REG - Inspired PLC - Final Results 2023
26/03/2024 07:00
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RNS Number : 2360I Inspired PLC 26 March 2024
26 March 2024
Inspired PLC
("Inspired" or the "Group")
Final Results 2023
Solid operational and financial performance with accelerating cross selling
momentum
Inspired (AIM: INSE), a technology-enabled service provider delivering
solutions to enable businesses to transition to net-zero and manage their
response to climate change, announces its consolidated, audited final results
for the year ended 31 December 2023.
Financial highlights
2023 2022 % change
Revenue £98.8m £88.8m +11%
Gross profit £67.3m £57.7m +17%
Adjusted EBITDA* £25.2m £21.0m +20%
Adjusted profit before tax** £15.8m £14.0m +13%
Statutory loss before tax (£6.2m) (£4.0m) N/A
Underlying cash generated from operations*** £18.7m £21.7m -14%
Adjusted diluted EPS****† 13.4p 13.1p +2%
Diluted basic EPS† (7.2p) (3.7p) N/A
Net debt £48.7m £37.2m +31%
Dividend per share† 2.9p 2.7p +7%
· Double digit revenue and Adjusted EBITDA growth reflects solid trading across
all four divisions, in line with the Group's stated growth strategy.
· Adjusted PBT: £15.8m (2022: £14.0m), with the increase in adjusted EBITDA
offset in part by an increase in finance costs.
· Underlying operating cash conversion was 75%, as a result of the increased
number of Optimisation projects in H2 and the associated investment in working
capital. The working capital investment unwound post period, with cash
conversion for the 12 months to 29 February 2024 in excess of 100%.
· The Group paid £12.1m in contingent consideration fees, relating to the
achievement of earnout targets by prior acquisitions. The majority of the
final payments in relation to past acquisitions, being a further £10.6m in
cash consideration, will be made in FY24. The only remaining potential
payments of contingent consideration after 2024 will be up to the maximum
amounts payable under the Deed of Variation with Ignite Energy LTD ("Ignite")
of £2.3m per annum for 2024-2027 performance.
· Net debt increased to 1.95x Adjusted EBITDA, within the Board's stated
objective to maintain it to less than 2.00x. The Group remains focused on
reducing net debt as the performance fees conclude from the acquisitions
completed in 2020 and 2021, with the Board's objective to reduce the level of
net debt to Adjusted EBITDA to nearer to a 1 to 1 ratio through organic cash
generation by the end of 2025.
· Proposed final dividend has increased 7% to 1.50p (2022: 1.40p) resulting in
full year dividend of 2.90p in line with the stated policy and reflective of
the confidence in the business.
FY23 KPIs
The Group has outlined its aspiration to double Adjusted EBITDA organically
over the five years to 2027. This is primarily driven by the growth in
Optimisation Services, which is a logical additional service for clients who
utilise our Assurance Services or our ESG Services. The Group has made solid
progress executing this strategy since 2021, with Optimisation Services now
the largest revenue generator and contributing comparable Adjusted EBITDA to
Assurance Services, which represents an inflection point in the Group's
development.
The following KPIs have been developed to monitor the progress in cross
selling across the Group's divisions and to evidence the repeatable nature of
demand for Optimisation Services: (see CEO statement for further detail and
four prior years).
2023 2022 Change (%)
Number of clients supported by multiple divisions within Inspired 615 492 25%
Number of clients generating >£50,000 revenue 227 154 47%
Number of £50,000 revenue clients supported by more than one division 159 104 53%
Number of clients with Optimisation Projects in the FY 370 271 37%
Divisional operational and strategic highlights
Assurance Services
· Revenues of £36.3m (2022: £36.0m) and Adjusted EBITDA of £15.0m (2022:
£16.2m), at a margin of 41% (2022: 45%), margin was impacted by investment in
headcount and wage inflation.
· Secured several new client wins, including Central England Co-operative
Limited, Focus Hotels Management Limited and Rontec Roadside Retail Limited.
· Continued new business generation, improved churn rates and stabilisation of
margins in FY24 and beyond.
· The Assurance Services Division enters 2024 with 81% of expected 2024 revenues
contracted, with an expectation of 14% of revenue coming from in year
renewals, having seen improved churn rates in 2023, and the balancing 5% from
new wins in year. This provides confidence that the division will continue to
contribute revenue growth in 2024, with an expectation that margins will
stabilise.
ESG Services
· Revenue growth of 112% to £5.5m (2022: £2.6m) and Adjusted EBITDA
contribution to the Group of £1.5m (2022: Adjusted EBITDA loss of £0.6m), a
pleasing result given it is only three years since launch.
· The division is an exciting opportunity for the Group as it brings in new
clients and helps to meet an ever-growing statutory demand. The ESG Services
division enters 2024 with in excess of 60% of expected 2024 revenues
contracted.
Optimisation Services
· Revenue growth of 13% to £54.0m (2022: £47.7m) and Adjusted EBITDA up 52% to
£15.2m with a higher margin of 28% (2022: 21%), reflective of project mix and
strong repeatable demand driven by existing clients.
· Delivered 69 large sustainability solutions to existing Assurance and ESG
clients (2022: 35) of which 65% were clients that had previously procured
Optimisation Services.
· Demand continues to increase, supported by the drive to net-zero and a desire
by corporates to protect themselves from the risk of high commodity prices.
Software Services
· Revenues up 18% to £3.0m (2022: £2.5m), driven by new client acquisition and
an increase in revenue generated from existing customers, with in excess of
80% of expected revenues in 2024 coming through renewals of existing customer
licenses.
· Planned launches of new modules in 2024 will help enhance the platform's
capabilities and provide scope for further revenue growth within the division.
Current trading and outlook
· The secular demand from companies to reduce energy consumption, drive
efficiencies and report against progress remains unchanged and underpins
demand for the Group's services.
· FY24 has started strongly, with the Group trading in line with expectations
and with substantial cash generation as the working capital investment in Q4
2023 unwound.
· The growing demand, and demonstrable success, of selling into new and existing
customers, underpins the Board's confidence in the outlook for FY24.
Commenting on the results, Mark Dickinson, CEO of Inspired, said: "FY23 was
another year of solid strategic progress for Inspired, as the Group continues
to benefit from the realisation by corporates of all sizes of the growing need
for, and tangible benefits of, effective management of energy costs and
consumption. The solid organic growth we have continued to deliver, within the
context of a challenging macro-economic backdrop, demonstrates the team's hard
work to transition into a full suite, technology enabled, sustainability
services provider.
"Our diverse service offering, and strong customer relationships underpin our
organic growth strategy, supported by our growing cross-selling successes
across our customer base as evidenced by our newly published non-financial
KPIs. This, coupled with a supportive market backdrop, gives the Board
confidence in achieving its long-term financial aspirations."
An overview video of the results, by CEO Mark Dickinson, is available to watch
here: https://plcwebcast.uk/insefy23overview
(https://plcwebcast.uk/insefy23overview)
Note
*Adjusted EBITDA is earnings before interest, taxation, depreciation, and
amortisation, excluding exceptional items and share-based payments.
**Adjusted profit before tax is earnings before tax, amortisation of
intangible assets (excluding internally generated amortisation related to
computer software and customer databases), exceptional items, share-based
payments, the change in fair value of contingent consideration and foreign
exchange gains/(losses) (A reconciliation of adjusted profit before tax to
reported profit before tax can be found in note 5)
***Underlying cash generated from operations is cash generated from
operations, as adjusted to remove the impact of restructuring costs and fees
associated with acquisitions.
****Adjusted diluted earnings per share represents the diluted earnings per
share, as adjusted to remove amortisation of intangible assets (excluding
internally generated amortisation related to computer software and customer
databases), exceptional items, share-based payments, the change in fair value
of contingent consideration and foreign exchange gains/(losses).
†All per-share figures have been adjusted to reflect the 10:1 share
consolidation undertaken on 3 July 2023.
For further information, please contact:
Inspired PLC www.inspiredplc.co.uk
(https://url.avanan.click/v2/___http:/www.inspiredplc.co.uk___.YXAxZTpzaG9yZWNhcDphOm86ZGVkMmZlMmM1ZmEyYzEyOTFhZDM0NGMwYTUyMWY0Zjc6NjpmZmIxOmEyZmZjNzUzNjVkNGI5MGM4YzI3MGE3YmYzMjgzYzQxYzRjZjQ4NmI3ZDcwZTQ2OGQwMjRhYTg4NTc5NTA0YzI6cDpU)
Mark Dickinson (Chief Executive Officer)
+44 (0) 1772 689250
Paul Connor (Chief Financial Officer)
David Cockshott (Chief Commercial Officer)
Shore Capital (Nominated Adviser and Joint Broker) +44 (0) 20 7408 4090
Patrick Castle
James Thomas
Rachel Goldstein
Liberum (Joint Broker) +44 (0) 20 7418 8900
Edward Mansfield
Satbir Kler
Alma Strategic Communications +44 (0) 20 3405 0205
Justine James +44 (0) 7525 324431
Hannah Campbell inspired@almastrategic.com
Will Ellis Hancock
Notes to editors
Inspired PLC is a leading B2B technology enabled service provider delivering
solutions that enable corporate businesses to transition to net-zero carbon
and manage their response to climate change in the UK and Ireland.
Founded in 2000, Inspired operates four divisions: Assurance Services,
Optimisation Services, ESG Services and Software Services, providing expert
energy advisory and sustainability services to over 3,500 businesses who
typically spend more than £100,000 on energy and water per year. The Group's
four divisions work together to help corporate businesses manage all aspects
of their energy and sustainability programme through the lens of what the
Group refers to as the 4Cs of Cost, Consumption, Compliance and Carbon.
Inspired has been recognised with the London Stock Exchange's Green Economy
market since 2020 for its environmental and strategic advice, service, and
support to customers and is also ranked as the UK's leading advisor by the
independent energy market intelligence consultancy, Cornwall Insight.
Chairman's Statement
Overview of the year and the financial results
Inspired delivered a very good performance in FY23 as the secular demand from
companies to reduce energy consumption, drive efficiencies and report against
progress continued to grow. We have seen growing interest in our services
across all four divisions this year, particularly in ESG Services and
Optimisation Services, with demand for our Assurance Services expanding as new
business opportunities remain high.
The financial performance reflects the resilience of our business, with
Adjusted EBITDA and Adjusted EPS in line with market expectations. We remain
focussed on cash generation and continue to take every opportunity to help
customers across the UK and ROI mitigate the cost of energy and manage their
energy consumption and carbon emissions within a challenging macroeconomic
backdrop.
We have a resilient business model thanks to the strategy we adopted to
diversify our product offering in 2019. This diverse offering has underpinned
our performance this year and is the framework that gives us the ability to
work towards our strategic aspiration, the organic doubling of Adjusted EBITDA
by 2027. We have developed robust KPIs to track our progress in this regard
and remain firmly on track in delivering our aspirations.
ESG
As a service provider helping businesses deliver market leading ESG
disclosures, it is important that the Group is at the forefront of ESG
performance. During FY23, the Group made the following progress towards its
ESG objectives:
1. Submitted our revised Scope 1 & 2 net-zero target, and our long-term Scope
3 net-zero target to the Science-Based Targets Initiative (SBTi).
2. Commenced the transition to a new head office, which will be a net-zero
building once fully re-developed in 2024, where we will remove all gas
boilers.
3. Started engagement with two of our tier 1 suppliers and two of our tier 2
suppliers.
4. Started the engagement process with our suppliers on their Life Cycle
Assessments (LCAs).
5. Started to develop the foundations of our STEM programme.
6. Started our preparations for our first Task Force on Nature-Related Financial
Disclosure.
7. Prepared our fifth Task Force on Climate-Related Financial Disclosure (TCFD).
8. Prepared our fifth voluntary ESG Report aligned to the Global Reporting
Initiative (GRI).
Dividend
Inspired has established a track record of delivering profitable and
cash-generative growth which has facilitated a consistent and progressive
dividend policy. Accordingly, the Board is pleased to propose a 7% increase in
the final dividend to 1.5 pence (2022: 1.4 pence), subject to shareholder
approval at the AGM in June, resulting in a full year dividend of 2.9 pence
(2022: 2.7 pence). The dividend aligns with the Board's stated policy of a
dividend cover of at least 3x earnings, with the objective of delivering
progressive dividend growth over time and reflects the Board's confidence in
the business. The dividend will be payable on 26 July 2024 to all shareholders
on the register on 21 June 2024 and the shares will go ex-dividend on 20 June
2024.
The Board / our people
In March 2023, we welcomed Peter Tracey, as a Non-Executive Director to the
Board. Peter is Managing Director of Blackdown Partners Limited, an
independent investment bank, and has over 25 years of capital markets
experience, bringing a wealth of expertise to the Board. Peter has already
proved to be an invaluable guide throughout the year and we are confident in
the strength of our leadership team as we work towards another year of
significant growth and development. The Board will continue to consist of
three Executive Directors supported by a Non-Executive Chairman and three
independent Non-Executive Directors, representing a broad mix of skills and
diversity to align with the Group's evolving strategy.
On behalf of the Board, I would like to thank our colleagues, who continue to
work tirelessly to support our customers. The Group's priority remains to help
customers mitigate the rising cost of energy, manage their energy consumption
and continue to reduce carbon emissions.
Summary and outlook
Inspired made good progress in FY23, as the Group strengthened its financial
footing, improving margins in Optimisation and increasing top-line growth,
underpinning an Adjusted EBITDA performance in line with expectations. The
Group remains focused on reducing net debt as the performance fees conclude
from the acquisitions completed in 2020 and 2021, reflecting our commitment to
financial prudence. We also successfully entered into a new £60.0m revolving
credit facility to provide the Group with the headroom and flexibility to
execute on our organic growth strategy. Momentum has carried over into the new
financial year and is expected to continue, providing confidence in the
long-term success of Inspired as we look ahead.
Richard Logan
Chairman
25 March 2024
Chief Executive Officer's Statement
Overview of the business in 2023
Inspired delivered another strong performance in FY23, successfully executing
against our organic growth aspiration to double Adjusted EBITDA in the five
years to 2027, achieving double digit Adjusted EBITDA growth of 20% to
£25.2m. This reflects the anticipated strategic progress across all four
divisions during the year.
The year saw an engraining of the critical need to manage energy costs and ESG
within corporates of all sizes. In recent years, we have worked hard to
transition into a full suite sustainability services provider and our
performance this year, within the context of a challenging macroeconomic
environment, demonstrates the multifaceted strengths of the Group. Revenue was
11% ahead of FY22 levels, with Optimisation Services delivering its
contribution at a better-than-expected Gross Margin due to the mix of energy
and carbon saving solutions to our clients during the year.
There is positive momentum across Inspired which, alongside our strong
financial position and dedicated team, enables us to continue to provide
increasingly mission critical solutions to clients as they adapt to the
challenges of meeting their obligations to achieve net-zero.
Strategy
The Government has estimated that the overall investment required to improve
commercial buildings and industrial processes is £138bn between 2024 and
2050. 1 (#_ftn1) The delivery of net-zero is a critical requirement for
society and Inspired has worked hard to position itself as a leading provider
of practical sustainability solutions to help businesses meet this challenge
in a structured and pragmatic way over the next 25 years.
Our substantial base of large clients, where we manage their energy and
environmental data through our Assurance and ESG Services provides a
structured way to increase our client lifetime value (CLV), the intrinsic
value of which is embedded in the portfolio. Our strategy remains:
· Deliver market opportunity afforded by three core macro themes (energy crisis
defence, ESG and net-zero)
· Utilise our proprietary software platform to manage clients' sustainability
data and deliver our services
· Evolve trusted adviser C-suite relationships with our clients
· Enhance C-suite relationships by managing their ESG disclosures
· Support clients in meeting their net-zero obligations and implement solutions
that remove actual Carbon emissions
Our focus on CLV growth underpins our aspiration to double Adjusted EBITDA
organically over the five years to 2027. At our current momentum and with the
scale of the market opportunity, we have the potential to outperform this
objective but remain prudent in our planning assumptions.
The Group made good progress executing this strategy and is delighted to
provide for the first time KPIs which demonstrate the progress made and
underpin the Board's confidence in the delivery of the Group's objectives for
2027. The following KPIs set out the cross selling achieved over the last four
years against its base of over 3,500 customers and evidence the repeatable
nature of the demand for Optimisation Services and the growing lifetime value
opportunity with respect for each client:
2020 2021 2022 2023
Number of clients supported by multiple divisions within Inspired 307 414 492 615
Number of clients generating >£50,000 in revenue 114 123 154 227
Number of >£50,000 revenue clients supported by more than one division 49 69 104 159
Average 10 Year CLV (£) potential per client(1) 102,468 119,079 161,109 231,160
Number of clients with Optimisation Projects in the FY 151 194 271 370
Number of repeat Optimisation clients(2) 79 94 142 208
Notes:
1. 10 Year CLV is calculated as the average annual revenue for each
active client in a year between that year and 2020 multiplied by 10.
2. Clients that have used Inspired to undertake an optimisation project
in previous financial years.
Assurance Services
Our Assurance Services division helps businesses manage all aspects of energy
and utility pricing data and accounting. The energy crisis of 2022 saw some of
the most challenging energy markets seen in the history of the energy markets
and energy crisis defence is now firmly on the Board Room agenda for
businesses. The division delivered a record level of new client wins for the
period including Central England Co-operative Limited, Focus Hotels Management
Limited and Rontec Roadside Retail Limited. This was driven by a flight to
quality as businesses look for differentiated solutions from a full suite
sustainability services provider to help them navigate the energy crisis.
To execute effectively, our Assurance teams manage and process thousands of
pieces of data through our proprietary software platform 'Unify'. Once this
data is collected and audited, it provides the detail required to identify and
deliver effective carbon action programmes and opportunities to implement
Optimisation Services.
This year the Assurance Services division performed as expected delivering
modest organic revenue growth of 1% to £36.3m at an Adjusted EBITDA margin of
41%. Assurance gives us access to some of the largest, most exciting companies
which, when coupled with the interconnectivity of our divisions, helps boost
our cross-selling opportunities to win further Carbon reduction, ESG reporting
and Optimisation work with clients.
Looking ahead for the division, we continue to be prudent in our expectations,
focusing on how the strong cash generation, data management and mission
critical services of this division provide the foundations of the cross sell
of sustainability solutions to our clients to help them reach net zero.
ESG Services
The ESG Services division supports businesses with the production of their ESG
disclosures to meet their regulatory obligations which in turn lead to the
provision of sustainability solutions to our clients to reduce carbon
emissions and deliver net-zero.
Once a business has a robust process for making consistent ESG disclosures,
its board has the information it needs to make more effective decisions and
the data required to formulate a carbon action program and deliver any
necessary Optimisation Services.
In the year, the ESG Services division achieved 112% revenue growth to £5.5m.
We are particularly pleased that only three years after its organic entry into
the market the division has made an Adjusted EBITDA contribution to the Group
of £1.5m, having contributed an Adjusted EBITDA loss of (£0.6m) in 2022. The
ESG Services division is becoming an increasingly exciting competitive
opportunity for the Group as it helps to meet an ever-growing statuary demand
and brings new clients to the Group.
Looking forward, the US SEC climate regulations and the Corporate
Sustainability Reporting Directive (CSRD) will bring another c.62,000
businesses and their supply chains under direct regulatory obligation. This
will open up the global market more broadly and align US requirements with
operations overseas.
Optimisation Services
The successful execution of our strategy to establish ourselves, through the
provision of our data rich Assurance and ESG services, as a trusted advisor
with the C-suite provides a platform to deliver sustainability solutions to
existing clients through our Optimisation Services division.
In the year, the division delivered 69 large sustainability solutions to
existing Assurance and ESG clients (2022: 35) of which 65% were clients that
has previously procured Optimisation Services. A further 301 (2022: 236)
existing Assurance and ESG clients procured smaller sustainability solutions
of which 54% were repeat demand from existing Optimisation Services. The Group
has over 3,000 clients for which its Optimisation Services are relevant
providing ample scope for future growth within the current portfolio.
The strong demand in the year, more notably in the second half of FY23,
delivered 13% revenue growth to £54.0m with adjusted EBITDA of £15.2m, up
52%. While on a month-to-month basis, average cash generation may fluctuate
across the year due to the timing of Optimisation projects and resulting
billing, the Group is pleased to report an average LTM cash generation of 84%
during 2023. More recently, in the LTM to 29 February 2024, the Group achieved
a cash conversion in excess of 100%.
The division reported an Adjusted EBITDA margin of 28% in the year (2022:
21%). The projects delivered in the period were of a higher margin than in
FY22, which is a trend we expect will continue to vary due to the mix of
projects delivered within the half year and full year periods.
Absolute gross profit contribution growth of the division is a truer
reflection of the Optimisation Services division's performance, and I am
pleased to report this grew by 33% to £27.0m this year. The steady progress
made by the division led to the Board's decision to incentivise the Ignite
vendors in the year, to build on the significant growth of the Optimisation
division achieved to date and to deliver for the long term for Inspired PLC.
Looking forward and noting the proven capability of expanding our cross-sell
opportunities, this division provides a gateway to the £138bn opportunity
over the next 25 years for the delivery of net-zero for commercial buildings
and industrial processes for the UK market.
Software Services
The provision of Assurance, Optimisation and ESG services require significant
management and processing of unstructured data which underpins our service
delivery. The technology enablement of these solutions is provided by 'Unify'
our proprietary software platform which has been significantly developed over
recent years and provides a market leading platform.
Unify is helping to technologically enable a market and industry that has in
the past been slow to react and incorporate digital solutions to improve
efficiency and performance.
We are pleased with the progress being made by the Software Services division,
as we achieved 18% organic revenue growth in the year to reach revenue of
£3.0m, Adjusted EBITDA margins of 59% and EBITDA of £1.8m. The reduction in
margin was driven by the allocation of central overheads. This division is
becoming a market leading platform which is now supporting over 60 TPIs,
reflecting its increasing integration into the fabric of the marketplace.
Looking ahead, we have a range of new of modules to launch in 2024 which will
help to further enhance the platform's capabilities and underpin the growth
aspirations for the business.
M&A
We have the potential to augment our organic growth aspiration to double
Adjusted EBITDA over the next five years with acquisitions at the appropriate
time and price.
In the near term, the Group is focused on reducing Net Debt to Adjusted EBITDA
nearer to one times. Therefore, acquisitions will only be made on the basis
that resulting net debt/EBITDA aligns with this objective.
Inspired's own ESG
In 2023, we progressed our ESG strategy. We revised our Scope 1 & 2
net-zero emissions target from 2035 to 2030 based on our 2019 baseline. We
modelled our decarbonisation trajectory in alignment with a 1.5°C warming
pathway and submitted our near-term and net-zero targets to the Science-Based
Targets Initiative for validation. One of the essential components of our
decarbonisation plan is to make our new head office in Kirkham a net-zero
building for Scope 1 & 2 emissions. Our electric vehicle employee benefit
scheme experienced a noticeable surge in participation during the year,
contributing to a reduction in our Scope 3 emissions. Although our water and
waste usage is low at our offices, we have made progress on our reduction plan
to meet our 2025 target. In 2023, we published our fourth TCFD and GRI reports
and signed the Taskforce on Nature-Related Financial Disclosures (TNFD) pledge
in early January 2024. The development of our STEM and other social programmes
made progress during the year, and we anticipate launching them later in 2024.
Our responsible business section has more details on our ESG performance.
Current trading and outlook
We are better placed than ever as a full-service sustainability provider to
support UK businesses to deliver net-zero and manage the estimated £138bn
costs of doing so between 2024 and 2050. Managing energy and utility costs and
ESG are now firmly embedded as operationally and commercially critical for
most larger corporates. This continues to create sustained and increasing
demand for Inspired's differentiated products and services across all
divisions.
Trading in FY24 so far has been in line with expectations, with substantial
cash generation as the working capital investment in Q4 2023 in Optimisation
unwound, with LTM Operating Cash Conversion in excess of 100% for the 12
months ending 29 February 2024. Whilst the short term macro-economic
environment for our customers remains challenging, our contracted revenues and
pipeline of Optimisation projects means the Board remains confident in its
expectations for 2024.
Mark Dickinson
Chief Executive Officer
25 March 2024
Chief Financial Officer's Statement
We are pleased to report strong financial results for the year ended 31
December 2023. The Group delivered a solid operational and financial
performance during the year, with Adjusted EBITDA and Adjusted EPS in line
with market expectations and a continued focus on cash generation. Positive
momentum in the second half of the year enabled the Group to deliver a strong
overall trading performance for FY23, whilst also making clear strategic and
financial progress.
2023 was a year in which we achieved an 11% increase in revenue organically,
with total revenues of £98.8m compared to £88.8m in 2022. Group Adjusted
EBITDA increased by 20% to £25.2m (2022: £21.0m). In percentage terms the
Adjusted EBITDA margin was 26% (2022: 24%), reflecting a shift in product mix
in the Optimisation Services division driving a higher margin contribution
from the revenue generated in that division, offsetting the reduction in
margin generated by the Assurance Services division.
Divisional performance
Assurance Services
Assurance Services delivered revenues in line with expectations, generating
37% of total Group revenues in 2023 (2022: 41%) at £36.3m (2022: £36.0m).
Assurance Services contributed Adjusted EBITDA in line with expectations of
£15.0m (2022: £16.2m), a reduction of 7%, as expected, as a result of an
increase in staff costs, with the division seeing an increase in FTE in 2023
to 349 (2022: 332, 2021: 320) combined with an 18% increase in average cost
per FTE from 2021 to 2023, as the division responded to the impact of the
energy crisis. As a result, the Adjusted EBITDA percentage margin was 41%
(2022: 45%). The Board anticipates that margins will stabilise moving into
2024, as we retain our objective to provide a first-class level of service to
our Assurance clients, which we believe is essential to continue to be the
market leaders in Assurance Services.
The Assurance Services division enters 2024 with 81% of expected 2024 revenues
contracted, with an expectation of 14% of revenue coming from in year
renewals, with customer retention rates returning to historic levels seen pre
2022 during 2023 at 90% (2022: 86%), with the balancing 5% from new wins in
year. This provides confidence that the division will continue to contribute
revenue growth in 2024. The division has 56% of 2025 revenues contracted, an
expectation of 32% from renewals to be secured in 2024 and 2025, and 12% from
new wins in 2024 and 2025.
Optimisation Services
Optimisation Services generated 55% of total Group revenues in 2023 (2022:
54%), amounting to £54.0m (2022: £47.7m), an increase of 13%, all of which
was organic. The division continues to benefit from cross-selling and repeat
demand from customers, with clients focusing on the beneficial impact of
energy usage and demand reduction. Noting that revenue growth and profit
margins can vary due to product mix within the Optimisation Services division,
Optimisation Services delivered a 33% increase in gross profit, contributing
£27.0m (2022: £20.3m), and contributed Adjusted EBITDA of £15.2m (2022:
£10.0m), an increase of 52% and a resulting improvement in Adjusted EBITDA
margin to 28% (2022: 21%) driven by product mix. Subject to product mix,
management's expectation is that the division will consistently generate
Adjusted EBITDA margins of c.20-25%.
In the financial years 2022 and 2023, the Optimisation Services division
experienced higher activity levels in H2 compared to H1, caused by the timing
of large customers' financial year ends and budget timings, driving spending
patterns throughout the year. The Group is expecting the same weighting
towards H2 activity in 2024.
The Optimisation Services division increased investment in FTE from 111 in
2021 to 166 in 2023 (2022: 133), enabling the growth in gross profit
generation by the division during the period.
Demand for Optimisation Services continues to increase, with strong underlying
drivers, including the drive to net-zero, and also further accelerated by the
high commodity prices. As the division continues to represent a greater
proportion of Group revenues, Group margins will reflect the change in
business mix.
ESG Services
ESG Services generated revenues of £5.5m (2022: £2.6m), delivering 112%
growth. The ESG Services division delivered Adjusted EBITDA of £1.5m (2022:
Adjusted EBITDA loss of £0.6m).
Within ESG Services, revenue growth of £1.9m (2022: £0.5m) was from delivery
of services in relation to the Energy Savings Opportunity Scheme (ESOS). The
Group note that this revenue is cyclically based on the phases of the scheme
which repeat every four years. The Group's exceptional performance in ESOS
delivery during 2023 provides a platform to deliver significant Optimisation
Services to clients and we note that ESOS phase 4 will contribute to Group
revenues in 2027. ESOS services contribute a lower GP margin than other ESG
services at c.35%.
The ESG Services division delivered retention rates for recurring revenue
services of 89% in 2023 (2022: 83%).
With these high levels of customer retention and the division entering 2024
with over 65% of the 2024 forecast revenue already contracted, the Group has
confidence in the ESG Services division continuing its growth trajectory in
2024.
The increasing focus of investors and businesses on net-zero targets, combined
with mandatory requirements for businesses to make ESG disclosures, provides a
favourable backdrop to continue to invest in the strategy for the ESG Services
division.
Software Services
The Group's Software Services division continues to develop well, with
revenues growing by 18% to £3.0m (2022: £2.5m), with the growth driven by
new client acquisition and an increase in revenue generated from existing
customers, as the Group continues to add additional modules to its existing
platform.
Software Services generated Adjusted EBITDA of £1.8m (2022: £1.8m) and
produced an Adjusted EBITDA margin of 59% (2022: 70%) with the reduction in
margin driven by the allocation of central overheads based on gross profit
contribution.
The Software Services division delivered retention rates for recurring revenue
services of 95% in 2023 (2022: 98%), with in excess of 80% of expected
revenues in 2024 coming through renewals of existing customer licenses.
Group results
Group central PLC costs were £8.2m (2022: £6.4m), driven by an increase in
staff costs (both from an FTE and cost per head perspective), and an
underlying increase in non-employment related overheads in the period due to
the increase in the size of the Group. Investment in overhead costs has laid a
solid foundation for Group growth and provides the required resources to
underpin that growth. In 2023, the Group invested to make planned process
changes, with a view to improving margins across all divisions. The Group
expects a deceleration of PLC cost growth from 2023 onwards, as the Group
looks to recognise the benefits of operating leverage and improved
productivity.
Overall, the Group generated adjusted EBITDA for the year of £25.2m (2022:
£21.0m); in percentage terms the adjusted EBITDA margin was 26% (2022: 24%).
This increase is due to a shift in product mix within the Optimisation
Services division driving a higher margin contribution, with Optimisation
Services generating a greater proportion of Group revenue, ESG contributing a
material increase in Adjusted EBITDA, a reduction in the Adjusted EBITDA
margin from Assurance Services, and an increase in PLC costs.
After deducting charges for depreciation, amortisation of internally generated
intangible assets and finance expenditure, the adjusted profit before tax for
the year was £15.8m (2022: £14.0m). The increase in adjusted EBITDA was
offset, in part, by an increase in finance costs. Finance costs were higher
than in 2022 due to a combination of the company carrying a higher level of
debt over the year and increased interest rates.
Under International Financial Reporting Standard (IFRS) measures, the Group
reported a loss before tax for the year of £6.2m (2022: loss of £4.0m), with
reported loss before tax in the year impacted significantly by substantial
charges for changes in the fair value of contingent consideration, the
amortisation of intangible assets as a result of acquisitions, share-based
payment charges and restructuring costs. A reconciliation of reported loss
before tax to adjusted profit before tax is calculated in the table below.
2023 2022
£000 £000
Loss before income tax (6,169) (3,957)
Share-based payment cost 1,187 1,732
Amortisation of acquired intangible assets 2,272 2,687
Foreign exchange variance (257) 508
Change in fair value of contingent consideration 14,621 10,936
Finance expenditure 482 -
Exceptional costs 3,620 2,097
15,756 14,003
Alternative performance measures
Acquisition activity, non-recurring items and material items can significantly
distort underlying financial performance from IFRS measures. The Board
therefore considers it appropriate to report adjusted metrics, as well as IFRS
measures, for the benefit of primary users of the Group's financial
statements. Reconciliations to Adjusted Profit Before Tax and Adjusted Fully
Diluted EPS can be found in note 5.
Exceptional costs
Exceptional costs of £3.6m (2022: £2.1m) were incurred in the year.
Exceptional costs include £1.5m in relation to a claim from a former Ignite
customer, which the Group was protected from through the Share Purchase
Agreement for acquisition of Ignite. Therefore, the cost of the settlement was
paid by the Ignite vendors through a reduction in contingent consideration
payable, resulting in a c.£1.5m reduction in fair value of contingent
consideration payable. Exceptional costs also include a further £0.6m in
relation to a write-off of a legacy debt balance within Ignite, against which
the Group was again protected through a contingent consideration structure
within the Deed of Variation entered in May 2023, resulting in a reduction in
fair value of contingent consideration payable. The remaining £1.5m of
exceptional costs includes £0.4m of onerous lease costs resulting from the
Group's consolidation of its office portfolio, and £1.1m in relation to
restructuring costs, including restructuring programmes associated with the
integration of businesses acquired prior to 2022.
For the purposes of calculating Adjusted Profit before Tax, there is an add
back of £0.3m, relating to the accelerated amortisation of capitalised loan
fees following the refinancing during the year end. There was a further £0.2m
relating to the write-off of leasehold improvement costs relating to the
former head office which the Group vacated in December 2023. Both have been
shown as Finance expenditure in the table above.
Change in fair value of contingent consideration
Within the balance sheet as at 31 December 2023, the Group has a contingent
consideration current liability of £13.2m to be paid in 2024, of which £5.2m
relates to Ignite, payable as £2.6m of cash, and £2.6m by the issue of
ordinary shares, and £8.0m to the vendors of Businesswise Solutions Limited,
wholly payable in cash. There is also a non-current liability of £5.5m
relating to the Deed of Variation entered into with Ignite.
The fair value of contingent consideration at the balance sheet date is a
judgement of the contingent consideration which will become payable based on a
weighted average range of performance outcomes of the acquired business during
earn out periods reflecting uncertainty in future periods, which is
subsequently discounted at a risk-free rate for the time value of money.
The Group recognised a £14.6m charge (2022: charge of £10.9m) in the period
as a result of changes in the fair value of contingent consideration which was
treated as exceptional.
Of the £14.6m charge, a total of £9.9m is in respect of payments due to the
vendors of Ignite. Of this total, £2.7m relates to the increase in the
liability for contingent consideration payable in respect of Ignite for 2023
EBITDA (excl. central overheads), as Ignite outperformed expectations by
£1.9m EBITDA (excl. central overheads) in FY23, which was a key driver in the
Group increasing Group EBITDA expectations on publication of the 2023 interim
results, offsetting a £0.8m lower than expected contribution from Technical
Services. In addition, a £3.2m charge relates to cash which was collected
and generated from a Specific Optimisation Customer (rather than profit
generation) as detailed in the Deed of Variation RNS (22 May 2023) and the
settlement of the claim as set out above reduced this amount by £1.5m.
The remaining £5.5m of the £9.9m charge relating to Ignite, all of which is
a non-current liability, relates to the Deed of Variation entered into with
the vendors of Ignite in May 2023. The Deed of Variation relates to the
performance of Ignite across the financial years 2024 to H1 2027. In arriving
at the liability to be recognised in the Group balance sheet as at 31 December
2023, as required by the relevant IFRS accounting standard, the Group
considered several scenarios of future performance, with consideration to
visibility decreasing and risk of delivery increasing across the performance
period. The Group considered a low performance case in which the Group pays
minimal contingent consideration under the Deed, medium performance cases in
which the Group pays c.55% of the contingent consideration due, and a high
performance case in which the Group pays the c.£9.2m, being the full
consideration which could be earned under the Deed of Variation. Based on
historic performance of Ignite Energy LTD, the weightings within the model
assume Ignite Energy LTD performances at the mid-high end of the scale in 2024
and 2025, and due to uncertainty over future visibility, and added risk
through the length of the test period, an assumption Ignite will perform at
low-mid end of the scale in 2026 and 2027. The weighted average performance
outcome discounted assumes the Group will pay £1.9m in relation to 2024
performance, £1.5m in relation to 2025, £1.4m in relation to 2026 and £0.6m
in relation to H1 2027. The Group continues to guide the market on the Ignite
profit performance being at the low-mid range in 2024 and 2025 in recognition
of the variable nature of their project revenues and risk around predicting
future performance, with upside potential subject to delivery.
In total the consideration paid for Ignite to date is £32.8m for a business
which has delivered £11.3m of Adjusted EBITDA contribution in FY23
representing a lookback multiple of 2.90 times Adjusted EBITDA. Since
acquisition Ignite had delivered cumulative Adjusted EBITDA of £32.6 million
(99% of the total consideration paid for the business).
In addition to the £9.9m charge relating to Ignite Energy LTD, of the £14.6m
total charge for contingent consideration recognised by the Group, £3.4m
relates to the increase in the liability for contingent consideration payable
in respect of Businesswise Solutions Limited, of which £1.6m is as a result
of performing to the high end of the range of possible EBITDA outcomes in
FY23, and £1.8m as a result of a strong delivery on the order book in H2 2023
as contracted behaviour normalised as energy prices stabilised thus
contributing to the greater visibility in revenues for FY24 and beyond.
The total consideration paid for Businesswise Solutions Limited since its
acquisition in March 2021 has been £23.8m for a business which contributed
£4.2m Adjusted EBITDA in FY23 representing a lookback multiple of 5.66 times
Adjusted EBITDA. Since its acquisition, Businesswise Solutions Limited has
cumulatively contributed £8.9m of Adjusted EBITDA (37% of the total
consideration paid for the business).
The balance of £1.3m (of the £14.6m total contingent consideration charge)
relates to the final payments made to the vendors of IU and LSI.
Exceptional costs, amortisation and impairment of internally generated
intangible assets, share based payment charges and changes in fair value of
contingent consideration are considered by the Directors to be material and
exceptional in nature; they, therefore, merit separate identification to give
a true and fair view of the Group's result for the period.
Cash and working capital
Group cash generated from operations during the period was £15.9m (2022:
£19.7m), a 19% reduction. Excluding exceptional costs, cash generated from
operations was £18.7m (2022: £21.7m).
Underlying operating cash conversion ratios remain a key focus for management,
acknowledging the need to facilitate the acceleration of growth within the
Optimisation Services division. The Group review underlying operating cash
conversion ratios on a Last Twelve Months (LTM) basis each month noting the
impact the irregularity of Optimisation Services working capital movement can
have on month- by- month cash conversion metrics. Due to the high levels of
project activity in Q4 2023, and the associated investment in working capital,
underlying operating cash conversion for the 12 months to 31 December 2023 was
75%. The working capital investment in the high levels of Q4 2023 Optimisation
Services activity has unwound as expected, with LTM underlying operating cash
conversion in the 12 months to 29 February 2024 was in excess of 100%.
Trade and other receivables and deferred consideration increased 20% in the
period to £46.5m (2022: £38.6m), with invoiced trade receivables increasing
43% to £17.6m (2022: £12.3m) as a result of the very high levels of project
activity in Q4 2023 within the Optimisation Services division with the balance
unwinding in early 2024 as expected. Accrued income increased in the period by
7% to £19.9m (2022: £18.6m). Working capital management remains a key focus
for the Group in sustaining strong cash conversion.
Trade and other payables increased 17% to £19.9m (2022: £17.1m), with a 5%
increase in trade payables to £6.3m (2022: £6.0m) and accruals increased by
46% to £4.6m (2022: £3.1m) reflecting the increased activity levels.
The Group made payments to acquire intangible assets of £5.6m in 2023 (2022:
£4.6m), and payments to acquire property, plant and equipment of £0.9m
(2022: £1.1m).
The Group's net debt (defined as bank borrowings less cash and cash
equivalents) increased by £11.5m (31%) in the year to £48.7m (2022:
£37.2m), equating to 1.95x FY2023 Adjusted EBITDA This level of net debt is
in line with the Board's near-term objective to maintain net debt to less than
2.00x Adjusted EBITDA, subject to the short-term impact of acquisition
payments. In 2025, through organic cash generation, it is the Board's
intention to reduce the level of net debt to Adjusted EBITDA to nearer to a 1
to 1 ratio.
Financial position and liquidity
At 31 December 2023, the Group's net debt, excluding the impact of IRFS16, was
£48.7m (2022: £37.2m). Cash and cash equivalents were £8.8m (2022:
£12.3m).
Approximately £1.6m of the Group's £60.0m Revolving Credit Facility was
undrawn at December 2023, with an additional £25.0m accordion option
available to the Group, subject to covenant compliance.
The Group refinanced its banking facilities in November 2023 through to
October 2026. Furthermore, on entering the current facility agreement with
Santander and Bank of Ireland in November 2023, the Group has an option to
extend the term of the facility from October 2026 to October 2028. Under the
refinanced facility, the Group reset the Adjusted Leverage Covenant, with an
increase in headroom to 2.75 : 1.00 through to June 2024, tapering to 2.50 :
1.00 from June 2024 to June 2025, and then tapering to 2.00 : 1.00 across the
remainder of the facility. Interest Cover is not to be less that 4.00 : 1.00
across the term of the facility.
In summary
The strategic and financial initiatives delivered in the year have ensured the
Group is well placed to deliver the effective implementation of our strategic
growth plan. The strong growth of the Group's revenues, and adjusted EBITDA in
the year, in a challenging environment coupled with a strengthened platform
capable of generating long-term growth position leaves Inspired well placed to
achieve its long-term financial goals.
Paul Connor
Chief Financial Officer
25 March 2024
Group statement of comprehensive income
For the year ended 31 December 2023
2023 2022
Note £000 £000
Revenue 98,757 88,776
Cost of sales (31,460) (31,070)
Gross profit 67,297 57,706
Administrative expenses (69,000) (58,524)
Analysed as:
Adjusted EBITDA 25,212 21,000
Exceptional costs (3,620) (2,097)
Change in fair value of contingent consideration (14,621) (10,936)
Depreciation, impairment and loss on disposal 6/7 (1,920) (1,827)
Amortisation of acquired intangible assets 8 (2,272) (2,687)
Amortisation and impairment of internally generated intangible assets 8 (3,295) (2,539)
Share-based payment cost (1,187) (1,732)
Operating profit/(loss) (1,703) (818)
Finance expenditure 3 (4,483) (3,148)
Other financial items 17 9
Loss before income tax (6,169) (3,957)
Income tax (charge)/credit 4 (993) 329
Loss for the year (7,162) (3,628)
Attributable to:
Equity owners of the company (7,162) (3,628)
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Movement in deferred tax asset as a result of change in fair value of share 4 - (1,323)
options
Exchange differences on translation of foreign operations (32) 119
Total other comprehensive expense for the year (32) (1,204)
Total comprehensive expense for the year (7,162) (4,832)
Attributable to:
Equity owners of the company (7,194) (4,832)
Basic loss per share attributable to the equity holders of the company (pence) 5 (7.20) *(3.72)
Diluted loss per share attributable to the equity holders of the company 5 (7.20) *(3.72)
(pence)
*All per-share figures have been adjusted to reflect the 10:1 share
consolidation undertaken on 3 July 2023.
Group statement of financial position
At 31 December 2023
2023 2022
Note £000 £000
ASSETS
Non-current assets
Investments 1,930 1,737
Goodwill 8 76,913 76,960
Other intangible assets 8 17,792 17,716
Property, plant and equipment 6 2,804 3,216
Right of use assets 7 2,291 1,428
Trade and other receivables 9 4,082 2,697
Non-current assets 105,812 103,754
Current assets
Trade and other receivables 9 41,837 34,823
Deferred contingent consideration 615 1,077
Inventories 633 211
Cash and cash equivalents 8,782 12,270
Current assets 51,867 48,381
Total assets 157,679 152,135
LIABILITIES
Current liabilities
Trade and other payables 10 19,946 17,079
Lease liabilities 604 869
Contingent consideration 13,200 13,056
Current tax liability 3,488 3,091
Current liabilities 37,238 34,095
Non-current liabilities
Bank borrowings 57,541 49,462
Lease liabilities 1,649 552
Contingent consideration 5,458 5,699
Interest rate swap - 17
Deferred tax liability 910 1,282
Non-current liabilities 65,558 57,012
Total liabilities 102,796 91,107
Net assets 54,883 61,028
EQUITY
Share capital 1,260 1,220
Share premium account 60,930 60,930
Merger relief reserve 23,563 20,995
Share-based payment reserve 9,298 8,111
Retained earnings (28,363) (18,447)
Investment in own shares (28) (36)
Translation reserve (394) (362)
Reverse acquisition reserve (11,383) (11,383)
Total equity 54,883 61,028
Group statement of changes in equity
For the year ended 31 December 2023
Share Share premium Merger Share-based payment Retained Investment in own Translation Reserve acquisition Total shareholders'
relief
capital account reserve reserve earnings shares reserve reserve equity
£000 £000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2022 1,219 60,923 20,995 6,379 (11,036) (36) (481) (11,383) 66,580
Loss for the year - - - - (3,628) - - - (3,628)
Other comprehensive expense for the year - - - - (1,323) - 119 - (1,204)
Total comprehensive income/(expense) for the year - - - - (4,951) - 119 - (4,832)
Share-based payment cost - - - 1,732 - - - - 1,732
Shares issued (12 April 2022) - 7 - - - - - - 7
Shares issued (7 December 2022) 1 - - - - - - - 1
Dividends paid - - - - (2,460) - - - (2,460)
Total transactions with owners 1 7 - 1,732 (7,411) - 119 - (5,552)
Balance at 31 December 2022 1,220 60,930 20,995 8,111 (18,447) (36) (362) (11,383) 61,028
Loss for the year - - - - (7,162) - - - (7,162)
Other comprehensive expense for the year - - - - - - (32) - (32)
Total comprehensive expense for the year - - - - (7,162) - (32) - (7,194)
Share-based payment cost - - - 1,187 - - - - 1,187
Shares issued (5 May 2023) 3 - - - - - - - 3
Shares issued (25 May 2023) 32 - 2,568 - - - - - 2,600
Shares issued (21 June 2023) 1 - - - - - - - 1
Shares issued (5 October 2023) 3 - - - - - - - 3
Shares issued (17 November 2023) 1 - - - - - - - 1
Shares issued (21 December 2023) - - - - - - - - -
Shares transferred - - - - - 8 - - 8
Dividends paid - - - - (2,754) - - - (2,754)
Total transactions with owners 40 - 2,568 1,187 (9,916) 8 (32) - (6,145)
Balance at 31 December 2023 1,260 60,930 23,563 9,298 (28,363) (28) (394) (11,383) 54,883
Merger relief reserve
The merger relief reserve represents the premium arising on shares issued as
part or full consideration for acquisitions, where advantage has been taken of
the provisions of section 612 of the Companies Act 2006.
Reverse acquisition reserve
The reverse acquisition reserve relates to the reverse acquisition between
Inspired Energy Solutions Limited and Inspired PLC on 28 November 2011 and
arises on consolidation.
Translation reserve
The translation reserve comprises translation differences arising from the
translation of the financial statements of the Group's foreign entities into
GBP (£).
Share-based payment reserve
The share-based payment reserve is a reserve to recognise those amounts in
equity in respect of share-based payments.
Investment in own shares equates to 2,204,750 (2022: *2,911,500) shares.
*All number of figures have been adjusted to reflect the 10:1 share
consolidation undertaken on 3 July 2023.
Group statement of cash flows
For the year ended 31 December 2023
2023 2022
£000 £000
Cash flows from operating activities
Loss before income tax (6,169) (3,957)
Adjustments
Depreciation and impairment 1,920 1,827
Amortisation and impairment 5,567 5,226
Share-based payment cost 1,187 1,732
Finance expenditure 4,483 3,139
Exchange rate variances 222 151
Change in fair value of contingent consideration 14,621 10,936
Cash flows before changes in working capital 21,831 19,054
Movement in working capital
(Increase)/decrease in inventories (422) 88
Increase in trade and other receivables (8,328) (3,995)
Increase in trade and other payables 2,867 4,602
Cash generated from operations 15,948 19,749
Income taxes paid (774) (421)
Net cash flows from operating activities 15,174 19,328
Cash flows from investing activities
Contingent consideration paid (12,102) (10,790)
Acquisition of subsidiaries and investments, net of cash acquired (193) (1,233)
Disposal of investments - 324
Repayment of working capital facility to discontinued operation 375 375
Payments to acquire property, plant and equipment (930) (1,137)
Payments to acquire intangible assets (5,644) (4,651)
Net cash outflows from investing activities (18,494) (17,112)
Cash flows from financing activities
New bank loans 7,850 3,500
Proceeds from issue of new shares 16 8
Interest paid on financing activities (4,254) (3,032)
Repayment of lease liabilities (1,013) (1,048)
Dividends paid (2,754) (2,460)
Net cash outflows from financing activities (155) (3,032)
Net decrease in cash and cash equivalents (3,475) (816)
Cash and cash equivalents brought forward 12,270 12,994
Exchange differences on cash and cash equivalents (13) 92
Cash and cash equivalents carried forward 8,782 12,270
Notes to Final Results
Statement of compliance
These Condensed Consolidated Financial Statements do not constitute statutory
financial statements within the meaning of Section 434 of the Companies Act
2006 for the financial year ended 31 December 2023 but has been extracted from
those financial statements. The annual financial statements for the year ended
31 December 2023 have been prepared in accordance with UK adopted
International Accounting Standards. These Condensed Consolidated Financial
Statements do not include all the disclosures required in financial statements
prepared in accordance with UK adopted International Accounting Standards and
accordingly do not themselves comply with UK adopted International Accounting
Standards.
The financial information for the period ended 31 December 2022 is derived
from the statutory accounts for that year which have been delivered to the
Registrar of Companies. The statutory accounts for the year ended 31 December
2023 will be delivered to the Registrar of Companies following the Company's
annual general meeting. The auditors have reported on the financial statements
for the years ended 31 December 2022 and 2023; their reports were unqualified,
did not include any matters to which the auditor drew attention by way of
emphasis and did not contain a statement under s498(2) or s498(3) of the
Companies Act 2006.
The Board of directors approved the Condensed Consolidated Financial
Statements on 25 March 2024.
The Consolidated Financial Statements of the Group as at and for the year
ended 31 December 2023 (2023 Annual Report) are available upon request from
the Company Secretary, Inspired PLC, Calder House, St Georges Park, Kirkham,
Lancashire, PR4 2DZ.
The principal accounting policies applied in the preparation of the Group
financial statements are set out below.
1. Basis of preparation
The Group financial statements have been prepared in accordance with the
Companies Act 2006 and UK adopted International accounting standards. They
have been prepared on an accrual basis and under the historical cost
convention except for certain financial instruments measured at fair value.
The Group has taken advantage of the audit exemption for 18 of its
subsidiaries, Independent Utilities Limited (company number 05658810), LSI
Independent Utility Brokers Limited (04072919), Energy Team (UK) Limited
(06285279), Energy Team (Midlands) Ltd (02913371), Waterwatch UK Limited
(08854844), Inspired Energy EBT Limited (10807501), Energy Broker Solutions
Limited (07355726), Flexible Energy Management Limited (10264309), Inspired 4U
Limited (08895906), Squareone Enterprises Limited (05261796), Energy Cost
Management Limited (03377082), STC Energy Management Limited (03094427),
Professional Cost Management Group Limited (06511368), Energy and Carbon
Management Limited (05498141), Inprova Energy Limited (04729586), General
Energy Management Limited (07236859), I-Prophets Compliance Limited (04194486)
and Digital Energy Limited (07369818) by virtue of s479A of the Companies Act
2006. The Group has provided parent guarantees to these 18 subsidiaries which
have taken advantage of the exemption from audit.
Going concern
For the purposes of assessing the appropriateness of preparing the Group's
accounts on a going concern basis, the Directors have considered the current
cash position, available banking facility and the Group's base case financial
forecast through to 31 December 2025, including the ability to adhere to
banking covenants.
The Directors believe the Group has a strong balance sheet position, having
refinanced its banking facility in November 2023 extending through to October
2026. Furthermore, on entering its current facility agreements with Santander
and Bank of Ireland in November 2023, the Group has an option to further
extend the term of each of the facilities from October 2026 to October 2028.
At 31 December 2023, the Group's net debt was £48.7 million, increasing from
£37.2 million at 31 December 2022. In addition to cash and cash equivalents
of £8.8 million on hand as at 31 December 2023 (2022: £12.3 million),
approximately £1.6 million of the Group's £60.0 million revolving credit
facility was undrawn with an additional £25.0 million accordion option also
available to the Group, subject to covenant compliance. The facility is
subject to two covenants, which are tested quarterly: adjusted leverage to
adjusted EBITDA (Adjusted Leverage Covenant) and adjusted EBITDA to net
finance charges (Interest Cover).
Under the refinanced facility, the Group reset the Adjusted Leverage Covenant,
with an increase in headroom to 2.75:1.00 through to June 2024, tapering to
2.50:1.00 from June 2024 to June 2025, and then tapering to 2.00:1.00 across
the remainder of the facility. The Interest Cover covenant is not to be less
that 4.00:1.00 across the term of the facility.
The Directors believe that the Group is well placed to manage its business
risks and, after making enquiries including a review of forecasts and
scenarios, taking account of reasonably possible changes in trading
performances in the next twelve months and considering the available
liquidity, including banking facilities, have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the
next twelve months following the date of approval of these financial
statements. Therefore, the Directors continue to adopt the going concern basis
of accounting in preparing the financial statements.
2. Segmental information
Revenue and segmental reporting
The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the operating segments, has been
identified as the Group's Executive Directors. Operating segments for the year
to 31 December 2023 were determined on the basis of the reporting presented at
regular Board meetings of the Group. The segments comprise:
Assurance Services
Key services provided are the review, analysis and negotiation of gas and
electricity contracts on behalf of clients in the UK and ROI. To access this
market, we have a professional bid response team, direct field sales team, and
partnership channel.
Optimisation Services
This division focuses on the optimisation of a client's energy consumption.
Services provided include forensic audits, energy efficiency projects and
water solutions.
Software Services
This division comprises the provision of energy management software to third
parties.
ESG Services
Within this division, the Group manages the data collection and validation of
consumption data to provide the resources for the creation of mandatory ESG
disclosures, such as Streamlined Energy and Carbon Reporting (SECR) and
Taskforce on Climate-related Financial Disclosure (TCFD) reporting.
PLC costs
This comprises the costs of running the PLC, incorporating the cost of the
Board, listing costs and other professional service costs, such as audit, tax,
legal and Group insurance.
Any charges between segments are made in line with the Group's transfer
pricing policy. These amounts have been removed, via consolidation, for the
purposes of the information shown below.
2023 2022
Assurance Optimisation Software ESG PLC Total Assurance Optimisation Software ESG PLC Total
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 36,313 53,989 2,979 5,476 - 98,757 35,972 47,710 2,514 2,580 - 88,776
Cost of sales (3,456) (27,005) (85) (914) - (31,460) (3,231) (27,427) (157) (255) - (31,070)
Gross profit 32,857 26,984 2,894 4,562 - 67,297 32,741 20,283 2,357 2,325 - 57,706
Administrative expenses (20,255) (12,509) (1,149) (3,080) (24,520) (61,513) (17,410) (10,373) (596) (2,935) (20,157) (51,471)
EBITDA 12,602 14,475 1,745 1,482 (24,520) 5,784 15,331 9,910 1,761 (610) (20,157) 6,235
Analysed as:
Adjusted EBITDA 14,956 15,169 1,757 1,493 (8,163) 25,212 16,177 9,979 1,768 (572) (6,352) 21,000
Share-based payment cost - - - - (1,187) (1,187) - - - - (1,732) (1,732)
Exceptional costs (2,354) (694) (12) (11) (549) (3,620) (846) (69) (7) (38) (1,137) (2,097)
Change in fair value of contingent consideration - - - - (14,621) (14,621) - - - - (10,936) (10,936)
12,602 14,475 1,745 1,482 (24,520) 5,784 15,331 9,910 1,761 (610) (20,157) 6,235
Depreciation and impairment and loss on disposal (1,920) (1,827)
Amortisation and impairment (5,567) (5,226)
Finance expenditure (4,483) (3,148)
Other financial items 17 9
Loss before income tax (6,169) (3,957)
Segmental assets and liabilities are not reviewed separately by operating
segment.
3. Finance expenditure
2023 2022
£000 £000
Interest payable on bank borrowings 4,214 2,268
Interest payable on lease liabilities 90 83
Foreign exchange variance (239) 508
Other interest 80 20
Loan facility fees 80 153
Amortisation of debt issue costs 258 116
4,483 3,148
4. Income tax charge/(credit)
The income tax charge/(credit) is based on the loss for the year and
comprises:
2023 2022
£000 £000
Current tax
Current tax expense 2,056 2,379
Adjustments in respect of prior years (777) (1,145)
1,279 1,234
Deferred tax
Origination and reversal of temporary differences (372) (1,563)
Adjustment in respect of prior years 86 -
(286) (1,563)
Total income tax charge/(credit) 993 (329)
Reconciliation of tax charge/(credit) to accounting loss:
Loss on ordinary activities before taxation (6,169) (3,957)
Tax at UK income tax rate of 23.5% (2022: 19%) (1,450) (752)
Disallowable expenses 4,191 2,490
Exchange rate difference (204) (99)
Share options (191) (628)
Tax R&D credits (276) -
Effects of current year events on prior year balances (690) (1,145)
Movement in deferred tax asset not recognised (229) (59)
Movement in deferred tax in respect of business combinations (568) -
Excess of taxation allowances over depreciation on all non-current assets 263 (320)
Non-eligible intangible assets 147 184
Total income tax charge/(credit) 993 (329)
The UK income tax rate of 23.5% is a blended rate based on 3 months at 19.0%
and 9 months at 25.0%, based on the increase in the main rate of Corporation
Tax which came into effect on 1 April 2023.
5. Earnings per share
The basic earnings per share is based on the net profit for the year
attributable to ordinary equity holders divided by the weighted average number
of ordinary shares outstanding during the year.
2023 2022
£000 £000
Loss attributable to equity holders of the Group (7,162) (3,628)
Fees associated with acquisition 8 523
Restructuring costs 3,612 1,574
Exceptional finance expenditure 482 -
Changes in fair value of contingent consideration 14,621 10,936
Amortisation of acquired intangible assets 2,272 2,687
Foreign exchange variance (257) 508
Deferred tax in respect of amortisation of intangible assets (568) (673)
Share-based payment cost 1,187 1,732
Adjusted profit attributable to owners of the Group 14,195 13,659
Weighted average number of ordinary shares in issue (000) 99,422 *97,507
Dilutive effect of share options (000) 6,698 *7,100
Diluted weighted average number of ordinary shares in issue (000) 106,120 *104,607
Basic loss per share (pence) (7.20) *(3.72)
Diluted loss per share (pence) (7.20) *(3.72)
Adjusted basic earnings per share (pence) 14.28 *14.01
Adjusted diluted earnings per share (pence) 13.38 *13.06
*All per-share and number of figures have been adjusted to reflect the 10:1
share consolidation undertaken on 3 July 2023.
The weighted average number of shares in issue for the adjusted diluted
earnings per share includes the dilutive effect of the share options in issue
to senior staff of the Group.
Adjusted earnings per share represents the earnings per share, as adjusted to
remove the effect of fees associated with acquisitions, restructuring costs,
the amortisation of intangible assets (excluding internally generated
amortisation related to computer software and customer databases), deferred
tax in respect of amortisation of intangible assets, exceptional items and
share-based payment costs which have been expensed to the Group statement of
comprehensive income in the year, the unwinding of contingent consideration
and foreign exchange variances. The adjustments to earnings per share have
been disclosed to give a clear understanding of the Group's underlying trading
performance.
Adjusted profit before tax on continuing operations is calculated as follows:
2023 2022
£000 £000
Loss before income tax (6,169) (3,957)
Share-based payment cost 1,187 1,732
Amortisation of acquired intangible assets 2,272 2,687
Foreign exchange variance (257) 508
Change in fair value of contingent consideration 14,621 10,936
Finance expenditure 482 -
Exceptional costs 3,620 2,097
Adjusted profit before tax on continuing operations 15,756 14,003
Acquisition activity, non-recurring items and material items can significantly
distort underlying financial performance from IFRS measures and therefore the
Board deems it appropriate to report adjusted metrics as well as IFRS measures
for the benefit of primary users of the Group financial statements.
6. Property, plant and equipment
Fixtures and Motor Computer Leasehold Office
fittings vehicles equipment improvements equipment Total
£000 £000 £000 £000 £000 £000
Cost
At 1 January 2022 720 107 3,004 806 - 4,637
Transfer between classes (368) 42 92 386 415 567
Foreign exchange variances 5 - 4 - - 9
Additions 8 32 1,094 - 3 1,137
Disposals (30) (66) (60) - - (156)
At 31 December 2022 335 115 4,134 1,192 418 6,194
Foreign exchange variances (2) (2) (3) - (2) (9)
Additions 153 - 697 79 1 930
Disposals (58) (41) - (977) (323) (1,399)
At 31 December 2023 428 72 4,828 294 94 5,716
Depreciation
At 1 January 2022 664 38 1,042 441 - 2,185
Transfer between classes (450) 38 281 70 293 232
Charge for the year 37 22 496 123 56 734
Foreign exchange variances 3 - 4 - (33) (26)
Disposals (30) (3) (60) (29) (25) (147)
At 31 December 2022 224 95 1,763 605 291 2,978
Charge for the year 77 6 660 119 72 934
Foreign exchange variances (1) (2) (2) - - (5)
Disposals (26) (29) (12) (611) (317) (995)
At 31 December 2023 274 70 2,409 113 46 2,912
Net book value
At 31 December 2023 154 2 2,419 181 48 2,804
At 31 December 2022 111 20 2,371 587 127 3,216
7. Right of use assets
Fixtures Motor
and fittings vehicles Property Intangibles Total
£000 £000 £000 £000 £000
Cost
At 1 January 2022 623 353 3,689 - 4,665
Transfer between classes - (14) (277) - (291)
Foreign exchange variances - 1 (5) - (4)
Additions - 86 360 301 747
Disposals (368) (5) (433) - (806)
At 31 December 2022 255 421 3,334 301 4,311
Foreign exchange variances - - 18 - 18
Additions 116 47 1,683 - 1,846
Disposals - (283) (2,329) - (2,612)
At 31 December 2023 371 185 2,706 301 3,563
Depreciation
At 1 January 2022 282 146 1,944 - 2,372
Transfer between classes - 19 25 - 44
Charge for the year 87 169 742 50 1,048
Foreign exchange variances - (2) 14 - 12
Disposals (211) (22) (473) - (706)
At 31 December 2022 158 310 2,252 50 2,770
Charge for the year 103 87 696 100 986
Foreign exchange variances - - 3 - 3
Disposals - (271) (2,329) - (2,600)
At 31 December 2023 261 126 622 150 1,159
Impairment
At 1 January 2023 - - 113 - 113
Charge for the year - - - - -
At 31 December 2023 - - 113 - 113
Net book value
At 31 December 2023 110 59 1,971 151 2,291
At 31 December 2022 97 111 969 251 1,428
8. Intangible assets and goodwill
Computer software - internally generated Computer software - external Trade name Customer contracts Customer relationships Total other intangibles Goodwill Total
£000 £000 £000 £000 £000 £000 £000 £000
Cost
At 1 January 2022 17,273 4,044 160 21,575 7,511 50,563 76,111 126,674
Additions 3,873 778 - - - 4,651 - 4,651
Acquisitions through business combinations - - - - - 730 730
-
Foreign exchange variances - - - - - - 119 119
At 31 December 2022 21,146 4,822 160 21,575 7,511 55,214 76,960 132,174
Additions 3,242 2,402 - - - 5,644 - 5,644
Foreign exchange variances - - - (255) - (255) (47) (302)
At 31 December 2023 24,388 7,224 160 21,320 7,511 60,603 76,913 137,516
Amortisation
At 1 January 2022 10,207 1,192 37 16,796 4,040 32,272 - 32,272
Charge for the year 2,461 459 8 1,531 767 5,226 - 5,226
Foreign exchange variances - - - - - - - -
At 31 December 2022 12,668 1,651 45 18,327 4,807 37,498 - 37,498
Charge for the year 2,562 814 8 1,429 754 5,567 - 5,567
Foreign exchange variances - - - (254) - (254) - (254)
At 31 December 2023 15,230 2,465 53 19,502 5,561 42,811 - 42,811
Net book value
At 31 December 2023 9,158 4,759 107 1,818 1,950 17,792 76,913 94,705
At 31 December 2022 8,478 3,171 115 3,248 2,704 17,716 76,960 94,676
9. Trade and other receivables
Group
2023 2022
£000 £000
Trade receivables 17,550 12,298
Other receivables 861 1,078
Deferred contingent consideration 615 1,077
Prepayments 7,596 5,524
Accrued income 19,912 18,620
46,534 38,597
Deferred contingent consideration relates to the collection and run off of the
SME division's accrued income balance at disposal.
Included within accrued income is an amount of £4,082,000 (2022: £2,697,000)
which is recoverable after more than one year.
The Group does not hold any collateral as security (2022: none). Group debtor
days were 54 days (31 December 2022: 42 days).
10. Trade and other payables
Group
2023 2022
£000 £000
Current
Trade payables 6,261 5,952
Social security and other taxes 6,393 5,117
Accruals 4,595 3,141
Deferred income 2,095 1,861
Other payables 602 1,008
19,946 17,079
1 Source: Company Information, Cornwall Insights, Fiscal Risks Report 2021
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