Regulatory Story
Go to market news section View chart   Print
RNS
Inspired Energy PLC   -  INSE   

2018 Preliminary Results

Released 07:00 27-Mar-2019

RNS Number : 1404U
Inspired Energy PLC
27 March 2019
 

27 March 2019

Inspired Energy plc

("Inspired" or the "Group")

 

Preliminary Results for the year ended 31 December 2018

 

Inspired (AIM: INSE), a leading UK energy procurement consultant to UK and Irish corporates, announces record preliminary results for the year ended 31 December 2018.

 

HIGHLIGHTS

                                                                                                                                         

Financial Highlights

 

2018

 

2017

Restated1

 

Movement

Revenue

£32.69m

£26.36m

24%

Gross Profit

£27.67m

£21.76m

27%

Adjusted EBITDA2

£13.75m

£10.44m

32%

Adjusted Profit Before Tax3

£11.38m

£8.40m

35%

Profit Before Tax

£4.20m

£2.99m

40%

Cash Generated From Operations

£10.01m

£6.45m

55%

Adjusted Diluted EPS4

1.61p

1.29p

25%

Diluted Basic EPS

0.53p

0.37p

43%

Net Debt

£23.54m

£14.79m

59%

Full Year Dividend Per Share

0.65p

0.55p

18%

Corporate Order Book

£53.00m

£39.00m

36%

 

Operational Highlights

·      Record revenues delivered by the Corporate Division, growing 34% to £27.3m (2017: £20.4m), contributing 84% of Group revenue for the period (2017: 77%). 8% of the Corporate Division revenue growth in the year was organic (2017: 6%).

·      Corporate Division contributed Adjusted EBITDA of £13.8m, an increase of 43% (2017: £9.6m).

·      Corporate Order Book increased 36% to £53.0m (2017: £39.0m) with strong customer retention and robust performance from significant new customer wins.

·      The Corporate Order Book provides 12 months secured revenue of £26.0m (2017: £18.6m) for the Corporate Division entering 2019.

·      Excellent cash performance with cash generated from operations up 55% to £10.0m (2017: £6.5m), further enhancing cash conversion metrics of the Group.

·      SME Division generated EBITDA of £2.4m (2017: £2.5m) with EBITDA margins increasing to 45% (2017: 41%) following streamlining of the division.

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

·      Launch of three-year capital investment programme to raise the level of digitisation in the energy markets to ensure clients services and solutions evolve to meet future market needs over the next 3 to 5 years

 

Acquisition Highlights

Completion of five strategic acquisitions in 2018, further enhancing growth opportunities and client service offering:

·      Acquisition of Inprova Finance Limited ("Inprova") for a consideration of £19.5m, funded by a £19.0m placing, completed in December 2018. In the financial year ended 30 June 2018 (being the accounting period prior to acquisition), Inprova generated revenues of £7.8m and EBITDA of £2.9m.

·      Acquisition of Inprova increased the Corporate Order Book and will provide a material contribution to Group revenues from the Corporate Division in 2019, increasing the Corporate market share and significantly strengthening the Group's position as market leader in the UK.

·      Integration of Inprova has started well and is in line with management's expectations.

·      Integration of Squareone Limited and Professional Cost Management Group Limited, acquired in August and September 2018 respectively, is progressing well.

·     SystemsLink 2000 Limited ("SystemsLink") and Energy Cost Management Limited, both acquired in March 2018, are now fully integrated into the Group.

 

Board Transition

·      Matthew Thornton today steps down as Non-Executive Director and has entered into an orderly market agreement in relation to his holding expiring 31 March 2020.

·      The Board is now composed of two Executive Directors, supported by a Non-Executive Chairman and two Independent Non-Executive Directors.

 

Mark Dickinson, CEO of Inspired, commented on the results: "We are delighted to deliver such a strong set of results for 2018. We accelerated our next growth phase with five complementary and value-enhancing acquisitions, whilst continuing to deliver sustained organic growth in the Corporate Division.

Our acquisitions have further broadened our service offering and materially increased the level of the Group's client meters under management. We continue to systematically engage with clients to quantify cross-selling opportunities and increase the accessible revenue at each meter point.

"Ensuring we continue to evolve our services for our clients is a key focus for the business, simultaneously broadening the service offering we provide and optimising the value of every pound our clients spend on utilities, so that they can focus on running their businesses.

"Following an excellent 2018, we have had an encouraging start to 2019 and I am confident that the team will deliver another year of significant growth."

 

Note

1.     The Group's 2017 comparative financials restated to revise the date from which Horizon Energy Group Limited ("Horizon") was consolidated. This timing adjustment does not change the cash position of the Group, the 2018 results or future forecasts of the Group. See Updates to Accounting Policies within the Chief Executive Officer's Statement.

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

3.     Adjusted profit before tax is earnings before tax, amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), exceptional items, share-based payments, the unwinding of contingent consideration and foreign exchange variances (a reconciliation of this can be found in note 6 of the preliminary statements).

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

 

 

For further information, please contact:   

 

Inspired Energy plc

Mark Dickinson (Chief Executive Officer)

Paul Connor (Finance Director)

www.inspiredplc.co.uk

+44 (0) 1772 689250

 

 

 

Shore Capital (Nominated Adviser and Joint Broker)

Dru Danford

Edward Mansfield

James Thomas

 

 +44 (0) 20 7408 4090

 

Peel Hunt LLP (Joint Broker)

Mike Bell

Sam Cann

 

+44 (0) 20 7418 8900

Gable Communications

Justine James

John Bick

 

+44 (0) 20 7193 7463

+44 (0) 7525 324431

inspired@gablecommunications.com

 

CHAIRMAN'S STATEMENT

 

I am delighted to report another record year for Inspired in 2018 in which the Group completed five complementary and value-enhancing acquisitions, including the completion of a £19.0m placing in December. In addition, the Group continued to deliver sustained organic growth in the core Corporate Division, delivering results in line with management's expectations.

We have today completed the transition of the Board composition to two Executive Directors, supported by a Non-Executive Chairman and two Non-Executive Directors, with the appointment of Gordon Oliver as an independent non-executive in January 2018 and the resignation of Matthew Thornton who is today stepping down as Non-Executive Director. On behalf of all shareholders and the Board, I would like to thank Matthew for his years of dedication to the Group since its founding over 18 years ago. Matthew was a member of the Board on the IPO of the business on AIM in 2011 and has been an intrinsic part of the Group's success to date.

The strong financial performance and the strategic initiatives delivered during the period provide an excellent platform for continued organic and acquisitive growth, further establishing Inspired's market leading position as a third-party intermediary ("TPI") in the Industrial & Commercial ("I&C") sector.

The Board was pleased to announce the grant of awards under the Long-Term Incentive Plan ("LTIP") for the benefit of the Senior Management Team ("SMT") in May. The structure of the LTIP tracks the award to the Executive Directors in July 2017, albeit for an extended period to FY2023. The SMT is comprised of key senior directors of the Group, who are important to the long-term success and value of the Company, and the Board believes that the Group will continue to benefit from their drive and energy in the future.

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

Contribution from the 2017 and 2018 acquisitions, in conjunction with sustained organic growth, increased Corporate Division revenue to £27.3m (2017: £20.4m), an increase of 34% and representing 84% of Group revenue. The contribution from the Corporate Division to Group revenues is anticipated to increase further in 2019, with further organic growth expected together with a full year contribution from Inprova. The restructuring of the service offering in the Corporate Division has assisted in increasing the focus on driving organic growth which continues to be a primary objective of the Board.

Organic growth is calculated by reference to revenue growth of the Group, excluding current year acquisitions and taking into account the growth of previously acquired business from the last financial year prior to their acquisition by the Group. The Board are pleased to note that organic revenues in the Corporate Division grew by 8% in the period (2017: 6%). Adjusted EBITDA for the Corporate Division for the period was £13.8m (2017: £9.6m). This growth underpins the strong fundamentals of the Board's stated strategy to focus on growing the Corporate Division both organically and through further acquisitions.

The Corporate Order Book has increased to £53.0m as at 31 December 2018 (2017: £39.0m), representing a year on year increase of 36% and providing 12 months secured revenue of £26.0m (2017: £18.6m) for the Corporate Division entering 2019. This remains a consistent guide to the future performance of the Group, providing strong visibility of revenues for FY2019 and the next three years, enabling the Board to look forward with great confidence over the short to medium term.

The acquisition of Inprova in December was a significant milestone in the development of the Group, both strategically and financially, and the Board is pleased to report that its integration has started well. The five acquisitions completed in 2018 reinforce the focus of the Group delivering on its well-established acquisition strategy, being complementary to the Corporate Division, broadening the service offering and customer base of the Group and increasingly enabling the Group to benefit from operational leverage.

In the first half of 2018, the Board took the decision to streamline the focus of the SME Division and discontinue the non-profit generating revenue streams, including the affiliate channel. This has shown to be a prudent decision as although revenue for the SME Division for the year was down 10% at £5.4m (2017: £6.0m), margins have improved and the EBITDA contribution was maintained, such that the SME Division has continued to contribute strong profits and cash during 2018. Adjusted EBITDA generated by the division was stable at £2.43m (2017: £2.45m).

Accordingly, the Board is pleased to propose a final dividend of 0.46 pence (2017: 0.39 pence), subject to shareholder approval at the AGM in June, resulting in a full year dividend of 0.65 pence per share, an 18% increase (2017: 0.55 pence). The dividend increase in the year is a demonstration of the Board's confidence in the future for the enlarged Group.

Inspired had an excellent 2018 and I am confident that 2019 will be another year of significant progress for the Group with trading in the year so far in line with expectations.

 

Mike Fletcher

Chairman

27 March 2019

 

 

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

Following the Group's achievements in 2018 we have carried that momentum into 2019. Ensuring we maintain a market leading position for our clients is key as we drive the business forward combined with broadening our service offering through strategic acquisitions in order to enhance the service we provide.

The five acquisitions completed in 2018 underpin this strategy. With each acquisition complementing and broadening the service we provide our Corporate clients as well as increasing our client base. The Board remains focused on delivering continued organic growth and strives to maintain and build on the excellent performance of the Group for the year ahead.

Having established a strong and scalable platform for expansion, we have a clear strategy that will enable us to continue to build on the growth of the Group. We achieve this through four primary service lines:

1)   Procurement: supporting clients with the selection of the best energy supply contracts

2)   Energy Accounting: supporting clients with the validation of their energy invoices and accounting processes

3)   Compliance: supporting clients with their compliance obligations with respect to energy and environmental reporting

4)   Optimisation Services: supporting clients to increase the effectiveness of their energy consumption

As the largest energy procurement consultant in the UK, we continue to benefit from a highly fragmented market with attractive dynamics for acquisitive growth which we expect to continue during FY2019, with a particular focus on businesses that complement our existing services and increase our market share in the Optimisation Services space.

Our organic growth engine is targeted to deliver 6% to 8% organic revenue growth per annum and is driven by focusing on three primary Key Performance Indicators.  During FY2018 we have achieved the following:

1)   Units of Opportunity: The number of meters in the market place, owned by clients with whom we have a transactional relationship, increased from c.100,000 to 350,000 during FY2018 (250% increase)

2)   Meters Under Management: the number of meters (Unit of Opportunity) covered by our core services of Energy Procurement and Energy Accounting in the UK increased from c.75,000 to 129,000 during FY2018 (72% increase)

3)  White Space Bank: the quantified value of cross selling our broader Compliance and Optimisation Services to existing Meters Under Management clients is currently identified at c. £13m of annual revenue.

As set out above, significant progress has been made in 2018, particularly in expanding our Units of Opportunity through the acquisitions of SystemsLink and Inprova. The acquisitions of ECM and PCMG have created a more robust platform for the Optimisation Services offering and the Board continues to actively review and assess organic and acquisitive opportunities for further growth in this area, as the business continues to evolve as a leading player in the sector.

As with any business, the effectiveness of the organic growth engine and the ability of the business to improve its services to clients requires systematic investment to increase the quality of the client experience.

Whilst the business continues to deliver excellent year on year performance the energy markets are a notable laggard in their adoption of technology. The Board is cognisant that it is not just important to deliver results today, but also to ensure the business platform is robust and capable of supporting such growth in the medium-term (3 to 5 years). 

To this end, FY2019 will see the launch of a capital investment programme which will run for the next three years.  The programme has been designed to ensure that the services received by our customers in 2022 and beyond are underpinned by the same level of technological excellence as comparable products in areas such as telecoms and financial services. The Board believes that this level of investment is unrivalled in the sector and continues to demonstrate our commitment to adding value to clients by ensuring our services remain state of the art and relevant to our clients evolving needs.

 

Corporate Division

 

Overview

The Corporate Division's core services now operate under a unified "Inspired" brand and it currently provides the review, analysis, negotiation and energy accounting for gas and electricity contracts with the service offering segmented into four broad categories of customer focus being:

·      Energy intensive

·      Commercial/estate intensive

·      Public services

·      Corporate

The Group continues to develop its product suite to meet the individual energy management requirements of clients following the key themes we focus on in order to simplify, verify, protect, inform and optimise. The Group's current focus is on the following strategic areas:

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

 

Software Solutions: Further developing the Software Services Division to provide software solutions across the energy value chain. SystemsLink, acquired in March 2018, is central to the development of the Group's software solutions.

 

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

 

Corporate Division Financial Highlights

Highlights in the year include:

·       Revenue increased 34% to £27.3m (2017: £20.4m), including 8% organic revenue growth (2017: 6%).

·       The Corporate Division generated adjusted EBITDA of £13.8m (2017: £9.6m), a 43% year on year increase.

·       Corporate Order Book increased by 36% to £53.0m as at 31 December 2018 (FY2017: £39.0m).

The Corporate Order Book is defined as the aggregate revenue expected by the Group in respect of signed contracts between an Inspired client and an energy supplier, or Inspired and a client in the instance of direct client fees, for the remainder of such contracts (where the contract is live) or for the duration of such contracts (where the contract has yet to commence). No value is ascribed to expected retentions of contracts.

The Corporate Order Book only relates to the Corporate Division, and does not include any SME revenue or contracts within it. The growth of the Corporate Order Book provides an indicator of the latent growth of the business which has yet to be recognised as revenue of the Group.

SME Division

 

Within the SME Division, the Group's energy consultants contact prospective SME clients to offer price comparison services and contract arrangement service based on the unique situation of the customer.

The division continues to mature, with management focusing on margin and cash generation to support the Group's continued growth. In the first half of 2018, the Board took the decision to streamline the focus of the division and discontinue the non-profit generating revenue streams, including the affiliate channel. As a result of the reorganisation of the division, whilst revenue for the SME Division in the year was down 10% at £5.4m (2017: £6.0m), it continued to contribute strong profits and cash in the period, delivering stable adjusted EBITDA of £2.43m (2017: £2.45m), with increased margins enabling the division to continue to contribute materially to the cash generation of the Group.

The SME Division has now been structured to focus on the provision of complementary services that add value to SME consumers which is expected during 2019 to include proof of concept expansion into Merchant Services, Insurance and Telecoms.

Acquisition Strategy

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

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

·       Sector specialism and diversification increasing our Accessible Revenue;

·       Increased geographic footprint building our Units of Opportunity;

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

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

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

Alternative performance measures

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.

Exceptional costs/(items)

Exceptional costs of £2.7m (2017: £2.1m) have been incurred in the year, which primarily relate to fees associated with the five acquisitions in the year, the Board transition, the restructuring associated with the integration of the Corporate Division from trading subsidiaries to a customer focused structure and the change in the fair value of contingent consideration. Exceptional costs/(items) also includes a gain on revaluation of contingent consideration of £970,000 in relation to the acquisition of Horizon in July 2017. The final aggregate consideration paid for Horizon was £12.7m, with Horizon contributing £4.2m and £2.6m to Group revenues and EBITDA respectively in 2018, equating to a multiple of 4.9x EBITDA. These costs are considered by the Directors to be neither material in nature or non-recurring and therefore require separate identification to give a true and fair view of the Group's result for the period.
 

Updates to Accounting Policies

IFRS 15 - Revenue from Contracts with Customers

A key financial focus of the Group since IPO in 2011 remains to deliver a prudent set of financial statements, with an important focus on achieving a close alignment of revenues and cash, whilst adopting all appropriate accounting standards.

The financial statements reported for the year ended 31 December 2018 is the first year in which the Group have adopted the new revenue recognition accounting standard, IFRS15. In preparation for adopting the standard, management have completed an extensive review of their revenue recognition policies in all divisions of the Group.

The 2018 results herein adopt IFRS15, the impact of which is a £0.4m increase in revenue in 2018. As outlined in the interim statement, the adoption of IRFS15 has not had a significant impact on the Group's financial statements, and therefore future forecasts of the Group remain unchanged. The impact in 2017, an increase of £0.2m in revenue, has been adjusted through reserves.

IFRS 16 - Leases

The Group is currently undertaking a review of the leases in place, and assessing the impact of adopting IFRS16. Although the review remains ongoing, management currently expect the impact of adopting IFR16 on the Group financial statements for the year ending 31 December 2019 to be minimal.

Accounting for Acquisitions

We have restated the Group's 2017 comparative financials to revise the date from which we consolidated Horizon. In the financial statements for the year ended 31 December 2017, we consolidated Horizon from 31 March 2017 (the "Locked Box Date"), which was the date the economic benefits and risks of the trading of Horizon accrued to the Group. However, management have re-considered the relevant accounting rules and deemed Horizon should have been consolidated from legal completion of the acquisition being the 17 July 2017. All FY2018 acquisitions have been consolidated from the legal completion date.

This timing adjustment does not change the cash position of the Group, the 2018 results or future forecasts of the Group. The Group still retains the cash generated from operations from the Locked Box Date and the FY2017 impact is set out in note 1.2.

 

Cash and Borrowings

As at 31 December 2018, the Group had a cash balance of £2.2m and outstanding balances on its senior term debt facilities of £25.7m with a resulting net debt of £23.5m. Net debt increased by £8.8m during the period under review. The increase in net debt reflects a year in which the cash generation of the Group was offset by the payment of £6.6m of initial cash consideration (excluding placing proceeds) to the vendors of SystemsLink, ECM, Squareone, PCMG and Inprova and £3.6m of deferred cash consideration to the vendors of Informed and Horizon.

In July 2017, the Group entered into a facility agreement ("Facility") with Santander UK plc ("Santander"). The Facility incorporates a £29.6m and €7.0m term loan. £6.3m and €7.0m of the term facilities ("Tranche A and B") amortise over a period of five years. £8.3m ("Tranche C") along with the £15m balance (described further below) is repayable by way of a bullet repayment on 19 October 2022. The Facility has an interest rate of 2.75% over LIBOR in respect of Tranches A and B and 3.00% over LIBOR in respect of Tranche C. There are no ongoing monitoring fees.

The Group also entered into a revolving credit facility (RCF) with Santander, for the sum of £2.5m, to be used for the purposes of satisfying future working capital requirements and an acquisition facility of up to £12.5m to fund future Group acquisitions ("Acquisition Facility"). The Acquisition Facility can be drawn on the same commercial terms as the Facility at the election of the Group and subject to bank approval of any proposed acquisition. The RCF has an interest rate of 2.75% over LIBOR, and the Acquisition Facility has an interest rate of 3.25% over LIBOR. There are no ongoing monitoring fees.

As at 31 December 2018, the Acquisition Facility and the RCF had £5.5m and £1.9m drawn respectively and therefore had £7.0m and £0.6m undrawn respectively

Capital repayments of £1.3m per annum are made on Tranche A, and the Group commenced capital repayments on Tranche B of the Facility from September 2018, of £1.6m per annum.

Dividends

 

The Board is delighted to propose a final dividend of 0.46 pence per share, subject to shareholder approval at the annual general meeting of the Group. Following the payment of an interim dividend of 0.19 pence per share, the total dividend payable for the year ended 31 December 2018 is 0.65 pence per share (2017: 0.55 pence per share) representing an increase of 18% in respect of the previous year. The continuing trend of improvement in cash generation of the Group, supports our progressive Dividend policy applied.

The dividend will be payable on 25 July 2019 to all shareholders on the register on 14 June 2019 and the shares will go ex-dividend on 13 June 2019.

Focus on our people

We firmly believe that investment in staff development and welfare builds a stronger business and we are committed to continuing to make appropriate investment in order to further develop our team and our environment. The Board was pleased to announce the grant of awards under the LTIP the benefit of the SMT in May.

The structure of the LTIP tracks the award to the Executive Directors in July 2017, albeit for an extended period to FY2023. The Board believes it is crucial to retain and incentivise its senior management to enable the Board to deliver long-term value creation for shareholders and the Board believes that the Group will continue to benefit from their drive and energy in the future.

In addition, the Group continues to support its employees through professional qualifications and work-based learning. National Vocational Qualifications (NVQs) continue to be a great success. Finally, a number of staff are undertaking professional qualifications, including ACCA/AAT qualifications, to support their development within the business.

Throughout the year, the directors of the Group provide guidance and mentor employees, engaging in consultation with them to ensure that their views are heard and considered.

Outlook

The momentum created in 2018 has continued into Q1 2019, with the integration of our five acquisitions broadening our service offering and materially increasing the Group's client meters under management (units of opportunity). We will continue to systematically engage with clients to quantify cross-selling opportunities and increase the accessible revenue at each meter point across our growing number of clients throughout the UK and Ireland.

Ensuring we maintain a market leading position for our clients is key as we drive the business forward combined with continually refining our service offering in order to optimise the service we provide.

Our sector remains fragmented, highlighted by the five acquisitions completed in 2018 alone and there is significant scope for growth, as we continue to strengthen our Corporate Division and demonstrate the significant benefit we can provide clients optimising the value of every pound spent on utilities.

We value our team and the 2018 results are testament to their commitment and hard work which shows no sign of abating as we increase momentum across the Group.  We are very encouraged by developments in the first quarter and look forward to another year of sustainable growth in line with market expectations. 

Mark Dickinson

Chief Executive Officer

27 March 2019

 

 

 

 

Group statement of comprehensive income

For the year ended 31 December 2018

 

 

 

 

2018

2017

Restated

 

 

Note

 

£'000

£'000

Revenue

 

 

 

32,692

26,356

Cost of sales

 

 

 

(5,018)

(4,596)

Gross profit

 

 

 

27,674

21,760

Administrative expenses

 

 

 

(22,171)

(17,819)

Operating profit

 

 

 

5,503

3,941

 

 

 

 

 

 

Analysed as:

 

 

 

 

 

Earnings before exceptional costs/(items), depreciation, amortisation and share-based payments costs

 

 

 

13,752

10,442

Exceptional costs/(items)

 

3

 

(2,704)

(2,117)

Depreciation

 

7

 

(569)

(495)

Amortisation of acquired intangible assets

 

8

 

(3,749)

(2,565)

Amortisation of internally generated intangible assets

 

8

 

(756)

(732)

Share-based payment costs

 

 

 

(471)

(592)

 

 

 

 

5,503

3,941

Finance expenditure

 

4

 

(1,380)

(955)

Other financial items

 

 

 

76

5

Profit before income tax

 

 

 

4,199

2,991

Income tax expense

 

5

 

(960)

(958)

Profit for the year

 

 

 

3,239

2,033

Other comprehensive income:

 

 

 

 

 

Exchange differences on translation of foreign operations

 

 

 

112

210

Total other comprehensive income for the year

 

 

 

112

210

Total comprehensive income from continuing operations

 

 

 

3,351

2,243

Attributable to:

 

 

 

 

 

Equity owners of the company

 

 

 

3,351

2,243

 

 

 

 

 

 

Basic earnings per share attributable to the equity holders of the company (pence)

 

6

 

0.55

0.39

Diluted earnings per share attributable to the equity holders of the company (pence)

 

6

 

0.53

0.37

Adjusted basic earnings per share attributable to the equity holders of the company (pence)

 

6

 

1.68

1.33

Adjusted diluted earnings per share attributable to the equity holders of the company (pence)

 

6

 

1.61

1.29

 

Group Statement of Financial Position

At 31 December 2018

 

 

2018

2017

Restated

 

Note

£'000

£'000

ASSETS

 

 

 

Non-current assets

 

 

 

Goodwill

8

44,366

22,190

Other intangible assets

 

14,978

11,662

Property, plant and equipment

7

2,083

1,407

Non-current assets

 

61,427

35,259

Current assets

 

 

 

Trade and other receivables

9

21,906

15,877

Cash and cash equivalents

 

2,190

5,183

Current assets

 

24,096

21,060

Total assets

 

85,523

56,319

LIABILITIES

 

 

 

Current liabilities

 

 

 

Trade and other payables

10

7,037

2,532

Bank borrowings

 

3,047

2,037

Contingent consideration

 

1,479

3,619

Current tax liability

 

2,857

3,022

Current liabilities

 

14,420

11,210

Non-current liabilities

 

 

 

Bank borrowings

 

22,393

17,809

Trade and other payables

 

92

33

Contingent consideration

 

1,379

1,375

Interest rate swap

 

68

144

Deferred tax liability

 

1,856

1,126

Non-current liabilities

 

25,788

20,487

Total liabilities

 

40,208

31,697

Net assets

 

45,315

24,622

EQUITY

 

 

 

Share capital

 

892

711

Share premium account

 

37,422

14,203

Merger relief reserve

 

15,535

14,914

Share-based payment reserve

 

1,361

1,231

Retained earnings

 

7,908

7,354

Investment in own shares

 

(6,742)

(2,618)

Translation reserve

 

322

210

Reverse acquisition reserve

 

(11,383)

(11,383)

Total equity

 

45,315

24,622

 

 

Group Statement of Changes in Equity

For the year ended 31 December 2018

 

 

Share

Merger

Share-based

Retained

 

Investment

 

Reverse

Total

 

Share

premium

relief

payment

earnings

In own

Translation

acquisition

shareholders'

 

capital

account

reserve

reserve

(as restated)

Shares

reserve

reserve

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 January 2017

607

2,319

14,914

794

7,623

 

-

 

-

(11,383)

14,874

Profit and total comprehensive income for the period

-

-

-

-

2,533

 

 

-

 

 

210

-

2,743

Prior period adjustment (note 1)

-

-

-

-

(500)

 

 

-

 

 

-

-

(500)

Shares issued (30 March 2017)

2

169

-

-

-

 

-

 

-

-

171

Shares issued (20 April 2017)

4

496

-

-

-

 

-

 

-

-

500

Shares issued (24 April 2017)

1

50

-

-

-

 

-

 

-

-

51

Shares issued (12 July 2017)

77

8,396

-

-

-

 

-

 

-

-

8,473

Shares issued (20 July 2017)

18

2,600

-

-

-

-

-

-

2,618

Shares issued (29 August 2017)

2

173

-

-

-

 

-

 

-

-

175

Share-based payment cost

-

-

-

592

-

 

-

 

-

-

592

Share options exercised

-

-

-

(155)

155

-

-

-

-

Purchase of own shares

-

-

-

-

-

(2,618)

-

-

(2,618)

Dividends paid

-

-

-

-

(2,457)

-

-

-

(2,457)

Total transactions with owners (as restated)

104

11,884

-

437

(269)

 

(2,618)

 

210

-

9,748

Balance at 31 December 2017 (as restated)

711

14,203

14,914

1,231

7,354

 

(2,618)

 

210

(11,383)

24,622

Profit and total comprehensive income for the period

-

-

-

-

3,239

 

 

-

 

 

112

-

3,351

Prior year IFRS 15 impact

-

-

-

-

222

-

-

-

222

Shares issued (22 March 2018)

4

-

621

-

-

 

-

 

-

-

625

Shares issued (29 March 2018)

2

145

-

-

-

 

-

 

-

-

147

Shares issued (24 May 2018)

29

4,095

-

-

-

 

-

 

-

-

4,124

Shares issued (7 June 2018)

1

37

-

-

-

 

-

 

-

-

38

Shares issued (7 September 2018)

1

86

-

-

-

 

-

 

-

-

87

Shares issued (31 December 2018)

144

18,856

-

-

-

 

-

 

-

-

19,000

Share-based payment cost

-

-

-

471

-

 

-

 

-

-

471

Share options exercised

-

-

-

(341)

341

-

-

-

-

Purchase of own shares

-

-

-

-

-

(4,124)

-

-

(4,124)

Dividends paid

-

-

-

-

(3,248)

-

-

-

(3,248)

Total transactions with owners

181

23,219

621

130

554

 

(4,124)

 

112

-

20,693

Balance at 31 December 2018

892

37,422

15,535

1,361

7,908

 

(6,742)

 

322

(11,383)

45,315

 

 

 

Merger relief reserve

Merger relief reserve represents the premium arising on shares issued as part or full consideration for acquisitions, where advantage has been taken of the provisions of section 612 of the Companies Act 2006.

Reverse acquisition reserve

The reverse acquisition reserve relates to the reverse acquisition between Inspired Energy Solutions Limited and Inspired Energy plc on 28 November 2011 and arises on consolidation.

Translation reserve

The translation reserve comprises translation differences arising from the translation of the financial statements of the Group's foreign entities into GBP (£).

Share-based payment reserve

The share-based payment reserve is a reserve to recognise those amounts in equity in respect of share-based payments.

 

 

Group Statement of Cash Flows

For the year ended 31 December 2018

 

2018

2017

 

 

Restated

 

£'000

£'000

 

 

 

Cash flows from operating activities

 

 

Profit before income tax

4,199

2,991

Adjustments

 

 

Depreciation

569

495

Amortisation

4,505

3,297

Share- based payment cost

471

592

Finance expenditure

1,304

950

Exchange rate variances

(249)

(92)

Other financial items

(576)

407

Cash flows before changes in working capital

10,223

8,640

Movement in working capital

 

 

Increase in trade and other receivables

(1,689)

(2,391)

Increase in trade and other payables

1,479

202

Cash generated from operations

10,013

6,451

Income taxes paid

(1,853)

(1,418)

Net cash flows from operating activities

8,160

5,033

Cash flows from investing activities

 

 

Contingent consideration paid

(3,625)

(2,550)

Acquisition of subsidiaries net of cash acquired

(25,479)

(10,210)

Payments to acquire property, plant and equipment

(869)

(455)

Payments to acquire intangible assets

(1,509)

(1,222)

Net cash used in investing activities

(31,482)

(14,437)

Cash flows from financing activities

 

 

New bank loans (net of debt issue costs)

7,400

23,960

Proceeds from issue of new shares

19,272

8,870

Repayment of bank loans

(2,044)

(16,149)

Interest on bank loans paid

(1,049)

(627)

Dividends paid

(3,248)

(2,457)

Net cash flows from financing activities

20,331

13,597

Net (decrease)/increase in cash and cash equivalents

(2,991)

4,193

Cash and cash equivalents brought forward

5,183

985

Exchange differences on cash and cash equivalents

(2)

5

Cash and cash equivalents carried forward

2,190

5,183

 

 

NOTES TO PRELIMINARY RESULTS

 

1. Basis of preparation

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the year ended 31 December 2018. The audit of the statutory accounts of Inspired Energy Plc for the year ended 31 December 2018 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement. The statutory accounts for the year ended 31 December 2018 will be delivered to the registrar of Companies following the Company's Annual General Meeting.

Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS). 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 2018.

Going concern

The Group's forecasts, which have been prepared for the period to 31 December 2021 after taking into account the contracted order book, future sales performance, expected overheads, capital expenditure and debt service costs, show that the Group should be able to operate profitably and within the current financial resources available to the Group.

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

The preparation of financial statements, in conformity with Generally Accepted Accounting Principles under IFRSs, requires management to make estimates and assumptions that affect the reporting amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates.

 

1.1 Revenue recognition

 

The below represents the impact of the adoption of IFRS 15 revenue from contracts with customers:

 

Previous accounting policy

Policy applied from 1 January 2018

Revenue

Revenue is comprised of commissions received from energy suppliers, net of value-added tax, for the procurement as an agent of fixed, flexible or risk-managed energy contracts with Corporate and SME customers. The Group recognises revenue for services provided where the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the Group.

Revenue

Revenue is comprised of commissions received from energy suppliers and fees received from customers, net of value-added tax, for the review, analysis and negotiation of gas and electricity contracts on behalf of UK and Irish businesses.

To the extent that invoices are raised to a different pattern than the revenue recognition described below, appropriate adjustments are made through deferred and accrued revenue to account for revenue when performance obligations have been met.

Revenue - Corporate Division

Commissions received from the energy suppliers are based upon the energy usage of the Corporate customer at agreed commission rates with the energy suppliers. Commission income is recognised in line with the energy usage of the Corporate customer over the term of the contract, which is considered to be the point at which commission income can be reliably measured. This is due to the impact of the observed variability of actual to estimated energy usage on Corporate customer contracts on the substantial order book of the Corporate division.

The majority of contracts are entered into as 'direct billing' contracts, whereby commissions are received in cash terms in line with the billing profile of the ultimate customer, which can be on a monthly or quarterly basis. For a minority of suppliers, 'up-front payment' contracts are entered into, whereby the supplier pays a percentage of the commission on the contract commencement date, with the remaining percentage on contract reconciliation at a future specified date.

Accrued income for the Corporate division represents commission income recognised at the year-end in respect of customer energy usage prior to the year-end which has not been settled by the energy supplier at that point.

For risk-managed contracts, where a number of services are provided to the Corporate customer over the term of the contract, commission income is similarly recognised in line with the energy usage of the customer which approximates to recognition on a straight-line basis over the contract period.

In respect of contracts for ongoing services billed directly to the Corporate customer, including bureau services (range of services tailored to a client's specific requirement), revenue represents the value of work done in the year. Revenue in respect of contracts for ongoing consultancy services is recognised as it becomes unconditionally due to the Group as services are delivered and is measured by reference to stage of completion as determined by cost profile.

Revenue - Corporate Division

The Corporate division core services are the review, analysis and negotiation of gas and electricity contracts on behalf of UK and Irish Corporate clients (Procurement Revenue). Additional services provided include bill validation, cost recovery and optimisation services (Optimisation Revenue).

Procurement Revenue

Procurement revenue is generated by way of commissions received from energy suppliers, based upon energy usage of the Corporate customer, and fees received directly from customers.

The Group subcategorises the Corporate division into the following sectors, and given the differing service offerings provided by each, the measurement and recognition of procurement revenue should be assessed individually:

1.   Estate intensive clients.

2.   Energy intensive clients.

3.   Public sector clients.

4.   Corporate clients.

 

Estate intensive, energy intensive and public sector clients:

Within these sectors, there are a number of promises made within a contract, including, but not limited to, development of a risk management strategy, budgeting and forecasting, bill validation, ongoing market intelligence and ongoing account management. The various promises made within each contract are not distinct and each of the promises made are inputs into the combined output that each customer has contracted for, being a cost-effect energy management solution. Thus there is considered to be one performance obligation within each contract.

Estate intensive, energy intensive and public sector clients are provided with an outsourcing arrangement that requires significant input over the life of a contract. The customer receives and consumes the benefits of the services provided as Inspired perform, and revenue is recognised evenly over time.

Thus the change in accounting policy has no impact on revenue recognition within the estate intensive, energy intensive and public sectors.

Corporate clients:

Corporate clients require less input from Inspired over the life of the contract than the outsourcing arrangements provided to estate intensive, energy intensive and public sector clients. Corporate clients are provided with energy reviews, bill validation and account management, which are implied services, over the life of a contract. These promises are not distinct from the promise to provide procurement and therefore are combined into a single performance obligation.

The profile of revenue recognition, using a cost-based input method, should reflect the performance of the company, with the more labour-intensive contract negotiation being recognised up front.

After assessment of the costs to serve a corporate customer, we judged that an element of revenue proportional to the progress towards complete satisfaction of the performance obligation, should be recognised upon contract live date.

The revenue recognised is constrained by the proportion of the revenue that is expected to reverse over the life of the contract, due to consumption variances and contract attrition. This amount is calculated by comparing total amount realised versus total amount expected across all completed contracts within the portfolio.

The expected value of the contract recognised on the go-live date of the contract is 10% of the total contract value.

This represents a change in policy.

Optimisation Revenue

Optimisation revenue encompasses separate works carried out for customers, including, but not limited to, energy audits, infrastructure and metering services and legislative compliance. Each assignment is a separate engagement and each engagement is a separate performance obligation.

Revenue is generated by way of fees received directly from customers and recognised as the service is provided.

Thus the change in accounting policy has no impact on Optimisation revenue recognition.

Revenue - SME Division

The SME division provides services through procuring contracts with energy suppliers on behalf of SME customers and generates revenues by way of commissions received directly from the energy suppliers. No further services regarding procurement are performed once the contract is authorised by the supplier. Commissions earned by the SME division fall into two broad categories:

For other SME agreements, commissions are based upon the energy usage of the SME customer at agreed commission rates with the energy suppliers. The expected commission over the full term of the contract is recognised at the point the contract is authorised by the supplier. Where actual energy use by the business differs to that calculated at the date the contract goes live, an adjustment is made to revenue once the actual data is known.

The cash received profile relating to these revenues varies according to the contract terms in place with the energy supplier engaged and can be received before the date the contract goes live or spread over the terms of the contract between the energy supplier and the end customer, which can be for a period of up to three years. This amount is not discounted as the impact is immaterial. Accrued revenue relates to commission earned, not yet received or paid.

Revenue - SME Division

The SME division provides services through procuring contracts with energy suppliers on behalf of SME customers and generates revenues by way of commissions received directly from the energy suppliers. No further services regarding procurement are performed once the contract is authorised by the supplier.

Commissions are based upon the energy usage of the SME customer at agreed commission rates with the energy suppliers. The expected commission over the full term of the contract is recognised at the point the contract is authorised by the supplier as this is the point at which control of the service is seen to transfer to the customer.

The revenue recognised is constrained by the proportion of the revenue that is expected to reverse over the life of the contract, due to consumption variances and contract attrition. This amount is calculated by comparing total amount realised versus total amount expected across all completed contracts within the portfolio.

The cash received profile relating to these revenues varies according to the contract terms in place with the energy supplier engaged and can be received before the date the contract goes live or spread over the terms of the contract between the energy supplier and the end customer, which can be for a period of up to five years. This amount is not discounted as the impact is immaterial. Accrued revenue relates to commission earned, not yet received or paid.

The above assessment under IFRS 15 mirrors the Group's recognition of revenue under IAS 18, and as a result, the change in accounting policy has no impact on revenue recognition within this division.

 

Cost of Sales

Cost of sales represents internal or external commissions paid in respect of sales made and is recognised as follows:

Corporate Division

Sales commissions paid in respect of the Corporate division are recognised in profit or loss on a straight-line basis over the life of the contract, being a reasonable approximation of how the relative revenues are recognised.

SME Division

Sales commissions paid in respect of both COTS and other SME agreements are recognised in profit or loss at the point when the contract is authorised with the supplier, and is therefore recognised in the same period as the associated commission income.

Cost of Sales

Cost of sales represents internal or external commissions paid in respect of sales made and is recognised as follows:

Corporate Division

Commissions paid in respect of the Corporate division are capitalised and released over the length of the contract to which they relate. The value of capitalised commissions as at 31 December 2018 is £741,000.

SME Division

Commissions paid in respect of the SME division are recognised in profit or loss at the point when the contract is authorised with the supplier, thus mirroring the recognition of the associated revenue.

 

1.2 Prior Year Restatement - Business Combinations

The Group's financial statements for the year ended 31 December 2017 were sampled by the Financial Reporting council as part of the thematic review of smaller listed and AIM quoted companies report and accounts, with a focus on the Group's Statement of Cash Flows and Accounting Policies, including Critical Judgements and Estimates. As a result of the review, management were challenged on the Basis of preparation note in the 2017 financial statements, in particular, the date from which the Group consolidated Horizon.

In the financial statements for the year ended 31 December 2017, management judged the date at which control of Horizon passed to the Group, to be the date at which the locked box mechanism was entered into, being 31 March 2017 (the "Locked Box Date"), between the vendors and the Group. Where a deal subsequently completes, the Locked Box Date is the date at which the economic risks and benefits of ownership transferred to Group. Legal completion occurred on 17 July 2017.

As detailed in the Chief Executive's Statement, management have re-considered this accounting policy and concluded it was not consistent with the requirements of IFRS 10. Management acknowledges, that whilst there are significant indicators of control such as economic measures, including the benefit of all cash generated by the trading of the acquired entity from locked box date, in its current form, the share purchase agreement did not contain sufficient substantive rights to conclude the ability to control the acquired entity from the Locked Box Date.

 

As such, the financial statements for the year ended 31 December 2017 have been restated. Full details of the restated Group statement of comprehensive income are included below.

This change in date of consolidation had no impact on the acquired cash reserves or the financial statement for Horizon for the full year. The restatement has no impact on the 2018 statement of comprehensive income or future forecasts of the Group. The restatement had no impact on the organic growth of the Group in 2017.

All FY2018 acquisitions have been consolidated from the legal completion date.

 

Prior to the restatement the financial highlights comparison would be as follows:

 

Financial Highlights

 

2018

 

2017

 

 

Movement

Revenue

£32.69m

£27.46m

19%

Gross Profit

£27.67m

£22.81m

21%

Adjusted EBITDA2

£13.75m

£11.00m

25%

Adjusted Profit Before Tax3

£11.38m

£8.96m

27%

Profit Before Tax

£4.20m

£3.55m

18%

Cash Generated from Operations

£10.01m

£6.91m

45%

Adjusted Diluted EPS4

1.61p

1.38p

17%

Diluted Basic EPS

0.53p

0.46p

22%

As a comparison, the restated financial highlights are:

 

Financial Highlights

 

2018

 

2017

Restated1

 

Movement

Revenue

£32.69m

£26.36m

25%

Gross Profit

£27.67m

£21.76m

28%

Adjusted EBITDA2

£13.75m

£10.44m

34%

Adjusted Profit Before Tax3

£11.38m

£8.40m

38%

Profit Before Tax

£4.20m

£2.99m

48%

Cash Generated From Operations

£10.01m

£6.45m

54%

Adjusted Diluted EPS4

1.61p

1.29p

26%

Diluted Basic EPS

0.53p

0.37p

51%

 

Note

1.     Restated to revise the date from which Horizon was consolidated.

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

3.     Adjusted profit before tax is earnings before tax, amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), exceptional items, share-based payments, the unwinding of contingent consideration and foreign exchange variances.

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

 

The restated Group statement of comprehensive income is as follows:

 

 

Previously Reported

Restated Adjustments

Reclassification 1.

Restated

 

£000

£000

£000

£000

Revenue

27,458

(1,102)

-

26,356

Cost of sales

(4,645)

49

-

(4,596)

Gross profit

22,813

(1,053)

-

21,760

Administrative expenses

(17,703)

491

(607)

(17,819)

Operating profit

5,110

(562)

(607)

3,941

 

 

 

 

 

Analysed as:

 

 

 

 

Earnings before exceptional costs/(items), depreciation, amortisation and share-based payment costs

11,004

(562)

-

10,442

Exceptional costs/(items)

(1,510)

-

(607)

(2,117)

Depreciation

(495)

-

-

(495)

Amortisation of intangible assets

(3,297)

-

-

(3,297)

Share-based payment cost

(592)

-

-

(592)

 

5,110

(562)

(607)

3,941

Finance expenditure

(1,562)

-

607

(955)

Other financial items

5

-

-

5

Profit before income tax

3,553

(562)

-

2,991

Income tax expense

(1,020)

62

-

(958)

Profit for the year

2,533

(500)

-

2,033

Other comprehensive income:

 

 

 

 

Exchange differences on translation of foreign operations

210

-

-

210

Total other comprehensive income for the year

210

-

-

210

Total comprehensive income from continuing operations

2,743

(500)

-

2,243

Attributable to:

 

 

 

 

Equity owners of the Company

2,743

(500)

-

2,243

 

 

 

 

 

Basic earnings per share attributable to the equity holders of the Company (pence)

0.48

(0.09)

-

0.39

Diluted earnings per share attributable to the equity holders of the Company (pence)

0.46

(0.09)

-

0.37

Adjusted basic earnings per share attributable to the equity holders of the company (pence)

1.43

(0.10)

-

1.33

Adjusted diluted earnings per share attributable to the equity holders of the company (pence)

1.38

(0.09)

-

1.29

 

The restated Group statement of financial position is as follows:

 

 

Previously Reported

Restated Adjustments

Final fair value adjustment (goodwill) 2.

Restated

 

£000

£000

£000

£000

ASSETS

 

 

 

Non-current assets

 

 

 

 

Goodwill

21,680

(500)

1,010

22,190

Other intangible assets

11,662

-

-

11,662

Property, plant and equipment

1,407

-

-

1,407

Non-current assets

34,749

(500)

1,010

35,259

Current assets

 

 

 

Trade and other receivables

16,304

-

(427)

15,877

Cash and cash equivalents

5,183

-

-

5,183

Current assets

21,488

-

(427)

21,060

Total assets

56,237

(500)

583

56,319

LIABILITIES

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

2,532

-

-

2,532

Bank borrowings

2,037

-

-

2,037

Contingent consideration

3,036

-

583

3,619

Current tax liability

3,022

-

-

3,022

Current liabilities

10,627

-

583

11,210

Non-current liabilities

 

 

 

Bank borrowings

17,809

-

-

17,809

Trade and other payables

33

-

-

33

Contingent consideration

1,375

-

-

1,375

Interest rate swap

144

-

-

144

Deferred tax liability

1,126

-

-

1,126

Non-current liabilities

20,487

-

-

20,487

Total liabilities

31,114

-

583

31,697

Net assets

25,122

(500)

-

24,622

EQUITY

 

 

 

 

Share capital

711

-

-

711

Share premium account

13,707

-

-

13,707

Merger relief reserve

15,410

-

-

15,410

Share-based payment reserve

1,231

-

-

1,231

Retained earnings

7,854

(500)

-

7,354

Investment in own shares

(2,618)

-

-

(2,618)

Translation reserve

210

-

-

210

Reverse acquisition reserve

(11,383)

-

-

(11,383)

Total equity

25,122

(500)

-

24,622

 

The restated Group statement of cash flows is as follows:

 

 

Previously Reported

Restated Adjustments

Reclassification 1.

Restated

 

£000

£000

£000

£000

Cash flows from operating activities

 

 

 

Profit before income tax

3,553

(562)

-

2,991

Adjustments

 

 

 

 

Depreciation

495

-

-

495

Amortisation

3,297

-

-

3,297

Share-based payment cost

592

-

-

592

Finance expenditure

1,557

-

(607)

950

Exchange rate variances

(92)

-

-

(92)

Other financial items

(200)

-

607

407

Cash flows before changes in working capital

9,202

(562)

8,640

Movement in working capital

 

 

 

 

Increase in trade and other receivables

(2,441)

50

-

(2,391)

Increase in trade and other payables

152

50

-

202

Cash generated from operations

6,913

(462)

-

6,451

Income taxes paid

(1,418)

-

-

(1,418)

Net cash flows from operating activities

5,495

(462)

-

5,033

Cash flows from investing activities

 

 

 

Contingent consideration paid

(2,550)

-

-

(2,550)

Acquisition of subsidiaries, net of cash acquired (note 11)

(10,672)

462

-

(10,210)

Payments to acquire property, plant and equipment

(455)

-

-

(455)

Payments to acquire intangible assets

(1,222)

-

-

(1,222)

Net cash used in investing activities

(14,899)

462

-

(14,437)

Cash flows from financing activities

 

 

 

New bank loans (net of debt issue costs)

23,960

-

-

23,960

Proceeds from issue of new shares

8,870

-

-

8,870

Repayment of bank loans

(16,149)

-

-

(16,149)

Interest on bank loans paid

(627)

-

-

(627)

Dividends paid

(2,457)

-

-

(2,457)

Net cash flows from financing activities

13,597

-

-

13,597

Net increase in cash and cash equivalents

4,193

-

4,193

Cash and cash equivalents brought forward

985

-

-

985

Exchange differences on cash and cash equivalents

5

-

-

5

Cash and cash equivalents carried forward

5,183

-

-

5,183

 

1.  The reclassification column within the restated primary statements relates to the reclassification of the change in fair value of contingent consideration from finance expenditure to administrative expenses. This has now been included as an exceptional item and has no impact on adjusted EBITDA, profit before income tax, the balance sheet and cash generated from operations.

2.  In accordance with IFRS 3, where provisional fair value assessments are made at the date of acquisition, and are subsequently updated, such adjustments have been reflected in the comparative period.

 

 

2. Segmental information

 

Revenue and segmental reporting

The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group's Executive Directors. Operating segments for the year to 31 December 2018 were determined on the basis of the reporting presented at regular Board meetings of the Group which is by nature of customer and level of procurement advice provided. The segments comprise:

The Corporate Division ("Corporate")

 

This sector comprises the operations of Inspired Energy Solutions Limited, Direct Energy Purchasing Limited, Wholesale Power UK Limited, STC Energy and Carbon Holdings Limited, Informed Business Solutions Limited, Flexible Energy Management Limited, Churchcom Limited, Horizon Energy Group Limited, Energy Cost Management Limited, SystemsLink 2000 Limited, Professional Cost Management Group Limited, Squareone Enterprises Limited and Inprova Finance Limited. Corporate's core services are in the review, analysis and negotiation of gas and electricity contracts on behalf of UK and Irish Corporate clients. Additional services provided include energy review and benchmarking, negotiation, bill validation, cost recovery, optimisation services and software solutions. The Group's Corporate division benefits from a market-leading trading team, which actively focuses on energy intensive and public sector customers, providing more complex, long-term energy frameworks based on agreed risk management strategies.

The SME division ("SME")

 

This sector comprises the operations of EnergiSave Online Limited, KWH Consulting Limited and Simply Business Energy Limited. Within the SME division, the Group's energy consultants contact prospective SME clients to offer reduced tariffs and contracts based on the unique situation of the customer. Leads are generated and managed by the Group's internally generated, bespoke CRM and case management IT system. Tariffs are offered from a range of suppliers and the Group is actively working with new suppliers to increase the range of products available to SME clients.

PLC costs

 

This comprises the costs of running the PLC, incorporating the cost of the Board, listing costs and other professional service costs such as audit, tax, legal and Group insurance.

 

 

 

2018

 

2017 Restated

 

Corporate

SME

PLC costs

Total

Corporate

SME

PLC costs

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

27,311

5,381

-

32,692

20,358

5,998

-

26,356

Cost of sales

(1,923)

(3,095)

-

(5,018)

(2,180)

(2,416)

-

(4,596)

Gross profit

25,388

2,286

-

27,674

18,178

3,582

-

21,760

Administrative expenses

(13,848)

(157)

(8,166)

(22,171)

(10,078)

(1,533)

(6,208)

(17,819)

Operating profit

11,540

2,129

(8,166)

5,503

8,100

2,049

(6,208)

 

3,941

Analysed as:

 

 

 

 

 

 

 

 

EBITDA

13,769

2,431

(2,448)

13,752

9,635

2,454

(1,647)

10,442

Depreciation

(514)

(36)

(19)

(569)

(460)

(35)

-

(495)

Amortisation

(727)

(120)

(3,658)

(4,505)

(375)

(357)

(2,565)

(3,297)

Share-based payments

(157)

(19)

(295)

(471)

(278)

(13)

(301)

(592)

Exceptional costs/(items)

(831)

(127)

(1,746)

(2,704)

(422)

-

(1,695)

(2,117)

 

11,540

2,129

(8,166)

5,503

8,100

2,049

(6,208)

3,941

Finance expenditure

 

 

 

(1,380)

 

 

 

(955)

Other financial items

 

 

 

76

 

 

 

5

Profit before income tax

 

 

 

4,199

 

 

 

2,991

Total assets

26,134

6,938

52,451

85,523

20,017

4,420

31,882

56,319

Total liabilities

7,641

684

31,883

40,208

3,703

462

27,532

31,697

                   

 

3. Exceptional costs/(items)

 

2018

2017

 

£'000

£'000

Fees associated with acquisition

2,345

896

Restructuring costs                

935

614

Change in fair value of contingent consideration

(576)

607

 

2,704

2,117

 

One-off costs include costs of £935,000 relating to restructuring programmes associated with the Board transition, integration of the Corporate division from trading subsidiaries to a customer-focused structure, and the integration of businesses acquired in 2017 and 2018. These costs are considered by the Directors to be either material in nature or non-recurring and therefore require separate identification to give a true and fair view of the Group's result for the year. Costs associated with business combinations of £2,345,000 have been incurred which would not normally be seen as costs or income relating to the underlying principal activities of the Group.

Change in the fair value of contingent consideration includes a gain on revaluation of contingent consideration of £970,000 in relation to the acquisition of Horizon July 2017. The final aggregate consideration paid for Horizon was £12.7m, with Horizon contributing £4.2m and £2.6m to Group revenues and EBITDA respectively in 2018, equating to a multiple of 4.9x EBITDA.

 

 

 

4. Finance expenditure

 

2018

2017

 

£'000

£'000

Interest payable on bank borrowings

1,071

627

Foreign exchange variance

254

136

Amortisation of debt issue costs

55

192

 

1,380

955

 

 

5. Income tax expense

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

 

2018

2017

Restated

 

£'000

£'000

Current tax

 

 

Current tax charge

1,584

1,337

Adjustments in respect of prior periods

(87)

88

 

1,497

1,425

Deferred tax

 

 

Origination and reversal of temporary timing differences

(537)

(600)

Adjustments in respect of prior periods

-

133

 

(537)

(467)

Total income tax charge

960

958

Reconciliation of tax charge to accounting profit:

 

 

Profit on ordinary activities before taxation

4,199

2,991

Tax at UK income tax rate of 19% (2017: 19.25%)

798

576

Disallowable expenses

319

318

Share options

(70)

(50)

Adjust closing deferred tax to reflect change in tax rate

-

(107)

Effects of current period events on current tax prior period balances

(87)

221

Total income tax charge

960

958

 

 

 

 

6. Earnings per share

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

 

2018

2017

Restated

 

£'000

£'000

Profit attributable to equity holders of the Group

3,239

2,033

Fees associated with acquisition

2,345

896

Restructuring costs

935

614

Change in fair value of contingent consideration

(576)

607

Amortisation of acquired intangible assets

3,749

2,565

Foreign exchange variance

254

136

Deferred tax in respect of amortisation of intangible assets

(536)

(407)

Share-based payment costs

471

592

Adjusted profit attributable to owners of the Group

9,881

7,036

Weighted average number of ordinary shares in issue

587,602

528,034

Dilutive effect of share options

27,679

16,756

Diluted weighted average number of ordinary shares in issue

615,281

544,790

Basic earnings per share (pence)

0.55

0.39

Diluted earnings per share (pence)

0.53

0.37

Adjusted basic earnings per share (pence)

1.68

1.33

Adjusted diluted earnings per share (pence)

1.61

1.29

 

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

Adjusted earnings per share represents the earnings per share, as adjusted to remove the effect of fees associated with acquisitions, restructuring costs, the amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), exceptional items and share-based payment costs which have been expensed to the Group statement of comprehensive income in the year, the unwinding of contingent consideration and foreign exchange variances. The adjustments to earnings per share have been disclosed to give a clear understanding of the Group's underlying trading performance. Adjusted profit before tax is calculated as follows:

 

2018

2017

Restated

 

£'000

£'000

Profit before tax

4,199

2,991

Share-based payment cost

471

592

Amortisation of acquired intangible assets

3,749

2,565

Foreign exchange variance

254

136

Exceptional costs/(items):

 

 

  Fees associated with acquisition

2,345

896

  Restructuring costs

935

614

  Change in fair value of contingent consideration

(576)

607

Adjusted profit attributable to owners of the Group

11,377

8,401

 

 

7. Property, plant and equipment

 

 

Fixtures and

Motor

Computer

Leasehold

 

 

fittings

vehicles

equipment

improvements

Total

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

At 1 January 2017

615

13

1,229

313

2,170

Acquisitions through business combinations

31

55

18

14

118

Foreign exchange variances

1

2

1

-

4

Additions

96

21

224

114

455

Disposals

-

(22)

-

-

(22)

At 31 December 2017

743

69

1,472

441

2,725

Acquisitions through business combinations

156

15

228

12

411

Foreign exchange variances

-

1

1

-

2

Additions

62

88

460

258

868

Disposals

-

(40)

1

-

(39)

At 31 December 2018

961

133

2,162

711

3,967

Depreciation

 

 

 

 

 

At 1 January 2017

265

4

506

64

839

Charge for the year

108

14

335

38

495

Disposals

-

(16)

-

-

(16)

At 31 December 2017

373

2

841

102

1,318

Charge for the year

121

26

370

52

569

Disposals

-

(3)

-

-

(3)

At 31 December 2018

494

25

1,211

154

1,884

Net book value

 

 

 

 

 

At 31 December 2018

467

108

951

557

2,083

At 31 December 2017

370

67

631

339

1,407

At 31 December 2016

350

9

723

249

1,331

             

 

 

Included within the net book value is £231,000 (31 December 2017: £152,000) relating to assets held under hire purchase agreements. The depreciation charged to the financial statements in the period in respect of such assets amounted to £56,000 (31 December 2017: £51,000).

 

8. Intangible assets and goodwill

 

 

Computer

 

Customer

Customer

Customer

Total other

 

 

 

software

Trade name

databases

contracts

relationships

 intangibles

Goodwill

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

 

 

 

At 1 January 2017

4,762

115

1,320

4,405

1,989

12,591

12,987

25,578

Additions

1,043

-

178

-

-

1,221

-

1,221

Acquisitions through business combinations

-

-

-

6,182

-

6,182

8,626

14,808

Prior year adjustment

-

-

-

-

-

-

(500)

(500)

Fair value adjustment to business combinations

-

-

-

-

-

-

1,010

1,010

Foreign exchange variances

-

-

-

164

-

164

67

231

At 31 December 2017

5,805

115

1,498

10,751

1,989

20,158

22,190

42,348

Additions

1,411

-

98

-

-

1,509

-

1,509

Acquisitions through business combinations

2,134

-

-

3,848

242

6,224

22,140

28,364

Foreign exchange variances

-

-

-

88

-

88

36

124

At 31 December 2018

9,350

115

1,596

14,687

2,231

27,979

44,366

72,345

Amortisation

 

 

 

 

 

 

 

 

At 1 January 2017

1,241

6

961

2,435

556

5,199

-

5,199

Charge for the year

1,032

6

356

1,406

497

3,297

-

3,297

At 31 December 2017

2,273

12

1,317

3,841

1,053

8,496

-

8,496

Charge for the year

1,589

6

120

2,246

544

4,505

-

4,505

At 31 December 2018

3,862

18

1,437

6,087

1,597

13,001

-

13,001

Net book value

 

 

 

 

 

 

 

 

At 31 December 2018

5,488

97

159

8,600

634

14,978

44,366

59,344

At 31 December 2017

3,532

103

181

6,910

936

11,662

22,190

33,852

At 31 December 2016

3,521

109

359

1,970

1,433

7,392

12,987

20,379

 

Computer software is a combination of assets internally generated and assets acquired through business combinations. Amortisation charged in the period to 31 December 2018 associated with computer software acquired through business combinations is £953,000 (2017: £656,000). The additional £636,000 (2017: £376,000) charged in the period relates to the amortisation of internally generated computer software. Amortisation of customer databases of £120,000 (2017: £356,000) is also in relation to internally generated intangible assets. The total amortisation charged in the period to 31 December 2018 associated with intangible assets acquired through business combinations is £3,749,000 (2017: £2,565,000).

 

 

9. Trade and other receivables

 

 

 

 

2018

2017

 

 

£'000

£'000

 

Trade receivables

5,671

3,272

 

Other receivables

667

144

 

Prepayments

1,346

1,419

 

Accrued income

14,222

11,042

 

 

21,906

15,877

 

 

10. Trade and other payables

 

 

 

 

2018

2017

 

 

£'000

£'000

 

Trade payables

1,629

963

 

Social security and other taxes

1,844

1,239

 

Accruals

2,484

237

 

Deferred income

949

-

 

Amounts due under hire purchase agreements

131

93

 

 

7,037

2,532

 

 

11. Business combinations

 

SystemsLink 2000 Limited (SL2000)

On 21 March 2018, the Group acquired 100% of the issued share capital and voting rights of SystemsLink 2000 Limited, a company based in the United Kingdom. SL2000 is a supplier of energy management software, enabling customers to effectively monitor and manage their utilities consumption.  SL2000's energy management platform 'Energy Manager' is licensed to public and private sector energy users, energy consultancies and third party intermediaries. Inspired has been a licensee of Energy Manager since the Group's IPO in 2011, to support its service offering and energy management needs of the core Corporate Division. This acquisition brings this capability in-house, providing security of access.

The acquisition of SL2000 was completed for a total consideration of £4,154,000. The payment was satisfied by £3,529,000 cash and the issue of 2,948,113 ordinary shares (with an aggregate fair value at completion of £625,000) of Inspired Energy PLC.

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

Recognised amounts of identifiable net assets

 

 

Provisional

 

 

Book

fair value

Provisional

 

value

adjustment

fair value

 

£

£

£

Property, plant & equipment

12

-

12

Intangible assets

-

2,146

2,146

Trade and other receivables

295

(44)

251

Cash and cash equivalents

359

-

359

Total assets

666

2,102

2,768

Trade and other payables

114

401

515

Current tax liability

131

(51)

80

Deferred tax liability

-

365

365

Total liabilities

245

715

960

Provisional fair value of identifiable net assets

 

 

1,808

Provisional goodwill

 

 

2,346

Fair value of consideration transferred

 

 

4,154

Satisfied by:

 

 

 

- cash consideration paid

 

 

3,529

- fair value of shares issued on 22 March 2018

 

 

625

 

 

 

4,154

Net cash outflow arising from business combinations:

 

 

 

- cash consideration paid

 

 

3,529

- cash and cash equivalents acquired

 

 

(359)

Net cash outflow

 

 

3,170

 

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to SL2000 has been carried out. Fair values are provisional as they are still within the twelve-month hindsight period to adjust fair values.

The fair value of the acquired longstanding customer relationships was calculated as £242,000. The excess earnings approach was used in valuing SL2000's existing customer relationships. The value of the customer relationships is calculated as the sum of the present value of the projected cash flow, in excess of returns on contributory assets over the life of the relationship with the customer.

The fair value of the software development Intangible at acquisition was calculated to be £1,904,000 on a reproduction cost basis and is to be amortised on a straight-line basis over five years In line with its expected economic life.

The Group estimates costs incurred in relation to the transaction to be £235,000. These costs are included within exceptional costs/items in the Group statement of comprehensive income.

Energy Cost Management Limited (ECM)

On 21 March 2018, the Group acquired 100% of the issued share capital and voting rights of Energy Cost Management Limited, a company based in the United Kingdom. ECM is a niche operator of water and energy management services, specialising in water engineering solutions.  ECM provides a range of water management services to corporate customers, including water procurement, bill validation, retrospective audit of water bills, leak detection and repair and compliance services, broadening Inspired's service offering within its core Corporate Division.

The acquisition of ECM was completed for a total consideration of £1,772,000. The initial £934,000 was satisfied in cash. The additional £1,150,000 is contingent upon ECM achieving a challenging EBITDA target until 31 December 2020 payable on 31 March 2021. The range of potential outcomes of consideration payable varied from £0.3m to £1.5m.

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

Recognised amounts of identifiable net assets

 

 

Provisional

 

 

Book

fair value

Provisional

 

value

adjustment

fair value

 

£

£

£

Property, plant and equipment

62

-

62

Intangible assets

-

130

130

Trade and other receivables

149

26

175

Cash and cash equivalent

450

-

450

Total assets

661

156

817

Trade and other payables

181

-

181

Current tax liability

17

(14)

3

Deferred tax liability

11

22

33

Total liabilities

209

8

217

Provisional fair value of identifiable net assets

 

 

600

Provisional goodwill

 

 

1,172

Fair value of consideration transferred

 

 

1,772

Satisfied by:

 

 

 

- cash consideration paid

 

 

934

- contingent consideration

 

 

1,150

- discounting impact on contingent consideration

 

 

(312)

 

 

 

1,772

Net cash outflow arising from business combinations:

 

 

 

- cash consideration paid

 

 

934

- cash and cash equivalents acquired

 

 

(450)

Net cash outflow

 

 

484

 

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to ECM has been carried out. Fair values are provisional as they are still within the twelve-month hindsight period to adjust fair values. The fair value of the customer contracts was calculated as £130,000, which includes only values ascribed to existing customer contracts ECM has in place. No value was ascribed to the customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be £95,000. These costs are included within exceptional costs/items in the Group statement of comprehensive income.

Squareone Enterprises Limited (SQ1)

On 8 August 2018, the Group acquired 100% of the issued share capital and voting rights of Squareone Enterprises Limited, a company based in the UK. SQ1 provides energy consultancy and procurement services to a range of corporate customers, with a strong presence on the education and manufacturing sectors. SQ1 benefits from a strong secured order book and retention rates and is a complementary addition to Inspired's core Corporate Division.

The acquisition of SQ1 was completed for a total consideration of £1,267,000. The initial £820,000 was satisfied in cash. The additional £525,000 is contingent upon SQ1 achieving challenging revenue targets until 31 March 2020 payable in two instalments payable on 30 April 2019 and 30 April 2020. The range of potential outcomes of consideration payable varied from £0.4m to £0.6m.

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

Recognised amounts of identifiable net assets

 

 

Provisional

 

 

Book

fair value

Provisional

 

value

adjustment

fair value

 

£

£

£

Property, plant and equipment

9

-

9

Intangible assets

-

113

113

Trade and other receivables

46

(33)

13

Cash and cash equivalent

125

-

125

Total assets

180

80

260

Trade and other payables

33

-

33

Current tax liability

-

19

19

Deferred tax liability

48

15

63

Total liabilities

81

34

115

Provisional fair value of identifiable net assets

 

 

145

Provisional goodwill

 

 

1,122

Fair value of consideration transferred

 

 

1,267

Satisfied by:

 

 

 

- cash consideration paid

 

 

820

- contingent consideration

 

 

525

- discounting impact on contingent consideration

 

 

(78)

 

 

 

1,267

Net cash outflow arising from business combinations:

 

 

 

- cash consideration paid

 

 

820

- cash and cash equivalents acquired

 

 

(125)

Net cash outflow

 

 

695

 

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to SQ1 has been carried out. Fair values are provisional as they are still within the twelve-month hindsight period to adjust fair values. The fair value of the customer contracts was calculated as £113,000, which includes only values ascribed to valid energy supply contracts and letters of authority granting SQ1 exclusivity to negotiate future energy supply contracts. No value was ascribed to the customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be £63,000. These costs are included within exceptional costs/items in the Group statement of comprehensive income.

Professional Cost Management Group Limited (PCMG)

On 10 September 2018, the Group acquired 100% of the issued share capital and voting rights of Professional Cost Management Group Limited, a company based in the UK. PCMG provides a forensic auditing service to identify and recover overpayments of utilities and telecoms bills on behalf of its clients and provides optimisation analysis to enable customers to improve their tariff and billing structure. Whilst Inspired provides cost recovery services to Its clients, the integration of PCMG to the Group creates a market leading capability, allowing the Group's existing customer base to further benefit from PCMG's specialism, and conversely, providing PCMG customers with the opportunity to benefit from the broad service offering of the enlarged Group.

The acquisition of PCMG was completed for a total consideration of £1,072,000. The initial £800,000 was satisfied in cash. The additional £550,000 is contingent upon PCMG achieving challenging EBITDA targets until 31 December 2028 payable in nine instalments payable on 31 March 2019, 31 March 2020, 31 March 2021, 31 March 2022, 31 March 2023, 31 March 2024, 31 March 2025, 31 March 2026 and 31 March 2027. The contingent consideration is based on forecasted EBITDA for the period through to 31 December 2028.

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

Recognised amounts of identifiable net assets

 

 

Provisional

 

 

Book

fair value

Provisional

 

value

adjustment

fair value

 

£

£

£

Property, plant and equipment

16

-

16

Trade and other receivables

1,004

(428)

576

Cash and cash equivalent

151

-

151

Deferred tax asset

3

-

3

Total assets

1,174

(428)

746

Trade and other payables

482

-

482

Total liabilities

482

-

482

Provisional fair value of identifiable net liabilities

 

 

264

Provisional goodwill

 

 

808

Fair value of consideration transferred

 

 

1,072

Satisfied by:

 

 

 

- cash consideration paid

 

 

800

- contingent consideration

 

 

550

- discounting impact on contingent consideration

 

 

(278)

 

 

 

1,072

Net cash outflow arising from business combinations:

 

 

 

- cash consideration paid

 

 

800

- cash and cash equivalents acquired

 

 

(151)

Net cash outflow

 

 

649

 

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to PCMG has been carried out. No value was ascribed to customer contracts or customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be £139,000. These costs are included within exceptional costs/items in the Group statement of comprehensive income.

Inprova Finance Limited (IFL)

On 6 December 2018, the Group acquired 100% of the issued share capital and voting rights of Inprova Finance Limited, a company based in the UK. IFL provides energy procurement services to its customers analysing usage data to recommend the appropriate options on either flexible procurement arrangements or a fixed price basis. IFL also provides consultancy services to its customers to enable customers to buy energy efficiently and monitor and reduce their carbon footprint. IFL is a significant operator within the UK TPI market with access to 19,000 meter points through over 1,000 customers. IFL has a strong presence in four sectors which it believes have attractive long term growth dynamics being: data centres, social housing, education and construction, which the Board believe with further extend the Group's sector specialism.

The acquisition of IFL was completed for a total consideration of £21,096,000 satisfied in cash.

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

Recognised amounts of identifiable net assets

 

 

Provisional

 

 

Book

fair value

Provisional

 

value

adjustment

fair value

 

£

£

£

Property, plant and equipment

307

-

307

Intangible assets

231

3,605

3,836

Trade and other receivables

3,631

(395)

3,236

Cash and cash equivalent

615

-

615

Total assets

4,784

3,210

7,994

Trade and other payables

1,792

-

1,792

Current tax liability

366

-

366

Deferred tax liability

18

613

631

Total liabilities

2,176

613

2,789

Provisional fair value of identifiable net assets

 

 

5,205

Provisional goodwill

 

 

15,891

Fair value of consideration transferred

 

 

21,096

Satisfied by:

 

 

 

- cash consideration paid

 

 

21,096

 

 

 

21,096

Net cash outflow arising from business combinations:

 

 

 

- cash consideration paid

 

 

21,096

- cash and cash equivalents acquired

 

 

(615)

Net cash outflow

 

 

20,481

 

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to PCMG has been carried out. Fair values are provisional as they are still within the twelve-month hindsight period to adjust fair values. The fair value of the customer contracts was calculated as £3,605,000, which includes only values ascribed to existing customer contracts IFL has in place. No value was ascribed to the customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be £1,435,000. These costs are included within exceptional costs/items in the Group statement of comprehensive income.

Horizon Energy Group Limited (HEG)

As disclosed in the 31 December 2017 annual report and accounts, on 17 July 2017, the Group acquired an initial 90% of the issued share capital and voting rights of HEG, a company based in Cork, Ireland.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to HEG was carried out. Within the twelve-month hindsight period, the Group has re-assessed the provisional fair values and which have now been adjusted as per the table below:

Recognised amounts of identifiable net assets

 

Book

Fair value

Final

 

value

adjustment

Fair value

 

(restated)

 

 

 

£000

£000

£000

Property, plant and equipment

116

116

Intangible assets

-

5,478

5,478

Trade and other receivables

1,394

(427)

967

Cash and cash equivalent

1,303

-

1,303

Total assets

2,813

5,051

7,864

Trade and other payables

927

927

Deferred tax liability

-

685

685

Total liabilities

927

685

1,612

Fair value of identifiable net liabilities

 

6,252

Goodwill

 

 

5,505

Fair value of consideration transferred

 

 

11,757

Satisfied by:

 

 

- cash consideration paid

 

 

7,960

- contingent consideration

 

 

4,194

- discounting impact on contingent consideration

 

 

(397)

 

 

 

11,757

Net cash outflow arising from business combinations:

 

 

- cash consideration paid

 

 

7,960

- cash and cash equivalents acquired

 

 

(1,303)

Net cash outflow

 

 

6,657

 

12. Preliminary Announcement

 

This preliminary announcement was approved by the board of directors on 27 March 2019. It is not the Group's statutory accounts. Copies of the Group's audited statutory accounts for the year ended 31 December 2018 will be available at the company's website shortly and a printed version will be dispatched to shareholders thereafter. 

 

 

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
FR LIFVRVVIDFIA
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


2018 Preliminary Results - RNS