REG - Eneraqua Technolgs. - Interim Results
11/10/2023 07:15
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RNS Number : 7031P Eneraqua Technologies PLC 11 October 2023
The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.
11 October 2023
Eneraqua Technologies plc
("Eneraqua", the "Company" or the "Group")
Interim Results
Solid performance in H1 with headwinds expected to impact near-term outlook
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 2023.
Financial Highlights
- Revenue increased 7% to £26.0m (H1 23: £24.2m), reflecting contract wins
and project completions in the period.
- Gross profit of £8.9m (H1 23: £9.9m), at a margin of 34.1% reflecting
the project mix in the period.
- Adjusted EBITDA(1) £0.79m (H1 23: £3.98m) as a result of continued
investment in both the team and ongoing research and development work.
- Adjusted loss before tax (£0.4m) (H1 23: £3.0m) which includes the
increased costs of borrowing in H1.
- Adjusted diluted EPS: 0.47p (H1 23: 6.48p).
- Net cash* of £0.5m (H1 23: net debt of £0.2m) as working capital
investment in FY23 unwound.
- Group's order book(2) across Energy and Water stands at £146.2m and,
taking a prudent view, approximately 25% is now anticipated to be delivered in
the remainder of H2 FY24.
Operational and Strategic Highlights
- First major NHS Trust energy project secured with the award of an £11.3m
contract with Kingston NHS, following the acquisition of Mathewson (in 2022),
validating Group approach on strategic acquisitions to unlock new markets.
- Solid performance in Water as a result of new student housing and care
home customer wins in Spain, and greater awareness and adoption of water
technologies in UK.
- Following first agritech contract for the State of Uttarakhand, two
further states have now adopted the solution, with Indian Government now
trialling our technologies in its domestic water programmes.
- Completed global production facility in Toledo, Spain, where product
assembly is now under way with manufacturing of key components to commence in
Q4.
Post period end and Outlook
We have seen a marked change in some customer behaviours post-period end as
Local Authorities and social housing landlords have experienced further
pressure on their capital budgets, as a result of continuing increases in
building costs and required spend on Government-mandated cladding and
insulation projects.
These challenges are reflected in the recent report by the Regulator for
Social Housing 3 (#_ftn1) which highlights that approximately half of all
social landlords intend to re-phase projects.
Since the half-year end the Company has won a number of new contracts for
heat-pump systems including a £12.7m contract with Royal Borough of
Kensington & Chelsea and a £7.2m contract to supply a district system for
a museum, gallery and leisure centre.
However, following our clients' half-year budget reviews in September we have
been approached regarding the phasing of work. On a prudent basis we
anticipate that there will be a re-phasing of work to meet their in-year
budget pressures. This is expected to materially impact second half revenues
and margins. No contracts have been cancelled but the timing of revenues on
some is expected to move into FY25.
Separately as set out in the 31 August trading update, the unexpected policy
decision by the UK Government on net nutrient neutrality rules has resulted in
certain Water customers deferring investment decisions pending regulatory
clarity.
As a result of these challenges and the anticipated delays, we expect our
revenues and profit for FY24 to be substantially below market expectations.
These clients have planned multi-year programmes, and while no requests to
look at phasing have been made, we believe, given their fixed in-year budgets,
the knock-on impact means it is prudent to expect lower revenues and profits
in FY25 than currently forecast.
The Company returned to a net cash position at the end of H1 FY24. As at 30
September, over 83% of the accrued income had been collected as cash with the
remaining balance due in the coming weeks. Overall, we expect to end FY24 in
profit and with a net cash positive position.
*excluding IFRS 16 liabilities
Commenting on the results, Eneraqua Technologies CEO, Mitesh Dhanak,
said: "During the period the Group performed in line with our expectations
notwithstanding the inflationary pressure on our energy client budgets.
Post-period end the Group has faced dual headwinds. The continued and
increased budgetary pressures on local government are leading to discussions
on slowing down project delivery and deferring works into FY25. This
compounds the impact of the recent unexpected Government policy change in
relation to net nutrient neutrality. As a result, the Board now expects some
projects to be delivered more slowly with revenues moving into next year and
reduced operational leverage affecting margins. As a result we expect to see
a material reduction in revenues and outturn in profitability during FY24.
This is extremely disappointing given the underlying imperative to transition
to Net Zero.
"The Group continues to be cash generative and retain a net cash position as
it manages through these near-term headwinds. The Board remains confident
that the longer-term opportunity for the business driven by the social and
economic imperatives driving the carbon transition remains in place."
An overview of the interim results is available to watch here:
https://bit.ly/ETP_H12023overview (https://bit.ly/ETP_H12023overview)
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.
Investor Presentation
A presentation to retail investors will be hosted at 11am this morning.
Investors are invited to sign up for the presentation via the PI World
platform using the following link: https://bit.ly/ETP_FY24_H1_webinar
(https://bit.ly/ETP_FY24_H1_webinar) . Questions can be submitted during the
presentation.
(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
+44(0)203 100 2000
Liberum - Nominated Adviser and Broker
Edward Mansfield
Benjamin Cryer
Anake Singh
Singer Capital Markets (Joint Broker) +44 (0)20 7496 3000
Sandy Fraser
Justin McKeegan
Asha Chotai
Alma (Financial PR and IR) +44(0)20 3405 0205
Justine James eneraqua@almapr.co.uk
Sam Modlin
Will Ellis Hancock
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 191 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/)
CEO Statement
The first half of the financial year has been solid and in-line with our
expectations. We have continued to grow revenues and returned to a net cash
position.
The underlying longer term drivers of our end markets clearly remain strong
with significant opportunities in both Energy and Water in the UK and in our
other regions of operation. Cost effectiveness and energy efficiency remains
at the forefront of our clients' priorities alongside meeting net zero
goals. Similarly, our water efficiency technology offers a proven solution
to the challenges of drought that are being seen in the UK and Europe.
Whilst we delivered a solid performance in water and post period end secured
new student housing and care home customer wins in Spain, the unexpected UK
Government announcement on net nutrient neutrality at the end of August has
impacted our water business, as announced on 31 August, due to the regulatory
uncertainty for clients and this is discussed in detail below.
On Energy, we previously saw signs of a return to normality for FY25 with
recent contract awards including the Group's first NHS Trust and the Royal
Borough of Kensington & Chelsea being evidence of renewed commitment from
clients.
Notwithstanding this, from the end of September we have seen a marked change
in the behaviour of some customers. Local Authorities and social housing
landlord capital budgets continue to be under pressure with the Regulator of
Social Housing, now reporting that approximately half of these organisations
are planning to re-phase works to manage their annual budgets. The Regulator
also highlighted that the expected low-point cash position for the sector will
be in mid-2024. The substantial increase in costs on Government-mandated
cladding and insulation projects and other works has seen landlords
over-commit their annual capital budgets and as a result seek to slow down
spend in the second half of their financial year (October - March) to manage
their budgets.
Following their half-year budget reviews at end-September, we have recently
received requests to review delivery plans and phasing on a number of material
contracts due for delivery in our current financial year. While the final
outcomes remain uncertain, we have taken the prudent view that a number of
these contracts will be re-phased to move spend into FY25.
As a result of these anticipated delays, we envisage that revenue and profit
for the current year will be materially lower than previously expected. With
H1 revenue of £26.0m, the Group's order book stands at £146.2m of which
taking a prudent view, approximately 25% is now anticipated to be delivered in
the remainder of H2 FY24. Outturn margins are also expected to fall as the
slowing of project delivery reduces the operational leverage that we have
traditionally benefitted from as teams are required to stay on the project for
longer periods. We continue to see strong cash conversion and expect to
report a net cash position at the FY24 year end.
Importantly, no contracts have been cancelled and work continues, but we
anticipate that there will be a need to slow down delivery against initial
project plans, to enable a higher proportion of expenditure to fall into our
clients' following financial year (April 2024 - March 2025).
The clients concerned are all long-term relationships with planned works
across a number of years. While they have not discussed any changes to their
future plans with us, given the analysis from the Regulator of Social Housing,
we believe that it is prudent to assume there will also be slippage in their
spending plans for FY25 and we are planning accordingly to ensure that both
operating profit and net cash within the business are protected.
Financial performance
Our half year trading demonstrated the solid performance of the Group amidst
an ongoing challenging economic environment. Revenue for the half increased by
7% to £26.0m (H123: £24.2m), demonstrating the Group's ability to convert
our new business pipeline into contract wins and realised revenue.
In the period, average contract size was £2.45m (H123: £3.5m), reflecting
growth in our water business, which has smaller individual contracts. Gross
margin at 34.1% is in line with management expectations, reflecting the
project mix in the period.
Adjusted EBITDA was £0.79m (H1 FY22: £3.98m), whilst PBT moved to an
adjusted loss before tax of (£0.4m) (H123: profit £3.0m) reflecting the
expected H2 bias for the year.
As we have noted previously, due to the nature of our customers and their
procurement calendars, our contract delivery and revenues are traditionally
weighted to the second half of our financial year.
As at 30 September, the Group's order book across Energy and Water stood at
£146.2m
The Company remains well capitalised to fund growth in executing its order
book through existing resources and operating cash generation. The Group saw
a cash inflow in the first half of the year as it saw the unwind of its
working capital investment at FY23. As at 30 September 2023, over 83% of
accrued income at the FY23 year-end had been converted to cash. Net cash
(excluding IFRS 16 liabilities) at the H1 period end was £0.5m.
Operational and strategic progress
Despite the challenges in the current economic environment, Eneraqua remains
on course to deliver growth, albeit at a reduced pace to that anticipated in
late August. We have seen improved cash generation as working capital
begins to unwind and we expect this to continue for the remainder of the
year. Recent contract awards evidence the significant opportunity for us to
build further growth, while noting that many clients will continue to navigate
significant budgetary constraints.
We have seen orders from new and existing clients which reflect the quality of
service and value for money that our team delivers.
We have also completed our global production facility in Toledo, Spain, where
product assembly is now under way with manufacturing of key components to
commence in Q4. As previously outlined, this production facility will be
responsible for the assembly and supply of the Control Flow product range.
Having a central facility allows us better quality control, and also reduces
production costs by 12% per unit.
Energy
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. Ongoing wins
across our geographies and product lines give confidence of continued
environmental and political tailwinds supporting the Group's growth.
The acquisition of Mathewson Holdings in 2022 opened up new opportunities in
the health and commercial sectors, which has resulted in the Group securing
its first NHS Trust award with a £11.3m contract with the Kingston NHS
Trust. Delivery will commence in late Q4 with the majority of revenue
recognised in FY25.
The Mathewson team were instrumental in the winning of the contract through a
competitive tender process. At the time of the acquisition, we flagged the
opportunity to expand into the healthcare sector as a new opportunity thanks
to their expertise in the area. This contract is a clear demonstration of our
successful acquisition strategy in practice. We continue to pursue further
contracts in healthcare and look forward to further growth in this sector.
In addition, post period end, we secured a £12.7m contract with the Royal
Borough of Kensington & Chelsea for the replacement of an end of life
gas-fired district heating system with a low-carbon heat-pump based system,
underscoring the continued demand for our solutions in public, multi-occupancy
buildings, where there is a need to retrofit and upgrade end-of-life heating
systems that burn fossil fuels with a green alternative.
We also secured a £7.2m contract with a world-class museum, art gallery, and
leisure centre complex for the replacement of an old gas-fired system again
with a new low-carbon heat pump solution. These awards reflect the ongoing
investment in low-carbon solutions, and the continued demand from both private
and public bodies to transition towards heating systems that are cleaner,
cost-effective and less damaging to the environment.
Water
Water harnesses the patented Control Flow HL2024 technologies which 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
applications.
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. The benefits of the technology are becoming better
understood by clients and we experienced growing demand in H1 FY24.
As reported, on 29 August 2023, the UK Government ("Government") announced its
intention to change the legislation that governs development in
nitrate-sensitive areas. While the initial proposals were blocked in
Parliament, the Government has made clear its plan to press ahead with the
proposed changes through a specific Parliamentary Bill later this year. This
is expected to remove existing responsibilities and instead set up a
centralised management scheme.
As communicated in the trading update, the continuing policy uncertainty has
led clients to pause projects until there is greater clarity on their
responsibilities and the details of the proposals are finalised. We believe
this will be complete during FY25.
Notwithstanding this, the benefits of our water efficiency technologies are
becoming better understood in terms of both reducing water wastage and cutting
household utility bills. We expect this to create greater opportunities in
the future.
Away from the UK, we have seen success and continued interest in our water
technologies in both India and Spain.
In Spain we have completed installing Control Flow HL2024 in four hospitals
and a number of student accommodation and care home sites and we have a
healthy pipeline of new projects with interested parties in a variety of
sectors.
In India, following our first agritech contract to provide clean energy, water
efficient irrigation systems for the State of Uttarakhand, two further states
have now adopted the solution. Follow-on discussions with Uttarakhand have
been delayed due to the substantial flooding that has affected that state.
Separately, the Indian Government is trialling our technologies in its
domestic water programmes.
Acquisition Strategy
The acquisition of Mathewson Holdings completed in August 2022 brought
complementary technical capability and a market presence in the health and
commercial sectors. As already mentioned, this facilitated the award of our
first major NHS Trust contract award of £11.3m. This substantiates our
approach in making acquisitions that enhance our capabilities and enable
access to new markets.
This was followed by our acquisition of the Installatiebedrijf Vriend B.V
("Vriend") business in Holland. The integration of this highly skilled and
well-established team gives us a springboard for our Energy and Water
solutions in the Netherlands. The growth opportunity in North Western Europe
is large, with strong market drivers thanks to clearly defined targets and
commitments to achieve Net Zero from governments in the region. Following the
acquisition, we now have the requisite local accreditations which will enable
us to access new tender opportunities and accelerate our growth strategy in an
area where we see exciting potential.
People
The current labour market in the UK and Europe remains tight. We are
increasingly utilising offshore solutions using our engineering team in India
in order to manage workflows and costs.
As noted earlier, there is a risk of potential slippage in our energy projects
due to client budgetary pressures. If these occur, then we will delay
our planned recruitment and review existing teams to ensure they are
right-sized. We maintain a constant review to ensure that staffing levels
reflect our needs.
Outlook
The demand for our energy and water solutions remains strong. Whilst the
recent award of several major contracts indicates that some client capital
budgets are starting to return to normal, the increased inflation which
started to impact in 2022/23 is continuing to have a negative impact and
create budgetary pressures for others.
As noted above, this is expected to see some clients seek to delay project
delivery resulting in revenue slippage into FY25, with continuing pressure in
that year anticipated given the cautionary tone of the report from the
Regulator of Social Housing. This is clearly disappointing as it follows the
unexpected Government announcement on nutrient neutrality that affected our
water business.
Despite the impact of these two issues, the Group expects to remain profitable
for FY24 and report a net cash positive position at year end.
In both energy and water we are well placed to capitalise on growth, although
for both FY24 and FY25 we anticipate this will be at a slower pace than
previously expected. The Board remains confident that the longer-term
opportunity for the business driven by the social and economic imperatives
driving the carbon transition is unaffected. Our proven expertise in these
areas offers important assurance to clients on the quality and performance of
installations, thereby providing the confidence to make the move to low-carbon
and water efficient solutions. This remains the inevitable direction of travel
given the climate and water challenges that are now becoming apparent.
CFO Statement
I am pleased to report on Eneraqua's unaudited interim results for the six
months ended 31 July 2023 which marked a return to a net cash position
(excluding IFRS16 liabilities).
KPIs
The Group's financial Key Performance Indicators, which are aligned with its
growth strategy, are revenue growth, adjusted EBITDA, adjusted EBITDA margin,
adjusted PBT, R&D spend, cash conversion and ROCE.
31 Jul 2023 31 Jul 2022
Revenue £26.0m £24.2m
Revenue growth 7% 92%
EBITDA £0.74m £3.92m
Adjusted EBITDA £0.79m £3.98m
Adjusted EBITDA margin 3.0% 16.2%
Adjusted PBT (£0.4m) £3.0m
R&D spend £0.5m £1.07m
Cash conversion* 640% (56%)
ROCE (0.4%) 13.4%
*Cash from operating activities/EBITDA
Revenue
Group revenues increased by 7% to £26.0m, (H1 2023: £24.2m). International
revenues grew from £0.16m in H1 2023 to £0.57m in H1 2024.
As a result of the anticipated delays in both energy and water, we envisage
that revenue and profit for the current year will be materially lower than
previously expected.
The Group's order book stands at £146.2m of which, taking a prudent view,
approximately 25% is now anticipated to be delivered in the remainder of H2
FY24.
Profits
The growth in revenue was offset by investment in headcount and
infrastructure. Adjusted EBITDA was £0.8m, (H1 2023: £3.9m), with the Group
achieving Adjusted EBITDA margins of 3%.
The Group reported a small statutory operating loss of £0.1m (H1 2023: £3.1m
operating profit) and a statutory loss before tax of £0.4m (H1 2023: £2.9m
profit before tax).
Cash flow & net cash
The Group saw a cash inflow in the first half of the year through the unwind
of its working capital investment during FY23. As at 30 September over 83%
of accrued income at the FY23 year-end had converted to cash.
Capital expenditure was limited in H1, being £0.4m of plant and equipment
associated with the establishment of the manufacturing facility in Toledo,
Spain. Intangible asset additions reflect the continued development of the
HL2024 family of products. In addition, there was a further outflow of £0.3m
for the acquisition of Vriend.
The Group ended the period with net cash (excluding IFRS 16 liabilities) of
£0.5m compared with £0.2m of net debt at 31 July 2022 and £3.0m of net debt
at end-FY23. The Group expects to end FY24 in a net cash position.
Acquisitions
On 3 April 2023 the Group acquired Vriend a business incorporated in the
Netherlands, for total consideration of €0.522m. Vriend is a
multidisciplinary installer of sustainable energy solutions with a focus on
residential and commercial projects. The acquisition represents the Group's
first step on their European acquisition strategy, providing the necessary
accreditations and foundations to expand the Group offering into Northern
Europe.
Adjusting Items
The only adjusting item in the period was share based payment charges of
£0.1m (H1 2023: £0.1m).
Headcount
The Group's full time equivalent (FTE) employees at 31 July 2023 were 191 (31
July 22: 144). This growth reflects the addition of Vriend to the Group as
well as continued recruitment in key areas to support the Group's growth
strategy and ensure the management of key projects during the year.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 July
Six months to 31 Jul 2023 Six months to 31 Jul 2022 Twelve months to 31 Jan 2023
£'000
£'000
£'000
Note
Continuing operations
Revenue 3 26,047 24,246 55,074
Cost of sales (17,174) (14,327) (31,995)
Gross profit 8,873 9,919 23,079
Administrative expenses (8,973) (6,868) (12,774)
Other operating income - - -
Included within administrative expenses are:
- Share based payment charge (58) (58) (117)
- Depreciation of property, plant and equipment (297) (666) (655)
- Depreciation of right-of-use assets (204) (14) (196)
- Amortisation of intangible assets (333) (191) (573)
Adjusted administrative expenses (8,081) (5,939) (11,233)
Adjusted EBITDA(1) 792 3,980 11,846
Operating profit (100) 3,051 10,305
Interest payable and similar expenses (341) (100) (370)
Profit before taxation (441) 2,951 9,935
Income tax 540 (757) (1,420)
Profit for the period from continuing operations 99 2,194 8,515
Total profit for the period attributable to equity holders of the parent
Total comprehensive income for the period attributable to equity holders of 99 2,194 8,515
the parent
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 2023 31 Jul 2022 31 Jan 2023
£'000
£'000
£'000
Non-current assets
Intangible assets 9,255 8,505 8,703
Property, plant and equipment 3,251 2,868 3,441
Right-of-use assets 1,319 207 1,213
Deferred tax asset - - -
Total non-current assets 13,825 11,580 13,357
Current assets
Inventory 2,924 1,236 2,557
Trade and other receivables 6 26,825 13,148 29,226
Cash and cash equivalents 5,963 6,521 3,224
Total current assets 35,712 20,905 35,007
TOTAL ASSETS 49,537 32,485 48,364
Equity attributable to owners of the parent
Called up share capital 332 344 332
Share premium account 10,113 10,113 10,113
Merger reserve (5,490) (5,490) (5,490)
Other reserves 7 (624) 269
Retained earnings 20,055 13,963 19,791
Total equity 25,017 18,306 25,015
Current liabilities
Borrowings 7 1,457 2,310 2,793
Trade and other payables 16,866 7,248 15,154
Lease liabilities 428 118 543
Total current liabilities 18,751 9,676 18,490
Non-current liabilities
Borrowings 7 4,023 4,404 3,408
Lease liabilities 1,442 32 1,183
Deferred tax liability 305 67 268
Total non-current liabilities 5,769 4,503 4,859
Total liabilities 24,520 14,179 23,349
TOTAL EQUITY AND LIABILITIES 49,537 32,485 48,364
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 2023 Six months to 31 Jul 2022 Twelve months to 31 Jan 2023
£'000
£'000
£'000
Cash flow from operating activities
Profit for the financial period 99 2,194 8,515
Adjustments for:
Amortisation of intangible assets 204 191 573
Depreciation of property, plant and equipment 297 666 655
Depreciation on right-of-use assets 333 14 196
Interest payable 367 100 313
Lease liability finance charge 13 19 57
Taxation charge / (credit) (540) 756 1,420
Corporation tax received / (paid) (61) - 25
Foreign exchange (426) - (392)
Share based payment charge 58 58 117
Changes in working capital:
Increase in inventory (3,150) (50) (1,371)
Decrease / (increase) in trade and other receivables 8,430 (759) (16,837)
(Decrease) / increase in trade and other payables (723) (5,386) 3,685
Net (outflow) / increase from operating activities 4,901 (2,197) (3,044)
Cash flow from investing activities
Purchase of intangible assets (393) (285) (269)
Purchase of property, plant and equipment (425) (113) (882)
Sale of property, plant and equipment - - 3
Acquisition of businesses - net of cash acquired (312) (1,319) (1,620)
Net cash outflow from investing activities (1,130) (1,717) (2,768)
Cash flows from financing activities
Proceeds from borrowings - 7,340 7,249
Repayment of borrowings (759) (786) (1,369)
Reduction of share capital - - (12)
Interest paid (177) (100) (313)
Repayment of lease liabilities (96) (89) (261)
Dividends paid - - (328)
Net cash (outflow) / inflow from financing activities (1,032) 6,365 4,966
Net increase / (decrease) in cash and cash equivalents 2,739 2,451 (846)
Cash and cash equivalents at beginning of period 3,224 4,070 4,070
Cash and cash equivalents at the end of the period 5,963 6,521 3,224
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 2022 344 10,113 (5,490) (294) 11,769 16,442
Profit for the period - - - - 2,194 2,194
Total comprehensive profit for the period - - - - 2,194 2,194
Other(1) - - - (330) - (330)
Total transaction with owners - - - (330) - (330)
Balance at 31 July 2022 344 10,113 (5,490) (624) 13,963 18,306
At 1 August 2022 344 10,113 (5,490) (624) 13,963 18,306
Profit for the period - - - - 6,321 6,321
Total comprehensive profit for the period - - - - 6,321 6,321
Reduction in share capital (12) - - - - (12)
Dividends paid - - - - (328) (328)
Other(1) - - - 728 - 728
Total transaction with owners (12) - - 728 (328) 388
Balance at 31 January 2023 332 10,113 (5,490) 104 19,956 25,015
At 1 February 2023 332 10,113 (5,490) 104 19,956 25,015
Profit for the period - - - - 99 99
Other comprehensive income - - - - - -
Total comprehensive profit for the period - - - - 99 99
Other(1) - - - (97) - (97)
Total transaction with owners - - - (97) - (97)
Balance at 31 July 2023 332 10,113 (5,490) 7 20,055 25,017
(1)Other includes share based payments, foreign exchange and other items
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 2023 and 31 July 2022 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 2023.
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 2023, 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 2023 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 2023, 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 2023.
2. SEGMENT REPORTING
The following information is given about the Group's reportable segments:
The Chief Operating Decision Maker is the 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 2023 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 2023 United Kingdom Europe India 2023
£'000 £'000 £'000 £'000
Revenue 25,476 371 200 26,047
Cost of sales (16,802) (283) (89) (17,174)
Gross Profit 8,674 89 111 8,873
Administrative expenses (7,722) (1,092) (159) (8,973)
Included within administrative expenses are:
- Share based payment charge (58) - - (58)
- Depreciation of property, plant and equipment (143) (151) (3) (297)
- Depreciation of right-of-use assets (204) - - (204)
- Amortisation of intangible assets (268) (65) - (333)
Adjusted administrative expenses (7,049) (876) (156) (8,081)
Adjusted EBITDA(1) 1,625 (787) (45) 792
Operating profit/(loss) 952 (1,003) (49) (100)
Interest payable and similar expenses (325) (18) 3 (341)
Profit/(Loss) before tax 626 (1,021) (46) (441)
Taxation 464 82 (6) 540
Profit/(Loss) after tax 1,090 (940) (51) 99
Net Assets as at 31 July 2023
Assets: 37,373 11,647 517 49,537
Liabilities (12,254) (11,702) (564) (24,520)
Net assets / (liabilities) 25,119 (55) (47) 25,017
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:
- Share based payment charges (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 (611) (306) (12) (929)
Adjusted EBITDA(1) 4,491 (509) (2) 3,980
Operating profit/(loss) 3,880 (815) (14) 3,051
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
Twelve months to 31 January 2023 United Kingdom Europe India 2023
£'000 £'000 £'000 £'000
Revenue 54,546 77 451 55,074
Cost of sales (32,525) 718 (188) (31,995)
Gross profit 22,021 795 263 23,079
Administrative expenses (11,249) (1,232) (293) (12,774)
Included within administrative expenses are:
- Share based payment charges (117) - - (117)
- Depreciation of property, plant and equipment (350) (288) (17) (655)
- Depreciation of right-of-use assets (196) - - (196)
- Amortisation of intangible assets (505) (68) - (573)
Adjusted administrative expenses (10,081) (876) (276) (11,233)
Adjusted EBITDA(1) 11,940 (81) (13) 11,846
Operating profit/(loss) 10,772 (437) (30) 10,305
Interest payable and similar expenses (98) (271) (1) (370)
Profit/(Loss) before tax 10,674 (708) (31) 9,935
Taxation (1,378) (40) (2) (1,420)
Profit/(Loss) after tax 9,296 (748) (33) 8,515
Net Assets
Assets: 36,995 10,840 529 48,364
Liabilities (12,869) (9,955) (525) (23,349)
Net assets 24,126 885 4 25,015
3. REVENUE
Six months to 31 Jul 2023 Six months to 31 Jul 2022 Twelve months to 31 Jan 2023
£'000 £'000 £'000
United Kingdom 25,476 24,087 54,546
Europe 371 66 77
Rest of the World 200 93 451
26,047 24,246 55,074
4. OPERATING PROFIT
Operating profit from continued operations is stated after charging /
(crediting):
Six months to 31 Jul 2023
£'000 Twelve months to 31 Jan 2023
£'000
Six months to 31 Jul 2022
£'000
Depreciation of property, plant and equipment 297 666 655
Depreciation of right-of-use assets 333 14 196
Amortisation of fixed assets 204 191 573
Share based payments 58 58 117
Exchange differences - 75 -
5. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is calculated by
dividing the profit or loss for the year by the weighted average number of
ordinary shares in issue during the period.
Six months to 31 Jul 2023 Six months to 31 Jul 2022 Twelve months to 31 Jan 2023
Profit for the period from continuing operations - £'000 99 2,194 8,515
Weighted number of ordinary shares in issue 33,388,788 34,438,730 33,388,788
Weighted number of fully diluted ordinary shares in issue 332,673 332,673 332,673
Basic earnings per share from continuing operations - pence 0.30 6.37 25.50
Diluted earnings per share from continuing operations - pence 0.30 6.31 25.25
6. TRADE AND OTHER RECEIVABLES
31 Jul 2023
£'000
31 Jul 2022 31 Jan 2023
£'000
£'000
Trade receivables 4,895 4,916 3,492
Contract assets 3,119 - 459
Other debtors 2,671 1,894 2,352
Prepayments and accrued income 16,140 6,338 22,778
Tax recoverable - - 145
26,825 13,148 29,226
7. BORROWINGS
31 Jul 2023 31 Jul 2022 31 Jan 2023
£'000
£'000
£'000
Current 1,457 2,310 2,793
Non-current 4,023 4,404 3,408
5,480 6,714 6,201
Analysis of maturity of loans is given below:
31 Jul 2023
£'000
31 Jul 2022 31 Jan 2023
£'000
£'000
Amounts falling due within one year
Other loans 1,457 2,310 1,469
Amounts falling due 1-2 years
Other loans 1,821 1,612 1,821
Amounts falling due 2-5 years
Other loans 2,202 2,792 2,911
5,480 6,714 6,201
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
Instituto De Finanzas De Castilla-La Mancha S.A.U. ("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. RECONCILIATION OF MOVEMENT IN NET DEBT
At 1 February 2022 Non-cash changes Cashflow At 31 July 2022
£'000 £'000 £'000 £'000
Cash at bank 4,070 - 2,451 6,521
Borrowings - current - - (2,310) (2,310)
Borrowings - non-current - - (4,404) (4,404)
Lease liability - current & non current (191) (48) 89 (150)
Net Cash / (Debt) 3,879 (48) (4,174) (343)
Adjusted Net Cash / (Debt)(2) 4,070 - (4,263) (193)
At 1 August 2022 Non-cash changes Cashflow At 31 January 2023
£'000 £'000 £'000 £'000
Cash at bank 6,521 - (3,297) 3,224
Borrowings - current (2,310) - 841 (1,469)
Borrowings - non-current (4,404) - (328) (4,732)
Lease liability - current & non current (150) (1,226) (350) (1,726)
Net Cash / (Debt) (343) (1,226) (3,134) (4,703)
Adjusted Net Cash / (Debt)(2) (193) - (2,784) (2,977)
At 1 February 2023 Non-cash changes Cashflow At 31 July 2023
£'000 £'000 £'000 £'000
Cash at bank 3,224 - 2,739 5,963
Borrowings - current (2,793) - 1,336 (1,457)
Borrowings - non-current (3,408) - (615) (4,023)
Lease liabilities - current & non-current (1,726) 31 (175) (1,870)
Net Cash / (Debt) (4,703) 31 3,285 (1,387)
Adjusted Net Cash / (Debt)(2) (2,977) - 3,460 483
(2)Adjusted Net Cash / (Debt) is considered to be a Key Performance Indicator
and consistent with how the Group measures net cash / debt. It is calculated
as cash at bank less borrowings. Note this is an Alternative Performance
Measure and is a non-IFRS measure.
9. BUSINESS COMBINATION
On 3 April 2023 Cenergist Spain SL acquired all of the share capital of
Installatiebedrijf Vriend B.V. ("Vriend"). Vriend provides low carbon
solutions to customers in the Netherlands.
Background and Rationale
Vriend is a renowned multidisciplinary installer of sustainable energy
solutions with a focus on residential and commercial projects. The
acquisition represents the Group's first step on their European acquisition
strategy, providing the necessary accreditations and foundations to expand the
Group offering into Northern Europe.
Consideration
The total consideration for the acquisition was €0.522 million. The
consideration was structured as follows:
Initial consideration, payable in cash on completion of €0.485 million; and
Working capital adjustment of €0.037 million, paid within three months of
acquisition.
The initial estimates of the fair value of the assets acquired and liabilities
assumed of Vriend at the date of acquisition give rise to goodwill of
€0.376m, relating to accumulated "know how" and expertise of the business
and its staff. None of the goodwill is expected to be deducted for income
tax purposes.
Note that this assessment is not yet finalised.
10. EVENTS SUBSEQUENT TO PERIOD END
The Group has not identified any subsequent event to be reported.
3 (#_ftnref1)
https://www.gov.uk/government/publications/quarterly-survey-for-q1-april-to-june-2023-to-2024/quarterly-survey-for-q1-april-to-june-2023-to-2024-summary-accessible-version
(https://www.gov.uk/government/publications/quarterly-survey-for-q1-april-to-june-2023-to-2024/quarterly-survey-for-q1-april-to-june-2023-to-2024-summary-accessible-version)
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