Half Yearly Report

RNS Number : 9452L

Inspired Energy PLC

19 August 2013

 



19 August 2013

Inspired Energy plc

("Inspired" or the "Group")

Half Year Results for the six months ended 30 June 2013

Inspired Energy plc (AIM: INSE), a leading UK energy procurement consultant to UK corporates, announces its consolidated, unaudited, half year results for the six month period ended 30 June 2013. 

Financial highlights

§ Revenue in the six months to 30 June 2013 increased 65% to £3.5m (H1 2012: £2.1m)

§ EBITDA* for the period increased 49% to £1.6m (H1 2012: £1.1m)

§ Record six months of Corporate order book sales of £4.0m (2012 pro-forma: £3.4m), an increase of 18%

§ Combined order book of £9.9m as at 30 June 2013 (H1 2012: £7.9m)

§ Maiden interim dividend of 0.05 pence declared

§ Cashflow from operations of £1.9m (H1 2012: £0.6m)

Operational highlights

§ Corporate division performed strongly, consolidating Inspired's position as a market leader

§ SME business outperformed initial expectations resulting in further investment to the team

§ Direct Energy Purchasing integration has enabled Inspired to deliver a broader service bringing greater opportunities to the Group to tender for more complex businesses by leveraging off the different service capabilities of Inspired Energy Solutions and Direct Energy Purchasing

§ New product launches continued including first customers taking up the innovative Multi-Customer Management ("MCM") product

Commenting on the results, Janet Thornton, Managing Director of Inspired said:  "I am delighted by the strong performance the Group has delivered across both the Corporate and SME divisions in the first half, traditionally the quieter half for the business.  The business is performing very well with the order book growing by £1.0 million during the period to c. £9.9 million.  We have started the second half at pace and believe we are in a strong position to deliver further growth for the full year."

* Earnings before interest, taxation, depreciation, amortisation, exceptional costs and share based payments

For further information, please contact:   

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

Chairman's Statement

I am pleased to present the Group's unaudited interim results for the six months ended 30 June 2013. 

The Group has performed well, delivering results in line with management expectations.  The team delivered a record six months of order book sales of £4.0m (2012 pro forma: £3.4m), increasing the Corporate order book by 25 per cent. to £9.9m as at 30 June 2013 (2012: £7.9m).  In this period, we won a number of high profile clients, including Oxford Instruments PLC, Castings PLC, Kemira Chemicals and Esterform Packaging, in addition to continuing the high level of client retention across the Group in excess of 75 per cent. and maintaining a 100 per cent.  client retention rate in our more complex Risked Management division in Inspired Energy Solutions.

The period in question has seen some notable developments in our sector following the completion of two large acquisitions of competitors of the Group.  The increase in M&A within the sector suggests an increasing understanding of the value of energy consultants to UK corporates, as well as an appreciation of the benefits which can be obtained through supplier relationships, scale and market presence.  With this in mind, we remain committed to our stated strategy and it is our intention that we continue to grow both organically and through acquisition. We believe that the Group has an excellent platform onto which we can bolt complementary, earnings enhancing acquisitions benefitting from a greater depth of products or a wider range of potential customers. 

We are delighted with our performance in the first half of 2013, one which we could not have achieved without the hard work of our team and of course without the continued support of our loyal customers who we strive to deliver the best advice and results for.  We are well set to enter H2 of 2013 with confidence.

Bob Holt

Chairman

19 August 2013

Managing Director's Statement

Inspired Corporate

Inspired Energy's corporate focused business, comprising Inspired Energy Solutions ("IES") and Direct Energy Purchasing ("DEP"), has performed strongly during the first half of 2013, consolidating our position as one of the larger players in the corporate energy consultancy market.

Operational Achievements

Significant achievements during the period include:

Increased new business within DEP

Following the integration of DEP onto the same IT platform in H2 2012, management sought to streamline and synchronise the sales and account management functions performed by the telesales, analysts and accounts managers at both IES and DEP. This has been achieved in H1 2013 and delivered significant benefits with new business opportunities and order book sales at DEP increasing significantly in the period.  New business within DEP has more than doubled in comparison to the first six months of the Group's ownership and we expect this growth in sales to continue into the medium term.

Joint tendering

In addition, the businesses are now able to develop joint tenders for larger potential customers who have complex energy requirements that would benefit from the trading expertise and product development of IES and the bureau and account management skills of DEP.

Extension of telesales

The telesales team has been extended into DEP in order to target multi-site and complex clients.  The team, formed by the recruitment of sales personnel who were new to the industry, has performed well and is starting to generate and convert an increasing number of opportunities.  The team operates on the same IT and Customer Relationship Management ("CRM") system as the IES team which increases the opportunity to cross-sell into multiple sectors and areas of expertise.

Improved product offering

The Group constantly seeks to improve and enhance its range of products through continual development and discussion with key energy suppliers.  In addition to the innovative MCM product, a number of new, exclusive products have been added to the portfolio, aimed specifically at providing a product designed for the core customer profile of Inspired.  New products include a long term, 5 year fixed price contract designed to provide certainty to customers and counteract any future commodity price rises along with a new flexible product with increased flexibility throughout the life of the contract.

Commencement of Multi-Client Management ("MCM") trading

The first MCM product contracts were signed in the first half of the year, with estimated total demand within the product standing at c. 846 gWhs.  The product has a 24 month lifespan and provides customers with complete purchasing strategy flexibility within a large, group buying, framework and benefits from considerable economies of scale for the underlying customer through reduced pass through charges and costs.  Clients include:

·      Muller Wiseman Dairies

·      Pittards Plc

·      Oxford Instruments Plc

·      Freemans Grattan

The Group sees strong growth prospects for MCM and expects to see continued growth and uptake of MCM by new and existing customers.

Growth of special projects

In addition to growing the core revenue streams of the business, the Group has started to realise revenue opportunities from a range of special projects including Power Purchase Agreements, Renewable Heat Incentive projects and OFGEM accreditation consultancy.  Whilst these projects are unlikely to become a core component of profitability within the business, the in-house expertise provides a crucial element of the total service offering of the Group, increasing stickiness of existing customers and opening opportunities for new client development.

Inspired SME - EnergiSave

The Group launched EnergiSave, which is focused solely on SME and micro-businesses, in late 2012 in order to provide energy consultancy services to SMEs in the UK.  The service is less complex than that provided to the larger corporate customers within the Corporate division and is driven mainly by price, duration of contract and the accompanying terms and conditions, which are better suited to this type of customer. Customers benefit as the Group is able to make significant cost savings for customers as a result of the significant buying power and negotiation of terms with energy suppliers and through advising customers on penal terms and conditions included within several standard tariffs.

The division has grown rapidly since its launch and as a result of its success management has decided to make further investments into the division.  Approximately 30 sales people now work within the business, split into market, geographic or situational teams which specialise in offering specifically picked contracts to their respective target customers.

Notwithstanding this investment in people, the business is performing in line with management expectations.  This is made possible by the much shorter lead time for new employees to reach both cash and profit breakeven due to up front payments of commission by energy suppliers.   The division is profitable for the six months to 30 June 2013 and run-rate sales are increasing which will lead to an improved contribution in H2 2013 and beyond.

Inspired Ireland

During the period, the Group has continued to make progress within the Irish market place.  Negotiations are ongoing with Irish suppliers and the first Irish contracts have been placed and revenues have begun to be realised. The business is approaching the Irish market from both an in-country presence in County Monaghan and through negotiating Irish contracts from the Kirkham head office.  We believe this provides us with the optimum entry strategy into the market without incurring significant start up costs and from progress to date management are confident of the long term prospects of the business.

Group

Within the first half of the year, there has been a significant focus on the implementation of an improved real-time management reporting system within IES which provides increased granularity to the Board on the performance of the underlying contracts.  The rollout of this reporting system to DEP is underway and will be complete by the end of H2 2013. The reporting system has already materially improved the insight that the bureau team is able to provide to customers and will provide a platform onto which future acquisitions can be bolted in order to generate consolidated data across the Group.  The system has undergone rigorous internal testing.  This has shown the system to be robust, reliable and scalable.

In order to continue to manage the Group's growth carefully, the Board has decided to invest in additional finance resource in H2 of 2013.  A Head of Finance has been recruited and will be responsible for Group reporting, KPI production and cash flow management of the Group who will report directly to David Foreman, Finance Director. 

Financial Achievements

Corporate Order Book Sales¹ have increased by c.18 per cent. to £4.0 million in the six month period ended 30 June 2013 (30 June 2012 pro forma: £3.4m).  This strong performance has been achieved despite operating in a market in 2013 which has been hindered somewhat by uncertainty over increasing government levies and pass through charges.  This uncertainty has had the effect of delaying a number of clients from signing extensions and renewals to their energy contracts.  Accordingly, we believe that the results of the period represent an outstanding achievement from the Inspired Corporate division's sales team.

Due to the increased level of Order Book Sales, which have been significantly higher than revenue recognised throughout the period, the combined Order Book Value² now stands at a record £9.9 million (30 June 2012: £7.9m) representing 25 per cent. growth year-on-year. Contracted revenues now extend into 2016 which provides good earnings visibility and an extremely strong platform from which to continue to grow organically or to bolt on another earnings enhancing acquisition.

The Group successfully refinanced its debt in March 2013, securing a significantly improved facility with Santander.  The £3.5 million, five year term facility replaced the existing term facilities of c. £3.0 million and in addition, the Group was able to secure a committed acquisition facility of £1.5 million.  The new facilities benefit from reduced margins, monitoring fees and amortisation and provide a supportive banking partner to enable the business to continue to explore earnings enhancing acquisition opportunities.

Financial Review

Revenue in the six months to 30 June 2013 was £3.5m (H1 2012: £2.1m). Operating profit for the period was £0.9m (H1 2012: £0.7m).  Earnings before interest, taxation, depreciation, amortisation, exceptional costs and costs associated with share based payments for the period were £1.6m (H1 2012: £1.1m).  Basic earnings per share for the period was 0.12 pence (H1 2012: 0.09 pence). Adjusted basic earnings per share (excluding exceptional items, share based payments costs and amortisation of intangible assets acquired) was 0.26 pence (H1 2012: 0.19 pence).

Administrative expenses (excluding fees associated with acquisition/listing and amortisation of intangibles) in the financial period were £1.5m (H1 2012: £1.0m). Finance expenditure for the period was £0.1m (H1 2012: £0.1m).

Profit before income tax for the period was £0.8m (H1 2012: £0.5m).

Net cashflows from operating activities during the period were £1.4m (H1 2012: £0.0m).  Cash generated from operations was £1.9m (H1 2012: £0.2m)

Group cash balances as at 30 June 2013 amounted to £2.9m, with a net debt position of £0.5m (H1 2012: £2.2m).

The Group declared a final dividend of 0.11p per share in respect of the financial year to 31 December 2012 and is pleased to announce its intention to pay a maiden interim dividend of 0.05p in respect of the 6 months ended 30 June 2013 (H1 2012: £nil).

______________

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

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

Outlook

The Group has made significant progress over the last 12 months and in particular in H1 2013.  The Corporate division is performing exceptionally well with the order book going from strength to strength. EnergiSave has been embraced by customers and it is our expectation that it will make a profitable contribution to the Group in the second half of the year and into 2014.  We will continue to develop the Irish market and progress with careful expansion into Europe via UK based, European contract negotiation.

We remain committed to our acquisitions strategy and, having secured a new banking arrangement and acquisition facility with Santander UK plc, we will continue to actively review further EPS enhancing acquisitions.

We enter H2 2013 in a strong position remaining confident, based on performance to date, that earnings for the full year are expected to be in line with market expectations and look forward to delivering further growth with confidence.

Janet Thornton

Managing Director

19 August 2013

Group Income Statement for the six months ended 30 June 2013

								Six months ended 30 June 2013 (unaudited)	Six months ended 30 June 2012 (unaudited)	Year ended 31 December 2012 (audited)
								£	£	£
Revenue								3,511,115	2,126,160	5,260,518
Cost of sales								(469,691)	(117,716)	(283,540)
Gross profit								3,041,424	2,008,444	4,976,978
Administrative expenses								(2,096,814)	(1,350,041)	(3,804,087)
Operating profit								944,610	658,403	1,172,891
Analysed as:
Earnings before interest, taxation, exceptional costs, depreciation, amortisation and share based payments								1,572,230	1,058,337	2,641,307
Fees associated with acquisition								-	(187,504)	(195,404)
Restructuring costs								(76,100)	-	(234,095)
Depreciation								(45,817)	(16,328)	(33,458)
Amortisation								(399,654)	(196,102)	(793,361)
Share based payment costs								(106,049)	-	(212,098)
								944,610	658,403	1,172,891
Finance expenditure								(141,702)	(116,806)	(256,123)
Other financial items								-	-	(26,358)
Profit before income tax								802,908	541,597	890,410
Income tax expense								(312,666)	(180,276)	(251,242)
Profit for the period and total comprehensive income								490,242	361,321	639,168
Attributable to:						Note
Equity holders of the company								490,242	361,321	639.168
Basic earnings/(loss) per share attributable to the equity holders of the company (pence)						3		0.12	0.09	0.16

The profit for the period per the income statement is also the total comprehensive income for the period and consequently no separate statement of comprehensive income is presented.  All revenue and costs originate from continuing activities.

Group Statement of Financial Position at 30 June 2013

	Note	30 June  2013 (unaudited)	30 June  2012 (unaudited)	31 December 2012 (audited)
		£	£	£
ASSETS
Non-current assets
Intangible assets		2,500,176	3,307,549	2,892,956
Property, plant and equipment		239,065	184,064	198,266
		2,739,241	3,491,613	3,091,222
Current assets
Trade and other receivables		1,952,133	1,609,291	2,437,732
Cash and cash equivalents		2,911,030	943,740	1,070,468
		4,863,163	2,553,031	3,508,200
Total assets		7,602,404	6,044,644	6,599,422
LIABILITIES
Current liabilities
Trade and other payables		594,267	303,826	541,275
Bank borrowings		700,000	524,000	524,000
Current tax liability		814,567	803,801	870,319
Dividend payable		445,589	-	-
Contingent consideration		1,000,000	1,000,000	1,000,000
		3,554,423	2,631,627
Non-current liabilities
Bank borrowings		2,706,746	2,590,976	2,371,867
Trade and other payables		-	-	102,959
Deferred tax liability		253,612	402,954	253,612
Interest rate swap		-	-	26,358
Contingent consideration		501,145	501,145	501,145
		3,461,503	3,495,075	3,255,941
Total liabilities		7,015,926	6,126,702	6,191,535
Net assets/(liabilities)		586,478	(82,058)	407,887
EQUITY
Share capital		506,352	505,190	505,190
Share premium account		1,070,333	1,043,606	1,043,606
Merger relief reserve		8,623,237	8,623,237	8,623,237
Retained earnings		1,451,182	1,128,682	1,406,529
Share based payments reserves		318,147	-	212,098
Reverse acquisition reserve		(11,382,773)	(11,382,773)	(11,382,773)
Total equity/(deficit)		5856,478	(82,058)	407,887

Group Statement of Cash Flows for the six months ended 30 June 2013

	Note		Six months ended 30 June 2013 (unaudited)	Six months ended 30 June 2012 (unaudited)	Year ended 31 December 2012 (audited))
			£	£	£
Cashflows from operating activities
Operating profit			802,908	541,597	890,410
Adjustments
Depreciation			45,817	16,328	33,458
Amortisation			399,654	196,102	793,361
Share based payment costs			106,049	-	212,098
Finance expenditure			141,702	112,828	256,123
Other financial items			-	-	26,358
Cash flows before changes in working capital			1,496,130	866,855	2,211,808
Movement in working capital
Decrease/(Increase) in trade and other receivables			456,579	(303,425)	(1,131,870)
(Decrease)/increase in trade and other payables			(49,370)	(321,401)	44,176
Cash generated from operations			1,903,339	242,029	1,124,114
Income taxes paid			(366,353)	(243,252)	(414,333)
Net cashflows from operating activities			1,536,986	(1,223)	709,781
Cashflows from investing activities
Purchase of property, plant and equipment			(93,490)	(52,060)	(83,389)
Payments to acquire intangible assets			-	-	(182,666)
Acquisition of subsidiary, net of cash		4	-	(844,922)	(844,922)
			(93,490)	(896,982)	(1,110,977)
Cashflows from financing activities
New bank loans			3,500,000	-	-
Repayment of bank loans			(2,989,121)	(245,000)	(507,000)
Finance expenses			(141,702)	(112,828)	(212,829)
Repayment of hire purchase agreements			-	-	(8,280)
Net proceeds of equity			27,889	941,370	941,370
			397,067	583,542	213,261
Net increase/(decrease) in cash and cash equivalents			1,840,563	(314,663)	(187,935)
Cash and cash equivalents brought forward			1,070,467	1,258,403	1,258,403
Cash and cash equivalents carried forward			2,911,030	943,740	1,070,467

Group Statement of Changes in Equity for the six months ended 30 June 2012

	Share Capital	Share Premium Account	Merger Relief Reserve	Share Based Payment Reserve	Retained Earnings	Reverse Acquisition Reserve	Total Shareholders Equity/ (Deficit)
	£	£	£	£	£	£	£
Balance at 1 January 2012	442,690	137,950	7,900,023	-	767,361	(11,382,773)	(2,134,749)
Profit and total comprehensive profit for the period	-	-	-	-	361,321	-	361,321
Shares issued (5 April 2012)	35,714	964,286	-	-	-	-	1,000,000
Share issue expenses	-	(58,630)	-	-	-	-	(58,630)
Shares issued in respect of consideration (16 April 2012)	26,786	-	723,234	-	-	-	750,000
Balance at 30 June 2012 and 1 July 2012	505,190	1,043,606	8,623,237	-	1,128,682	(11,382,773)	(82,058)
Profit and total comprehensive profit for the period	-	-	-	-	277,847	-	277,847
Share based payments	-	-	-	212,098	-	-	212,098
Balance at 31 December 2012 and 1 January 2013	505,190	1,043,606	8,623,237	212,098	1,406,529	(11,382,773)	407,887
Profit and total comprehensive profit for the period	-	-	-	-	490,242	-	490,242
Shares issued (26 March 2013)	1,162	26,727	-	-	-	-	27,889
Share based payments	-	-	-	106,049	-	-	106,049
Dividend	-	-	-	-	(445,589)	-	(445,589)
Balance at 30 June 2013	506,352	1,070,333	8,623,237	318,147	1,451,182	(11,382,773)	586,478

1.     Accounting Policies

Nature of Operations and General Information

Inspired Energy plc ("the Company") and its subsidiaries (together "The Group") provide consultancy and brokerage energy services to UK SMEs and corporates, in order that clients purchase energy efficiently and ensure that their energy bills are accurate.

Inspired Energy plc is incorporated in England and Wales.  The address of the registered office is 29 Progress Park, Orders Lane, Kirkham, Lancashire, PR4 2TZ.  Inspired Energy plc's shares are listed on the AIM market of the London Stock Exchange.

Inspired Energy plc's consolidated interim financial statements are presented in pounds sterling, which is also the functional currency of the parent company.

Basis of Preparation

These consolidated, unaudited, interim financial statements are for the six months ended 30 June 2013. They have not been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2012.

The financial information set out in these unaudited, consolidated, interim financial statements does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The consolidated statement of financial position as at 31 December 2012 and the consolidated income statement, consolidated statement of cash flows, consolidated statement of changes in equity and associated notes for the year then ended have been extracted from the Group's Financial Statements as at 31 December 2012. Those financial statements have received an unqualified report from the auditors and have been delivered to the Registrar of Companies. The 2012 statutory accounts contained no statement under section 498(2) or section 498(3) of the Companies Act 2006.

The consolidated interim financial statements for the period ended 30 June 2013 have not been audited or reviewed in accordance with International Standard on Review Engagement 2410 issued by the Auditing Practices Board.

The Consolidated Interim Financial Statements have been approved by the Board of Directors on 19 August 2013.

Going Concern

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

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

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

2.     Segmental Information

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

3.     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.

The weighted average number of ordinary shares for the period ended 30 June 2013 assumes that the 1,859,297 ordinary shares issued in respect of the exercise of share options on 26 March 2013 have been included since the issue date.

The weighted average number of ordinary shares for the period ended 30 June 2012 assumes that the 50,000,000 ordinary shares issued, cumulatively, in relation to the £1.0 million placing completed on 5 April 2012 and the consideration shares issued on 16 April 2012 have been included since their respective issue dates.

			Six months ended 30 June 2013 (unaudited)	Six months ended 30 June 2012 (unaudited)	Year ended 31 December 2012 (audited)
			£	£	£
Profit attributable to equity holders of the Group			490,242	361,321	639,168
Amortisation of intangible assets acquired			399,654	196,102	793,361
Deferred tax in respect of amortisation			-	-	(198,772)
Fees associated with acquisition/listing			-	187,504	195,404
Share based payments costs			106,049	-	212,098
Exceptional items			76,100	-	234,095
Adjusted profit attributable to equity holders of the Group			1,072,045	744,927	1,875,354
Weighted average number of ordinary shares in issue			404,616,670	387,485,178	387,485,179
Diluted weighted average number of ordinary shares in issue			430,420,695	406,078,148	406,196,483
Basic earnings per share (pence)			0.12	0.09	0.16
Diluted earnings per share (pence)			0.11	0.09	0.16
Adjusted basic earnings per share (pence)			0.26	0.19	0.48
Adjusted diluted earnings per share (pence)			0.25	0.18	0.48

               
The weighted average number of shares in issue for the adjusted diluted earnings per share include the dilutive effect of the 25,804,025 share options in issue to senior staff of Inspired Energy plc.

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, share based payments and exceptional items which have been expensed to the income statement in the period.

4.     Post Balance Sheet Events

On 6 July 2013, an aggregate amount of £1,100,000 was paid to the vendors of Direct Energy Purchasing Limited as deferred consideration in accordance with the terms of the acquisition.

5.     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.inspiredenergy.co.uk.

-Ends-

 

END

 

 

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