TIDMUTW
RNS Number : 7014L
Utilitywise plc
23 April 2018
23 April 2018
Utilitywise plc
("Utilitywise", the "Company" or the "Group")
Interim results
for the six-months ended 31 January 2018
Utilitywise, a leading independent utility cost management
consultancy, announces its financial results for the six-months
ended 31 January 2018 ("H1 FY18"). Following the early adoption of
IFRS15 on 1 August 2017, the comparable financial information has
also been restated to reflect the adoption of this new accounting
standard.
Financial summary
-- Revenue of GBP39.7m, an increase of 3% (H1 FY17: GBP38.4m)
-- Adjusted EBITDA(1) of GBP3.4m, an increase of 31% (H1 FY17: GBP2.6m)
-- Adjusted profit before tax(2) of GBP3.2m, an increase of 33% (H1 FY17: GBP2.4m)
-- Adjusted fully diluted earnings per share(3) of 4.1 pence, an
increase of 64% (H1 FY17: 2.5 pence)
-- Underlying operating cash flow(4) of GBP5.9m, an increase of 168% (H1 FY17: GBP2.2m)
-- Underlying free cash flow(4,5) of GBP6.1m (H1 FY17: GBP(0.2)m)
-- Group net debt of GBP15.0m at 31 January 2018, compared to
GBP9.6m at 31 January 2017 and GBP19.0m at 31 July 2017
-- Group net liabilities of GBP32.0m impacted by:
o Deferral of revenue to later periods of GBP17.2m, upon the
adoption of IFRS 15
o Un-recognised deferred tax assets of GBP10.3m
o Non-cash impairment charges in prior year of GBP17.3m
Operational summary
-- Growth in total customer numbers of 1% to c.43,000, driven by
a 3% growth in the UK & Ireland, the core geographical market
of the Group.
-- Energy Consultant attrition of 72% for the twelve-month
period ended 31 January 2018, compared to 59% in the same period
last year, primarily due to a spike in attrition late in H1 FY18,
caused by uncertainty regarding the suspension of the shares of the
Group, as a result of the delay in the completion of the FY17
year-end audit.
-- Order book(6) impacted by the further strengthening of a
number of internal controls to improve the quality of business
delivered, along with commercial decisions taken by management for
the benefit of the business:
o Increase in "go-live" rates on new contracts secured of 82%
compared to 78% in the prior period, leading to increase in
expected proportion of delivered contracts that subsequently become
revenue for the Group
o On a like-for-like basis(7) , order book additions were 3.1%
lower than the same period in the prior year and closing order book
remained broadly consistent with 31 July 2017
-- Increase of 299% in buildings made intelligent to 1,221 in
the period, using Utilitywise's IoT-enabled intelligent
platform
-- A further increase in net promoter score from 60 to 63.
Brendan Flattery, Chief Executive Officer, commented:
"The overall performance of the Group in the first half is in
line with our expectations with revenue, profit and cash flow all
improving while we have maintained our customer base, whose
satisfaction with our services, as reflected in our net promoter
score, is high. As I said at the full year results published in
March, the significant delay in the completion of the 2017 year-end
audit has had a destabilising effect on several key stakeholders,
including colleagues, and accordingly, we expect that the
Enterprise division, in particular, will have a softer second half
of the financial year. The performance of the Corporate division
was strong and, in particular, the growth potential of corporate
controls and "intelligent building" enablement through "internet of
things" technology remains exciting. In the first half of the year,
the number of buildings made intelligent, using our IoT-enabled
platform has quadrupled compared to the same period last year.
In the short term, we have dealt with a number of legacy issues
from earlier years but, looking ahead, I remain excited about the
prospects for Utilitywise. We have a clearly stated Strategy for
Growth, including both the Enterprise and Corporate divisions,
which will create significant value for our shareholders."
There will be a meeting for analysts at 9.30am today at the
offices finnCap, 60 New Broad Street, London EC2M 1JJ. For details,
please contact Redleaf Communications at utilitywise@redleafpr.com
or 020 3757 6865.
(1) Adjusted EBITDA means earnings before interest, taxation,
depreciation and amortisation and adjusted EBITDA is stated before
exceptional income and costs and non-cash accounting charges for
share based payments, as set out in the financial review
(2) Adjusted profit before tax is stated before exceptional
income and costs, non-cash accounting charges for share based
payments and amortisation of intangible assets acquired through
business combinations, as set out in the financial review
(3) Adjusted earnings per share is stated before exceptional
income and costs, non-cash accounting charges for share based
payments and amortisation of intangible assets acquired through
business combinations and the tax impact of those items
(4) Underlying operating cash flow and free cash flow(5) are
both stated before operating cash outflows in respect of
exceptional items
(5) Free cash flow is net cash flow stated before dividend
payments or receipts from the issue of equity, as set out in the
financial review
(6) Order book means total value of closed transactions in the
period, which may either be included within revenue in the period
or is included within future secured revenue
(7) Like-for-like basis means Order book(6) , as adjusted for
the internal control improvements and commercial decisions, as
described in the business review
For further information please contact:
Utilitywise plc 0330 303 0233
Brendan Flattery (CEO)
Richard Laker (CFO)
finnCap (NOMAD and broker) 020 7220 0500
Matt Goode / Henrik Persson (Corporate Finance)
Simon Johnson (Corporate Broking)
Liberum (Joint broker) 020 3100 2000
Robert Morton / Steve Pearce
Redleaf Communications 020 3757 6865
Robin Tozer / Elisabeth Cowell utilitywise@redleafpr.com
About Utilitywise
Utilitywise is a leading independent utility cost management
consultancy, which has established trading relationships with a
number of major UK and European energy suppliers and provides
services to its customers designed to assist them in achieving
better value out of their energy contracts, reduced energy
consumption and lower carbon footprint. Utilitywise is a UK company
quoted on the AIM market of the London Stock Exchange. For more
information, please visit www.utilitywise.com.
Business review
The summary adjusted financial results for the Group, stated
before exceptional income and costs, non-cash accounting charges
for share-based payments and amortisation of intangible assets
acquired through business combinations, for the six-month period
ended 31 January 2018 showed growth in each of revenue, Adjusted
EBITDA(1) and Adjusted profit before tax(2) compared to the same
period last year.
The 31% increase in the Group's Adjusted EBITDA to GBP3.4m (H1
FY17: GBP2.6m) included an unchanged Adjusted EBITDA contribution
from the Enterprise division and an increase of GBP0.8m from the
Corporate division.
Particularly pleasing was the significant growth in underlying
operating cash flow and underlying free cash flow, which
contributed to a 21% reduction in the net debt of the Group to
GBP15.0m at 31 January 2018, compared to GBP19.0m at 31 July
2017.
Total customer numbers grew by 1% in the period to c. 43,000,
driven by a 3% growth in the UK & Ireland, which is the core
geographical market of the Group.
As set out in the divisional review below, a number of further
improvements to internal controls and commercial decisions have
been implemented. This has led to an increased "go-live" rate on
new contracts secured of 82%, compared to 78% in the prior period,
which reflects an improvement in the quality of the business won in
the period. On a like-for-like basis, order book additions were
3.1% lower than the same period in the prior year and closing order
book remained consistent with 31 July 2017.
The delay in completion of the FY17 year-end audit process had a
short-term destabilising effect on colleagues, with a sharp
increase in sales staff attrition late in the period and overall
Energy Consultant attrition increasing to 72% for the twelve-month
period ended 31 January 2018, compared to 59% in the same period in
the prior year.
The Corporate business saw further traction in the delivery of
corporate controls solutions, with an increase of 299% in the
number of buildings "made intelligent" in the period to 1,221,
compared to the same period last year.
The Group's customers provided further endorsement of their
experience dealing with the Group, with a further increase in net
promoter score from 60 to 63.
Divisional performance
During the period, the Group operated from two main divisions.
The performance of both divisions is reported separately. All
references to Adjusted EBITDA below refer to Earnings before
interest, taxation, depreciation and amortisation (EBITDA), stated
before exceptional income and costs and non-cash accounting charges
for share based payments, as defined above. Divisional revenues are
stated before the elimination of intersegment revenue.
Enterprise division
The total number of Enterprise customers increased in the UK and
Ireland by 3% to 34,115 and decreased in Europe by 5% to 7,551, an
overall Enterprise Division increase of 1%, equating to 575
customers.
Energy Consultant staff turnover was 72% for the twelve-month
period ended 31 January 2018, compared to 59% in the same period
last year
The amount added to the order book of the Enterprise division
was impacted during the period by the further strengthening of a
number of internal controls, along with commercial decisions taken
by management for the longer-term benefit of the business, as
follows:
-- The implementation of additional internal processes to be
followed before any procurement contract is added to the Group's
order book. This is with the intention of improving the quality of
the business that is written by the division, leading to an
increase in the proportion of that business which ultimately goes
live, which is the point at which revenue is recognised by the
business. The "go-live" rate in H1 FY18 was 82%, compared to 78% in
H1 FY17.
-- Additional management scrutiny of proposed contracts where
the levels of energy consumption are estimated, leading to lower
initial order book values recognised on those contracts. Any
contract which has estimated consumption, rather than based upon
historic actual data, is now recognised in the order book of the
division (and commissions paid to sales staff) at 50% of its
estimated value, until consumption data from the energy supplier
justifies an increase. Historically, those estimated consumption
contracts were treated the same way as other contracts and included
in the order book at their full estimated value The value of the
50% reduction in estimated value is GBP1.6m in the period. Whilst
this value is excluded from the internal order book of the
division, for the reasons set out above, it has been nominally
added back to the order book figures below to allow like-for-like
comparison between years.
-- In August 2017, the Group took the decision to discontinue
trading with certain sub-brokers in its partner channel, as the
quality of the business delivered and the associated commercial
terms did not give an appropriate financial return for the Group.
Accordingly, the order book delivery in H1 FY18 is lower as a
result of this decision.
-- Prior to the adoption of IFRS 15 on 1 August 2017, the Group
recognised revenue on same supplier renewal contracts upon
signature of the contract rather than the go-live date of the
contract. As a result, the business historically sought to sign
significant extra renewals contracts in the final month of each
six-month accounting period. Since the adoption of IFRS 15, the
business has discontinued this practice. As a result of this
decision, order book additions in H1 FY18 were lower than H1
FY17.
The order book additions in the period were as follows:
H1 2018 H1 2017
GBP'm GBP'm
--------------------------------------- --------- ---------
Gross order book additions (100%
go-live) 41.3 50.2
--------------------------------------- --------- ---------
Observed go-live rate 82% 78%
--------------------------------------- --------- ---------
Gross order book additions (expected
go-live rate) 33.9 39.2
--------------------------------------- --------- ---------
Taking into account the above factors, the order book additions
in the period, on a like-for-like basis at expected go-live rate,
were 3.1% lower than the same period in the prior year as
follows:
Expected
100% go-live
basis rate
--------------------------------------------- -------- ----------
H1 FY17 order book delivery 50.2 39.2
--------------------------------------------- -------- ----------
Sub-broker partners discontinuation (2.6) (2.0)
--------------------------------------------- -------- ----------
Change of commercial delivery of
same supplier renewals (2.6) (2.1)
--------------------------------------------- -------- ----------
H1 FY17 order book delivery (like-for-like
basis) 45.0 35.1
--------------------------------------------- -------- ----------
Like-for-like change (incorporating
improvement in expected go-live
rate) (3.7) (1.2)
--------------------------------------------- -------- ----------
H1 FY18 order book delivery 41.3 33.9
--------------------------------------------- -------- ----------
The closing order book was similarly impacted by the above
decisions. On a like-for-like basis at expected go-live rate, the
closing order book remained broadly consistent with 31 July 2017 as
follows:
Expected
100% go-live
basis rate
-------------------------------------- -------- ----------
Closing order book 31 July 2017
(IFRS15 adjusted) 66.0 51.4
-------------------------------------- -------- ----------
Sub-broker partners discontinuation (0.8) (0.6)
-------------------------------------- -------- ----------
Change of commercial delivery of
same supplier renewals (2.4) (1.9)
-------------------------------------- -------- ----------
Closing order book 31 July 2017
(like-for-like basis) 62.8 48.9
-------------------------------------- -------- ----------
Like-for-like change (incorporating
improvement in expected go-live
rate) (3.2) (0.1)
-------------------------------------- -------- ----------
Closing order book 31 January 2018 59.6 48.8
-------------------------------------- -------- ----------
The revenue and EBITDA of the division were as follows:
H1 FY18 H1 FY17 Change Change
GBP'm GBP'm GBP'm %
---------------- --------- ---------- -------- --------
Revenue 33.2 31.4 1.8 5.7
---------------- --------- ---------- -------- --------
EBITDA 2.4 2.4 - -
---------------- --------- ---------- -------- --------
EBITDA margin 7.2% 7.6% - (0.4)%
---------------- --------- ---------- -------- --------
The year-on-year change in revenue and EBITDA is summarised as
follows:
Revenue EBITDA
GBP'm GBP'm
-------------------------------------- --------- --------
H1 FY17 (as restated) 31.4 2.4
-------------------------------------- --------- --------
Change in leakage rates on live
contracts less than GBP50,000
as at 31 July 2017 4.6 4.6
-------------------------------------- --------- --------
H1 FY17 with closing live contracts
less than GBP50,000 adjusted
to H1 FY18 leakage rates 36.0 7.0
-------------------------------------- --------- --------
Revenue changes at constant
leakage rates (2.8) (2.4)
-------------------------------------- --------- --------
Other costs - (2.2)
-------------------------------------- --------- --------
H1 FY18 33.2 2.4
-------------------------------------- --------- --------
After adjusting the opening live contracts to the current year
leakage rate, that revenue fell by 8% from GBP36.0m to GBP33.2m and
EBITDA fell by 66% from GBP7.0m to GBP2.4m. This GBP3.6m reduction
in EBITDA, compared to H1 FY17 (as restated), is impacted by
GBP2.2m of additional other costs, mainly comprising overheads,
support costs and annual bonus charges.
Corporate division
The Corporate division offers a comprehensive portfolio of
products and services designed to assist larger companies with more
complex energy needs in managing their energy consumption. These
include both energy procurement and broader services designed to
give customers enhanced control over their energy. Within the
portfolio of services is the Utilitywise IoT-enabled intelligent
platform which gives customers real-time visibility of energy usage
and an ability to monitor asset usage across multiple sites from a
central interface.
The revenue and EBITDA of the division including intercompany
transactions were as follows:
H1 FY18 H1 FY17 Change Change
GBP'm GBP'm GBPm %
---------------- --------- ---------- -------- --------
Revenue 6.5 7.3 (0.8) 10.9%
---------------- --------- ---------- -------- --------
EBITDA 0.9 0.1 0.8 800.0%
---------------- --------- ---------- -------- --------
EBITDA margin 13.8% 1.4% - 12.4%
---------------- --------- ---------- -------- --------
The financial year ended 31 July 2017 ("FY17") was a year of
transition for the Corporate division, as it changed its focus
towards quality of revenue and profit margin from a different mix
of income streams. That transition included, in the early part of
FY18, a restructuring to reduce the operational gearing of the
business. The restructuring removed GBP1.9m of annualised fixed
costs from the business, the non-recurring cost of which is
included in exceptional items, as set out in the financial
review.
During H1 FY18, the business saw significant growth in its
profitability, with adjusted EBITDA increasing to GBP0.9m, compared
to GBP0.1m in the same period in the prior year. This was from
revenue of GBP6.5m, which was 11% lower than H1 FY17, as a result
of the change in focus and mix detailed above.
The division saw continued traction from its energy services/IoT
offering, with a growth in the number of buildings "made
intelligent" of 915, from 306 at H1 FY17 to 1,221 at H1 FY18.
Further growth is expected in the second half of the financial year
as the commercial offering is considered compelling and
disruptive.
Financial review
Group overview
A summary of the Group's performance, where "adjusted" means
excluding exceptional items, amortisation of intangible assets
acquired in business combinations and share-based payment charges
in the six-month period ended 31 January 2018 ("H1 FY18"), along
with the change compared to the prior year ("H1 FY17"), as
restated, is as follows:
Adjusted basis:
GBP'm except where stated H1 FY18 H1 FY17 Change Change
Revenue 39.7 38.4 1.3 3.4%
----------------------------- --------- --------- -------- --------
Adjusted EBITDA (defined
below) 3.4 2.6 0.8 30.7%
----------------------------- --------- --------- -------- --------
Adjusted profit before
tax 3.2 2.4 0.8 33.3%
----------------------------- --------- --------- -------- --------
Diluted earnings per share 4.1p 2.5p 1.6p 64%
----------------------------- --------- --------- -------- --------
Statutory basis:
GBP'm except where stated H1 FY18 H1 FY17 Change Change
Revenue 39.7 38.4 1.3 3.4%
---------------------------- --------- --------- -------- --------
Profit/(loss) before tax 1.0 (12.9) 13.9 n/a
---------------------------- --------- --------- -------- --------
Diluted earnings/(loss)
per share 1.2p (15.8)p 17p n/a
---------------------------- --------- --------- -------- --------
Cash flows from operating
activities 3.9 1.4 2.5 178.6%
---------------------------- --------- --------- -------- --------
Group net debt (15.0) (9.6) (5.4) 56.2%
---------------------------- --------- --------- -------- --------
Trading and EBITDA
During H1 FY18, Group revenue was GBP39.7m, an increase of 3.4%
compared to H1 FY17 (H1 FY17: GBP38.4m, as restated).
Adjusted Earnings before interest, taxation, depreciation and
amortisation (EBITDA) is calculated as follows:
GBP'm except where stated H1 FY18 H1 FY17 Change Change
--------------------------------
Operating profit/(loss) 0.6 (13.2) 13.8 n/a
-------------------------------- --------- ---------- -------- --------
Exceptional items (see below) 2.0 14.4 (12.4) (86)%
-------------------------------- --------- ---------- -------- --------
Share option (credit)/expense (0.2) 0.1 (0.3) n/a
-------------------------------- --------- ---------- -------- --------
Depreciation 0.4 0.3 0.1 33.3%
-------------------------------- --------- ---------- -------- --------
Amortisation of intangible
assets 0.5 1.0 (0.5) (50)%
-------------------------------- --------- ---------- -------- --------
Adjusted EBITDA 3.4 2.6 0.8 30.7%
-------------------------------- --------- ---------- -------- --------
Exceptional items in the current period comprise legal and
settlement costs, incurred as a result of a disputes with customers
and competitors, of GBP0.4m, restructuring and re-organisation
costs of GBP0.7m and other non-recurring professional fees of
GBP0.9m.
In the prior period, they comprised GBP13.4m of non-cash
impairment losses, GBP1.2m of legal, restructuring and
re-organisation costs and a credit of GBP0.2m from a historic
provision release.
The main changes in the Adjusted EBITDA of the Group are as
follows:
GBP'm
----------------------------------------------- -------
H1 FY17 adjusted EBITDA (as restated) 2.6
----------------------------------------------- -------
Non-cash change in Enterprise EBITDA due
to change in leakage rate on contracts less
than GBP50,000 live as at 31 July 2017 4.6
----------------------------------------------- -------
Impact of change in revenue in Enterprise
division (2.4)
----------------------------------------------- -------
Other costs in Enterprise division (2.2)
----------------------------------------------- -------
Increase in profit in Corporate division 0.8
----------------------------------------------- -------
H1 FY18 adjusted EBITDA 3.4
----------------------------------------------- -------
The above items are explained further in the Business review
above.
Taxation
At the balance sheet date, there were un-recognised deferred tax
assets in respect of unutilised tax losses of GBP10.3m (31 July
2017 GBP7.2m), at the UK headline rate of corporate tax of 19%. Of
those un-recognised deferred tax assets, GBP3.3m arose on the
adoption of IFRS 15 on 1 August 2017.
In light of this position, no accounting taxation charges or
credits have been recognised in the consolidated income statement
for the six months ended 31 January 2018.
Earnings per share
Diluted adjusted earnings per share, with Adjusted earnings
stated before exceptional items, non-cash accounting charges for
share-based payments and amortisation of intangible assets acquired
in business combinations and the associated tax impact of these
adjustments was 4.1 pence per share (H1 FY17: 2.5 pence, as
restated). Adjusted Earnings, stated on the same basis as above,
were GBP3.2m (H1 FY17: GBP1.9m, as restated) and the weighted
average number of shares in issue, on a diluted basis, increased
from 78,888,456 to 79,178,133 shares.
Balance sheet
The Group balance sheet is summarised below on a statutory
basis:
31 Jan 31 Jan
GBP'm 2018 2017 Change
-----------------------------------
Goodwill and intangible assets 17.0 20.4 (3.4)
----------------------------------- -------- -------- ----------
Property, plant and equipment 5.2 5.4 (0.2)
----------------------------------- -------- -------- ----------
Accrued revenue 33.7 29.7 4.0
----------------------------------- -------- -------- ----------
Deferred revenue (69.6) (53.9) (15.7)
----------------------------------- -------- -------- ----------
Other net liabilities (excluding
net debt) (3.3) (5.5) 2.2
----------------------------------- -------- -------- ----------
Net debt (15.0) (9.6) (5.4)
----------------------------------- -------- -------- ----------
Net liabilities (32.0) (13.5) (18.5)
----------------------------------- -------- -------- ----------
The Group balance sheet had a negative net assets position at 31
January 2018. This is summarised as follows:
31 Jan
GBP'm 2018
---------------------------------------------------- --------
Net assets prior to the adoption of IFRS
15 and excluding impairment losses and tax
asset not recognised 12.8
---------------------------------------------------- --------
Non-cash impairment losses recognised in
prior year (17.3)
---------------------------------------------------- --------
Adoption of IFRS 15 (17.2)
---------------------------------------------------- --------
Aggregate deferred tax assets not recognised
as at 31 January 2018 (10.3)
---------------------------------------------------- --------
Net liabilities as at 31 January 2018 (unaudited) (32.0)
---------------------------------------------------- --------
The above items are summarised as follows:
-- In the prior year, non-cash impairments totalling GBP17.3m
were charged against the equity of the Group.
-- On 1 August 2017, the Group adopted IFRS 15, the main effect
of which was to defer the recognition of revenue on same supplier
renewal contracts to later financial periods. Accordingly, it is
anticipated that this value will subsequently be recognised in the
Group's financial statements in those future periods.
-- The unrecognised deferred tax assets are considered in the "taxation" section above.
As well as the above items, the business review sets out that
the total value of new contracts, not yet recognised in the Group
financial statements and stated net of the expected rate of failure
to subsequently go-live, total GBP48.8m. This value is stated
before any provision for expected under-consumption. If the
conditions used and/or observed in H1 FY18 remained constant in
future, this would represent the following theoretical revenue
value, to be recognised in the equity of the Group in future:
-- At the average accounting rate of under-consumption used in
H1 FY18 of 30.7%, total future revenue of GBP33.8m; or
-- At the average rate of under-consumption observed on maturing
contracts in the FY18(H1)/17 lookback period of 21.6%, total future
revenue of GBP38.3m
Cash flows and net debt
The cash flow of the Group is summarised as follows:
GBP'm H1 FY18 H1 FY17 Change
-------------------------------------- --------- ---------- --------
Cash flow from operating activities 3.9 1.4 2.5
-------------------------------------- --------- ---------- --------
Interest and corporate tax payments 1.0 (1.7) 2.7
-------------------------------------- --------- ---------- --------
Capital expenditure (0.8) (0.7) (0.1)
-------------------------------------- --------- ---------- --------
Free cash flow 4.1 (1.0) 5.1
-------------------------------------- --------- ---------- --------
Dividend payments - (3.3) 3.3
-------------------------------------- --------- ---------- --------
Receipts from issue of equity - 0.5 (0.5)
-------------------------------------- --------- ---------- --------
Net cash flow 4.1 (3.8) 7.9
-------------------------------------- --------- ---------- --------
Opening net debt (19.0) (5.5) (13.5)
-------------------------------------- --------- ---------- --------
Non cash changes in net debt (0.1) (0.3) 0.2
-------------------------------------- --------- ---------- --------
Closing net debt (15.0) (9.6) (5.4)
-------------------------------------- --------- ---------- --------
The above operating cash flow amount is stated after cash
outflows in respect of exceptional items of GBP2.0m (H1 FY17:
GBP0.8m), such that the underlying operating cash flow of the Group
was GBP5.9m, an increase of 168% compared to H1 FY17 (H1 FY17:
GBP2.2m). The underlying free cash flow of the Group, on the same
basis, was GBP6.1m (H1 FY17: GBP(0.2)m).
The closing net debt balance is made up as follows:
31 Jan 31 Jan
GBP'm 2018 2017 Change
---------------- --------
Bank loans (24.2) (17.2) (7.0)
---------------- -------- -------- --------
Cash 12.3 12.3 -
---------------- -------- -------- --------
Net bank debt (11.9) (4.9) (7.0)
---------------- -------- -------- --------
Other loans (3.1) (4.7) 1.6
---------------- -------- -------- --------
Net debt (15.0) (9.6) (5.4)
---------------- -------- -------- --------
Financing and banking covenants
The activities of the Group are substantially funded by a GBP25m
revolving credit facility (RCF) with a single lender, Royal Bank of
Scotland plc. The RCF facility matures in April 2019.
As at 31 January 2018, the undrawn committed facilities of the
Group were GBP13.1m, net of cash and cash equivalents.
At the balance sheet date, the Group had two main financial
performance covenants:
-- Minimum liquidity covenant, which sets out maximum balance
sheet positions on a monthly basis, taking into account the Group's
net debt as well as amounts due back to energy suppliers in respect
of projected under-consumption
-- EBITA interest cover, with EBITA determined on an assumed
constant under-consumption rate of 20% on procurement
contracts.
As at the date of approval of the interim financial statements,
the Group is in compliance with these covenants and expects to
remain so in future.
Related parties
During the period there have been no related party transactions
that have had a material impact on the financial position or
performance of the Group. There have been no significant changes to
related party transactions disclosed in the annual report for the
year ended 31 July 2017.
Principal risks and uncertainties
The principal risks and uncertainties of the Group are set out
in the FY17 annual report, which is available on the Group's
website www.utilitywise.com.
Outlook
The Enterprise division was impacted by a period of uncertainty
as a result of the delay in completion of the Group's FY17 year-end
audit process and consequential suspension of the Group's shares
from trading, with colleague attrition peaking in January 2018 and
early in the second half of the financial year. While the attrition
levels have stabilised since the FY17 year-end results were
announced in March 2018, this will undoubtedly have an impact on
the level of order book delivery. Therefore, as previously
indicated, the Board anticipates softer trading in the second half
of the year. The Corporate division, after a strong performance in
the first half, has continued to gain traction and further growth
is expected in the second half of the year. Despite the challenging
period that the Group has come through, the Board remains confident
in the future prospects of the Group.
By order of the Board
Brendan Flattery
Chief Executive Officer
20 April 2018
Note - revenue recognition on procurement contracts
The average levels of under-consumption against initial values
of procurement contracts ("leakage") observed upon the scheduled
maturity of those contracts was:
All Less than
contracts GBP50k
only
% %
-------------- ----------- -----------
FY18(H1)/17 21.6% 19.1%
-------------- ----------- -----------
FY17/16 21.0% 17.7%
-------------- ----------- -----------
FY16/15 19.3% 16.0%
-------------- ----------- -----------
FY15/14 21.4% 19.3%
-------------- ----------- -----------
Using the methodology set out in the Group's FY17 Annual Report,
the leakage provision rates used, for live contracts of less than
GBP50,000 at the balance sheet date that are expected to reach
their scheduled maturity dates are as follows:
Rates Rates
used used
H1 FY18 H1 FY17
% %
------------------- --------- ---------
Tranche A 17.4% 26.3%
------------------- --------- ---------
Tranche B 23.5% 24.7%
------------------- --------- ---------
Tranche C 32.7% 30.8%
------------------- --------- ---------
Weighted average 23.2% 27.8%
------------------- --------- ---------
Including provisions for contracts that are not expected to
reach their scheduled maturity dates, the total level of leakage
provisions used were as follows:
Rates Rates Rates
used used used
H1 FY18 H1 FY17 FY17
% % %
---------------------- --------- --------- -------
Contracts less than
GBP50,000 27.3% 30.5% 30.3%
---------------------- --------- --------- -------
Contracts more than
GBP50,000 42.0% 62.5% 60.2%
---------------------- --------- --------- -------
All contracts 30.7% 37.6% 36.1%
---------------------- --------- --------- -------
Condensed consolidated statement of total comprehensive
income
For the six months ended 31 January 2018
31 January 2018 31 January 2017 (restated)
--------------------------------------- ------------------------------------------
Exceptional Exceptional
and adjusting and adjusting
Adjusted items(2) Total Adjusted items (2) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 39,701 - 39,701 38,368 - 38,368
Cost of sales 27,683 - 27,683 28,743 - 28,743
Gross profit 12,018 - 12,018 9,625 - 9,625
Total operating
income 16 - 16 174 249 423
Total
administrative
expenses 9,147 2,270 11,417 7,648 15,563 23,211
Profit/(loss)
from operations 2,887 (2,270) 617 2,151 (15,314) (13,163)
EBITDA(1) (excluding
share based
payments) 3,356 (2,047) 1,309 2,570 (14,360) (11,790)
Depreciation (357) - (357) (340) - (340)
Amortisation (112) (383) (495) (79) (891) (970)
Share option
credit/(expense) - 160 160 - (63) (63)
Profit/(loss)
from operations 2,887 (2,270) 617 2,151 (15,314) (13,163)
---------------------- ---- ---------- ---------------- --------- ---------- ---------------- ------------
Finance income 721 - 721 631 - 631
Finance expense (388) - (388) (356) - (356)
---------- ---------------- --------- ---------- ---------------- ------------
Profit/(loss)
before tax 3,220 (2,270) 950 2,426 (15,314) (12,888)
Taxation
(expense)/credit - - - (485) 1,093 608
Profit/(loss)for
the year
attributable
to equity holders
of parent company 3,220 (2,270) 950 1,941 (14,221) (12,280)
Other comprehensive
income
Items that may
be reclassified
to profit or
loss:
Exchange difference
on translation
of foreign
operation 6 - 6 (1) - (1)
Total
comprehensive
income
attributable
to equity holders
of parent company 3,226 (2,270) 956 1,940 (14,221) (12,281)
Earnings per
share:
Basic 4.1p - 1.2p 2.5p - (15.8)p
Diluted 4.1p - 1.2p 2.5p - (15.8)p
---------- ---------------- --------- ---------- ---------------- ------------
Condensed consolidated statement of total comprehensive
income
For the six months ended 31 January 2018 (continued)
31 July 2017
(adjusted(3) and unaudited)
------------------------------------------
Exceptional
and adjusting
Adjusted items(2) Total
GBP'000 GBP'000 GBP'000
Revenue 64,074 - 64,074
Cost of sales 59,811 - 59,811
Gross profit 4,263 - 4,263
Total operating
income 192 249 441
Total administrative
expenses 16,316 22,154 38,470
(Loss)/profit from
operations (11,861) (21,905) (33,766)
EBITDA(1) (excluding
share based payments) (10,971) (20,865) (31,836)
Depreciation (696) - (696)
Amortisation (194) (1,287) (1,481)
Share option credit/(expense) - 247 247
(Loss)/profit from
operations (11,861) (21,905) (33,766)
--------------------------------- ----- ---------- ---------------- ------------ ----
Finance income 1,269 - 1,269
Finance expense (765) - (765)
---------- ---------------- ------------
(Loss)/profit before
tax (11,357) (21,905) (33,262)
Taxation 1,325 1,920 3,245
(Loss)/profit for
the year attributable
to equity holders
of parent company (10,032) (19,985) (30,017)
Other comprehensive
income
Items that may be
reclassified to
profit or loss
Exchange difference
on translation of
foreign operation 56 - 56
Total comprehensive
income attributable
to equity holders
of parent company (9,976) (19,985) (29,961)
Earnings per share:
Basic (12.8)p - (38.5)p
Diluted (12.8)p - (38.5)p
---------- ---------------- ------------
(1) EBITDA means earnings before interest, taxation, depreciation and amortisation.
(2) Exceptional and adjusting items before tax consist of GBP2,047,000 (2017:
GBP14,360,000) of exceptional items as detailed in Note 3
and GBP223,000 (2017: GBP954,000) of other adjusting items relating to
amortisation and share option credit/expense as detailed above.
(3) Adjusted for the early adoption of IFRS15 as detailed in the announcement
dated 13 April 2018
Condensed consolidated statement of financial position
As at 31 January 2018
As at As at As at
31 January 31 January 31 July
2018 2017 2017
(restated) (adjusted
and unaudited)
GBP'000 GBP'000 GBP'000
------------------------------------------ ----- ------------ ------------- ------------------
Non-current assets
Property, plant and equipment 5,227 5,410 5,380
Goodwill 10,903 14,851 10,903
Intangible assets 6,103 5,575 5,992
Accrued revenue 15,362 12,772 13,591
Total non-current assets 37,595 38,608 35,866
------------------------------------------------- ------------ ------------- ------------------
Current assets
Inventories 417 528 342
Trade and other receivables 32,600 28,635 14,492
Corporation tax debtor 2,443 - 3,729
Cash and cash equivalents 12,341 12,310 10,076
Total current assets 47,801 41,473 28,639
------------------------------------------------- ------------ ------------- ------------------
Total assets 85,396 80,081 64,505
------------------------------------------------- ------------ ------------- ------------------
Current liabilities
Trade and other payables 50,629 39,907 37,942
Corporation tax liability - 688 -
Loans and other borrowings 1,209 1,707 26,301
Total current liabilities 51,838 42,302 64,243
------------------------------------------------- ------------ ------------- ------------------
Non-current liabilities
Trade and other payables 38,760 30,343 29,619
Loans and other borrowings 26,105 20,184 2,732
Deferred tax liability 739 753 753
Total non-current liabilities 65,604 51,280 33,104
------------------------------------------------- ------------ ------------- ------------------
Total liabilities 117,442 93,582 97,347
------------------------------------------------- ------------ ------------- ------------------
Net liabilities (32,046) (13,501) (32,842)
------------------------------------------------- ------------ ------------- ------------------
Equity attributable to equity holders
of the parent company
Called-up share capital 79 79 79
Share premium 14,667 14,599 14,667
Merger reserve 9,532 9,532 9,532
Share option reserve 738 904 890
Own shares reserve (748) (748) (748)
Foreign currency reserve 32 (31) 26
Retained earnings (56,346) (37,836) (57,288)
------------------------------------------------- ------------ ------------- ------------------
Total equity (32,046) (13,501) (32,842)
------------------------------------------------- ------------ ------------- ------------------
Condensed consolidated statement of changes in equity
For the six months ended 31 January 2018
Share Own Foreign
Share Share Merger option shares Retained currency
capital premium reserve reserve reserve earnings reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 August 2016
(as originally
stated) 79 14,129 9,532 1,359 - 34,320 (30) 59,389
Prior period
adjustments:
as original
January
2017 - - - - (748) (608) - (1,356)
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
At 1 August 2016
(Restated original
January 2017) 79 14,129 9,532 1,359 (748) 33,712 (30) 58,033
Prior period
adjustments:
Restated at July
2017 - - - - - (41,702) - (41,702)
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
At 1 August 2016
(Restated for July
2017 restatements) 79 14,129 9,532 1,359 (748) (7,990) (30) 16,331
Early adoption
of IFRS15
adjustments - - - - - (14,369) - (14,369)
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
At 1 August 2016 79 14,129 9,532 1,359 (748) (22,359) (30) 1,962
(IFRS15 adopted)
Loss for the period - - - - - (12,280) - (12,280)
Other comprehensive
income - - - - - - (1) (1)
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
Total comprehensive
income - - - - - (12,280) (1) (12,281)
Dividends paid - - - - - (3,342) - (3,342)
Share-based payment
expense - - - 63 - - - 63
Deferred tax on
share options - - - (373) - - - (373)
Issue of shares - 470 - - - - - 470
Reserve transfer
relating to share
based payments - - - (145) - 145 - -
At 31 January 2017 79 14,599 9,532 904 (748) (37,836) (31) (13,501)
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
Condensed consolidated statement of changes in equity
For the six months ended 31 January 2018 (continued)
Share Own Foreign
Share Share Merger option shares Retained currency
capital premium reserve reserve reserve earnings reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 August 2017
(as originally
stated and
audited) 79 14,667 9,532 890 (748) (40,087) 26 (15,641)
Adoption of
IFRS15 - - - - - (17,201) - (17,201)
---------- ---------- ---------- ---------- ----------- ----------- ----------- ----------
At 1 August 2017 79 14,667 9,532 890 (748) (57,288) 26 (32,842)
(IFRS15 adopted
and unaudited)
Profit for the
period - - - - - 950 - 950
Other
comprehensive
income - - - - - - 6 6
---------- ---------- ---------- ---------- ----------- ----------- ----------- ----------
Total
comprehensive
income - - - - - 950 6 956
Share-based
payment
expense - - - (160) - - - (160)
Reserve transfer
relating to
share
based payments - - - 8 - (8) - -
At 31 January
2018 79 14,667 9,532 738 (748) (56,346) 32 (32,046)
---------- ---------- ---------- ---------- ----------- ----------- ----------- ----------
Condensed consolidated cash flow statement
For the six months ended 31 January 2018
31 January 31 January 31 July 2017
2018 2017
(restated) (adjusted
and unaudited)
GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------ ------------- ------------------
Operating activities
Profit/(loss) before tax 950 (12,888) (33,262)
Finance income (721) (631) (1,269)
Finance expense 388 356 765
Depreciation of property, plant and
equipment 357 340 696
Share option (credit)/expense (160) 63 (247)
Amortisation of intangible fixed assets 495 970 1,481
Impairment of goodwill and intangible
assets - 13,367 17,315
---------------------------------------------- ------------ ------------- ------------------
1,309 1,577 (14,521)
Change in trade and other receivables (19,166) (9,022) 4,946
Change in inventories (75) 30 216
Change in trade and other payables 21,828 9,298 6,519
Change in provisions - (526) (526)
---------------------------------------------- ------------ ------------- ------------------
2,587 (220) 11,155
---------------------------------------------- ------------ ------------- ------------------
Cash flows from operating activities 3,896 1,357 (3,366)
Income taxes received/(paid) 1,270 (1,496) (2,810)
---------------------------------------------- ------------ ------------- ------------------
Net cash flows from operating activities 5,166 (139) (6,176)
---------------------------------------------- ------------ ------------- ------------------
Investing activities
Purchase of property, plant and equipment (199) (160) (489)
Purchase of intangible assets (602) (528) (1,460)
Finance income 1 8 8
Net cash flows used in investing activities (800) (680) (1,941)
---------------------------------------------- ------------ ------------- ------------------
Financing activities
Issue of shares - 470 539
Loans repaid (1,719) (5,200) (5,700)
Loans received - 9,200 16,700
Finance expense (388) (235) (503)
Dividends paid - (3,342) (5,136)
---------------------------------------------- ------------ ------------- ------------------
Net cash flows (used in)/from financing
activities (2,107) 893 5,900
---------------------------------------------- ------------ ------------- ------------------
Net increase/(decrease) in cash and
cash equivalents 2,259 74 (2,217)
Translation gain/(loss) on cash and
cash equivalents 6 (1) 56
Cash and cash equivalents at beginning
of period 10,076 12,237 12,237
---------------------------------------------- ------------ ------------- ------------------
Cash and cash equivalents at end of
period 12,341 12,310 10,076
---------------------------------------------- ------------ ------------- ------------------
Unaudited notes
1 Basis of preparation and accounting policies
Utilitywise plc is incorporated and domiciled in the United
Kingdom.
The condensed consolidated interim financial information should
be read in conjunction with the financial statements for the year
ended 31 July 2017, which have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union.
On 1 August 2017, the Group early-adopted IFRS 15 (Revenue from
Contracts with Customers). In accordance with IAS 8, the results of
the Group for the six-month period ended 31 January 2017 and for
the year ended 31 July 2017 have been restated to take account of
this change in accounting policy. A qualitative explanation of the
impact on the Group's results, as a result of the adoption of IFRS
15, is set out in the financial statements of the Group for the
year ended 31 July 2017.
The information for the year ended 31 July 2017 does not
constitute statutory accounts within the meaning of Section 435 of
the Companies Act 2006, but is based on the statutory financial
statements for that year, on which the auditors have reported, as
subsequently restated upon the adoption of IFRS 15 as explained
above. Their audit report was unqualified, did not include
references to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and did not contain
a statement under Section 498 (2) or (3) Companies Act 2006.
A financial reconciliation of the Group's results for the year
ended 31 July 2017 and on the consolidated balance sheet of the
Group as at 31 July 2017 and 31 July 2016, between the audited
results and the results as restated upon the adoption of IFRS 15,
was announced on 13 April 2018. As this was after the approval of
the financial statements of the Group for the year ended 31 July
2017, the financial reconciliation has not been audited.
The interim financial information for each of the six-month
periods ended 31 January 2018 and 31 January 2017 has not been
audited and does not constitute statutory accounts within the
meaning of Section 435 of the Companies Act 2006.
The principal accounting policies have been applied consistently
to all years and are set out in the 2017 Annual Report and
Accounts, with the exception of the change in accounting policy
upon the adoption of IFRS 15, as explained above.
2 Segment information
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker ("CODM") has been identified as
the management team, including, amongst others, the Chief Executive
Officer, Non-executive Chairman and Chief Financial Officer.
During the year, the Group serviced both Enterprise and
Corporate businesses. The Board considers that the services were
offered from two distinct segments in the current year.
Operating segments are determined based on the internal
reporting information and management structure within the Group.
Information regarding the results of the reportable segment is
included below. Performance is based on segment Adjusted Earnings
before income taxation, depreciation and amortisation (EBITDA),
which is operating profit or loss stated before depreciation,
amortisation, share-based payment expenses and any exceptional
items, as reported in the internal management reports that are
reviewed by the CODM. The segment EBITDA, as defined above, is used
to measure performance. Revenues disclosed below represent revenues
to external customers.
The Enterprise Division derives its revenues from energy
procurement by negotiating rates with energy suppliers for small
and medium sized business customers throughout the UK, Republic of
Ireland and certain European markets. The Corporate Division
derives its revenues from energy procurement of larger industrial
and commercial customers, providing an account care service and
offering a variety of utility management products and services
designed to assist customers in managing their energy
consumption.
31 January 31 January
2018 2017
(restated)
GBP'000 GBP'000
----------------------- ------------ -------------
Revenue
Enterprise 33,235 31,417
Corporate 6,516 7,252
Intersegment revenue (50) (301)
----------------------- ------------ -------------
Total Group revenue 39,701 38,368
----------------------- ------------ -------------
2 Segment information (continued)
31 January 31 January 31 January
2018 2018 2018
Enterprise Corporate Total
GBP'000 GBP'000 GBP'000
-------------------------------------------- ------------ ------------ ------------
Segment adjusted EBITDA 3,006 350 3,356
Intercompany revenue - (72) (72)
Intercompany direct costs 50 22 72
Intercompany management charges (647) 647 -
Segment adjusted EBITDA post intercompany
adjustments 2,409 947 3,356
Share option (expense)/credit (18) 178 160
Exceptional charges (1,745) (302) (2,047)
Finance income 721 - 721
Finance expense (388) - (388)
Depreciation (289) (68) (357)
Amortisation (5) (107) (112)
Taxation - - -
-------------------------------------------- ------------ ------------ ------------
Segment profit after tax 685 648 1,333
-------------------------------------------- ------------ ------------ ------------
31 January 31 January 31 January
2017 2017 2017
Enterprise Corporate Total
(restated) (restated) (restated)
GBP'000 GBP'000 GBP'000
-------------------------------------------- ------------- ------------- -------------
Segment adjusted EBITDA 2,781 (211) 2,570
Intercompany revenue - (355) (355)
Intercompany direct costs 300 55 355
Intercompany dividend income (647) 647 -
-------------------------------------------- ------------- ------------- -------------
Segment adjusted EBITDA post intercompany
adjustments 2,434 136 2,570
Share option expense (51) (12) (63)
Exceptional income 249 - 249
Exceptional charges (1,231) (10) (1,241)
Exceptional impairment - (13,367) (13,367)
Finance income 630 1 631
Finance expense (356) - (356)
Depreciation (276) (64) (340)
Amortisation (9) (70) (79)
Taxation (833) 490 (343)
-------------------------------------------- ------------- ------------- -------------
Segment profit/(loss) after tax 557 (12,896) (12,339)
-------------------------------------------- ------------- ------------- -------------
3 Exceptional items
Exceptional charges/(income), stated before applicable taxation
effects, are as follows:
31 January 31 January
2018 2017
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Exceptional charges/(income):
Goodwill impairment - 8,957
Impairment of intangible assets - 4,411
Legal, restructuring and re-organisation 2,047 1,241
Provision release - (249)
2,047 14,360
------------------------------------------- ------------ ------------
Exceptional items in the six-month period ended 31 January 2018
comprise:
-- Legal and settlement costs incurred as a result of a disputes
with customers and competitors of GBP422,000
-- Restructuring and re-organisation costs of GBP685,000
-- Other non-recurring professional fees of GBP940,000
Exceptional items in the six-month period ended 31 January 2017
comprise:
-- An impairment loss in respect of t-mac Technologies Limited CGU of GBP13,367,000
-- Other charges in relation to various legal, restructuring and other costs total GBP1,241,000
-- Exceptional income of GBP249,000 in the period relates to an
adjustment to a historic dilapidations provision.
4 Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the period.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares in issue to assume the
conversion of all potentially dilutive ordinary shares. The Group
has potentially dilutive ordinary shares, being those share options
granted to employees where the exercise price is less than the
average market price of the Company's ordinary shares during the
period. Own shares held are excluded from the average number of
shares used to calculate basic and diluted EPS.
31 January 31 January
2018 2017
(restated)
GBP'000 GBP'000
--------------------------------------------------------- ------------ -------------
Profit/(loss) used in calculating basic and diluted
EPS 956 (12,281)
Exceptional items 2,047 14,360
Amortisation of intangible assets acquired in business
combinations 383 891
Share-based payment (credit)/expense (160) 63
Tax impact of the above adjustments - (1,093)
--------------------------------------------------------- ------------ -------------
Earnings for the purpose of adjusted basic and diluted
EPS 3,226 1,940
--------------------------------------------------------- ------------ -------------
Number of shares
Weighted average number of shares for the purpose
of basic earnings per share 79 79
Effects of dilutive potential ordinary shares from - -
share options
--------------------------------------------------------- ------------ -------------
Weighted average number of shares for diluted earnings
per share 79 79
--------------------------------------------------------- ------------ -------------
Earnings per share
--------------------------------------------------------- ------------ -------------
Basic 1.2p (15.8)p
Diluted 1.2p (15.8)p
--------------------------------------------------------- ------------ -------------
Adjusted earnings per share
--------------------------------------------------------- ------------ -------------
Basic 4.1p 2.5p
Diluted 4.1p 2.5p
--------------------------------------------------------- ------------ -------------
In accordance with IAS33, a diluted loss per share cannot be a lower
loss per share than a basic loss per share.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ITMRTMBATBFP
(END) Dow Jones Newswires
April 23, 2018 02:00 ET (06:00 GMT)
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