TIDMINSE
RNS Number : 0381U
Inspired Energy PLC
31 March 2021
31 March 2021
Inspired Energy PLC
("Inspired Energy" or the "Group")
Final Results 2020
Inspired Energy (AIM: INSE), the leading consultant for energy
procurement, utility cost optimisation and legislative compliance
in the UK and Ireland, announces its consolidated, audited final
results for the year ended 31 December 2020.
Year in review
2020 2019
*Restated
------------------------------------------------- ---------- ---------
Continuing Operations
Revenue GBP46.1m GBP43.7m
Gross profit GBP38.9m GBP39.0m
Adjusted EBITDA** GBP12.8m GBP16.9m
Adjusted profit before tax*** GBP6.9m GBP13.0m
(Loss)/profit before tax (GBP4.54m) GBP3.08m
Underlying cash generated from operations**** GBP11.6m GBP12.9m
Adjusted diluted EPS***** 0.70p 1.74p
Diluted basic EPS (1.34p) 0.53p
Net debt GBP18.8m GBP33.4m
Corporate order book GBP63.0m GBP57.5m
Final dividend per share 0.12p nil
------------------------------------------------- ---------- ---------
Financial highlights in respect of the continuing operations of
the Group
-- Revenues delivered by the Group's continuing operations of
GBP46.1 million, 6% ahead of 2019 (2019: GBP43.7 million).
-- Group adjusted EBITDA from the continuing operations
decreased 25%, to GBP12.8 million, as a result of the impact from
the COVID-19 pandemic (2019: GBP16.9 million).
-- Corporate Order Book at 31 December 2020 increased 10% year
on year to GBP63.0 million (2019: GBP57.5 million); increasing
further to GBP73.0 million following the post period end
acquisition of Businesswise Solutions Ltd ("Businesswise") and
General Energy Management Limited ("GEM").
-- Underlying cash generated from continuing operations
(excluding the impact of deal fees and restructuring costs) of
GBP11.6 million (2019: GBP12.9 million).
-- Completed a successful fundraising of GBP31.3 million (before
expenses) in July 2020, with net debt reducing significantly to
GBP18.8 million at the year-end (2019: GBP33.4 million).
-- Reinstatement of the final dividend of 0.12 pence per share
which delivers a full year dividend of 0.22 pence per share (2019:
0.22 pence per share), in line with the Group's stated policy of
dividend cover of at least 3.0x earnings.
Operational and acquisition highlights
-- The Group exited 2020 having made strong strategic progress
and with a strengthened platform, capable of generating long term
growth and significant stakeholder returns as its markets continue
to recover.
-- Successful exit from SME business, transforms the Group into
a pure play technology enabled service provider delivering market
leading energy advisory, ESG disclosure and sustainability
solutions to UK and Irish corporate customers.
-- Business now structured across three divisions, reflecting
capabilities where the Group has a strongly differentiated
offering, all of which are underpinned by long term structural
growth drivers:
- Energy Solutions Division
- ESG Solutions Division
- Software Solutions Division
-- GBP31.3 million fundraise provided capacity to execute on
M&A opportunities, whilst retaining flexibility to invest in
further opportunities to accelerate the Group's strategic
momentum:
- Acquisition of the remaining 60% interest of Ignite Energy LTD
("Ignite") and LSI Energy Holdings Limited ("LSI"), in Q3,
strengthened the Energy Optimisation Services offering, positioning
the Group to be a leader in the delivery of Net Zero Carbon and ESG
objectives for its clients.
- Post period end, the acquisition of Businesswise and GEM have
increased our market share for Energy Assurance services, broadened
customer base and significantly increased our units of
opportunity.
-- The significant development of our sustainability offering
was recognised by the receipt of the London Stock Exchange Green
Economy Mark.
-- Further developed our technology capability through 2020,
with the roll out of new digital technology through our Software
Solutions Division offerings in 2021.
Board changes
-- Sarah Flannigan appointed to the Board as a Non-Executive
Director in July 2020, bringing a wealth of experience in the
energy sector and technology transformation.
-- Non-Executive Director Gordon Oliver stepped down from the Board on the 31 December 2020.
Current trading and outlook
2021 trading to date in the core Energy Assurance Services
business (part of the Energy Solutions Division) remains in line
with expectations and consistent with the Group's energy
consumption assumptions, being approximately 13% below 2019 levels
in Q1.
As anticipated the Group's Energy Optimisation Services (part of
the Energy Solutions Division) business has been more significantly
disrupted in Q1, as a result of ongoing lockdowns, with performance
in line with management's expectations. Demand for optimisation
services is expected to recover as clients' attention turns to the
reopening their premises in a post lockdown world.
We are excited by the prospects of the Group's recently launched
ESG Disclosure product which in Q1 reached first revenue six months
ahead of expectations. The increasing requirements of Corporate
Businesses to make mandatory ESG disclosures in 2022 provides a
favourable back drop to our strategy for the ESG Services Division
and we will continue our organic entry into this market.
One of the key areas of focus for the Group in 2021 is the
evolution of the Software Solutions Division, which creates the
proprietary software used by the Group to underpin its technology
enabled services, as well by third parties under a SaaS model. We
have been building the division for the last two years into a
platform operation which we believe is capable of delivering
incremental returns to the Group in 2022 which are greater than we
had originally anticipated.
Whilst uncertainties relating to the global pandemic remain and
should not be discounted, we continue to be excited by the
prospects for the business especially as we transform from Inspired
Energy PLC to the more holistic service offering under Inspired PLC
and aim to return to delivering our pre-covid thesis.
As a business, we are proud to have delivered Carbon Neutrality
on a market basis in 2020 and will continue our drive to achieve
Net Zero by 2035 on a location basis. In addition, from 2021
onwards we shall include ESG performance as a key component of
executive remuneration which continues to demonstrate the Group's
commitment to lead by example with respect to Energy and ESG
performance.
The Board is confident of the longer-term prospects of the Group
with the secular trend towards ESG and improved energy usage.
Despite the near-term challenges faced in Energy Optimisation
Services, the Board remains confident of achieving current market
expectations.
Commenting on the results, Mark Dickinson, CEO of Inspired
Energy, said: "Whilst 2020 clearly presented challenging marketing
conditions, the Group achieved significant strategic milestones
whilst remaining profitable and cash generative and managing an
effective response to the global pandemic.
"Looking at the year to date, the business is performing in line
with expectations and consistently with our assumptions with
respect to the global pandemic. Whilst the risks associated with
the pandemic should not be discounted, we are excited by potential
for the business to bounce back.
"In recognition of this strategic evolution, the Company is
proposing to rename itself Inspired PLC at our AGM in June 2021, to
better reflect the structure into which the Group has now evolved:
a technology enabled service provider with the market leading
position for energy procurement, utility cost optimisation and
sustainability enhancement in the UK and Ireland."
Note
* The prior year income statement has been restated to reflect
the impact of treating the SME Division as a discontinued operation
(see note 5).
**Adjusted EBITDA is earnings before interest, taxation,
depreciation, and amortisation, excluding exceptional items and
share-based payments.
***Adjusted profit before tax is earnings before tax,
amortisation of intangible assets (excluding internally generated
amortisation related to computer software and customer databases),
exceptional items, share-based payments, the change in fair value
of contingent consideration and foreign exchange gains/(losses) (A
reconciliation of this can be found in note 6)
****Underlying cash generated from operations is cash generated
from operations, as adjusted to remove the impact of restructuring
costs, fees associated with acquisitions and dividends declared to
NCI.
*****Adjusted diluted earnings per share represents the diluted
earnings per share, as adjusted to remove amortisation of
intangible assets (excluding internally generated amortisation
related to computer software and customer databases), exceptional
items, share-based payments, the change in fair value of contingent
consideration and foreign exchange gains/(losses).
For further information, please contact:
Inspired Energy PLC www.inspiredplc.co.uk
Mark Dickinson, Chief Executive Officer +44 (0) 1772 689 250
Paul Connor, Chief Financial Officer
Shore Capital (Nomad and Joint Broker) +44 (0) 20 7408 4090
Edward Mansfield
James Thomas
Michael McGloin
Peel Hunt LLP (Joint Broker)
Mike Bell
Ed Allsopp +44 (0) 20 7418 8900
Alma PR +44 (0) 20 3405 0205
Justine James +44 (0) 7525 324431
David Ison Inspired@almapr.co.uk
Molly Gretton
Group Evolution
Inspired Energy has, over the past year, evolved into a UK
market leading and technology enabled provider of energy advisory,
ESG disclosure and sustainability services.
In November 2020, we were delighted to receive the London Stock
Exchange Green Economy Mark, recognising the Group's environmental
and strategic advice, service and support to customers and the
impact the business has on the green economy.
Our 3,400 clients are present in every part of society, in both
the public sector (education, NHS, local government and social
housing) and private sector, particularly those businesses with
large property estates (distribution, property management, retail
and leisure) or which are highly energy intensive (data centres,
waste and water, manufacturing and industrial), and all of whom
typically spend more than GBP100,000 on energy and water per year
("Corporate Businesses").
The Group has evolved from solely providing assurance services
to help Corporate Businesses manage their energy procurement,
energy accounting and statutory reporting processes (Energy
Assurance Services), into a leading designer of solutions that
allow Corporate Businesses to reduce their energy consumption
through the provision of optimisation services (Energy Optimisation
Services), underpinned by a software offering to both Corporate
clients and other service providers such as third party
intermediaries (Software Solutions). The cheapest unit of energy is
the one you don't consume; it also happens to be the cleanest.
Today, Inspired Energy is also emerging as a leading provider of
ESG disclosure services, which takes our understanding of managing
large data sets relating to environmental and social issues and
supporting clients in making disclosures under a number of
reporting taxonomies (ESG Disclosure Services).
Corporate Businesses can collect and manage auditable ESG data
effectively, and disclose ESG information correctly, we further
help them work from this baseline to design solutions to improve
their ESG impact (ESG Impact Services)
Inspired ESG Inspired Energy Inspired Software
Specialises in end-to-end Delivers energy, water Delivers technology
solutions for investors and sustainability and software solutions
and Corporate Businesses assurance and optimisation that underpin the
to make effective services, so Corporate services provided
ESG Disclosures and Businesses can manage by Inspired PLC and
transform them into their costs better, makes them available
ESG Impacts reduce their carbon to third parties.
efficiently and meet
their net zero targets.
============================ ========================
Chairman's Statement
The Board is pleased with the strategic progress achieved during
the period, which ensured the Group exited 2020 having made
significant progress and with a strengthened platform capable of
generating long term growth and significant stakeholder returns, as
our customers' markets continue to recover. Whilst the financial
performance of the Group for FY20 was materially impacted by the
challenges caused by the pandemic, as conditions normalise, the
Group's medium and longer-term prospects are stronger than
ever.
Green Economy Mark
The Board is delighted to have received the London Stock
Exchange's Green Economy Mark in recognition of the sustainability
credentials and high proportion of green revenue the Group
generates through our services to customers. As ESG becomes more
central to investment decisions for every business, energy is one
of the highest cost components in the ESG wheel and one of the most
data intensive elements of the Climate change segment. As an ESG
solutions provider, it is important that we continue to lead by
example in regard to best practice and reporting in order to remain
at the forefront of energy and sustainability solutions in a Net
Zero Carbon future.
Acquisitions and Fundraise
In July 2020, the Group completed a successful fundraising of
GBP31.3 million (before expenses) through an oversubscribed placing
of GBP30.0 million, with a further GBP1.3 million raised via an
open offer (the "Fundraise"). I would like to thank our existing
shareholders for their continued support, and I would like to
extend a warm welcome to several new institutional investors who
joined the register. Part of the proceeds from the Fundraise
financed the initial cash consideration for the acquisition of the
balancing interest of Ignite. Ignite offers a broad spectrum of
energy management services, with a strong focus on delivering
energy efficiency projects and Optimisation Services to blue chip
corporate customers, increasing the capability of the Energy
Optimisation Services business. The Group subsequently completed
the value enhancing acquisition of LSI in August.
In early 2021, the Board was delighted to conclude the
acquisition of Businesswise and GEM, which are highly complementary
additions to the Group. The Fundraise provided the capacity to
execute on M&A opportunities, which were carefully structured
in light of the current economic uncertainty, to accelerate the
Group's strategic momentum. Both acquisitions increase our market
share for Energy Assurance services, broaden our customer base and
significantly increase our units of opportunity.
We are delighted to welcome the LSI, Businesswise and GEM teams
to the enlarged Group.
SME disposal
The disposal of the SME Division represented an important
milestone in the strategic direction of Inspired Energy. Having
taken the decision to exit this business, the Board concluded the
sale of the SME Division by MBO was the optimal route as it enabled
the Group to realise value, maintain continuity of service delivery
to the customer base and enable Inspired Energy to maintain full
market coverage. We wish the team every success for the future.
Dividend
Since its IPO in 2011, Inspired Energy has established a track
record of delivering profitable and cash-generative growth which
has facilitated a consistent and progressive dividend policy.
The pandemic brought a temporary halt to dividend payments,
since re-established with an interim dividend declared in September
2020. The Board remains confident in the Group's prospects and
continued ability to continue to pay a dividend. It is therefore it
is proposing, subject to shareholder approval at the AGM, a final
dividend of 0.12 pence (2019: nil pence). The final dividend aligns
with the Board's stated policy of a dividend cover of at least 3.0x
earnings, with the objective of delivering progressive dividend
growth over time.
The dividend will be payable on 26 July 2021 to all shareholders
on the register on 18 June 2021 and the shares will go ex-dividend
on 17 June 2021.
Board changes
On 28 July 2020, the Board was pleased to welcome Sarah
Flannigan to the Board as a Non-Executive Director. Her significant
experience in the energy sector and in technology transformation is
invaluable to the Board at a time when we are looking to
revolutionise our sector with a full digitisation programme for our
customers.
In addition, Gordon Oliver stood down from his position of
Non-Executive Director on the 31 December 2020. On behalf of the
Board and all at Inspired Energy, I would like to thank Gordon for
his valuable contribution during a period of significant growth for
the Group.
Staff
I would like to thank our employees who have risen to, and
overcome, the challenges that we have faced in what was an
unprecedented year. The health and wellbeing of our colleagues and
customers remains our priority. We have continued to invest in the
business and are well positioned for growth as we emerge from the
pandemic.
Mike Fletcher
Chairman
30 March 2021
CEO's Statement
I am pleased to report on the Group's 2020 results, a period in
which Inspired Energy has continued to deliver its strategic plan
and remain profitable and cash generative, whilst managing an
effective response to the global pandemic. In recognition of this
strategic evolution, the Company is proposing to rename itself
Inspired PLC subject to resolution of the Group's Annual General
Meeting in June 2021, to better reflect the structure into which
the Group has now evolved: a technology enabled service provider
with the market leading position for energy procurement, utility
cost optimisation and sustainability enhancement in the UK and
Ireland.
As we reflect on FY20, there have been many noteworthy points
throughout the year.
Record breaking indicators in Q1 FY20
The Group started Q1 with record performance in terms of
contracted business, as we carried strong momentum into FY20 from
FY19. During this time, we successfully transformed the business
from one with an operational capability of delivering 6% to 8%
annual organic growth, to one capable of delivering double digit
organic growth.
Professional pandemic response
We were immensely proud of the way the business responded to the
pandemic. We took the strategic decision some years ago to move all
staff to laptops as an aid to productivity and were an early
adopter of Microsoft Teams, so we had a strong platform on which to
build.
Having transitioned to home working seamlessly, we were most
proud of how our employees' efforts immediately focused on our
clients' needs, including those where we have essential supplier
status for (e.g. HMRC and Amey).
A key decision in our financial planning was to renegotiate and
reset banking covenants through to June 2021 to further bolster our
financial strength. This allowed us to operate effectively through
the pandemic, remaining profitable and cash generative, without
compromising our strategic focus.
Better than expected impact on Energy Assurance Services
In our early assessment of the potential impact of the COVID-19
pandemic, during Q2 2020, we identified that c.50% of the Group's
revenues were potentially exposed. This is because client fees are
recovered via the energy supplier, and therefore directly impacted
by client consumption. In response to this, the Company based its
planning assumptions on a 25% reduction in energy consumption over
the period from March to December, which pleasingly proved to have
been a conservative assessment with actual consumption reducing by
only 18% in that period.
The biggest operational impact from the pandemic has been on
optimisation services, within the Energy Solutions Division, where
access to premises has been restricted. This led to a number of
delayed orders, noting that whilst none of these orders have been
cancelled, the impact has been a delay in revenues.
M&A execution
Inspired Energy has a clearly defined acquisition strategy and
the pandemic has increased the pipeline of opportunities. We
identified a strategic opportunity to accelerate our M&A
strategy and took the opportunity to further strengthen our balance
sheet to pursue this strategy through the GBP31.3 million fundraise
in July 2020.
This facilitated the completion of the acquisition of the
remaining 60% of Ignite, which is a key pillar to deliver our Net
Zero Carbon solutions to our clients. Whilst optimisation services
have been disrupted in the short term, Ignite has continued to
build its pipeline, including signing projects with a major DIY
products retailer and a leading variety retailer.
When we completed our Fundraise, we allocated GBP20 million of
the Fundraise to a strategy of delivering between 3 and 5
acquisitions in the Energy Assurance Services market during H2
FY20. Since starting to execute this strategy, the UK has entered
into two further national lock downs. In response to this
disruption, we have maintained a disciplined approach to M&A,
stepping away from one potentially significant transaction which
did not meet our criteria. With the three acquisitions completed to
date, we believe that in a post-Covid world we will have delivered
c. GBP3 million EBITDA for c.GBP15.5 million consideration and this
marks the completion of the M&A thesis that underpinned our
placing. Our attention will now turn to further acquisitions that
underpin our Energy Optimisation Services and Software Solutions
Division. As always we will continue to evaluate our M&A
strategy pragmatically in the context of the evolving pandemic
situation and the opportunities that are available to us.
Focus on technology enabled service provision
Following the restructure at the end of FY20 on the Group now
represents a pure play technology enabled services provider to
Corporate Businesses across UK and Ireland. Capitalising on our
position as the player of scale in the highly attractive, energy,
sustainability and ESG markets, where we have strong regulatory and
compliance drivers and non-discretionary calls to action, we
provide a holistic suite of solutions to help Corporate Businesses
meet their Net Zero Carbon and ESG objectives.
Leading the way on disclosures
We were delighted to publish our Streamlined Energy and Carbon
Reporting (SECR) disclosure for FY19 a year early. SECR is a
disclosure more than 12,000 businesses in the UK need to publish
each year.
With a clear objective to lead by example in the sustainability
arena, we have published a Taskforce for Climate related Financial
Disclosures (TCFD) report a year earlier than guidance, as we
strive to deliver on our own ESG strategy, in addition to
delivering an ESG report to a GRI (Global Reporting Initiative)
standard.
As a Group we are undertaking the following initiatives as we
align our objectives and behaviours to our purpose:
Adopting the UN Sustainable Development Goals (SDGs): The Group
is in the process of rolling out the SDGs as underling principles
across the organisation. Employees have the ability to track their
activity via our proprietary 'SDGme" software which allows
companies to track their actions against the SDGs is also available
for use freely by all of our clients.
Aligning executive remuneration : To ensure the SDGs and ESG
behaviours are embedded in our daily operations, they are now a key
element in the award of performance related pay for the executive
directors.
Embedding in the culture : The Company adopts the Blanchard
framework (more detail for which can be found at:
https://www.kenblanchard.com/ ) to create a common language of
leadership across the organisation. The SDGs and ESG objectives of
the business are embedded within this.
Outlook
Increasing scale in Energy Assurance Services
As the clear player of scale in the UK and Irish market for
Energy Assurance Services, we are able to deliver services to a
level of depth and quality that it is difficult for other advisors
to compete with. The strength of our balance sheet and the impact
of the pandemic provides an opportunity to accelerate our scale in
this marketplace from a 13% market share to one between 16% and 18%
through our acquisitions and organic growth during FY21.
This increase in scale provides a platform for sustainable
double digit organic growth into the future.
Delivering Net Zero Carbon Solutions
The strategic investments the Group made in Energy Optimisation
Services between FY18 and FY20 have created a market leading
capability to deliver Net Zero Carbon Solutions to Corporate
Businesses. With COP26 (the UN Climate Change Conference of
Parties) taking place in the UK this year and an increasing
recognition of the climate emergency, the Group is well placed to
meet the needs of Corporate Businesses.
Acceleration of Software Solutions
Our Software Solutions Division is solving some of the biggest
challenges facing Corporate Businesses with respect to optimising
their energy cost equations, quantifying their carbon emissions,
and delivering their ESG objectives.
Proprietary software, developed by our Software Solutions
Division, underpins our technology enabled service provision and
allows us to deliver market leading solutions to Corporate
Businesses.
Some of the most attractive things about our market are the long
contract durations (which provide strong revenue visibility), high
client retention rates (which reduce revenue volatility) and its
highly fragmented nature which provides an attractive consolidation
opportunity. However, these attractive features also restrict the
number of clients that the Group can access at any point in time
and as such the Software Solutions Division also provides software
to other energy advisors.
This software provision to c.50 other TPIs allows us to create
value from more clients in the marketplace and to work with
successful energy advisors that could be attractive acquisition
targets in the future.
Currently our Software Solutions Division has an implied 5%
share of the market for Energy Assurance Services.
Delivery of ESG Disclosure Services
We are delighted to have started generating revenues with
respect to ESG Disclosure Services some six months ahead of plan
and are very excited about the opportunities this represents.
In order to make repeatable, auditable and consistent
disclosures, large amounts of unstructured data need to be
processed. Many Corporate Businesses do not have the resources or
expertise to do this. Our technology enabled service allows
organisations to make effective disclosures against any taxonomy
without distracting their internal resources.
The Group is also starting to build out its solutions with
respect to ESG impact starting with the launch of the SDGme system
which allows Corporate Businesses to record the contributions of
their employees towards the SDGs.
Preparation for internationalisation
As a business we focus on accelerating each of our levers of
value creation to their full potential whilst preparing for the
next lever we intend to add. ESG Disclosures is naturally a global
market and there are strong opportunities in Europe for Energy
Assurance Services and Energy Optimisation Opportunities. With this
in mind, we are looking to start the execution of our
internationalisation strategy towards the end of FY21 focusing on
acquisitions in Europe as part of thesis to provide a pan European
service provider or Energy Assurance Services.
We estimate that the size of the European market in aggregate is
six times larger than the UK market, representing an additional
GBP8.4 billion market opportunity over and above the GBP1.4 billion
opportunity the Company currently has in the UK.
Q1 2021 update
Looking at the year to date, the business is performing in line
with expectations and consistently with our assumptions with
respect to the global pandemic. Whilst the risks associated with
the pandemic should not be discounted, we are excited by potential
for the business to bounce back to levels of performance closer to
2019.
Despite the challenges the pandemic will undoubtedly bring, we
find ourselves more excited and confident than ever about the
opportunities ahead of us.
On behalf of the Board, I would like to thank our staff,
customers and wider stakeholders, for their great support
navigating through the past year of the COVID-19 pandemic and whose
health, safety and wellbeing continues to be our overriding
priority.
Mark Dickinson
Chief Executive Officer
30 March 2021
CFO's Statement
2020 has presented its challenges, and notwithstanding the
significant change to working practices from Q2 2020 onwards, the
Corporate Division, and continuing operations, delivered revenues
growing 6% to GBP46.1 million (2019: GBP43.7million).
Corporate Division (continuing operations)
As a result of the COVID-19 pandemic, organic revenues in 2020
declined 20% in the Corporate Division (2019: +6%) driven by a
reduction in energy consumption by our Corporate customers, and the
deferral of optimisation revenues. The blended decline in
consumption across Q2, Q3 and Q4 was 18%.
The Corporate Division contributed adjusted EBITDA of GBP16.1
million, a decline of 20% (2019: GBP20.2 million), with the
division generating an EBITDA margin of 35% (2019: 46%) with the
reduction in margin resulting primarily from the reduction in
consumption experienced across the Corporate client portfolio.
The Corporate Order Book as at 31 December 2020 was GBP63.0
million, an increase of 10% over the prior period (2019: GBP57.5
million), with strong customer retention and robust performance
from significant new customer wins providing visibility to the
Group. The Corporate Order Book increased to GBP73.0 million
following the post period end acquisition of Businesswise Solutions
and GEM.
Following the disposal of the SME Division in December 2020, the
Group intends to revise its segmental reporting from 2021 onwards,
to reflect the revised Group structure of the Energy Solutions,
Software Solutions and ESG Solutions divisions. During 2020, within
the Energy Solutions Division, assurance services contributed
GBP29.8 million of revenue (2019: GBP33.0 million) optimisation
contributed GBP14.2 million (2019: GBP9.0 million) and software
solutions contributed revenues of GBP2.1 million during 2020 (2019:
GBP1.7 million).
SME Division disposal
The SME Division experienced a material impact to revenues from
the pandemic and was the primary beneficiary of the Group's
utilisation of the Government CJRS which protected jobs in the
short term. The subsequent disposal of the SME Division represented
an important milestone in the strategic direction of Inspired
Energy. Having taken the decision to exit this business, the Board
believes the sale of the SME Division by MBO was the optimal route
as it enables the Group to realise value, maintain continuity of
service delivery to the customer base and enable Inspired Energy to
maintain full market coverage.
Aggregate consideration of up to GBP10.5 million payable to
Inspired Energy on the collection and run off of the SME Division's
accrued income balance, the majority of which is expected to be
received within three years of completion.
In forming a view on the fair value of the contingent
consideration to be recovered for the SME disposal, and resulting
loss on disposal, an analysis of the Group's SME portfolio at
completion of the disposal was undertaken with consideration given
to the estimated impact of the pandemic on the consumptions levels,
business failure rate and contracts not running the expected
duration. As a result, the deemed fair value of expected future
invoicing against the book was calculated to be GBP7.2 million
prior to discounting for the time value of money, the inclusion of
which equates to the GBP6.9 million contingent asset recognised in
the balance sheet at the 31 December 2020, of which, in excess of
70% is expected to be recovered prior to 31 December 2022.
The net assets of the SME Division at disposal were valued at
GBP13.4 million, including Trade and Other Payable balances of
GBP11.3 million, which includes accrued income of GBP10.5 million
and GBP1.2 million of goodwill from the acquisitions of Simply
Business Energy and KWH Consulting in 2014. Therefore, the
resulting loss on disposal recognised in the 2020 financial
statements is (GBP6.5 million).
The disposal of the SME Division has a significant impact in
reducing the working capital levels of the Group at 31 December
2020.
Group results
PLC costs of GBP3.4m (2019: GBP3.3m) remaining consistent over
the year resulting in an overall adjusted EBITDA for the year of
GBP12.8m (2019:GBP16.9m) which was impacted by the revenue
reduction as a result of the pandemic. After deducting charges for
depreciation, amortisation of internally generated intangible
assets and finance expenditure the adjusted profit before tax for
the year GBP6.9m (2019:GBP13.0m) from continuing operations once
again reflecting the impact of the pandemic on the Group's
performance.
Under IFRS measures the Group reported a loss before tax for the
year from continuing operations of GBP4.5m (2019: profit of
GBP3.1m). A full reconciliation of the Group's adjusted profit
before tax to its reported profit before tax is included at note 6.
The items included in the reconciliation include substantial
charges for the amortisation of intangible assets as a result of
acquisitions, share based payment charges, fees associated with
acquisitions, restructuring costs and the changes in the fair value
of contingent consideration.
Cash generation
Cash conversion was robust in the period with cash generated
from operations of GBP9.2 million (2019: GBP9.4 million). Excluding
non-recurring fees associated with restructuring costs and deal
fees, cash generated from operations was GBP11.6 million (2019:
GBP12.9 million).
The benefit of the deferral in Q2 VAT Payments, was offset by
the reduction in deferred income, primarily within the
project-based revenues within Ignite during the year, leading to a
GBP0.9 million reduction in payables. Following the disposal of the
SME Division, management expect cash conversion ratios in 2021 and
beyond to remain consistent with the levels seen in 2020.
Alternative performance measures
Acquisition 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
Exceptional costs of GBP3.5 million (2020: GBP2.6 million) were
incurred in the year, which GBP1.4 million of deal fees associated
with acquisitions completed in the year or subsequent to the year
end, including GBP0.3m relating to the transaction aborted Q4.
Restructuring costs of GBP0.9 million have been incurred in the
year, which includes GBP0.4 million of termination payments from
the integration of acquisitions completed prior to 2020 and LSI
acquired in August 2020, GBP0.3 million of termination payments as
a result of the disposal of the SME Division and GBP0.2 million
resulting from office and staff facility closures which the Group
took the decision not to reopen.
Furthermore, a GBP1.2 million loss due to changes in the fair
value of contingent consideration were treated as exceptional in
the period.
These costs are considered by the Directors to be material in
nature and non-recurring and therefore require separate
identification to give a true and fair view of the Group's result
for the period.
Financial position and liquidity
In May 2020, the Group agreed with its lenders to increase its
leverage covenant covering the test periods ending 30 June 2020
through to 30 June 2021 (inclusive) as part of its prudent and
measured response to the COVID-19 pandemic.
In July 2020, the Group raised GBP30.0 million (before expenses)
through an oversubscribed placing of 200,000,000 new ordinary
shares, with a further GBP1.3 million raised through an open offer
to qualifying shareholders.
The net proceeds from the placing funded the initial cash
consideration for the acquisition of the balancing interest of
Ignite, with the remaining funds enabling the Group to take
advantage of its active pipeline of potential acquisition
targets.
In addition, the acquisition of Ignite has had a material
benefit to the Group's financial position. The Group now receives
the full free cash flow benefits of wholly owning Ignite, having
previously only received 40% of profits distributed by Ignite every
six months via dividends.
From a banking covenant perspective, prior to the acquisition of
the balancing interest of Ignite in July 2020, under the Net
Adjusted Leverage definition per the facility agreement, the EBITDA
contribution from Ignite was not included within Group EBITDA.
However, the Group now benefits from 100% of Ignite's contribution
to Group EBITDA on an last twelve months basis. The treatment of
Ignite EBITDA, the free cash flow of ownership and the funding of
the transaction via equity, has significantly increased the
headroom available to the Group from a covenant perspective.
In March 2021, the Board agreed with their lenders to amend the
definition of Adjusted Net Leverage to apply from the 1 July 2021,
to reverse the impact of the adoptions of IFRS 16 and the
definition of contingent consideration to only included deferred
consideration or crystalised contingent consideration.
Collectively, these amends significantly reduce the forecast
leverage of the Group for covenant purposes.
At 31 December 2020, the Group's net debt was GBP18.8 million.
In addition to cash and cash equivalents of GBP26.9 million on hand
as at 31 December 2020, approximately GBP14.0 million of the
Group's GBP60.0 million Revolving Credit Facility is undrawn with
an additional GBP25.0 million accordion option available, subject
to covenant compliance.
Dividend
The Board is pleased to announce the reinstatement of a final
dividend of 0.12 pence per share (2019: nil pence) in line with the
Groups' revised policy of paying dividends initially covered by at
least 3.0x earnings.
The dividend will be payable on 26 July 2021 to all shareholders
on the register on 18 June 2021 and the shares will go ex-dividend
on 17 June 2021.
In summary
The strategic and financial initiatives delivered in the year,
ensure the Group is well placed to endure the economic uncertainty
generated by COVID-19, and in turn facilitate the effective
implementation of our strategic growth plan as envisaged prior to
the COVID-19 crisis, and which we expect to resume unfettered, save
for delay, post this crisis.
The Group has started 2021 positively, despite the impact of the
lockdown provisions in Q1 2021, with January and February trading
in line with management expectations.
Paul Connor
Chief Financial Officer
30 March 2021
Group statement of comprehensive income
For the year ended 31 December 2020
2020 2019
(restated*)
-------------------------------------------------------- ---- -------- -----------
Note GBP000 GBP000
-------------------------------------------------------- ---- -------- -----------
Continuing operations
Revenue 46,110 43,696
Cost of sales (7,210) (4,652)
-------------------------------------------------------- ---- -------- -----------
Gross profit 38,900 39,044
Administrative expenses (40,723) (34,813)
-------------------------------------------------------- ---- -------- -----------
Analysed as:
Adjusted EBITDA 12,767 16,920
Exceptional costs 6 (3,513) (2,547)
Depreciation 7/8 (1,173) (1,627)
Amortisation of acquired intangible assets 9 (6,038) (5,302)
Amortisation and impairment of internally generated
intangible assets 9 (2,268) (1,051)
Share-based payment cost (1,598) (2,162)
-------------------------------------------------------- ---- -------- -----------
Operating (loss)/profit (1,823) 4,231
-------------------------------------------------------- ---- -------- -----------
Finance expenditure 3 (2,678) (1,197)
Other financial items (35) 41
-------------------------------------------------------- ---- -------- -----------
(Loss)/profit before income tax 6 (4,536) 3,075
Income tax credit/(expense) 4 251 (581)
-------------------------------------------------------- ---- -------- -----------
(Loss)/profit for the year from continuing operations (4,285) 2,494
-------------------------------------------------------- ---- -------- -----------
(Loss)/profit for the year from discontinued operations 5 (6,740) 1,514
-------------------------------------------------------- ---- -------- -----------
(Loss)/profit for the year (11,025) 4,008
-------------------------------------------------------- ---- -------- -----------
Attributable to:
Non-controlling interest 1,448 602
Equity owners of the company (12,473) 3,406
-------------------------------------------------------- ---- -------- -----------
Other comprehensive income:
Items that will be reclassified subsequently to
profit or loss:
Exchange differences on translation of foreign
operations 364 (414)
-------------------------------------------------------- ---- -------- -----------
Total other comprehensive income/(expense) for
the year 364 (414)
-------------------------------------------------------- ---- -------- -----------
Total comprehensive (expense)/income for the year (10,661) 3,594
-------------------------------------------------------- ---- -------- -----------
Total comprehensive (expense)/income from continuing
operations (3,921) 2,080
-------------------------------------------------------- ---- -------- -----------
Total comprehensive (expense)/income from discontinued
operations (6,740) 1,514
-------------------------------------------------------- ---- -------- -----------
Attributable to:
Non-controlling interest 1,448 602
Equity owners of the company (12,109) 2,992
-------------------------------------------------------- ---- -------- -----------
Continuing operations
-------------------------------------------------------- ---- -------- -----------
Basic earnings per share attributable to the equity
holders of the company (pence) 6 (0.52) 0.38
Diluted earnings per share attributable to the
equity holders of the company (pence) 6 (0.52) 0.36
-------------------------------------------------------- ---- -------- -----------
Continuing and discontinued operations
-------------------------------------------------------- ---- -------- -----------
Basic earnings per share attributable to the equity
holders of the company (pence) 6 (1.34) 0.56
Diluted earnings per share attributable to the
equity holders of the company (pence) 6 (1.34) 0.53
-------------------------------------------------------- ---- -------- -----------
*The prior year income statement has been restated to reflect
the impact of treating the SME Division as a discontinued operation
(see note 5).
Group statement of financial position
At 31 December 2020
2019
2020 (restated*)
Note GBP000 GBP000
------------------------------------ ---- -------- ------------
ASSETS
Non-current assets
Investments 898 648
Goodwill 9 63,776 61,627
Other intangible assets 9 16,351 18,887
Property, plant and equipment 7 2,322 2,684
Right of use assets 8 2,593 3,710
------------------------------------ ---- -------- ------------
Non-current assets 85,940 87,556
------------------------------------ ---- -------- ------------
Current assets
Trade and other receivables 10 18,841 29,561
Deferred contingent consideration 10 6,925 -
Inventories 119 76
Cash and cash equivalents 26,884 5,241
------------------------------------ ---- -------- ------------
Current assets 52,769 34,878
------------------------------------ ---- -------- ------------
Total assets 138,709 122,434
------------------------------------ ---- -------- ------------
LIABILITIES
Current liabilities
Trade and other payables 11 8,230 10,464
Lease liabilities 992 1,125
Contingent consideration 7,741 3,311
Current tax liability 2,456 3,618
------------------------------------ ---- -------- ------------
Current liabilities 19,419 18,518
------------------------------------ ---- -------- ------------
Non-current liabilities
Bank borrowings 45,730 38,614
Lease liabilities 1,679 2,595
Contingent consideration 4,198 1,280
Interest rate swap 130 95
Deferred tax liability 1,278 1,993
------------------------------------ ---- -------- ------------
Non-current liabilities 53,015 44,577
------------------------------------ ---- -------- ------------
Total liabilities 72,434 63,095
------------------------------------ ---- -------- ------------
Net assets 66,275 59,339
------------------------------------ ---- -------- ------------
EQUITY
Share capital 1,202 892
Share premium account 67,000 37,422
Merger relief reserve 20,995 15,535
Share-based payment reserve 5,349 3,523
Retained earnings (10,418) 6,719
Investment in own shares (6,742) (6,742)
Translation reserve 272 (92)
Reverse acquisition reserve (11,383) (11,383)
------------------------------------ ---- -------- ------------
Equity attributable to shareholders 66,275 45,874
------------------------------------ ---- -------- ------------
Non-controlling interest - 13,465
------------------------------------ ---- -------- ------------
Total equity 66,275 59,339
------------------------------------ ---- -------- ------------
*The prior year statement of financial position has been
restated to reflect the impact of a change in goodwill (see note
13).
Group statement of changes in equity
For the year ended 31 December 2020
Share-
Share Merger based Investment Reverse Non- Total
Share premium relief payment Retained in own Translation acquisition controlling shareholders'
Interest
(as
capital account reserve reserve earnings shares reserve reserve restated) equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
Balance at 1
January
2019 892 37,422 15,535 1,361 7,908 (6,742) 322 (11,383) - 45,315
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
Profit for the
year - - - - 3,406 - - - 602 4,008
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
Other
comprehensive
income for
the year - - - - - - (414) - - (414)
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
Total
comprehensive
income for
the year - - - - 3,406 - (414) - 602 3,594
Share-based
payment
cost - - - 2,162 - - - - - 2,162
Acquisition of
subsidiary
undertaking
(note
13) - - - - - - - - 16,163 16,163
Dividends
declared - - - - - - - - (900) (900)
Dividends paid - - - - (4,595) - - - (2,400) (6,995)
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
Total
transactions
with owners
(as restated) - - - 2,162 (1,189) - (414) - 13,465 14,024
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
Balance at 31
December
2019 (as
restated) 892 37,422 15,535 3,523 6,719 (6,742) (92) (11,383) 13,465 59,339
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
(Loss)/profit
for
the year - - - - (12,473) - - - 1,448 (11,025)
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
Other
comprehensive
income for
the year - - - - - - 364 - - 364
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
Total
comprehensive
income for
the year - - - - (12,473) - 364 - 1,448 (10,661)
Share-based
payment
cost - - - 1,598 - - - - - 1,598
Shares issued
(2
June 2020) 6 - - - - - - - - 6
Shares issued
(10
July 2020) 89 10,620 - - - - - - - 10,709
Shares issued
(17
July 2020) 40 - 5,460 - - - - - - 5,500
Shares issued
(28
July 2020) 172 18,958 - - - - - - - 19,130
Shares issued
(15
September
2020) 3 - - - - - - - - 3
Acquisition of
subsidiary
undertaking
(note
12) - - - - (3,740) - - - (14,163) (17,903)
Disposal of
subsidiary
undertaking
(note
5) - - - 228 - - - - - 228
Dividends paid - - - - (924) - - - (750) (1,674)
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
Total
transactions
with owners 310 29,578 5,460 1,826 (17,137) - 364 - (13,465) 6,936
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
Balance at 31
December
2020 1,202 67,000 20,995 5,349 (10,418) (6,742) 272 (11,383) - 66,275
-------------- ------- ------- ------- ------- --------- ---------- ----------- ----------- ----------- -------------
The acquisition of subsidiary undertaking in 2019 has been
restated. Please see note 13 for further details.
Merger relief reserve
The 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 (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.
Non-controlling interest
The non-controlling interest represented the outstanding 60% of
the issued share capital of Ignite Energy LTD (IGN) held by third
parties. IGN was consolidated and treated as a subsidiary in the
prior year as the Group had an exclusive one-way call option to
acquire the outstanding 60% of the issued share capital. The
Directors recognised a non-controlling interest as the Share
Purchase Agreement (SPA) was structured in such a way that the
Group was deemed to have substantive control. On 17 July 2020, IGN
became 100% owned and as such a non-controlling interest was no
longer held.
Group statement of cash flows
For the year ended 31 December 2020
2020 2019
GBP000 GBP000
-------------------------------------------------------- -------- --------
Cash flows from operating activities
(Loss)/profit before income tax (11,276) 4,753
Adjustments
Depreciation 1,173 1,657
Amortisation and impairment 8,306 6,547
Share-based payment cost 1,598 2,162
Loss for the year from discontinued operations 6,740 -
Finance expenditure 2,678 1,159
Exchange rate variances (323) 82
Change in fair value of contingent consideration 1,157 136
-------------------------------------------------------- -------- --------
Cash flows before changes in working capital 10,053 16,496
Movement in working capital
(Increase)/decrease in inventories (43) 15
Increase/(decrease) in trade and other receivables 154 (5,200)
Dividends declared to NCI (900) 900
Decrease in trade and other payables (925) (1,862)
-------------------------------------------------------- -------- --------
Cash generated from operations 8,339 10,349
Income taxes paid (2,222) (1,873)
-------------------------------------------------------- -------- --------
Net cash flows from operating activities 6,117 8,476
-------------------------------------------------------- -------- --------
Cash flows from investing activities
Contingent consideration paid (3,800) (2,156)
Acquisition of subsidiaries, net of cash acquired (note
12) (5,866) (3,718)
Provision of working capital facility to discontinued
operation (250) -
Payments to acquire property, plant and equipment (1,925) (1,479)
Payments to acquire intangible assets (3,716) (2,654)
-------------------------------------------------------- -------- --------
Net cash flows used in investing activities (15,557) (10,007)
-------------------------------------------------------- -------- --------
Cash flows from financing activities
New bank loans 7,000 49,335
Repayment of bank loans - (35,033)
Debt issue costs - (580)
Proceeds from issue of new shares 29,848 -
Interest on financing activities (2,273) (1,159)
Repayment of lease liabilities (918) (978)
Dividends paid to NCI (1,650) (2,400)
Dividends paid (924) (4,595)
-------------------------------------------------------- -------- --------
Net cash flows from financing activities 31,083 4,590
-------------------------------------------------------- -------- --------
Net increase in cash and cash equivalents 21,643 3,059
Cash and cash equivalents brought forward 5,241 2,190
Exchange differences on cash and cash equivalents - (8)
-------------------------------------------------------- -------- --------
Cash and cash equivalents carried forward 26,884 5,241
-------------------------------------------------------- -------- --------
Notes to Final Results
Statement of compliance
These Condensed Consolidated Financial Statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS). They do not include all of the information
required for full annual statements and should be read in
conjunction with the 2020 Annual Report. The comparative figures
for the financial year 31 December 2019 have been extracted from
the Group's statutory accounts for that financial year. The Group
Financial Statements for the year ended 31 December 2020 were
approved by the Board on [30] March 2021. They have been reported
on by the Group's auditors and will be delivered to the registrar
of companies in due course. The report of the auditors was (i)
unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under section 498(2) or (3) of the Companies Act 2006. The Board of
directors approved the Condensed Consolidated Financial Statements
on [30] March 2021. They are not statutory accounts within the
meaning of section 435 of the Companies Act 2006.
The Consolidated Financial Statements of the Group as at and for
the year ended 31 December 2020 (2020 Annual Report) are available
upon request from the Company Secretary, Inspired Energy plc, 29
Progress Park, Orders Lane, Kirkham, Lancashire, PR4 2TZ.
The principal accounting policies applied in the preparation of
these Group financial statements are set out below.
1. Basis of preparation
The Group financial statements have been prepared under
applicable law and International Financial Reporting Standards as
adopted by the European Union (IFRSs). They have been prepared on
an accrual basis and under the historical cost convention except
for certain financial instruments measured at fair value.
The Group has taken advantage of the audit exemption for eleven
of its subsidiaries, Waterwatch UK Limited (company number
08854844), Direct Energy Purchasing Limited (03529303), Utility
Management Holdings Limited (06969480), Energy Team (UK) Limited
(06285279), Energy Team (Midlands) Limited (02913371), Churchcom
Limited (05343736), Flexible Energy Management Limited (10264309),
Inspired 4U Limited (08895906), Squareone Enterprises Limited
(05261796), Energy Cost Management Limited (03377082) and
Professional Cost Management Group Limited (06511368) by virtue of
s479A of the Companies Act 2006. The Group has provided parent
guarantees to these eleven subsidiaries which have taken advantage
of the exemption from audit.
Going concern
For the purposes of assessing the appropriateness of preparing
the Group's accounts on a going concern basis, the Directors have
considered the current cash position, available banking facilities
and the Group's base case financial forecast through to 31 December
2022, including the ability to adhere to banking covenants.
The Directors believe the Group has a strong balance sheet
position, having refinanced its banking facilities in October 2019
through to October 2023, with an option to extend to October 2024.
Furthermore, in July 2020, the Group completed a fundraise of
GBP30.0 million (before expenses) through an oversubscribed placing
of 200,000,000 new ordinary shares, with a further GBP1.3 million
via an open offer to qualifying shareholders.
As a result, at 31 December 2020 the Group's net debt was
GBP18.8 million, reducing from GBP33.4 million at 31 December 2019.
In addition to cash and cash equivalents of GBP26.9 million on hand
as at 31 December 2020, approximately GBP14.0 million of the
Group's GBP60.0 million Revolving Credit Facility is undrawn with
an additional GBP25.0m accordion option available, subject to
covenant compliance. The facility is subject to two covenants,
which are tested quarterly, adjusted leverage to Adjusted EBITDA
and Adjusted EBITDA to net finance charges. Following the onset of
the COVID-19 pandemic in March 2020, the Group agreed with its
banking partners in May 2020 a resetting of the adjusted leverage
covenant for quarters ending 30 June 2020 through to 30 June
2021.
Furthermore, the Group has agreed in March 2021 with its banking
partners to amend the treatment of contingent consideration and
IFRS 16 under the Net Adjusted Leverage covenant, which will be
applied from the quarter ending 30 September 2021. The amendment
has significantly increased the headroom available to the Group
from a covenant perspective.
Having considered this information, excluding the potential
impact of COVID-19, which is considered below, the directors
conclude that the Group has adequate resources to continue to trade
for the foreseeable future and that the accounts should be prepared
on a going concern basis.
The uncertainty as to the future impact on the Group of the
COVID-19 pandemic has been separately considered as part of the
consideration of the going concern basis of preparation. As a
Group, we earn our revenue based on providing advice and expertise
in commercial utility consumption in the UK and ROI which is a
fundamental input into any economy. Therefore, there will naturally
be a reduction in utilities consumption and demand for associated
consultancy services, such as optimisation, and revenues in the UK
and ROI commercial markets, as a result of the ongoing Covid19
pandemic.
Market data indicates year-on-year industrial and commercial
consumption reductions averaging 22% across Q2 2020, 10% in Q3 2020
and 9% in Q4 2020. January and February 2021 saw an average 11%
reduction to 2020 and 2019 comparatives.
In consideration of this market consumption data, the Group's
base case for 2021 assumes an 11% reduction in consumption across
Q1 2021 (being an average of the variance of consumption seen in
January and February 2021), Q2 2021 assumes a 9% reduction (as per
Q4 2020), and subsequently a 6% on going reduction from H2 2021
onwards.
In addition to consumption-based revenues of the Group being
directly impacted by the pandemic from Q2 to Q4 2020, the Group's
Energy Optimisation Services businesses, which are project based
and typically require access to customer sites, were disrupted from
April to September as a result of pandemic restrictions resulting
in some project deferrals. Whilst October saw the start of a
recovery for the Optimisation Services business, the lockdowns
during November again restricted site access and caused the
deferral of some projects into FY2021.
The Group's base case assumes significant disruption to
optimisation revenues in Q1, and then optimisation revenues
recovering during Q2 2021 as the UK progresses through the roadmap
to the economy re-opening in June 2021.
Clearly, the ultimate impact, and duration of the COVID-19
pandemic is difficult to predict and as such, we have considered
scenarios when stress testing the downside scenario forecasts for
the period to December 2022.
Our stress testing indicates that to breach the banking
covenants, the Group would have to miss forecast Q1 and Q2 EBITDA
per the base case by more than 25% for the last twelve months test
periods ending 31 March 2021 and 30 June 2021, with the levels of
headroom increasing further to in excess of 40% from the quarter
ending 30 September 2021 onwards.
The Board considered a severe downside scenario which assumed
the Optimisation Service Revenues performed in Q2, Q3 and Q4 2021
as per the 2020 comparative and year-on-year consumption levels
(2021 vs 2019) in Q2 through to Q4 matched the reductions seen in
Q2 2020 of 22%. In this scenario, even prior to the Group taking
any mitigating actions in relation to costs or cash, the Group
would still have sufficient headroom under its banking
covenants.
The Directors note that the Group traded marginally ahead of the
base case during January and February 2021.
Therefore, despite the ongoing uncertainty created by the
pandemic, the Directors believe that the Group is well placed to
manage its business risks and, after making enquiries including a
review of forecasts and scenarios, taking account of the impact of
the pandemic on 2020 and YTD 2021 trading, reasonably possible
changes in trading performances in the next 12 months and
considering the available liquidity, including banking facilities,
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the next 12 months
following the date of approval of these financial statements.
Therefore, the Directors continue to adopt the going concern basis
of accounting in preparing the financial statements.
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 2020 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. Following the decision to dispose of
the SME Division, the Group is organised into two operating
segments. 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, Inprova
Finance Limited, Ignite Energy LTD, Waterwatch UK Limited,
Independent Utilities Limited and LSI Independent Utility Brokers
Limited. Corporate's core services are the review, analysis and
negotiation of gas and electricity contracts on behalf of UK and
ROI 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.
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.
Any charges between segments are made in line with the Group's
transfer pricing policy. These amounts have been removed, via
consolidation, for the purposes of the information shown below.
The comparative year segmental information has been restated to
remove the SME Division. Information about the income, expenses,
cash flows and net assets of the SME Divisions is provided in note
5.
2020 2019 (restated)
------------------------------- ------------------------------
Corporate PLC costs Total Corporate PLC costs Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- --------- --------- -------- --------- --------- --------
Revenue 46,110 - 46,110 43,696 - 43,696
Cost of sales (7,210) - (7,210) (4,652) - (4,652)
----------------------------- --------- --------- -------- --------- --------- --------
Gross profit 38,900 - 38,900 39,044 - 39,044
Administrative expenses (28,858) (11,865) (40,723) (25,337) (9,476) (34,813)
----------------------------- --------- --------- -------- --------- --------- --------
Operating (loss)/profit 10,042 (11,865) (1,823) 13,707 (9,476) 4,231
----------------------------- --------- --------- -------- --------- --------- --------
Analysed as:
EBITDA 16,119 (3,352) 12,767 20,229 (3,309) 16,920
Depreciation (771) (402) (1,173) (1,493) (134) (1,627)
Amortisation and impairment (2,639) (5,667) (8,306) (1,111) (5,242) (6,353)
Share-based payment cost (1,598) - (1,598) (2,162) - (2,162)
Exceptional costs (1,069) (2,444) (3,513) (1,756) (791) (2,547)
----------------------------- --------- --------- -------- --------- --------- --------
10,042 (11,865) (1,823) 13,707 (9,476) 4,231
---------------------------- --------- --------- -------- --------- --------- --------
Finance expenditure (2,678) (1,197)
Other financial items (35) 41
----------------------------- --------- --------- -------- --------- --------- --------
(Loss)/profit before income
tax (4,536) 3,075
----------------------------- --------- --------- -------- --------- --------- --------
Total assets 5,416 133,293 138,709 6,544 98,054 104,598
----------------------------- --------- --------- -------- --------- --------- --------
Total liabilities 15,055 57,379 72,434 20,904 41,680 62,584
----------------------------- --------- --------- -------- --------- --------- --------
3. Finance expenditure
2020 2019
(restated)
GBP000 GBP000
-------------------------------------- ------ ----------
Interest payable on bank borrowings 1,766 1,268
Interest payable on lease liabilities 288 132
Foreign exchange variance 253 (414)
Other interest 30 -
Loan facility fees 225 192
Amortisation of debt issue costs 116 19
-------------------------------------- ------ ----------
2,678 1,197
-------------------------------------- ------ ----------
4. Income tax (credit)/expense
The income tax (credit)/expense is based on the (loss)/profit
for the year and comprises:
2019
2020 (restated)
GBP000 GBP000
-------------------------------------------------------------------- ------- -----------
Current tax
Current tax expense 575 1,885
-------------------------------------------------------------------- ------- -----------
575 1,885
-------------------------------------------------------------------- ------- -----------
Deferred tax
Origination and reversal of temporary differences (826) (1,304)
-------------------------------------------------------------------- ------- -----------
(826) (1,304)
-------------------------------------------------------------------- ------- -----------
Total income tax (credit)/expense (251) 581
-------------------------------------------------------------------- ------- -----------
Reconciliation of tax (credit)/expense to accounting (loss)/profit:
(Loss)/profit on ordinary activities before taxation (4,536) 3,470
-------------------------------------------------------------------- ------- -----------
Tax at UK income tax rate of 19% (2019: 19%) (862) 659
Disallowable expenses 501 429
Exchange rate difference (145) (186)
Share options 164 (295)
Movement in deferred tax asset not recognised (271) (130)
Non-eligible intangible assets 362 104
-------------------------------------------------------------------- ------- -----------
Total income tax (credit)/expense (251) 581
-------------------------------------------------------------------- ------- -----------
5. Discontinued operations
On 10 December 2020, the Group completed the sale of the SME
Division, consisting of subsidiaries Energisave Online Limited, KWH
Consulting Limited and Simply Business Energy Limited, to its
management team by way of a management buyout.
The results of the discontinued operation and the effect of the
disposal on the financial position of the Group were as
follows:
Results for the discontinued operations for the period to
disposal
2020 2019
Income Statement GBP000 GBP000
------------------------------------------------ ------- -------
Revenue 3,128 5,603
Operating costs (3,376) (3,921)
------------------------------------------------- ------- -------
Operating (loss)/profit (248) 1,682
------------------------------------------------- ------- -------
Net finance costs (4) (3)
------------------------------------------------- ------- -------
(Loss)/profit before tax (252) 1,679
------------------------------------------------- ------- -------
Tax expense - (164)
------------------------------------------------- ------- -------
(Loss)/profit from operating activities, net of
tax (252) 1,515
------------------------------------------------- ------- -------
Loss on sale of discontinued operation (6,488) -
------------------------------------------------- ------- -------
(Loss)/profit from discontinued operations, net
of tax (6,740) 1,515
------------------------------------------------- ------- -------
Effect of disposal on the financial position of the Group
2020
Net assets disposed of and loss on disposal GBP000
--------------------------------------------- -------
Goodwill 1,208
Intangible assets 187
Right of use assets 10
Property, plant and equipment 12
Trade and other receivables 11,353
Cash and cash equivalents 63
Current tax assets 420
Deferred tax liabilities -
Trade and other payables (68)
Share-based payment reserve 228
----------------------------------------------- -------
13,413
--------------------------------------------- -------
Deferred contingent consideration receivable 6,925
----------------------------------------------- -------
Loss on sale of discontinued operation (6,488)
----------------------------------------------- -------
As the deferred contingent consideration gives the Group a
contractual right to receive cash consideration, and that
consideration is variable depending on revenue, the financial asset
meets the definition of a derivative financial asset as defined by
IFRS 9 and has been recognised at fair value through profit or
loss.
2020 2019
Cash flows from/(used in) discontinued operation GBP000 GBP000
--------------------------------------------------------- ------- ------
Net cash flows from operating activities (1,756) 161
Net cash flows from investing activities (101) (63)
Net cash flows from financing activities (1,346) (2)
---------------------------------------------------------- ------- ------
Net cash flows from discontinued operations (3,203) 96
---------------------------------------------------------- ------- ------
Net cash flows from intra-group funding and transactions 3,035 (194)
---------------------------------------------------------- ------- ------
Net cash flows from discontinued operations, net
of intercompany (168) (98)
---------------------------------------------------------- ------- ------
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.
2020 2019
GBP000 GBP000
--------------------------------------------------------------- -------- -------
(Loss)/profit attributable to equity holders of the Group (11,025) 4,008
Fees associated with acquisition 1,366 725
Restructuring costs 990 1,691
Accelerated write off of capitalised debt facility arrangement
fees upon refinancing - 333
Changes in fair value of contingent consideration 1,157 136
Loss on disposal of subsidiary entities 6,740 -
Amortisation of acquired intangible assets 6,038 5,329
Foreign exchange variance 253 (414)
Deferred tax in respect of amortisation of intangible
assets (1,025) (843)
Share-based payment cost 1,598 2,162
--------------------------------------------------------------- -------- -------
Adjusted profit attributable to owners of the Group 6,092 13,127
--------------------------------------------------------------- -------- -------
Weighted average number of ordinary shares in issue (000) 824,647 713,973
Dilutive effect of share options (000) 49,107 38,736
--------------------------------------------------------------- -------- -------
Diluted weighted average number of ordinary shares in
issue (000) 873,754 752,709
--------------------------------------------------------------- -------- -------
Basic earnings per share (pence) (1.34) 0.56
Diluted earnings per share (pence) (1.34) 0.53
Adjusted basic earnings per share (pence) 0.74 1.84
Adjusted diluted earnings per share (pence) 0.70 1.74
--------------------------------------------------------------- -------- -------
2019
2020 (restated)
GBP000 GBP000
----------------------------------------------------------------- -------- -----------
(Loss)/profit attributable to equity holders of the Group (11,025) 4,008
Loss/(profit) from discontinued operations 6,740 (1,284)
----------------------------------------------------------------- -------- -----------
Underlying (loss)/profit from continuing operations attributable
to equity holders of the Group (4,285) 2,724
----------------------------------------------------------------- -------- -----------
Weighted average number of ordinary shares in issue (000) 824,647 713,973
Dilutive effect of share options (000) 49,107 38,736
----------------------------------------------------------------- -------- -----------
Diluted weighted average number of ordinary shares in
issue (000) 873,754 752,709
----------------------------------------------------------------- -------- -----------
Basic earnings per share from continuing operations (pence) (0.52) 0.38
Diluted earnings per share from continuing operations
(pence) (0.52) 0.36
----------------------------------------------------------------- -------- -----------
The weighted average number of shares in issue for the adjusted
diluted earnings per share includes 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 on continuing operations is
calculated as follows:
2019
2020 (restated)
GBP000 GBP000
----------------------------------------------------------------- ------- -----------
(Loss)/profit before income tax (4,536) 3,075
Share-based payment cost 1,598 2,162
Amortisation of acquired intangible assets 6,038 5,302
Foreign exchange variance 253 (414)
Exceptional costs:
- fees associated with acquisition 1,366 725
- restructuring cost 990 1,686
- accelerated write off of capitalised debt facility arrangement
fees upon refinancing - 333
- change in fair value of contingent consideration 1,157 136
----------------------------------------------------------------- ------- -----------
6,865 13,005
----------------------------------------------------------------- ------- -----------
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
7. Property, plant and equipment
Fixtures
and Motor Computer Leasehold
fittings vehicles equipment improvements Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------- -------- -------- --------- ------------ -------
Cost
At 1 January 2019 961 133 2,162 711 3,967
Acquisitions through business combinations 46 13 19 - 78
Transfer of asset to right of use
assets - on adoption of IFRS 16 (231) - - - (231)
Foreign exchange variances (1) (6) (7) (1) (15)
Additions 68 1 1,075 337 1,481
Disposals - - (566) - (566)
------------------------------------------- -------- -------- --------- ------------ -------
At 31 December 2019 843 141 2,683 1,047 4,714
Acquisitions through business combinations 22 - - - 22
Assets transferred to disposal group (12) - (11) (17) (40)
Assets transferred to intangible
assets - - (1,338) - (1,338)
Foreign exchange variances - 3 1 1 5
Additions 200 29 1,624 72 1,925
Disposals (116) (15) (547) (511) (1,189)
------------------------------------------- -------- -------- --------- ------------ -------
At 31 December 2020 937 158 2,412 592 4,099
------------------------------------------- -------- -------- --------- ------------ -------
Depreciation
At 1 January 2019 494 25 1,211 154 1,884
Charge for the year 123 35 447 102 707
Disposals - - (561) - (561)
------------------------------------------- -------- -------- --------- ------------ -------
At 31 December 2019 617 60 1,097 256 2,030
Charge for the year 221 21 75 254 571
Charge for the year transferred to
intangible assets - - (380) - (380)
Assets transferred to disposal group (10) - (10) (8) (28)
Disposals (85) (11) (144) (176) (416)
------------------------------------------- -------- -------- --------- ------------ -------
At 31 December 2020 743 70 638 326 1,777
------------------------------------------- -------- -------- --------- ------------ -------
Net book value
At 31 December 2020 194 88 1,774 266 2,322
------------------------------------------- -------- -------- --------- ------------ -------
At 31 December 2019 226 81 1,586 791 2,684
------------------------------------------- -------- -------- --------- ------------ -------
At 31 December 2018 467 108 951 557 2,083
------------------------------------------- -------- -------- --------- ------------ -------
8. Right of use assets
Fixtures Motor
and fittings vehicles Property Total
GBP000 GBP000 GBP000 GBP000
------------------------------------------- ------------ -------- -------- ------
Cost
At 1 January 2020 472 319 3,869 4,660
Acquisitions through business combinations - - 156 156
Remeasurement of Finance lease - - (347) (347)
Assets transferred to disposal group - (66) - (66)
Disposals (5) (164) (352) (521)
Additions 23 225 - 248
------------------------------------------- ------------ -------- -------- ------
At 31 December 2020 490 314 3,326 4,130
------------------------------------------- ------------ -------- -------- ------
Depreciation
At 1 January 2020 69 103 778 950
Charge for the year 69 125 788 982
Assets transferred to disposal group - (56) - (56)
Disposals - (86) (253) (339)
------------------------------------------- ------------ -------- -------- ------
At 31 December 2020 138 86 1,313 1,537
------------------------------------------- ------------ -------- -------- ------
Net book value
At 31 December 2020 352 228 2,013 2,593
------------------------------------------- ------------ -------- -------- ------
At 31 December 2019 403 216 3,091 3,710
------------------------------------------- ------------ -------- -------- ------
9. Intangible assets and goodwill
Total
Computer Customer Customer Customer other
Trade Goodwill
software name databases contracts relationships intangibles (as restated) Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ -------- ------ --------- --------- ------------- ------------ -------------- -------
Cost
At 1 January 2019 9,350 115 1,596 14,687 2,231 27,979 44,366 72,345
Additions 2,595 - 58 - - 2,653 - 2,653
Acquisitions through
business combinations
(restated - see note
13) - - - 2,861 5,280 8,141 16,379 24,520
Adjustment to previous
business combinations - - - - - - 992 992
Foreign exchange
variances - - - (338) - (338) (110) (448)
------------------------ -------- ------ --------- --------- ------------- ------------ -------------- -------
At 31 December 2019
(as restated) 11,945 115 1,654 17,210 7,511 38,435 61,627 100,062
Additions 3,615 - 101 - - 3,716 - 3,716
Acquisitions through
business combinations 37 - - 583 - 620 3,241 3,861
Transfer from property,
plant and equipment 1,338 - - - - 1,338 - 1,338
Impairment (188) - - - - (188) - (188)
Assets transferred
to disposal group (432) - (1,755) - - (2,187) (1,208) (3,395)
Foreign exchange
variances - - - 283 - 283 116 399
------------------------ -------- ------ --------- --------- ------------- ------------ -------------- -------
At 31 December 2020 16,315 115 - 18,076 7,511 42,017 63,776 105,793
------------------------ -------- ------ --------- --------- ------------- ------------ -------------- -------
Amortisation
At 1 January 2019 3,862 18 1,437 6,087 1,597 13,001 - 13,001
Charge for the year 2,121 6 134 3,473 813 6,547 - 6,547
------------------------ -------- ------ --------- --------- ------------- ------------ -------------- -------
At 31 December 2019 5,983 24 1,571 9,560 2,410 19,548 - 19,548
Charge for the year 2,895 6 - 4,022 815 7,738 - 7,738
Charge for the year
transferred from
property,
plant and equipment 380 - - - - 380 - 380
Assets transferred
to disposal group (429) - (1,571) - - (2,000) - (2,000)
------------------------ -------- ------ --------- --------- ------------- ------------ -------------- -------
At 31 December 2020 8,829 30 - 13,582 3,225 25,666 - 25,666
------------------------ -------- ------ --------- --------- ------------- ------------ -------------- -------
1Net book value
At 31 December 2020 7,486 85 - 4,494 4,286 16,351 63,776 80,127
------------------------ -------- ------ --------- --------- ------------- ------------ -------------- -------
At 31 December 2019
(as restated) 5,962 91 83 7,650 5,101 18,887 61,627 80,514
------------------------ -------- ------ --------- --------- ------------- ------------ -------------- -------
At 31 December 2018 5,488 97 159 8,600 634 14,978 44,366 59,344
------------------------ -------- ------ --------- --------- ------------- ------------ -------------- -------
Computer software is a combination of assets internally
generated and assets acquired through business combinations. The
amortisation charge in the period to 31 December 2020 associated
with computer software acquired through business combinations is
GBP1,195,000 (2019: GBP1,037,000). The additional GBP2,080,000
(2019: GBP1,084,000) charged in the period relates to the
amortisation of internally generated computer software. The total
amortisation charged in the period to 31 December 2020 associated
with intangible assets acquired through business combinations is
GBP6,038,000 (2019: GBP5,329,000).
10. Trade and other receivables
Group
--------------
2020 2019
GBP000 GBP000
---------------------------------- ------ ------
Trade receivables 6,995 8,712
Other receivables 297 606
Deferred contingent consideration 6,925 -
Prepayments 2,764 2,041
Accrued income 8,785 18,202
---------------------------------- ------ ------
25,766 29,561
---------------------------------- ------ ------
Deferred contingent consideration relates to the collection and
run off of the SME Division's accrued income balance at
disposal.
11. Trade and other payables
Group
--------------
2020 2019
GBP000 GBP000
-------------------------------- ------ ------
Current
Trade payables 1,943 1,977
Social security and other taxes 4,162 2,857
Accruals 866 1,954
Deferred income 745 3,676
Other payables 514 -
-------------------------------- ------ ------
8,230 10,464
-------------------------------- ------ ------
12. Business combinations
LSI Energy Holdings Limited (LSI)
On 14 August 2020, the Group acquired 100% of the issued share
capital and voting rights of LSI Energy Holdings Limited, a company
based in the United Kingdom. LSI provides business energy and
procurement services to a range of Corporate and SME customers,
broadening Inspired Energy's service offering within its core
Corporate Division.
The acquisition of LSI was completed for a total consideration
of up to GBP9,122,000. The initial GBP3,122,000 was satisfied in
cash. The additional GBP6,000,000 comprises of three earn out
tranches as follows. Of the aggregate contingent consideration of
GBP6,000,000, GBP1,750,000 is payable based on conversion of the
order book of LSI at completion to cash, GBP2,250,000 is payable as
twelve months' value of contract renewals completed within three
years of completion, and GBP2.000,000 is payable as twelve months'
value of contracted new business generated within three years of
completion. The range of potential outcomes varied from
GBP1,750,000 to GBP6,000,000.
The fair value of the contingent consideration of GBP3,600,000
was estimated by calculating the present value of the future cash
flows and discounted using a rate of 13%.
The acquisition was financed through the drawdown of the Group's
refinance facilities with Santander and Bank of Ireland. The
details of the business combination are as follows:
Recognised amounts of identifiable net assets
Provisional
Book fair value Provisional
value adjustment fair value
GBP000 GBP000 GBP000
----------------------------------------------------- ------ ----------- -----------
Property, plant and equipment 1 - 1
Intangible assets - 583 583
Trade and other receivables 254 - 254
Current tax asset 365 - 365
Cash and cash equivalents 3,064 - 3,064
----------------------------------------------------- ------ ----------- -----------
Total assets 3,684 583 4,267
----------------------------------------------------- ------ ----------- -----------
Trade and other payables 534 - 534
Deferred tax liability - 111 111
----------------------------------------------------- ------ ----------- -----------
Total liabilities 534 111 645
----------------------------------------------------- ------ ----------- -----------
Provisional fair value of identifiable net assets 3,622
Provisional goodwill 3,100
----------------------------------------------------- ------ ----------- -----------
Fair value of consideration transferred 6,722
----------------------------------------------------- ------ ----------- -----------
Satisfied by:
- cash consideration paid 3,122
- contingent consideration 3,600
----------------------------------------------------- ------ ----------- -----------
6,722
----------------------------------------------------- ------ ----------- -----------
Net cash outflow arising from business combinations:
- cash consideration paid 3,122
- cash and cash equivalents acquired (3,064)
----------------------------------------------------- ------ ----------- -----------
Net cash outflow 58
----------------------------------------------------- ------ ----------- -----------
Since acquisition LSI has contributed GBP943,000 to revenue and
GBP113,000 to profit before income tax. If the acquisition had
taken place at the start of the financial period, LSI would have
contributed GBP2,081,000 to revenue and GBP224,000 to profit before
income tax.
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 LSI 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 to be
GBP583,000.
The Group estimates costs incurred in relation to the
transaction to be GBP111,000. These costs are included within
exceptional costs in the Group statement of comprehensive
income.
A reconciliation of acquisition of subsidiaries, net of cash
acquired is as follows:
GBP000
LSI - net cash outflow (per above) (58)
Completion of 100% acquisition of Ignite Energy
LTD 5,500
Acquisition of 100% of Energy Broker Solutions
Limited 174
Investment in Switchd Ltd 250
----------------------------------------------------- ------
Acquisition of subsidiaries, net of cash acquired 5,866
----------------------------------------------------- ------
13. Business combinations - prior year
Ignite Energy LTD (IGN)
As disclosed in the 31 December 2019 annual report and accounts
the Group acquired an initial 40% of the issued share capital and
voting rights of IGN.
During the year ended 31 December 2020, the Group deemed it
appropriate to change the way the non-controlling interest was
measured at acquisition, from the proportionate share method to the
fair value method. This change in accounting policy had the
following impact on the business combination and associated
goodwill.
Recognised amounts of identifiable net assets
Fair value Fair value
Book Fair value as as
originally Adjustment restated
value adjustment presented
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------- ------ ---------- ---------- ---------- ----------
Property, plant and equipment 153 - 153 - 153
Intangible assets - 8,141 8,141 - 8,141
Inventories 524 (399) 125 - 125
Trade and other receivables 3,371 (1,025) 2,346 - 2,346
Cash and cash equivalents 4,748 - 4,748 - 4,748
---------------------------------------- ------ ---------- ---------- ---------- ----------
Total assets 8,796 6,717 15,513 - 15,513
---------------------------------------- ------ ---------- ---------- ---------- ----------
Trade and other payables 2,198 100 2,298 - 2,298
Current tax liability 356 - 356 - 356
Deferred tax liability 30 1,547 1,577 - 1,577
---------------------------------------- ------ ---------- ---------- ---------- ----------
Total liabilities 2,584 1,647 4,231 - 4,231
---------------------------------------- ------ ---------- ---------- ---------- ----------
Provisional fair value of identifiable
net assets 11,282 - 11,282
Provisional goodwill 5,087 9,394 14,481
---------------------------------------- ------ ---------- ---------- ---------- ----------
Fair value of consideration transferred 16,369 9,394 25,763
---------------------------------------- ------ ---------- ---------- ---------- ----------
Satisfied by:
- cash consideration paid 5,000 - 5,000
- deferred consideration paid 1,600 - 1,600
- contingent consideration 3,000 - 3,000
- non-controlling interest (60%) 6,769 9,394 16,163
---------------------------------------- ------ ---------- ---------- ---------- ----------
16,369 9,394 25,763
---------------------------------------- ------ ---------- ---------- ---------- ----------
Net cash outflow arising from -
business combinations:
- cash consideration paid 6,600 - 6,600
- cash and cash equivalents acquired (4,748) - (4,748)
---------------------------------------- ------ ---------- ---------- ---------- ----------
Net cash outflow 1,852 - 1,852
---------------------------------------- ------ ---------- ---------- ---------- ----------
Waterwatch UK Limited (WW)
As disclosed in the 31 December 2019 annual report and accounts
the Group acquired 100% of the issued share capital and voting
rights of WW.
The provisional fair value of identifiable net assets was
carried out and no adjustment is to be made following the
completion of the twelve-month hindsight period.
Independent Utilities Limited (IU)
As disclosed in the 31 December 2019 annual report and accounts
the Group acquired 100% of the issued share capital and voting
rights of IU.
The provisional fair value of identifiable net assets was
carried out and no adjustment is to be made following the
completion of the twelve-month hindsight period.
14. Post-balance sheet events
On 3 March 2021 the Group acquired 100% of the issued share
capital and voting rights of BWS Holdco Limited, and its trading
subsidiary Businesswise, and 100% of the issued share capital and
voting rights of GEM. Businesswise is an energy consultant
providing assurance services and incremental optimisation services
to corporate customers. GEM provides energy assurance services to
corporate customers.
The Group is paying an initial consideration of GBP6.0 million
to acquire Businesswise on a debt free cash free basis, to be
satisfied in cash at completion. In order to incentivise the
vendors, further contingent consideration of up to GBP23.5 million
may become payable in cash, subject to the achievement of
challenging EBITDA and Order Book growth targets for the years
ending 31 December 2021, 2022 and 2023. To achieve the earn out in
full, Businesswise would be required to generate EBITDA of GBP5.0
million for the year ending 31 December 2023 and have a closing
order book in excess of GBP19.0 million.
In regard to the acquisition of GEM, consideration will be
satisfied by an initial cash payment of GBP1.5 million to the
shareholders of GEM, with deferred consideration of GBP250,000
payable at 31 December 2021, and a potential further contingent
cash consideration of up to GBP250,000 payable based on achieving a
target level of contracted future revenues.
The Group has not given full disclosure of the fair value at
acquisition as it was considered impractical to do so within the
reporting timeframe.
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