met their initial earn-out performance conditions and are successfully integrated within the Group.

· Significant contract momentum achieved in the second half should underpin a strong financial performance in successive years: P&R was awarded contracts from Carillon, the London Boroughs of Lambeth, Bexley, Haringey, Tower Hamlets and the Housing Associations Phoenix and Paradigm and East Kent Housing.

· P&R finished first in the framework tender for gas support work for the South-East Consortium and was appointed to the Fusion 21 Heating framework. As a result it was subsequently awarded contracts by Walterton and Elgin Community Housing and Sussex and Hampshire Housing Association Saxon Weald.

· DCB was awarded two major contracts to build and refurbish houses in Kent with the Borough of Ashford and West Kent Housing. 

· Purdy has been appointed to the Fusion 21, (Electrical) and Eastern Procurement frameworks and has recently secured a contract with Barnet Homes. Many of Purdy's clients have recently increased the scope of work to be undertaken by Purdy.

· The Group is now one of the largest gas contractors in London and the South East providing general building, gas maintenance and electrical services to over 300,000 domestic and commercial properties across London and South East England.

· Continued investment into operational systems and efficiencies during 2017 has enabled the Group to increase its cash reserves at the year end, which stood at £1.9 million.

Phil Copolo, P&R Founder and Executive Deputy Chairman of Bilby Plc, said:

"We have benefited directly from our buy and build growth strategy, and are pleased to have successfully integrated DCB and Spokemead into the Group. We have made considerable progress in the second half of the year further strengthening our position and market share in London and the South East, where our ongoing commitment to best in class customer service has enabled us to win major contracts that underpin our confidence in the future."

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

Enquiries

Bilby Plc 020 8269 3777

Phil Copolo, Deputy Executive Chairman

Sangita Shah, Non-Executive Chairman

David Ellingham, Finance Director

Northland Capital Partners 020 3861 6625

(Nominated Adviser and Broker)

Corporate Finance:

David Hignell

Matthew Johnson

Patrick Claridge

Sales and Broking:

Bob Pountney

John Howes

Hudson Sandler 020 7796 4133

(Financial PR)

Charlie Jack

Emily Dillon

Chairman's Review

I am delighted to report that the Group has continued to make solid progress. Our strategy of organic growth bolstered by acquisitions has ensured the Group remains on track to increase its market share in the gas heating and general building services markets in London and the South East. This progress is underpinned by Bilby's commitment to consistently deliver outstanding customer service.

Buy and build

In April 2016, Bilby completed its acquisition of DCB, a provider of high quality building, refurbishment and maintenance services to housing associations and local authorities, for a maximum consideration of £4.0 million. At the same time, the Group completed the acquisition of Spokemead, a specialist in electrical installation repairs and maintenance services for local authority-owned housing stock, for a maximum consideration of £8.7 million. The acquisitions, which were immediately earnings enhancing, were supported by a successful placing to new and existing institutional investors, which raised £5.0 million (before expenses).

The acquisitions of DCB and Spokemead have enhanced the Group's service offering as well as its customer and geographic reach. Both businesses have now been successfully integrated, have met their initial earn-out performance conditions and continue to trade strongly. When appropriate, the Group will seek to make further acquisitions to increase its growing presence and market share in London and South East England, whilst progressing its organic growth strategy. Any potential acquisition will continue to meet Bilby's stringent criteria relating to: service synergies, management strength, geographic and customer reach, robust margins, cash flow and revenue visibility. We are pleased to report that all three acquisitions since Bilby's IPO in 2015 have continued to demonstrate and maintain these attributes.

Organic growth

Whilst the Group finished the year with considerable commercial momentum, during the first half of the year trading was impacted when a major customer of the Group took a substantial amount of work in house, which impacted half year revenues and profitability. Despite this challenge, the Group continued to focus on its strategy of organic growth and significant progress was made in the second half of the year. This included existing customers extending the scope of contracted work and companies within the Group winning a number of new and sizable long-term contracts.

The new large contract gains validate the Group's buy and build strategy. Furthermore, they are a clear endorsement of the strong reputation for operational excellence that Bilby companies command in the market place. Importantly, this clear momentum significantly increases the Group's revenue visibility for the current financial year and beyond.

Dividend

The Board has recommended a final dividend of 1.50p per ordinary share that, together with the interim dividend of 0.25p, represents a total of 1.75p per share. The final dividend will be paid, subject to shareholder approval, to those shareholders on the register at close of business on 31 July 2017. The Group's dividend policy will continue to be actively reviewed by the Board to ensure shareholders receive an appropriate return whilst ensuring the Group retains sufficient resource to invest for growth.

Our People

The Group's leading reputation is driven by the passion and commitment of our employees. They are an integral asset to the Group and underpin our success. On behalf of the Board I would like to thank them all for their perseverance, continued hard work and commitment to ensuring that our customers are served in the best possible manner. The continual development of all our staff remains a priority and we are fully committed to being a best in class employer.

Outlook

Bilby has achieved a considerable amount during the financial year. Our successfully integrated companies continue to benefit from the opportunities and synergies that Bilby's scale, service offering and customer reach provide. Critically, the Group's strong commercial momentum in the second half, which has continued into the current period, gives Bilby a robust platform for future growth. Accordingly, we can look to the future with considerable confidence.

Sangita Shah, Chairman

Operational review

Financial performance

In the twelve month period ended 31 March 2017, and reflecting a full years contribution from DCB and Spokemead, Group revenue increased 103% to £63.98 million (2016 restated: £31.45 million), with underlying operating profit before taxation increasing to £3.32 million (2016 restated: £2.20 million). Profit before taxation and non-underlying items was £0.06 million (2016 £0.72 million).

The Board has recommended a final dividend of 1.50p per ordinary share, together with the interim dividend of 0.25p, representing a total of 1.75p per share for the full year.

Continued investment into operational systems and efficiencies during 2017 has enabled the Group to increase its positive cash reserves at the year-end, which stood at £1.9 million.

Buy and build

The acquisition and successful integration of DCB and Spokemead has delivered a number of strategic benefits to the Group. The acquired businesses have significantly enhanced the Group's service offering, customer and geographic reach in Bilby's core London and South East markets.

Importantly, these businesses have given Bilby the critical mass required to tender for larger contracts, as well as the ability to cross-sell services now available within the Bilby Group. The newly won large contracts in the second half of the financial year have validated this strategy. Furthermore, I am pleased to report that following the acquisitions, the cross fertilisation of services has gained real momentum with numerous joint projects for existing and new customers underway. This is testament to the significant opportunities that exist for the enlarged Group as well as the collaborative nature of the management and companies within Bilby.

Customers - significant momentum in the second half

Whilst the first half saw the exciting addition of the newly acquired businesses the Group faced challenges with a long-standing customer of the Group changing the processes by which they manage their outsourced building services work. This resulted in both delays to expected work and certain work being taken in house by the customer. The Group remains confident that this occurrence is not reflective of any fundamental shift in market practice nor Bilby's highly regarded reputation for operational excellence. The significant trading progress made by Bilby since this development gives the management confidence that this view is validated.

The second half was characterised by the Group winning a substantial quantum of new customers which will result in the scaling up of associated revenues during current and future financial years. New client wins include Carillon (The Ministry of Defence), where, in addition to gas services, it is providing a wide range of building and support services work for one of its core regions. Additionally, the Group was pleased to add the London Boroughs of Lambeth, Haringey, Tower Hamlets, Bexley and the Housing Associations Phoenix and Paradigm to its list of existing customers.

The Group's disciplined focus on the London and the South East markets and long-standing reputation for best in class gas services work led to P&R signing an eight year contract to provide gas services for East Kent Housing. The contract, which commenced on 1 April 2017, is the largest gas services contract awarded in Kent and covers servicing and support for over 16,700 properties. Given the nature of the services provided, both of these gas contracts give the Group significant visibility on higher margin revenues.

As a result of P&R finishing first in the framework tender for gas support work for the South-East Consortium (SEC), giving it access to over 140,000 properties in South East England, it was awarded a contract by Walterton and Elgin Community Housing. The seven year gas-servicing contract commenced prior to the year end.

Additionally, following its appointment to Fusion 21's £200 million per annum Heating Framework in 2016, P&R has now secured a three year gas servicing contract, with a two year extension option, with Sussex and Hampshire Housing Association Saxon Weald. This contract has now started and covers over 4,000 properties.

DCB, Purdy and Spokemead have all performed well. DCB made good progress winning contracts to build and refurbish houses in Kent with the Borough of Ashford and West Kent Housing. During the year Purdy and Spokemead's high levels of customer service enabled them to trade ahead of expectations. 

Marketplace

Whilst some customers have tightened their discretionary spending, we remain confident that the market will continue to benefit from initiatives such as the Decent Homes Standard and the Right to Repair scheme, which remain an ongoing focus for government investment. The growth Bilby has achieved during the year has enabled us to expand both our geographic presence in this core market and our service offering.

Investment

The Group continues to make substantial investment in its operational and IT systems required to realise the benefits and synergies available to the enlarged Group. This investment gives the Board confidence that it can maximise the efficiencies of scale and gain from cost savings generated from activities such as materials and insurance procurement.

Current trading and outlook

Considerable progress has been made in the second half with new contracts significantly increasing the Group's revenue visibility for the current financial year and beyond. Our commitment to the highest standards of service and operational excellence has supported our ongoing work with long-term customers where the scope of work has been extended. At present, no major contracts are due to be retendered during 2017. The enlarged Group continues to tender for a number of significant new local authority and social housing opportunities where spend is largely non-discretionary. This, combined with the customer momentum generated in the second half, ensures that the Board looks forward with confidence.

Phil Copolo, Founder and Deputy Chairman

STRATEGIC REPORT

FINANCIAL REVIEW

Our Financial Performance

Revenues

After a slow start to the financial year, we are delighted to report record revenues of £63.98 million for the year to 31 March 2017 (£31.45 million for the year to 31 March 2016). Included in the revenues of £63.98 million, are contributions from DCB (£22.3 million) and Spokemead (£2.89 million). On a like for like basis, our revenue increased by £32.53 million representing a growth rate of 103%. Revenues recovered during the second half of the year to be ahead of market expectations.

Underlying Operating Profits

We are also pleased to report underlying (adjusted for the share based payment charge, restructuring costs, amortisation of customer relationships, acquisition costs, change in estimated accrued income and the change in value of contingent consideration) operating profits of £3.55million (2016 - adjusted £2.31 million) and underlying profit before tax of £3.32 million (2016 - adjusted £2.20 million)

Our margins have varied during the year since the introduction of DCB and Spokemead to the Group. Our 2017 margin performance of 17.2% compares favourably when a comparison is made with our peer group.

Our direct costs are being closely monitored on all our contracts. The Group has benefited by the increased purchasing power the acquisitions and internal growth has afforded without compromising the service levels. We now have the opportunity for each company within the Group to enjoy a flexible workforce either through our direct labour or utilisation of sub-contractors. This flexibility and greater purchasing power has enabled the Group to gain critical mass.

Overheads

Our overhead cost base increased as a result of the acquisitions of DCB and Spokemead. Our central overhead costs have remained constant and are considerably lower than comparable AIM listed companies. We remain cost conscious with each subsidiary requiring group approval to increase their overhead expenditure. The integration of DCB and Spokemead into the Group has been funded from existing resource.

Our Financial Position

The acquisitions of DCB and Spokemead continue to strengthen our financial position with Group Total Assets of £36.9 million at 31 March 2017 (2016 Restated £20.9 million). The Group Net Assets as at 31 March 2017 were £13.4 million (2016 Restated £8.0 million). Net debt (bank loans plus hire purchase liabilities less cash) at 31 March 2017 amount to £3.95 million (2016 Restated £3.89 million) with the majority of this balance being attributable to the 5 year term loan signed for the purpose of the acquisitions of Purdy, DCB and Spokemead.

The Group remains relatively ungeared with cash resource of £1.9 million (2016 £0.44 million). The Group has a working capital facility of £2.25 million as at 31 March 2017. During the year, a decision was taken to transfer the working capital requirement for DCB from invoice discounting to the Group's working capital facility. This was successfully completed in December 2016 and has substantially reduced the Group's future finance costs.

The Group has complied with all the financial covenants set by our bankers HSBC Bank Plc, during the financial year.

We are fortunate to enjoy long term client relationships with a number of local government organisations and other housing associations. This has resulted in an improvement in cash collections. Our recently appointed Group treasury manager understands our challenges especially as cash collections sometimes represent high volumes and low values. Our clients continually look to re-organise departments and divisions in order to generate cost savings. We continue to monitor cash collection on a daily basis. In addition, management have focused on improving financial and operating systems and the rollout of Bilby's enhanced financial software has enabled us to become more efficient. We have also managed to negotiate better terms with our suppliers which has enable us to take advantage of early settlement discounts.

We focus on a range of key indicators to assess our performance. Our performance indicators are both financial and non-financial and ensure that the Group targets its resources around its customers, operations and finance. Collectively they form an integral part of the way that we manage the business to deliver our strategic goals.

The key business drivers which are monitored on a regular basis are as follows:

* Customer Compliancy - currently running near 100% across our largest contracts

* Customer Satisfaction - currently running at 95%+ across our largest contracts

Notes

1. Adjusted for amortisation of customer relationships, share based payment charges, acquisition costs, framework development costs, change in estimate of accrued income, restructuring costs and change in value of contingent consideration.

2. Underlying measures stated before charging the share based payment charges, acquisition costs, framework development costs, amortisation of customer relationships, change in value of contingent consideration, change in estimate of accrued income and restructuring costs.

3. Calculated as inventories, trade and other receivables less trade and other payables.

Dividends

The Board has recommended a final dividend of 1.50p per ordinary share, which subject to shareholder approval at the forthcoming Annual General Meeting, will be paid in August 2017 to those shareholders on the register at the close of business on 31 July 2017. Together with the interim dividend of 0.25p, this represents a total of 1.75p per ordinary share.

Conclusion

The Group continues to make progress and is driven by a determined focus to increase shareholder value. Management intend to achieve this by continuing to implement the following:-

· Increasing revenues, maintaining margins and growing earnings in a sustainable and profitable manner.

· Increasing our client base.

· Efficient and targeted investment of cash.

· Making full utilisation of our increased purchasing power.

· When appropriate implementing an earnings enhancing buy and build strategy.

· Applying a dividend policy which closely tracks earnings growth.

We look forward to providing our shareholders with updates regarding our key financial objectives during the course of the next financial year.

David Ellingham

Finance Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2017

NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017

1. BASIS OF PREPARATION

Bilby Plc and its subsidiaries (together 'the Group') operate in the gas heating, electrical and general building services industries. The Company is a public company operating on AIM and is incorporated and domiciled in England and Wales (registered number 09095860). The address of its registered office is 6-8 Powerscroft Road, Sidcup, DA14 5DT. The Company was incorporated on 20 June 2014.

The Group's preliminary results have been prepared on a going concern basis under the historical cost convention, and in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union, the International Financial Reporting Interpretations Committee ("IFRIC") interpretations issued by the International Accounting Standards Boards ("IASB") that are effective or issued and early adopted as at the time of preparing these financial statements and in accordance with the provisions of the Companies Act 2006.

The Group has adopted all of the new and revised standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB, as they have been adopted by the European Union, that are relevant to its operations and effective for accounting periods beginning on 1 April 2016.

The preparation of financial statements requires management to exercise its judgement in the process of applying accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

The functional and presentational currency of the Group is Pounds Sterling (£).

The principal accounting policies adopted by the Group are set out in note 2.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1. Going Concern

As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled "Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risk", issued April 2016.

The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of these consolidated financial statements. In developing these forecasts the Directors have made assumptions based upon their view of the current and future economic conditions that will prevail over the forecast period.

On the basis of the above projections, the Directors are confident that the Group has sufficient working capital to honour all of its obligations to creditors as and when they fall due. Accordingly, the Directors continue to adopt the going concern basis in preparing these consolidated financial statements.

2.2. Basis of Consolidation

The consolidated financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 31 March each year. Subsidiaries are entities over which the Company has the power to control the financial and operating policies so as to obtain benefits from their activities. The Group generally obtains and exercises control through voting rights.

The consolidated financial statements incorporate the financial information of Bilby Plc and its subsidiaries. Subsidiary companies are consolidated from the date that control is gained.

On 6 March 2015 the Company acquired the shares of P&R Installation Company Limited in exchange for its own shares. The Company issued 25,000,000 10p shares in exchange for the entire share capital of P&R Installation Company Limited. The acquisition did not meet the definition of a business combination as the Company was not a business and therefore falls outside the scope of IFRS 3. As IFRS does not provide specific guidance in relation to group reorganisations it defers to the next appropriate GAAP being UK GAAP. The acquisition of P&R Installation Company Limited by the Company has therefore been accounted for in accordance with the principles of merger accounting as applied to group reorganisations as set out in Section 19 of FRS102. Accordingly, the consolidated financial statements for the Group have been presented as if the Company throughout the current and preceding periods has owned P&R Installation Company Limited. The comparative figures for the previous year include the results of the merged entity, the assets and liabilities at the previous balance sheet date and the shares issued by the Company as consideration as if they had always been in issue. The difference between the share capital of P&R Installation Company Limited and the nominal value of shares issued by the Company to acquire P&R Installation Company Limited is recorded as a merger reserve.

On 13 July 2015, the Company acquired the entire issued share capital of Purdy Holdings Limited and its subsidiary Purdy Contracts Limited for a maximum consideration of £8.07 million. The acquisition meets the definition of a business combination and has been accounted for using the acquisition method in accordance with the Group's accounting policy.

On 12 April 2016, the Company acquired the entire issued share capital of DCB (Kent) Limited for a maximum consideration of £4million. The acquisition meets the definition of a business combination and has been accounted for using the acquisition method in accordance with the Group's accounting policy.

On 12 April 2016, the Company acquired the entire issued share capital of Spokemead Maintenance Limited for a maximum consideration of £8.7million. The acquisition meets the definition of a business combination and has been accounted for using the acquisition method in accordance with the Group's accounting policy.

All intra-group transactions, balances, income and expense are eliminated on consolidation.

2.3 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the provision of the Group's services. Revenue is recognised by the Group, net of value added tax, based upon the following:

Gas Maintenance - Gas maintenance revenue is recognised when the services have been rendered, that is when the individual job has been completed.

Building Services - Building Services contracts range between 2-24 months. During the course of a project an independent surveyor will conduct a monthly review of the work done and agree an incremental payment. The Group thus recognises the revenue of a project gradually and on a monthly basis upon the accreditation of the surveyor. Revenue recognisable in relation to work completed and accredited is recognised as accrued income until invoiced.

Electrical services - Electrical services revenue is recognised when the services have been rendered, that is when the individual job has been completed.

Trade Counter - Revenue is recognised upon the point of sale of items sold over the trade counter.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of these consolidated financial statements in conformity with IFRS as adopted by the European Union requires the Directors to make certain critical accounting estimates and judgements. In the process of applying the Group's accounting policies, management has decided the following estimates and assumptions have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities recognised in the consolidated financial statements.

Recoverability of trade receivable balances

In the periods shown in these consolidated financial statements, there are a small number of customers with a significant trade receivable balance at the period end. Management have not made a provision against any of these receivable balances at any date. Although this is an area of judgement, management are comfortable with this position due to the high credit ratings of the customers involved and the lack of any history of non-payment.

Valuation of accrued income

Revenue recognisable in relation to work completed and accredited is recognised as accrued income until invoiced based on actual purchase order value, plus any variations or based on the estimated cost of the job using recent past performance as a basis for the price of the work. Some judgement is therefore required in assessing the estimated cost but management are comfortable with their basis of estimation which has been supported by post year end invoice values.

Share based payment charge

The Group issued share options to Directors and employees of the Group in the year. The Black Scholes model is used to calculate the appropriate charge for these options. The use of this model to calculate a charge involves using a number of estimates and judgements to establish the appropriate inputs to be entered into the model, covering areas such as the use of an appropriate interest rate and dividend rate, exercise restrictions and behavioural considerations. A significant element of judgement is therefore involved in the calculation of the charge.

Valuation of customer relationships

Determining the valuation of customer relationships does require use of estimates and judgements in terms of determining the relevant cash flows and the discount factor to be applied in the valuation to calculate the present value. Future cash flows are estimated based on actual contract values and durations for contractual relationships. Average monthly run rates and estimated durations using length of current relationship, then moderated using an attrition rate, are applied to non-contractual relationships. Cash outflows are forecast using direct costs and overheads based on past performance. Change in contract values and duration, together with margins achieved and overheads applied could result in variations to the carrying value of customer relationships. In addition, an adverse movement in the discount factor due to an increased risk profile or a change in the cost of debt (increase in interest rates) would also result in a variation to the carrying value of the customer relationships.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimate of the value in use of the Cash Generating Units (CGUs) to which goodwill has been allocated. The value in use calculation involves an estimate of the future cash flows of the CGUs and also the selection of appropriate discount rates to calculate present values. Future cash flows are estimated based on contract values and duration, together with margin based on past performance. Change in contract values and duration, together with margins achieved could result in variations to the carrying value of goodwill. In addition, an adverse movement in the discount factor due to an increased risk profile or a change in the cost of debt (increase in interest rates) would also result in a variation to the carrying value of goodwill.

4. REVENUE

Revenue is analysed as follows:

All results in the current and prior year derive from continuing operations and all revenues are derived in the UK.

5. OPERATING PROFIT

Operating profit is stated after charging all costs including non-underlying Items.

The depreciation and amortisation charges as stated in the table above are included within administrative expenses in the Consolidated Statement of Comprehensive Income.

6. NON-UNDERLYING ITEMS & RESTATEMENT OF THE PRIMARY STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017

Operating profit includes the following items which are considered by the Board to be one off in nature, non-cash expenses or necessary elements of expenditure to derive future benefits for the Group which have not been capitalised in the Consolidated Statement of Financial Position.

Amortisation of customer relationships was £1,792,000 for the year (2016: £582,000).

A group share option scheme is in place and options were granted during the year. The share based payment charge has been separately identified as it is a non-cash expense.

Acquisition costs comprise legal, professional and other expenditure in relation to acquisition activity during the year amounted to £395,000 (2016: £459,000). In addition to the acquisition costs for DCB (Kent) Limited and Spokemead Maintenance Limited, acquisition costs include the cost of the Group's Business Development and Managing Director who devoted most of his time to sourcing, researching and negotiating our acquisitions and an allocation of the cost of the Founder and Deputy Chairman who is involved in discussions with potential target companies from an early stage.

During the course of the preparation of post 31 March 2016 management information, certain entries were identified which on subsequent investigation should have been included in the results for the year ended 31 March 2016.

It was determined by the Board of Directors that adjustments should be made to the results for the year ended 31 March 2016 to reflect the actual position and performance of the Group for the year.

The adjustments to the financial statements for the year ended 31 March 2016 are as follows:

1. Reversal of a disputed invoice valued at £99,000. The adjustment was made to revenue and trade receivables.

2. Understatement of sub-contractor costs due to a change in the terms of trade with certain sub-contractors. The adjustment of £566,000 was made to cost of sales and trade payables.

3. The corporation tax impact of the adjustments to revenue and cost of sales noted above at a rate of 20% amounted to £131,000. The adjustment was made to corporation tax and current tax liabilities.

7. EARNINGS PER SHARE

The calculation of basic and diluted earnings per share is based on the result attributable to shareholders divided by the weighted average number of ordinary shares in issue during the year.

Basic earnings per share amounts are calculated by dividing net profit for the year or period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

The Group has potentially issuable shares all of which relates to potential dilution from the Group's share options issued to Directors and employees in the period.

Basic and diluted profit per share from continuing operations is calculated as follows:

Adjusted EPS

Profit after tax is stated after deducting non-underlying items totalling £3.3million. Non-underlying items are either one-off in nature, non-cash expenses or necessary elements of expenditure to derive future benefits for the Group which have not been capitalised in the Consolidated Statement of Financial Position. These are shown separately on the face of the Consolidated Statement of Comprehensive Income.

The calculation of adjusted basic and adjusted diluted earnings per share is based on the result attributable to shareholders, adjusted for exceptional items, divided by the weighted average number of ordinary shares in issue during the year.

8. INTANGIBLE ASSETS

The DCB (Kent), Spokemead and Purdy Contracts customer relationships intangible asset are recognised and valued at £2.4million, £5.9million and £5.6million respectively.

These represent the expected value to be derived from contractual and non contractual customer relationships. The value placed on the contractual customer relationship is based on the expected cash revenue inflows over the estimated remaining life of each existing contract.

Goodwill on consolidation of DCB (Kent), Spokemead and Purdy Contracts arise on the excess of cost of acquisition over the fair value of the net assets acquired on purchase of the companies.

DCB (Kent), Spokemead and Purdy Contracts are its own CGU for the purposes of the goodwill calculation and impairment reviews carried out by the Board and monitored on an ongoing basis. 

9. BORROWINGS

The maturity analysis of borrowings, inclusive of finance charges is included above. All of the loans are denominated in £ sterling.

On 28 November 2016, the Group extended its working capital facility to £2.25million to accommodate a transfer of DCB (Kent) Limited's banking from invoice discounting to the Group's working capital facility.

Bank overdrafts are held at an interest rate of 2.5% above the Bank of England base rate. All cash at bank balances are denominated in £ sterling. As at 31 March 2017, the Group had unused overdraft facilities of £2.25million (2016: £0.75million)

Non-current bank loans amounting to £4.4million as at 31 March 2017 (31 March 2016: £3.4million), and current bank loans amounting to £1.3million as at 31 March 2017 (31 March 2016: £0.9million) are secured on related property, plant and equipment and debtor books of the Group and are repayable by quarterly instalments.

In relation to all facilities there is an Unlimited Composite Company Guarantee given by Bilby PIc, Purdy Contracts Limited, P&R Installation Company Limited, DCB (Kent) Limited and Spokemead Maintenance Limited to secure all liabilities of each borrower.

Details of the interest rates charged on the loans are as follows:

· A 5-year term loan of £5.7 million with HSBC Bank Plc originally drawn down in July 2015 (£4.2 million) increased in March 2016 (by £1.5 million) and August 2016 (by £1million), is at 2.75% above the Bank of England base rate.

· A 10-year mortgage loan of £570,000 with HSBC Bank Plc drawn down in July 2015, is at 1.9% above the Bank of England base rate. The mortgage is held over the freehold property of Purdy Contracts Limited known as Brooklyn Lodge, Mott Street, Chingford, London E4 7PW.

On 13 July 2015 Bilby Plc issued £500,000 of loan notes to J R Horlock as part of the consideration for Purdy Holdings Limited. The loan notes are governed by a document containing the following terms:

· Interest will be charged at 1.5% per annum.

· Interest shall be accrued but not paid and will be taken into account when calculating the amount to be redeemed.

· If not converted or redeemed by the final maturity date then 5% interest will be accrued for the 24 month period.

· Convertible by the holder into equity shares on 13 July 2017, the conversion window starts 30 business days prior to 13 July 2017 and ends 20 business days after 13 July 2017.

· Conversion price will be the higher of the average closing mid-price for 60 days trading immediately prior to 13 July 2017 and £0.80.

There is an lntercreditor Deed between Bilby, Purdy Contracts, P&R Installation Company and J R Horlock subordinating fully the loan notes and related security granted to J R Horlock behind the Bank's facilities and security.

10. SHARE CAPITAL

On 13 July 2015 the Company acquired the entire issued share capital of Purdy Holdings Limited satisfied by way of an initial cash payment of £6.57 million together with the issue of 1,250,000 new Bilby ordinary shares at a price of 80 pence per share and the issue of a £500,000 Convertible Loan Note.

The acquisition was partly funded through the Placing of 3,687,500 ordinary shares at a price of 80 pence per share raising £2.95 million for the Group.

On 12 April 2016, the Company acquired the entire issued share capital of DCB (Kent) and Spokemead Maintenance. The initial consideration for DCB (Kent) was satisfied by a cash payment of £1.5million together with an issue of 423,729 new Bilby ordinary shares at a price of 118 pence per share.

The initial consideration for Spokemead Maintenances was satisfied by a cash payment of £5.7million together with an issue of 423,729 new Bilby ordinary shares at a price of 118 pence per share.

The DCB (Kent) and Spokemead acquisitions were partly funded through the placing of 4,237,288 new ordinary shares at a price of 118 per share raising £5 million for the Group.

Further consideration for DCB (Kent) was satisfied by a cash payment of £500,000 together with an issue of 397,140 new Bilby ordinary shares at a price of 126 pence per share.

Further consideration for Spokemead Maintenance was satisfied by a cash payment of £1 million paid in August 2016.

Merger Reserve

The acquisition of Purdy Holdings Limited was partly funded through the Placing of 3,687,500 ordinary shares at a price of 80 pence per share. The difference between the nominal value of the shares issued and the Placing price gives rise to a premium of £875,000 which has been added to the merger reserve.

The acquisitions of DCB (Kent) and Spokemead Maintenance was partly funded through a placing of 4,237,238 new ordinary shares at a price of 118 pence per share. The difference between the nominal value of the shares issued and the placing price gives rise to a premium of £1.37million which has been added to the merger reserve.

11. RELATED PARTY TRANSACTIONS

During the current and previous years, the Group operated from headquarters at 6-8 Powerscroft Road, Sidcup, Kent. The freehold of the property is owned by P Copolo, the majority shareholder of the Group as at 31 March 2017. A formal 20 year lease was entered into on 6 March 2015 between P Copolo and the Group. Under the terms of the lease, the initial rent is £50,000 per annum with the Group being responsible for all ongoing costs.

P Copolo purchased goods through DCB (Kent) to the sum of £69,533 (inc. of VAT) during the course of the year. The total cost was settled by P Copolo during the year.

Key management compensation

The Group's key management are considered to comprise the directors and two non-executive directors of Bilby Plc. Their remuneration is as follows:

The remuneration of the highest paid director during the year was £116,607 (12 months to 31 March 2016: £119,300).

There were no other transactions with directors or key management personnel to disclose.

12. ULTIMATE CONTROLLING PARTY

By virtue of his majority shareholding, as at 31 March 2017, P Copolo is the ultimate controlling party of Bilby Plc.