Half-year Results

RNS Number : 6393Z

Inspired Energy PLC

04 September 2018

 

4 September 2018

Inspired Energy plc

("Inspired" or the "Group")

Results for the six months ended 30 June 2018

Continued strong performance

Inspired Energy plc (AIM: INSE), a leading UK energy procurement consultant to UK and Irish corporates and SMEs, announces its consolidated, unaudited half year results for the six month period ended 30 June 2018.

Financial Highlights

	H1 2018	H1 2017	2018 % change
Revenue	£16.24m	£12.24m	+33%
Gross profit	£13.74m	£9.83m	+40%
Adjusted EBITDA*	£6.53m	£4.71m	+39%
Adjusted profit before tax**	£5.35m	£3.84m	+39%
Profit before tax	£2.09m	£2.18m	-4%
Cash generated from operations	£4.96m	£3.47m	+43%
Interim dividend per share	0.19p	0.16p	+19%
Adjusted diluted EPS***	0.78p	0.69p	+13%
Diluted EPS	0.27p	0.36p	-25%
Net Debt	£19.88m	£12.60m	+58%

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

**Adjusted profit before tax is earnings before tax, amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), exceptional items, share-based payments, the unwinding of deferred consideration and foreign exchange variances. (A reconciliation of this can be found in note 3 of the financial statements).

***Adjusted diluted earnings per share represents the diluted earnings per share, as adjusted to remove amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), exceptional items, share-based payments, the unwinding of deferred consideration and foreign exchange variances.

Operational Highlights

·    Record revenues delivered by the Corporate Division, growing 50% to £13.76m (H1 2017: £9.19m), contributing 85% of Group revenue for the period (H1 2017: 75%). 10% of the Corporate Division revenue growth in the period was organic (H1 2017: 6%).

·     Corporate Division contributed Adjusted EBITDA of £6.43m, an increase of 50% (H1 2017: £4.28m).

·     Strong cash generation from operations representing 76% of adjusted EBITDA (H1 2017: 74%; FY17: 63%).

·     Interim dividend increased by 19% to 0.19p per share (H1 2017: 0.16p).

·     The Procurement Corporate Order Book, which provides strong visibility of revenues and is a consistent guide to the future performance of the Corporate Division, has increased by 3% to £40.1m as at 31 August 2018 (FY 2017: £39.0m).

·    Long Term Incentive Plan ("LTIP") extended to the 13 members of the Senior Management Team ("SMT") in order to deliver long-term value creation for shareholders.

·     Completed the restructuring of the service offering in the Corporate Division by client category under a unified "Inspired Energy" brand, which the Board believes creates a more streamlined platform to deliver organic and acquisitive growth.

Acquisitions Highlights

·   Completed the acquisitions of SystemsLink 2000 Limited ("SystemsLink") and Energy Cost Management Limited ("ECM") in March 2018, with both businesses performing well and in line with expectations.

·    Completed the acquisition of Squareone Enterprise Limited ("Squareone") in August 2018, post period end, for a consideration of up to £1.38m, of which £0.75m was paid on completion 

·     The acquisitions were all financed from the Group's existing £12.5 million acquisition facility with Santander.

·   In July 2018, post period end, exercised the call option to acquire the outstanding 10 per cent interest in Horizon Energy Group Limited, for cash consideration of €1.0 million.

Board Transition

·   Gordon Oliver, Group Finance Director of James Halstead plc, appointed as an independent non-executive Director in January 2018.

·   Matthew Thornton stepped down as Sales Director and moved to Non-Executive Director in March 2018, completing the transition of the Board composition to two Executive Directors, supported by a Non-Executive Chairman and three Non-Executive Directors (two of whom are independent).

Corporate Highlights

·     Ranked first place in the 2018 Cornwall Insight I&C TPI index rankings out of 111 TPI's shortlisted, reaffirming the Group's position as a market leader. This independent report is based on the opinions of business energy suppliers which reinforces to the Group's strong positioning within the TPI market and that its development and growth strategy has been well received.

Commenting on the results, Mark Dickinson, CEO of Inspired, said: "2018 has seen the acceleration of our next growth phase with three complementary and value-enhancing acquisitions completed to date whilst the Group has continued to deliver sustained organic growth. We remain focused on delivering our core financial, operational and strategic objectives, whilst simultaneously  broadening the service offering for our clients, to help them to optimise the value of every pound spent on utilities through our bespoke service."

"On behalf of the Board, I would like to thank all of the Inspired team for their hard work over the past six months, as we look forward to completing another year of growth and development of the business."

For further information, please contact:  

Inspired Energy plc	www.inspiredplc.co.uk
Mark Dickinson, Chief Executive Officer	[phone]
Paul Connor, Finance Director
Shore Capital (Nomad and Joint Broker)	[phone]
Dru Danford Edward Mansfield James Thomas
Peel Hunt LLP (Joint Broker) Mike Bell Sam Cann	[phone]
Gable Communications	[phone]
Justine James John Bick	[phone] [e-mail]

Chairman's Statement

I am pleased to present the Group's unaudited interim results for the six months ended 30 June 2018, a period in which Inspired continued to deliver on all strategic fronts, achieving results in line with management's expectations.

We have completed the transition of the Board composition to two Executive Directors, supported by a Non-Executive Chairman and three Non-Executive Directors, with the appointment of Gordon Oliver as an independent non-executive, and Matthew Thornton stepping down as Sales Director and moving to Non-Executive Director.

The Board were pleased to announce the implementation of a LTIP for the benefit of the SMT. The structure of the LTIP tracks the award to the Executive Directors in July 2017, albeit for an extended period. The SMT is comprised of 13 key senior directors of the Group, who are important to the long-term success and value of the Company, and the Board believes that the Group will continue to benefit from their drive and energy in the future.

The acquisitions of SystemsLink and ECM during the period and, following the period end, Squareone, reinforce the focus of the Group delivering on its well-established acquisition strategy, being complementary to the Corporate Division, broadening the service offering and customer base of the Group and increasingly enabling the Group to benefit from operational leverage. Importantly, we are pleased to report that these acquisitions are integrating well and trading in line with management expectation.

The financial results highlight strong organic growth in our core Corporate Division, achieved whilst also executing the Group's acquisition strategy and completing the process of restructuring the service offering within the Corporate Division by client category under a unified "Inspired Energy" brand. The Board believes the client category led structure provides the Corporate Division with the best platform to facilitate future organic and acquisitive growth.

The Procurement Corporate Order Book has increased to £40.1m as at 31 August 2018 (31 December 2017: £39.0m), representing an increase of 3% in the period. This remains a consistent guide to the future performance of the Group, providing strong visibility of revenues for FY 2018 and the next three years, enabling the Board to look forward with great confidence over the short to medium term.

Contribution from the 2017 and H1 2018 acquisitions, in conjunction with sustained organic growth from the existing Corporate Division, increased the Corporate Division revenue to £13.8m (H1 2017: £9.2m) an increase of 50% and representing 85% of Group revenue. The restructuring of the service offering in the Corporate Division has assisted in increasing the focus on driving organic growth. Organic growth is calculated by reference to revenue growth of the Group excluding current year acquisitions and taking into account the growth of previously acquired business from the last financial year prior to their acquisition into the Group.  As a result of this increased focus the board are pleased to note that organic revenues in the Corporate Division grew by 10% in the period (H1 2017: 6%). Adjusted EBITDA for the Corporate Division for the period was £6.4m (H1 2017: £4.3m). This growth underpins the strong fundamentals of the Board's stated strategy to focus on growing the Corporate Division both organically and through further acquisitions.

In the first half of 2018, the Board took the decision to streamline the focus of the SME Division and discontinue the non-profit generating revenue streams, including the affiliate channel. As a result, revenue for the SME Division in the six-month period was down 17% at £2.5m (H1 2017: £3.0m). However, margins have improved and the EBITDA contribution was maintained such that the SME Division has continued to contribute strong profits and cash during H1 of 2018. Adjusted EBITDA generated by the division was £0.9m (H1 2017: £1.0m) and the SME Division contributed materially to cash generation in the period.

Accordingly, the Board is pleased to propose an interim dividend of 0.19 pence per share (H1 2017: 0.16).

We are delighted with the performance of the Group in the first half of 2018 and we enter the second half of 2018 with confidence. 

Michael Fletcher

Chairman

4 September 2018

CEO's Statement

The first half of 2018 has started with great momentum for the Group, organic growth has improved to higher end of management's expectations in our core Corporate Division and we have successfully completed three acquisitions. The Board remains focused on delivering continued growth and strives to maintain and build on the excellent performance of the Group in the first half of 2018.

Having established a strong and scaleable platform for expansion, we have a clear strategy that will enable us to continue to build on the growth of the Group. We achieve this by:

1)   Recognising that the UK and Irish energy markets have a known number of energy consumers and these consumers occupy buildings and infrastructure with a series of meter points. 

2)   Understanding that different types of business have different needs at their meter points and each meter point represents an opportunity for Inspired to service the specific needs of the client (our 'Units of Opportunity').

3)   Expanding the number of Units of Opportunity we have a transactional or commercial relationship with, through acquisitive and organic growth of the Group's client base.

4)   Broadening the service offering of the Group and in turn the value Inspired can add to a client at each meter point (our 'Accessible Revenue').

5)   Quantifying our bank of cross selling opportunities into our existing client base on a case by case basis and systematically engaging with clients to maximise their utilisation of relevant services.

During H1 2018 we have achieved the following:

1.   We have increased the number of Units of Opportunity that we have a commercial relationship with by c.250% through the acquisition of SystemsLink.

2.   Increased the potential Accessible Revenue per meter point (assuming all clients could take all services) by c.106% through the ECM acquisition and by 2.5% through the acquisition of Squareone.

3.   The integration of SystemsLink and ECM was successfully completed as scheduled in H1 of 2018.

In addition, through increased utilisation and optimisation of the Group's integrated IT platforms, which continue to be developed, the Corporate Division has increased efficiency, benefiting from operational leverage as the Group continues to grow organically and by acquisition whilst delivering increased levels of a broader and more diversified service to our valued clients.

Our commitment to the acceleration of our growth strategy is clearly demonstrated by our systematic and pragmatic approach to the integration of our acquired businesses, the expansion of our executive bandwidth to support the Group's growth and implementation of remuneration structures designed to align our performance with shareholder interests. We continue to identify exciting opportunities for further growth as the business evolves as a leading player in the sector.

Corporate Division

Overview

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

Organic growth and integration of division

In H2 2017, the Board identified that there was scope to leverage specialist knowledge and improve efficiency by streamlining the business and re-focusing the commercial structure. The Board initiated the process of consolidating the Corporate service offering from subsidiary brands, to operating under a unified "Inspired Energy" brand with the service offering segmented into four broad categories of customer focus being:

·      Energy intensive

·      Commercial/estate intensive

·      Public services

·      Corporate

The customer focused structure of the Corporate Division ensures the delivery of a high level of tailored service to corporate customers which, coupled with the continuous development of our product suite, enables us to meet the individual energy management requirements of the clients following the key themes we focus on in order to simplify, verify, protect, inform and optimise. The Group's current focus is on the following strategic areas:

Optimisation Services: Expansion of our Optimisation Services Division to match client needs which are becoming increasingly sophisticated with respect to monitoring, targeting and efficiency.

Software Solutions: Creation of a Software Services Division to provide software solutions across the energy value chain.

Research and Development: Creation of an 'Inspired Incubator' to allow Inspired to support early stage energy and utility solutions which have the potential to add value to energy consumers in the future.

Corporate Division Financial Highlights

Highlights in the first half of the year include:

·    Revenue increased 50% to £13.76m (H1 2017: £9.19m), including 10% organic revenue growth (H1 2017: 6%).

·     The Corporate Division generated adjusted EBITDA of £6.4m (H1 2017: £4.3m), a 50% year on year increase.

·     Procurement Corporate Order Book increased by 3% to £40.1m as at 31August 2018 (FY 2017: £39.0 million).

·    High customer retention rates maintained at 85% across the Corporate Division, whilst delivering strong new customer win performance.

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 due to no revenue being recognised by Inspired's Corporate Division until the energy is physically consumed by the client.

SME Division

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.

In the first half, the Board took the decision to streamline the focus of the division and discontinue the non-profit generating revenue streams, including the affiliate channel. Whilst revenue for the SME Division in the six-month period was down 17% at £2.5m (H1 2017: £3.0m), the reorganisation of the division has allowed it to continue to contribute strong profits and cash in the period, delivering adjusted EBITDA of £0.9m (H1 2017: £1.0m), with increased margins enabling the division to contribute materially to the cash generation of the Group.

Having completed the transition of the revenue mix for the SME Division we now have a steady state platform to allow focus on the complementary services that add value to SME consumers including Merchant Services, Insurance and Telecoms (the "Complementary Services").

Acquisition Strategy

The Board continues to evaluate opportunities for the Group to participate in further industry consolidation. With a strong focus on building an enlarged and improved business, as demonstrated by the acquisitions to date, we believe that potential targets should offer one or more of the following criteria:

·     Additional technical and/or service capability increasing our Accessible Revenue;

·     Sector specialism and diversification increasing our Accessible Revenue;

·     Increased geographic footprint building our Units of Opportunity;

·    Increased number of meter points we have a commercial relationship with building our Units of Opportunity; and

·     Significant opportunities for sales or cost synergies to generate further economies of scale.

The Board continues to explore acquisition opportunities which fit with the Group's strategy in order to augment the Group's services, products or markets.

Dividends

The Board is delighted to propose an interim dividend of 0.19 pence per share. This represents an increase of 19% over the interim dividend paid in 2017, being 0.16 pence per share.

The ex-dividend date is 18 October 2018 with a record date of 19 October 2017. The dividend will be paid to shareholders on 6 December 2018.

Outlook

Our excellent performance in the first half of 2018, underpinned by strong organic growth, provides a strong operational and financial platform for the full year. The Group is well placed to deliver another set of record results, as we continue to benefit from further organic growth and the net contribution from the three recent acquisitions.  

In parallel, we remain focused on developing three strategic areas, outlined above, with the expansion of our Optimisation Services and creation of Software Services division and further Research and Development which, when combined, enable us to look ahead into FY 2019 with even greater confidence.

The Group's established acquisition strategy has delivered strong results as demonstrated by the success achieved by value enhancing acquisitions made in 2017 and 2018 year to date. In addition our increased focus on delivering organic growth, delivering results in our core Corporate Division we remain focused on evaluating varied opportunities in the sector.

As the Corporate Division continues to build on its firm foundations, we are excited by the opportunity to build on  the enhanced capacity, depth, skills and expertise our team can provide to our expanding customer base allowing us to accelerate our activity levels and exploit the multiplicative effect of delivering growth on multiple dimensions of scale. 

On behalf of the Board, I would like to thank all of the Inspired team for the hard work over the past six months, as we look forward to completing another exciting year of growth and development of the business.

Mark Dickinson

Chief Executive Officer

4 September 2018

 

Group Statement of Comprehensive Income

For the six months ended 30 June 2018

	Note	Six months ended 30 June 2018 (unaudited) £		Six months ended 30 June 2017 (unaudited) £		Year ended 31 December 2017 (audited) £
Revenue		16,241,491		12,237,457		27,458,397
Cost of sales		(2,500,592)		(2,409,720)		(4,645,550)
Gross profit		13,740,899		9,827,737		22,812,847
Administrative expenses		(10,827,286)		(7,320,060)		(17,702,755)
Operating profit		2,913,613		2,507,677		5,110,092
Analysed as:
Earnings before exceptional costs, depreciation, amortisation and share-based payment costs		6,527,814		4,714,212		11,004,142
Fees associated with acquisition		(311,837)		(332,407)		(896,217)
Restructuring costs		(567,687)		(228,724)		(614,153)
Depreciation		(268,963)		(216,424)		(495,080)
Amortisation of intangible assets		(2,169,974)		(1,269,966)		(3,297,120)
Share-based payment costs		(295,740)		(159,014)		(591,480)
		2,913,613		2,507,677		5,110,092
Finance expenditure		(824,266)		(328,725)		(1,561,833)
Other financial items		-		-		4,668
Profit before income tax		2,089,347		2,178,952		3,552,927
Income tax expense		(459,656)		(370,422)		(1,020,374)
Profit for the period		1,629,691		1,808,530		2,532,553
Other comprehensive income:
Exchange differences on translation of foreign operations		(37,507)		-		210,432
Profit for the period and total comprehensive income		1,592,184		1,808,530		2,742,985
Attributable to:	Note
Equity owners of the Company		1,592,184		1,808,530		2,742,985
Basic earnings per share attributable to the equity holders of the Company (pence)	3	0.28		0.37		0.48
Adjusted basic earnings per share attributable to the equity holders of the Company (pence)	3	0.81		0.71		1.43

 

  

Group Statement of Financial Position

At 30 June 2018

	Note	Six months ended 30 June 2018 (unaudited) £		Six months ended 30 June 2017 (unaudited) £		Year ended 31 December 2017 (audited) £
ASSETS
Non-current assets
Intangible assets	5	38,812,866		23,675,715		33,342,407
Property, plant and equipment	4	1,521,781		1,301,113		1,405,642
		40,334,647		24,976,828		34,748,049
Current assets
Trade and other receivables		17,481,205		13,406,013		16,305,545
Cash and cash equivalents		3,663,016		2,296,415		5,182,633
		21,144,221		15,702,428		21,488,178
Total assets		61,478,868		40,679,256		56,236,227
LIABILITIES
Current liabilities
Trade and other payables		2,959,938		2,116,264		2,532,086
Bank borrowings		2,810,113		3,037,500		2,036,984
Current tax liability		2,008,527		1,677,137		3,022,319
Contingent consideration		2,876,603		3,064,403		3,035,996
		10,655,181		9,895,304		10,627,385
Non-current liabilities
Bank borrowings		20,629,623		11,896,365		17,808,507
Trade and other payables		-		-		32,500
Contingent consideration		862,788		193,384		1,374,627
Deferred tax liability		1,511,369		1,130,601		1,126,300
Interest rate swap				-		144,452
		23,003,780		13,220,350		20,486,386
Total liabilities		33,658,961		23,115,654		31,113,771
Net assets		27,819,907		17,563,602		25,122,456
EQUITY
Share capital		747,528		613,291		711,397
Share premium account		19,100,567		2,537,931		14,202,921
Merger relief reserve		14,913,911		15,410,169		14,913,911
Retained earnings		9,561,111		9,509,316		7,853,954
Share based payments reserves		1,448,943		875,670		1,230,669
Investment on own shares		(6,742,305)		-		(2,618,055)
Translation reserve		172,925		-		210,432
Reverse acquisition reserve		(11,382,773)		(11,382,773)		(11,382,773)
Total equity		27,819,907		17,563,603		25,122,456

 

Group Statement of Cash Flows

For the six months ended 30 June 2018

	Note	Six months ended 30 June 2018 (unaudited) £		Six months ended 30 June 2017 (unaudited) £		Year ended 31 December 2017 (audited) £
Cash flows from operating activities
Profit before income tax		2,089,347		2,178,952		3,552,927
Adjustments
Depreciation		268,963		216,424		495,080
Amortisation		2,169,974		1,269,966		3,297,120
Share based payment costs		295,740		159,014		591,480
Finance expenditure		824,266		328,725		1,557,165
Exchange rate variances		40,469		-		(92,269)
Other financial items		-		-		(200,000)
Cash flows before changes in working capital		5,688,759		4,153,081		9,201,503
Movement in working capital
Increase in trade and other receivables		(696,386)		(970,005)		(2,441,252)
(Decrease)/increase in trade and other payables		(33,478)		285,063		152,373
Cash generated from operations		4,958,895		3,468,139		6,912,624
Income taxes paid		(1,606,318)		(1,183,627)		(1,417,807)
Net cash flows from operating activities		3,352,577		2,284,512		5,494,817
Cash flows from investing activities
Purchase of property, plant and equipment		(332,422)		(176,873)		(455,251)
Payments to acquire intangible assets		(635,968)		(307,780)		(1,221,690)
Contingent consideration paid		(2,275,235)		-		(2,550,000)
Acquisition of subsidiary, net of cash		(4,524,423)		(3,503,122)		(10,671,960)
		(7,768,048)		(3,987,775)		(14,898,901)
Cash flows from financing activities
New bank loans		4,000,000		3,581,500		23,960,003
Repayment of bank loans		(630,000)		(459,375)		(16,149,554)
Finance expenses		(638,960)		(328,725)		(626,858)
Net proceeds of equity		184,528		221,875		8,870,444
Dividends paid		-		-		(2,456,851)
		2,915,568		3,015,275		13,597,184
Net (decrease)/increase in cash and cash equivalents		(1,499,903)		1,312,012		4,193,100
Cash and cash equivalents brought forward		5,182,633		984,403		984,403
Exchange differences on cash and cash equivalents		(19,714)		-		5,130
Cash and cash equivalents carried forward		3,663,016		2,296,415		5,182,633

 

  

Group Statement of Changes in Equity

For the six months ended 30 June 2018

	Share capital £		Share premium account £		Merger relief reserve £		Share-based payment reserve £		Retained earnings £		Investment in own shares £		Translation reserve £		Reverse acquisition reserve £		Total shareholders' equity £
Balance at 1 January 2017	606,987		2,318,619		14,913,911		794,120		7,623,321		-		-		(11,382,773)		14,874,185
Profit and total comprehensive income for the period	-		-		-		-		2,532,553		-		210,432		-		2,742,985
Shares issued (30 March 2017)	2,000		169,250		-		-		-		-				-		171,250
Shares issued (20 April 2017)	3,742		496,258		-		-		-		-		-		-		500,000
Shares issued (24 April 2017)	563		50,063		-		-		-		-		-		-		50,626
Shares issued (17 July 2017)	77,586		8,396,382		-		-		-		-		-		-		8,473,968
Shares issued (20 July 2017)	18,563		2,599,493		-		-		-		-		-		-		2,618,056
Shares issued (29 August 2017)	1,956		172,856		-		-		-		-		-		-		174,812
Share-based payment cost	-		-		-		591,480		-		-		-		-		591,480
Share options lapsed/exercised	-		-		-		(154,931)		154,931		-		-		-		-
Purchase of own shares	-		-		-		-		-		(2,618,055)		-		-		(2,618,055)
Dividends paid	-		-		-		-		(2,456,851)		-		-		-		(2,456,851)
Total transactions with owners	104,410		11,884,302		-		436,549		230,633		(2,618,055)		210,432		-		10,248,271
Balance at 31 December 2017	711,397		14,202,921		14,913,911		1,230,669		7,853,954		(2,618,055)		210,432		(11,382,773)		25,122,456
Profit and total comprehensive income for the period	-		-		-		-		1,629,691		-		(37,507)		-		1,592,184
Shares issued (22 March 2018)	3,685		621,315		-		-		-		-		-		-		625,000
Shares issued (29 March 2018)	2,090		144,825		-		-		-		-		-		-		146,915
Shares issued (24 May 2018)	29,250		4,095,000		-		-		-		-		-		-		4,124,250
Shares issued (20 June 2018)	1,106		36,506		-		-		-		-		-		-		37,612
Purchase of own shares	-		-		-		-		-		(4,124,250)		-		-		(4,124,250)
Share options lapsed/exercised	-		-		-		(77,466)		77,466		-		-		-		-
Share-based payment costs	-		-		-		295,740		-		-		-		-		295,740
Balance at 30 June 2018	747,528		19,100,567		14,913,911		1,448,943		9,561,111		(6,742,305)		172,925		(11,382,773)		27,819,907

 

1.     Accounting Policies

Basis of preparation

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the period ended 30 June 2018. Whilst the financial information included in this interim announcement has been computed in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS). They have been prepared on an accrual basis and under the historical cost convention except for certain financial instruments measured at fair value. 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 2017.

The Group has completed its assessment of the impact of IFRS 15, which has been adopted in the current financial year, and current revenue recognition policies, and whilst unaudited, following that assessment, the Board believe that the adoption of IFRS 15 has not resulted in a material change to the Group statement of comprehensive income.

Going Concern

The Group's forecasts, which have been prepared for the period to 31 December 2020 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 IFRSs, 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.

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 period 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 (range of services tailored to a client's specific requirement), 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. For 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 is 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 period to 30 June 2018 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, Informed Business Solutions Limited, Flexible Energy Management Limited, Churchcom Limited, Horizon Energy Group Limited, Energy Cost Management Limited, SystemsLink 2000 Limited and Squareone Enterprises 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. 

		Six months ended 30 June 2018								Six months ended 30 June 2017
		Corporate £		SME £	PLC costs £		Total £	Corporate £				SME £	PLC costs £		Total £
	Revenue	13,759,731		2,481,760	-		16,241,491	9,187,645				3,049,813	-		12,237,457
	Cost of sales	(1,082,052)		(1,418,540)	-		(2,500,592)	(1,021,524)				(1,388,196)	-		(2,409,720)
	Gross profit	12,677,679		1,063,220	-		13,740,899	8,166,121				1,661,616	-		9,827,737
	Administration expenses	(7,354,950)		(348,380)	(3,123,956)		(10,827,286)	(4,459,543)				(853,571)	(2,006,946)		(7,320,060)
	Operating profit	5,322,729		714,840	(3,123,956)		2,913,613	3,706,578				808,045	(2,006,946)		2,507,677
	Analysed as:
	EBITDA	6,432,354		943,404	(847,944)		6,527,814	4,284,937				1,007,051	(577,777)		4,714,212
	Depreciation	(247,100)		(21,863)	-		(268,963)	(198,578)				(17,846)	-		(216,424)
	Amortisation	(281,159)		(87,468)	(1,801,347)		(2,169,974)	(151,058)				(181,160)	(937,748)		(1,269,966)
	Share-based payments	(138,936)		(6,633)	(150,171)		(295,740)	-				-	(159,014)		(159,014)
	Exceptional costs	(442,430)		(112,600)	(324,494)		(879,524)	(228,724)				-	(332,407)		(561,131)
		5,322,729		714,840	(3,123,956)		2,913,613	3,706,578				808,045	(2,006,946)		2,507,677

3.     Earnings Per Share

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

	Six months ended 30 June 2018 (unaudited) £		Six months ended 30 June 2017 (unaudited) £		Year ended 31 December 2017 (audited) £
Profit attributable to equity holders of the Group	1,629,691		1,808,530		2,532,553
Amortisation of other intangible assets acquired	1,801,347		937,748		2,565,107
Deferred tax in respect of amortisation	(197,505)		-		(407,265)
Unwinding of deferred consideration	185,306		-		607,039
Foreign exchange variation	96,173		-		136,108
Fees associated with acquisition	311,837		332,407		896,217
Share-based payments costs	295,740		159,014		591,480
Restructuring costs	567,687		228,724		614,153
Adjusted profit attributable to equity holders of the Group	4,690,276		3,466,423		7,535,392
Weighted average number of ordinary shares in issue	576,500,465		486,549,629		528,034,301
Diluted weighted average number of ordinary shares in issue	604,122,686		504,396,648		544,790,555
Basic earnings per share (pence)	0.28		0.37		0.48
Diluted earnings per share (pence)	0.27		0.36		0.46
Adjusted basic earnings per share (pence)	0.81		0.71		1.43
Adjusted diluted earnings per share (pence)	0.78		0.69		1.38

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

Adjusted earnings per share represents the earnings per share, as adjusted to remove the effect of the fees associated with acquisition, amortisation of intangible assets (excluding 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. Adjusted profit before tax is calculated as follows:

	Six months ended 30 June 2018 (unaudited) £		Six months ended 30 June 2017 (unaudited) £		Year ended 31 December 2017 (audited) £
Profit Before Tax	2,089,347		2,178,952		3,552,927
Share-based payments costs	295,740		159,014		591,480
Amortisation of other intangible assets acquired	1,801,347		937,748		2,565,107
Unwinding of deferred consideration	185,306		-		607,039
Foreign exchange variation	96,173		-		136,108
Fees associated with acquisition	311,837		332,407		896,217
Restructuring costs	567,687		228,724		614,153
Adjusted Profit Before Tax	5,347,437		3,836,845		8,963,031

4.     Property, Plant and Equipment

	Fixtures and fittings £		Motor vehicles £		Computer equipment £		Leasehold improvements £		Total £
Cost
As at 1 January 2017	615,302		13,100		1,229,390		312,869		2,170,661
Acquisitions through business combinations	30,385		54,754		17,626		14,519		117,284
Additions	96,229		21,325		224,115		113,582		455,251
Disposals	-		(22,197)		-		-		(22,197)
Foreign exchange variations	639		1,641		528		435		3,243
At 31 December 2017	742,555		68,623		1,471,659		441,405		2,724,242
Acquisitions through business combinations	17,845		14,952		34,005		8,492		75,294
Additions	21,827		56,154		223,244		31,197		332,422
Foreign exchange variations	(46)		(148)		(48)		(46)		(288)
Disposals	-		(22,326)		-		-		(22,326)
At 30 June 2018	782,181		117,255		1,728,860		481,048		3,109,344
Depreciation
As at 1 January 2017	264,997		3,732		506,525		63,804		839,058
Charge for the year	107,690		13,563		335,640		38,187		495,080
Disposals	-		(15,538)		-		-		(15,538)
At 31 December 2017	372,687		1,757		842,165		101,991		1,318,600
Charge for the period	31,480		12,348		200,939		24,196		268,963
At 30 June 2018	404,167		14,105		1,043,104		126,187		1,587,563
Net Book Value
At 30 June 2018	378,014		103,150		685,756		354,861		1,521,781
At 31 December 2017	369,868		66,866		629,494		339,414		1,405,642

 

5.     Intangible assets and goodwill

	Computer software £		Trade name        £		Customer databases £		Customer contracts £		Customer relationships £		Goodwill £		Total £
Cost
At 1 January 2017	4,761,474		115,000		1,319,490		4,404,850		1,989,000		12,987,651		25,577,465
Additions	1,043,419		-		178,271		-		-		-		1,221,690
Foreign exchange variances	-		-		-		164,176		-		66,778		230,954
Acquisitions through business combinations	-		-		-		6,182,445		-		8,625,805		14,808,250
At 31 December 2017	5,804,893		115,000		1,497,761		10,751,471		1,989,000		21,680,234		41,838,359
Additions	582,468		-		53,500		-		-				635,968
Foreign exchange variances	-		-		-		(13,993)		-		(148)		(14,141)
Acquisitions through business combinations	1,903,600		-		-		129,600		242,200		4,160,525		6,435,925
Alteration to initial recognition	-		-		-		-		-		582,681		582,681
At 30 June 2018	8,290,961		115,000		1,551,261		10,867,078		2,231,200		26,423,292		49,478,792
Amortisation
As at 1 January 2017	1,240,864		6,427		961,088		2,434,623		555,830		-		5,198,832
Charge for the period	1,032,216		5,750		356,097		1,405,807		497,250		-		3,297,120
At 31 December 2017	2,273,080		12,177		1,317,185		3,840,430		1,053,080		-		8,495,952
Charge for the year	711,961		2,851		87,468		1,104,358		263,336		-		2,169,974
At 30 June 2018	2,985,041		15,028		1,404,653		4,944,788		1,316,416		-		10,665,926
Net Book Value
At 30 June 2018	5,305,920		99,972		146,608		5,922,290		914,784		26,423,292		38,812,866
At 31 December 2017	3,531,813		102,823		180,576		6,911,041		935,920		21,680,234		33,342,407

Computer software is a combination of assets internally generated and assets acquired through business combinations. Amortisation charged in the period to 30 June 2018 associated with computer software acquired through business combinations is £430,803. The additional £281,158 charged in the period relates to the amortisation of internally generated computer software. Amortisation of customer databases of £87,468 is also in relation to internally generated intangible assets.

6.     Availability of this announcement

This announcement together with the financial statements herein and a presentation in respect of the interim financial results are available on the Group's website, www.inspiredplc.co.uk

 

END

 

 

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