Final Results

RNS Number : 6621S

Inspired Energy PLC

21 March 2016

 

21 March 2016

Inspired Energy plc

("Inspired" or the "Group")

Final Results for the year ended 31 December 2015

Inspired Energy plc (AIM: INSE), a leading energy procurement consultant to UK corporates and SME's, announces record final results for the year ended 31 December 2015.

HIGHLIGHTS

Financial Highlights

	2015	2014	2015 % Increase
Revenue	£15.19m	£10.84m	40%
Gross profit	£11.57m	£8.52m	36%
Adjusted EBITDA*	£5.69m	£4.56m	25%
Adjusted Profit Before Tax	£5.07m	£4.27m	19%
Profit Before Tax	£3.49m	£2.98m	17%
Cash Generated From Operations	£2.72m	£1.74m	56%
Net Debt	£8.90m	£3.08m	189%
Dividend per share	0.35p	0.25p	40%
Adjusted EPS	1.00p	0.89p	12%
Basic EPS	0.65p	0.59p	10%
Procurement Corporate Order Book	£24.50m	£14.0m	75%

* Adjusted EBITDA is earnings before interest, taxation, depreciation and amortisation, excluding exceptional items and share based payments.

Operational Highlights

·      Significant growth in the Corporate division as a result of:

§ Acquisition of Wholesale Power UK ("WPUK") in July 2015, providing the Group with entry into new industry sectors, including leisure and logistics

§ Acquisition of STC Energy and Carbon Holdings ("STC") in November 2015, a market leading energy bureau, billing and management service provider to large multi-site organisations, enabling further diversification of customer base both regionally and by sector, including entry into the Public Sector and generating additional revenue streams

§ Record revenue, profits and organic Procurement Corporate Order Book Sales during the year

·      Robust organic growth, with the Procurement Corporate Order Book, excluding the impact of the acquisitions of WPUK and STC, increasing by 25% to £17.5 million as at 31 December 2015 (2014: £14.0 million).

·      Strong growth in the SME division, delivering record revenue, profits and cash generation.

·      High client retention rates maintained:

§ Renewals across the Group at 85%

§ Risk Management division maintained 100% client retention

·      Headcount increased by 70% to 170 staff as a result of Corporate acquisitions and investment within the operational team.

Commenting on the results, Janet Thornton, Chief Executive Officer, said: "2015 represented our fifth consecutive year of record revenues and profits with revenue increasing by 40% and adjusted EBITDA by 25%.  The Corporate division continues to gain traction, both through organic growth and the added services our strategic acquisitions have delivered for our customers. 

"I am proud of the accomplishments of the team whose hard work has delivered strong growth on all fronts as we continue to add value through our broadened services to our customers. Our strong organic growth has been enhanced by the successful completion of the acquisitions of WPUK and STC, which are both integrating extremely well in a relatively short period of time and have proved earnings enhancing. We have increased the breadth of our target customer base, whilst broadening our sector specialism to now include Leisure, Logistics and the Public Sector.

"The momentum from 2015 has carried through to the first quarter of this year, with the Procurement Corporate Order Book growing to £25.5 million. We are seeing the trend for growth in the year continuing on a positive trajectory."  

For further information, please contact:   

Inspired Energy plc Janet Thornton (Chief Executive) Paul Connor (Finance Director) David Foreman (Corporate Development Director)	www.inspiredenergy.co.uk [phone] [phone]
Shore Capital (Nominated Adviser and Joint Broker) Bidhi Bhoma Edward Mansfield	[phone]
Panmure Gordon (Joint Broker) Ben Thorne Erik Anderson	[phone]
Gable Communications Justine James John Bick	[phone] [phone] [e-mail]

CHAIRMAN'S STATEMENT

Inspired had an extremely strong 2015. The excellent set of results delivered by the Group for the year ended 31 December 2015, highlight its ability to deliver both record-breaking organic growth and the successful integration of two material acquisitions within the Corporate division.  This is a testament to the talent and dedication of the entire Inspired team which has been able to deliver our organic growth strategy supplemented by selective complementary acquisitions enabling us to maintain and improve our robust core business model.

The acquisitions of WPUK and STC were significant milestones in the development of the Group and the Board is pleased to report that both businesses are integrating well and that the acquisitions have, as expected, both enhanced Inspired Energy's service offering and broadened the client base within the Corporate division. The acquisition of STC in particular has added skills, services and strategic options to the Group and the Board is pleased to report that the alignment between the existing Corporate division and the team at STC is already providing significant incremental revenue opportunities.

The core Corporate division has delivered an exceptional year of organic and acquisitive growth. The Corporate division made like-for-like Procurement Corporate Order Book Sales, excluding the impact of WPUK and STC, of £12.2 million in the year to 31 December 2015 (2014: £10.0 million), representing an increase of 22%. Following an outstanding year for Procurement Corporate Order Book Sales, the Procurement Corporate Order Book, again excluding the impact of the acquisitions of WPUK and STC, increased by 25% to £17.5 million as at 31 December 2015 (2014: £14.0 million).

When including the acquired Order Books, the Procurement Corporate Order Book of the Group exceeded £24.5 million as at 31 December 2015, representing a year on year increase of 75%. The Procurement Corporate Order Book remains a consistent guide to the future performance of the Group and provides strong visibility of revenues for the next three years, demonstrating our position as a market leader to UK corporates in the energy consultancy sector.

The SME division has continued to deliver strong growth of revenue and profits during 2015, with material contribution to cash generation of the Group. This has been achieved through the investments made to infrastructure and operation expertise, with minimal increase in headcount during the year.

The results set out herein represent a record year with Group revenue increasing by 40% to £15.19 million (2014: £10.84 million) and adjusted EBITDA increasing by 25% to £5.69 million (2014: £4.56 million). Adjusted profit before tax increased by 19% to £5.07 million (2014: £4.27 million) and Adjusted EPS increased by 12% to 1.00 pence (2014: 0.89 pence).

Accordingly, the Board is pleased to propose a final dividend of 0.25 pence per share subject to shareholder approval at the AGM in June. This combined with the interim dividend payment of 0.10 pence per share, results in a full year dividend of 0.35 pence per share, a 40% increase on 2014 (2014: 0.25 pence). The dividend increase in the year of 40% is a demonstration of the Board's confidence in the future for the enlarged Group.

With the Group now in place, and the integration of the acquired businesses continuing as planned, we have a very strong platform for continued growth. 2016 has started strongly with the performance seen in 2015 continuing into the current year and the Board is confident that the Group will continue to go from strength to strength in 2016. 

Bob Holt

Chairman

21 March 2016

CHIEF EXECUTIVE OFFICER'S STATEMENT

The Board is delighted with the performance of the Group in the year to 31 December 2015, delivering record organic growth in both divisions, enhanced by the strategic acquisitions of both WPUK in July 2015 and STC in November 2015.

The continued growth achieved by the Group both in 2015 and during its time as a public company is a testament to the hard work and talent of our staff and to the strength of our customer proposition. The enlarged Group has a very strong platform from which to continue the organic growth of the business, onto which we can add new service lines and sector specialisms via acquisition as clearly demonstrated with WPUK and STC. We look forward to the coming year with confidence.

Corporate Division

Overview

The Group's Corporate division comprises:

·      Inspired Energy Solutions (founder business);

·      DEP (acquired in 2013);

·      WPUK (acquired in 2015); and

·      STC (acquired in 2015).

The Division's core services include the review, analysis, negotiation and bureau of gas and electricity contracts.

Organic Growth

In 2015 this division had an outstanding year delivering record organic revenue, profits and Procurement Corporate Order Book Sales. The success of the division is built upon delivering a high level of service to corporate customers combined with continuous development of the product suite available to clients from energy suppliers.  In addition, through increased utilisation and optimisation of IT platforms developed over the last three years, the Corporate team has been able to increase efficiency and service more clients with the existing staff.

Furthermore, through the hard work and dedication of the team, Inspired has been able to maintain superb client retention rates in excess of 85%, a KPI which continues to demonstrate the value placed on Inspired's service offering by our valued clients.

2015 was a strong year for new business, with key client wins including Sheffield Forgemasters Ricardo UK, Newsquest Media Group and Llhoist Group which reinforces our strong track record of tendering and winning high profile, significant users of energy in the UK Corporate space. We are also particularly pleased to be able to report a strong set of client wins within the Public Sector arena, a market which has recently been targeted by Inspired through the introduction of a specific public sector focused team, comprising key individuals with significant experience in successfully negotiating the OJEU (the Official Journal of the European Union) tender process in addition to the expertise in this arena from the STC team. Key client wins in this market include United Learning, University of Central Lancashire, Sparsholt College and North Warwickshire College.

2015 Acquisitions

Inspired completed the acquisitions of two Corporate focused businesses in 2015, reflecting the focus of the Group on enhancing the scale, service offering and sector specialisms of the Corporate division.

WPUK, an energy procurement consultant based in Blackpool, which delivers integrated energy solutions to UK Corporates, was acquired in July 2015 for an initial consideration of £2.0 million with a further contingent consideration of up to £0.75 million subject to achieving certain financial performance hurdles. The acquisition added service specialism and increased the average size of clients across the enlarged Group's portfolio.  The business was fully integrated by the end of 2015 and the Board is pleased with the progress made since acquisition.

STC, a specialist technology and software enabled energy consultancy based in Kent which provides a complete range of energy services to help organisations manage their utilities more effectively, was acquired in November 2015 for an initial consideration of £9.0 million with a further contingent consideration of up to £3.0 million subject to achieving certain financial performance hurdles. STC's core clients are typically larger UK corporates or organisations with extensive property portfolios or complex billing environments such as large multi-site retailers, county councils and housing associations. The acquisition has introduced a new customer offering into the Group, for specialist and complex billing and bureau services which has increased the Group's addressable market significantly. The integration is progressing as planned and the Board is delighted with the synergistic opportunities as the integration of the business continues.

Highlights

Highlights In the year include:

·      Revenue increased 40% to £10.07 million (2014: £7.2 million)

·      The Corporate division generated adjusted EBITDA of £4.97 million (2014: £4.01 million), a 17% year on year increase.

·      Like-for-like Procurement Corporate Order Book Sales, excluding the contribution of WPUK and STC which were acquired in the year, increased by 22% to £12.2 million in the year to 31 December 2015 (2014: £10.0 million)

·      Like-for-like Procurement Corporate Order Book (previously reported as 'Corporate Order Book'), excluding WPUK and STC, increased by 25% to £17.5 million as at 31 December 2015 (2014: £14.0 million)

·      Including the acquired Procurement Corporate Order Books of WPUK and STC, the Procurement Corporate Order Book exceeded £24.5 million, representing a year on year increase of 75%

·      High customer retention rates maintained, 85% across the Group (100% in Risk Managed), whilst delivering strong new customer win performance

Procurement Corporate Order Book

The Group is proud to be able to report organic and acquisitive Procurement Corporate Order Book growth in the year to a record £24.5 million. This represents an increase of 75% and £10.5 million in absolute terms.

Procurement Corporate Order Book Analysis		£'m
Procurement Corporate Order Book b/f at 31 December 2014		14.0
Add: Procurement Corporate Order Book Sales in period (excl. WPUK and STC)		12.2
Less: Revenue recognised from Procurement Corporate Order Book in period (excl. WPUK and STC)		(8.7)
Add: Acquired Procurement Corporate Order Book less revenue recognised in the period		7.0
Procurement Corporate Order Book c/f at 31 December 2015		24.5

The Procurement Corporate Order Book is defined as the aggregate revenue expected by the Group in respect of signed contracts between an Inspired client and an energy supplier 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.

The Procurement Corporate Order Book only relates to the Corporate division, and does not include any SME revenue or contracts within it. The growth of the Procurement Corporate Order Book provides an indicator of the latent growth of the business which has yet to be recognised as revenue of the Group. This is because no revenue is recognised by Inspired's Corporate division until the energy is physically consumed by the client.

Procurement Corporate Order Book Sales

Procurement Corporate Order Book Sales values represent the aggregated expected revenue due to the Group from contracts secured within a defined period. Expected revenue is calculated as the expected commission due to the Group from signed contracts between a client an energy supplier for an agreed consumption value at an agreed commission rate.

A Procurement Corporate Order Book Sales Value which is in excess of revenue recognised, within a defined period, will increase the Procurement Corporate Order Book of the Group, providing an indicator of expected future growth already secured by the Group. In 2015, organic Procurement Corporate Order Book Sales (excluding WPUK and STC) were 40% in excess of revenue recognised in the year, which is manifested in the increase of the Procurement Corporate Order Book (excluding WPUK and STC) of £3.5 million.

SME Division

The Group's SME division includes: EnergiSave Online ("EnergiSave"), KWH Consulting ("KWH") and Simply Business Energy ("SBE"). Within the SME Division, the Group's energy consultants contact prospective SME clients to offer reduced tariffs and contracts based on the unique situation of the customer.

The SME division has achieved strong growth in 2015, with revenue increasing 41% to £5.1 million from £3.6 million in 2014. The division increased operating profit to £1.2 million from £1.0 million in 2014, representing organic growth of 39%.  The growth achieved in the year represents the maturing of the business following a period of significant investment in SME sales and administration staff at the beginning of 2014 in order to establish a robust platform for the division.  This is emphasised by staff numbers remaining broadly stable at 49 (2014: 45) despite the increase in revenue.

The Board is particularly pleased to report that the strong cash generation in H2 of 2014 by the division has continued throughout 2015, in part, by improved payment terms with suppliers.  The Group remains focused on continuing to improve these terms into 2016.

Acquisition strategy

The Board continues to investigate opportunities for the Group to participate in industry consolidation. To create an enlarged and improved business, as demonstrated with the acquisitions made in 2015, we believe that potential targets should offer one or more of the following criteria:

·      Additional technical and/or service capability;

·      Sector specialism and diversification; and

·      Increased geographic footprint

The Board continues to seek acquisition opportunities which fit with the Group's strategy in order to augment the Group's services, products or markets and is delighted to have completed the acquisitions of WPUK and STC in H2 of 2015.

Exceptional Deal Related costs

Exceptional costs of £480,128 have been incurred in the year, all of which relates to fees associated with the two acquisitions in the year. These costs are considered by the Directors to be either material in nature, non-recurring and therefore require separate identification to give a true and fair view of the Group's result for the period.

Cash and Borrowings

As at 31 December 2015, the Group had cash balances of £1.6 million. As at the date of this announcement, the Group had outstanding balances on its senior term debt of £10.0 million, for which annual capital repayments are £1.4 million, plus £0.6 million drawn of the £1.5 million revolving credit facility.

To finance the acquisition of WPUK in July 2015, the Group extended the previous £3.5 million term loan facility to £5.0 million, amortising over a period of five years.

To finance the acquisition of STC in November 2015, the Group entered into a new facility agreement with Santander UK plc ("Santander"), replacing the £5.0 million term loan facility and £0.6 million of drawn RCF facilities. The new facility agreement ("Facility") was for a £10.0 million term loan. £7.0 million of the term facilities ("Tranche A") amortise over a period of five years with the balance, and the remaining £3.0 million ("Tranche B"), repayable by way of a bullet repayment on 16 May 2021. The Facility has an interest rate of 3.0% over LIBOR in respect of Tranche A and 3.25% over LIBOR in respect of Tranche B.  There are no ongoing monitoring fees. 

In addition, the Group has also entered into a revolving credit facility with Santander, for the sum of £1.5 million, of which £0.6 million is drawn, to be used for the purposes of satisfying future working capital requirements (the "RCF") and an acquisition facility of up to £3.5 million to fund future Group 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.

As at 31 December 2015, net debt stood at £8.9 million, an increase of £5.9 million in comparison to 31 December 2014.

The increase in net debt reflects a year in which the cash generation of the Group was offset by the payment of £1.5 million of initial cash consideration to the vendors of WPUK and £5.0 million of initial cash consideration to the vendors of STC.

Dividends

The Board is delighted to propose a final dividend of 0.25 pence per share subject to approval at the annual general meeting of the Group. Following the payment of an interim dividend of 0.10 pence per share, the total dividend payable for the year ended 31 December 2015 is 0.35 pence per share. This represents an increase of 40% over the dividend payable in respect of 31 December 2014, being 0.25 pence per share.

The dividend will be payable to all shareholders on the register as at 3 June 2016 and will be paid on 8 July 2016.

Focus on our people

The Group believes that investment in staff development and welfare builds a stronger business and we will continue to make appropriate investment in order to further develop our team and our environment. This is demonstrated by the Group supporting employees through professional qualifications and work based learning. National Vocational Qualifications (NVQs) continue to be a great success, with employees delivering 100% pass rate in 2015. In addition, a number of staff are undertaking professional qualifications including  ACCA/AAT qualifications to support their development within the business.

Throughout the year, Directors of the Group provide guidance and mentor employees, engaging in consultation with them to ensure that their views are heard and considered.

Applications for employment by disabled persons are given full and fair consideration for all vacancies in accordance with their particular aptitude and abilities. In the event of employees becoming disabled, every effort if given to retrain them in order that their employment with the Group may continue.

Outlook

I am delighted with the Group's achievements over the past year, delivering strong growth on all fronts as we continue to deliver value-added services to our customers. Our strong organic growth has been enhanced by the successful execution of the acquisitions of WPUK and STC. Both acquisitions have proved complimentary to the business, increasing the breadth of our target customer base, while enhancing our sector specialism to now include Leisure, Logistics and the Public Sector.

Integration of both companies is progressing well, and we continue to advance our position as a market leader. On behalf of the Board, I would like to thank all of the Inspired team for the hard work over the past year, and we look forward to another exciting year of growth and development of the business.

Janet Thornton

Chief Executive Officer

21 March 2016

INSPIRED ENERGY PLC

The Group

Inspired Energy PLC provides energy procurement consultancy to a range of UK business customers. The Group's core services are primarily the review, analysis and negotiation of gas and electricity contracts on behalf of our clients. The Group generates the majority of its income from commissions received from energy suppliers.

In addition to providing expert consultancy on the negotiation of energy contracts, the Group provides on-going services to our clients throughout the life of each contract, including energy bureau, billing and management services.

Customers

Our size and reputation enables us to partner with UK energy suppliers to offer exclusive contracts to our customers.

Through optimising energy procurement on behalf of our clients, Inspired enables them to achieve greater certainty of their energy costs and in many cases delivers significant savings.

The Group currently manages and negotiates gas and electricity supply agreements for approximately 95,000 meters across the UK, operating on behalf of c.9,500 customers.

Corporate division

The Corporate division, which includes Inspired Energy Solutions, DEP, Wholesale Power UK and STC Energy and Carbon Holdings, delivers core services, which are the review, analysis and negotiation of gas and electricity contracts on behalf of corporate clients. In addition, the division provides customers with leading energy bureau, billing and management service.

Energy review and benchmarking

The Group's team of energy analysts reviews 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 Inspired clients includes a number of contracts that are exclusive to the Group which have been 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 twelve and 36 months.

Bureau and bill validation

In addition, the Group offers a market leading energy bureau and 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 acts on behalf of the client to resolve queries and ensure that only valid charges are paid.

Additional services

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.

·      Retrospective Auditing - review of last six 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.

Risk managed trading

Managed frameworks

The Group's Corporate division benefits from a market leading trading team of continued six analysts, who actively focus on high volume consumers and allow customers to operate more complex, long-term energy 'frameworks' based on agreed risk management strategies.

Comprehensive approach

Inspired's approach to risk management is comprehensive. The team actively manages the entire energy procurement process from wholesale commodity level to total cost at meter. This is necessary in order to create a succinct, robust and dynamic risk policy tailored to each individual client. Prior to commencement, Inspired undertakes a strategy workshop with clients to establish financial objectives, risk parameters and market engagement rules.

Market leading terms

Inspired's risk management team ensures clients are offered market leading supplier terms which support the trading strategy, ensuring each client meets their specific procurement objectives.

'Whole of market' access

Combined with the team's considerable industry experience and knowledge, the trading team uses all of the LEBA broker platforms and exchanges for the energy markets across the UK and Europe, which ensures all opportunities to mitigate price risk are identified and utilised. In addition to these platforms, the team also has access to leading-edge news and commentary, technical analysis, statistical models and other proprietary tools which helps provide clients with clear views on market behaviour and what future movements could be.

Budget clarity

All of our risk managed products are supported by sophisticated internal systems which generate pricing automatically so clients are always aware of their total budgetary position.

SME division

The SME division was launched in October 2012 and has grown rapidly since its launch. SME energy consultants contact prospective clients to offer reduced tariffs and contracts based on the unique situation of the customer.

Leads are generated and managed by the Group's internally generated, bespoke CRM and case management IT system. Tariffs are offered from a range of suppliers and the Group is actively working with new suppliers to increase the range of products available to SME clients.

Following the acquisitions made in 2014, the division has developed a fully automated, fully operational online quoting platform for SME customers looking to switch their energy supplier and it has agreements in place with the majority of energy suppliers within the SME sector. The web enabled capability is offered to prospective new, online, customers, and is also used by the sales agents in the division.

Group statement of comprehensive income

For the year ended 31 December 2015

				2015	2014
		Note		£	£
Revenue				15,188,071	10,835,322
Cost of sales				(3,622,110)	(2,311,683)
Gross profit				11,565,961	8,523,639
Administrative expenses				(7,651,117)	(5,363,347)
Operating profit				3,914,844	3,160,292
Analysed as:
Earnings before exceptional costs, depreciation, amortisation and share-based payments costs				5,688,954	4,556,228
Exceptional costs		3		(480,128)	(458,302)
Depreciation				(194,358)	(116,798)
Amortisation of intangible assets				(786,705)	(521,102)
Share-based payment costs				(312,919)	(299,734)
				3,914,844	3,160,292
Finance expenditure				(358,593)	(168,832)
Other financial items				(61,658)	(10,147)
Profit before income tax				3,494,593	2,981,313
Income tax expense		4		(651,344)	(508,550)
Profit for the year and total comprehensive income from continuing operations				2,843,249	2,472,763
Attributable to:
Equity owners of the company				2,843,249	2,472,763
Basic earnings per share attributable to the equity holders of the company (pence)		5		0.65	0.59
Diluted earnings per share attributable to the equity holders of the company (pence)		5		0.62	0.57

Group Statement of Financial Position

At 31 December 2015

		2015	2014
	Note	£	£
ASSETS
Non-current assets
Intangible assets	6	16,938,740	3,119,578
Property, plant and equipment		1,360,303	560,230
Deferred tax asset		-	50,076
Non-current assets		18,299,043	3,729,884
Current assets
Trade and other receivables	7	9,460,174	6,199,883
Cash and cash equivalents		1,604,851	774,822
Current assets		11,065,025	6,974,705
Total assets		29,364,068	10,704,589
LIABILITIES
Current liabilities
Trade and other payables		1,357,231	892,163
Bank borrowings		2,000,000	2,200,000
Deferred consideration		-	50,000
Contingent consideration		1,654,601	-
Current tax liability		1,144,139	1,159,998
Current liabilities		6,155,971	4,302,161
Non-current liabilities
Bank borrowings		8,490,569	1,656,746
Trade and other payables		50,000	184,235
Deferred consideration		-	300,000
Contingent consideration		1,788,506	-
Interest rate swap		76,571	14,913
Deferred tax liability		1,495,244	-
Non-current liabilities		11,900,890	2,155,894
Total liabilities		18,056,861	6,458,055
Net assets		11,307,207	4,246,534
EQUITY
Share capital		589,505	529,602
Share premium account		1,901,747	1,596,028
Merger relief reserve		13,675,249	8,925,737
Share-based payment reserve		631,023	457,728
Retained earnings		5,892,456	4,120,212
Reverse acquisition reserve		(11,382,773)	(11,382,773)
Total equity		11,307,207	4,246,534

Group Statement of Changes In Equity

For the year ended 31 December 2015

		Share	Merger	Share-based		Reverse	Total
	Share	premium	relief	payment	Retained	acquisition	shareholders'
	capital	account	reserve	reserve	earnings	reserve	equity
	£	£	£	£	£	£	£
Balance at 1 January 2014	512,162	1,203,970	8,623,237	291,616	2,310,934	(11,382,773)	1,559,146
Profit and total comprehensive income for the period	-	-	-	-	2,472,763	-	2,472,763
Shares issued (18 March 2014)	2,500	-	302,500	-	-	-	305,000
Shares issued  (10 April 2014)	1,437	39,481	-	-	-	-	40,918
Shares issued (29 April 2014)	1,814	46,410	-	-	-	-	48,224
Shares issued (4 June 2014)	3,472	95,311	-	-	-	-	98,783
Shares issued (2 September 2014)	8,217	210,856	-	-	-	-	219,073
Share-based payment cost	-	-	-	299,734	-	-	299,734
Share options lapsed/exercised	-	-	-	(133,622)	133,622	-	-
Dividends paid	-	-	-	-	(797,107)	-	(797,107)
Total transactions with owners	17,440	392,058	302,500	166,112	(663,485)	-	214,625
Balance at 31 December 2014	529,602	1,596,028	8,925,737	457,728	4,120,212	(11,382,773)	4,246,534
Profit and total comprehensive income for the period	-	-	-	-	2,843,249	-	2,843,249
Shares issued (1 April 2015)	2,675	84,707	-	-	-	-	87,382
Shares issued  (20 May 2015)	3,704	-	296,296	-	-	-	300,000
Shares issued (31 July 2015)	5,800	-	494,200	-	-	-	500,000
Shares issued (21 August 2015)	6,740	221,012	-	-	-	-	227,752
Shares issued (17 November 2015)	40,984	-	3,959,016	-	-	-	4,000,000
Share-based payment cost	-	-	-	312,919	-	-	312,919
Share options lapsed/exercised	-	-	-	(139,624)	139,624	-	-
Dividends paid	-	-	-	-	(1,210,629)	-	(1,210,629)
Total transactions with owners	59,903	305,719	4,749,512	173,295	(1,071,005)	-	4,217,424
Balance at 31 December 2015	589,505	1,901,747	13,675,249	631,023	5,892,456	(11,382,773)	11,307,207

Merger relief reserve

Merger relief reserve represents the premium arising on shares issued as part or full consideration for acquisitions, where advantage has been taken of the provisions of section 612 of the Companies Act 2006.

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 and arises on consolidation.

Share-based payment reserve

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

Group Statement of Cash Flows

For the year ended 31 December 2015

	2015	2014
	£	£
Cash flows from operating activities
Profit before income tax	3,494,593	2,981,313
Adjustments
Depreciation	194,358	116,798
Amortisation	786,705	521,102
Share- based payment costs	312,919	299,734
Contingent consideration	-	141,855
Finance expenditure	358,593	168,832
Other financial items	61,658	10,147
Cash flows before changes in working capital	5,208,826	4,239,781
Movement in working capital
Increase in trade and other receivables	(2,200,656)	(2,553,399)
(Decrease)/increase in trade and other payables	(289,165)	50,358
Cash generated from operations	2,719,005	1,736,740
Income taxes paid	(987,833)	(133,102)
Net cash flows from operating activities	1,731,172	1,603,638
Cash flows from investing activities
Contingent consideration paid	(50,000)	(750,000)
Acquisition of subsidiaries net of cash acquired	(5,571,279)	(223,569)
Payments to acquire property, plant and equipment	(246,091)	(380,236)
Payments to acquire intangible assets	(529,772)	(627,414)
Proceeds for disposal of property, plant and equipment	19,911	-
Net cash used in investing activities	(6,377,231)	(1,981,219)
Cash flows from financing activities
New bank loans (net of debt issue costs)	7,363,158	1,500,000
Proceeds from equity fundraising	315,134	406,998
Repayment of bank loans	(613,158)	(700,000)
Interest on bank loans paid	(355,192)	(178,979)
Dividends paid	(1,210,629)	(797,107)
Repayment of hire purchase agreements	(23,225)	(8,990)
Net cash from/(used in) financing activities	5,476,088	221,922
Net increase/(decrease) in cash and cash equivalents	830,029	(155,659)
Cash and cash equivalents brought forward	774,822	930,481
Cash and cash equivalents carried forward	1,604,851	774,822

.

NOTES TO PRELIMINARY RESULTS

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 2015. 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 2015 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 2014. These accounting policies have remained unchanged for the financial year ended 31 December 2015.

Going Concern

The Group's forecasts, which have been prepared for the period to 31 December 2017 after taking into 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 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.

The preparation of financial statements, in conformity with generally accepted accounting principles under IFRS, requirements management to make estimates and assumptions that affect the reporting amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates.

1.1 Revenue recognition

Corporate division

Commissions received from the energy suppliers are based upon the energy usage of the Corporate customer at agreed commission rates with the energy suppliers. Commission income is recognised in line with the energy usage of the Corporate customer over the term of the contract which is considered to be the point at which commission income can be reliably measured. This is due to the impact of the observed variability of actual to estimated energy usage on Corporate customer contracts on the substantial Procurement Corporate Order Book of the Corporate division.

The majority of contracts are entered into as 'direct billing' contracts, whereby commissions are received in cash terms in line with the billing profile of the ultimate customer, which can be on a monthly or quarterly basis. For a minority of suppliers, 'up-front payment' contracts are entered into, whereby the supplier pays a percentage of the commission on the contract commencement date, with the remaining percentage on contract reconciliation at a future specified date.

Accrued income for the Corporate division represents commission income recognised at the year-end in respect of customer energy usage prior to the year-end which has not been settled by the energy supplier at that point.

For risk managed contracts, where a number of services are provided to the Corporate customer over the term of the contract, commission income is similarly recognised in line with the energy usage of the customer which approximates to recognition on a straight line basis over the contract period.

In respect of contracts for on-going services billed directly to the Corporate customer including bureau services, which have increased since the acquisition of STC Energy and Carbon Holdings Limited, revenue represents the value of work done in the year. Revenue in respect of contracts for on-going consultancy services is recognised as it becomes unconditionally due to the group as services are delivered and is measured by reference to stage of completion as determined by cost profile.

SME division

The SME division provides services through procuring contracts with energy suppliers on behalf of SME customers and generates revenues by way of commissions received directly from the energy suppliers. No further services regarding procurement are performed once the contract is authorised by the supplier. Commissions earned by the SME division fall into two broad categories:

Change of Tenancy Agreements ('COTS')

COTS agreements are largely entered into by customers on moving into new premises. Revenue relates to an upfront fixed commission received from the energy supplier, on setting up a new supply agreement. The commission received has no linkage to future energy usage and hence revenue can be reliably measured at the point the contract has been authorised by the energy supplier. Revenue is recognised at the point the contract has been authorised by the energy supplier.

Other SME Agreements

For other SME agreements, commissions are based upon the energy usage of the SME customer at agreed commission rates with the energy suppliers. The expected commission over the full term of the contract is recognised at the point the contract is authorised by the supplier. Where actual energy use by the business differs to that calculated at the date the contract goes live, an adjustment is made to revenue once the actual data is known.

The cash received profile relating to these revenues varies according to the contract terms in place with the energy supplier engaged and can be received before the date the contract goes live or spread over the terms of the contract between the energy supplier and the end customer which can be for a period of up to three years. Accrued revenue relates to commission earned, not yet received or paid and are discounted at an appropriate rate.

2. Segmental information

Revenue and segmental reporting

The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the group's executive directors. Operating segments for the year to 31 December 2015 were determined on the basis of the reporting presented at regular board meetings of the group which is by nature of customer and level of procurement advice provided. The segments comprise:

The Corporate division ("Corporate")

This sector comprises the operations of Inspired Energy Solutions Limited, Direct Energy Purchasing Limited, Wholesale Power UK and STC Energy and Carbon Holdings. The corporate's core services are primarily in the review, analysis and negotiation of gas and electricity contracts on behalf of corporate clients. Additional services provided include Energy Review and Benchmarking, Negotiation and Bill Validation. The Group's Corporate division benefits from a market leading trading team, who actively focus on high volume customers, providing more complex, long term energy frameworks based on agreed risk management strategies.

The SME division ("SME")

This sector comprises the operations of the EnergiSave Online Limited, KWH Consulting Limited and Simply Business Energy Limited. Within the SME division, the Group's energy consultants contact prospective SME clients to offer reduced tariffs and contracts based on the unique situation of the customer. Leads are generated and managed by the Group's internally generated, bespoke CRM and case management IT system. Tariffs are offered from a range of suppliers and the Group is actively working with new suppliers to increase the range of products available to SME clients.

Plc costs

This comprises the costs of running the plc, incorporating the cost of the board, listing costs and other professional service costs such as audit, tax, legal and group insurance.

	2015				2014
	Corporate	SME	PLC costs	Total	Corporate	SME	PLC costs	Total
	£	£	£	£	£	£	£	£
Revenue	10,073,654	5,114,417	-	15,188,071	7,200,811	3,634,511	-	10,835,322
Cost of sales	(981,536)	(2,640,574)	-	(3,622,110)	(460,503)	(1,851,180)	-	(2,311,683)
Gross profit	9,092,118	2,473,843	-	11,565,961	6,740,308	1,783,331	-	8,523,639
Administrative expenses	(4,430,546)	(1,286,006)	(1,934,565)	(7,651,117)	(3,150,782)	(786,240)	(1,426,325)	(5,363,247)
Operating profit	4,661,572	1,187,837	(1,934,565)	3,914,844	3,589,526	997,091	(1,426,325)	3,160,292
Analysed as:
EBITDA	4,973,426	1,543,532	(828,004)	5,688,954	4,012,219	1,155,422	(611,413)	4,556,228
Depreciation	(177,681)	(16,677)	-	(194,358)	(110,802)	(5,996)	-	(166,798)
Amortisation	(134,173)	(339,018)	(313,514)	(786,705)	(92,317)	(152,335)	(276,450)	(521,102)
Share based payments	-	-	(312,919)	(312,919)	-	-	(299,734)	(299,734)
Exceptional costs	-	-	(480,128)	(480,128)	(219,574)	-	(238,728)	(458,302)
	4,661,572	1,187,837	(1,934,565)	3,914,844	3,589,526	997,091	(1,426,325)	3,160,292
Finance expenditure				(358,593)				(168,832)
Other financial items				(61,658)				(10,147)
Profit before income tax				3,494,593				2,981,313
Total assets	10,804,672	4,376,283	14,183,113	29,364,068	5,122,235	2,901,759	2,680,595	10,704,589
Total liabilities	1,505,147	2,347,433	14,204,282	18,056,861	1,587,214	337,358	4,533,483	6,458,055

3. Exceptional costs

	2015	2014
	£	£
Fees associated with acquisition	480,128	49,270
Additional consideration in relation to acquisition*	-	141,855
Restructuring costs**	-	267,177
	480,128	458,302

*Relates to additional consideration in respect of the acquisition of Direct Energy Purchasing Limited in 2012

 **Restructuring costs relate to costs incurred outside the course of normal business activity and therefore deemed exceptional. They relate to the relocation of Direct Energy Purchasing Limited and Inspired Energy (Ireland) Limited to the Inspired Energy Plc head office.

4. Income Tax Expense

The income tax expense is based on the profit for the year and comprises:

	2015	2014
	£	£
Current tax
Current tax charge	638,969	568,656
Adjustments in respect of prior periods	(39,044)	103,365
	599,925	672,021
Deferred tax
Origination and reversal of temporary timing differences	51,419	(163,471)
Total income tax charge	651,344	508,550
Reconciliation of tax charge to accounting profit:
Profit on ordinary activities before taxation	3,494,593	2,981,313
Tax at UK income tax rate of 20.25% (2014: 21.50%)	707,655	640,982
Disallowable expenses	82,350	109,723
Share options	(99,617)	(248,766)
Movement of deferred tax not provided for	-	(96,754)
Effects of current period events on current tax prior period balances	(39,044)	103,365
Total income tax charge	651,344	508,550

5. Earnings per share

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

	2015	2014
	£	£
Profit attributable to equity holders of the Group	2,843,249	2,472,763
Consideration in relation to acquisition	-	141,855
Fees associated with acquisition	480,128	49,270
Restructuring costs	-	267,177
Amortisation of intangible assets	786,705	521,102
Deferred tax in respect of amortisation of intangible assets	(62,703)	(55,290)
Share-based payment costs	312,919	299,734
Adjusted profit attributable to owners of the Group	4,360,298	3,696,611
Weighted average number of ordinary shares in issue	434,844,094	416,871,033
Dilutive effect of share options	24,005,835	18,324,125
Diluted weighted average number of ordinary shares in issue	458,849,929	435,195,158
Basic earnings per share (pence)	0.65	0.59
Diluted earnings per share (pence)	0.62	0.57
Adjusted basic earnings per share (pence)	1.00	0.89
Adjusted diluted earnings per share (pence)	0.95	0.85

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

Adjusted earnings per share represents the earnings per share, as adjusted to remove the effect of fees associated with acquisitions, restructuring costs, the amortisation of intangible assets and share-based payment costs which have been expensed to the Group Income Statement in the year. The adjustments to earnings per share have been disclosed to give a clear understanding of the Group's underlying trading performance

6. Intangible assets and goodwill

	Computer		Customer	Customer	Customer
	software	Tradename	databases	contracts	relationships	Goodwill	Total
	£	£	£	£	£	£	£
Cost
At 1 January 2014	571,004	-	-	1,835,850	-	1,667,801	4,074,655
Reclassification	(161,800)	-	161,800	-	-	-	-
Additions	273,199	-	354,215	-	-	-	627,414
Acquisitions through business combinations	272,500	-	-	-	-	407,938	680,438
At 31 December 2014	954,903	-	516,015	1,835,850	-	2,075,739	5,382,507
Additions	101,487	-	428,285	-	-	-	529,772
Acquisitions through business combinations	3,009,000	115,000	-	1,638,000	1,989,000	7,325,095	14,076,095
At 31 December 2015	4,065,390	115,000	944,300	3,473,850	1,989,000	9,400,834	19,988,374
Amortisation
As at 1 January 2014	141,552	-	-	1,600,275	-	-	1,741,827
Reclassification	(64,711)	-	64,711	-	-	-	-
Charge for the year	133,194	-	152,333	235,575	-	-	521,102
At 31 December 2014	210,035	-	217,044	1,835,850	-	-	2,262,929
Charge for the year	259,570	677	339,018	128,860	58,580	-	786,705
At 31 December 2015	469,605	677	556,062	1,964,710	58,580	-	3,049,634
Net Book Value
At 31 December 2015	3,595,785	114,323	388,238	1,509,140	1,930,420	9,400,834	16,938,740
At 31 December 2014	744,868	-	298,971	-	-	2,075,739	3,119,578

7. Trade and other receivables

	2015	2014
	£	£
Trade receivables	1,998,904	1,019,616
Other receivables	3,238	3,238
Prepayments	798,648	356,759
Accrued income	6,659,384	4,820,270
	9,460,174	6,199,883

8. Business Combinations

 Wholesale Power UK Limited (WPUK)

On 31 July 2015, the Group acquired 100% of the issued share capital and voting rights of Wholesale Power UK Limited a company based in the United Kingdom. The principal reason for the acquisitions was to strengthen the Group's existing service offering to its core Corporate customers, as well as providing the Group with entry into new industry sectors, including leisure and logistics.

The acquisition of WPUK was completed for a total consideration of £2,850,000. The initial £2,100,000 payment was satisfied by £1,600,000 cash and £500,000 consideration shares. In addition, £750,000 is contingent upon WPUK achieving challenging revenue targets until 31 October 2017, and will be payable in two instalments, on 31 December 2016 and 31 December 2017. The agreed cash consideration totalled £1,500,000 prior to calculation of the normalised working capital position of the business. A further £100,000 was added to the cash consideration to reflect excess cash in the business at acquisition.

The acquisition was financed through the extension of the Group's existing facility with Santander. The details of the business combination are as follows:

		Provisional
	Book	fair value	Provisional
	value	adjustment	fair value
	£	£	£
Property, Plant and Equipment	16,570	-	16,570
Intangible assets	-	1,079,000	1,079,000
Trade and other receivables	199,375	-	199,375
Cash and cash equivalents	306,784	-	306,784
Total assets	522,729	1,079,000	1,601,729
Trade and other payables	78,403	-	78,403
Current tax liability	76,870	-	76,870
Deferred tax liability	-	215,800	215,800
Total liabilities	155,273	215,800	371,073
Provisional fair value of identifiable net assets			1,230,656
Provisional goodwill			1,554,248
Fair value of consideration transferred			2,784,904
Satisfied by:
- cash consideration paid			1,600,000
- shares issued 31 July 2015			500,000
- contingent consideration			750,000
- discounting impact on contingent consideration			(65,096)
			2,784,904
Net cash outflow arising from business combinations:
- cash consideration paid			1,600,000
- cash and cash equivalents acquired			(306,784)
Net cash outflow			1,293,216

Goodwill

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

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to WPUK has been carried out. The fair value of the customer contracts was calculated as £1,079,000, which includes only values ascribed to valid energy supply contracts and letters of authority granting WPUK 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.

The Group estimates costs incurred in relation to the transaction to be £168,574. These costs are included within exceptional costs in the Group income statement.

STC Energy and Carbon Holdings Limited ("STC")

On 17 November 2015, the Group acquired 100% of the issued share capital and voting rights of STC a company based in the United Kingdom. The principal reason for the acquisition was to strengthen the Group's existing service offering to its core Corporate customers, as well as providing the Group with entry into new industry sectors, including the public sector.

The acquisition of STC Energy and Carbon Holding Limited was completed for a total consideration of up to £12,000,000. The initial £9,000,000 payment was satisfied by the issue of 32,786,885 ordinary shares (with aggregate value at completion of £4,000,000) of Inspired Energy PLC and £5,000,000 cash. The agreed cash consideration totalled £5,000,000 prior to calculation of the normalised working capital position of the business. The sum of £489,727 was deducted from the cash consideration to reflect a shortfall in cash in the business at acquisition and therefore the actual cash payment was £4,510,273.

The acquisition of STC Energy and Carbon Holding Limited was completed for a total consideration of up to £12,000,000. The initial £9,000,000 payment was satisfied by the issue of 32,786,885 ordinary shares (with aggregate value at completion of £4,000,000) of Inspired Energy PLC and £5,000,000 cash. The agreed cash consideration totalled £5,000,000 prior to calculation of the normalised working capital position of the business. The sum of £489,727 was deducted from the cash consideration to reflect a shortfall in cash in the business at acquisition and therefore the actual cash payment was £4,510,273.

Recognised amounts of identifiable net assets

		Provisional
	Book	fair value	Provisional
	value	adjustment	fair value
	£	£	£
Property, Plant and Equipment	751,681	-	751,681
Intangible assets	-	5,672,000	5,672,000
Trade and other receivables	1,030,546	(170,286)	860,260
Cash and cash equivalents	232,209	-	232,209
Total assets	2,014,436	5,501,714	7,516,150
Trade and other payables	445,241	-	445,241
Current tax liability	295,179	-	295,179
Deferred tax liability	177,758	1,100,343	1,278,101
Total liabilities	918,178	1,100,343	2,018,521
Provisional fair value of identifiable net assets			5,497,629
Provisional goodwill			5,770,847
Fair value of consideration transferred			11,268,476
Satisfied by:
- cash consideration paid			4,510,273
- shares issued 17 November 2015			4,000,000
- contingent consideration			3,000,000
- discounting impact on earn outs			(241,797)
			11,268,476
Net cash outflow arising from business combinations:
- cash consideration paid			4,510,273
- cash and cash equivalents acquired			(232,209)
Net cash outflow			4,278,064

Goodwill

The goodwill arising on this acquisition is attributable to new and niche sector expertise enabling cross selling opportunities achieved from combining the acquired customer bases and trade with existing group.

Identifiable net assets

In acquiring STC, the Group acquired market leading energy bureau products and services (typically billing, estate management, financial analysis and invoice validation) aimed at larger UK corporations or organisations with extensive property portfolios or complex billing environments. The fair value of the software development intangible at acquisition was calculated to be £3,009,000 on a reproduction cost basis and is to be amortised on a straight line basis over five years in line with its expected economic life.

Furthermore, through acquiring STC, the Group acquired long standing customer relationships. The excess earnings approach was used in valuing STC's existing customer relationships. The value of the customer relationships is calculated as the sum of the present value of the projected cash flow, in excess of returns on contributory assets over the life of the relationship with the customer. The fair value of the customer relationships at acquisition was calculated to be £1,989,000.

The fair value of the customer contracts includes only values ascribed to valid energy supply contracts and letters of authority granting STC exclusivity to negotiate future energy supply contracts. No value was ascribed any likely renewals of contracts outside of a period of exclusivity. The fair value of the customer contracts was calculated to be £559,000.

The fair value of the Tradename acquired was valued by means of the royalty savings method of the income approach. Under this premise, it is assumed that a company, without similar asset, would license the right to use the marketing-related intangible asset and pay a royalty to turnover achieved. The fair value of the customer contracts was calculated to be £115,000.

The Group estimates costs incurred in relation to the transaction to be £311,554. These costs are included within exceptional costs in the Group income statement.

9. Preliminary Announcement

This preliminary announcement, which has been agreed with the auditors, was approved by the board of directors on 21 March 2016.  It is not the Group's statutory accounts.  Copies of the Group's audited statutory accounts for the year ended 31 December 2015 will be available at the company's website later this week and a printed version will be dispatched to shareholders shortly.

 

END

 

 

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