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RNS
Utilitywise plc  -  UTW   

Interim Results

Released 07:00 04-Apr-2017

RNS Number : 4451B
Utilitywise plc
04 April 2017
 

4 April 2017

Utilitywise plc

("Utilitywise", the "Company" or the "Group")

 

Interim Results

for the six months ended 31 January 2017

 

Utilitywise, a leading independent utility cost management consultancy, is pleased to announce its financial results for the six months ended 31 January 2017.

 

Financial highlights

 

 

H1 2017

H1 2016

Change

Revenue

£46.1m

£41.6m

11%

Adjusted EBITDA1

£9.7m

£9.7m

-

Adjusted profit before tax2

£9.4m

£9.1m5

4%

Adjusted fully diluted earnings per share3

9.6p

9.6p5

-

Interim dividend per share

2.3p

2.2p

5%

Closing net debt

£9.6m

£16.8m (*)5

(43)%

(*) Closing net debt impacted by prior period adjustments (see 'Financial performance')

 

Operational highlights

·     Strong performance from Enterprise division:

Revenue added to order book4 during the period increased by 24% to £50.2m (H1 2016: £40.4m), from increase in Energy consultants headcount 6% to 661 (H1 2016: 625)

Future secured revenue increased 13% to £28.0m (H1 2016: £24.7m)

·     Investment in 'smart' building energy management technology and services to drive future growth in Corporate division

·     Total group customers increased by 17% to 40,855 (H1 2016: 35,064)

·     Customer advocacy remains high with Net Promoter Score of 59 (FY16: 58)

 

Post period end

·     Geoff Thompson becomes Non-executive Chairman

·     Appointment of Kathie Child-Villiers to the Board as non-executive director

·     Announcement of refreshed Strategy for Growth

Commitment to continue to pursue best possible terms with suppliers for procurement price competitiveness

·     De-regulation of water market in England

 

Brendan Flattery, Chief Executive Officer, commented:

 

"The Group has continued its sustained progression in the period, whilst investing and preparing the Group for its next phase of growth. With an extensive portfolio of services in place and a focus on providing a great customer experience, Utilitywise has a strong platform for continued growth.

 

There continues to be an increasing opportunity for us on both sides of the meter - from providing independent advice on tariffs and helping customers get a better deal on their energy procurement, to providing technology that helps them monitor and reduce energy consumption as well as ensuring compliance and saving money. 

 

In order to further strengthen the Group's commercial prospects, the Board has taken the strategic decision to discontinue the practice of taking cash advances from suppliers, as well as increasing the transparency of the balance sheet through a number of prior period restatements and the non-cash impairment of our investment in t-Mac.  The decision to discontinue cash advances from suppliers and the prior period adjustments will have a one-off impact on net debt but puts the Group in a stronger position to achieve its future growth ambitions.

 

Against this market backdrop, the Group's refreshed strategy is aimed at growing customer numbers, cross and upselling its increasing suite of products to those customers, and increasing recurring revenues as a percentage of Group revenues.  There are ambitious KPIs in place and the Group is focused on delivery of those.

 

With clarity of strategy, ambition and focus, Utilitywise enters the period ahead with confidence and looks forward to full year trading in line with expectations and driving longer-term shareholder value."

 

1 EBITDA means earnings before interest, taxation, depreciation and amortisation and adjusted EBITDA is stated before exceptional income and costs and non-cash accounting charges for share based payments, as set out in the financial review

2 Adjusted profit before tax is stated before exceptional income and costs, non-cash accounting charges for share based payments and amortisation of intangible assets acquired through business combinations, as set out in the financial review

3 Adjusted earnings per share is stated before exceptional income and costs, non-cash accounting charges for share based payments and amortisation of intangible assets acquired through business combinations and the tax impact of those items, as set out in Note 6

4  Order book means total value of closed transactions in the period, which may either be included within revenue in the period or is included within future secured revenue

5  Restated, as set out in the financial review and in Note 10.

 

There will be a meeting for analysts at 9.30am today at the offices finnCap, 60 New Broad Street, London EC2M 1JJ. To register to attend, please contact Redleaf Communications at utilitywise@redleafpr.com or 020 7382 4730.

For further information please contact:

 

Utilitywise plc

0330 303 0233

Brendan Flattery (CEO)

 

Richard Laker (CFO)

 

 

 

finnCap (NOMAD and broker)

020 7220 0500

Matt Goode/Henrik Persson (Corporate Finance)

 

Simon Johnson (Corporate Broking)

 

Liberum (Joint broker)

 

 

020 3100 2000

Robert Morton/Steve Pearce

 

 

Redleaf Communications

020 7382 4730

Rebecca Sanders-Hewett/David Ison/Susie Hudson

 

 

About Utilitywise

Utilitywise is a leading independent utility cost management consultancy, which has established trading relationships with a number of major UK and European energy suppliers and provides services to its customers designed to assist them in achieving better value out of their energy contracts, reduced energy consumption and lower carbon footprint. Utilitywise is a UK company quoted on the AIM market of the London Stock Exchange. For more information, please visit www.utilitywise.com.

 

 

 

Strategy

 

On 2 March 2017, the Group announced its Strategy for Growth, with a target to continue the growth journey of the Group. The key priorities of that refreshed strategy are as follows:

 

Winning in the market:               

Grow the Group's customer base by expanding its service proposition, developing established and new sales channels such as digital to meet changing customer preferences, and continuing to pursue the best possible terms for customers;

 

Customers for life:

Build on the high levels of customer satisfaction and retention rates through cross and upselling new products and services into our expanding customer base. 70% of Utilitywise customers want a "one-stop shop" that can help manage all utilities;

 

Revolutionise markets:

Develop and employ the use of disruptive technology platforms such as WiseLife to help customers save money by reducing energy consumption at the point of use;

 

Colleagues:

Make Utilitywise a great place to work with opportunity for career progression;

 

One Utilitywise:              

Bring the different parts of the business closer together under a single vision, strategy, set of values and brand.

 

Accordingly, the Group has set itself some challenging targets, to be delivered by the end of the financial year ending 31 July 2021, namely:

 

·     Increasing its share of the SME and micro SME energy procurement market, by customer number, from 2% to 7%;

·     Increasing UK SME customers to c. 130,000; and

·     Developing a 5% share of the £1.5bn UK corporate energy controls market.

 

To this end, the Group intends to gradually introduce new ways of measuring success as the revenue mix evolves over time.

 

Once progress has been made in implementing the refreshed strategy in the UK, the Group intends to roll it out across certain international markets.   

 

 

 

Market

 

The needs of customers in the Utilities market are growing and diversifying and Utilitywise is well-positioned to capitalise on an increasingly significant opportunity.

 

Research by Ofgem6 indicates that 16% of businesses in the UK currently use third-party intermediaries to get a better deal on their energy. Approximately 12% of those businesses are current Utilitywise customers, so despite being the market leader, there remains a clear opportunity for increased penetration.

 

The same research also indicates that 47% of businesses in the UK switch supplier direct and 37% have never switched. The latter represents c.700,000 businesses and Group estimates, based upon previous BEIS7 research in respect of residential customers, suggest that savings of up to £500 per non-domestic customer are achievable, representing annual savings in excess of c.£300m by seeking an improved deal. Engaging with this combined 84% of UK businesses represents a substantial long-term opportunity for the Group.

 

For many businesses, energy is one of the top three costs alongside people and property. Whilst getting the best price remains the most obvious way for them to save, a backdrop of rising utility and operating costs, growing awareness of the importance of sustainability, and increasingly stringent legislation means that more and more businesses are turning to technology to help them reduce consumption.

 

With the emergence of the Internet of Things ("IoT") and "smart" buildings, by connecting once-disparate, energy-expending systems and devices together and enabling them to interact with one another, businesses can access a level of monitoring, insight and control over their energy consumption that wasn't previously possible. With high barriers to entry, as the largest business energy consultant in the UK, Utilitywise is uniquely placed to take advantage of this growing opportunity. To this end, the Group has invested heavily in its technological capabilities in the past twelve months. Research from BEIS7 shows that the aggregate UK SME annual spend on energy is c. £20bn, giving a savings opportunity of £2bn if energy wastage was improved by 10%.

 

At the same time, by providing businesses with a straight-forward and compelling way to create savings, the imminent deregulation of the water market presents Utilitywise with new engagement and revenue opportunities.

 

 

6  Office of Gas and Electricity Markets

7 Department for Business, Energy and Industrial Strategy

 

 

 

Operating review

 

Group performance

 

The Group delivered a strong performance in the six months ended 31 January 2017. The overall financial results for the Group showed:

 

·     An increase in Group revenue of 11% to £46.1m (H1 2016: £41.6m);

·     No change in adjusted EBITDA1 at £9.7m (H1 2016: £9.7m);

·     An increase in adjusted profit before tax2 of 4% to £9.4m (H1 2016: £9.1m - as restated);

·     Adjusted fully diluted earnings per share3 unchanged 9.6p (H1 2016: 9.6p - as restated);

·     Closing net debt of £9.6m (H1 2016: £16.8m - as restated).

 

These results were underpinned by a number of achievements, including:

 

·     Growth in total customer numbers of 17% to 40,855 (H1 2016: 35,064)

·     Growth in closing order book of Enterprise division of 13% to £28.0m (H1 2016: £24.7m), representing secured future revenue of the Group

·     An improvement in efficiency from the Group's team of Energy Consultants, with an increase in Gross Enterprise order book additions of 24%, to £50.2m (H1 2016: £40.4m) from an increase in closing headcount of 6% to 661 Energy Consultants (H1 2016: 625);

·     Energy Consultant attrition reduced to 25% (H1 2016: 39%)

·     An increase in the use of WiseLife and SmartDash digital offerings; and

·     A further increase in net promoter score from 58 to 59, reinforcing the Group's position as a trusted advisor to customers.

 

The Board has proposed an interim dividend of 2.3p per share, a 5% increase compared to the same period last year (H1 2016: 2.2p), reflecting its confidence in the prospects of the business.

 

Divisional performance

 

During the period, the Group operated from two principal divisions. The performance of both divisions is reported separately.  All references to Adjusted EBITDA below refer to Earnings before interest, taxation, depreciation and amortisation (EBITDA), stated before exceptional income and costs and non-cash accounting charges for share based payments. Divisional revenues are stated before the elimination of intersegment revenue.

 

Enterprise division

 

The Enterprise division is the core division of the Group (representing 83% of Group revenue, before intercompany trading). It focuses on small, medium and multi-site organisations and maintains well-established trading relationships with a number of major utility suppliers to provide services to customers, which are designed to assist those customers in achieving better value from their utility contracts. Utilitywise negotiates rates with suppliers on behalf of business customers and provides an account care service where account managers help customers execute a Utility Management Plan to manage their utility contracts more efficiently, as well as aiming to reduce waste and lowering their carbon footprint.

 

The total number of Enterprise customers increased in the UK and Ireland by 13% to 31,978 and in Europe by 32% to 7,360, equating to an overall Enterprise Division increase of 16% to 39,338.

 

Revenue in the division grew 20% to £39.1m (H1 2016: £32.6m), of which the UK business grew by 18% to £34.5m (H1 2016: £29.2m). Telesales activities contributed 72% of the Enterprise UK revenue (H1 2016: 65%). The UK business delivered a growth of 13% in Adjusted EBITDA to £9.1m (H1 2016: £8.0m).

 

The European business also performed well during the period with revenue increasing by 37% to £4.6m (H1 2016: £3.4m) and Adjusted EBITDA increasing to £0.4m (H1 2016: £nil). The Adjusted EBITDA margin for the Enterprise division as a whole was 24.2% (H1 2016: 24.6%), with the UK margin of 26.3% (H1 2016: 27.5%) reflecting the investments in people and marketing, to position the business for further revenue growth.

 

Enterprise revenue added to order book increased by 24% to £50.2m (H1 2016: £40.4m) in the period. This was from an increase in Energy Consultant headcount of only 6% as at 31 January 2017, compared to the same position in the prior year, demonstrating progress in increasing the efficiency of the division, in line with the aim of the business to move away from a direct correlation between headcount numbers and revenue volumes, upon which an element of the Group's growth had been based in previous years.

 

Notwithstanding this increased efficiency, significant progress has been made with staff attrition issues in this area, both in terms of retention of staff and in investments in both new and existing colleagues to improve the overall quality of the operation. As such, Energy Consultant staff turnover was 25% compared to 39% in the same period last year.

 

The Enterprise division derives the majority of its revenue from the placement of customers with new energy suppliers ("Acquisition Contracts") and a minority of its revenue from the renewal of contracts of customers with their existing suppliers ("Same Supplier Renewals"). The mix of this revenue is a function of the pricing offered by the energy suppliers for varying lengths of contracts and hence it is often in our customers' best interest to take advantage of attractive pricing of longer dated energy contracts via either Acquisition Contracts or Same Supplier Renewals. The billing of the majority of commissions for the delivery of Acquisition Contracts typically takes place between one and 12 months after the placement of the contract. As previously announced, the Group successfully negotiated terms with certain suppliers to accelerate cash payment terms in respect of Same Supplier Renewals. Whilst this renegotiation has accelerated a proportion of those terms, on average Same Supplier Renewals typically have longer dated billing profiles than Acquisition Contracts, dependent upon the mix of Same Supplier Renewal business placed across the range of energy partners that the Group deals with. Same supplier renewals made up 23% of the Enterprise division total revenue in the current period (H1 2016: 22%). This has contributed to the net increase in the accrued revenue in the Group's balance sheet, which was £46.1m as at 31 January 2017 (H1 2016: £39.5m), carried net of appropriate provisions for recoverability and discounting for the time value of money.

 

The Group has historically obtained significant cash advances from certain major utility suppliers, paid against future contracts delivered by the Group for those suppliers. In the year ended 31 July 2016, those cash advances totalled £10.4m, inclusive of VAT. As noted in the Strategy section above, the Group intends to significantly grow its number of customers between 2017 and 2021. In order to deliver that volume growth, the Group must be committed to delivering the most competitive and transparent prices for its customers. It is, therefore, essential that the Group continues to maintain commercial independence from its major utility partners as it delivers upon its strategy. Accordingly, the Board has determined that it is in the best commercial interests of the Group to discontinue the practice of seeking significant cash advances in this manner.

 

This means that the Group will not seek previously planned cash advances totalling £9.2m during the second half of FY17 and, as a result of its commitment, will also repay a further £4.5m as the assumed volume of contracts delivered by the Group for certain suppliers will not be met. These amounts, along with associated VAT, will together lead to a one-off impact upon the Group's cash flow during the second half of FY17 of £16.4m with a resultant increase in the closing net debt of the Group at 31 July 2017 compared to the previously forecast position.

 

Whilst the decision to discontinue the practice of seeking cash advances was taken to increase the commercial opportunities open to the Group through continuing to provide customers with the most competitive and transparent prices, it is expected that this will also result in a closer correlation between the Group's profits and operating cash flow, in future periods.

 

Corporate division

 

The Corporate division consists of a comprehensive portfolio of products and services designed to assist larger companies with more complex energy needs in managing their energy consumption. 

 

The Corporate offering includes energy procurement ("Corporate Procurement") but there is a much greater emphasis on additional services designed to give customers enhanced control over their energy consumption ("Energy Services"). Through the use of Utilitywise IoT-enabled hardware, developed by its technology partner, Dell, and cloud-based software technology platforms such as SmartDash and WiseLife, corporates are able to connect and monitor the energy consumption of all operational systems in their building, access detailed insight into where energy wastage is taking place, and make the necessary corrections using a dashboard on a computer or mobile phone.

 

Entering the second half of FY2017, Utilitywise now offers an intelligent platform that can provide customers with a single gateway and control over every operational system within their building, regardless of what devices they comprise. The solution is already producing results for customers. Two major high street retailers, for example, have been able to reduce their energy consumption by 15% and 23% respectively as a result of the solution provided by Utilitywise. In addition, by connecting previously disparate systems, Utilitywise has saved those customers money by removing the need for several software licences. For both, the payback period was less than 12 months. Going forward, the Group's investment in technology will provide it with a growing channel through which to engage with new customers, build long-term relationships and cross-sell its services. Although formative relative to the core procurement offering, the Board anticipates Energy Services becoming progressively more important to the business in the coming years.

 

The revenue of the Corporate division (17% of Group revenues, before intercompany eliminations) fell by 19% to £7.8m, compared to the same period in the prior year (H1 2016: £9.5m). This was primarily due to the Energy Services element of the division, which saw a fall in revenue of 30% to £3.6m (H1 2016: £5.1m). This was due to delays in the rollout of technology across certain customer retail sites, as well as the prior year having the benefit of £0.6m of revenue from the ESOS (Energy Savings Opportunity Scheme), which did not recur in the current period. The Corporate Procurement element of this division saw revenue fall by 2% to £4.2m (H1 2016: £4.3m).

 

Following the noted revenue delays and ESOS non-recurrence, the Adjusted EBITDA of the division fell by 87% to £0.2m (H1 2016: £1.7m), with Energy Services Adjusted EBITDA falling from £0.6m to a negative EBITDA of £0.9m and Corporate Procurement Adjusted EBITDA remaining flat at £1.1m (H1 2016: £1.1m). The reduction in EBITDA was also impacted by investments to position the business for growth, which commenced in the second half of the previous financial year. The Corporate division delivered an Adjusted EBITDA in the current period £0.7m higher than the second half of last year (H2 2016: negative EBITDA £0.5m)

 

The near-term delays in certain revenues has caused the Group to recognise an impairment loss of £13.4m against its investment in t-Mac Technologies, which was acquired in 2015. That non-cash accounting loss has been recognised as an exceptional item within the Group's income statement in the current period. The number of utility meters using the Group's SmartDash technology platform increased by 119% to 11,811 compared to the same period last year and the number of customers using the WiseLife technology solution was 193 in the current period (H1 FY16: nil).

 

The Corporate division, including both the procurement and Energy Services elements, forms a key part of the Group's Strategy for Growth, as announced in March 2017.

 

Financial performance

 

Group overview

 

A summary of the Group's performance, on an adjusted basis excluding exceptional items, amortisation of intangible assets acquired in business combinations and share-based payment charges in the six months ended 31 January 2017, along with the change compared to the same period last year, is as follows:

 

£'m except where stated

2017

2016

Change %

Revenue

46.1

41.6

11%

Adjusted EBITDA (defined below)

9.7

9.7

-

Adjusted profit before tax

9.4

9.1 (*)

4%

Cash flow from operating activities

2.2

(0.4) (*)

650%

Diluted earnings per share

9.6p

9.6p (*)

-

 

(*) Restated, as set out in Note 10

 

Trading and EBITDA

 

During the six month period ended 31 January 2017, Group revenue increased by 11% over the corresponding period last year to £46.1m (H1 2016: £41.6m). Total Enterprise revenue added to the order book in the period totaled £50.2m (H1 2016: £40.4m) and the secured pipeline (gross secured future revenue) was £28.0m compared to £24.7m at 31 January 2016.

 

Adjusted Earnings before interest, taxation, depreciation and amortisation (EBITDA) is calculated as follows:

 

£'m except where stated

2017

2016

Change

(Loss)/profit before taxation

(6.0)

11.8 (*)

(17.8)

Exceptional items

14.4

(4.0)

18.4

Share option expense

0.1

0.3

(0.2)

Amortisation of intangible assets acquired through business combinations

0.9

1.0

(0.1)

Adjusted profit before taxation

9.4

9.1

0.3

Depreciation and other amortisation

0.4

0.4

-

Net finance (income)/expense

(0.1)

0.2 (*)

(0.3)

Adjusted EBITDA

9.7

9.7

-

 

 

 

 

EBITDA margin %

21%

23%

(2)%

 

(*) Restated, as set out in Note 10

 

The Group's EBITDA margin (as a percentage of revenue) has fallen to 21% (H1 2016: 23%), primarily as a result of the reduction in profit from the Corporate division, as explained in the Operating Review above.

Exceptional items

 

Exceptional charges in the period comprise a £13.4m impairment of goodwill and intangible assets in the t-Mac Technologies cash generating unit, as well as £1.2m of other charges relating to legal, restructuring and other items, along with a £0.2m credit in respect of an adjustment to a historic dilapidations provision.

 

Earnings per share

 

Diluted adjusted earnings per share, with Adjusted earnings stated before exceptional items, non-cash accounting charges for share-based payments and amortisation of intangible assets acquired in business combinations and the associated tax impact of these adjustments, remained at 9.6p (H1 2016: 9.6p - as restated).

 

Adjusted Earnings, stated on the same basis as above, increased 3% to £7.6m (H1 2016: £7.4m) and the weighted average number of shares in issue, on a diluted basis, increased by 4% from 76,131,000 to 79,019,000 shares.

 

Dividend

 

An interim dividend of 2.3p per share has been declared, an increase of 5% on the same period last year (H1 2016: 2.2p) and covered 4.2 times by Adjusted diluted EPS (H1 2016: 4.4 times).

 

The interim dividend is payable on 20 June 2017 to shareholders on the register at close of business on 19 May 2017, with an associated ex-dividend date of 18 May 2017.

 

Balance sheet

 

As at 31 January 2017, the Group had total net assets of £48.3m compared to £53.5m as at 31 January 2016, summarised as follows:

 

£'m

31 Jan 2017

31 Jan 2016

Change

Goodwill and intangible assets

20.4

35.1

(14.7)

Property, plant and equipment

5.4

5.7

(0.3)

Net accrued revenue(*)

46.1

39.5

6.6

Trade and other receivables (excluding accrued revenue)

7.7

9.6

(1.9)

Other net assets (excluding net debt)

(21.7)

(19.6)

(2.1)

Net debt

(9.6)

(16.8)

7.2

Net assets

48.3

53.5

(5.2)

 

(*) shown net of supplier advances, which are categorised within trade and other payables in the balance sheet

 

Net tangible assets, being net assets excluding goodwill and intangible assets, increased to £27.9m (31 January 2016: £18.4m).

 

Goodwill and intangible assets decreased primarily due to an impairment loss of £13.4m that has been recognised as at 31 January 2017, as explained above.

 

The increase in accrued revenue at 31 January 2017 was primarily due to the mix of revenue in the Enterprise division, between Acquisition Contracts and Same Supplier Renewals, as explained in the Operating Review above. All accrued revenue balances are carried in the balance sheet net of provisions for expected amounts that will ultimately not be billable by the Group, due to events outside the control of the Group that typically occur between the date of contracts being signed and those contracts concluding. The level of such provisions is based upon the long-term experience of the Group. The balances are further discounted for the time value of money, where those balances are longer dated. The ageing of the billable dates for the carried accrued revenue balance, stated net of provisions and discounts, is summarised as follows:

 

£'m

31 Jan 2017

31 Jan 2016

(restated)

31 July 2016

(restated)

Within 12 months of period end

               12.6

               12.1

                 5.8

Within 12 to 24  months of period end

                  5.4

                 8.3

                 7.0

Within 24 to 36 months of the period end

                  6.0

                 4.8

                 4.9

More than 36 months after the period end

               20.0

               12.4

              16.7

Enterprise UK net accrued revenue

               44.0

               37.6

              34.4

Enterprise Europe and Corporate division

                  2.1

                 1.9

                 2.1

Group net accrued revenue

               46.1

               39.5

              36.5

 

29% of the Enterprise UK net accrued revenue balance is billable within 12 months of the period end, compared to 17% at 31 July 2016 and 32% at 31 January 2016.  A further 26% is billable within the following two years (July 2016: 34%, January 2016: 35%) and 45% longer dated than that (July 2016: 49%, January 2016: 33%).

 

Cash flows and net debt

 

The cash flow of the Group is summarised as follows:

 

£'m

2017

2016

Change

Cash flow from operating activities before exceptional items

2.2

(0.4)

2.6

Operating cash flow from exceptional items

(0.9)

(0.3)

(0.6)

Cash flow from operating activities

1.3

(0.7)

2.0

Interest and corporate tax payments

(1.8)

(0.8)

(1.0)

Capital expenditure

(0.7)

(0.4)

(0.3)

Dividend payments

(3.3)

(2.5)

(0.8)

Receipts from issue of equity

0.5

0.9

(0.4)

Net cash flow

(4.0)

(3.5)

(0.5)

Opening net debt - without restatement

(0.2)

(6.7)

6.5

Restatement of opening net debt

(5.3) (#)

(6.4)

1.1

Non cash movement in net debt

(0.1)

(0.2)

0.1

Closing net debt

(9.6)

(16.8)

7.2

 

(#) See prior period adjustments below

 

The closing net debt, comprising total borrowings less cash and cash equivalents, was £9.6m (H1 2016: £16.8m as restated). The ratio of net debt to Adjusted annual EBITDA was 0.5 times (H1 2016: 0.9 times). 

 

Cash flow from operating activities was generated from underlying trading as follows:

 

£'m

2017

2016

Change

Adjusted EBITDA

9.7

9.7

-

Change in net accrued revenue

(9.6)

(8.0)

(1.6)

Other working capital movements

2.1

(2.1)

4.2

Cash flow from operating activities before exceptional items

2.2

(0.4)

2.6

 

As noted in the Operating review above, the Group has historically taken significant cash advances from certain major utility companies, paid against future contracts delivered to those suppliers. The impact of those cash advances, in previous financial years, negatively impacted the operating cash flow of the Group in the current period by £4.6m (H1 2016: £2.4m), such that that the operating cash flow would have been £6.7m during the period had the Group not taken the cash advances. This would represent 70% of Adjusted EBITDA in the period, rather than the 23% actually delivered by the Group.

 

The changes in accrued revenue are explained above, with their consequential impact on the operating cash flows of the Group in the period as set out in the above table. The cash outflow for dividends in the period relates to the final dividend in respect of the year ended 31 July 2016, which was paid to shareholders after the Annual General Meeting in December 2016.

 

Financing

 

The activities of the Group are substantially funded by a £25m revolving credit facility (RCF) with a single lender, Royal Bank of Scotland plc. The RCF facility matures in April 2019. As at 31 January 2017, the undrawn committed facilities of the Group were £20.9m, net of cash and cash equivalents.

 

Prior period adjustments

 

The Group has made prior period adjustments in respect of Own shares and Fixed-payment liabilities, as set out in Note 10. The adjustments are not considered to have a material impact on either the profit and loss account or the cash flow statement of the Group but do materially amend the net debt of the Group as follows:

 

£'m

31 Jan 2017

31 Jan 2016

31 Jul 2016

Net debt (without restatement)

4.1

10.2

0.2

Reclassification of liabilities from trade and other payables

4.7

5.3

4.0

Correction of loan balances

-

0.5

0.5

Reclassification of own shares out of cash

0.8

0.8

0.8

Net debt (as restated)

9.6

16.8

5.5

Net restatement

5.5

6.6

5.3

 

Principal risks and uncertainties

 

The Group is affected by certain risks, not wholly within its control. The principal risks and uncertainties facing the Group are not considered to have changed from those as set out in the Strategic report on pages 8 to 9 of the 2016 Annual Report and Accounts. Further detail regarding those risks and mitigation can be found in the 2016 Annual Report.

 

Related parties

 

During the period there have been no related party transactions that have had a material impact on the financial position or performance of the Group. There have been no significant changes to related party transactions disclosed in the annual report for the year ended 31 July 2016.

 

Board changes

 

On 1 October 2016, Brendan Flattery joined the Board as Chief Executive Officer, replacing Geoff Thompson who took up the position of Executive Chairman on the same date. Richard Feigen stepped down as non-executive Chairman on that date, remaining on the Board as a non-executive director.

 

On 1 November 2016, Simon Waugh joined the Board as a non-executive director.

 

On 1 January 2017, Richard Laker joined the Board as Chief Financial Officer, replacing Jon Kempster who stood down from the Board on 31 December 2016.

 

On 1 February 2017, Kathie Child-Villiers joined the Board as a non-executive director. Tom Maxfield stood down from the Board on the same date.

 

On 4 April 2017, Geoff Thompson will take up the position of Non-Executive Chairman.

 

Outlook

 

The Group has continued its sustained progression in the period, whilst investing and preparing the Group for its next phase of growth. With an extensive portfolio of services in place and a focus on providing a great customer experience, Utilitywise has a strong platform for continued growth. There continues to be an increasing opportunity for us on both sides of the meter - from providing independent advice on tariffs and helping customers get a better deal on their energy procurement, to providing technology that helps them monitor and reduce energy consumption as well as ensuring compliance and saving money. 

 

In order to further strengthen the Group's commercial prospects, the Board has taken the strategic decision to discontinue the practice of taking cash advances from suppliers, as well as increasing the transparency of the balance sheet through a number of prior period restatements and the non-cash impairment of our investment in t-Mac.  The decision to discontinue cash advances from suppliers and the prior period adjustments will have a one-off impact on net debt but puts the Group in  a stronger position to achieve its future growth ambitions.

 

Against this market backdrop, the Group's refreshed strategy is aimed at growing customer numbers, cross and upselling its increasing suite of products to those customers, and increasing recurring revenues as a percentage of Group revenues.  There are ambitious KPIs in place and the Group is focused on delivery of those.  With clarity of strategy, ambition and focus, Utilitywise enters the period ahead with confidence and looks forward to full year trading in line with expectations and driving longer-term shareholder value.

 

By order of the Board

 

 

 

BP Flattery

Chief Executive Officer

3 April 2017

 


 

INDEPENDENT REVIEW REPORT TO UTILITYWISE PLC

 

Introduction

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2017 which comprises the condensed consolidated statement of total comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

Directors' responsibilities

 

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2017 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

  

 

BDO LLP

Chartered Accountants and Registered Auditors

Leeds

United Kingdom

3 April 2017

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

 

 

Condensed consolidated statement of total comprehensive income

For the six months ended 31 January 2017

 

 

 

Six months ended

Six months ended

 

Year ended

 

 

 

31 January 2017

(Unaudited)

£'000

31 January 2016

(Restated)

£'000

31 July 2016

(Restated)

£'000

 

 

Note

 

 

 

 

Revenue

3

46,082

41,565

84,428

 

Cost of sales

 

(29,421)

(25,000)

(51,637)

 

Gross profit

 

16,661

16,565

32,791

 

Other operating income

 

423

5,963

6,233

 

Administrative expenses

 

(23,124)

(10,462)

(20,900)

 

(Loss)/profit from operations

 

(6,040)

12,066

18,124

 

 

 

 

 

 

 

 

Analysed as:

Earnings before exceptional costs, exceptional income, depreciation, amortisation and share-based payment charges

 

                9,693

 

  9,676

 

  18,268

 

 

Exceptional income (Note 4)

249

5,740

5,740

 

 

Exceptional charges (Note 4)

(14,609)

(1,686)

(2,548)

 

 

Depreciation

(340)

(393)

(757)

 

 

Amortisation of intangible assets

(970)

(985)

(1,940)

 

 

Share-based payment charges

(63)

(286)

(639)

 

 

(Loss)/profit from operations

(6,040)

12,066

18,124

 

 

Finance income

 

431

 

39

 

858

 

Finance expense

 

(356)

(268)

(674)

 

(Loss)/profit before taxation

 

(5,965)

11,837

18,308

 

Taxation

 

(596)

(1,441)

(2,548)

 

(Loss)/profit for the period attributable to equity holders of the parent company

 

(6,561)

10,396

15,760

 

 

Other comprehensive (expense)/income

 

 

 

 

 

Items that may be reclassified to profit or loss in subsequent periods

 

 

 

 

 

Exchange difference on translation of foreign operations 

 

(1)

(4)

12

 

Total comprehensive income attributable to equity holders of the parent company

 

(6,562)

10,392

15,772

 

 

 

 

 

 

 

(Loss)/earnings per share for profit attributable to the owners of the parent during the period

 

 

 

 

 

Basic

6

(8.4)p

13.6p

20.5p

 

Diluted

6

(8.4)p

13.6p

20.2p

 

                     

                        

Condensed consolidated statement of financial position

As at 31 January 2017

 

 

 

 

 

 

 

 

 

31 January 2017

(Unaudited)

£'000

31 January 2016

(Restated)

£'000

31 July 2016

(Restated)

£'000

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

5,411

5,705

5,591

 

 

Goodwill

 

14,851

23,808

23,808

 

 

Intangible assets

 

5,574

11,291

10,426

 

 

Accrued revenue

 

33,901

25,707

29,650

 

 

Total non-current assets

 

59,737

66,511

69,475

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Inventories

 

528

508

559

 

 

Trade and other receivables

 

24,182

23,407

19,656

 

 

Cash and cash equivalents

 

12,310

6,185

12,237

 

 

Total current assets

 

37,020

30,100

32,452

 

 

 

 

 

 

 

 

 

Total assets

 

96,757

96,611

101,927

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 

20,233

12,157

19,346

 

 

Loans and other borrowings

 

1,707

5,390

1,572

 

 

Current tax liability

 

1,205

1,646

1,199

 

 

Current provisions

 

-

711

526

 

 

Total current liabilities

 

23,145

19,904

22,643

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Trade and other payables

 

3,492

3,642

2,884

 

 

Loans and other borrowings

 

20,184

17,549

16,187

 

 

Deferred tax liability

 

1,647

1,996

2,180

 

 

Total non-current liabilities

 

25,323

23,187

21,251

 

 

 

 

 

 

 

 

 

Total liabilities

 

48,468

43,091

43,894

 

 

Net assets

 

48,289

53,520

58,033

 

 

 

 

 

 

 

 

Equity attributable to equity holders of the company

 

 

 

 

 

 

Called up share capital

 

79

78

78

 

 

Share premium

 

14,599

13,812

14,130

 

 

Merger reserve

 

9,532

9,532

9,532

 

 

Share option reserve

 

904

1,069

1,359

 

 

Own shares reserve

 

(748)

(748)

(748)

 

 

Foreign currency reserve

 

(31)

(46)

(30)

 

 

Retained earnings

 

23,954

29,823

33,712

 

 

Total equity

 

48,289

53,520

58,033

 

 

                                               

 

Condensed consolidated statement of changes in equity

For the six months ended 31 January 2017

 

Share capital

Share premium

Merger reserve

Share option reserve

Own shares reserve

Retained earnings

Foreign currency reserve

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

At 1 August 2015 (as originally stated)

77

12,873

9,532

1,600

-

22,081

(42)

46,121

Prior period adjustments

-

-

-

-

(748)

(548)

-

(1,296)

At 1 August 2015 (Restated)

77

12,873

9,532

1,600

(748)

21,533

(42)

44,825

Profit for the period (Restated)

-  

-  

-  

-  

-

10,396

-

10,396

Other comprehensive income

-  

-  

-  

-  

-

-  

(4)

(4)

Total comprehensive income

-  

-  

-  

-  

-

10,396

(4)

10,392

Dividends paid

-

-

-

-

-

(2,514)

-

(2,514)

Share-based payment  expense

-

-

-

286

-

-

-

286

Deferred tax on share options

-

-

-

(409)

-

-

-

(409)

Issue of shares

1

939

-

-

-

-

-

940

Reserve transfer relating to share based payment

-

-

-

(408)

-

408

-

-

At 31 January 2016

78

13,812

9,532

1,069

(748)

29,823

(46)

53,520

 

 

 

 

 

 

 

 

 

 

 

At 1 August 2016 (as originally stated)

78

14,130

9,532

1,359

-

34,320

(30)

59,389

Prior period adjustments

-

-

-

-

(748)

(608)

-

(1,356)

At 1 August 2016 (Restated)

78

14,130

9,532

1,359

(748)

33,712

(30)

58,033

Loss for the period

-

-

-

-

-

(6,561)

-

(6,561)

Other comprehensive income

-

-

-

-

-

-

(1)

(1)

Total comprehensive income

-  

-  

-  

-  

-

(6,561)

(1)

(6,562)

Dividends paid

-

-

-

-

-

(3,342)

-

(3,342)

Share-based payment  expense

-

-

-

63

-

-

-

63

Deferred tax on share options

-

-

-

(373)

-

-

-

(373)

Issue of shares

1

469

-

-

-

-

-

470

Reserve transfer relating to share based payments

-

-

-

(145)

-

145

-

-

 

 

 

 

 

 

 

 

 

At 31 January 2017

79

14,599

9,532

904

(748)

23,954

(31)

48,289

Condensed consolidated cash flow statement

For the six months ended 31 January 2017

 

 

 

 

Six months ended

Six months ended

Year

ended

 

Note

31 January 2017

(Unaudited)

£'000

31 January 2016

(Restated)

£'000

31 July

2016

(Restated) £'000

Net cash flows (used in)/ from operating activities

7

(139)

(1,363)

11,807

Investing activities

 

 

 

 

Purchase of property, plant and equipment

 

(161)

(199)

(467)

Purchase of intangible assets

 

(528)

(229)

(318)

Interest received

 

9

7

18

Net cash used in investing activities

 

(680)

(421)

(767)

 

Financing activities

 

 

 

 

Issue of shares

 

470

940

1,257

Loans repaid

 

(5,200)

-

(5,025)

Loans received

 

9,200

4,000

4,000

Interest paid

 

(235)

(197)

(672)

Dividends paid

 

(3,342)

(2,514)

(4,218)

Net cash flows from/(used in) financing activities

 

893

2,229

(4,658)

 

 

 

 

 

Net increase in cash and cash equivalents

 

74

445

6,382

Translation (loss)/gain on cash and cash equivalents

 

(1)

(4)

110

Cash and cash equivalents at beginning of period

 

12,237

5,744

5,745

Cash and cash equivalents at end of period

 

12,310

6,185

12,237

 

 

 

 

 

           

 

 

Notes

 

1      Accounting policies

 

The condensed consolidated interim financial information should be read in conjunction with the financial statements for the year ended 31 July 2016, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

 

The interim financial information for each of the six-month periods ended 31 January 2017 and 31 January 2016 has not been audited and does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The information for the year ended 31 July 2016 does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006, but is based on the statutory financial statements for that year, on which the auditors have reported, as subsequently restated as set out in Note 10. Their audit report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498 (2) or (3) Companies Act 2006.

 

The principal accounting policies have been applied consistently to all years and are set out in the 2016 Annual Report and Accounts.

 

2      Basis of preparation

 

Utilitywise plc is incorporated and domiciled in the United Kingdom.

 

The accounts for the periods have been prepared in accordance with IAS 34 (Interim Financial Reporting) and the accounting policies are consistent with those of the annual financial statements for the year ended 31 July 2016 and those envisaged for the financial statements for the year ending 31 July 2017. The Group has not adopted any standards or interpretation in advance of the required implementation dates.

 

The Board is considering the requirements of the following forthcoming accounting standards:

 

·     IFRS 9 (Financial Instruments);

·     IFRS 15 (Revenue From Contracts with Customers); and

·     IFRS 16 (Leases)

 

If material, the Board will confirm the outcomes by no later than the date of approval of the Group's financial statements for the year ended 31 July 2017.

 

The financial statements have been prepared on a going concern and historical cost basis as stated in the accounting policies. There have been no changes in accounting policies. All policies are in line with the year ended 31 July 2016.

 

3      Segment information

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker ("CODM") has been identified as the management team, including the Chief Executive Officer and Chief Financial Officer.

 

During the current period the Group serviced both Enterprise and Corporate businesses. The Board considers that the services were offered from two distinct segments in the current period.

 

Operating segments are determined based on the internal reporting information and management structure within the Group. Information regarding the results of the reportable segment is included below.  Performance is based on segment Adjusted Earnings before income taxation, depreciation and amortisation (EBITDA), which is operating profit or loss stated before depreciation, amortisation, share-based payment expenses and any exceptional items, as reported in the internal management reports that are reviewed by the CODM.  The segment EBITDA, as defined above, is used to measure performance.  Revenues disclosed below represent revenues to external customers.

 

The Enterprise Division derives its revenues from energy procurement by negotiating rates with energy suppliers for small and medium sized business customers throughout the UK, Republic of Ireland and certain European markets. The Corporate Division derives its revenues from energy procurement of larger industrial and commercial customers, providing an account care service and offering a variety of utility management products and services designed to assist customers in managing their energy consumption. 

 

Revenue

Six months ended

31 January 2017

(Unaudited)

£'000

Six months ended

31 January 2016               (Unaudited)

£'000

Year ended

31 July 2016

 

(Audited)

£'000

Enterprise 

39,131

32,578

68,797

Corporate

7,752

9,553

17,104

Intersegment revenue

(801)

(566)

(1,473)

Total Group revenue

46,082

41,565

84,428

 

3      Segment information (continued)

 

Six months ended 31 January 2017

Enterprise

Corporate

Total

 

£'000

£'000

£'000

Segment Adjusted EBITDA

8,668

1,025

9,693

Intersegment revenue/(costs)

801

(801)

-

Segment Adjusted EBITDA after intercompany adjustments

9,469

224

9,693

Share option expense

(51)

(12)

(63)

Exceptional income

249

-

249

Exceptional charges

(1,232)

(13,377)

(14,609)

Finance income

430

1

431

Finance expense

(356)

-

(356)

Depreciation

(275)

(65)

(340)

Amortisation

(9)

(70)

(79)

Taxation

(1,427)

(157)

Segment profit after tax

6,798

(13,456)

(6,658)

 

Six months ended 31 January 2016

Enterprise

Corporate

Total

(Restated)

£'000

£'000

£'000

Segment Adjusted EBITDA

7,448

2,228

9,676

Intersegment revenue/(costs)

566

(566)

-

Segment Adjusted EBITDA after intercompany adjustments

8,014

1,662

9,676

Share option expense

(208)

(78)

(286)

Exceptional income

-

5,740

5,740

Exceptional charges

(371)

(1,315)

(1,686)

Finance income

37

2

39

Finance expense

(268)

-

(268)

Depreciation

(287)

(106)

(393)

Amortisation

(9)

(2)

(11)

Taxation

(1,431)

(205)

Segment profit after tax

5,477

5,698

11,175

 

Included in the above is a segment restatement in relation to exceptional income and exceptional charges reported in respect of the six months ended 31 January 2016. Exceptional income of £5.7m in relation to the release of deferred consideration and exceptional charges of £1.3m have been reallocated to the Corporate segment from the Enterprise segment. There is no change to the Group total.

 

3      Segment information (continued)

 

Profit after tax

 

Six months ended

31 January 2017

(Unaudited)

£'000

Six months ended

31 January 2016 (Restated)

£'000

 

Year ended

31 July 2016

(Restated)

£'000

 

 

 

 

Enterprise before exceptional items

7,781

5,848

13,624

Corporate before exceptional items

(79)

1,273

332

Exceptional income 

249

5,740

5,740

Exceptional charges

(14,609)

(1,686)

(2,548)

 

(6,658)

11,175

17,148

Group deferred tax adjustments

988

195

521

Amortisation

(891)

(974)

(1,909)

Total Group profit after tax

(6,561)

10,396

15,760

 

4      Exceptional items

 

Exceptional income and charges, stated before applicable taxation effects, are as follows:

 

 

Six months ended

31 January 2017

(Unaudited)

£'000

Six months ended

31 January 2016 (Unaudited)

£'000

 

Year ended

31 July 2016

(Audited)

£'000

 

 

 

 

Exceptional income:

 

 

 

Dilapidation provision release

249

-

-

Contingent consideration release

-

5,740

5,740

 

249

5,740

5,740

Exceptional charges:

 

 

 

Impairment loss (Note 9)

13,367

1,315

1,315

Legal, restructuring and other charges

1,242

371

1,233

 

14,609

1,686

2,548

 

Exceptional charges in the period comprise an impairment charge in connection to the cost of t-mac Technologies Limited, as explained further in Note 9, and charges in relation to various legal, restructuring and other costs. Exceptional income in the period relates to an adjustment to a historic dilapidations provision. Exceptional income items are included within other operating income and exceptional cost items are included within administrative expenses in the income statement.

 

5      Taxation

 

The taxation charge includes a credit of £1.1m (H1 2016: £0.1m) in respect of exceptional items. The remaining charge of £1.7m (H1 2016: £1.5m) is in respect of profit before tax before exceptional items, and has been charged at a rate of 20%. The rate applied of 20% is consistent with the expected rate for the year ended 31 July 2017 (2016: 20%).

 

6      Earnings per share

 

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period. 

 

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume the conversion of all potentially dilutive ordinary shares.  The Group has potentially dilutive ordinary shares, being those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. Own shares held are excluded from the average number of shares used to calculate basic and diluted EPS.

 

 

 

Six months ended

Six months ended

Year

ended

 

31 January 2017

(Unaudited)

£'000

31 January 2016 (Restated)  

£'000

31 July
 2016 (Restated)

£'000

 

 

 

 

Total comprehensive income

(6,562)

10,392

15,772

 

 

 

 

Adjustments

 

 

 

Exceptional income

(249)

(5,740)

(5,740)

Exceptional charges

14,609

1,686

2,548

Amortisation of intangible assets acquired in

business combinations

 

891

 

974

 

1,909

Share-based payment expense

63

286

639

Tax impact of above adjustments

(1,142)

(245)

(678)

Earnings for Adjusted EPS

7,610

7,353

14,450

 

 

 

 

Number of shares

 

 

 

Weighted average number of shares for the purpose of basic earnings per share

77,815

76,385

76,889

Effect of: Employee share options and warrants

1,204

(254)

1,210

Weighted average number of shares for the purpose of diluted earnings per share

79,019

76,131

78,099

 

 

 

 

Earnings per share for profit attributable to the owners of the parent during the period

 

 

 

Basic

(8.4)p

13.6p

20.5p

Diluted

(8.4)p*

13.6p

20.2p

Adjusted Basic

9.8p

9.6p

18.8p

Adjusted Diluted

9.6p

9.6p

18.5p

         

 

* In accordance with IAS 33, a diluted loss per share cannot be a lower loss per share than a basic loss per share.

 

7      Reconciliation of operating (loss)/profit to net cash flow (used in)/from operating activities

 

 

Six months ended

Six months ended

Year ended

 

31 January 2017

(Unaudited)

£'000

31 January 2016

(Restated)

£'000

31 July 2016

(Restated)

£'000

 

Operating (loss)/profit

 

(6,040)

12,066

18,124

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

340

393

757      

 

Share option expense

63

286

639      

 

Loss on disposal of fixed assets

-

-

21      

 

Amortisation of intangible fixed assets

970

985

1,940      

 

Exceptional release of contingent consideration

-

(5,740)

(5,740)     

 

Impairment loss

13,367

1,315

1,315      

 

 

8,700

9,305

17,056      

 

Change in trade and other receivables

(8,354)

(10,197)

  (9,615)     

 

Change in inventories

30

135

84      

 

Change in trade and other payables

1,507

173

 6,441      

 

Change in provisions

(526)

(160)

(345)     

 

Cash flow (used in)/from operating activities

       1,357

(744)      

13,621  

 

Income taxes paid

   (1,496)

(619)     

(1,814) 

 

Net cash flow (used in)/from operating activities

(139)

(1,363)    

11,807  

 

 

 

 

 

 

                   

The net cash flow from operating activities includes a net cash outflow of £0.9m in respect of exceptional items (H1 2016: £0.3m, FY16: £1.2m).

 

8      Reconciliation of net debt

 

 

 

1 August

2016

(Restated)

£'000

Cash

Flows

£'000

 

Exchange

differences £'000

 

Other non-

cash changes

£'000

31 January 2017

£'000

 

 

 

 

 

 

 

 

Cash and cash equivalents

12,237

74

(1)

-

12,310

 

Borrowings

(17,759)

(4,000)

-

(132)

(21,891)

 

Net debt

(5,522)

(3,926)

(1)

(132)

(9,581)

 

 

9      Impairment loss

 

As a result of a significant shortfall in financial performance against previous expectations, a potential impairment was identified in the t-mac cash generating unit (CGU), which forms part of the Corporate division segment but has been determined as a separate CGU.

 

Accordingly, a discounted cash flow was carried out to determine the value in use of the assets of the t-mac CGU, in accordance with IAS 36 (Impairment of Assets).

 

The following key assumptions were made in the value in use calculation:

 

·     Five-year forecast period;

·     Revenues and costs based on past experience and cost estimates, with growth rates based on management estimates and forecasts, from internal and external market information;

·     Pre-tax discount rate of 12.9%, based upon the weighted average cost of capital, appropriately adjusted to take account of any risks not already accounted for in the forecast future undiscounted cash flows;

·     Terminal growth rate of 2.5%

 

The resulting value in use calculation was lower than the fair value of those assets less costs to sell, which itself was lower than the carrying value of the assets of the t-mac CGU.

 

Accordingly, an impairment was identified and the carrying value of the assets was written down to the fair value of those assets less costs to sell, being higher than the value in use, as an impairment loss.

 

The pre-tax value of the impairment loss was £13,367,000 which has been recognised as an exceptional item, as set out in Note 4. The impairment loss was allocated first against the goodwill of £8,957,000. The residual balance of the impairment was then allocated against the remaining assets on a pro-rata basis, which resulted in an impairment of £4,410,000 being allocated against intangible assets, as all other assets were already carried at their net realisable value in the balance sheet.

 

No other risks of impairment were identified and, therefore, no further value in use calculations were deemed necessary as at the 31 January 2017 balance sheet date.

 

 

10   Prior period adjustments

 

The Group has made prior period adjustments in respect of the following items:

 

Own shares

 

In 2013, the Group purchased certain of its own shares through an employee benefit trust, as a hedge against share option exercises. The value of the shares purchased was £748,000. As at 31 January 2017, those shares are still held by the Group. The shares have historically been shown within "cash and cash equivalents" in the statement of financial position. In accordance with IAS 32 (Financial Statements: Presentation), those shares are required to be shown within equity.

 

Accordingly, a prior period adjustment has been made, which has the following impacts on the consolidated statement of financial position as at 31 January 2016 and 31 July 2016.

 

·     Reduction in cash and cash equivalents of £748,000; and

·     Creation of "Own shares reserve" in equity with a balance of £748,000.

 

There is no impact on the consolidated income statement or consolidated cash flow statement of the Group in the year ended 31 July 2016 or the six months ended 31 January 2016.

 

Fixed-payment liabilities

 

The Group has maintained certain liabilities within "trade and other payables" within the statement of financial position, which include cash repayments to the counterparty, where the timing and amount of those repayments are not within the control of the Group and which include implicit financing charges. It is now concluded that it is more appropriate to classify those liabilities as "borrowings" rather than "trade and other payables" in the statement of financial position. It was further determined that those liabilities were understated due to the incorrect application of the effective interest rate method as at 31 January 2016 and 31 July 2016 and, therefore, their carrying value should also be corrected. Accordingly, prior period adjustments have been made, which have the following impacts:

 

 

 

31 January

2016

£'000

31 July

 2016

£'000

 

 

 

Statement of financial position:

 

 

Increase in borrowings

5,764

4,584

Decrease in trade and other payables

5,065

3,850

Decrease in opening retained earnings

548

548

Decrease in current period retained earnings

48

60

Decrease in corporation tax liability

103

125

 

 

 

Income statement:

 

 

Increase in interest expense

71

104

Decrease in taxation charge

22

44

 

 

 

Cash flow statement:

 

 

(Decrease)/increase in operating cash flow

-

1,245

Increase in interest payments

-

220

Increase in repayment of loans

-

1,025

10   Prior period adjustments (continued)

 

Earnings per share impact of prior period adjustments

 

The prior period adjustments, noted above, have the following impacts:

 

 

 

31 January

2016

£'000

31 July

2016

£'000

 

 

 

Earnings for Basic and Diluted EPS:

 

 

As originally stated

10,440

15,832

Adjustment - Fixed-payment liabilities

(48)

(60)

As restated

10,392

15,772

 

 

 

Earnings for Adjusted Basic and Adjusted Diluted EPS:

 

 

As originally stated

7,401

14,510

Adjustment - Fixed-payment liabilities

(48)

(60)

As restated

7,353

14,450

 

 

 

Average number of shares for Basic EPS:

 

 

As originally stated

76,885

77,389

Adjustment - Own shares

(500)

(500)

As restated

76,385

76,889

 

Average number of shares for Diluted EPS:

 

 

As originally stated

76,631

78,599

Adjustment - Own shares

(500)

(500)

As restated

76,131

78,099

 

 

 

Basic EPS

 

 

As originally stated

13.6p

20.5p

As restated

13.6p

20.5p

 

 

 

Diluted EPS

 

 

As originally stated

13.6p

20.1p

As restated

13.6p

20.2p

 

 

 

 

 

 

Adjusted Basic EPS

 

 

As originally stated

9.6p

18.7p

As restated

9.6p

18.8p

 

 

 

Adjusted Diluted EPS

 

 

As originally stated

9.6p

18.5p

As restated

9.6p

18.5p

         

 

In accordance with IAS 33 (Earnings per Share), own shares held are required to be excluded from the average number of shares used in the calculation of basic and diluted EPS.


This information is provided by RNS
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