Half-year Report
16/05/2023 07:00
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RNS Number : 4807Z Sureserve Group PLC 16 May 2023
16 May 2023
Sureserve Group plc
("Sureserve" or the "Group")
Unaudited Interim Results for the six months ended 31 March 2023 (H1 FY23)
Sureserve, the Social Housing Energy Services Group, is pleased to announce
its unaudited interim results for the six-month period ended 31 March 2023.
Highlights
· Revenue(*1) increased by 23.0% to £155.3m (H1 2022: £126.2m)
· EBITA(*1,2) increased by 41.2% to £7.2m (H1 2022: £5.1m)
· Profit before tax(*1) increased by 55.8% to £6.7m (H1 2022:
£4.3m)
· Adjusted basic earnings per share(*3) increased by 3.3% to 3.1p
(H1 2022: 3.0p)
· Net cash(*4) (excluding IFRS 16 lease liabilities) increased to
£14.4m (31 March 2022: £11.8m)
· Order book(*1) increased by 10.9% to £567.7m (31 March 2022:
£512.1m)
· Improvement in the EBITA margin(*1) to 4.6% (H1 2022: 4.0%)
· 44 contract wins in H1 with a total contract value of £93.2m (H1
2022: £101.2m)
Outlook
· The Group's order book(*1) provides good visibility of revenue
streams with 98% of FY23 expected revenue covered by the order book
· The Group continues to pursue its goal of becoming a leading
provider of energy services to the social housing sector in the UK.
Update on Recommended Cash Offer
· On 21 April 2023, Cap10 4NetZero Bidco Limited and Sureserve
announced that they had reached agreement on the terms of a recommended all
cash offer for the Company
· Completion of the transaction is, subject to the prior
satisfaction or, where permitted, waiver of the conditions set out in the
announcement dated 21 April 2023, expected during early July 2023
Peter Smith, Chief Executive Officer of Sureserve, commented:
"The Group's half year performance endorses the operational expertise across
the Group and the resilience of the business model, which is supported by
non-discretionary, regulatory led spend alongside the Government's continued
emphasis on a net zero target for carbon emissions by 2050 with current
legislation supporting this target."
( )
(*1) - From continuing operations. Continuing operations comprises the Social
Housing Energy Services division and central costs. Sureserve Fire and
Electrical Limited and Precision Lift Services Limited have been classified as
assets held for sale and are excluded from continuing operations.
(*2) - EBITA is defined as Operating profit before impairment of goodwill,
amortisation of acquisition related intangibles and exceptional items.
(*3) - Adjusted basic earnings per share from continuing and discontinued
operations excluding impairment of goodwill, amortisation of acquisition
related intangibles, exceptional items, and their associated tax effect.
(*4) - From continuing and discontinued operations. The cash from discontinued
operations is presented within assets held for sale.
Enquiries:
Sureserve Group
Peter Smith, Chief Executive Officer 07590 929 431
Sameet Vohra, Chief Financial Officer 07834 740 059
Camarco (Financial Public Relations)
Ginny Pulbrook 020 3757 4992
Rosie Driscoll
Shore Capital (Nominated Adviser and Broker) 020 7408 4090
Stephane Auton
Daniel Bush
Tom Knibbs
Fiona Conroy
Notes to editors
Sureserve is a leading UK social housing energy services Group. The Group was
founded in 1988 and is headquartered in Dartford. It currently employs 2,756
staff from 33 offices across the UK.
Chairman's Statement
Trading performance
The first half of FY23 was encouraging, with both total Group and continuing
operations showing strong sales growth as well as EBITA growth compared to the
same six months in FY22. Our net cash position as at 31 March 2023 was £14.4m
(£11.8m at 31 March 2022).
Update on Recommended Cash Offer
On 21 April 2023, the Boards of Cap10 4NetZero Bidco Limited ("Bidco"), a
newly incorporated company established on behalf of Cap10 Partners LLP, and
Sureserve announced that they had reached agreement on the terms of a
recommended all cash offer pursuant to which Bidco, will acquire the entire
issued and to be issued share capital of Sureserve. Completion of the
transaction is, subject to the prior satisfaction or, where permitted, waiver
of the conditions set out in the announcement dated 21 April 2023, expected
during early July 2023.
Chief Executive's review
The first half of FY23 saw revenue from the continuing businesses up 23% on
last year with growth seen across all Group businesses, notably Aaron
Services, Everwarm and Providor, who are all up more than 28% on last year. It
is particularly pleasing to see Providor performing so well this year, after a
difficult first half of last year when we made investments in training. A move
to a hybrid model, employing both our own engineers and sub-contractors has
proved successful for Providor and the business has performed strongly as a
result. Everwarm has also had a more than credible H1 with upside coming from
increased revenue and contract mix. Two of the Gas businesses have been
impacted by the cold weather we had in both December and March, with Aaron
offsetting this challenge with their renewables work and a number of new
contract wins.
Our acquisition strategy has led to a number of conversations with potential
target companies which are ongoing. On 21 April 2023, the Company announced
that it was in in advanced discussions regarding a possible acquisition.
Discussions are continuing although there is no certainty that these will
result in any agreement. On the disposal front, we are continuing to market
both businesses held for sale, Sureserve Fire and Electrical and Precision
Lift Services, and interest has been encouraging. Discussions with potential
buyers are underway, supported by our advisors, Quercus Corporate Finance.
We continue to make progress on the ESG front. At the end of March, 10% of our
fleet was electric. We are looking forward to our Sureserve Academy Day in
late May when we will celebrate the successes of our Apprentices and we will
run another Employee Engagement Survey in June. We believe we have made good
progress since last year on a number of fronts and will monitor results of
this year's survey closely.
In March we held our inaugural Renewables Conference. The venue was carefully
chosen as the Widnes Vikings' Stadium in Widnes. The decarbonisation of the
stadium was completed by Sure Maintenance for Halton Borough Council in March
2022, incorporating state of the art infrastructure and air source heat pump
(ASHP) technology, supporting the Council's carbon reduction plans and
longer-term decarbonisation goals. It was the perfect opportunity to show a
number of our clients and other invited guests around the stadium and provide
advice on both how to access funding streams, and the skills that Sureserve
bring to the communities we support. We have every intention of making this an
annual event and are currently looking at venues for next year.
As ever I want to close by thanking all of our staff for all they do for our
clients and the communities they support.
Operational review
Group Summary
The first half of FY23 was encouraging, with continuing operations showing
sales and EBITA growth over the same six months in FY22 against a challenging
macroeconomic inflationary environment. This demonstrates the resilience of
the business model which is based on predictable and recurring revenues in
areas supported by non-discretionary and regulatory led spend. Our growth is
underpinned by high levels of long term contracts and frameworks for which we
have continued to see high appointment and retention levels. Our client base,
largely of local authorities and housing associations, provides us with
sustainable partnerships that we regard as blue chip.
Our strategy is to drive growth from within our specialism of social housing
energy services ('SHES'). We believe this focus plays to our core strengths
and in identifying business areas where we have an established market
position, we can maximise our growth potential. The results below have
therefore been presented on a continuing operations basis (including the SHES
business and central costs) and do not include our fire and electrical or lift
businesses which are classified as discontinued operations.
The Group delivered period on period revenue growth of 23.0% to £155.3m (H1
22: £126.2m). All businesses delivered higher revenues than the prior period,
with the majority returning double-digit growth. EBITA increased by 41.2% to
£7.2m (H1 22: £5.1m) with this additional profitability driven by a
combination of factors. It is encouraging to see Providor performing so well
this year, after a challenging first half of last year. A move to a hybrid
model, employing both our own engineers and sub-contractors has proved
successful and the business has performed strongly as a result. Everwarm has
started the year well with upside coming from higher sales volumes. Two of the
gas businesses were impacted by the colder weather in the period, with the
other delivering record monthly sales from a combination of installations,
renewables and electrical works coupled with new contract wins.
Looking forward
We remain optimistic around opportunities for continued growth within the
Group. We believe our businesses have a positive outlook, with many
opportunities for growth ahead. Our position is reinforced by the Government's
continued emphasis on a net zero target for carbon emissions by 2050 with
current legislation supporting this target. The Group and our experienced
management teams remain well placed to support our clients through the energy
transition, and we will continue to monitor developments as opportunities
present themselves.
The current energy environment in the UK has prompted additional actions from
the Government. One such action, announced in November 2022, is the
introduction of a new £1bn ECO+ scheme, which will provide funding for
hundreds of thousands of homes across the country to install new home
insulation. This is part of wider actions across energy policy to help the UK
meet its ambition of becoming energy independent. The new scheme will extend
support to those who do not currently benefit from any other Government
support to upgrade their homes and is in addition to the existing £6.6bn
'Help to Heat' energy schemes. Around one-fifth of the £1bn fund will also be
targeted towards the most vulnerable, including those on means tested benefits
or in fuel poverty. The Group has been active in delivering other Energy
Company Obligation ('ECO') schemes and is well placed to benefit from these
new opportunities as they arise.
Energy services and future energy transition will continue to be a core focus
moving forward and we believe we have developed a successful basis for
achieving growth both organically and through acquisition. Our established
presence in the installation of solar PV works, battery storage projects,
energy efficient lighting, air source heat pumps and electric vehicle charging
points presents our experienced management team with attractive growth
opportunities going forward that we are well placed to deliver on. The
backdrop of global climate change combined with the UK Government's ongoing
initiatives and future commitments, is believed likely to provide further
opportunities to increase our delivery in these, and associated, service
areas.
As we communicated at the time, purchasing CorEnergy is a key example of the
type of strategic acquisition we wish to pursue. CorEnergy is a business
focused on delivering sustainable energy solutions for public and private
sector organisations, supplementing our energy services, and immediately
enhancing earnings for the Group. In line with our strategy, we will continue
to review other appropriate acquisition opportunities as we expand our scale,
service mix and geographical offering.
The nature of our Group, particularly our gas businesses, remains as a core
service provider to customers, including vital emergency repair and compliance
testing services to properties. Our continued growth further strengthens our
position in the energy services sector, with a true national reach across our
businesses. Nearly all of our gas contracts include annual contractual price
increases which are either CPI-linked, or linked to another associated price
index, with the increase typically falling due on the contract anniversary
date. Consequently, we are well positioned to continue our growth both
organically and through further acquisitions in what are mostly fragmented and
regional markets. Each of the gas businesses has achieved revenue growth
compared to the previous period, with Aaron Services delivering record sales
in the period. We remain confident that our experienced leadership in this
stable sector provides a strong platform for further growth and cash
generation underpinned by a strong order book.
While we are not exposed to fluctuations in wholesale gas prices given our
position as an installer and maintainer of heating assets, we are well
positioned to benefit from UK Government initiatives to reduce fuel poverty,
particularly in times when wholesale energy prices are high for extended
periods. Our role is to support our client base and the end user with
compliant, safe, and effective heating. In addition to the gas heating
services and products we more generally work with, we are seeing increased
demand for alternative heat sources. This includes, but is not limited to, air
source heat pumps. The Government has targeted 600,000 heat pump installations
per year by 2028 as part of its 2050 net zero initiative. We therefore believe
this will continue to be an area of focus and an opportunity for growth as we
move forward. It is seen as largely supplementary to existing revenue streams.
High success rates for contract bids and retention levels continue to be
achieved, and the order book from continuing operations totalled £567.7m at
the end of March 2023. This represented a 10.9% increase compared to the prior
period (March 2022: £512.1m). On an overall Group basis, the order book
totalled £611.8m (March 2022: £556.2m). This provides visibility over future
revenue, profitability, and cash flow, facilitating longer term planning and
helping to drive efficiencies. The order book is consistent with our
previously stated view around our targeted efforts on long term contracts that
provide opportunities to deliver profitably in our core areas, and we remain
focused on securing contracts with long term visibility and robust value. We
remain confident in our future profitable growth with a significantly
increased order book value and good visibility on future earnings,
underpinning our belief in a robust financial outlook.
Operational summary
Gas
The Group's gas businesses provide planned and responsive maintenance,
installation, and repair services predominantly to local authority and housing
association clients, in the areas of domestic and commercial gas. These
activities include the installation of lower carbon renewable technologies
such as air source heat pumps.
The gas businesses delivered 15.4% revenue growth compared to the prior
period, with progression coming from all three businesses. In addition to
winning new business, year on year sales have also increased due to the
contractual price increase mechanisms included within nearly all of the
contracts. The latter has helped to mitigate against some of the continuing
cost pressures experienced during the period resulting in increased
profitability.
Revenue is primarily derived from recurring contracted service and repair work
throughout the year, coupled with ad hoc project-based work. The gas
businesses normally have more callouts during colder months, resulting in
higher labour and materials costs. This seasonality drives higher levels of
profitability and cash generation in the warmer months when call-out rates are
lower, and a proportion of our engineers can be redeployed to jobs that yield
further income. As a result, a significant proportion of the annual profit
often occurs during the second half of the financial year.
The gas businesses continued to win substantial new business during the
period. The most significant awards included a gas servicing, maintenance, and
installation contract with Great Places worth in the region of £19m over a
five-year period and an installation of renewable technology and solid fuel
heating system for £3.0m over a six-year period for East Midlands Housing
Group.
Water and air hygiene
H2O is our water and air risk assessment specialist provider across the UK.
Performance of the business has continued to be positive with strong client
service supporting consistent delivery.
Smart metering
Providor is our leading national installer of smart meters (operating as a
meter asset manager and meter operator), undertaking work for utility
suppliers which are required by the UK Government to install smart meters in
every home across England, Wales, and Scotland. The business is among the most
experienced in the ongoing UK-wide roll-out and remains focused on existing
contract delivery through to the current installation deadline of 31 December
2025. As of December 2022, over 28 million of the newly installed meters were
operating in smart mode. With more than 55 million smart meter installations
required in total, there remains a significant market opportunity ahead of the
roll-out deadline.
The business has delivered considerable growth in the period and continues to
assess new revenue prospects, both from new clients and existing contractual
relationships. The business is well placed to grow further with continued
confidence in operational delivery.
Providor has extensive experience of the national smart meter roll-out and
continues to apply careful management to the situation. We consider our
contractual positions while seeking to provide strong and secure employment
for our engineers. The UK Government has confirmed that it remains committed
to smart meter roll-out and that this initiative aligns with its net zero
commitment.
Energy efficiency and renewables
These businesses provide a range of energy efficiency services such as
insulation, heating, and energy efficient technologies. The latter includes
air source heat pumps, solar PV, battery storage, energy efficient lighting
and electric vehicle charging points through the Everwarm and CorEnergy
businesses. Everwarm provides these services predominantly for social housing
and private homes, through grant funding, with CorEnergy focusing more on
renewables projects for non-domestic clients. The Everwarm business also
includes our joint ventures, Warmworks and Arbed, which are similarly focused
on energy efficiency works in domestic properties backed by Government
funding.
Everwarm delivers energy efficiency measures that support carbon emissions
savings for utility companies, enabling them to meet their legislative
targets. The insulation operations are driven by seasonal influences as
rendering processes are not permitted below certain temperatures. As a result,
we typically experience a far larger number of productive working days in
summer, compared to winter months, with higher revenues and margins normally
achieved in the second half of the financial year. However the seasonality
effect is lessening as the mix of works changes. CorEnergy works are project
based and therefore not subject to the same seasonality.
Results across our energy efficiency businesses saw increased profitability
with Everwarm benefitting from gross margin drop-through on higher sales
volumes and mix of works. CorEnergy initiated its "Invest to Grow" strategy,
which is designed to accelerate growth and propel the business to the next
stage of its lifecycle.
The energy efficiency and renewables businesses continued to see several large
wins and awards as reflected in the order book growth. The largest wins for
Everwarm included the retrofit programme for Pobl Group for £14.1m, and a
regeneration project for Osprey Housing valued at £1.9m. CorEnergy also saw a
number of wins including £4.0m lighting and heat decarbonisation works for
the M&S Bank Arena (ACC Group / Liverpool City Council), £2.6m solar PV
for First Group PLC, and various other ongoing and associated works.
We continue to believe we are well placed to deliver on behalf of our utility
partners based on our management team's extensive experience in this area. The
'ECO4' scheme, which commenced on 1 April 2022, commits funding of £1bn per
year until 31 March 2026. Additionally, the ECO+ scheme announced in November
2022 will provide a further £1bn in funding. This should provide further
opportunities for Everwarm to deliver increased volumes.
The Public Sector Decarbonisation Scheme supports the aim of reducing
emissions from public sector buildings by 75% by 2037. Phase 3B announced a
further £635m of grant funding available for non-domestic public sector
buildings for the financial years 2023 to 2025. This scheme provides an
ongoing revenue stream for CorEnergy for consultancy and contracting works for
existing and new public sector clients.
Our Warmworks joint venture, delivering the Warmer Homes Scotland initiative
for the Scottish Government, saw continued momentum in performance and client
delivery.
Peter Smith
Chief Executive Officer
Chief Financial Officer's review
Group revenue from continuing operations(*1), increased by 23.0% to £155.3m
(H1 2022: £126.2m), reflecting strong revenue growth across the gas and
energy efficiency businesses.
Group EBITA from continuing operations(*1), increased by 41.2% to £7.2m (H1
2022: £5.1m) reflecting strong revenue growth, notwithstanding the
inflationary macroeconomic backdrop which we continue to proactively manage
against, and recognising the investments in training made in the prior period
in the smart metering business. Central costs were £1.4m (H1 2022: £1.6m).
The Group reported an operating profit(*1) of £7.2m (H1 2022: £4.7m), after
£nil of amortisation charges for acquisition intangibles (H1 2022: £0.3m)
and exceptional costs of £nil (H1 2022: £0.1m relating to acquisition costs
for CorEnergy).
The net finance expense(*1) was £0.5m (H1 2022: £0.4m), and taxation(*1) was
£1.5m (H1 2022: £0.8m). The profit after tax(*1) was £5.2m (H1 2022:
£3.5m).
Loss after tax from discontinued operations was £0.1m (H1 2022: profit after
tax of £1.0m).
Tax
The effective tax rate for the period was 22%, which is in line with the
blended statutory rate of corporation tax, and we expect the full year
effective tax rate to be at this level.
Earnings per share
Basic earnings per share from continuing operations(*1) were 3.1 pence (H1
2022: 2.2 pence), based on profit after tax from continuing operations of
£5.2m (H1 2022: £3.5m). Group adjusted basic earnings per share(*3) was 3.1
pence (H1 2022: 3.0 pence).
Our profit for the period was £5.1m (H1 2022: £4.5m). Based on the weighted
average number of shares in issue during the year of 166.1m, this resulted in
basic earnings per share of 3.1 pence (H1 2022: 2.8 pence) from continuing and
discontinued operations.
Cash flow performance
Our operating cash flow(*4) for the period was an outflow of £4.8m (H1 2022:
inflow of £1.4m) with the management of working capital remaining an area of
continued focus. The reduction in the cash balance from 30 September 2022 to
31 March 2023 is due in part to the increased working capital requirement to
address supply chain challenges in the industry, e.g. by maintaining higher
levels of inventory, and in part due to the cash cycle seasonality of the
business, whereby the business invests in, and absorbs more working capital
during the colder winter months.
Net cash / (debt)
At 31 March 2023, the Group had net cash (including cash balances in assets
held for sale) excluding lease liabilities(*4) of £14.4m (H1 2022: £11.8m).
Unaudited six months ended 31 March 2023 Unaudited six months ended 31 March 2022 Audited year ended 30 September 2022
£'000 £'000 £'000
Cash and cash equivalents 12,784 8,857 19,319
Unamortised finance costs (included in other receivables) 118 185 151
Net cash excluding lease liabilities 12,902 9,042 19,470
Lease liabilities (17,702) (11,450) (15,076)
Total net cash in continuing operations (4,800) (2,408) 4,394
Cash and cash equivalents in assets held for sale 1,653 2,963 3,989
Lease liabilities in assets held for sale (1,128) (484) (599)
Total net cash (including lease liabilities) (4,275) 71 7,784
Total net cash (excluding lease liabilities) 14,437 11,820 23,308
The total net debt, including lease liabilities(*4) of £18.8m (H1 2022:
£11.9m), was £4.3m (H1 2022: net cash of £0.1m).
Banking arrangements
In December 2021, the Group renewed its bank facilities to provide an
overdraft facility of £5,000,000 together with a revolving credit facility of
£15,000,000 which runs to 31 January 2025. We had drawn £nil as at 31 March
2023 (31 March 2022: £nil) under the revolving credit facility, and as at the
date of this report the facility remained undrawn. National Westminster Bank
('NatWest') continues to be a highly supportive banking partner.
We are confident that our banking facilities provide sufficient support in
managing our corporate affairs and provides sufficient capacity to plan for
future growth, particularly in bidding with confidence on new contracts, and
funding strategic organic and acquisitive growth.
Statement of financial position
The principal items in our balance sheet are goodwill and working capital.
Goodwill has remained unchanged at £40.9m from 30 September 2022. As at 31
March 2023, there are £nil acquisition intangibles (31 March 2022: £nil)
remaining on the statement of financial position as these have been fully
amortised.
As at 31 March 2023, net current assets stood at £29.8m (31 March 2022:
£19.6m).
The principal items of working capital (including balances held in assets held
for sale) are noted below and reflect the continued focus on working capital:
31 March 2023 31 March 2022 30 September 2022
£m £m £m
Trade receivables 34.8 26.3 23.1
Accrued income 20.7 16.8 22.1
Trade payables (33.2) (29.5) (31.2)
Accruals (7.2) (10.2) (11.1)
(*1) - From continuing operations. Continuing operations comprises the Social
Housing Energy Services division and central costs. Sureserve Fire and
Electrical Limited and Precision Lift Services Limited have been classified as
assets held for sale and are excluded from continuing operations.
(*2) - EBITA is defined as Operating profit before impairment of goodwill,
amortisation of acquisition related intangibles and exceptional items.
(*3) - Adjusted basic earnings per share from continuing and discontinued
operations excluding impairment of goodwill, amortisation of acquisition
related intangibles, exceptional items, and their associated tax effect.
(*4) - From continuing and discontinued operations. The cash from discontinued
operations is presented within assets held for sale.
Risks
The Board considers strategic, financial, and operational risks and identifies
actions to mitigate those risks.
Our period-end review included an assessment of accrued income, of which the
balance was £20.7m at the reporting date (31 March 2022: £16.8m). Accrued
income is reviewed regularly for impairment and represents a balance sheet
risk in our industry and we continue to ensure a balanced approach between
risk and possible outcome on final invoicing.
We continue to manage a number of potential risks and uncertainties, including
claims and disputes which are common to other similar businesses which could
have a material impact on short- and longer-term performance. The Board
remains focused on the outcome of a number of contract settlements on which
there is a range of outcomes for the Group in terms of both cash flow and
impact on the consolidated statement of comprehensive income.
In preparing our annual accounts and interim financial statements, we have
taken a view on the financial risk of pending claims and disputes and seek to
provide in full for potential shortfalls, whilst taking account of potential
counter-claims, such that we have a collectively balanced position of risk
across all such matters.
Going Concern statement
In assessing the Group and Company's ability to continue as a going concern,
the Board reviews and approves the annual budget, three-year plan, and a
rolling 12 month forecast, including forecasts of cash flows, borrowing
requirements and covenant headroom. The Board reviews the Group's sources of
available funds and the level of headroom available against its committed
borrowing facilities and associated covenants. The Group's financial
forecasts, considering possible sensitivities in trading, indicate that the
Group will be able to operate within the level of its committed borrowing
facilities and within the requirements of the associated covenants for the
foreseeable future. NatWest remains very supportive of the Group and in
December 2021, the Group renewed its bank facilities to provide an overdraft
facility of £5,000,000 together with a revolving credit facility of
£15,000,000 which runs to 31 January 2025. The Directors have a reasonable
expectation that the Group and Company have adequate resources to continue
their operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis of accounting in preparing the
unaudited interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 March 2023
Audited year ended 30 September 2022
Unaudited six months ended 31 March 2023 Unaudited six months ended 31 March 2022
Notes £'000 £'000 £'000
Revenue 2 155,303 126,243 275,096
Cost of sales (134,071) (108,707) (234,049)
Gross profit 21,232 17,536 41,047
Other operating expenses (14,701) (13,165) (25,644)
Share of results of joint venture 627 712 1,424
Operating profit before impairment of goodwill, amortisation of acquisition 2 7,158 5,083 16,827
intangibles and acquisition costs
Amortisation of acquisition intangibles - (269) (269)
Acquisition costs - (115) (120)
Operating profit 7,158 4,699 16,438
Finance expense (493) (365) (864)
Profit before tax from continuing operations 2 6,665 4,334 15,574
Taxation 3 (1,466) (807) (2,481)
Profit for the period attributable to the equity holders of the Group from 5,199 3,527 13,093
continuing operations
(Loss) / profit for the period from discontinued operations 4 (115) 1,006 (2,022)
Profit for the period attributable to the equity holders of the Group 5,084 4,533 11,071
Earnings per share from continuing operations
Basic 5 3.1p 2.2p 8.0p
Diluted 5 3.0p 2.1p 7.8p
(Loss) / earnings per share from discontinued operations
Basic 5 (0.1p) 0.6p (1.2p)
Diluted 5 (0.1p) 0.6p (1.2p)
Earnings per share from continuing and discontinued operations
Basic 5 3.1p 2.8p 6.8p
Diluted 5 3.0p 2.7p 6.6p
Adjusted earnings per share
Basic 5 3.1p 3.0p 9.0p
Diluted 5 3.0p 2.9p 8.8p
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 March 2023
Unaudited as at 31 March 2023 Unaudited as at 31 March 2022 Audited as at 30 September 2022
Notes £'000 £'000 £'000
Non-current assets
Goodwill 40,932 41,079 40,932
Other intangible assets 1,684 1,184 1,403
Property, plant and equipment 1,906 1,870 1,989
Right-of-use assets 17,192 10,956 14,363
Interest in joint ventures 2,148 2,032 2,494
Deferred tax asset 444 420 444
64,306 57,541 61,625
Current assets
Inventories 7,275 4,042 5,059
Trade and other receivables 66,801 52,682 53,996
Cash and cash equivalents 6 12,784 8,857 19,319
86,860 65,581 78,374
Assets classified as held for sale 4 15,689 20,010 15,338
102,549 85,591 93,712
Total assets 166,855 143,132 155,337
Current liabilities
Trade and other payables 57,175 53,485 54,070
Lease liabilities 6 6,304 4,132 5,494
Provisions 432 523 497
Income tax payable 408 915 238
64,319 59,055 60,299
Liabilities directly associated with assets classified as held for sale 4 8,397 6,914 8,233
72,716 65,969 68,532
Net current assets 29,833 19,622 25,180
Non-current liabilities
Lease liabilities 6 11,398 7,318 9,582
Provisions 1,509 1,509 1,467
12,907 8,827 11,049
Total liabilities 85,623 74,796 79,581
Net assets 81,232 68,336 75,756
Equity
Called up share capital 16,623 16,508 16,589
Share premium account 28,803 28,606 28,740
Share-based payment reserve 904 420 634
Merger reserve 20,067 20,067 20,067
Retained earnings 14,835 2,735 9,726
Equity attributable to equity holders of the Group 81,232 68,336 75,756
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 March 2023
Share-based
Share premium account payment
Share reserve Merger reserve Retained earnings Total
capital equity
£'000 £'000 £'000 £'000 £'000 £'000
At 30 September 2021 (audited) 16,122 25,620 349 20,067 (1,832) 60,326
Profit for the period - - - - 4,533 4,533
Issue of shares (acquisition of CorEnergy Limited) 370 2,942 - - - 3,312
Issue of shares (exercise of options) 16 44 - - - 60
Equity-settled share-based payments, net of tax - - 105 - - 105
Reserve transfer - - (34) - 34 -
At 31 March 2022 (unaudited) 16,508 28,606 420 20,067 2,735 68,336
Profit for the period - - - - 6,538 6,538
Issue of shares (exercise of options) 81 134 - - - 215
Equity-settled share-based payments, net of tax - - 276 - 391 667
Reserve transfer - - (62) - 62 -
At 30 September 2022 (audited) 16,589 28,740 634 20,067 9,726 75,756
Profit for the period - - - - 5,084 5,084
Issue of shares 34 63 - - - 97
Equity-settled share-based payments, net of tax - - 295 - - 295
Reserve transfer - - (25) - 25 -
At 31 March 2023 (unaudited) 16,623 28,803 904 20,067 14,835 81,232
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 31 March 2023
Audited year ended 30 September 2022
Unaudited six months ended 31 March 2023 Unaudited six months ended 31 March 2022
Notes £'000 £'000 £'000
Cash flows from operating activities
Cash (used in) / generated from continuing operations 7 (685) 3,037 16,372
Net interest paid (459) (326) (791)
Taxation (1,263) (939) (2,637)
Net cash used in / (generated from) operating activities from discontinued (2,349) (328) 3,408
activities
Net cash (used in) / generated from operating activities (4,756) 1,444 16,352
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (49) (2,661) (2,661)
Purchase of property, plant and equipment (509) (404) (765)
Purchase of intangible assets (490) (524) (911)
Sale of property, plant and equipment - 7 7
Net cash used in investing activities from discontinued activities (135) (44) (85)
Net cash used in investing activities (1,183) (3,626) (4,415)
Cash flows from financing activities
Proceeds from issue of shares 97 60 275
Repayment of lease liabilities (2,843) (2,147) (4,797)
Finance issue costs - (201) (201)
Net cash used in financing activities from discontinued activities (186) (154) (350)
Net cash used in financing activities (2,932) (2,442) (5,073)
Net (decrease) / increase in cash and cash equivalents (8,871) (4,624) 6,864
Cash and cash equivalents at beginning of year 23,308 16,444 16,444
Cash and cash equivalents at end of period / year 14,437 11,820 23,308
Cash and cash equivalents 12,784 8,857 19,319
Cash and cash equivalents included in assets held for sale 1,653 2,963 3,989
Cash and cash equivalents at end of period / year 14,437 11,820 23,308
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 31 March 2023
1. Basis of preparation
The results presented in this report are unaudited and they have been prepared
in accordance with the recognition and measurement principles of UK-adopted
International Accounting Standards that are expected to be applicable to the
financial statements for the year ending 30 September 2023 and on the basis of
the accounting policies to be used in those financial statements. The figures
for the year ended 30 September 2022 are extracted from the statutory accounts
of the Group for that period. The condensed consolidated financial statements
do not include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the Group's annual
financial statements, being the statutory financial statements for Sureserve
Group plc, as at 30 September 2022, which have been prepared in accordance
with UK adopted International Accounting Standards with the requirements of
the Companies Act 2006 as applicable to companies reporting under those
standards.
The condensed consolidated financial statements for the six months ended 31
March 2023 do not comprise statutory accounts within the meaning of Section
434 of the Companies Act 2006. Statutory accounts for the year ended 30
September 2022 have been approved by the Board of Directors and delivered to
the Registrar of Companies. These accounts, which contained an unqualified
audit report under Section 495, did not include a reference to any matters to
which the auditor drew attention by way of emphasis of matter and did not
contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
Significant accounting policies
The accounting policies adopted in the preparation of the condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 30
September 2022.
Seasonality
The Group has seasonal influences in specific areas. The gas entities
experience higher activity levels during colder weather, leading to higher
working capital requirements and lower profitability in the winter, and the
opposite in the summer. Within Everwarm it is not possible to render walls or
use fixing glue at temperatures below three degrees centigrade, nor perform
cladding work in high winds. As such, weather has an influence on this
business, meaning that the Group must plan to increase capacity during warmer
and more settled periods to compensate for time lost during colder ones.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended 31 March 2023
2. Operating segments
The Group's chief operating decision maker is considered to be the Board of
Directors. The Group's operating segments are determined with reference to the
information provided to the Board of Directors in order for it to allocate the
Group's resources and to monitor the performance of the Group.
The Group reports under a single operating segment of "Social Housing Energy
Services." The services provided to customers within Social Housing Energy
Services comprises of the following:
- Installation, maintenance and repair-on-demand of gas appliances
and central heating systems, and air and water hygiene solutions where we
contract predominantly under framework agreements to predominantly housing
associations and local authorities;
- Consultancy and project management services for renewables and
other technology;
- Services in the energy efficiency sector, including external,
internal and cavity wall insulation, loft insulation, gas central heating,
boiler upgrades and other renewable technologies. The services are offered
under various energy saving initiatives including Energy Company Obligations
("ECO"), Green Deal and the Scottish Government's HEEPs ("Home Energy
Efficiency Programme") Affordable Warmth programme. Clients include housing
associations, social landlords, local authorities and private householders and
we have trading relationships with all of the large utility suppliers and many
of the leading smaller suppliers.
- Metering services involving the installation, servicing and
administration of smart meter devices and associated data.
All revenue and profit is derived from operations in the United Kingdom only.
The profit measure the Board used to evaluate performance is operating profit
before amortisation of acquisition intangibles, impairment of goodwill and
exceptional items (acquisition costs), as outlined below and on the face of
the statement of comprehensive income.
The Group accounts for inter-segment trading on an arm's length basis. All
inter-segment trading is eliminated on consolidation.
The following is an analysis of the Group's revenue and operating profit
before amortisation of acquisition intangibles, impairment of goodwill and
exceptional items (acquisition costs) by reportable segment:
Unaudited six months ended 31 March 2023 Unaudited six months ended 31 March 2022 Audited year ended 30 September 2022
£'000 £'000 £'000
Continuing revenue
Social Housing Energy Services 155,972 126,874 276,029
Inter-segment elimination (669) (631) (933)
Total revenue 155,303 126,243 275,096
Reconciliation of operating profit before exceptional and other items to
profit before taxation:
Unaudited six months ended 31 March 2023 Unaudited six months ended 31 March 2022 Audited year ended 30 September 2022
£'000 £'000 £'000
Continuing operating profit before exceptional and other items by segment
Social Housing Energy Services 8,607 6,720 20,236
Central overheads (1,449) (1,637) (3,409)
Total operating profit before exceptional and other items 7,158 5,083 16,827
Amortisation of acquisition intangibles - (269) (269)
Acquisition costs - (115) (120)
Finance expense (493) (365) (864)
Profit before taxation from continuing operations 6,665 4,334 15,574
Only the Group consolidated statement of financial position is regularly
reviewed by the chief operating decision maker and consequently no segment
assets or liabilities are disclosed here under IFRS 8.
3. Taxation
The corporation tax charge for the six months ended 31 March 2023 is
calculated based upon the effective tax rates expected to apply to the Group
for the full financial year of 22% (2022: 19%).
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended 31 March 2023
4. Assets held for sale and discontinued operations
As previously disclosed in the FY22 Annual Report, the Group is looking to
dispose of the Sureserve Fire and Electrical Limited and Precision Lift
Services Limited businesses. A disposal process is underway and is expected to
be completed within 12 months. Accordingly, as required under IFRS, the
associated assets and liabilities have consequently been presented as held for
sale at 31 March 2023. The businesses were both initially classified as held
for sale at 31 March 2022.
The results of the discontinued operations, which have been included in the
profit for the year, were as follows:
Audited year ended 30 September 2022
Unaudited six months ended 31 March 2023 Unaudited six months ended 31 March 2022
£'000 £'000 £'000
Revenue 17,743 17,280 34,177
Cost of sales (16,015) (13,756) (27,397)
Gross profit 1,728 3,524 6,780
Other operating expenses (1,858) (2,272) (4,988)
Impairment of goodwill - - (3,460)
Operating (loss) / profit (130) 1,252 (1,668)
Finance expense (17) (11) (24)
(Loss) / profit before tax from discontinued operations (147) 1,241 (1,692)
Taxation 32 (235) (330)
(Loss) / profit for the period attributable to the equity holders of the Group (115) 1,006 (2,022)
from discontinued operations
Audited year ended 30 September 2022
Unaudited as at 31 March 2023 Unaudited as at 31 March 2022
£'000 £'000 £'000
Current assets
Goodwill 4,321 7,631 4,321
Other intangible assets 14 20 16
Property, plant and equipment 188 71 87
Right-of-use assets 1,106 479 594
Deferred tax asset 88 56 88
Inventories 1,802 761 1,713
Trade and other receivables 6,517 8,029 4,530
Cash and cash equivalents 1,653 2,963 3,989
Total assets classified as held for sale 15,689 20,010 15,338
Current liabilities
Trade and other payables (7,052) (6,430) (6,958)
Income tax payable - - (366)
Lease liabilities (1,128) (484) (599)
Provisions (217) - (310)
Total liabilities directly associated with current assets classified as held (8,397) (6,914) (8,233)
for sale
Net assets 7,292 13,096 7,105
The proceeds of disposal are expected to exceed the carrying amount of the
related net assets and accordingly no impairment losses have been recognised
in the period. An impairment charge of £3,460,000 was recognised in H2 FY22.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended 31 March 2023
5. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Unaudited six months ended 31 March 2023 Unaudited six months ended 31 March 2022 Audited year ended 30 September 2022
Number Number Number
Weighted average number of ordinary shares for the purposes of basic earnings 166,114,337 162,946,985 163,895,387
per share
Diluted
Effect of dilutive potential ordinary shares:
Share options 5,291,991 3,188,785 3,694,811
Weighted average number of ordinary shares for the purposes of diluted 171,406,328 166,135,770 167,590,198
earnings per share
Earnings for the purpose of basic and diluted earnings per share from 5,199 3,527 13,093
continuing operations being net earnings attributable to the owners of the
Company from continuing operations (£'000)
Basic earnings per share from continuing operations 3.1p 2.2p 8.0p
Diluted earnings per share from continuing operations 3.0p 2.1p 7.8p
(Loss) / earnings for the purpose of basic and diluted earnings per share (115) 1,006 (2,022)
from discontinued operations being net earnings attributable to the owners
of the Company from discontinued operations (£'000)
Basic (loss) / earnings per share from discontinued operations (0.1p) 0.6p (1.2p)
Diluted (loss) / earnings per share from discontinued operations (0.1p) 0.6p (1.2p)
Earnings for the purpose of basic and diluted earnings per share being net 5,084 4,533 11,071
profit after tax attributable to the owners of the Company from continuing and
discontinued operations (£'000's)
Basic earnings per share 3.1p 2.8p 6.8p
Diluted earnings per share 3.0p 2.7p 6.6p
Earnings for the purpose of basic and diluted earnings per share, being net 5,084 4,828 14,695
profit after tax attributable to the owners of the Company from continuing and
discontinued operations, adjusted for the tax effected impairment of goodwill,
amortisation of acquisition intangibles and exceptional items (£'000's)
Basic earnings per share 3.1p 3.0p 9.0p
Diluted earnings per share 3.0p 2.9p 8.8p
The number of shares in issue as at 31 March 2023 was 166,222,616 (31 March
2022 was 165,080,074).
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the six months ended 31 March 2023
6. Net (debt) / cash
Unaudited six months ended 31 March 2023 Unaudited six months ended 31 March 2022 Audited year ended 30 September 2022
£'000 £'000 £'000
Cash and cash equivalents 12,784 8,857 19,319
Unamortised finance costs (included in other receivables) 118 185 151
Net cash excluding lease liabilities 12,902 9,042 19,470
Lease liabilities (17,702) (11,450) (15,076)
Total net (debt) / cash in continuing operations (4,800) (2,408) 4,394
Cash and cash equivalents in assets held for sale 1,653 2,963 3,989
Lease liabilities in assets held for sale (1,128) (484) (599)
Total net (debt) / cash (including lease liabilities) (4,275) 71 7,784
Total net cash (excluding lease liabilities) 14,437 11,820 23,308
7. Cash (used in) / generated from continuing operations
Unaudited six months ended 31 March 2023 Unaudited six months ended 31 March 2022 Audited year ended 30 September 2022
£'000 £'000 £'000
Operating profit 7,158 4,699 16,438
Adjustments for:
Depreciation 3,230 2,647 5,762
Amortisation of intangible assets 211 427 597
Share-based payments 295 105 381
Profit on disposal of property, plant and equipment - (7) (7)
Changes in working capital:
Inventories (2,217) (615) (1,634)
Trade and other receivables (11,659) (11,220) (11,145)
Trade and other payables 2,320 6,968 6,054
Provisions (23) 33 (74)
Cash (used in) / generated from operations (685) 3,037 16,372
8. Related party transactions
There have been no material changes to the related party balances disclosed in
the Group's Annual Report and Accounts 2022 and there have been no related
party transactions that have materially affected the financial position or
performance of the Group in the six months to 31 March 2023.
9. Post balance sheet events
Recommended cash offer
On 21 April 2023, The Boards of Cap10 4NetZero Bidco Limited ("Bidco"), a
newly incorporated company established on behalf of Cap10 Partners LLP, and
Sureserve announced that they have reached agreement on the terms of a
recommended all cash offer pursuant to which Bidco, will acquire the entire
issued and to be issued share capital of Sureserve. Completion of the
transaction is, subject to the prior satisfaction or, where permitted, waiver
of the conditions set out in the announcement dated 21 April 2023, expected
during early July 2023.
Warmworks joint venture
On 28 April 2023, the Warmworks joint venture was informed by Scottish
Government that it had successfully won the Heat in Buildings Scotland (HIBS)
national scheme, which is the successor national fuel poverty scheme to Warmer
Homes Scotland. The HIBS scheme has a contract value of £560m over 7 years to
October 2030.
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