REG - Eneraqua Technolgs. - Interim Results
11/10/2022 07:00
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RNS Number : 4081C Eneraqua Technologies PLC 11 October 2022
11 October 2022
Eneraqua Technologies plc
("Eneraqua", the "Company" or the "Group")
Interim Results
92% uplift in H1 revenue and full revenue cover for FYJan23
Investment in people and infrastructure underpins growth strategy
Eneraqua Technologies plc, a specialist provider of energy and water
efficiency solutions, is pleased to announce its interim results for the six
months ended 31 July 2022.
H1 FYJan23 Financial Highlights
- Revenue increased 92% to £24.2m (H1 FYJan22: £12.6m), reflecting growth
in contract wins and project completions.
- Gross profit increased 64% to £9.9m (H1 FYJan22: £6.1m), reflecting
growth in revenue with increased contract sizes and, as expected, reduction in
gross margin reflecting larger contract wins and maturing market compared to
H1 FYJan22.
- Adjusted EBITDA(1) £3.98m (H1 FYJan22: £3.23m) reflecting the continued
investment in the team and our delivery capabilities.
- Adjusted profit before tax £3.07m (H1 FYJan22: £2.98m).
- Gross cash of £6.5m and net debt of £0.2m (H1 FYJan22: Gross cash of
£4.5m and net cash of £0.03m) following significant planned investment to
manage increase in project delivery.
- Adjusted diluted EPS: 6.48p.
Operational and Strategic Highlights
- Delivered on plan to move into agritech with first contract secured to
provide ClimateSmart Irrigation solution to the State of Uttarakhand in India.
- Awarded multiple contracts with new and existing social housing and
private sector clients to provide heat pump solutions. These will help them
meet their sustainability and net zero goals and reduce residents' energy
bills.
- Awarded two English local authority contracts to deliver net water
neutrality pilot programmes, for residential new build, using Control Flow
products.
- Completed the acquisition of Mathewson Holdings Ltd (Mathewson) on 29 July
2022, for an initial consideration of £1.3m.
Post period end and Outlook
- The Group continues to trade well and expects to benefit from the
traditional H2 weighting of client procurement calendars.
- Strong pipeline of opportunities for the current year and beyond with an
order book(2) providing full revenue cover for the Group's FYJan23 revenue
target.
- Having reviewed the performance to date, the Board has evaluated prospects
for FYJan24 and increased its revenue target by 14% to £80.1m, materially
ahead of prior management expectations.
- This increased FYJan24 revenue target is already 72% covered by the order
book(2) (82% based on prior FYJan24 revenue target).
- Pre-launch costs of £0.5m to be incurred in the current period to
facilitate the move into a new B2C revenue stream via the launch of our
Control Flow HL2024 technology direct to consumers in FYJan24.
Commenting on the results, Eneraqua Technologies CEO, Mitesh Dhanak, said: "I
am pleased to report on a solid first half, which has positioned the Group to
deliver on its targets for FYJan23 with confidence. Our performance
underpins the Company's growth plans in the domestic and commercial energy
markets as well as the water sector. We are pleased to have increased revenue
visibility through our order book(2), with the current financial year
remaining fully covered. We have increased the revenue target for FYJan24 to
£80.1m, materially ahead of prior management expectations, and have 72% of
this already covered.
"Looking forward, we expect to launch our water efficiency product direct to
consumers later this year. This has been proven to reduce domestic water and
energy consumption and utility bills. We remain confident in our products
and in our valued team and have a clear strategy focused on expanding our
current offering and nurturing our strong client relationships. This strategy
coupled with our strong order book and trading in the first months of the
second half, leave the Group feeling confident for the future, as demonstrated
by the 14% revenue upgrade for FYJan24, and focused on the next stage of its
development."
An overview of the interim results is available to watch here:
https://bit.ly/ETP_H123o (https://bit.ly/ETP_H123o)
Analyst Presentation
A presentation for analysts will be held today at 9:00am via webinar. Analysts
wishing to attend should contact eneraqua@almapr.co.uk.
(1)( )Adjusted EBITDA - Adjusted for share based payment charges (prior
year also excludes IPO costs).
(2)( )Order Book defined as Contracted + Secured. Contracted = project
contract issued and signed, with work started or ready to start. Secured = sum
of a) tender process successful, awaiting project contract, and b) Directors'
assumed win rate on Framework opportunities.
For more information, please contact:
Eneraqua Technologies plc Via Alma PR
Mitesh Dhanak, CEO www.eneraquatechnologies.com (http://www.eneraquatechnologies.com)
Iain Richardson, CFO
finnCap Limited - Nominated adviser and Joint Broker +44(0)20 7220 0500
Ed Frisby / Charlie Beeson - Corporate Finance
Andrew Burdis / Sunila de Silva - ECM
Singer Capital Markets - Joint Broker +44(0)20 7496 3000
Sandy Fraser / Justin McKeegan / Rachel Hayes
Alma PR - Financial PR and IR +44(0)20 3405 0205
Justine James / Sam Modlin / Will Ellis Hancock eneraqua@almapr.co.uk
Notes to editors
Eneraqua Technologies (AIM:ETP) is a specialist in energy and water
efficiency. The Group designs and delivers improved energy and water systems
which utilise its wholly owned intellectual property, Control Flow HL2024.
Energy was the first market the Company entered and this is the larger sector,
with the Company focused on clients with end of life gas, oil or electric
heating and hot water systems. The Group provides turnkey retrofit district or
communal heating systems based either on high-efficiency gas or ground/air
source heat pump solutions that support Net Zero and decarbonisation goals.
Water is a growing service offering focused on water efficiency upgrades for
utilities and commercial clients including hotels and care homes. It has
also expanded into agritech systems.
The activities in both areas are underpinned by the Company's wholly-owned
intellectual property, the Control Flow HL2024 family of products which reduce
water wastage and improve the performance of heating and hot water systems.
The Company's main country of operation is the United Kingdom. The Company's
head office is in London with additional offices in Leeds, Washington
(Sunderland), India, Spain and the Netherlands. The Company has 144 employees,
with the majority employed within the UK. Eneraqua Technologies has received
the London Stock Exchange's Green Economy Mark.
To find out more, please visit: www.eneraquatechnologies.com
(http://www.eneraquatechnologies.com/)
Operational Review
In the first half of the financial year, Eneraqua made strong progress in
delivering on its growth strategy with energy efficiency clearly at the
forefront of our clients' priorities both in terms of carbon emissions and
cost. Our success is due to the great work of our team in delivering our
client goals, enabling us to continue to focus on delivering on the Group's
strategic objectives.
Having successfully raised funds at IPO last November, the business has
further strengthened its position in its target sectors. The current
macroeconomic environment, while difficult for all, creates opportunities for
the Group as the technologies we provide are becoming increasingly important
solutions in the mission to reduce global carbon emissions and cut utility
bills. With a clear strategic plan for growth, we are well positioned to
help our customers navigate the issues of today by improving the efficiency of
their heating and water systems.
In Energy, our turnkey retrofit district and communal heating systems,
including ground and air source heat pump solutions, are an important tool for
clients in meeting their sustainability and net zero goals. For their
residents, it cuts their energy bills substantially. Our public and private
sector clients rely on and welcome our impartial advice and ability to deliver
the best solution for their buildings.
Water harnesses the patented Control Flow HL2024 technologies that reduce
water wastage and improve the efficiency of heating and hot water systems.
Clients include water companies, developers, hotels, schools and leisure
centres, with the products installed in both domestic and commercial
settings. By reducing water wastage, we can cut water consumption by up to
26% in homes and deliver energy bill savings through improved performance of
heating and hot water systems.
Financial performance
Our half year trading was robust and demonstrated the solid performance of the
Group amidst a challenging economic environment. Revenue for the half
increased by 92% to £24.2m, demonstrating the Group's ability to convert our
new business pipeline into contract wins and realised revenue. This has seen
the average contract size increase from £2.25m in H1 FYJan22 to £3.5m in H1
FYJan23. As expected at IPO, alongside this growth in contract size there
has also been a reduction in gross margin compared to the previous period. We
expect gross margin to stabilise at or around 34% during FYJan24.
Through the contract wins secured in the second half of FY22, adjusted
EBITDA(1) increased to £3.98m (H1 FYJan22: £3.23m), whilst PBT increased to
£2.95m (H1 FYJan22: £2.75m).
As we have noted previously, due to the nature of our customers and their
procurement calendars, our contract delivery and revenues are weighted to the
second half of our financial year.
As planned, we have invested in our teams and infrastructure to deliver
contracts this year and allow for future growth next year. This is reflected
in the increase in administrative expenses in the period.
The phasing of contract delivery and the full impact of the larger contracts
is expected to deliver a strong second half of this financial year. We
expect a larger working capital requirement at the year end due to the timing
of contract payment terms and need for early ordering of key components. The
latter is required on a growing number of contracts to ensure project delivery
remains in line with agreed timetables. The Company remains well capitalised
to fund growth in executing its order book through existing resources and
operating cash generation.
The strength of the Group's orderbook, which already provides full revenue
cover for its FYJan23 revenue target and 72% cover for the increased FYJan24
target (82% based on prior FYJan24 revenue target), underpins the Board's
positive outlook for the year.
Operational and strategic progress
Despite the challenges in the current economic environment, Eneraqua remains
on course to deliver substantial growth, with strong performances from both
the Energy and Water sectors in the financial year to date. In Energy, the
period saw major contract wins with growing demand for our air and ground
source based systems. This was further highlighted by the announcement of
our post-period contract wins and extensions with new and existing social
housing and private sector clients, to provide heat pump based solutions over
a three-year period. The decision of clients to extend existing contracts to
cover additional buildings is a great reflection of the quality of service and
value for money that our team delivers. Our strong company culture of
delivering high quality outcomes helps form and support strong relationships
with clients.
Water has continued to grow, with a focus on helping clients improve their
water efficiency. Alongside our core programmes to improve domestic and
commercial buildings, we also completed our planned expansion into the
agritech sector with a first contract win in India, delivering our
ClimateSmart Irrigation programme for the State of Uttarakhand. Following
the success of this project, we are now in discussion with other states in
India.
Water also saw the award of contracts with two English local authorities to
deliver net water neutrality programmes. Within the UK there are 74 local
authorities where there are concerns about water stress and nitrate levels in
the local area. This has led to applications to build over 120,000 new homes
becoming stuck in the planning process. By using Control Flow HL2024 in
existing homes in the area, the pilot schemes showed it was possible to save
enough water to meet the needs of the new homes and thereby avoid placing any
additional demand on local water resources. Following the success of the
pilot programmes we are now in discussion with other local authorities and
developers that face this same issue.
The water neutrality pilot also demonstrated the substantial energy and water
bill savings for domestic households through Control Flow HL2024. On average
each household would save an equivalent of c£360 per annum. Following this
success, the Board has decided to invest in a direct B2C offering. With
pre-launch costs of approximately £0.5m in the second half, this will create
a new and exciting revenue stream for the business.
Our Research and Development teams in Europe and India remain focused on
developing new, innovative solutions that help reduce carbon emissions and
water consumption in both buildings and agriculture. We are on track to
launch our new MeterSave product later this year which allows for easier
installation of the Control Flow technology alongside the water meter. Our
R&D teams have submitted new patent applications and are now focused on
the design and development of follow-on products for new sectors.
Following the two acquisitions last year, we were delighted to complete at the
end of H1 FYJan23 the acquisition of Mathewson, an established provider of
underfloor heating solutions for the health and commercial sectors. This
acquisition extends our reach into the healthcare sector and deepens our
offering in the commercial sector by broadening the services we offer clients.
The integration of Mathewson is underway and we expect a positive benefit from
FY24 onwards.
The integration of Welltherm has continued during the period and this has
helped ensure that we continue to deliver key ground source heat pump projects
on time and in line with client expectations as well as mitigating increasing
costs in the sub-contract drilling market. We have invested in additional
capacity in Welltherm in order to meet demand.
Expanding our growth opportunities
Our growth strategy continues to be underpinned by expanding our offerings
within both the Energy and Water sectors, whether that be organically or
inorganically. As previously discussed, Energy continues to grow with a strong
pipeline and healthy order book.
Water is also seeing substantial growth, following recent contract wins and
the two ongoing net water neutrality pilot programmes. Both these pilots and
the agritech contract in India, highlight the effect that investing in
increasing the efficiency of existing water systems can have on the local
environment. With water stress continuing to be a risk, compounded by the high
temperatures seen in many geographies in recent months, Water and the
solutions it provides will continue to help reduce water wastage around the
globe.
Market dynamics
Energy continues to see increasing demand for low-carbon solutions from both
existing and new clients. With greater familiarity in the technology, most
clients are now seeking to replace old district heating systems with
ground-source heat pump systems. As well as reducing carbon emissions, these
also offer lower energy bills for tenants making them particularly attractive
in the current climate.
For commercial buildings, the drive for low carbon heating remains strong.
Due to the nature of these buildings, the typical package is based on large
air-source heat pumps to provide the bulk of demand with gas boilers providing
top-up heating and hot water.
In Energy, our technology-agnostic approach allows us to identify and advise
clients on the best solution for their building. This can be pure heat pump
solutions as well as hybrid gas-heat pump systems depending on the individual
circumstance. Coupled with our ability to provide turnkey technical and
financial design and delivery, this creates an important point of
differentiation to our competitors. For Water, our patented technology
offers a performance edge for clients.
Regulatory and financial stability is an important consideration for us and
our clients. A stable environment supports the long-term investment required
to address climate change and water stress issues.
People and culture
As expected, in order to deliver our order book for this year and beyond, we
are investing in the growth of our team. During H1, the Group grew from 113
to 144 full time equivalent team members. We are now more than double in
size compared to the 71 members at the end of H1 FYJan22.
We take great care in recruitment and whilst it has been a challenging job
market, we are proud to offer an opportunity to join an exciting business
operating in an accelerating market environment. This has paid dividends for
the business and was reinforced in our latest annual staff survey where over
95% of staff responded. Key highlights included:
- 96% agreed or strongly agreed that they find the work they do
meaningful;
- 96% were confident in the Company's direction; and
- 92% agreed or strongly agreed that the Company has a good culture.
Our Company purpose and core values were drawn up by a cross-company group and
these have been adopted and are owned by our team. This has created a strong
company culture based on delivering quality outcomes that has under-pinned our
success to date.
Purpose: To inspire and deliver innovative solutions to support our clients'
needs
and create a sustainable planet.
Outlook
The Company continues to make great strides forward. We have seen momentum in
our order book pipeline and new client wins in Energy and Water; we have seen
existing customers sign new contracts and extend their working relationships
with us; and we have seen the roll out of exciting new products and a further
business acquisition.
Despite the challenges being faced globally, our business has moved to
mitigate these through the identification of multiple suppliers and diligent
recruitment, leaving it well positioned to navigate these unprecedented times
of economic disruption. Our customers remain focused on reducing their climate
impact and we continue to support them, as they too adapt to the current
financial environment.
In terms of our inorganic growth strategy, we are very pleased with the
success of our recent acquisitions and how they are integrating within the
Group. We continue to look for opportunities which meet our strict investment
criteria and will accelerate the growth of our business technologically,
geographically or through the enhancement of our delivery and service.
We remain confident in our products and our team and have a clear strategy
focused on expanding our current offering and nurturing our strong, existing
client relationships. This strategy coupled with our significant order book
and robust trading in the first months of the second half, leave the Directors
feeling confident for the future and, noting the performance to date, the
Board has reviewed prospects for FYJan24 and increased its revenue target by
14% to £80.1m, materially ahead of prior management expectations.
Financial Review
Strategy
The Group's strategy is based on developing and delivering profitable
solutions and products which help our clients reduce their carbon consumption
and improve their water efficiency.
In addition, we have continued with our inorganic growth strategy outlined at
the time of IPO, focussing on the acquisition of strategic, bolt-on
opportunities in the UK, such as the acquisition of Mathewson Limited, and the
exploration and identification of targets in North West Europe, which would
give the Group the relevant accreditations and credentials to operate in these
areas.
KPIs
The Group's financial Key Performance Indicators, which are aligned with its
growth strategy include Revenue growth, gross profit, Adjusted EBITDA,
adjusted EBITDA margin and R&D spend.
31 Jul 2022 31 Jul 2021
Revenue £24.2m £12.6m
Revenue growth 92% 53%
Gross profit £9.9m £6.1m
EBITDA £3.92m £3.00m
Adjusted EBITDA £3.98m £3.23m
Adjusted EBITDA margin 16.4% 25.6%
R&D spend £1.07m £0.7m
Revenue
Group revenues increased by 92% to £24.2m, (H1 FYJan22: £12.6m).
International revenues grew from £0.09m in H1 FYJan22 to £0.159m in H1
FYJan23. Group revenues include £0.7m from Welltherm Drilling Limited,
following its acquisition last year.
Profits
As the Group has secured and delivered larger value contracts, gross margins,
as expected, have reduced reflecting the nature of larger client contracts.
The Group has experienced inflationary price pressure from its subcontractor
cost base, which it has been able to be passed on to the client in most cases.
The strong growth in revenue supported the investment in headcount and
infrastructure required for those projects starting in the current financial
year. Adjusted EBITDA increased 23% to £4.0m (H1 FYJan22: £3.2m), with the
Group achieving Adjusted EBITDA margins of 16%, as expected, after allowing
for significant investment in team and infrastructure to deliver the larger
contracts commencing in H2 FYJan23. This investment supports both our
current operations and future growth.
Statutory operating profit increased to £3.1m (H1 FYJan22: £2.9m) and
statutory profit before tax was £2.9m (H1 FYJan22: £2.8m).
Acquisitions
On 29 July 2022, the Group acquired Mathewson Holdings Ltd and its trading
subsidiary, Mathewson Ltd, an established provider of underfloor heating
solutions for the health and commercial sectors, for an initial consideration
of £1.3m with further consideration of £0.35m payable over two years.
Headcount
The Group's full time equivalent (FTE) employees at 31 July 2022 were 144 (31
July 21: 71). This growth reflects the acceleration in recruitment in order to
support the Group's growth strategy. Headcount also includes 12 Welltherm
Drilling Limited employees, following the acquisition of this business in
September 2021.
Cash flow & cash position
The Group saw a cash outflow in the first half of the year as it managed its
project delivery timetable, requiring the forward purchasing of key items on a
number of projects.
Gross cash at 31 July 2022 was £6.5m (H1 FYJan22 £4.5m) with net debt £0.2m
(H1 FYJan22 net cash £0.03m).
The Group experienced a working capital outflow in the period due to the
timing of a number of trade creditor payments at the start of the financial
year. As a result of the global supply chain issues, the Group has continued
to forward order key material components for its larger contracts, which are
passed on to and paid for by clients once the materials have been delivered,
impacting on working capital.
Capital expenditure was limited in H1, being £0.1m of deposits for new drill
rigs, due for delivery by the end of the calendar year. In addition, there was
a further outflow of £1.3m for the acquisition of Mathewson.
During the period the Group secured new banking facilities with HSBC UK Plc
for an aggregate of £6.0m. The new facility will support the Group in its
growth strategy, both in terms of working capital requirements and acquisition
opportunities.
The Group ended the period with net debt (excluding IFRS 16 right of use lease
liabilities) of £0.2m compared with £0.03m of net cash at 31 July 2021,
following the drawdown of the Group's new debt facility.
Outlook
The Group is in a strong position with a healthy balance sheet, well funded to
be able to execute on its strong order book and growth strategy. The Group is
well placed to deliver another set of strong results, as we continue to
benefit from continued organic growth.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 July
Six months to 31 Jul 2022 Six months to 31 Jul 2021 Twelve months to 31 Jan 2022
£'000
£'000
£'000
Note
Continuing operations
Revenue 3 24,246 12,633 36,176
Cost of sales (14,327) (6,578) (21,572)
Gross profit 9,919 6,057 14,604
Administrative expenses (6,868) (3,206) (10,171)
Other operating income - - -
Included within administrative expenses are:
- Exceptional items 4 - (225) (1,178)
- Share based payments (58) - -
- Depreciation of property, plant and equipment (666) (30) (618)
- Depreciation of right-of-use assets (14) (44) (113)
- Amortisation of intangible assets (191) (82) (381)
Adjusted administrative expenses (5,939) (2,825) (7,881)
Adjusted EBITDA(1) 3,980 3,232 6,723
Operating profit 3,051 2,851 4,433
Interest payable and similar expenses (100) (100) (366)
Profit before taxation 2,951 2,751 4,067
Income tax (757) 159 (8)
Profit for the period from continuing operations 2,194 2,910 4,059
Total profit for the period attributable to equity holders of the parent
Other comprehensive income - (66) -
Total comprehensive income for the period attributable to equity holders of 2,194 2,844 4,059
the parent
Other comprehensive income relates to the translation of foreign operations.
The accompanying notes form part of the condensed interim consolidated
financial statements
(1)Adjusted EBITDA is considered to be a Key Performance Indicator and
consistent with how the Group measures trading and cash generative
performance. Note this is an Alternative Performance Measure and is a
non-IFRS measure.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 31 Jul 2022 31 Jul 2021 31 Jan 2022
£'000
£'000
£'000
Non-current assets
Intangible assets 8,505 6,736 7,218
Property, plant and equipment 2,868 3,061 3,095
Right-of-use assets 207 330 243
Deferred tax asset - 44 -
Total non-current assets 11,580 10,172 10,556
Current assets
Inventory 1,236 921 1,186
Trade and other receivables 13,148 3,856 12,389
Cash and cash equivalents 6,521 4,459 4,070
Total current assets 20.905 9,236 17,645
TOTAL ASSETS 32,485 19,408 28,201
Equity attributable to owners of the parent
Called up share capital 344 3 344
Share premium account 10,113 457 10,113
Merger reserve (5,490) - (5,490)
Other reserves (624) (10) (294)
Retained earnings 13,963 4,671 11,769
Total equity 18,306 5,120 16,442
Current liabilities
Borrowings 7 2,310 812 -
Trade and other payables 7,248 9,507 11,426
Lease liabilities 118 119 82
Total current liabilities 9,676 10,438 11,508
Non-current liabilities
Borrowings 7 4,404 3,612 -
Lease liabilities 32 238 109
Deferred tax liability 67 - 142
Total non-current liabilities 4,503 3,850 251
Total liabilities 14,179 14,288 11,759
TOTAL EQUITY AND LIABILITIES 32,485 19,408 28,201
The accompanying notes form part of the condensed interim consolidated
financial statements
CONSOLIDATED STATEMENT OF CASHFLOWS
For the six months ended 31 July
GROUP Six months to 31 Jul 2022 Six months to 31 Jul 2021 Twelve months to 31 Jan 2022
£'000
£'000
£'000
Cash flow from operating activities
Profit for the financial period 2,194 2,910 4,059
Adjustments for:
Amortisation of intangible assets 191 82 381
Depreciation of property, plant and equipment 666 30 618
Depreciation on right-of-use assets 14 44 113
Interest payable 100 1 330
Lease liability finance charge 19 13 36
Taxation charge / (credit) 756 (159) 8
Corporation tax received / (paid) - 380 380
Foreign exchange - 33 (38)
Share based payment charge 58 - 333
Changes in working capital:
Increase in inventory (50) (30) (295)
Increase in trade and other receivables (759) (949) (9,540)
(Decrease) / increase in trade and other payables (5,386) 570 7,278
Net (outflow) / increase from operating activities (2,197) 2,927 3,663
Cash flow from investing activities
Purchase of intangible assets (285) (354) (549)
Purchase of property, plant and equipment (113) (350) (2,722)
Acquisition of businesses - net of cash acquired (1,319) (1,665) (5,111)
Interest received - - -
Net cash outflow from investing activities (1,717) (2,369) (8,382)
Cash flows from financing activities
Proceeds from borrowings 7,340 - 9,998
Repayment of borrowings (786) (383) (4,972)
Interest paid (100) - (330)
Repayment of lease liabilities (89) - (191)
Net cash inflow from financing activities 6,365 (383) 4,505
Net increase / (decrease) in cash and cash equivalents 2,451 175 (214)
Cash and cash equivalents at beginning of period 4,070 4,284 4,284
Cash and cash equivalents at the end of the period 6,521 4,459 4,070
The accompanying notes form part of the condensed interim consolidated
financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 July
Share Capital Share Premium Merger Reserve Other Reserves Retained Earnings Total Equity
£000 £000 £000 £000 £000 £000
At 1 February 2021 3 456 - 56 1,761 2,276
Profit for the period - - - - 2,910 2,910
Other comprehensive income - - - (66) - (66)
Total comprehensive income for the period - - - (66) 2,910 2,844
Balance at 31 Jul 2021 3 456 - (10) 4,671 5,120
At 1 Aug 2021 3 456 - (10) 4,671 5,120
Profit for the period - - - - 1,149 1,149
Other comprehensive income - - - 66 - 66
Total comprehensive income for the period - - - 66 1,149 1,215
Merger reserve (3) (456) (5,490) - 5,949 -
Issue of shares 344 11,996 - - - 12,340
Share issue costs - (1,883) - - - (1,883)
Other, including share based payments and foreign exchange reserves - - - (350) (350)
Total transaction with owners 341 9,657 (5,490) (350) 5,949 10,107
Balance at 31 Jan 2022 344 10,113 (5,490) (294) 11,769 16,442
At 1 February 2022 344 10,113 (5,490) (294) 11,769 16,442
Profit for the period - - - - 2,194 2,194
Other comprehensive income - - - - - -
Total comprehensive profit for the period - - - - 2,194 2,194
Other, including share based payments and foreign currency reserves - - - (330) - (330)
Total transaction with owners - - - (330) 2,194 1,864
Balance at 31 July 2022 344 10,113 (5,490) (624) 13,963 18,306
The accompanying notes form part of the condensed interim consolidated
financial statements
Notes to the financial information
1. BASIS OF PREPARATION
The figures for the six months ended 31 July 2022 and 31 July 2021 are
unaudited and do not constitute statutory accounts.
As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial
Statements" in preparing this Interim Financial Information. The accounting
policies adopted are consistent with those applied by the Group in the
preparation of the annual consolidated financial statements for the year ended
31 January 2022.
The Group has not early adopted any standard, interpretation or amendment that
has been issued but is not yet effective. Several amendments and
interpretations apply for the first time in 2022, but these do not have a
material impact on the interim condensed consolidated financial statements of
the Group. The financial information for the year ended 31 January 2022 set
out in this interim report does not comprise the Group's statutory accounts as
defined in section 434 of the Companies Act 2006.
The statutory accounts for the year ended 31 January 2022, which were prepared
under international accounting standards in conformity with the requirements
of the Companies Act 2006, have been delivered to the Registrar of Companies.
The auditors reported on those accounts; their report was unqualified and did
not contain a statement under either Section 498(2) or Section 498(3) of the
Companies Act 2006 and did not include references to any matters to which the
auditor drew attention by way of emphasis.
1.1 Critical accounting judgements and key sources of
estimation uncertainty
The preparation of condensed Interim Financial Information requires the
Directors to make judgments, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. There are no
changes to critical accounting judgements and key sources of estimation
uncertainty from those disclosed in the annual accounts for the year ended 31
January 2022.
2. SEGMENT REPORTING
The following information is given about the Group's reportable segments:
The Chief Operating Decision Maker is the executive Board of Directors. The
Board reviews the Group's internal reporting in order to assess performance of
the Group. Management has determined the operating segment based on the
reports reviewed by the Board.
The Board considers that during the period ended 31 July 2022 the Group
operated in the three business segments according to the geographical location
of its operations and those being:
- United Kingdom
- Europe; and
- India
Six months to 31 July 2022 United Kingdom Europe India 2022
£'000 £'000 £'000 £'000
Revenue 24,087 66 93 24,246
Cost of sales (14,231) (80) (16) (14,327)
Gross Profit 9,856 (14) 77 9,919
Administrative expenses (5,976) (801) (91) (6,868)
Included within administrative expenses are:
- Exceptional costs - - - -
- Share based payments (58) - - (58)
- Depreciation of property, plant and equipment (348) (306) (12) (666)
- Depreciation of right-of-use assets (14) - - (14)
- Amortisation of intangible assets (191) - - (191)
Adjusted administrative expenses (5,365) (495) (79) (5,939)
Adjusted EBITDA(1) 4,491 (509) (2) 3,980
Operating profit/(loss) 3,880 (815) (14) 3,051
Interest receivable and similar income - - - -
Interest payable and similar expenses (83) (17) - (100)
Profit/(Loss) before tax 3,797 (832) (14) 2,951
Taxation (756) - (1) (757)
Profit/(Loss) after tax 3,041 (832) (15) 2,194
Net Assets as at 31 July 2022
Assets: 27,679 3,748 242 31,669
Liabilities (11,998) (1,348) (17) (13,363)
Net assets / (liabilities) 15,681 2,400 225 18,306
Six months to 31 July 2021 United Kingdom Europe India 2021
£'000 £'000 £'000 £'000
Revenue 12,624 - 9 12,633
Cost of sales (6,523) (50) (3) (6,576)
Gross Profit 6,102 (50) 6 6,058
Administrative expenses (2,989) (211) (7) (3,206)
Other operating income - - - -
Operating profit 3,113 (261) (1) 2,851
Interest receivable and similar income - - - -
Interest payable and similar expenses (94) (6) - (100)
Profit before tax 3,019 (267) (1) 2,751
Taxation 159 - - 159
Profit after tax 3,178 (267) (1) 2,910
Net Assets as at 31 July 2021
Assets: 9,512 9,848 48 19,408
Liabilities (10,240) (4,031) (17) (14,288)
Net assets / (liabilities) (728) 5,817 31 5,120
Twelve months to 31 January 2022 United Kingdom Europe India 2022
£'000 £'000 £'000 £'000
Revenue 35,918 216 42 36,176
Cost of sales (21,350) (187) (35) (21,572)
Gross profit 14,568 29 7 14,604
Administrative expenses (8,974) (1,079) (118) (10,171)
Included within administrative expenses are:
- Exceptional costs (1,178) - - (1,178)
- Depreciation of property, plant and equipment (132) (485) (1) (618)
- Depreciation of right-of-use assets (113) - - (113)
- Amortisation of intangible assets (339) (42) - (381)
Adjusted administrative expenses (7,212) (552) (117) (7,881)
Adjusted EBITDA(1) 7,356 (523) (110) 6,723
Operating profit/(loss) 5,594 (1,050) (111) 4,433
Interest receivable and similar income - - - -
Interest payable and similar expenses (366) - - (366)
Profit/(Loss) before tax 5,228 (1,050) (111) 4,067
Taxation (7) (1) - (8)
Profit/(Loss) after tax 5,221 (1,051) (111) 4,059
Net Assets
Assets: 24,847 3,245 109 28,201
Liabilities (9,208) (2,538) (13) (11,759)
Net assets 15,639 707 96 16,442
3. REVENUE
Six months to 31 Jul 2022 Twelve months to 31 Jan 2022
£'000 Six months to 31 Jul 2021 £'000
£'000
United Kingdom 24,087 12,624 35,918
Europe 66 - 216
Rest of the World 93 9 42
24,246 12,633 36,176
4. EXCEPTIONAL COSTS
Exceptional costs of £nil (six months to 31 July 2021: £224,900; twelve
months to 31 January 2022: £1,178,000) relate to non-incremental costs
associated with the initial public offering of the Group.
5. OPERATING PROFIT
Operating profit from continued operations is stated after charging /
(crediting):
Six months to 31 Jul 2022
£'000 Twelve months to 31 Jan 2022
Six months to 31 Jul 2021 £'000
£'000
Depreciation of property, plant and equipment 666 30 618
Depreciation of right-of-use assets 14 44 113
Amortisation of fixed assets 191 82 381
Inventories recognised as an expense - - 1
Research and development costs 67 - -
Share based payments 58 - 17
Exchange differences 75 33 (20)
Research and development costs in H1 FYJan2023 relate to the development of
new applications for HL2024 products. These were incurred in the United
Kingdom and were written off to the statement of comprehensive income.
6. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is calculated by
dividing the profit for the period by the weighted average number of ordinary
shares in issue during the period.
Six months to 31 Jul 2022 Six months to 31 Jul 2021 Twelve months to 31 Jan 2022
Profit for the period from continuing operations - £'000 2,194 2,910 4,059
Weighted number of ordinary shares in issue 33,558,207 253,774 22,204,677
Weighted number of fully diluted ordinary shares in issue 33,890,880 - 147,183
Basic earnings per share from continuing operations - pence 6.54 1,146.69 18.28
Diluted earnings per share from continuing operations - pence 6.48 1,146.69 18.16
Prior to the IPO, the number of shares is based on Cenergist Limited. From the
date of the IPO, the number of shares is based on the Company.
7. BORROWINGS
31 Jul 2022 31 Jul 2021 31 Jan 2022
£'000
£'000
£'000
Current 2,310 812 -
Non-current 4,404 3,612 -
6,714 4,424 -
Analysis of maturity of loans is given below:
31 Jul 2022
£'000
31 Jul 2021 31 Jan 2022
£'000
£'000
Amounts falling due within one year
Other loans 2,310 812 -
Amounts falling due 1-2 years
Other loans 1,612 899 -
Amounts falling due 2-5 years
Other loans 2,792 2,713 -
6,714 4,424 -
Other loans relate to a £6,000,000 facility provided by HSBC to Cenergist
Limited and a €1,500,000 facility provided to Cenergist Spain SL by CLM, and
are secured by fixed and floating charges over the assets of the Company and
by cross guarantees from the Company's subsidiary undertakings.
Interest on the HSBC facility is at a rate of 3.450% over the Bank of England
Base Rate with the repayment period being 48 months from date of individual
tranche drawdown.
Interest on the CLM facility is at a rate of 3.50% with the repayment period
being 84 months from date of individual tranche drawdown.
8. BUSINESS COMBINATION
On 29 July 2022 Cenergist Limited acquired all of the share capital of
Mathewson Holdings Limited ("Mathewson"). Mathewson provides a complete
service in underfloor heating solutions from original specification, planning
and drawings through to final surface finish.
Background and Rationale
Mathewson and its subsidiary, Mathewson Limited are an established provider of
underfloor heating solutions in the health and commercial sectors.
The acquisition extends the Group's low carbon offering into the healthcare
sector and strengthens its offering in other commercial sectors where
Mathewson provides underfloor heating solutions.
For the 10 months ended 30 June 2022, Mathewson recorded revenues of £813,000
with a net profit before tax of £205,000.
Consideration
The total consideration for the acquisition, assuming all earn-out payments
are made, will be £1.7 million. The consideration, is structured as follows:
Initial consideration, payable in cash on completion of £1.3 million; and
Contingent consideration of £0.4m, payable over the course of 24 months, in
3-monthly instalments. The first instalment is payable on 30 September 2022.
The initial estimates of the fair value of the assets acquired and liabilities
assumed of Mathewson Limited at the date of acquisition are as follows:
£'000
Cash at bank 313
Inventory 60
Other receivables 676
Trade and other payables (132)
Total identifiable net assets / (liabilities) acquired 917
Goodwill 817
1,734
Consideration
Initial consideration 1,320
Deferred consideration 414
Total consideration 1,734
Note that the above assessment is not yet finalised.
Goodwill relates to the accumulated "know how" and expertise of the business
and its staff. None of the goodwill is expected to be deducted for income tax
purposes.
9. EVENTS SUBSEQUENT TO PERIOD END
The Group has not identified any subsequent event to be reported.
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