Results for the six months ended 30 June 2023

Inspired PLC

11 September 2023

 

11 September 2023

Inspired PLC

("Inspired" or the "Group")

Results for the six months ended 30 June 2023

Solid financial and operational progress with strong momentum in Optimisation and ESG Divisions providing confidence in full year market expectations

Inspired (AIM: INSE), a leading technology enabled service provider supporting businesses in their drive to reduce energy consumption, deliver net-zero, control energy costs and manage their response to climate change, announces its consolidated, unaudited half-year results for the six-months ended 30 June 2023.

Financial Results

	H1 2023	H1 2022	% change
Revenue	£44.63m	£40.45m	10%
Gross profit	£30.99m	£26.81m	16%
Adjusted EBITDA*	£10.57m	£9.67m	9%
Adjusted profit before tax**	£6.24m	£6.47m	(4%)
Underlying cash generated from operations***	£3.40m	£5.77m	(41%)
Profit before tax	£0.19m	£2.43m	(92%)
Adjusted diluted EPS**** †	4.84p	5.47p	(12%)
Net debt	(£49.10m)	(£42.94m)	(14%)
Interim dividend per share †	1.40p	1.30p	8%

Highlights

·	Each of the Group's four divisions traded well, with the Group delivering organic revenue growth of 10% in H1 2023.
·	Adjusted EBITDA grew by 9% in H1 2023, with Group margins remaining stable and in line with expectations at 24% (H1 2022: 24%).
·	Adjusted profit before tax was £6.2m (H1 2022: £6.5m), with growth in Adjusted EBITDA offset by increased finance costs reflecting the higher levels of debt over the period, and increased interest rates.
·	Underlying cash generation from operations (excluding non-recurring fees associated with restructuring costs) was £3.4m; a reflection of the timing and profile of the optimisation service projects in H1 2023. The Group generated a further £4.7m of cash from operations in July, or £8.1m across the seven-month period to 31 July 2023 and is confident in achieving a cash conversion ratio in excess of 80% for FY23.
·	During the period the Group paid £8.6m in performance fees, relating to the achievement of earnout targets by prior acquisitions.
·	Net debt has increased in line with management's expectations at 30 June 2023, driven by performance related payments in relation to acquisitions, plus the timing and profile of optimisation projects in the period, and is expected to decrease by the year end and be in line with expectations.
·	The interim dividend has increased to 1.40p,(H1 2022: 1.30p), reflecting the Board's continued confidence in the Group's prospects.

Operational and Strategic Highlights

Strong performance across all four divisions, underpinned by long term structural growth drivers:

Assurance Services

·	Revenues were in line with H1 2022 levels and, the Group continued to see good momentum in new business generation. Retention rates are continuing their recovery, following an increase in client churn in FY 2022 as a result of the unprecedented conditions in UK energy markets, and we expect the division to return to growth in FY24.
·	Margins are in line with expectations with an anticipated increase in overheads to maintain the highest service quality standards for Inspired's clients whilst supporting them in managing energy costs.

ESG Services

·	ESG Services continue to gain significant market traction as the Group leverages its expanded service offering to meet clients growing demand.
·	Revenues increased 98% to £2.4m (H1 2022: £1.2m) and represent 500% growth in the two years since inception in H1 2021, with significant further potential ahead.
·	ESG Services not only offer an opportunity to increase the lifetime value of the existing client base but has also brought new clients to the Group including YouGov plc, Empiric Student Property plc, Acteon Group Limited, Optimas OE Solutions Limited, FW Thorpe plc, and Dyer Engineering Ltd.

Optimisation Services

·	Revenues grew 14% to £22.4m (H1 2022: £19.6m), as the division continues to benefit from cross selling and a strong step up in demand, with clients focussing on the beneficial impacts of energy reduction and delivering net-zero.
·	Largest revenue contributor to the Group, delivering c.40% of the divisions expected 2023 gross profits in H1 and management expects the division to deliver c.60% in H2 2023.
·	As a reflection of the growth trajectory, project activity increased throughout H1 and post period end. The timing and profile of the optimisation service projects commencing and concluding in H1 2023 impacted the Group's underlying cash generated from operations over the period with substantial cash subsequently generated post period end as the associated working capital unwound.  Optimisation Services are a key component in increasing the lifetime value of Inspired's clients. The repeat demand for solutions to deliver net-zero and reduce costs is significant as clients respond to the macro themes of ESG and climate change. This offers the opportunity to drive significant absolute EBITDA growth for the Group over the long term.

Software Services

·	Performed well delivering 24% increase in revenues to £1.5m (H1 2022: £1.2m), driven by new client acquisition and an increase in revenue generated from existing customers, as the Group continues to add additional modules to its existing platform.
·	Software is rapidly becoming the market leading technology platform with strong growth potential supported by the Group's proprietary software platform: 'Unify'.

Current trading and outlook

·	The over-arching business necessity for energy efficiency initiatives should support continued strong demand for the value added by Optimisation Services in H2.
·	ESG Services is expected to maintain its strong momentum in H2.
·	Managing energy costs and ESG have become firmly embedded as operationally and commercially critical for Inspired's clients, creating sustained and increasing demand for Inspired's differentiated products and services in the long-term.
·	Given this half-year performance and current trading, the Board remains confident in delivering market consensus for the full year 2023.

Commenting on the results, Mark Dickinson, CEO of Inspired, said: "We are pleased to have delivered solid financial and operational progress during H1. The elevated volatility in the energy market has made energy procurement challenging for customers, and our staff have gone above and beyond during this time to support them. We have been delighted by the momentum achieved in the Optimisation and ESG divisions in particular, as these offerings become ever more relevant to our customers in the current climate.

"Whilst the economic backdrop continues to present risks, our solid first-half performance, strong market position and unique ability to support customers across a wide offering, provide us with confidence for H2 and beyond."

An overview video of the results, by CEO Mark Dickinson, is available to watch here: https://bit.ly/INSE_H123_overview

Note

*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 change in fair value of contingent consideration and foreign exchange gains/(losses) (A reconciliation of adjusted profit before tax to reported profit before tax can be found in note 4)

***Underlying cash generated from operations is cash generated from operations, as adjusted to remove the impact of restructuring costs and fees associated with acquisitions.

****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 change in fair value of contingent consideration and foreign exchange gains/(losses).

†All per-share figures have been adjusted to reflect the 10:1 share consolidation undertaken on 3 July 2023.

For further information, please contact:  

Inspired PLC	www.inspiredplc.co.uk
Mark Dickinson, Chief Executive Officer	[phone]
Paul Connor, Chief Financial Officer
David Cockshott, Chief Commercial Officer
Shore Capital (Nomad and Joint Broker)	[phone]
Patrick Castle James Thomas Rachel Goldstein
Liberum (Joint Broker) Edward Mansfield Satbir Kler	[phone]
Alma PR	[phone]
Justine James Hannah Campbell Will Ellis Hancock	[phone] [e-mail]

Chair's Statement

Inspired continues to take every opportunity to help customers mitigate the cost of energy and manage their energy consumption and carbon emissions during these challenging times.

The Group made good progress in the first half of the financial year, with the momentum continuing into H2. As a result, the Board is pleased to report robust results for the period ended 30 June 2023.

Deed of Variation - Ignite Energy LTD ("Ignite")

As we announced on 22 May 2023, the Group entered into a deed of variation to the share purchase agreement dated 9 July 2020 between the Company and vendors of Ignite Energy LTD ("Ignite Vendors"). The Optimisation Division delivered significant growth in FY22 and H1 2023, driven by an increase in demand as the ongoing energy crisis sharpened clients' focus on the economics of investment in energy reductions, combined with the drive for delivering net-zero. With national COVID-19 restrictions behind us, we are now able to deliver on-site services once again undisrupted, a material factor which is driving strong demand for our Optimisation Services the Deed of Variation will incentivise the Ignite Vendors to deliver substantial long term for Inspired in a manner that is entirely self-funding.

Dividend

Since IPO in 2011, Inspired has established a track record of delivering profitable and cash-generative growth, which has facilitated a consistent and progressive dividend policy.

Accordingly, the Board is pleased to announce an interim dividend of 1.4 pence per share  (H1 2022:1.3 pence), with the H1 2022 figure adjusted to reflect the 10:1 share consolidation undertaken on 3 July 2023. The dividend aligns with the Board's stated policy of a dividend cover of at least 3x earnings, with the objective of delivering progressive dividend growth over time.

The interim dividend will be paid on 8 December 2023 to all shareholders on the register at close of business on 13 October 2023. The shares will be marked ex-dividend on 12 October 2023.

Our People

On behalf of the Board, I would like to thank our colleagues, who continue to work tirelessly to support our customers through the challenges of these unprecedented times. We continue to invest in our valued team and the business. The Group's priority remains to help customers mitigate the rising cost of energy, manage their energy consumption and continue to reduce carbon emissions.

Richard Logan

Chair

10 September 2023

Chief Executive Officer's Statement

The first half of 2023 has been another period of strong progress for Inspired, delivering revenue growth of 10% to £44.6m and Adjusted EBITDA growth of 9% to £10.6m reflecting the increasing demand for our differentiated solutions, and in particular optimisation services, as businesses need to manage their energy costs and commence on their journeys to net-zero.

The unprecedented conditions in the UK energy markets during 2022 sharpened our clients' focus on ensuring they have invested effectively in carbon and energy reduction; as a consequence, managing energy costs and making ESG disclosures are now firmly embedded as operationally and commercially critical for most businesses. Supporting our customers is paramount to the whole team and Inspired's solid performance in the period, positions us well to continue supporting our customers and address their growing needs.

Each of the four divisions performed well, with Optimisation and ESG delivering particularly strong revenue growth. Optimisation continues to deliver organic growth from cross selling and a strong step up in in new customer demand, with clients focussing on the beneficial impacts of energy reduction and delivering net-zero. ESG has performed exceptionally well, increasing the lifetime value of existing clients and adding new clients to the Group providing incremental cross sell opportunities. Assurance continues to see momentum in new business generation, with client churn reducing and retention rates recovering. Software continues to deliver growth, rapidly becoming the market leading technology platform with strong client wins from competing technologies in the first half of the year as well as underpinning the Group's broader service delivery.

Whilst mindful of the challenges posed by the macro-economic environment, and in particular the impact on the Assurance Services division, we still expect to deliver double digit organic growth this year across the Group which is testament to the success of our diversification strategy to become a full suite sustainability services provider and underpins the Board's confidence in the continued success of Inspired in the long-term.

Strategy

FY22 saw the completion of the Group's initial five-year strategy to transition into a full suite sustainability services provider.  We have created a business that has fully diversified from being solely an energy broker with low single digit organic revenue growth, to a business with a double-digit organic growth engine capable of delivering our ambition to double Adjusted EBITDA organically by FY27.

Our strategy for the next five years to deliver on the client life-time value opportunity, the intrinsic value of which has already firmly been embedded in the portfolio, can be summarised as:

1.	Deliver the market opportunity afforded by the three primary macro themes of Energy crisis defence, ESG and transition to net-zero;
2.	Deliver a technology enabled service utilising our proprietary software platform that becomes industry standard;
3.	Evolve trusted adviser C-Suite relationships with clients by assuring their energy costs and managing their energy crisis defence through our Assurance division;
4.	Enhance C-Suite relationships with clients by managing their ESG disclosures and designing their net-zero strategies through our ESG Services division; and
5.	Implement the solutions that remove the actual carbon emissions and reduce the energy consumption across our customers' portfolios to enable them to actually deliver net-zero through our Optimisations Services division increasing their client lifetime value.

The Group has made good progress executing this strategy in H1 adding new clients for Assurance Services and ESG Services and cross selling services to clients. Of particular note:

1.	ESOS Phase 3 (the Energy Savings Opportunity Scheme) is a mandatory ESG disclosure and the number of clients taking this service has increased by over 50% during the period
2.	During FY22 our Optimisation Services teams were active on 1,000 client sites and this year we are currently on a run rate to be on site with 1,500 clients for FY23
3.	Software Services delivered additional Optimisation and ESG services provided by the Group to its intermediary customers.

Assurance Services

Our Assurance Services division is a leader in helping businesses manage their energy costs and the risks of the energy markets, the importance of which has never been greater.

To do this effectively and take advantage of opportunities to reduce costs as they occur, thousands of pieces of data need to be processed every month, which is made possible by our proprietary software platform: 'Unify'.  Once this data is collected and audited, it provides the detail required to identify and deliver effective carbon action programmes and opportunities to implement Optimisation Services.

The Group guided to low single digit revenue growth and a circa 40% Adjusted EBITDA margin for FY23 for the division reflecting the full year impact of client churn and increased costs to maintain service levels arising from the energy crisis. The division is performing as we expected in FY23 with a return to growth expected in FY24.

The Group has posted a record level of new client wins for the period including Central England Co-operative Limited, Focus Hotels Management Limited, and Rontec Roadside Retail Limited. New client wins have been driven by a flight to quality as businesses look for differentiated solutions from a full suite sustainability services provider to help them navigate through the energy crisis. We are also pleased to report that we expect retention levels to return to pre-energy crisis by FY24.  

For H2 2023 the Group remains focussed on ensuring that Assurance Services continues to evolve to keep pace with the increasing challenges faced by clients and adding new clients to the Group.

ESG Services

The ESG Services division supports businesses with the production of their ESG disclosures to meet their regulatory obligations and determining strategies to deliver the ESG impacts clients' wish to make.

Once a business has a robust process for making consistent disclosures, its board has the information it needs to make more effective decisions and the data required to formulate a carbon action programme and deliver any necessary Optimisation Services.

The division has delivered 98% organic growth compared to H1 2022 and is expected to deliver a positive Adjusted EBITDA contribution in FY23 only two years since its inception as a boot strap market entrant.

We are delighted by the performance of the ESG Services division which added a number of clients to the Group in H1 2023 including YouGov plc, Empiric Student Property plc, Acteon Group Limited, Optimas OE Solutions Limited, FW Thorpe plc, and Dyer Engineering Ltd. These client wins also provide a further opportunity to develop the Group's revenues through cross selling the Group's product suite into the client.

As we look towards H2 2023 we see strong momentum leading management to expect organic growth of c.90% for FY23 for this division. 

Importantly the ESG macro environment continues to develop strongly with the anticipated introduction of the Corporate Sustainability Reporting Directive ('CSRD') set to encompass 50,000 European businesses under the umbrella of mandatory sustainability reporting compared to 1,800 in the UK.

Optimisation Services

Once clients have benefitted from the Group's Assurance Services to manage the price of their energy and are reporting their ESG disclosures effectively, their attention quickly turns to how they can reduce energy and carbon emissions.

The cornerstone of Assurance and ESG Services is data management through the data provided at the meter point, and this data allows the Group to help clients identify opportunities to reduce carbon emissions and energy consumption, delivering their response to climate change and further reducing their energy costs. It is the cross selling of Optimisation Services to Assurance Services and ESG Services' customers which provides the Group with the opportunity to remove carbon from the environment and allow clients drive material progress in the transition to net-zero; providing a key competitive advantage to the Group.

H1 2023 has seen 14% organic growth from the Optimisation Services division with sales pipelines for Optimisation Services on client sites reaching record levels and the division is expected to deliver in excess of 30% organic growth by the end of FY23. We have seen an increased interest for supporting clients with the provision of environmental certificates which help them attain carbon neutrality as they continue on their journey to deliver net-zero carbon.

Unlike the other divisions, Optimisation Services revenue is project driven and consequently, revenue, profits and operating cash conversion are impacted by the timing of project work over the year and, as we observed last year, we expect higher revenues in H2 than we experienced in H1 2023.

We continue to see strong momentum in demand for optimisation projects and solutions for clients with pipelines for the rest of FY23 and FY24 at record levels and more than capable of supporting double digit growth expectations.

The Board is cognisant that there are elements outside of the Group's control with respect to the macro-environment and the timing of individual companies' decisions to deploy capital on projects, which can lead to variations in the timing of revenue, gross margin and cash conversion but the Board remains confident in meeting expectations for the division for FY23.

Software Services

Assurance, Optimisation and ESG Services require significant management and processing of unstructured data which underpins our service delivery. The technology enablement of these solutions is provided by 'Unify' our proprietary software platform which has been significantly developed over recent years and provides a market leading platform.

Software Services delivered 22% organic growth in H1 2023 compared to H1 2022 whilst maintaining significant margins, increasing expenditure from existing clients by 18% and introducing ten new TPIs and 5 direct clients to the Group.

We continue to develop incremental functionality to the platform and expect to deliver organic growth in excess of 20% for the full year FY23.

Acquisitions

Since IPO the Group has successfully completed 21 acquisitions adding £44.8m revenue and £14.4m of Adjusted EBITDA.  Prior to 2017 the strategic focus of the Group was scale through consolidation, and nine Assurance Services acquisitions were completed in five years which added £12.4m of Assurance Services revenue and £5.6m Adjusted EBITDA. This strategy has allowed the Group to transform from a subscale business into a platform business. However, this single service business strategy delivered relatively low organic growth with exposure to macro risks, such as COVID-19.

From 2017 to 2022 the Group completed 12 further acquisitions, including Ignite under a self-funding structure, adding £15.6m of Assurance Services revenue and £5.7m Adjusted EBITDA, £15.5m of Optimisation Services revenue and £2.6m Adjusted EBITDA and £1.3m of Software Services revenue and £0.5m Adjusted EBITDA. These acquisitions accelerated the diversification of the Group into a full suite sustainability services provider capable of delivering double digit organic growth whilst reducing the Groups exposure to macro risks. 

The Groups acquisition strategy has created a player of scale in the Assurance Services market, with a full suite of sustainability services, capable of delivering double digit organic growth with the ambition to double Adjusted EBITDA organically by the end of FY27.

After a slow down over the past few years impacted by the energy crisis and challenges of COVID-19, M&A activity in the sector is now resuming. The Board continues to monitor opportunities which can enhance the Group performance and shareholder returns in the long-term, in line with the Group's five-year strategy. 

Inspired's own ESG and people

As a service provider helping businesses deliver market leading ESG disclosures, it is important that the Group is at the forefront of ESG performance.  During H1 2023 the Group made the following progress with respect its ESG targets:

·	We accelerated our emissions reduction targets and Inspired will now be net-zero for scope 1 & 2 by 2030 from our 2019 baseline year.
·	We submitted our Scope 1, 2 and 3 targets to SBTi for validation.
·	We have enhanced our supplier engagement with our top 5 suppliers and selected 3 products to carry out life cycle assessment.
·	We commenced the development of our STEM scholarship programme.

Strategic priorities and outlook 

Managing energy costs and ESG have now become firmly embedded as operationally and commercially critical for most businesses. This is creating sustained and increasing demand for Inspired's differentiated products and services as a full-service provider.

The Group's objective is to deliver double digit Adjusted EBITDA growth for FY23 and double Adjusted EBITDA organically by FY27 and the Board is pleased to confirm that, with our performance in H1 2023 and having started H2 2023 well, we are on track to achieve our objectives and deliver in line with market consensus for the year.  

Mark Dickinson

Chief Executive Officer

10 September 2023

Chief Financial Officer's Statement

We are pleased to report strong financial results for the six months period ended 30 June 2023; we have remained agile and alert to the challenging environment in which we operate whilst making clear strategic progress.

In H1 2023 the Group achieved 10% organic revenue growth at £44.6m (H1 2022: £40.5m). Group Adjusted EBITDA increased by 9% to £10.6m (H1 2022: £9.7m). Group margins remained stable and in-line with expectations at 24% (H1 2022: 24%) with the lower margin within Assurance Services offset by margin improvement in Optimisation Services.

Divisional performance

Assurance Services

Whilst continuing to face volatility in UK energy markets, the Group's Assurance Services delivered revenues in line with expectations. The division continued to see momentum in new business generation and recovery in retention rates after the increase in client churn experienced in FY22 as a result of the unprecedented conditions in UK energy markets. Margins were in line with expectations, with an anticipated increase in overheads, to maintain the highest service quality standards for our clients, whilst supporting them in managing their energy costs.

Assurance Services generated 41% of total Group revenues in H1 2023 (H1 2022: 45%), being £18.4m (H1 2022: £18.4m).

Assurance Services continues to be a significant contributor to the Group, representing 55% of Group Adjusted EBITDA, prior to accounting for PLC costs, and contributed Adjusted EBITDA of £7.7m (H1 2022: £8.3m), a reduction of 7%. The Assurance Services adjusted EBITDA percentage margin was 42% (H1 2022: 45%). We retain our objective to provide a first-class level of service to our Assurance clients, which we believe is essential to retain our market leadership position in Assurance Services and to generate client lifetime value for the Group.

ESG Services

ESG Services generated revenues of £2.4m (H1 2022: £1.2m), delivering 98% growth organically, reflective of the demand and growing market for these services. ESG Services was break even for the period as the Group continues to invest to scale up the division in response to the substantial market opportunity.

The increasing focus of investors and businesses on net-zero targets, combined with mandatory requirements for businesses to make ESG disclosures from 2022, provides a favourable backdrop for the ESG Services division.

Optimisation Services

The ongoing energy crisis has significantly sharpened clients' focus on the economics of investment in energy reductions. Combined with the drive for delivering net-zero, this has translated into a significant step up in demand and activity for the Optimisation Services division.

Optimisation Services generated 50% of Group revenues in H1 2023 (H1 2022: 49%), amounting to £22.4m (H1 2022: £19.6m), an increase of 14%, all of which was organic. Optimisation Services contributed Adjusted EBITDA of £5.1m (H1 2022: £3.1m), an increase of 68% and a resulting improvement in Adjusted EBITDA margin to 23% (H1 2022: 16%).

Demand for Optimisation Services continues to increase, with strong underlying drivers, including the drive to net-zero and the need to manage high commodity prices. As the division continues to represent a growing proportion of Group revenues, Group margins will reflect the change in business mix in the future.

Software Services

Software Services continues to develop well, with revenues growing by 22% to £1.5m (H1 2022: £1.2m) and Adjusted EBITDA of £1.0m (H1 2022: £0.9m) reflecting momentum in client acquisition activity and an increase in revenue generated from existing clients.  The division produced an Adjusted EBITDA margin of 70% in line with FY2022 (H1 2022: 74%).

Group results

PLC costs were £3.3m (H1 2022: £2.7m) in line with expectations, the increase over the prior period reflecting the investment made in FY 22 into central functions including Marketing, Finance and HR, to support the acceleration in growth.

Overall, the Group generated Adjusted EBITDA of £10.6m in H1 2023 (H1 2022: £9.7m). In percentage terms the Adjusted EBITDA margin was stable in line with expectations at 24% (H1 2022: 24%). After deducting charges for depreciation, amortisation of internally generated intangible assets and finance expenditure, the adjusted profit before tax for the half-year was £6.2m (H1 2022: £6.5m). The increase in Adjusted EBITDA was offset by an increase in finance costs, due to a combination of the company carrying a higher level of debt over the period and increased interest rates.

Under IFRS measures, the Group reported a profit before tax for the half-year of £0.2m (H1 2022: £2.4m), with the reduction in reported profit before tax being primarily driven by increased charges for changes in the fair value of contingent consideration. Other items contributing to the reduction in the adjusted profit before tax include the amortisation of intangible assets as a result of acquisitions, share-based payment charges and restructuring costs, all of which have reduced from H1 2022.

A reconciliation of reported profit/(loss) before tax to adjusted profit before tax is set out below:

	Six months ended 30 June 2023 (unaudited) £000		Six months ended 30 June 2022 (unaudited) £000		Year ended 31 December 2022 (audited) £000
Profit/(loss) before tax	190		2,429		(3,957)
Share-based payments costs	521		715		1,732
Amortisation of acquired intangible assets	1,178		1,359		2,687
Foreign exchange variation	6		263		508
Exceptional costs:
Fees associated with acquisition	8		144		523
Restructuring costs	451		615		1,574
Exceptional finance costs	120		-		-
Change in fair value of contingent    consideration	3,764		943		10,936
Adjusted profit before tax	6,238		6,468		14,003

Alternative performance measures

Acquisition activity can significantly distort underlying financial performance from IFRS measures. The Board therefore considers it appropriate to report adjusted metrics, as well as IFRS measures, for the benefit of primary users of the Group's financial statements. Reconciliations to adjusted profit before tax and adjusted fully diluted EPS can be found in note 4.

Exceptional costs

Exceptional costs of £0.5m (H1 2022: £0.8m) incurred in the period related to restructuring programmes associated with the integration of businesses acquired prior to 2022, reducing significantly from the prior year.

Change in fair value of contingent consideration

The fair value of contingent consideration at the balance sheet date is a judgement of the contingent consideration which will become payable based on a weighted average range of performance outcomes of the acquired business during an earn out period, which is subsequently discounted for the time value of money and risk.

The Group reported a £0.2m pre-tax profit (H1 2022: £2.4m) in the period, of which £3.8m (H1 2022: £0.9m) related to the increase in the liability for contingent consideration payable, of which £0.7m (H2 2022: £0.9 m) related to the unwinding of discount rate, and £3.1m in respect of Ignite Energy LTD and Businesswise Solutions Limited performing at the higher end of the range of possible performance outcomes. The changes in the fair value of contingent consideration was treated as exceptional.

Exceptional costs, amortisation and impairment of internally generated intangible assets, share based payment charges and changes in fair value of contingent consideration are considered by the Directors to be material in nature and non-recurring; they, therefore, merit separate identification to give a true and fair view of the Group's result for the period.

Cash and Working Capital

Group cash generated from operations in H1 2023 was £3.0m (H1 2022: £5.0m), impacted by the timing and profile of optimisation services projects over the period and receipts post the period end. Excluding non-recurring fees associated with restructuring costs and deal fees, cash generated from operations was £3.4m (H1 2022: £5.8m).

Underlying operating cash conversion remain a key focus for management, acknowledging the need to facilitate the acceleration of growth within the Optimisation Services division.

Trade and other receivables increased 19% in the period to £45.8m (FY 2022: 38.6m), driven by a 52% increase in trade receivables to £18.7m (2022: £12.3m) as a result of the increased activity levels, and invoicing in the Optimisation Services division, which unwound post period end. Accrued income reduced in the period to £18.3m (FY 2022: £18.6m). Working capital management remains a key focus for management in sustaining strong cash conversion.

Trade and other payables increased 5% to £18.0m (FY 2022: £17.1m), driven by an increase in deferred income to £4.9m, primarily within the Optimisation Services division, as the division continues to focus on improving the number of stage payments it receives from its Optimisation project customers.

The Group's net debt (defined as bank borrowings less cash and cash equivalents) increased by £11.9m in the period to £49.1 million (FY 2022: £37.2m) in line with expectations.

The increase in Group net debt reflects the payment of £8.6m of contingent cash consideration to the vendors of Ignite, BWS and LSI, with a further £2.6m paid to the vendors of Ignite in ordinary shares of the Group. A further £4.0m performance payments, in the form of contingent cash consideration for acquisitions is expected to be paid in H2 2023. The balance of the contingent consideration within current liabilities will be payable in H1 2024.

Financial position and liquidity

At 30 June 2023, the Group's net debt was £49.1m (H1 2022: £42.9m). Cash and cash equivalents stood at £8.4m (H1 2022: £6.4m). Approximately £2.4m of the Group's £60.0m Revolving Credit Facility was undrawn, with an additional £25m accordion option available to the Group, subject to covenant compliance.

On entering the current facility agreement with Santander and Bank of Ireland in October 2019, the Group had an option to extend the term of the facility from October 2023 to October 2024. The Group exercised that option in September 2021, taking the term of the existing facility to October 2024.

In March 2023, the Group agreed with its lenders a resetting of the adjusted leverage covenant for quarters ending 31 March 2023 through to 30 June 2024, increasing the headroom available to the Group from a covenant perspective through a period in which the Group expects to make material contingent consideration payments, while facilitating the acceleration of growth within the Optimisation Services division.

Summary

The strategic and financial initiatives delivered in the year have ensured that the Group is is in a strong position to implement our strategic growth plan effectively, whilst managing the additional risks created by the continued market volatility. The strong performance in the Group's revenues, and adjusted EBITDA, in a challenging environment coupled with a strengthened platform capable of generating enhanced long-term growth leaves Inspired better placed than ever           to achieve its long-term financial goals.

Paul Connor

Chief Financial Officer

10 September 2023

Group Statement of Comprehensive Income

For the six months ended 30 June 2023

		Six months ended 30 June 2023 (unaudited) £000		Six months ended 30 June 2022 (unaudited) £000		Year ended 31 December 2022 (audited) £000
Revenue		44,634		40,448		88,776
Cost of sales		(13,648)		(13,635)		(31,070)
Gross profit		30,986		26,813		57,706
Administrative expenses		(28,755)		(23,184)		(58,524)
Operating profit/(loss)		2,231		3,629		(818)
Analysed as:
Earnings before exceptional costs, depreciation, amortisation and share-based payment costs		10,568		9,672		21,000
Fees associated with acquisition		(8)		(144)		(523)
Restructuring costs		(451)		(615)		(1,574)
Change in fair value of contingent consideration		(3,764)		(943)		(10,936)
Depreciation, impairment and loss on disposal of property, plant and equipment		(839)		(936)		(1,827)
Amortisation of acquired intangible assets		(1,178)		(1,359)		(2,687)
Amortisation of internally generated intangible assets		(1,576)		(1,331)		(2,539)
Share-based payment costs		(521)		(715)		(1,732)
		2,231		3,629		(818)
Finance expenditure	3	(2,058)		(1,211)		(3,148)
Other financial items		17		11		9
Profit/(loss) before income tax		190		2,429		(3,957)
Income tax (expense)/credit		(858)		(510)		329
(Loss)/profit for the period		(668)		1,919		(3,628)
Attributable to:
Equity owners of the company		(668)		1,919		(3,628)
Other comprehensive income:
Exchange differences on translation of foreign operations		(120)		354		119
Movement in deferred tax asset as a result of change in fair value of share options		-		-		(1,323)
Total other comprehensive (expense)/income for the year		(120)		354		(1,204)
Total comprehensive (expense)/income for the year		(788)		2,273		(4,832)
Attributable to:
Equity owners of the company		(788)		2,273		(4,832)
	Note
Diluted earnings/(loss) per share attributable to the equity holders of the Company (pence)	4	(0.75)		1.84		(3.47)
Adjusted diluted earnings per share attributable to the equity holders of the Company (pence)	4	4.84		5.47		13.06

Group Statement of Financial Position

At 30 June 2023

	Note	Six months ended 30 June 2023 (unaudited) £000		Six months ended 30 June 2022 (unaudited) £000		Year ended 31 December 2022 (audited) £000
ASSETS
Non-current assets
Investments		1,830		1,137		1,737
Goodwill	7	76,901		76,895		76,960
Other intangible assets	7	17,972		18,247		17,716
Property, plant and equipment	5	3,079		2,743		3,216
Right of use assets	6	1,509		1,875		1,428
		101,291		100,897		101,057
Current assets
Trade and other receivables	8	44,837		36,424		37,520
Deferred contingent consideration	8	1,002		4,208		1,077
Inventories		668		370		211
Cash and cash equivalents		8,416		6,410		12,270
		54,923		47,412		51,078
Total assets		156,214		148,309		152,135
LIABILITIES
Current liabilities
Trade and other payables	9	17,996		10,888		17,079
Lease liabilities		439		834		869
Current tax liability		3,835		2,560		3,091
Contingent consideration		11,273		9,998		13,056
		33,543		24,280		34,095
Non-current liabilities
Bank borrowings		57,520		49,346		49,462
Lease liabilities		940		1,049		552
Contingent consideration		-		2,523		5,699
Deferred tax liability		838		1,522		1,282
Interest rate swap		-		14		17
		59,298		54,454		57,012
Total liabilities		92,841		78,734		91,107
Net assets		63,373		69,575		61,028
EQUITY
Share capital		1,256		1,219		1,220
Share premium account		63,498		60,930		60,930
Merger relief reserve		20,995		20,995		20,995
Retained earnings		(19,115)		(9,117)		(18,447)
Share based payments reserves		8,632		7,094		8,111
Investment on own shares		(28)		(36)		(36)
Translation reserve		(482)		(127)		(362)
Reverse acquisition reserve		(11,383)		(11,383)		(11,383)
Total equity		63,373		69,575		61,028

Group Statement of Cash Flows

For the six months ended 30 June 2023

		Six months ended 30 June 2023 (unaudited) £000		Six months ended 30 June 2022 (unaudited) £000		Year ended 31 December 2022 (audited) £000
Cash flows from operating activities
Profit/(loss) before income tax		190		2,429		(3,957)
Adjustments
Depreciation and impairment		839		936		1,827
Amortisation and impairment		2,754		2,690		5,226
Share based payment costs		521		715		1,732
Finance expenditure		2,041		1,200		3,139
Exchange rate variances		(133)		(449)		151
Change in fair value of contingent consideration		3,764		943		10,936
Cash flows before changes in working capital		9,976		8,464		19,054
Movement in working capital (Increase)/decrease in inventories		(457)		(71)		88
Increase in trade and other receivables		(7,490)		(2,179)		(3,995)
Increase/(decrease) in trade and other payables		916		(1,207)		4,602
Cash generated from operations		2,945		5,007		19,749
Income taxes paid		(460)		(215)		(421)
Net cash flows from operating activities		2,485		4,792		19,328
Cash flows from investing activities
Purchase of property, plant and equipment		(242)		(646)		(1,137)
Payments to acquire intangible assets		(3,001)		(2,742)		(4,651)
Contingent consideration paid		(8,646)		(10,174)		(10,790)
Contingent consideration received		-		320		-
Repayment of working capital facility to discontinued operation		250		125		375
Disposal of investments		-		324		324
Acquisition of subsidiary, net of cash		(93)		(633)		(1,233)
Net cash flows from investing activities		(11,732)		(13,426)		(17,112)
Cash flows from financing activities
New bank loans		8,000		3,500		3,500
Interest paid on financing activities		(2,000)		(907)		(3,032)
Repayment of lease liabilities		(589)		(546)		(1,048)
Proceeds from issue of new shares		4		7		8
Dividends paid		-		-		(2,460)
Net cash flows from financing activities		5,415		2,054		(3,032)
Net decrease in cash and cash equivalents		(3,832)		(6,580)		(816)
Cash and cash equivalents brought forward		12,270		12,944		12,994
Exchange differences on cash and cash equivalents		(22)		46		92
Cash and cash equivalents carried forward		8,416		6,410		12,270

Group Statement of Changes in Equity

For the six months ended 30 June 2023

	Share capital £000		Share premium account £000		Merger relief reserve £000		Share-based payment reserve £000		Retained earnings £000		Investment in own shares £000		Translation reserve £000		Reverse acquisition reserve £000		Total shareholders' equity £000
Balance at 1 January 2022	1,219		60,923		20,995		6,319		(11,036)		(36)		(481)		(11,383)		66,580
Loss for the year	-		-		-		-		(3,628)		-		-		-		(3,628)
Other comprehensive income	-		-		-		-		(1,323)		-		119		-		(1,204)
Total comprehensive income/(expense) for the year	-		-		-		-		(4,951)		-		119		-		(4,832)
Share-based payment cost	-		-		-		1,732		-		-		-		-		1,732
Shares issued (12 April 2022)	-		7		-		-		-		-		-		-		7
Shares issued (7 December 2022)	1		-		-		-		-		-		-		-		1
Dividends paid	-		-		-		-		(2,460)		-		-		-		(2,460)
Total transactions with owners	1		7		-		1,732		(7,411)		-		119		-		(5,552)
Balance at 31 December 2022	1,220		60,930		20,995		8,111		(18,447)		(36)		(362)		(11,383)		61,028
Profit for the period	-		-		-		-		(668)		-		-		-		(668)
Other comprehensive expense	-		-		-		-		-		-		(120)		-		(120)
Total comprehensive income/(expense) for the period	-		-		-		-		(668)		-		(120)		-		(788)
Share-based payment cost	-		-		-		521		-		-		-		-		521
Shares issues (5 May 2023)	3		-		-		-		-		-		-		-		3
Shares issued (25 May 2023)	32		2,568		-		-		-		-		-		-		2,600
Shares issued (21 June 2023)	1		-		-		-		-		-		-		-		1
Shares transferred	-		-		-		-		-		8		-		-		8
Total transactions with owners	36		2,568		-		521		(668)		8		(120)		-		2,345
Balance at 30 June 2023	1,256		63,498		20,995		8,632		(19,115)		(28)		(482)		(11,383)		63,373

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 2023. 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 2022. The accounting policies in this announcement are consistent with those set out in the annual report for the year ended 31 December 2022.

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. The Group reports under four reporting segments, namely Assurance, Optimisation, Software and ESG.

		Six months ended 30 June 2023							Six months ended 30 June 2022
		Assurance £000	Optimisation £000	Software £000	ESG £000	PLC £000	Total £000			Assurance £000	Optimisation £000	Software £000	ESG £000	PLC £000	Total £000
	Revenue	18,343	22,372	1,507	2,412	-	44,634			18,378	19,619	1,233	1,218	-	40,448
	Cost of sales	(1,233)	(11,991)	(56)	(368)	-	(13,648)			(1,555)	(11,964)	(51)	(65)	-	(13,635)
	Gross profit	17,110	10,381	1,451	2,044	-	30,986			16,823	7,655	1,182	1,153	-	26,813
	Overheads	(9,566)	(5,234)	(397)	(2,085)	(7,880)	(25,162)			(8,852)	(4,590)	(270)	(1,080)	(4,766)	(19,558)
	EBITDA	7,544	5,147	1,054	(41)	(7,880)	5,824			7,971	3,065	912	73	(4,766)	7,255
	Analysed as:
	Adjusted EBITDA	7,670	5,148	1,054	(41)	(3,263)	10,568			8,337	3,069	912	73	(2,719)	9,672
	Share-based payments	-	-	-	-	(521)	(521)			-	-	-	-	(715)	(715)
	Exceptional costs	(126)	(1)	-	-	(4,096)	(4,223)			(366)	(4)	-	-	(1,332)	(1,702)
		7,544	5,147	1,054	(41)	(7,880)	5,824			7,971	3,065	912	73	(4,766)	7,255
	Depreciation						(839)								(936)
	Amortisation						(2,754)								(2,690)
	Finance expenditure						(2,058)								(1,211)
	Other financial items						17								11
	Profit before income tax						190								2,429

3.     Finance Expenditure

	Six months ended 30 June 2023 (unaudited) £000		Six months ended 30 June 2022 (unaudited) £000		Year ended 31 December 2022 (audited) £000
Interest payable on bank borrowings	1,930		822		2,268
Interest payable on lease liabilities	41		45		83
Foreign exchange variance	6		263		508
Other interest	23		9		20
Loan facility fees	-		14		153
Amortisation of debt issue costs	58		58		116
	2,058		1,211		3,148

4.     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 2023 (unaudited) £000		Six months ended 30 June 2022 (unaudited - restated) £000		Year ended 31 December 2022 (audited - restated) £000
(Loss)/profit attributable to equity holders of the Group	(788)		1,919		(3,628)
Amortisation of acquired intangible assets	1,178		1,359		2,687
Deferred tax in respect of amortisation of intangible assets	(294)		(258)		(673)
Changes in fair value of contingent consideration	3,764		943		10,936
Foreign exchange variation	126		263		508
Fees associated with acquisition	8		144		523
Share-based payments costs	521		715		1,732
Restructuring costs	451		615		1,574
Exceptional finance costs	120		-		-
Adjusted profit attributable to equity holders of the Group	5,086		5,700		13,659
Weighted average number of ordinary shares in issue (000)	98,277		97,497		97,507
Dilutive effect of share options (000)	6,749		6,706		7,100
Diluted weighted average number of ordinary shares in issue (000)	105,026		104,203		104,607
Basic earnings/(loss) per share (pence)	(0.80)		1.97		(3.72)
Diluted earnings/(loss) per share (pence)	(0.75)		1.84		(3.47)
Adjusted basic earnings per share (pence)	5.18		5.85		14.01
Adjusted diluted earnings per share (pence)	4.84		5.47		13.06

All per share figures have been adjusted to reflect the 10:1 share consolidation undertaken on 3 July 2023.

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 2023 (unaudited) £000		Six months ended 30 June 2022 (unaudited) £000		Year ended 31 December 2022 (audited) £000
Profit/(loss) before tax	190		2,429		(3,957)
Share-based payments costs	521		715		1,732
Amortisation of acquired intangible assets	1,178		1,359		2,687
Foreign exchange variation	6		263		508
Exceptional costs:
Fees associated with acquisition	8		144		523
Restructuring costs	451		615		1,574
Exceptional finance costs	120		-		-
Change in fair value of contingent consideration	3,764		943		10,936
Adjusted profit before tax	6,238		6,468		14,003

Acquisitional activity can significantly distort underlying financial performance from IFRS measures and therefore the Board deems it appropriate to report adjusted metrics as well as IFRS measures for the benefit of primary users of the Group financial statements.

5.     Property, plant and equipment

	Fixtures and fittings £000		Motor vehicles £000		Computer equipment £000		Leasehold improvements £000		Office equipment £000		Total £000
Cost
As at 1 January 2022	720		107		3,004		806		-		4,637
Transfer between classes	(368)		42		92		386		415		567
Foreign exchange variances	5		-		4		-		-		9
Additions	8		32		1,094		-		3		1,137
Disposals	(30)		(66)		(60)		-		-		(156)
At 31 December 2022	335		115		4,134		1,192		418		6,194
Foreign exchange variances	(2)		(2)		(2)		-		(1)		(7)
Additions	-		-		240		-		-		240
Disposals	-		(37)		-		-		-		(37)
At 30 June 2023	333		76		4,372		1,192		417		6,390
Depreciation
As at 1 January 2022	664		38		1,042		326		-		2,185
Transfer between classes	(450)		38		281		70		293		232
Foreign exchange variances	3		-		4		-		(33)		(26)
Charge for the year	37		22		496		123		56		734
Disposals	(30)		(3)		(60)		(29)		(25)		(147)
At 31 December 2022	224		95		1,763		605		291		2,978
Charge for the period	14		5		236		61		49		365
Foreign exchange variance	(2)		(2)		(3)		-		-		(7)
Disposals	-		(25)		-		-		-		(25)
At 30 June 2023	236		73		1,996		666		340		3,311
Net Book Value
At 30 June 2023	97		3		2,376		526		77		3,079
At 31 December 2022	111		20		2,371		587		127		3,216

6.     Right of use assets

	Fixtures and fittings £000		Motor   vehicles £000		Property £000		Intangibles £000		Total £000
Cost
As at 1 January 2022	623		353		3,689		-		4,665
Transfer between classes	-		(14)		(277)		-		(291)
Foreign exchange variances	-		1		(5)		-		(4)
Additions	-		86		360		301		747
Disposals	(368)		(5)		(433)		-		(806)
At 31 December 2022	255		421		3,334		301		4,311
Additions	115		20		403		-		538
Foreign exchange variances	-		-		16		-		16
Disposals	-		(232)		(53)		-		(285)
At 30 June 2023	370		209		3,700		301		4,580
Depreciation
As at 1 January 2022	282		146		1,944		-		2,372
Transfer between classes	-		19		25		-		44
Foreign exchange variances	-		(2)		14		-		12
Charge for the year	87		169		742		50		1,048
Disposals	(211)		(22)		(473)		-		(706)
At 31 December 2022	158		310		2,252		50		2,770
Charge for the period	51		62		311		50		474
Disposals	-		(232)		(54)		-		(286)
At 30 June 2023	209		140		2,509		100		2,958
Impairment
As at 1 January 2022	-		-		113		-		113
Impairment for the year	-		-		-		-		-
At 31 December 2022	-		-		113		-		113
Impairment for the period	-		-		-		-		-
At 30 June 2023	-		-		113		-		113
Net Book Value
At 30 June 2023	161		69		1,078		201		1,509
At 31 December 2022	97		111		969		251		1,428

7.     Intangible assets and goodwill

	Computer software £000		Trade name        £000		Customer contracts £000		Customer relationships £000		Total other intangibles £000		Goodwill £000		Total £000
Cost
At 1 January 2022	21,317		160		21,575		7,511		50,563		76,111		126,674
Additions	4,651		-		-		-		4,651		-		4,651
Acquisitions through business combinations	-		-		-		-		-		730		730
Foreign exchange variances	-		-		-		-		-		119		119
At 31 December 2022	25,968		160		21,575		7,511		55,214		76,960		132,174
Additions	3,002		-		-		-		3,002		-		3,002
Foreign exchange variance	1		-		(247)		-		(246)		(59)		(305)
At 30 June 2023	28,971		160		21,328		7,511		57,970		76,901		134,871
Amortisation
As at 1 January 2022	11,399		37		16,796		4,040		32,272		-		32,272
Charge for the year	2,920		8		1,531		767		5,226		-		5,226
At 31 December 2022	14,319		45		18,327		4,807		37,498		-		37,498
Foreign exchange variance	-		-		(254)		-		(254)		-		(254)
Charge for the period	1,659		4		714		377		2,754		-		2,754
At 30 June 2023	15,978		49		18,787		5,184		39,998		-		39,998
Net Book Value
At 30 June 2023	12,993		111		2,541		2,327		17,972		76,901		94,873
At 31 December 2022	11,649		115		3,248		2,704		17,716		79,960		94,676

Computer software is a combination of assets internally generated and assets acquired through business combinations. Amortisation charged in the period to 30 June 2023 associated with computer software acquired through business combinations is £83,000.  The additional £1,576,000 charged in the period relates to the amortisation of internally generated computer software.

8. Trade and other receivables

	30 June 2023	30 June 2022	31 December 2022
	£000	£000	£000
Trade receivables	18,695	16,351	12,298
Other receivables	900	1,338	1,078
Deferred contingent consideration	1,002	4,208	1,077
Prepayments	6,990	4,265	5,524
Accrued income	18,252	14,470	18,620
	45,839	40,632	38,597

9. Trade and other payables

	30 June 2023	30 June 2022	31 December 2022
	£000	£000	£000
Trade payables	5,240	4,587	5,952
Social security and other taxes	4,514	2,918	5,117
Accruals	2,463	2,303	3,141
Deferred income	4,912	526	1,861
Other payables	867	554	1,008
	17,996	10,888	17.079

 

10.     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