Final Results

RNS Number : 5402A

Inspired Energy PLC

27 March 2017

 

27 March 2017

Inspired Energy plc

("Inspired" or the "Group")

Final Results for the year ended 31 December 2016

Inspired Energy plc (AIM: INSE), a leading energy procurement consultant to UK corporates, announces record final results for the year ended 31 December 2016.

HIGHLIGHTS

Financial Highlights

	2016	2015	2016 % Increase
Revenue	£21.51m	£15.19m	42%
Gross profit	£17.31m	£11.57m	50%
Adjusted EBITDA*	£8.26m	£5.69m	45%
Adjusted Profit Before Tax**	£7.02m	£5.07m	38%
Profit Before Tax	£4.02m	£3.49m	15%
Cash Generated From Operations	£4.98m	£2.72m	83%
Net Debt	£10.79m	£8.90m	21%
Dividend per share***	0.45p	0.35p	29%
Adjusted EPS	1.27p	1.00p	27%
Basic EPS	0.71p	0.65p	9%
Procurement Corporate Order Book****	£28.00m	£24.50m	14%

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

**Adjusted Profit before Tax is earnings before amortisation, excluding exceptional items and share based payments.

***Full year dividend of 0.45p, includes interim dividend of 0.13p (2015: 0.10p), and 0.32p final dividend (2015: 0.25p).

**** Refer to page 5 for definition of the Procurement Corporate Order Book.

Operational Highlights

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

§ Strong conversion of new business wins in both commercial and public sectors in addition to record renewals

§ Acquisition of Informed Business Solutions Limited ("Informed") in September 2016:

·      Broadening the Group's customer base and strengthening its presence in the multi-site retail and leisure markets

·      Fully integrated, with the entire Informed team now relocated to the Group's head office

§ 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, STC and Informed, increasing by 9% to £19.1 million as at 31 December 2016 (2015: £17.5 million).

·      The Group's SME Division performed strongly in the year, providing material contribution to cash generation  

·      High client retention rates maintained:

§ Risk Management division maintained 100% client retention

§ Renewals across the Corporate Division at 85%

·      Average headcount increased by 68% to 200 staff as a result of Corporate acquisitions and investment within the operational team

Commenting on the results, Janet Thornton, Chief Executive Officer, said: "I am delighted to report our sixth consecutive year of record revenues and profits. The investment we have made in people, acquisitions and technology over the past years has allowed us to develop into a market leader in our industry and to provide best in class services to our customers.

"I am proud of the accomplishments of our talented and dedicated team, whose hard work has delivered strong growth on all fronts. Our growth has been further enhanced by the successful acquisition of Informed, which has integrated extremely well in a relatively short period of time and has continued to perform well as part of the enlarged Group. We are also pleased to today welcome Richard Logan to the team as an Independent Non-Executive Director.

"Our model of strong organic growth with selected, complimentary acquisitions is proven and we look forward to 2017 with confidence." 

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

 

I am delighted to report another record year for the Inspired Group in 2016. The business continued to deliver across all fronts; excelling operationally and posting strong financial results in line with management expectations.

The results set out herein represent another record year with Group revenue increasing by 42% to £21.51 million (2015: £15.19 million) and adjusted EBITDA increasing by 45% to £8.26 million (2015: £5.69 million). Adjusted profit before tax increased by 38% to £7.02 million (2015: £5.07 million) and Adjusted EPS increased by 27% to 1.27 pence (2015: 1.00 pence). Importantly, the Group generated cash from operations of £4.98m, an increase of 83 per cent, from £2.72m in 2015.

The results are testament to the talent and dedication of the entire Inspired team.  Their commitment has once again delivered our organic growth strategy, supplemented by selective earnings enhancing acquisitions, which have enabled us to maintain and improve our robust core business model. During the year, we completed the acquisition of Informed and I am pleased to report, as expected, that Informed has broadened the Group's customer base and strengthened the Group's presence in the multi-site retail and leisure markets for corporate energy procurement. I would also like to thank the entire Informed team for their dedication post acquisition, during which period the entire business operation has relocated to Inspired Energy's head office.

As in previous years, the core business' Corporate Procurement Order Book is a consistent guide to the future performance of the Group and provides strong visibility of revenues for FY 2017 and the next three years. Accordingly, we are pleased to announce that the combined (including acquired businesses) Corporate Procurement Order Book totals £28.0 million as at 31 December 2016, representing a year on year increase of 14% (2015: £24.5 million). Excluding the impact of the acquisitions of Wholesale Power UK ("WPUK"), STC Energy and Carbon Holdings Limited ("STC") and Informed, the Procurement Corporate Order Book increased by 9% to £19.1 million as at 31 December 2016 (2015: £17.5 million). This growth was driven by an 11% like-for-like increase in Procurement Corporate Order Book Sales, excluding the impact of WPUK, STC and Informed, to £13.5 million in the year to 31 December 2016 (2015: £12.2 million).

As outlined in previous announcements, our strategy to build out the Corporate Division, via both organic and acquisitive growth. Group revenue from the Corporate Division has increased to approximately 76 per cent, an increase of 9 per cent. against 2015 (67 per cent.). This trend towards the Corporate Division growth is expected to continue into the short and medium term, as we continue to focus our acquisition strategy on Corporate businesses.

In addition to the strong performance from the Corporate division, the Group's SME Division performed strongly in the year and in line with management expectations. Increasingly, the division continues to make a material contribution to cash generation for the Group, which is reflected in the strong operating cash generated by the Group during the year.  We have benefitted in the year from previous investments made to infrastructure and operational expertise, with a 2% increase in SME revenue, delivering an impressive 14% increase in SME EBITDA.

Accordingly, the Board is pleased to propose a final dividend of 0.32 pence per share subject to shareholder approval at the AGM in June. This combined with the interim dividend payment of 0.13 pence per share, results in a full year dividend of 0.45 pence per share, a 29% increase on 2015 (2015: 0.35 pence). The dividend increase in the year of 29% is a demonstration of the Board's confidence in the future for the enlarged Group.

With the Group structure firmly embedded, a proven strategy which combines organic growth with selective acquisitions, and the integration of the acquired businesses continuing as planned, we have a very strong platform from which to continue our growth. 2017 has started positively with the performance seen in 2016 continuing into the current year and the Board is confident that the Group will continue to go from strength to strength in 2017. 

Michael Fletcher

Chairman

27 March 2017

CHIEF EXECUTIVE OFFICER'S STATEMENT

The Board is delighted with the performance of the Group in the year to 31 December 2016, delivering record growth, enhanced by the complementary acquisition of Informed Business Solutions Limited ("Informed") in September 2016. 

The growth achieved by the Group both in 2016 and during its time as a public company is a testament to the value of our customer proposition and the talent and dedication of our staff. The enlarged Group has a very strong platform from which to continue to build on the organic growth of the business, onto which we can add new service lines and sector specialisms via acquisition as demonstrated with Informed. 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 2012);

·      WPUK (acquired in 2015);

·      STC (acquired in 2015); and

·      Informed (acquired in 2016).

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

Organic Growth

2016 was an outstanding year for our Corporate Division, delivering record revenue, profits and Procurement 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 which continue to be developed, the Corporate team has been able to increase efficiency whilst delivering increased levels of service to our valued clients.  This is demonstrated by the continued superb client retention rates in excess of 85% with Risk Management retained at 100%.

The year was an exciting one for new business wins and renewals, with key client wins including Victrex PLC, Travis Perkins PLC and Samworth Brothers 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 further strong client wins within the Public Sector arena, a market which Inspired believes can deliver significant growth 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 West Thames College, Metropolitan Housing Trust, Westminster CC, The David Ross Education Trust and St Helens College.

2016 Acquisitions

Inspired completed the acquisition of Informed in September 2016. Informed is an energy procurement and environmental compliance consultancy based in Kirkham, Lancashire which has now been integrated into the Group's headquarters. Informed has a strong presence in the multi-site retail and leisure markets for energy procurement and has complemented its service offering through the development of environmental compliance auditing services, which it launched in 2014. As expected, the acquisition has complemented Inspired's core Corporate Division and further extended the Group's sector specialism.

Informed was acquired in September 2016 for an initial consideration of £2.25 million, with a further contingent consideration of up to £2.00 million subject to achieving certain financial performance hurdles. 

Corporate Division Financial Highlights

Highlights In the year include:

·      Revenue increased 62% to £16.32 million (2015: £10.74 million)

·      The Corporate Division generated adjusted EBITDA of £7.60 million (2015: £4.97 million), a 53% year on year increase

·      Like-for-like Procurement Corporate Order Book Sales, excluding the contribution of WPUK, STC and Informed, the acquisitions made in 2015 and 2016, increased by 11% to £13.5 million in the year to 31 December 2015 (2015: £12.2 million)

·      Like-for-like Procurement Corporate Order Book (previously reported as 'Corporate Order Book'), excluding WPUK, STC and Informed increased by 9% to £19.1 million as at 31 December 2015 (2014: £17.5 million)

·      Procurement Corporate Order Book exceeded £28.0 million, representing a year on year increase of 14%

·      High customer retention rates maintained, at 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 £28.0 million. This represents an increase of 14% during the year.

Procurement Corporate Order Book Analysis	£'m
Procurement Corporate Order Book b/f at 31 December 2015	17.5
Add: Procurement Corporate Order Book Sales in period (excl. WPUK, STC and Informed)	13.5
Less: Revenue recognised from Procurement Corporate Order Book in period (excl. WPUK, STC and Informed)	(11.9)
Add: Acquired Procurement Corporate Order Book less revenue recognised in the period	8.9
Procurement Corporate Order Book c/f at 31 December 2016	28.0

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 2016, organic Procurement Corporate Order Book Sales (excluding WPUK, STC and Informed) were 13% in excess of revenue recognised in the year, which is manifested in the increase of the Procurement Corporate Order Book (excluding WPUK, STC and Informed) of £1.6 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 delivered another strong set of results in 2016.  Following a period of investment in the team and operational infrastructure, the SME Division has become a strong, mature and consistent performer within the Group.  Following a strategic decision to maintain, rather than increase, headcount, the division has delivered a 11% increase in Gross Profit to £2.74 million (2015: £2.47 million)and 14% increase in EBITDA to £1.75 million (2015: £1.54 million) in 2016, resulting in an increase in EBITDA margin to 34% (2015: 30%). The division continues to provide material cash generation to the Group.

Following a year of expected stability, the Board may look to modestly increase headcount in the division in order to deliver increased growth in the division in the short to medium term but will ensure that cash generation is maintained at an appropriate level after taking into account any investment in staff.

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 6 acquisitions since admission to trading on AIM, 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 acquisition of Informed in H2 of 2016.

Exceptional Deal Related costs

Exceptional costs of £530,285 have been incurred in the year, all of which relates to fees and restructuring associated with the two acquisitions in H2 of 2015 and the acquisition of Informed in 2016. These costs are considered by the Directors to be either material in nature or 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 2016, the Group had a cash balance of £1.0 million. As at that date, the Group had outstanding balances on its term debt facilities of £13.6 million comprising;

·     senior term debt of £8.6 million

·     £1.75 million drawn of the £3.5 million acquisition facility and;

·     £1.5 million drawn of the £1.5 million revolving credit facility.

Capital repayments of £1.4m per annum are made on the senior term debt.

As at 31 December 2016, net debt stood at £10.79 million, which is an increase of £1.89 million in comparison to 31 December 2015.

The increase in net debt reflects a year in which the cash generation of the Group was offset by the payment of £1.75 million of initial cash consideration to the vendors of Informed and £2.0 million of deferred cash consideration to the vendors of STC and WPUK.

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 new revolving credit facility with Santander, for the sum of £1.5 million, of which £1.5 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"), of which £1.75 million is currently drawn. 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.

Dividends

The Board is delighted to propose a final dividend of 0.32 pence per share subject to approval at the annual general meeting of the Group. Following the payment of an interim dividend of 0.13 pence per share, the total dividend payable for the year ended 31 December 2016 is 0.45 pence per share. This represents an increase of 29% over the dividend payable in respect of 31 December 2015, being 0.35 pence per share.

The dividend will be payable to all shareholders on 13 July 2017 to shareholders on the register on 9 June 2017 and the shares will go ex-dividend on 8 June 2017.

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 2016. 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 further enhanced by the successful execution of the acquisition of Informed which has integrated seamlessly into the Group and performed in line with expectations.

Integration of Informed is now complete, 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

27 March 2017

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 more than 100,000 meters across the UK, operating on behalf of c.10,800 customers.

Corporate Division

The Corporate Division, which includes Inspired Energy Solutions, DEP, Wholesale Power UK, STC Energy and Carbon Holdings and Informed Business Solutions Limited, 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 six analysts has continued, 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 2016

				2016	2015
		Note		£	£
Revenue				21,514,911	15,188,071
Cost of sales				(4,205,931)	(3,622,110)
Gross profit				17,308,980	11,565,961
Administrative expenses				(12,470,995)	(7,651,117)
Operating profit				4,837,985	3,914,844
Analysed as:
Earnings before exceptional costs, depreciation, amortisation and share-based payments costs				8,257,775	5,688,954
Exceptional costs		3		(530,285)	(480,128)
Depreciation				(422,279)	(194,358)
Amortisation of intangible assets				(2,149,198)	(786,705)
Share-based payment costs				(318,028)	(312,919)
				4,837,985	3,914,844
Finance expenditure				(742,085)	(358,593)
Other financial items				(77,315)	(61,658)
Profit before income tax				4,018,585	3,494,593
Income tax expense		4		(616,430)	(651,344)
Profit for the year and total comprehensive income from continuing operations				3,402,155	2,843,249
Attributable to:
Equity owners of the company				3,402,155	2,843,249
Basic earnings per share attributable to the equity holders of the company (pence)		5		0.71	0.65
Diluted earnings per share attributable to the equity holders of the company (pence)		5		0.68	0.62

Group Statement of Financial Position

At 31 December 2016

		2016	2015
	Note	£	£
ASSETS
Non-current assets
Goodwill	7	12,987,651	9,400,834
Other intangible assets		7,390,982	7,537,906
Property, plant and equipment	6	1,331,603	1,360,303
Non-current assets		21,710,236	18,299,043
Current assets
Trade and other receivables	8	12,408,789	9,460,174
Cash and cash equivalents		984,403	1,604,851
Current assets		13,393,192	11,065,025
Total assets		35,103,428	29,364,068
LIABILITIES
Current liabilities
Trade and other payables		1,712,175	1,357,231
Bank borrowings		3,337,500	2,000,000
Deferred consideration			-
Contingent consideration		2,460,354	1,654,601
Current tax liability		2,413,464	1,144,139
Current liabilities		9,923,493	6,155,971
Non-current liabilities
Bank borrowings		8,286,462	8,490,569
Trade and other payables		61,866	50,000
Deferred consideration			-
Contingent consideration		797,433	1,788,506
Interest rate swap		149,120	76,571
Deferred tax liability		1,010,869	1,495,244
Non-current liabilities		10,305,750	11,900,890
Total liabilities		20,229,243	18,056,861
Net assets		14,874,185	11,307,207
EQUITY
Share capital		606,987	589,505
Share premium account		2,318,619	1,901,747
Merger relief reserve		14,913,911	13,675,249
Share-based payment reserve		794,120	631,023
Retained earnings		7,623,321	5,892,456
Reverse acquisition reserve		(11,382,773)	(11,382,773)
Total equity		14,874,185	11,307,207

 

Group Statement of Changes In Equity

For the year ended 31 December 2016

		Share	Merger	Share-based		Reverse	Total
	Share	premium	relief	payment	Retained	acquisition	shareholders'
	capital	account	reserve	reserve	earnings	reserve	equity
	£	£	£	£	£	£	£
Balance at 1 January 2015	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
Profit and total comprehensive income for the period	-	-	-	-	3,402,155	-	3,402,155
Shares issued (19 January 2016)	2,188	131,565	-	-	-	-	133,753
Shares issued (3 May 2016)	1,672	122,859	-	-	-	-	124,531
Shares issued (23 May 2016)	6,906		743,094	-	-	-	750,000
Shares issued (2 September 2016)	1,347	97,760	-	-	-	-	99,107
Shares issued (28 September 2016)	4,432	-	495,568	-	-	-	500,000
Shares issued (3 November 2016)	937	64,688	-	-	-	-	65,625
Share-based payment cost	-	-	-	318,028	-	-	318,028
Share options exercised	-	-	-	(154,931)	154,931	-	-
Dividends paid	-	-	-	-	(1,826,221)	-	(1,826,221)
Total transactions with owners	17,482	416,872	1,238,662	163,097	1,730,865	-	3,566,978
Balance at 31 December 2016	606,987	2,318,619	14,913,911	794,120	7,623,321	(11,382,773)	14,874,185

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 2016

	2016	2015
	£	£
Cash flows from operating activities
Profit before income tax	4,018,585	3,494,593
Adjustments
Depreciation	422,279	194,358
Amortisation	2,149,198	786,705
Share- based payment costs	318,028	312,919
Finance expenditure	742,085	358,593
Other financial items	77,315	61,658
Cash flows before changes in working capital	7,727,490	5,208,826
Movement in working capital
Increase in trade and other receivables	(2,948,615)	(2,200,656)
Increase/(decrease) in trade and other payables	199,551	(289,165)
Cash generated from operations	4,978,426	2,719,005
Income taxes paid	(532,786)	(987,833)
Net cash flows from operating activities	4,445,640	1,731,172
Cash flows from investing activities
Contingent consideration paid	(1,250,000)	(50,000)
Acquisition of subsidiaries net of cash acquired	(1,374,189)	(5,571,279)
Payments to acquire property, plant and equipment	(368,873)	(246,091)
Payments to acquire intangible assets	(1,071,274)	(529,772)
Proceeds for disposal of property, plant and equipment	-	19,911
Net cash used in investing activities	(4,064,336)	(6,377,231)
Cash flows from financing activities
New bank loans (net of debt issue costs)	2,623,750	7,363,158
Proceeds from issue of new shares	423,015	315,134
Repayment of bank loans	(1,509,375)	(613,158)
Interest on bank loans paid	(712,921)	(355,192)
Dividends paid	(1,826,221)	(1,210,629)
Repayment of hire purchase agreements	-	(23,225)
Net cash (outflow)/inflow financing activities	(1,001,752)	5,476,088
Net (decrease)/increase in cash and cash equivalents	(620,448)	830,029
Cash and cash equivalents brought forward	1,604,851	774,822
Cash and cash equivalents carried forward	984,403	1,604,851

.

 

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 2016. 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 2016 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 2015. These accounting policies have remained unchanged for the financial year ended 31 December 2016.

Going Concern

The Group's forecasts, which have been prepared for the period to 31 December 2018 after taking into account the contracted order 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.

The preparation of financial statements, in conformity with generally accepted accounting principles under IFRS, requires 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 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 ongoing 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 ongoing 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 up-front 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. This amount is not discounted as the impact would be immaterial. Accrued revenue relates to commission earned, not yet received or paid.

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 2016 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 Limited, STC Energy and Carbon Holdings Limited and Informed Business Solutions Limited. 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 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.

	2016					2015
	Corporate	SME	PLC costs	Total	Corporate		SME	PLC costs	Total
	£	£	£	£	£		£	£	£
Revenue	16,320,105	5,194,806	-	21,514,911	10,073,654		5,114,417	-	15,188,071
Cost of sales	(1,752,147)	(2,453,783)	-	(4,205,930)	(981,536)		(2,640,574)	-	(3,622,110)
Gross profit	14,567,958	2,741,023	-	17,308,981	9,092,118		2,473,843	-	11,565,961
Administrative expenses	(7,838,521)	(1,437,217)	(3,195,258)	(12,470,996)	(4,430,546)		(1,286,006)	(1,934,565)	(7,651,117)
Operating profit	6,729,437	1,303,806	(3,195,258)	4,837,985	4,661,572		1,187,837	(1,934,565)	3,914,844
Analysed as:
EBITDA	7,596,048	1,751,987	(1,090,259)	8,257,776	4,973,426		1,543,532	(828,004)	5,688,954
Depreciation	(387,334)	(34,945)	-	(422,279)	(177,681)		(16,677)	-	(194,358)
Amortisation	(169,459)	(405,026)	(1,574,713)	(2,149,198)	(134,173)		(339,018)	(313,514)	(786,705)
Share-based payments	(309,818)	(8,210)	-	(318,028)	-		-	(312,919)	(312,919)
Exceptional costs	-	-	(530,286)	(530,286)	-		-	(480,128)	(480,128)
	6,729,437	1,303,806	(3,195,258)	4,837,985	4,661,572		1,187,837	(1,934,565)	3,914,844
Finance expenditure				(742,085)					(358,593)
Other financial items				(77,315)					(61,658)
Profit before income tax				4,018,585					3,494,593
Total assets	15,150,679	3,142,071	16,810,678	35,103,428	10,804,672		4,376,283	14,183,113	29,364,068
Total liabilities	2,394,173	653,166	17,181,904	20,229,243	1,505,147		2,347,433	14,204,282	18,056,861

3. Exceptional costs

	2016	2015
	£	£
Fees associated with acquisition	407,750	480,128
Restructuring costs	122,535	-
	530,285	480,128

One off costs include costs of £122,536 relating to restructuring programmes and costs associated with business combinations of £407,750  which would not normally be seen as costs or income relating to the underlying principal activities of the Group.

 

4. Income Tax Expense

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

	2016	2015
	£	£
Current tax
Current tax charge	1,212,067	638,969
Adjustments in respect of prior periods	65,050	(39,044)
	1,277,117	599,925
Deferred tax
Origination and reversal of temporary timing differences	(489,625)	51,419
Adjustments in respect of prior periods	(171,062)
	(660,687)	51,419
Total income tax charge	616,430	651,344
Reconciliation of tax charge to accounting profit:
Profit on ordinary activities before taxation	4,018,585	3,494,593
Tax at UK income tax rate of 20.00% (2015: 20.25%)	803,717	707,655
Disallowable expenses	33,805	82,350
Share options	(46,050)	(99,617)
Adjust closing deferred tax to reflect change in tax rate	(69,030)	-
Effects of current period events on current tax prior period balances	(106,012)	(39,044)
Total income tax charge	616,430	651,344

 

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.

	2016	2015
	£	£
Profit attributable to equity holders of the Group	3,402,155	2,843,249
Fees associated with acquisition	407,750	480,128
Restructuring costs	122,536	-
Amortisation of intangible assets	2,149,198	786,705
Deferred tax in respect of amortisation of intangible assets	(299,195)	(62,703)
Share-based payment costs	318,028	312,919
Adjusted profit attributable to owners of the Group	6,100,472	4,360,298
Weighted average number of ordinary shares in issue	478,910,478	434,844,094
Dilutive effect of share options	20,216,912	24,005,835
Diluted weighted average number of ordinary shares in issue	499,127,390	458,849,929
Basic earnings per share (pence)	0.71	0.65
Diluted earnings per share (pence)	0.68	0.62
Adjusted basic earnings per share (pence)	1.27	1.00
Adjusted diluted earnings per share (pence)	1.22	0.95
Alternate adjusted basic earnings per share (pence)	1.15	0.88
Alternate adjusted diluted earnings per share (pence)	1.11	0.83

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.

Alternate adjusted earnings per share represents the earnings per share, as adjusted to remove the effect of the fees associated with acquisition/listing, amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), share based payments and exceptional items which have been expensed to the income statement in the period.

 

6. Property, plant and equipment

	Fixtures and	Motor	Computer	Leasehold
	fittings	vehicles	equipment	improvements	Total
	£	£	£	£	£
Cost
As at 1 January 2015	315,873	38,326	263,071	183,796	801,066
Acquisitions through business combinations	30,802	13,100	724,349	-	768,251
Additions	101,768	-	109,460	34,863	246,091
Disposals	-	(38,326)	-	-	(38,326)
At 31 December 2015	448,443	13,100	1,096,880	218,659	1,777,082
Acquisitions through business combinations	15,929	-	8,777	-	24,706
Additions	150,930	-	123,733	94,210	368,873
Disposals	-	-	-	-	-
At 31 December 2016	615,302	13,100	1,229,390	312,869	2,170,661
Depreciation
As at 1 January 2015	98,086	12,478	111,673	18,599	240,836
Charge for the year	68,876	8,213	96,950	20,319	194,358
Disposals	-	(18,415)	-	-	(18,415)
At 31 December 2015	166,962	2,276	208,623	38,918	416,779
Charge for the year	98,035	1,456	297,902	24,886	422,279
Disposals	-	-	-	-	-
At 31 December 2016	264,997	3,732	506,525	63,804	839,058
Net book value
At 31 December 2016	350,305	9,368	722,865	249,065	1,331,603
At 31 December 2015	281,481	10,824	888,257	179,741	1,360,303

Included within the net book value is £147,330 (31 December 2015: £nil) relating to assets held under hire purchase agreements. The depreciation charged to the financial statements in the period in respect of such assets amounted to £31,695 (31 December 2015: £5,938).

7. Intangible assets and goodwill

	Computer	Trade	Customer	Customer	Customer
	software	name	databases	contracts	relationships	Total other intangibles	Goodwill	Total
	£	£	£	£	£	£	£	£
Cost
At 1 January 2015	954,903	-	516,015	1,835,850	-	3,306,768	2,075,739	5,382,507
Additions	101,487	-	428,285	-	-	529,772	-	529,772
Acquisitions through business combinations	3,009,000	115,000	-	1,638,000	1,989,000	6,751,000	7,325,095	14,076,095
At 31 December 2015	4,065,390	115,000	944,300	3,473,850	1,989,000	10,587,540	9,400,834	19,988,374
Additions	696,084	-	375,190	-	-	1,071,274	-	1,071,274
Alteration to initial recognition	-	-	-	-	-	-	605,726	605,726
Acquisitions through business combinations	-	-	-	931,000	-	931,000	2,981,091	3,912,091
At 31 December 2016	4,761,474	115,000	1,319,490	4,404,850	1,989,000	12,589,814	12,987,651	25,577,465
Amortisation
At 1 January 2015	210,035	-	217,044	1,835,850	-	2,262,929	-	2,262,929
Charge for the year	259,570	677	339,018	128,860	58,580	786,705	-	786,705
At 31 December 2015	469,605	677	556,062	1,964,710	58,580	3,049,634	-	3,049,634
Charge for the year	771,259	5,750	405,026	469,913	497,250	2,149,198	-	2,149,198
At 31 December 2016	1,240,864	6,427	961,088	2,434,623	555,830	5,198,832	-	5,198,832
Net book value
At 31 December 2016	3,520,610	108,573	358,402	1,970,227	1,433,170	7,390,982	12,987,651	20,378,633
At 31 December 2015	3,595,785	114,323	388,238	1,509,140	1,930,420	7,537,906	9,400,834	16,938,740

Computer software is a combination of assets internally generated and assets acquired through business combinations. Amortisation charged in the period to 31 December 2016 associated with computer software acquired through business combinations is £601,800. The additional £169,459 charged in the period relates to the amortisation of internally generated computer software. Amortisation of customer databases of £405,026 is also in relation to internally generated intangible assets.

8. Trade and other receivables

	2016	2015
	£	£
Trade receivables	2,610,360	1,998,904
Other receivables	57,276	3,238
Prepayments	819,463	798,648
Accrued income	8,921,690	6,659,384
	12,408,789	9,460,174

9. Business Combinations

Informed Business Solutions Limited (IBSL)

On 28 September 2016, the Group acquired 100% of the issued share capital and voting rights of Informed Business Solutions Limited, 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 environmental consultancy services which was seen to broaden the Group's overall service offering to corporates.

The acquisition of IBSL was completed for a total consideration of £4,250,000. The initial £2,250,000 payment was satisfied by £1,750,000 cash and the issue of 3,545,596 ordinary shares (with an aggregate value at completion of £500,000) of Inspired Energy PLC. In addition, £2,000,000 is contingent upon IBSL achieving challenging revenue targets until 30 June 2018, and will be payable in four instalments, on 31 July 2017, 30 September 2017, 28 February 2018 and 31 July 2018. The agreed cash consideration totalled £1,750,000 prior to calculation of the normalised working capital position of the business. A further £479,000 was added to the cash consideration to reflect excess cash in the business at acquisition.

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

Recognised amounts of identifiable net assets

		Provisional
	Book	fair value	Provisional
	value	adjustment	fair value
	£	£	£
Property, plant and equipment	24,706	-	24,706
Intangible assets	-	931,000	931,000
Trade and other receivables	303,224	-	303,224
Cash and cash equivalents	854,811	-	854,811
Total assets	1,182,741	931,000	2,113,741
Trade and other payables	257,791	-	257,791
Current tax liability	150,314	152,000	302,314
Deferred tax liability	6,118	176,890	183,008
Total liabilities	414,223	328,890	743,113
Provisional fair value of identifiable net assets			1,370,628
Provisional goodwill			2,981,091
Fair value of consideration transferred			4,351,719
Satisfied by:
- cash consideration paid			2,229,000
- shares issued 28 September 2016			500,000
- contingent consideration			2,000,000
- discounting impact on contingent consideration			(377,281)
			4,351,719
Net cash outflow arising from business combinations:
- cash consideration paid			2,229,000
- cash and cash equivalents acquired			(854,811)
Net cash outflow			1,374,189

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 IBSL has been carried out. The fair value of the customer contracts was calculated as £931,000, which includes only values ascribed to valid energy supply contracts and letters of authority granting IBSL 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 £102,675. These costs are included within exceptional costs in the Group statement of comprehensive income.

10. Preliminary Announcement

This preliminary announcement, which has been agreed with the auditors, was approved by the board of directors on 27 March 2017.  It is not the Group's statutory accounts.  Copies of the Group's audited statutory accounts for the year ended 31 December 2016 will be available at the company's website shortly and a printed version will be dispatched to shareholders thereafter. 

 

END

 

 

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