Final Results

RNS Number : 5119A

Inspired Energy PLC

21 March 2013

 



21 March 2013

Inspired Energy plc

("Inspired" or the "Group")

Final Results for the 12 months ended 31 December 2012

Inspired Energy plc (AIM: INSE), a leading UK energy procurement consultant to UK corporates, announces its final results for the 12 month period ended 31 December 2012. 

HIGHLIGHTS

Financial Highlights

·           Revenue in the year to 31 December 2012 was £5.26 million (six months to 31 December 2011: £1.53 million)

·           Earnings before exceptional costs, depreciation, amortisation and share-based payment costs for the period was £2.64 million (six months to 31 December 2011: £0.91 million)

·           Adjusted EPS was 0.48 pence (excluding amortisation, acquisition cost, share based payments and restructuring cost) (six months ended 31 December 2011: 0.20 pence)

·           Profit before tax £0.89 million (six months to 31 December 2011: £0.61 million loss)

·           Record period of new sales and retentions, continuing into the new year

·          Completed aggressive and successful strategy of recruitment of key staff

·          Order book of £8.9 million as at 31 December 2012 (£4.3 million at 31 December 2011)

·          New Group bank facilities agreed with Santander UK Plc ("Santander") - £3.5 million facility to replace existing debt on more attractive terms with an additional acquisition facility of £1.5 million for future transactions

·           Maiden dividend proposed of 0.11 pence per share

Operational Highlights

·          Successful integration of Direct Energy Purchasing Limited, acquired in April 2012

·          Diversification of customer base into new sectors, including public sector and large scale infrastructure

·          Strong sustainable client retention

- Renewals across the Group at 86 per cent (by contract value)

- Risk Management division achieved a 100 per cent retention

·         Significant investment in staffing to drive revenue growth with average headcount in year increasing 69 per cent to 54 (31 December 2011: 32)

·          Investment in a bespoke core IT platform to optimise sales and client servicing, in line with the Group's strategy on admission

·          Ongoing product development including launch of innovative Multi-Customer Management solution

·           Secured additional exclusive contracts with chosen energy suppliers through to 2014

·           Client driven expansion into Europe commenced, including set up of Irish office

Commenting on the results, Bob Holt, Chairman, said: "2012 was a transformational year for the Group, which has delivered confidently on its growth strategy; completing the first acquisition, broadening the customer base, both by sector and geographically and hiring key talent. This combined with the investment in a bespoke IT platform has streamlined business processes enabling us to increase the productivity from our highly skilled and experienced team."

Janet Thornton, Managing Director, added: "Following a strong performance in 2012 and the significant investment in the business platform I am confident of the prospects for the Group in the new financial year. We have delivered a strong set of results whilst growing the business organically, accelerated by the investment in additional expertise and through the acquisition of DEP. In 2013, I believe that the Group will begin to see significant financial and operational benefits from the investment we have made in both IT infrastructure and talent and we will be able to continue our strong growth rates as well as broadening our product base and geographic reach."

For further information, please contact:   

Inspired Energy plc Janet Thornton, Managing Director David Foreman, Finance Director	www.inspiredenergy.co.uk [phone] [phone]
Shore Capital Bidhi Bhoma Edward Mansfield	[phone]
Gable Communications Justine James John Bick	[phone] [phone] [e-mail]

CHAIRMAN'S STATEMENT

I am pleased to present the audited results for the year ended 31 December 2012, a transformational year for the Group. The team has delivered on its growth strategy, completing our first acquisition, broadening the customer base, both by sector and geographically and attracted key talent as part of the Group's planned accelerated staff recruitment. This has been augmented by investment in our bespoke IT platform that has streamlined business processes and will allow us to continue to increase the productivity from our highly experienced team.

I am delighted to announce that even after significant investment in the business the Group has achieved record profits in our first full year as a public company. Revenue increased to £5.26 million (2011: £1.53 million) and earnings before exceptional costs, depreciation, amortisation and share-based payments grew to £2.64 million (2011: £0.91 million).

The acquisition of Direct Energy Purchasing Ltd ("DEP") in April 2012 expanded both the range of services provided and customer base to which the Group provides services. The integration has gone well and the two operating businesses delivered successful organic growth in the year supplemented by cross-selling between Inspired Energy Solutions Limited ("IES") and DEP. The Group order book now stands at a record £8.9 million.

The Group enjoyed a renewal record of 86 per cent (by value) of existing customers in the year underlining the professional aspect of our service offering.

The results are particularly pleasing following the decision to recruit a significant number of senior industry appointments from within the energy sector and thus significantly increase the cost base of the Group. Your Board took the view that the added expertise and capacity offered by the new employees would provide additional impetus to the two growth engines of the Group both in 2012 but, more importantly, in 2013 and beyond. I look forward to bringing further news on exciting developments in our service offering in due course.

In the fourth quarter of 2012 the Group developed a new service offering into the direct energy market serving smaller single site, SME, energy users. This business, from a standing start, has performed impressively and the Board believes that the future looks excellent for this new service offering. In addition, and in response to customer demand, we are now servicing the market in Ireland through a small team of experienced energy professionals. The Group has also entered into its first European contract, servicing an existing client. The Board believes that that the Group's new service offering to SMEs and the move into Ireland and Europe will contribute significantly in the medium term.

Group Highlights

·            Successful acquisition and integration of our first acquisition, DEP which has performed to plan

·           Recruited several high quality staff members with a proven track record, increasing our  technical abilities and organic growth prospects

·           Implemented and augmented an end-to-end prospect and client management system which  has:

 -      increased lead generation

 -      streamlined repetitive tasks for our analyst team, improving productivity significantly

 -      standardised and improved the back end reporting and processes

 -      allowed for greater management and financial reporting

•      Expansion into the Irish market responding to customer demand, with bespoke products being developed for this market

·          Client driven growth into Europe with the Group's first European contract servicing an existing client

·          Integration of IES and DEP has provided strong leverage for cross sell opportunities providing a value add offering for clients and broadened the pool of potential clients for the Group

Inspired Energy Solutions Limited ("IES") Highlights

·            Record order book sales¹ in the period of £5.4 million (year to December 2011: £3.8 million)

·            Increased order book value² to £6.3 million as at 31 December 2012 (31 December 2011: £4.3 million)

·            Won several major new clients including Morning Foods, Associated British Ports, Emcor and Halcrow Group

·            100 per cent retention within the higher value, Risk Management division

Direct Energy Purchasing Limited ("DEP") Highlights

·            53 per cent increase in order book value to £2.6 million as at 31 December 2012 (31 December 2011: £1.7 million)

·            94 per cent customer retention rate (by client) since acquisition

·            Won several major new clients including Kwikfit, B & M Bargains and completed the Group's first European contract

·            Secured exclusive, ring fenced flexible trading products for the core non-half-hourly clients

2012 has been a transformational year for the Group. Following the acquisition of DEP both of our trading companies (IES and DEP) have benefitted from the inherent knowledge within each business and are working together to deliver best service to our clients. In addition, with the accelerated staff recruitment programme now complete, I believe we have a highly talented and stable team in place to achieve our near and medium term goals.

We are confident that the strategy we have identified for the Group is the correct one and is one that can yield significant benefits to our shareholders. We continue to investigate acquisition opportunities in complementary sectors and with niche capabilities. The Board's primary focus remains on continuing the rapid rate of organic growth and capitalising on the investment made in the business in 2012.

We are delighted with our performance in the year reported, one which we could not have achieved without the hard work of the team and of course without the continued support of our loyal customers who we strive to deliver the best advice and results for. We are well positioned to enter 2013 with a high degree of confidence.

Bob Holt
Chairman

21 March 2013

1   Order book sales represents the aggregate expected revenue due to the Group from contracts secured during the period. Expected revenue is calculated as the expected commission due to the Group from signed contracts between client and an energy supplier for an agreed consumption value at an agreed commission rate.

2   Order book value is defined as the aggregate revenue expected by the Group in respect of signed contracts for the remainder of such contracts (where the contract is live) or for the duration of such contracts (where the contract has yet to commence). No value is ascribed to expected retentions of contracts .

BUSINESS REVIEW

Inspired Energy plc

Inspired Energy plc (the "Group") consists of two leading UK energy procurement consultancies to UK corporates. Inspired Energy Solutions Limited ("IES") was founded in 2000 by Group Managing Director, Janet Thornton, and has been part of the Group since its admission to the AIM market of the London Stock Exchange in November 2011 ("Admission"). Direct Energy Purchasing Limited ("DEP") which was acquired by the Group in April 2012 as the first stage in the Group's strategy to acquire complementary businesses within the sector to grow the scope and coverage of the Group's energy consulting platform by continuing to increase the breadth of sectors covered and also increasing the average size of its client portfolio. In addition, in the fourth quarter of 2012 the Group commenced a new service offering into the direct energy market serving smaller single site, SME, energy users.

Following the acquisition of DEP, the Group now manages energy contracts on behalf of over 650 UK corporates. Sector specialisms include food manufacturing, heavy industrials, multi-site retail and healthcare. Both IES and DEP offer a bespoke advisory service to clients in order to implement appropriate and cost effective buying strategies, tailored to each client's appetite for risk. The Group benefits from having negotiated a range of exclusive products with a number of energy suppliers and can, as a result, offer unique solutions to clients in order to help them manage budgets, lock in savings or put capital to work to achieve savings by operating a risk managed strategy in the wholesale market.

Services

The Group's core services are primarily in the review, analysis and negotiation of gas and electricity contracts on behalf of our clients.

Energy Review and Benchmarking

The Group's team of energy analysts review the historical energy consumption and purchasing on behalf of clients in order to understand and analyse the client's energy needs. Following this review and in-depth discussions with clients regarding their individual requirements, energy purchasing goals and appetite for risk, a bespoke, tailored energy purchasing strategy is designed.

Negotiation

Based on the agreed tailored purchasing strategy, the analyst team will negotiate, on the client's behalf, with energy suppliers ensuring that the client has a choice of the most appropriate energy contracts available in the market. The choice of contracts available to the Group's clients include a number of contracts that are exclusive to the Group which the Group have created in partnership with the energy suppliers. Typically these include a range of caveats, carve outs or options which offer the client increased flexibility within a fixed price framework - allowing our clients to fix their budget at the time of purchase but with the opportunity to benefit from any fall in commodity prices.

All tenders also include a thorough review and explanation of the additional pass through charges applicable on an energy contract, ensuring that the client is fully informed and aware of all costs prior to signing an energy contract. The contracts run for between 12 and 36 months.

Bill Validation

Within the Group the bureau team is responsible for the administration of new energy contracts and, in addition, the Group offers a bill validation service to all clients. Experienced bureau managers, utilising a bespoke end-to-end contract management IT platform, analyse each client's energy bills throughout the period of their contract, confirming that usage, pass through charges and tariffs are all correctly charged to their energy supplier. In instances of dispute, the bureau team act on behalf of the client to resolve queries and ensure that only valid charges are paid.

In addition to the above core services, a number of additional services are offered to customers.

·           CRC Reporting - production of management information for customers to comply with Carbon Reduction Commitment legislation

·           Historical Auditing - review of last 6 years' energy procurement charges to ensure no over-charges have been made. The Group operates on a share of savings revenue model in respect of rebates achieved

·           Power Purchasing Agreements - the Group is able to trade green energy certificates on behalf of renewable energy producers

Customers

The Group focuses predominantly on mid-sized UK corporates with anticipated revenues
in excess of £1.0 million and greater than 50 employees. The Group has, with
commencement of its new service offering, also begun to service smaller, single site SMEs.

Systems and Processes

In line with the Group's strategy on Admission, the Group has invested heavily in its IT platform as it is the Board's belief that this will increase efficiencies allowing the Group's sales and analytical teams to focus on winning new business while at the same time retaining existing customers. Consequently, 2012 has seen a significant transformation in the core IT platform. The Group now operates a bespoke end-to-end IT system which manages the client journey from initial sales lead generation through to bill validation and commissions invoicing. The system allows for greater automation of processes, increased efficiency and greater data security and accuracy. It is anticipated that the introduction of the system, which has been brought on-line in three stages during the year, will allow the business to process increased sales and revenue levels without having to significantly increase head-count.

Key benefits include:

Stage 1

Online, Integrated Telesales CRM (Customer Relationship Management)

·           Integrated, bespoke call scheduling, monitoring and CRM system

·           Doubled level of active leads fitting the Group's criteria produced by call centre per month

·           Increased 'on-call' time within team and improved monitoring, reporting and accountability

·           Extended into DEP; small telesales team now recruited to support positive results

Stage 2

Group-wide Bureau System

·           Acquired with DEP, Systemlink has now been integrated throughout Group

·           Increased reporting and monitoring capability, particularly for more complex client structures

·           Increased automation of data entry

Stage 3

Open ERP (Enterprise Resource Planning) contract management system

·           Fully integrated, end-to-end platform the entire life cycle of our clients' procurement and trading strategies

·           Significant reduction in human repetition

·           Increased robustness of platform on which to continue our growth

·           Full data integration with bureau system

Strategy

The strategy identified at the time of Admission and restated herein remains our focus for the development of the Group as we move into 2013.

Focus on customer service and savings

The Group's primary goal is to provide a market leading service to our clients, both in terms of our interactions with our clients and with respect to the energy contracts we are able to offer. We focus on the quality of our team's communications and service levels through ongoing training and review processes. In addition, we continually look to work with our energy suppliers to create products which offer significant benefits to our clients. This focus has been replicated within the DEP business, with the introduction of additional account management staff to ensure that our clients benefit from a single point of contact throughout the life of their contract with us.

Product innovation

We believe that continuing to offer innovative and commercial solutions to our clients will allow us to sustain our strong growth. During 2012, we were able to renew and extend our exclusive arrangements, developed in conjunction with some of our energy suppliers, which allows us to continue to market innovative products that are exclusive to the Group within the marketplace. In addition, we have been able to negotiate additional exclusive contracts, similar in nature to the IES exclusive products, aimed specifically at the client segments handled by DEP, namely multi-site retail and healthcare.

In addition to our range of exclusive products, our risk management team has also recently launched a Multi-Customer Management solution which has been developed to provide enhanced energy buying methods to smaller users by enabling them to access benefits traditionally only enjoyed by very large energy consumers.

The Multi-Customer Management solution provides the benefits of aggregation with the associated economies of scale while not locking customers into a product thus providing clients with the individual flexibility required to meet each client's tailored energy procurement strategies.

The Multi-Customer Management solution offers:

·           Individual strategies within group buying organisation

·           Economies of scale with over 450 GWh of purchasing power

·           Improved wholesale energy pricing

·           Reduced supply side management charges

·           Shape benefit which reduces peak energy demand

In addition to extending and improving the range of energy contracts we are able to offer our clients, the Group has also focused on developing additional services and products for our existing client base. Examples include:

•      Open Market - due to market positioning and knowledge, the Group is able to advise on trades and trade on behalf of smaller energy suppliers and customers, accessing more competitive prices in between the bid and offer spread

·           European contracts - during 2012, the Group was able to negotiate and procure our first European energy contract on behalf of one of our existing clients

·           Water - through a partnership developed by the Group, we are able to offer water audit and procurement services to our clients

·           Ireland - The Irish market has only recently been de-regulated. The Group is working alongside Irish energy suppliers to develop products which offer similar flexibility and cost benefits to Irish customers as are already available in the UK. The Board believes that the Group is the first consultant to develop exclusive products in conjunction with Irish energy suppliers and believes that this will act as a competitive advantage as the Group expands its operations in Ireland

Customer diversification

The core clients of IES are energy-intensive SMEs and UK corporates, predominantly with a manufacturing and production focus. The core clients of DEP are multi-site retail and healthcare. Continued growth for the Group will come from continued excellence and penetration in our sector specialisms, in addition to diversifying our client base.

In order to achieve our diversification goals, we have restructured our telesales team across IES and DEP to promote sales within new sectors and to develop new client relationships and cross sell the Group's capabilities. This has allowed us to make strong progress within the public sector and large scale infrastructure sector.

In addition to entering new sectors via IES and DEP, the Group has also extended its reach into UK SMEs. The Group's new division targeting smaller, single-site operations has begun impressively and is seeking to grow rapidly over the medium term.

Acquisitions

We continue to investigate opportunities for the Group to participate in industry consolidation. We have reviewed a large number of opportunities in 2012 and have completed the acquisition of DEP in the current year.

In order to create an enlarged and improved business, we believe that potential targets should offer one or more of the following criteria:

·           Additional technical and/or service capability

·           Sector specialism and diversification

·           Increased geographic footprint

Outlook

As we move into the new financial year, I am confident of the prospects for the Group. We have achieved a strong set of financial results whilst growing the business organically, accelerated by the investment in additional expertise and IT and through the acquisition of DEP. In 2013, I believe that the Group will begin to see significant financial and operational benefits from the investments we have made in 2012 and we will be able to continue our strong growth rates.

Janet Thornton Managing Director

21 March 2013

FINANCIAL REVIEW

Statutory Results

Revenue for the year to 31 December 2012 was £5.26 million (six months ended 31 December 2011: £1.53 million). Operating profit for the year was £1.17 million (six months ended 31 December 2011: loss £0.59 million). Earnings before exceptional costs, depreciation, amortisation and share-based payment costs for the year, was £2.64 million (six months ended 31 December 2011: £0.91 million). Earnings per share for the year was 0.16 pence (six months ended 31 December 2011: loss per share 0.26 pence). Adjusted earnings per share (excluding amortisation, acquisition cost, share based payments and restructuring cost) was 0.48 pence (six months ended 31 December 2011: 0.20 pence).

Administrative expenses (excluding amortisation, acquisition cost, restructuring costs and share based payments costs) for the year were £2.12 million (six months ended 31 December 2011: £0.49 million). Finance expenditure for the year was £0.26 million (six months ended 31 December 2011: £0.01 million).

Profit before tax for the year was £0.89 million (six months ended 31 December 2011: loss £0.61 million).

Cash generated from operations during the financial year was £1.12 million (six months ended 31 December 2011: £0.0 million).

Group cash balances at the year-end amounted to £1.07 million (31 December 2011: £1.26 million), with a net debt position of £1.82 million (31 December 2011: £2.10 million).

Cash Generation

Within the year, there are a number of one-off items which have impacted upon the cash generation of the Group. These items include:

·           Deal fees in respect of DEP Acquisition of £0.20 million

·           Deal fees in respect of Admission on 28 November 2011, which were paid during the financial year, of £0.15 million

Adjusted cash generated from operations taking into account the above is £1.47 million.

In addition, to the above one-off items, the Group has made a number of operational changes to ensure greater cash flow in future periods. Measures taken include an amendment to the internal commission payments to closer match revenue and cash generation from contracts. In addition, the Group has worked closely with key energy suppliers to increase the number and value of monthly commission receipts, as opposed to quarterly statements, which reduces working capital consumption in the core businesses of IES and DEP. The introduction of the SME focused business is also expected to have a positive impact on cashflow generation given the shorter term working capital cycle inherent with business of that nature.

Bank Facilities

The Group has entered into a new facility agreement ("Facility") with Santander for a £3.5 million term loan over five years. The Facility replaces the Group's previous facility of the same amount and carries an improved interest rate of 3% over LIBOR (previously 4.2%) and no ongoing monitoring fees.  In addition, the Group has also entered into a revolving credit facility, also with Santander, for the sum of £1.5 million to be used for the purposes of future acquisitions ("Acquisition Facility").  The Acquisition Facility can be drawn on the same commercial terms as the Facility at the election of the Group and subject to bank approval of any proposed acquisition. Both facilities contain market standard covenants set at similar levels to the Group's previous arrangements."

Dividend

The Board are proposing a maiden dividend of 0.11 pence per share. The dividend will be payable to all shareholders on the register as at 7 June 2013 and will be paid on 5 July 2013. This maiden dividend acts as the commencement of a progressive dividend policy and the Board believes that dividends are likely to increase in line with earnings and a dividend cover of c. 3.5x earnings per share to be an appropriate ratio for subsequent dividends. As at 31 December 2012, Inspired Energy Plc's company balance sheet showed negative distributable reserves. Sufficient intra-group dividends were paid up to Inspired Energy Plc from its subsidiaries on 19 March 2013 to enable the proposed dividend to be paid.

David Foreman

Finance Director

21 March 2013

	GROUP INCOME STATEMENT
	FOR THE YEAR ENDED 31 DECEMBER 2012
					Year	Six months
					ended	ended
					31 December 31 December
					2012	2011
		Note			£	£
	Revenue				5,260,518	1,527,623
	Cost of sales				(283,540)	(125,876)
					------------	-----------
	Gross profit				4,976,978	1,401,747
	Administrative expenses				(3,804,087)	(1,993,797)
					------------	-----------
	Operating profit/(loss)				1,172,891	(592,050)
	Analysed as:
	Earnings before exceptional costs, depreciation,
	amortisation and share-based payments costs				2,641,307	907,756
	Exceptional costs	3			(429,499)	(1,489,465)
	Depreciation				(33,458)	(10,341)
	Amortisation of intangible assets				(793,361)	-
	Share based payment costs				(212,098)	-
					------------	-----------
					1,172,891	(592,050)
	Finance expenditure				(256,123)	(14,584)
	Other financial items				(26,358)	-
					------------	-----------
	Profit/(loss) before income tax				890,410	(606,634)
	Income tax expense	6			(251,242)	(240,247)
					------------	-----------
	Profit/(loss) for the period and total
	comprehensive income/(loss)				639,168	(846,881)
					------------	------------
	Attributable to:
	Equity holders of the company				639,168	(846,881)
					------------	------------
Basic earnings/(loss) per share attributable to the
equity holders of the company (pence)			4	0.16			(0.26)
Diluted earnings/(loss) per share attributable to the
equity holder of the company (pence)				0.16			(0.26)

The profit/(loss) for the period per the income statement is also the total comprehensive profit/(loss) for the period and consequently no separate statement of comprehensive income is presented.

GROUP STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2012
		31 December 31 December
		2012	2011
	Note	£	£
ASSETS
Non-current assets
Intangible assets	5	2,892,956	-
Property, plant and equipment		198,266	112,045
		-------------	------------
		3,091,222	112,045
Current assets
Trade and other receivables		2,437,732	922,210
Cash and cash equivalents		1,070,468	1,258,403
		-------------	------------
		3,508,200	2,180,613
		-------------	------------
Total assets		6,599,422	2,292,658
		-------------	------------
LIABILITIES
Current liabilities
Trade and other payables		541,275	404,200
Bank borrowings		524,000	507,000
Contingent consideration		1,000,000	-
Current tax liability		870,319	634,700
		-------------	------------
		2,935,594	1,545,900
Non-current liabilities
Bank borrowings		2,371,867	2,852,976
Trade and other payables		102,959	11,239
Contingent consideration		501,145	-
Interest rate swap		26,358	-
Deferred tax liability	7	253,612	17,292
		-------------	------------
		3,255,941	2,881,507
		-------------	------------
Total liabilities		6,191,535	4,427,407
		-------------	------------
Net asset/(liabilities)		407,887	(2,134,749)
		-------------	-------------
EQUITY
Share capital		505,190	442,690
Share premium account		1,043,606	137,950
Merger relief reserve		8,623,237	7,900,023
Share based payment reserve		212,098	-
Retained earnings		1,406,529	767,361
Reverse acquisition reserve		(11,382,773) (11,382,773)
		-------------	-------------
Total equity/(deficit)		407,887	(2,134,749)
		-------------	-------------

GROUP STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2011
	Year	Six months
	ended	ended
	31 December 30 December
	2012	2011
	£	£
Cash flows from operating activities
Profit/(loss) before income tax	890,410	(606,634)
Adjustments
Depreciation	33,458	10,342
Amortisation	793,361	-
Shared based payment costs	212,098	-
Finance expenditure	256,123	-
Other financial items	26,358	-
Deemed cost of listing	-	911,005
Loss on disposal of property, plant and equipment	-	4,563
	-----------	-----------
Cash flows before changes in working capital	2,211,808	319,276
Movement in working capital
Increase in trade and other receivables	(1,131,870)	(296,284)
Increase in trade and other payables	44,176	19,411
	-----------	-----------
Cash generated from operations	1,124,114	42,403
Income taxes paid	(414,333)	(20,669)
	-----------	-----------
Net cash flows from operating activities	709,781	21,734
	-----------	-----------
Cash flows from investing activities
Acquisition of a subsidiary, net of cash acquired	(844,922)	-
Return on equity to original shareholders	-	(7,382,915)
Increase in directors' loan accounts	-	(1,246,798)
Repayment of directors' loan accounts	-	1,889,139
Payments to acquire property, plant and equipment	(83,389)	(52,651)
Payments to acquire intangible assets	(182,666)	-
	-----------	-----------
	(1,110,977)	(6,793,225)
Cash flows from financing activities
New bank loans (net of debt issue costs)	-	3,429,958
Net proceeds from equity fundraising	941,370	4,000,001
Repayment of bank loans	(507,000)	-
Interest on bank loans	(212,829)	-
Fees charged to merger relief reserve	-	(430,343)
Repayment of hire purchase agreements	(8,280)	(4,140)
	-----------	-----------
	213,261	6,995,476
	-----------	-----------
Net (decrease)/increase in cash and cash equivalents	(187,935)	223,985
Cash and cash equivalents brought forward	1,258,403	1,034,418
	-----------	-----------
Cash and cash equivalents carried forward	1,070,468	1,258,403
	-----------	-----------

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2012

					Share-				Total
			Share	Merger	based			Reverse	Shareholders
		Share	Premium	Relief	payment	Retained		Acquisition	Equity/
		Capital	Account	Reserve	reserve	Earnings		Reserve	(Deficit)
		£	£	£	£	£		£	£
Balance at 1 July 2010		142	-	-	-	762,665		-	762,807
Profit and total comprehensive
income for the year		-	-	-	-	910,077		-	910,077
Transaction with owners:
- equity dividends		-	-	-	-	(58,500)		-	(58,500)
	-----------		----------	-----------	-----------	-----------		------------	-----------
Balance at 30 June 2011		142	-	-	-	1,614,242		-	1,614,384
	-----------		-----------	-----------	-----------	-----------		------------	-----------
Loss and total
comprehensive loss
for six months ended
31 December 2011		-	-	-	-	(846,881)		-	(846,881)
	-----------		-----------	-----------	-----------	-----------		------------	-----------
Shares issued by legal parent
prior to reverse acquisition		1,610	216,840	-	-	-		-	218,450
Bonus issue by legal parent
prior to reverse acquisition
(7 November 2011)		78,890	(78,890)	-	-	-		-	-
Deemed cost of listing		-	-	-	-	-		911,005	911,005
Return on equity to
original shareholders
(28 November 2011)		-	-	-	-	-		(7,382,915)	(7,382,915)
Shares issued by legal parent
on reverse acquisition
(28 November 2011)		362,190	-	8,330,366	-	-		-	8,692,556
Share issue expenses		-	-	(430,343)	-	-		-	(430,343)
Reverse acquisition adjustment		(142)	-	-	-	-		(4,910,863)	(4,911,005)
	-----------		-----------	-----------	-----------	-----------		------------	-----------
Transactions with owners		442,548	137,950	7,900,023	-	-	(11,382,773) (2,902,252)
	-----------		-----------	-----------	-----------	-----------		------------	-----------
Balance at
31 December 2011		442,690	137,950	7,900,023	-	767,361	(11,382,773) (2,134,749)
	-----------		-----------	-----------	-----------	-----------		------------	-----------
Profit and total
comprehensive profit
for the period		-	-	-	-	639,168		-	639,168
	-----------		-----------	-----------	-----------	-----------		------------	-----------
Shares issued (4 April 2012)		35,714	964,286	-	-	-		-	1,000,000
Share issue expenses		-	(58,630)	-	-	-		-	(58,630)
Share based payment cost		-	-	-	212,098	-		-	212,098
Shares issued in respect
of consideration
(16 April 2012)		26,786	-	723,214	-	-		-	750,000
	-----------		-----------	-----------	-----------	-----------		------------	-----------
Balance at
31 December 2012		505,190	1,043,606	8,623,237	212,098	1,406,529	(11,382,773)		407,887
	-----------		-----------	-----------	-----------	-----------		------------	-----------

Merger relief reserve

Merger relief reserve represents the premium arising on shares issued as part or full consideration for acquisitions.

Reverse acquisition reserve

The reverse acquisition reserve relates to the reverse acquisition between Inspired Energy Solutions Limited and Inspired Energy plc on 28 November 2011.

Share based Payment Reserve

The share based payment reserve is a reserve to recognise those amounts in equity in respect of share-based payments.

NOTES TO THE GROUP FINANCIAL STATEMENTS

1.    Basis of preparation

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the year ended 31 December 2012.  The auditors reported on those accounts; their report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.  The statutory accounts for the year ended 31 December 2012 will be delivered to the registrar of Companies following the Company's Annual General Meeting.

Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), this announcement in itself does not contain sufficient information to comply with IFRS.  Details of the accounting policies are those set out in the annual report for the year ended 31 December 2011.  These accounting policies have remained unchanged for the financial year ended 31 December 2012.

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement, Business Review and Financial Review. The financial position of the Group, its cash flows and liquidity position are described in the Financial Review.

The Group, together with its ultimate parent company, has sufficient financial resources to continue to operate for the foreseeable future. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully.

The Group's forecasts, which have been prepared for the period to 31 December 2015 after taking account the contracted orders book, future sales performance, expected overheads, capital expenditure and debt service costs, show that the Group should be able to operate profitably and within the current financial resources available to the Group.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Group financial statements.

2.    Segmental Information

The Group's Board of Directors is considered to be the Chief Operating Decision Maker (CODM) and the Board of Directors review the business based on the nature of the service provided. There is only one service sold being the supply of energy procurement advice, predominantly within the United Kingdom. The financial information provided to the CODM is under the same measurement basis as the group financial statements. Consequently, management have identified one segment, energy procurement advice, and so no further segmental information is required.

3.    Exceptional costs

		Year	6 months
		ended	ended
		31 December 31 December
		2012	2011
		£	£
	Fees associated with acquisition	195,404	-
	Restructuring costs regarding DEP	234,095	-
	Deemed cost of listing(i)	-	911,005
	Fees associated with listing	-	578,460
		---------	-----------
		429,499	1,489,465
		---------	-----------

(i)   The difference between the consideration transferred in the business combination of £4,911,005 and the fair value of net assets acquired amounting to £4,000,000, £911,005 has consequently been charged to the Group Income Statement in the 6 months ended 31 December 2011.

4.    Earnings/(loss) per share

The earnings/(loss) per share is based on the net profit/(loss) for the year/period attributable to ordinary equity holders divided by the weighted average number of ordinary shares outstanding during the period.

The weighted average number of ordinary shares for the year ended 31 December 2012 assumes that the 50,000,000 ordinary shares issued, cumulatively, in relation to the £1.0 million placing completed on 5 April 2012 and the consideration shares issued on 16 April 2012 have been included since their respective issue dates.

	Year	Six months
	ended	ended
	31 December 31 December
	2012	2011
	£	£
Profit/(loss) attributable to equity holders of the Group	639,168	(846,881)
Fees associated with acquisition	195,404	-
Restructuring costs regarding DEP	234,095	-
Amortisation of intangible assets	793,361	-
Deferred tax in respect of amortisation of intangible assets	(198,772)	-
Share-based payment costs	212,098	-
Deemed cost of listing	-	911,005
Fees associated with listing	-	578,460
	-----------	-----------
Adjusted profit attributable to equity holders of the Group	1,875,354	642,584
	-----------	-----------
Weighted average number of ordinary shares in issue	387,485,179	326,868,482
Diluted weighted average number of ordinary shares
in issue	406,196,483	342,362,623
Basic earnings/(loss) per share (pence)	0.16	(0.26)
Diluted earnings/(loss) per share (pence)	0.16	(0.26)
Adjusted basic earnings per share (pence)	0.48	0.20
Adjusted diluted earnings per share (pence)	0.46	0.19

The weighted average number of shares in issue for the basic and adjusted diluted earnings per share include the dilutive effect of the 29,592,970 share options in issue to senior staff of the Group.

In the six months ended 31 December 2011, the share options in issue were anti-dilutive in respect of the basic loss per share.

Adjusted earnings/(loss) per share represents the earnings/(loss) per share, as adjusted to remove the effect of fees associated with acquisition/listing, the amortisation of intangible assets, share-based payment costs and the deemed cost of listing which have been expensed to the Group Income Statement in the period.

5.    Intangible assets and goodwill

			Intangible assets
		Computer	Customer
		Software	contracts	Goodwill	Total
Cost		£	£	£	£
At 1 July 2011 and
31 December 2011		-	-	-	-
Additions		182,666	-	-	182,666
Acquisitions through business
combinations (note 8)		-	1,835,850	1,667,801	3,503,651
		-----------	-----------	-----------	-----------
At 31 March 2012		182,666	1,835,850	1,667,801	3,686,317
Amortisation		-------	---------	---------	-----------
At 1 July 2011 and
31 December 2011		-	-	-	-
Charge for the year		8,953	784,408	-	793,361
		-----------	-----------	-----------	-----------
At 31 December 2012		8,953	784,408	-	793,361
Net book value		-------------	-------------	-------------	-------------
At 31 December 2012		173,713	1,051,442	1,667,801	2,892,956
		-------------	-------------	-------------	-------------
At 31 December 2011		-	-	-	-
		-----------	-----------	-----------	-----------

6.    Income Tax Expense

The income tax charge is based on the profit/(loss) for the period and comprises:

	Year	6 months
	ended	ended
	31 December 31 December
	2012	2011
	£	£
Current tax
Current tax charge	522,278	235,310
Adjustments in respect of prior periods	(58,249)	-
Deferred tax
Origination and reversal of temporary timing differences	(210,985)	5,412
Effect of tax rate change on opening balance	(1,802)	(475)
	-----------	-----------
	(212,787)	4,937
	-----------	-----------
Total income tax charge	251,242	240,247
	-----------	-----------
	Year	6 months
	ended	ended
	31 December 31 December
	2012	2011
	£	£
Reconciliation of tax charge to accounting profit/(loss):
Profit/(loss) on ordinary activities before taxation	890,410	(606,634)
Tax at UK income tax rate of 24.5% (2011: 28%)	218,150	(169,858)
Disallowable expenses	315,271	405,583
Surplus of capital allowances over depreciation	(11,143)	(415)
Movement in deferred tax	(212,787)	4,937
Effects of current period events on current tax prior
period balances	(58,249)	-
	-----------	-----------
Total income tax charge	251,242	240,247
	-----------	-----------

7.    Deferred Tax Liability

Deferred taxation is calculated at a tax rate of 23 per cent and is set out below:

	Group
	31 December	31 December
	2012	2011
	£	£
Provision brought forward	17,292	-
Credited to income for the
period	(214,357)	17,292
Credit arising from
business combinations	450,677	-
	-----------	-----------
Provision carried forward	253,612	17,292
	-----------	-----------
Excess of taxation allowances
over depreciation on all
non-current assets	11,780	17,292
Temporary differences on
intangible assets	241,832	-
	-----------	-----------
	253,612	17,292
	-----------	-----------

Deferred taxation has been calculated at a rate of 23 per cent (2011: 26 per cent).

Corporation tax for the year ended 31 December 2012 was calculated at 24.5 per cent of profits for the year. During the year ended 31 December 2012, as a result of the reduction in the UK corporation tax rate to 24 per cent from 26, corporation tax has been calculated at an effective rate of 24.5 per cent.

During the year ended 31 December 2012 a further reduction in the UK corporation tax rate to 23 per cent was substantively enacted into law and will be effective from 1 April 2013, the relevant deferred tax balances have been re-measured at this rate. Further reductions in the main rate are proposed to reduce the rate by 1 per cent per annum to 22 per cent by 1 April 2014. These further changes have not been substantively enacted into law at 31 December 2012 and therefore are not included in the financial statements.

Deferred taxation at the period end is analysed as follows:
	2012	2011
	£	£
Deferred tax liability	253,612	17,292
	-----------	-----------
	253,612	17,292
	-----------	-----------

8.    Business Combination

On 16 April 2012, the Group acquired 100 per cent of the issued share capital and voting rights of Direct Energy Purchasing Limited, a company based in the United Kingdom. The principal reason for the acquisition was to enhance the Group's service offering and diversify the client base into new sectors, namely healthcare and multi-site retail. The acquisition of DEP was completed for a total consideration of up to £4.35 million. The initial £2.35 million payment which was satisfied by cash of £1.60 million and the issue of 21,428,572 ordinary shares in the capital of Inspired Energy Plc. In addition, two deferred payments of up to £1.0 million each contingent on the financial performance of DEP in the years to 31 March 2013 and 31 March 2014 are also payable. The acquisition was part financed by a £1.0 million equity placing, completed 5 April 2012, by the Group and partly from cash on the Group's balance sheet. The details of the business combination are as follows:

		Fair value
	Book value	adjustment	Fair value
Recognised amounts of identified net assets	£	£	£
Property, plant and equipment	44,573	(8,283)	36,290
Intangible assets	-	1,835,850	1,835,850
Trade and other receivables	383,652	-	383,652
Cash and cash equivalents	755,349	-	755,349
	-----------	-----------	-----------
Total assets	1,183,574	1,827,567	3,011,141
	-----------	-----------	-----------
Trade and other payables	376,849	-	376,849
Deferred tax liability	10,073	440,604	450,677
	-----------	-----------	-----------
Total liabilities	386,922	440,604	827,526
	-----------	-----------	-----------
Provisional fair value of identifiable net assets			2,183,615
Provisional goodwill			1,667,801
			-----------
Fair value of consideration transferred			3,851,416
Satisfied by			-----------
- cash consideration paid			1,600,271
- shares issued 16 April 2012			750,000
- contingent cash consideration payable			1,501,145
			-----------
			3,851,146
Net cash outflow arising from business combinations			-----------
- cash consideration paid			1,600,271
- cash and cash equivalents acquired			(755,349)
			-----------
Net cash outflow			844,922
			-----------

Goodwill

The goodwill arising on this acquisition is attributable to cross selling opportunities and niche market expertise that expected to be achieved from combining the acquired customer bases and trade with the existing group.

Contingent consideration is dependent upon the performance of Direct Energy Purchasing Limited for the twelve months ended 31 March 2013 and 31 March 2014 and was identified at the acquisition date to amount to £1,501,145. This was determined by management with reference to the forecasts produced for the periods under consideration.

Consideration Transferred

Acquisition related costs amounting to £195,404 are not included as part of consideration transferred and have been recognised as an expense in the Group Income Statement, as part of administrative expenses.

The fair value of the shares issued has been determined with reference to the Company's share price on the acquisition date.

Identifiable Net Assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to DEP has been carried out. The fair value of the customer contracts includes only values ascribed to valid energy supply contracts and letters of authority granting DEP exclusivity to negotiate future energy supply contracts. No value was ascribed to the customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

 

END

 

 

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