TIDMEAAS

RNS Number : 2793O

eEnergy Group PLC

07 October 2021

7 October 2021

eEnergy Group plc

("eEnergy" or "the Group")

Final Results

eEnergy (AIM: EAAS), a leading Energy Efficiency-as-a-Service business in the UK and Ireland, announces its audited results for the year ended 30 June 2021 ("FY21").

Highlights

Financial

   --   Revenue up 200% to GBP13.6 million (2020: GBP4.5 million) 

-- Organic revenue growth of 75% in the core eLight business, generating revenues of GBP7.9 million

   --   Generated maiden Group profit 
   --   Adjusted EBITDA(1) of GBP0.8 million (FY20: loss of GBP1.5 million) 
   --   Profit before tax and exceptional items(1) of GBP0.1 million (2020: loss of GBP1.9 million) 
   --   Cash at bank GBP3.3 million (30 June 2020: GBP1.5 million) 

-- Net cash (including GBP0.7 million of IFRS 16 lease liabilities) of GBP0.8 million (30 June 2020: net debt of GBP0.5 million, including GBP0.6 million of lease liabilities)

Operational

-- Number of eLight projects increased by 69% (FY21: 211, FY20: 125) and average revenue per project increased by 52%

-- Renewable Solutions Lighting ('RSL'), acquired in July 2020, fully integrated and strengthened Group's leading Lighting--as--a--Service ('LaaS') position in Multi-Academy Trusts and State schools

-- Beond, the Top 20 energy management business, acquired in December 2020, integrated into eEnergy with advanced discussions with a number of Beond's clients for Group's eLight LaaS solution

   --   Launched MY ZeERO, the smart metering and intelligent data analytics platform 
   --   Group delivered first combined LaaS and smart metering & analytics project in June 2021 

Since the year end

-- In September 2021, the Group completed its largest acquisition, UtilityTeam, and raised GBP12 million (gross) through a placing to both existing and new institutional investors to fund the initial cash consideration

-- On a pro forma basis, following the acquisition of UtilityTeam, we derive approximately 55% of Group revenue from our Energy Efficiency division and 45% from our Energy Management division(2)

-- Derek Myers has informed the Board of his decision to change his focus and step back from his role as Chief Innovation Officer, while remaining on the Board as a Non-Executive Director

Outlook

-- We expect revenue and profits before exceptional items for FY22 to be materially ahead of FY21 and trading in the year to date is in line with current market expectations.

(1) Adjusted EBITDA is EBITDA before exceptional items. Exceptional items are primarily transaction related expenses and the cost of share-based payments

(2) Pro forma annualised revenue is derived from the FY21 eEnergy audited accounts and includes 12 months pro rata for Beond. UtilityTeam revenue is taken from their FY20 accounts. No other adjustments have been made to those revenues.

Commenting on the results, Harvey Sinclair, CEO, said: " As a result of the successful execution of our strategy, we now have the necessary expertise to help businesses to procure Zero carbon energy, measure their usage and wastage and then deliver the energy reduction measures to enable customers to realise their net zero strategies."

Harvey Sinclair, Chief Executive Officer and Ric Williams, Chief Financial Officer will give a live presentation relating to the FY21 Results and the recent acquisition of UtilityTeam on the Investor Meet Company platform today at 2:00pm BST. Investors can register for the event at:

https://www.investormeetcompany.com/eenergy-group-plc/register-investor

For further information, please visit www.eenergyplc.com or contact:

 
 eEnergy Group plc                           Tel: +44 20 7078 
                                              9564 
 Harvey Sinclair, Chief Executive Officer    info@eenergyplc.com 
  Ric Williams, Chief Financial Officer 
 Singer Capital Markets (Nominated Adviser   Tel: +44 20 7496 
  and Joint Broker)                           3000 
 Justin McKeegan, Mark Taylor, Asha Chotai 
  (Corporate Finance) 
  Tom Salvesen (Corporate Broking) 
 Turner Pope Investments (Joint Broker)      Tel: +44 20 3657 
                                              0050 
 Andy Thacker, James Pope                    info@turnerpope.com 
 Tavistock                                   Tel: +44 207 920 
                                              3150 
 Simon Hudson, Matthew Taylor                eEnergy@tavistock.co.uk 
 

About eEnergy Group plc

eEnergy Group plc is an integrated energy services company, enabling organisations to transition to 'Net Zero' through "Energy-as-a-Service". The Group offers:

-- Energy Efficiency-as-a-Service; zero upfront capital, energy reduction solutions through measured savings contracts including its LED businesses

-- Energy Management-as-a-Service; providing energy measurement, monitoring and analytics on top of core "Zero Carbon" procurement services; and

-- Enhanced customer value proposition through data gathered and analysed with its proprietary MY ZeERO platform

eEnergy was admitted to AIM in January 2020. The Board's strategy is to use its market leading eLight LED business as the foundation to expand eEnergy as a broader energy services company via a 'buy and build' strategy in the energy management sector. The market in the EU for energy efficiency services was approximately EUR25 billion in 2017 and is expected to double by 2025.

eEnergy has been awarded the Green Economy Mark by the London Stock Exchange, which recognises a company's work on sustainability.

Chairman's Statement

Energy Markets

The UK is currently experiencing significantly higher wholesale energy prices than seen historically. High energy prices mean it is imperative that businesses and organisations focus ever more strongly on minimising energy usage and eliminating wastage. Our capability to measure and analyse energy consumption, implement capital free energy efficiency measures and manage the risks around procuring energy in volatile markets means we are well positioned to help our clients in these uncertain markets.

Strategy

Through FY21 we have built eEnergy into an integrated energy services business which allows its customers to transition to 'Net Zero' through our capital free 'Energy as a Service'. This business model provides many benefits but primarily gives greater visibility and predictability to our top line growth and a higher quality of earnings.

eEnergy has executed its 'Buy & Build' strategy by completing four transactions since listing on AIM: Renewable Solutions Lighting Ltd ('RSL') completed in July 2020 and Beond in December 2020. The investment in MY ZeERO was initially made in April 2021 and in September 2021 we completed our largest acquisition to date, UtilityTeam, so that we are now a Top 5 ranked energy management company.

The acquisition of UtilityTeam is expected to be significantly earnings enhancing in the current financial year (FY22) as well as grow our scale and scope to cross sell our products and services across our growing customer base.

People

eEnergy has continued to strengthen its Board and senior leadership team, hiring both externally and from its acquisitions made in the year. We have grown from a Group of 35 employees to now having over 130.

In December 2020, eEnergy announced the appointment of Rob Van Leeuwen to the Group's senior leadership team as Group Chief Operating Officer. Rob brings 20 years of experience in the energy management sector. Rob has worked closely with the Energy Management--as--a--Service ('EMaaS') management team and oversees its integration and growth strategy, which includes enhancing the customer value proposition, increasing levels of cross and upselling within the existing customer base and maximising synergies.

Derek Myers joined the Board in December as Chief Innovation Officer. Derek had built Beond to be the business we acquired and was CEO as well as the controlling shareholder prior to its acquisition by the Group. Following the successful integration of Beond into the Group, Derek has now chosen to change his focus and become a Non--Executive Director. As our largest shareholder Derek will not be considered to be 'independent' but the Board will continue to benefit from his experience in energy management and the broader energy markets.

In January 2021, Gary Worby joined the Board as an Independent Non--Executive and member of the Remuneration Committee. Gary brings considerable strategic experience having spent many years in the energy and carbon sector. Gary will support the Board in building eEnergy into a market-leading integrated energy management and energy savings platform, as well as strengthening the Group's focus on corporate governance. Gary's career has included a number of executive leadership roles and has specific experience in implementing successful organic growth strategies and European expansion, M&A and trade sales. He was Managing Director of EnergyQuote JHA, one of the largest pan--European energy consultants with a world-class client base, which Accenture acquired in 2014.

In June 2021, Crispin Goldsmith was appointed to the Group's senior leadership team as Chief Strategy & Commercial Officer, primarily responsible for the Group's M&A strategy. Crispin has over 20 years of experience in corporate finance and M&A. His previous roles include Director of Strategy and Corporate Development at Dixons Carphone, Investment Director at Duke Street, a leading UK private equity firm and Director at Royal Bank Equity Finance, the manager of the GBP1.1 billion RBS Special Opportunities Fund.

Finally, Delvin Lane, the CEO of UtilityTeam, joins the Group's senior leadership team as MD for the EMaaS division. Delvin has over 25 years' experience in the energy sector having worked for several the UK's largest utilities. Among other roles, Delvin has previously been Head of Energy Services for EDF, supporting customers in delivering cash and carbon savings, and CEO of Anesco, an energy efficiency solutions company. Delvin joined UtilityTeam as a Non--Executive Director in 2017, before being appointed as the company's CEO in 2019.

We have welcomed 96 new team members since listing on AIM in January 2020, both organically and through our M&A transactions, who, along with the rest of our team have made the transition to working flexibly through the pandemic with fortitude.

COVID-19

The resilience of the Group's business model has been able to ensure a robust performance for the year despite the impact of COVID-19 with new contract wins. While we have seen some delays in new contracts, impacting on project timeframes, the Board is encouraged with the current and future order book.

The underlying foundations and structural drivers within our market remain very robust and the breadth of applications for our services to new clients as well as our ability to cross and up sell additional services to our existing client base, continues to grow.

Outlook

The strong fundamentals of the market and associated regulatory drivers provide a significant opportunity for organic growth, complemented by acquired growth from our "buy and build" strategy in the medium term.

eEnergy will continue to execute against its M&A strategy and to assess strategic and accretive acquisition opportunities that will enable it to accelerate the rate of growth across the business.

The eEnergy leadership team is confident in the future prospects of the business, underpinned by the strong pipeline of opportunities seen by the Group, including the appetite from its customers for other products and services delivered by the Group.

I would like to take this opportunity to thank our employees for their hard work in the year, our customers for their loyalty and our shareholders for their continued support.

David Nicholl

Chairman

6 October 2021

CEO's Report

Introduction

Our business model combines organic growth and carefully targeted acquisitions and investments. The Group became the leading provider of Energy Efficiency--as--a--Service ('EEaaS') solutions to the school sector with the acquisition of RSL in July 2020. We created the Energy Management-as--a-Service ('EMaaS') division with the acquisition of Beond in December 2020 and our largest acquisition to date came after the year end, in September, when we acquired UtilityTeam, another Top 20 energy consulting and procurement business whose services aim to reduce costs for clients whilst supporting their transition to Net Zero. Together UtilityTeam and Beond make eEnergy a Top 5 energy management business in the UK.

In April 2021, we made an initial investment into a leading provider of intelligent metering and smart analytics which is now known as MY ZeERO. The MY ZeERO platform is one of only a handful that gathers circuit level data 'behind the meter' which enables us to provide our clients with granular visibility of their energy consumption and wastage which in turn underpins both our EMaaS and EEaaS businesses

As a result, we now have the necessary expertise to help businesses to procure Zero Carbon energy, measure their usage and wastage and then deliver the energy reduction measures to enable customers to realise their net zero strategies. On a proforma basis 55% of our annualised revenue comes our Energy Efficiency division and 45% from our Energy Management division.

Results

Our results for the year to 30 June 2021 reflect strong organic growth as well as increasing contributions from our acquisitions. Despite the continuing challenges of the COVID-19 pandemic, revenues increased to GBP13.6 million (2020: GBP4.5 million), including organic revenue growth of 75% in our core eLight business, which generated revenues of GBP7.9 million (2020: GBP4.5 million). I am particularly pleased to report our maiden profit with adjusted EBITDA of GBP0.8 million compared to a loss of GBP1.5 million in FY20 and a profit before tax and exceptional items of GBP0.1 million (2020: loss GBP1.9 million).

Divisions

EEaaS Division

Our decision in 2019 to focus on the opportunity in the education market has stood us in good stead in FY21. We estimate that UK education alone represents a GBP1.5 billion market opportunity given the low level of LED adoption in schools. In FY21 some 85%, of our revenue came from schools and our leading position in Lighting--as--a-Service in Multi Academy Trusts and State Schools was strengthened by the acquisition and integration of RSL. Demand from the education sector has proved to be resilient in the face of the challenges created by the COVID-19 pandemic. However, in the last quarter of FY21, the Group started to see renewed appetite from the commercial sector and secured its largest retail contract to date with a leading UK health food chain.

The strategic partnership with Venture Lighting, which provides the Group with eLight branded technology, signed in November 2020, has supported pricing to the Group's clients as well as contributed to improved gross margin.

Post year end, in August 2021, we were pleased to announce the Group's first contract win to provide solar power together with LED lighting in a single contract. The initial, single site, contract covers a solar power system, together with LED lighting, with a contract value of approximately GBP0.4 million. Over the 20-year lifetime of the system, we anticipate a total customer cost saving, at today's prices, of almost GBP1.4 million and a reduction of CO2 emissions of approximately 576 tonnes.

EMaaS Division

The Group's EMaaS Division was initially created with the acquisition of Beond, a leading renewable energy consulting and procurement business, in December 2020. Through Beond we offer Zero Carbon procurement using our proprietary reverse auction platform, ESG reporting and risk management and bureau services. EMaaS is a repeatable revenue model with client retention rates of over 90%.

Beond has traded ahead of the Board's initial expectation at the time of acquisition. It currently has more than 30,000 meters under management, an increase of 9% since acquisition and 82% of all electricity meters transacted since 1 January 2021 now have energy from a renewable source. Integration continues to be on plan, with sales, marketing and finance teams integrated and a common data platform delivered.

The acquisition of UtilityTeam in September 2021 brings significant additional scale to the EMaaS division and increases the Group's strong cross sell opportunity through UtilityTeam's long- term, strategic relationships with its mid-market customer base. The Chief Executive Officer of UtilityTeam, Delvin Lane, will lead the enlarged EMaaS Division and an integration team will work closely with the EMaaS team. Integration will focus on initiatives to accelerate growth, including cross selling and the creation of specific sales channels for Beond and UtilityTeam respectively, as well as consolidating operational activities, using the eEnergy reverse auction platform across procurement activities and ensuring a single technology platform for all EMaaS client data. The acquisition of UtilityTeam is expected to be immediately enhance earnings.

Intelligent Smart Metering and Analytics - MY ZeERO

In April 2021, the Group established a presence in smart metering and intelligent data analytics, by making an initial investment into a newly incorporated company, eEnergy Insights Limited ('EIL'). EIL acquired the trade and assets (including all IP) from the administrators of Measure My Energy, a UK based developer of intelligent energy metering and analytical solutions. In June, the Group confirmed plans to make a further investment in EIL and acquire 51%, in addition to pre agreed steps with the potential to increase the Group's equity stake to 100% over time.

Embedding the monitoring and analytics of the MY ZeERO platform into our businesses will be a key driver of our near-term growth and differentiate our offerings from the market. Using our energy efficiency solutions the Group will be able to offer measured savings contracts to its clients using the certified International Performance Measurement and Verification Protocol ('IPMVP') methodology to evidence the savings delivered by efficiency measures. In Energy Management the combination of monitoring and analytics with our energy procurement will enable clients to access their energy data through a simple subscription model and will transform Energy Management into 'as--a--Service'.

Synergy

The Group's growth trajectory and the successful acquisitions made to date - including UtilityTeam - have created attractive synergy and cross- selling opportunities. Our MY ZeERO platform enables us to offer data and analysis as a subscription-based EMaaS, therefore increasing the 'stickiness' of our client relationships.

EMaaS provides a customer acquisition platform for zero capital energy reduction solutions and within the Division, the Group now has over 1,800 existing customers with 38,000 meters under management and manages over 5.3 TW/h of energy.

For example, we are already in advanced discussions with a number of Beond's clients to provide them with the Group's eLight LaaS solution. In June, we delivered our first combined LaaS and smart metering and analytics project for a leading recycling business.

Going forward, as the Group starts to deliver measured savings contracts, it expects to see an increased share of our revenues come from contracted monthly recurring revenues which, in turn, will improve visibility of future revenues and lead to higher quality earnings.

Outlook

Whilst early in the current financial year, the Board expects revenue and profit before and after tax and before exceptional items for FY22 to be materially ahead of FY21, and trading in the year to date remains in-line with current market expectations. The Group continues to assess strategic and accretive acquisition opportunities that will enable it to accelerate the rate of growth across the business.

Harvey Sinclair

Chief Executive Officer

6 October 2021

CFO's Report

FY21 has been a transformational year as we have grown both organically and through acquisition to a point where we can report our maiden profits before exceptional items. eEnergy was created to deliver on a Buy & Build strategy and to turn a leading provider of Light-as-a-Service ('LaaS') into an integrated Energy Services company that enables its clients to meet their Net Zero objectives. I'm proud of the way that we were able not only to weather the COVID-19 pandemic, but also to deliver our underlying growth and strengthen the business.

Group Key performance indicators

-- Full year revenue of GBP13.6 million, 200% growth on FY20 revenue of GBP4.5 million, despite impacts of the COVID pandemic, including unexpected lockdowns

-- Organic revenue growth of 75% in the core eLight business, generating revenues of GBP7.9 million

   --    Adjusted EBITDA(1)  of GBP0.8 million (FY20 - Loss of GBP1.5 million) 
   --    All core business units profitable on EBITDA basis for FY21 
   --    Profit before tax and exceptional items(1)  of GBP0.1 million (2020 - loss GBP1.9 million) 
   --    Cash balance at 30 June 2021 of GBP3.3 million (30 June 2020 - GBP1.5 million) 

-- Net cash (including GBP0.7 million of IFRS 16 lease liabilities) at 30 June 2021 was GBP0.8 million (30 June 2020 - net debt of GBP0.5 million, including GBP0.6 million of lease liabilities).

(1) Adjusted EBITDA is EBITDA before exceptional items. Exceptional items are primarily transaction related expenses and the cost of share-based payments

Financial position and liquidity

The Board and I pay close attention to our financial position.

In September 2020 we increased our debt facility by GBP0.2 million to cover the costs of acquiring RSL (although the consideration was all in shares). In December 2020 we completed a Placing and raised GBP3.0 million of net proceeds to fund the cash component for the acquisition of Beond and provide additional working capital for the Group.

The combination of our organic growth plus the targeted acquisitions made in the year has propelled us beyond our breakeven point and with operating EBITDA in each core business we are now cash generative across the Group.

The acquisition of UtilityTeam in September 2021, which is highly cash generative, further improves our liquidity and working capital position.

Year-end debt of GBP2.5 million is made up of GBP1.8 million of borrowings and IFRS 16 lease liabilities of GBP0.7 million. GBP0.9 million of the total debt is due to be repaid within one year. Our year end cash balance was GBP3.2 million.

In September 2021 we completed a Placing and raised GBP11.4 million of net proceeds to fund the cash consideration for UtilityTeam, which is also cash generative in its own right.

We have modelled a number of potential scenarios that management believe are reasonably possible, including to reflect the ongoing impact of COVID-19, on our financial performance and cash generation. Having considered all of the potential scenarios individually and when combined the Board is confident that the Group has sufficient financial resources and headroom within its debt covenants for the foreseeable future should the worst of these scenarios be realised.

Energy Efficiency division

-- Total Contract Value (TCV) secured in FY21 was up 73% to GBP12.1 million (FY19: GBP7.0 million)

-- Order Book of GBP1.5 million at 30 June 2021 was down 32% (FY20: GBP2.2 million) although FY20 included c GBP1 million of projects delayed into the summer holidays due to COVID-19

-- Full year revenue of GBP11.4 million (FY20 - GBP4.5 million), representing growth of over 150% and organic growth of 75%

   --    Gross margin after commissions increased 350 bps to 34.4% in FY21 from 30.9% in FY20 
   --    211 projects installed in FY21, 69% up on 125 installed in FY20 

-- Average value of each installed project was GBP52,232 in FY21, 52% higher than the average value of GBP34,320 in FY20

The Group's EEaaS division is anchored in the core eLight business, which was strengthened by the acquisition of RSL on 1 July 2020. The primary focus during FY21 in both the UK and Ireland has been on the education sector, which has accounted for approximately 85% of revenue in FY21. The focus on education has stood the business in good stead in the face of the challenges of COVID-19. The delay of approximately GBP1.5 million of projects from the first half of calendar 2020 into the school summer holidays, meant we enjoyed a very strong start to the year. In the fourth quarter, the Group started to see the benefits of renewed appetite from the commercial sector and secured its largest retail contract with a leading UK health food chain.

Further, the Group secured its first integrated contract for a leading recycling business, to provide its LaaS offering with the Group's new MY ZeERO smart metering and intelligent data analytics solution.

The strategic partnership signed in November 2020 with Venture Lighting, which provides the Group with eLight branded technology, has supported pricing to the Group's clients as well as contributed to improved gross margin.

eLight UK (including RSL)

UK revenue grew 380% from GBP2.2 million to GBP8.5 million, of which 40% was earned by RSL and 60% in the core eLight UK business. This represents organic growth of 125%.

Gross margin after commissions improved 500bps to 33.3% (FY20: 28.3%). In part this modest improvement reflects the transition of RSL into the eLight operating model and being able to deploy our Venture Lighting technology as the year progressed. Our operating costs increased by GBP1.0 million as we increased resources in delivery to accommodate the 121 projects completed in the year (FY20: 40 projects) as well as continued to invest in sales and marketing channels.

RSL had a successful year and in FY21 generated more than double the revenue it had earned in the fifteen-month period prior to being acquired. This meant that RSL made a strong contribution to EBITDA but in the challenging market conditions did not achieve the profit target to earn the contingent consideration agreed at the time of the acquisition. Therefore, the provision we recorded for that contingent consideration of GBP1.4 million has been released into the income statement as an exceptional item.

eLight Ireland (including eLight Northern Ireland)

Revenue grew 26% to GBP2.9 million (FY20: 2.3 million) with our successful entry into Northern Ireland an important factor in driving that growth. Our typical project in Northern Ireland is more than double the value of one in Ireland and the 90 projects we completed in FY21 was only 6% up on FY20. The transition from our old funding arrangements to the EUR15 million facility committed by SUSI Partners in August 2020 also increased the proportion of the value of each contract that we retained.

During the extended lockdown in Ireland, we availed ourselves of the Irish Government support for our staff, to partially mitigate the impact on revenue and as a result we reduced our net operating costs by GBP0.3 million, a 28% reduction on FY20.

Energy Management division

The Group's Energy Management business, Beond, was acquired on 15 December 2020.

-- Revenue of GBP2.2 million (since the acquisition), ahead of the Board's expectation at the time of acquisition

   --    Over 30,000 meters under management, an increase of 9% since acquisition 

-- 82% of all electricity meters transacted since 1(st) January have been from a renewable source

Beond has performed ahead of our expectation at the time of acquisition with stronger revenue growth and tight cost control. In a market with rising wholesale prices we believe that Beond's customers value the risk management knowledge and advice that Beond provides to them. As we have focused Beond on our strategy, we have been able to sell all of the surplus crypto currency assets that Beond had acquired to support its Zero Carbon marketplace initiative. This gain on disposal of GBP0.3 million has been recorded as other operating income, within net operating expenses.

Under IFRS where an energy management contract includes energy procurement a proportion of the total contract revenue is recognised at the point the contract is signed. Energy management services such as risk management strategies, bill validation, reporting and compliance may be provided under the same contract and revenue for these services are recognised as earned over the term of the contract. On average Beond recognises 25% of revenue on contract signing with the balance spread over the term of the contract and for UtilityTeam the average is 20%.

Head office costs

Since listing in January 2020, we have transformed the breadth of the Group's activities and have expanded beyond LaaS into broader Energy efficiency offerings, entered the Energy Management market and invested in intelligent smart metering and analytics. With the acquisition of Beond in December 2020 we strengthened the Board and also the senior management team as well as developed marketing campaigns to drive energy efficiency opportunities in the energy management client base. As a result our head office operating costs have increased 50% to GBP1.3 million (FY20: GBP0.9 million).

During the year we implemented the Management Incentive Plan ('MIP') which is a long term incentive plan linked to delivering total shareholder returns. In accordance with IFRS 2 we are expensing the fair value of the awards made over their vesting period and have accordingly charged GBP0.5 million in the current year which we have classified as an exceptional item.

Acquisitions and investments

As we deliver our Buy & Build strategy, we have made three investments during FY21 and our largest acquisition to date in September 2021.

RSL

On 1 July 2020 we completed the acquisition of Renewable Solutions Lighting Limited. The initial consideration was paid entirely in eEnergy shares and eEnergy loaned RSL the funds to make a scheduled repayment of a director's loan note. The fair value of the initial consideration was GBP0.8 million.

RSL was a loss-making business when we acquired it but came with a healthy order book and a strong pipeline to complement our education focused business in the UK. The contingent consideration target was based upon FY21 adjusted EBITDA but despite more than doubling revenue RSL did not achieve the minimum target. We have therefore released the provision made of GBP1.4 million to the profit and loss account and treated it as an exceptional item.

Beond

On 15 December 2020 we acquired all of the share capital of Beond Group Limited, a Top 20 energy management business. We used a combination of eEnergy shares and cash raised through a Placing and consideration was GBP9.1 million. The Placing, which raised GBP3.2 million gross, was completed at 10p per share.

MY ZeERO

In April 2021 the Group entered into various agreements to acquire an initial 33.3% interest in eEnergy Insights Ltd ('EIL', trading as MY ZeERO) which was increased to 37.5% interest in June 2021. MY ZeERO is a newly formed specialist smart metering measurement equipment and analytics platform. As part of the agreement entered into in June the Group received nil cost warrants to raise its interest to 51% of the equity, subject to certain operational targets being achieved. In addition, agreement was reached on a mechanism to acquire the remaining 49% of the equity under a pre agreed valuation method after three years.

MY ZeERO acquired certain trade assets out of the administration process of Measure My Energy Limited ('MME') and all associated intellectual property assets in April 2021.

We equity account for our investment in MY ZeERO as we consider it to be an Associate. When we are able to exercise control of the Company following the exercise of our warrants, which is expected to be during the latter part of 2021, we will account for the Company as a subsidiary.

UtilityTeam

On 17 September 2021 we completed the acquisition of UtilityTeam, another Top 20 energy management business. We used a combination of eEnergy shares and cash raised through a Placing and initial consideration was GBP14.5 million. The Placing, which raised GBP12.0 million gross was completed at 15p per share. Contingent consideration of up to GBP5.1 million is payable if UtilityTeam delivers a minimum level of adjusted EBITDA for the calendar year 2021. The Contingent consideration is payable in eEnergy shares and up to GBP1.5 million of cash.

Acquisition related costs

In delivering the 'Buy & Build' strategy we have incurred professional fees in conducting commercial, financial and legal diligence. We have expensed GBP1.1 million of such professional fees as well as GBP0.1 million of incremental integration costs, which we have treated as exceptional items in the profit and loss account.

Borrowings

Group borrowings comprise a term loan in the eLight Group and CBILS / bounce back term loans in Beond and RSL. Total borrowings are GBP1.8 million, and we have a further GBP0.7 million of IFRS-16 lease liabilities. GBP0.9 million of our total indebtedness is due for repayment within one year. In addition, UtilityTeam had, at acquisition, a CBILS loan of GBP1.5 million and GBP0.3 million of IFRS 16 lease liabilities within the net cash balance at acquisition of GBP1.0 million.

Working capital

Our divisions operate with a very different working capital tempo. In Energy Efficiency we work with our panel of funding partners who typically purchase or take assignment of the future receivables for a completed project. The funding partner takes the collection risk and we are paid out in full, typically within 5 days of acceptance of the project by the client.

In Energy Management our contracts are either client pays, typically in equal instalments over the term of the contract, or supplier pays, where we receive a commission based upon the actual consumption of energy of the terms of the supply contract from the energy supplier. A proportion of the expected total commission is typically received when the contract is signed or when the energy supply to the client starts. Beond, on average, recognises 25% of the total contract value on contract signing and typically receives a similar percentage from the energy supplier, with the balance received over the remaining term of the contract. UtilityTeam, on average, recognises 20% of the total contract value on signing and typically receives between 30--40% of the contract value in cash in advance from the energy supplier. Differences between the revenue recognition and the underlying invoicing and cash collection are recorded as accrued income or deferred revenue in the balance sheet.

The changing profile of working capital and cash collection and payment accounts for the GBP3.2 million increase in trade and other receivables to GBP4.3 million and the GBP3.8 million increase in trade and other payables to GBP7.8 million.

Inventories have remained flat year on year at GBP0.4 million, reflecting the effectiveness of our supply chain management in the face of significantly higher volumes of purchases.

The Energy credits in Ireland, which are accounted for as financial assets at fair value through profit or loss have reduced from GBP0.4 million to GBP0.1 million as the new contract we signed with an energy supplier has accelerated the rate at which the value of the energy credits are realised.

Project Funding

Our business model depends upon working with a range of project funding partners to finance our client projects and we actively work to identify the best partners to work with. There is no doubt that the COVID-19 pandemic made project funders more cautious and selective and we have built that caution into our own credit assessment processes. In Ireland we have completed the migration from our principal historical relationship to the committed EUR15 million facility with SUSI Partners, announced in August 2020, which increases our share of each contract we install and provides us with access to 7 or even 10-year contracts. In the UK we continue to enjoy strong relationships with our primary funding partners and have created new relationships to broaden the range of our offering.

Summary

FY21 has been a transformational year for us in which the Group demonstrated strong organic growth, entered the energy management market and delivered its maiden profit in line with market expectations, despite the challenges of the global pandemic. With the UtilityTeam acquisition completed I am confident that we will deliver on our strategy.

Ric Williams

Chief Financial Officer

6 October 2021

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year to 30 June 2021

 
                                                             Year to     Year to 
                                                             30 June     30 June 
                                                    Note        2021        2020 
                                                             GBP'000     GBP'000 
  Continuing operations 
     Revenue from contracts with customers                    13,596       4,501 
     Cost of sales                                           (8,059)     (3,109) 
-----------------------------------------------  -------  ----------  ---------- 
 Gross profit                                                  5,537       1,392 
     Operating expenses                                      (4,955)     (4,237) 
 Included within operating expenses are: 
 
       *    Exceptional items                                    248       1,320 
 Adjusted operating expenses                                 (4,707)     (2,917) 
                                                          ---------- 
  Adjusted earnings before interest, taxation, 
   depreciation and amortisation                                 830     (1,525) 
-----------------------------------------------  -------  ----------  ---------- 
  Earnings before interest, taxation, 
   depreciation and amortisation                                 582     (2,845) 
     Depreciation and amortisation                             (333)        (72) 
     Finance costs - net                                       (426)       (277) 
  Loss before tax                                              (177)     (3,194) 
-----------------------------------------------  -------  ----------  ---------- 
     Income tax                                                  205           - 
-----------------------------------------------  -------  ----------  ---------- 
  Profit (loss) for the year from continuing 
   operations attributable to the owners 
   of the company                                                 28     (3,194) 
===============================================  =======  ==========  ========== 
  Other comprehensive income - items that 
   may be reclassified subsequently to 
   profit and loss 
     Change in the fair value of other current 
      assets                                                      34           - 
     Translation of foreign operations                           102        (82) 
-----------------------------------------------  -------  ----------  ---------- 
  Total other comprehensive profit (loss)                        136        (82) 
-----------------------------------------------  -------  ----------  ---------- 
  Total comprehensive profit (loss) for 
   the year attributable to the owners 
   of the company                                                164     (3,276) 
===============================================  =======  ==========  ========== 
 
  Basic and diluted earnings (loss) per 
   share from continuing operations (pence)         3          0.01p     (2.96)p 
-----------------------------------------------  -------  ----------  ---------- 
 

The accompanying notes form part of these financial statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

 
                                                         As at       As at 
                                                       30 June     30 June 
                                                          2021        2020 
                                               Note    GBP'000     GBP'000 
 NON-CURRENT ASSETS 
   Property, plant and equipment                            80         130 
   Intangible assets                                    11,693         211 
   Right of use assets                                     610         538 
   Deferred tax asset                                      415           - 
   Investment in associate                                 155           - 
  Total non-current assets                              12,953         879 
------------------------------------------  -------  ---------  ---------- 
   Inventories                                             371         356 
   Trade and other receivables                           4,276       1,073 
   Other current assets                                     47           - 
   Financial assets at fair value through 
    profit or loss                                         140         414 
   Cash and cash equivalents                             3,332       1,478 
------------------------------------------  -------  ---------  ---------- 
  Total current assets                                   8,166       3,321 
------------------------------------------  -------  ---------  ---------- 
 TOTAL ASSETS                                           21,119       4,200 
------------------------------------------  -------  ---------  ---------- 
 NON-CURRENT LIABILITIES 
   Lease liability                                         434         506 
   Borrowings                                  4         1,245       1,120 
   Deferred tax liability                                  415           - 
   Other non-current liabilities                           468           - 
 Total non-current liabilities                           2,562       1,626 
 CURRENT LIABILITIES 
   Trade and other payables                              7,819       3,955 
   Lease liability                                         264          76 
   Borrowings                                  4           601         304 
 Total current liabilities                               8,684       4,335 
------------------------------------------  -------  ---------  ---------- 
 TOTAL LIABILITIES                                      11,246       5,961 
------------------------------------------  -------  ---------  ---------- 
 NET ASSETS (LIABILITIES)                                9,873     (1,761) 
==========================================  =======  =========  ========== 
 Equity attributable to owners of the 
  parent 
   Issued share capital                                 16,071      15,725 
   Share premium                                        33,014      22,375 
   Other reserves                                          601          82 
   Reverse acquisition reserve                        (35,246)    (35,246) 
   Foreign currency translation reserve                   (13)       (115) 
   Accumulated losses                                  (4,554)     (4,582) 
------------------------------------------  -------  ---------  ---------- 
 Total equity                                            9,873     (1,761) 
==========================================  =======  =========  ========== 
 

The accompanying notes form part of these financial statements.

COMPANY STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

 
                                                      As at       As at 
                                                    30 June     30 June 
                                                       2021        2020 
                                           Note     GBP'000     GBP'000 
 NON-CURRENT ASSETS 
   Intangible assets                                     18           - 
   Investment in associate                              155           - 
   Investment in subsidiary                          17,947       6,574 
------------------------------------------------  ---------  ---------- 
  Total non-current assets                           18,120       6,574 
------------------------------------------------  ---------  ---------- 
   Loan to subsidiaries                                 579         480 
   Trade and other receivables                          153          26 
   Cash and cash equivalents                          1,187         909 
------------------------------------------------  ---------  ---------- 
  Total current assets                                1,919       1,415 
------------------------------------------------  ---------  ---------- 
 TOTAL ASSETS                                        20,039       7,989 
------------------------------------------------  ---------  ---------- 
 CURRENT LIABILITIES 
   Trade and other payables                           1,003         368 
   Loans from subsidiaries                            1,452           - 
 Total current liabilities                            2,455         368 
------------------------------------------------  ---------  ---------- 
 TOTAL LIABILITIES                                    2,455         368 
------------------------------------------------  ---------  ---------- 
 
 NET ASSETS                                          17,584       7,621 
================================================  =========  ========== 
 
 Equity attributable to owners of the 
  parent 
  Issued share capital                               16,071      15,725 
  Share premium                                      33,014      22,375 
  Other reserves                                        567          82 
  Accumulated losses                               (32,068)    (30,561) 
------------------------------------------------  ---------  ---------- 
 Total equity                                        17,584       7,621 
================================================  =========  ========== 
 

STATEMENTS OF CASHFLOWS

For the year ended 30 June 2021

 
                                                          Group                   Company 
                                                  ---------------------  ------------------------ 
                                                       Year 
                                                         to     Year to     Year to       Year to 
                                                    30 June     30 June     30 June       30 June 
                                                       2021        2020        2021          2020 
                                            Note    GBP'000     GBP'000     GBP'000       GBP'000 
 Cash flow from operating activities 
  Operating profit (loss) - continuing 
   operations                                            28     (3,194)     (1,507)         (635) 
 Adjustments for: 
   Depreciation and amortisation                        332          72           -             - 
   Finance cost (net)                                   311         277         (3)             3 
   Shares and warrants issued to 
    settle expenses                                     301         108         301           108 
   Share based payments                                 485           -         485 
   Gain on disposal of subsidiary 
    - Metaleach                                           -           -           -         (150) 
   Share of loss in associate                            34           -          34             - 
   Finance charge on lease liabilities                   65          53           - 
   Foreign exchange movement                             34        (14)           -             - 
   Gain on derecognition of contingent 
    consideration                                   (1,444)           -     (1,444)             - 
   Reverse acquisition share-based 
    payment expense                                       -       1,052           -             - 
                                                  ---------  ----------  ----------  ------------ 
  Operating cashflow before working 
   capital movements                                    147     (1,646)     (2,134)         (674) 
   (Increase) decrease in trade 
    and other receivables                           (2,406)       (998)       (127)            98 
   Increase (decrease) in trade 
    and other payables                                2,760       1,236         504           148 
   Increase in inventories                             (23)       (187)           -             - 
   Increase in deferred income                        (264)           -           -             - 
  Net cash inflow (outflow) from 
   operating activities                                 214     (1,595)     (1,757)         (428) 
------------------------------------------------  ---------  ----------  ----------  ------------ 
 Cash flow from investing activities 
   Amounts received from (paid 
    to) group undertakings                                -           -       1,299         (578) 
   Acquisition of subsidiaries                      (2,395)           -     (2,395) 
   Cash acquired on acquisition 
    of subsidiaries                                    1218         105           -             - 
   Cash from exercise of options 
    in acquired business                                521           -           -             - 
   Proceeds from disposal of subsidiary                   -         150           -           150 
   Expenditure on intangible assets                   (217)           -        (18) 
   Purchase of property, plant 
    and equipment                                     (134)        (82)           -             - 
------------------------------------------------  --------- 
  Net cash inflow (outflow) from 
   investing activities                             (1,007)         173     (1,114)         (428) 
------------------------------------------------  ---------  ----------  ----------  ------------ 
 Cash flows from financing activities 
   Interest (paid) received                           (319)       (225)           -           - 
   Repayment of lease liabilities                     (163)        (40)           -           - 
   Proceeds from the issue of share 
    capital, net of issue costs                       3,149       1,664       3,149       1,664 
  Proceeds from loans and borrowings                    294       1,342           -           - 
  Repayment of borrowings                             (314)           -           -           - 
----------------------------------------  ------  ---------  ----------  ----------  ---------- 
  Net cash inflow from financing 
   activities                                         2,647       2,741       3,149       1,664 
------------------------------------------------  ---------  ----------  ----------  ---------- 
  Net increase (decrease) in cash 
   & cash equivalents                                 1,854       1,319         278         808 
  Effect of exchange rates on 
   cash                                                   -          14           -           - 
  Cash & cash equivalents at the 
   start of the period                                1,478         145         909         101 
  Cash & cash equivalents at the 
   end of the year                                    3,332       1,478       1,187         909 
================================================  =========  ==========  ==========  ========== 
 
 

The non cash consideration issued to acquire subsidiaries during the year was GBP9.0 million and is disclosed for each acquisition in Note 5.

Refer Note 4 for net debt reconciliation.

The accompanying notes form part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2021

 
                                                      Reverse                 Foreign 
                                  Share      Share      Acqn.       Other    Currency    Accum:     Total 
                                Capital    Premium    Reserve    Reserves     Reserve    Losses    Equity 
                                GBP'000    GBP'000    GBP'000     GBP'000     GBP'000   GBP'000   GBP'000 
 
 Balance at 30 June 
  2019                               18          -          -           -        (33)   (1,388)   (1,403) 
 Other comprehensive 
  loss                                -          -          -           -        (82)         -      (82) 
 Loss for the year                    -          -          -           -           -   (3,194)   (3,194) 
----------------------------  ---------  ---------  ---------  ----------  ----------  --------  -------- 
 Total comprehensive 
  loss for the year 
  attributable to 
  equity holders 
  of the parent                       -          -          -           -        (82)   (3,194)   (3,276) 
----------------------------  ---------  ---------  ---------  ----------  ----------  --------  -------- 
 Shares issued during 
  the year                           51          -          -           -           -         -        51 
 Transfer to reverse 
  acquisition reserve              (69)          -         69           -           -         -         - 
 Recognition of 
  plc equity at acquisition 
  date                           15,376     14,468   (28,741)           -           -         -     1,103 
 Issue of shares 
  for acquisition 
  of subsidiary                     263      6,311    (6,574)           -           -         -         - 
 Issue of shares 
  for cash                           80      1,920          -           -           -         -     2,000 
 Issue of shares 
  in settlement of 
  fees                                6        144          -           -           -         -       150 
 Issue of warrants                    -          -          -          82           -         -        82 
 Cost of share issue                  -      (468)          -           -           -         -     (468) 
----------------------------  ---------  ---------  ---------  ----------  ----------  --------  -------- 
 Total transactions 
  with owners                    15,707     22,375   (35,246)          82           -         -     2,918 
----------------------------  ---------  ---------  ---------  ----------  ----------  --------  -------- 
 Balance at 30 June 
  2020                           15,725     22,375   (35,246)          82       (115)   (4,582)   (1,761) 
----------------------------  ---------  ---------  ---------  ----------  ----------  --------  -------- 
 Other comprehensive 
  loss                                -          -          -           -         102         -       102 
 Change in fair 
  value of other 
  current assets                      -          -          -          34           -         -        34 
 Profit for the 
  year                                -          -          -           -           -        28        28 
----------------------------  ---------  ---------  ---------  ----------  ----------  --------  -------- 
 Total comprehensive 
  profit for the 
  year attributable 
  to equity holders 
  of the parent                       -          -          -          34         102        28       164 
----------------------------  ---------  ---------  ---------  ----------  ----------  --------  -------- 
 Issue of shares 
  for cash                           96      3,104          -           -           -         -     3,200 
 Issue of shares 
  for acquisition 
  of subsidiary                     235      7,299          -           -           -         -     7,534 
 Issue of shares 
  in settlement of 
  fees                                9        293          -           -           -         -       302 
 Share based payment                  -          -          -         485           -         -       485 
 Exercise of warrants                 6        159          -           -           -         -       165 
 Cost of share issue                  -      (216)          -           -           -         -     (216) 
----------------------------  ---------  ---------  ---------  ----------  ----------  --------  -------- 
 Total transactions 
  with owners                       346     10,639          -         485           -         -    11,470 
----------------------------  ---------  ---------  ---------  ----------  ----------  --------  -------- 
 Balance at 30 June 
  2021                           16,071     33,014   (35,246)         601        (13)   (4,554)     9,873 
============================  =========  =========  =========  ==========  ==========  ========  ======== 
 

The accompanying notes form part of these financial statements.

COMPANY STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2021

 
                                  Share      Share       Other     Accum.     Total 
                                Capital    Premium    Reserves     Losses    Equity 
                                GBP'000    GBP'000     GBP'000    GBP'000   GBP'000 
 
 At 31 December 2019             15,376     14,468           -   (29,926)      (82) 
 
 Loss for the period                  -          -           -      (635)     (635) 
----------------------------  ---------  ---------  ----------  ---------  -------- 
 Total comprehensive 
  loss for the period 
  attributable to equity 
  holders of the parent               -          -           -      (635)     (635) 
----------------------------  ---------  ---------  ----------  ---------  -------- 
 Issue of shares for 
  acquisition of subsidiary         263      6,311           -          -     6,574 
 Issue of shares for 
  cash                               80      1,920           -          -     2,000 
 Issue of shares in 
  lieu of cash                        6        144           -          -       150 
 Issue of warrants 
  in lieu of cash                     -          -          82          -        82 
 Cost of share issue                  -      (468)                      -     (468) 
----------------------------  ---------  ---------  ----------  ---------  -------- 
 Total transaction 
  with owners                       349      7,907          82          -     8,338 
----------------------------  ---------  ---------  ----------  ---------  -------- 
 Balance at 30 June 
  2020                           15,725     22,375          82   (30,561)     7,621 
----------------------------  ---------  ---------  ----------  ---------  -------- 
 Loss for the year                    -          -           -    (1,507)   (1,507) 
----------------------------  ---------  ---------  ----------  ---------  -------- 
 Total comprehensive 
  loss for the year 
  attributable to equity 
  holders of the parent               -          -           -    (1,507)   (1,507) 
----------------------------  ---------  ---------  ----------  ---------  -------- 
 Issue of shares for 
  cash                               96      3,104           -          -     3,200 
 Issue of shares for 
  acquisition of subsidiary         235      7,299           -          -     7,534 
 Issue of shares in 
  settlement of fees                  9        293           -          -       302 
 Share based payment                  -          -         485          -       485 
 Exercise of warrants                 6        159           -          -       165 
 Cost of share issue                  -      (216)           -          -     (216) 
----------------------------  ---------  ---------  ----------  ---------  -------- 
 Total transaction 
  with owners                       346     10,639         485          -    11,470 
----------------------------  ---------  ---------  ----------  ---------  -------- 
 Balance at 30 June 
  2020                           16,071     33,014         567   (32,068)    17,584 
============================  =========  =========  ==========  =========  ======== 
 

The accompanying notes form part of these financial statements.

NOTES TO THE FINANCIAL INFORMATION

For the year ended 30 June 2021

1. ACCOUNTING POLICIES

IAS 8 requires that management shall use its judgement in developing and applying accounting policies that result in information which is relevant to the economic decision-making needs of users, that are reliable, free from bias, prudent, complete and represent faithfully the financial position, financial performance and cash flows of the entity.

1.1 Basis of preparation

The financial statements have been prepared in accordance with international accounting standards ("IFRS") in conformity with the requirements of the Companies Act 2006.

The financial statements have been prepared under the historical cost convention as modified by financial assets at fair value through profit or loss and other comprehensive income, and the recognition of net assets acquired under the reverse acquisition at fair value.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts in the financial statements. The areas involving a higher degree of judgment or complexity, or areas where assumptions or estimates are significant to the financial statements, are disclosed in note 1.23.

The financial statements present the results for the Group and Parent Company for the year ended 30 June 2021. The comparative period is for the year ended 30 June 2020. The comparative period for the Parent Company financial statements comprise the six months ended 30 June 2020.

The principal accounting policies are set out below and have, unless otherwise stated, been applied consistently in the financial statements. The consolidated financial statements are prepared in Pounds Sterling, which is the Group's functional and presentation currency, and presented to the nearest GBP'000.

1.2 New standards, amendments and interpretations

The Group and parent Company have adopted all of the new and amended standards and interpretations issued by the International Accounting Standards Board that are relevant to its operations and effective for accounting periods commencing on or after 1 July 2020.

The following new IFRS standards and / or amendments to IFRS standards were adopted for the first time during the year, none of which had a material impact on the financial statements:

   --      Amendments to IFRS 3: Business Combinations (effective 1 January 2020) 
   --      Amendments to IAS 1 and IAS 8: Definition of Material (effective 1 January 2020) 

-- Amendments to IFRS 9, IAS 39 and IFRS 17: Interest Rate Benchmark Reform (effective 1 January 2020)

No standards or Interpretations that came into effect for the first time for the financial year beginning 1 July 2020 have had an impact on the Group or Company.

1.3 New standards and interpretations not yet adopted

At the date of approval of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases have not yet been adopted by the UK):

-- Amendments to IAS 1: Presentation of Financial Statements - Classification of Liabilities as Current or Non-current (effective date not yet confirmed)*

-- Amendments to IFRS 3: Business Combinations - Reference to Conceptual Framework (effective 1 January 2022)*

   --      Amendments to IAS 16: Property, Plant and Equipment (effective 1 January 2022)* 

-- Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1 January 2022)*

   --      Annual Improvements to IFRS Standards 2018-2020 Cycle (effective 1 January 2022)* 

-- Amendments to IAS 8: Accounting Policies, Changes to Accounting Estimates and Errors (effective date not yet confirmed)*

-- Amendments to IAS 12: Income Taxes - Deferred Tax arising from a Single Transaction (effective date not yet confirmed)*

*subject to UK endorsement

The effect of these new and amended Standards and Interpretations which are in issue but not yet mandatorily effective is not expected to be material.

1.4 Going concern

The financial information has been prepared on a going concern basis, which assumes that the Group and Company will continue in operational existence for the foreseeable future. In assessing whether the going concern assumption is appropriate, the Directors have taken into account all relevant information about the current and future position of the Group and Company, including the current level of resources and the ability to trade within the terms and covenants of its loan facility over the going concern period of at least 12 months from the date of approval of the financial statements. The eEnergy group meets its working capital requirements from its cash and cash equivalents and its loan facilities, which are secured by debentures over the trading subsidiaries and their assets.

The directors note that COVID-19 continues to have a significant negative impact on the global economy and global supply chain. Having prepared budgets and cash flow forecasts covering the going concern period which have been stress tested for the negative impact of possible scenarios, the Directors believe the Group has sufficient resources to meet its obligations for a period of at least 12 months from the date of approval of these financial statements. Discretionary expenditure will be curtailed, if necessary, in order to preserve cash for working capital purposes and ensure compliance with covenants.

Taking these matters into consideration, the Directors consider that the continued adoption of the going concern basis is appropriate having prepared cash flow forecasts for the relevant period. The financial statements do not reflect any adjustments that would be required if they were to be prepared other than on a going concern basis.

1.5 Basis of consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Note 3 provides information on the consolidation of eLight Group Holdings Limited and the application of the reverse acquisition accounting principles.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquire on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

Acquisition-related costs are expensed as incurred.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated.

1.6 Investment in associate

The Group's interest in eEnergy Insights Ltd ("EIL"). This investment was included in the financial statements and accounted for using the equity method. The Group's share of the gains or losses of EIL are included within the statement of comprehensive income, except for exchange gains and losses on translation.

EIL prepares financial statements in accordance with the Group's accounting policies.

1.7 Foreign currency translation

   (i)         Functional and presentation currency 

Items included in the individual financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in GBP Sterling, which is the Company's presentation and functional currency. The individual financial statements of each of the Company's wholly owned subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional currency). IAS 21 The Effects of Changes in Foreign Exchange Rates requires that assets and liabilities be translated using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions (i.e. the average rate for the period).

   (ii)        Transactions and balances 

Transactions denominated in a foreign currency are translated into the functional currency at the exchange rate at the date of the transaction. Assets and liabilities in foreign currencies are translated to the functional currency at rates of exchange ruling at the balance sheet date. Gains or losses arising from settlement of transactions and from translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement for the period.

   (iii)       Group companies 

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

- assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;

- income and expenses for each income statement are translated at the average exchange rate; and

   -     all resulting exchange differences are recognised as a separate component of equity. 

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders' equity. When a foreign operation is partially disposed or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

1.8 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. The chief operating decision maker, who are responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive Board of Directors.

1.9 Impairment of non-financial assets

Non-financial assets and intangible assets not subject to amortisation are tested annually for impairment at each reporting date and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment review is based on discounted future cash flows. If the expected discounted future cash flow from the use of the assets and their eventual disposal is less than the carrying amount of the assets, an impairment loss is recognised in profit or loss and not subsequently reversed.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows (cash generating units or 'CGUs').

1.10 Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, and demand deposits with banks and other financial institutions and bank overdrafts.

1.11 Other current assets

Other current assets are digital assets, including tokens and cryptocurrency, which do not qualify for recognition as cash and cash equivalents or financial assets, and have an active market which provides pricing information on an ongoing basis. Other current assets are initially measured at fair value. Subsequent gains and losses on measurement are recognised in other comprehensive income except for impairment losses which are recognised directly in profit or loss. This treatment is consistent with the revaluation model applied to intangible assets in accordance with IAS 38. Where a digital asset is disposed of, the cumulative gain or loss previously recognised in other comprehensive income is reclassified to other operating income or expense within profit or loss. Digital assets are included in current assets as management expect them to be used within the normal operating cycle or otherwise disposed of.

1.12 Financial instruments

IFRS 9 requires an entity to address the classification, measurement and recognition of financial assets and liabilities.

   a)    Classification 

The Group classifies its financial assets in the following measurement categories:

   --    those to be measured at amortised cost; and 
   --    those to be measured subsequently at fair value through profit or loss. 

The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows.

The Group classifies financial assets as at amortised cost only if both of the following criteria are met:

-- the asset is held within a business model whose objective is to collect contractual cash flows; and

-- the contractual terms give rise to cash flows that are solely payment of principal and interest.

   b)    Recognition 

Purchases and sales of financial assets are recognised on trade date (that is, the date on which the Group commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

   c)    Measurement 

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.

Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Debt instruments

Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or loss.

   d)    Impairment 

The Group assesses, on a forward looking basis, the expected credit losses associated with any debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

The Group classifies energy credits at fair value through profit or loss.

1.13 Revenue recognition

Under IFRS 15, Revenue from Contracts with Customers, five key points to recognise revenue have been assessed:

Step 1: Identity the contract(s) with a customer;

Step 2: Identity the performance obligations in the contract;

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the performance obligations in the contract; and

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity, and specific criteria have been met for each of the Group's activities, as described below.

The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Where the Group makes sales relating to a future financial period, these are deferred and recognised under 'accrued expenses and deferred income' on the Statement of Financial Position.

The Group derives revenue from the transfer of goods and services overtime and at a point in time in the major product and service lines detailed below.

Energy Efficiency-as-a-Service

Revenues from external customers come from the provision of "Light-as-a-Service" (LaaS) agreements where the Group delivers lighting outcomes to its customers over time and from the supply and installation of lighting equipment. The Group may assign the majority or all of its right and obligations under a LaaS agreement to a Finance Partner once the lighting equipment is installed.

   a)      Light-as-a-Service 

The Group will undertake to provide Lighting Outcomes to customers over the term of a contract, typically 3, 5 or 7 years. The Group will design the installation of lighting equipment to meet the Lighting Outcomes over the contract term, source and then install that equipment. Once the installation has been accepted the customer will make payments monthly over the contract term. Where a contract is assigned to a Finance Partner then revenue will be recognised at the point of assignment. Where a contract is not assigned the transaction price will be adjusted for the time value of money and the revenue will be recognised rateable over the term.

Included within the LaaS contract is an undertaking to ensure that the agreed Lighting Outcomes are delivered and this may require the repair or replacement of faulty products. This performance obligation is not a material element of the LaaS contract and accordingly revenue is not separately recognised and an accrual for the expected future costs is recognised pro rata to the revenue that is recognised.

   b)      Supply and installation of lighting equipment 

The Group will supply and install lighting equipment for customers. Payment of the transaction price is typically due in instalments between the customer order and the installation being accepted or upon installation acceptance. Revenue is only recognised upon installation acceptance as the Group does not consider the supply of equipment and its installation as distinct performance obligations.

Cost of sales

The cost of sales for Energy-Efficiency-as-a-Service projects includes the cost of the technology that is installed and the cost of bringing the technology into use. The ongoing maintenance and warranty support performance obligation within an EEaaS contract is not considered by management to be sufficiently material to be recognised as a discrete revenue stream. Accordingly, a provision is also included in cost of sales for the Group's obligation to repair or replace faulty products under the standard warranty terms.

   c)      Energy credits 

From time to time the Group will receive consideration for both LaaS and supply & install contracts in Ireland in the form of energy credits. Energy credits are financial assets that are valued at fair value through profit or loss and their initial estimated value is included as part of the transaction price recognised as revenue. Energy credits are validated by the SEAI (the Irish regulator) and once validated are transferred to an undertaking that needs those energy credits, typically a power generation company. Any changes in the fair value of the energy credits between initial recognition and their realisation for cash are recorded as other gains or losses.

Energy Management-as-a-Service

Revenue is comprised of fees received from customers or commissions received from energy suppliers, net of value-added tax, for the review, analysis and negotiation of gas and electricity contracts on behalf of clients in the UK.

To the extent that invoices are raised in a different pattern from the revenue recognition policy described below, entries are made to record deferred or accrued revenue to account for the revenue when the performance obligations have been satisfied.

All of the Group's energy management clients receive Procurement Services and many also receive Risk management, consulting and advisory services (together "Management Services"). These services will often be combined into a single contract but the Group separately identifies the relevant procurement obligations and recognises revenue when the relevant performance obligations have been satisfied. Revenue is recognised for each of these as follows:

   a)   Procurement services 

Procurement revenue arises when the Group provides services that lead to the client entering into a contract with an energy supplier. The Group typically receives a commission from the energy supplier based upon the amount of energy consumed by the client over the life of the contract. As the services provided by the company are completed up to the point that the contract is signed between the client and the energy supplier the performance obligation is considered to be satisfied at that point and the revenue is recognised then. The total amount of revenue recognised is based upon the historical energy consumption of the client. This revenue is then limited by an allowance for actual consumption to be lower than originally estimated and an allowance for the contract term not being completed. The balance of revenue not recognised at the point the energy supply contract is signed is recognised over the life of the contract in line with the client's actual consumption.

   b)   Energy management services 

As well as Procurement services the Group provides clients with a range of risk management, consulting and advisory services which include Bill Validation, Cost recovery, compliance services, ongoing market intelligence, ongoing account management and the development of hedging strategies. These services are typically provided evenly over the term of the contract and are therefore recognised rateably over the contract life.

Client segmentation

The Group's energy management clients are segmented into four categories based upon the balance of services they contract to receive from the Group. These categories are:

   SME:                Small & Medium enterprise clients who typically only take procurement services 

Fixed: Clients who typically take fixed procurement contracts with a limited range of management services

Fixed Plus: Clients who take a wider range of management services, including Bill Validation or "Budget Defender" reporting

Flex: Clients who typically procure using a flex model with regular retrading of the procurement contract and more advanced risk management services.

The overall proportion of revenue attributed by management to Procurement Services and recognised at the point the energy supply contract is signed ranges from 70% for SME to 14% for Flex and the average recognised across the portfolio for FY21 was 25%.

Cost of sales

Cost of sales represents internal or external commissions paid in respect of sales made. The Cost of sale is matched to the revenue recognised so for Procurement Services is recognised at the time the contract is signed and for Management Services rateably over the contract term. To the extent the pattern of payment for these commissions is different from the costs being recognised accruals or prepayments are recorded in the balance sheet.

Other

   a)     Interest income 

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

   b)    Management services 

The Group provides management services to customers and certain other parties under fixed fee arrangements. Efforts to satisfy the performance obligation are expended evenly throughout the performance period and so the performance obligation is considered to be satisfied evenly over time and accordingly the revenue is recognised evenly over time.

1.14 Share based payments

The cost of equity-settled transactions with employees is measured by reference to the fair value of the equity instruments granted at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of a group company (market conditions) and non-vesting conditions. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other vesting conditions are satisfied. At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest or in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.

Where the terms of an equity-settled award are modified, or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the profit and loss account for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value expensed in the profit and loss account.

1.15 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

When the Group acquires any plant and equipment it is stated in the financial statements at its cost of acquisition.

Depreciation is charged to write off the cost less estimated residual value of Property, plant and equipment on a straight line basis over their estimated useful lives which are:

   -     Plant and equipment           4 years 
   -     Computer equipment         4 years 

Estimated useful lives and residual values are reviewed each year and amended as required.

1.16 Intangible assets

Intangible assets acquired as part of a business combination or asset acquisition, other than goodwill, are initially measured at their fair value at the date of acquisition. Intangible assets acquired separately are initially recognised at cost.

Amortisation is charged to write off the cost less estimated residual value of plant and equipment on a straight line basis over their estimated useful lives which are:

   -     Brand and trade names      10 years 
   -     Customer relationships       11 years 
   -     Software                                5 years 

Estimated useful lives and residual values are reviewed each year and amended as required.

Indefinite life intangible assets comprising goodwill are not amortised and are subsequently measured at cost less any impairment. The gains and losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset.

Other intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount might not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units).

Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

1.17 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour and other direct costs. It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

1.18 Leases

The Group leases properties and motor vehicles. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

   -     Fixed payments (including in-substance fixed payments), less any lease incentives receivable; 

- Variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date;

   -     Amounts expected to be payable by the Group under residual value guarantees; 

- The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and

- Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period. Right-of-use assets are measured at cost which comprises the following:

   -     The amount of the initial measurement of the lease liability; 

- Any lease payments made at or before the commencement date less any lease incentives received;

   -     Any initial direct costs; and 
   -     Restoration costs. 

Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.

Payments associated with short-term leases (term less than 12 months) and all leases of low-value assets (generally less than GBP5k) are recognised on a straight-line basis as an expense in profit or loss.

   1.19        Equity 

Share capital is determined using the nominal value of shares that have been issued.

The Share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from the Share premium account, net of any related income tax benefits.

The Reverse Acquisition reserve includes the accumulated losses incurred prior to the reverse acquisition, the share capital of eLight Group Holdings Limited at acquisition, the reverse acquisition share based payment expense as well as the costs incurred in completing the reverse acquisition.

The foreign currency translation reserve includes exchange differences arising from the translation of the results and financial position of foreign operations.

Accumulated losses includes all current and prior period results as disclosed in the income statement other than those transferred to the Reverse Acquisition reserve.

1.20 Taxation

Taxation comprises current and deferred tax.

Current tax is based on taxable profit or loss for the period. Taxable profit or loss differs from profit or loss as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The asset or liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

1.21 Borrowings and borrowing costs

Borrowings are recognised initially at fair value, net of transaction costs. Borrowings are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are capitalised as a prepayment for liquidity services and amortised over the period of the loan to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability or at least 12 months after the end of the reporting period.

1.22 Exceptional items and non-GAAP performance measures

Exceptional items are those items which, in the opinion of the Directors, should be excluded in order to provide a consistent and comparable view of the underlying performance of the Group's ongoing business. Generally, exceptional items include those items that do not occur often and are material.

Exceptional items include (i) the Reverse Acquisition costs incurred on the formation of the Group in 2020; (ii) the costs incurred in delivering the "Buy & Build" strategy associated with acquisitions and strategic investments; (iii) incremental costs of restructuring and transforming acquired businesses and (iv) share based payments.

We believe the non-GAAP performance measures presented, along with comparable GAAP measurements, are useful to provide information with which to measure the Group's performance, and its ability to invest in new opportunities. Management uses these measures with the most directly comparable GAAP financial measures in evaluating operating performance and value creation. The primary measure is Earnings before Interest, Tax, Depreciation and Amortisation ("EBITDA") and Adjusted EBITDA, which is the measure of profitability before Exceptional items. These measures are also consistent with how underlying business performance is measured internally. We also report our profit before exceptional items which is our net income, after tax and before exceptional items as this is a measure of our underlying financial performance.

The Group separately reports exceptional items within their relevant income statement line as it believes this helps provide a better indication of the underlying performance of the Group. Judgement is required in determining whether an item should be classified as an exceptional item or included within underlying results. Reversals of previous exceptional items are assessed based on the same criteria.

In the prior year central operating expenses were included in arriving at Adjusted EBITDA due to the quantum relative to the Group's trading activity. Given the increased scale of the Group in the current year the Directors have concluded that central operating expenses should no longer be included in arriving at Adjusted EBITDA. Central operating expenses are disclosed in Note 4, Segment Reporting.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP.

   1.23        Critical accounting judgements and key sources of estimation uncertainty 

In the process of applying the entity's accounting policies, management makes estimates and assumptions that have an effect on the amounts recognised in the financial statements. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. The following are the critical judgement the directors have made in the process of applying the Group's accounting policies.

Impairment assessment

In accordance with its accounting policies, each CGU is evaluated annually to determine whether there are any indications of impairment and a formal estimate of the recoverable amount is performed. The recoverable amount is based on value in use which require the Group to make estimates regarding key assumptions regarding forecast revenues, costs and pre-tax discount rate. Uncertainty about these assumptions could result in outcomes that require a material adjustment to the carrying amount of goodwill in future periods.

Energy credits

Energy credits are valued based on management's assessment of market price fair value underlying the energy credit. Such assessment is derived from valuation techniques that include inputs for the energy credit asset that are not based on observable market data. Uncertainty about the market price fair value used in valuing the energy credit assets could result in outcomes that require a material adjustment to the value of these energy credits assets in future periods.

Intangible assets

On acquisition, specific intangible assets are identified and recognised separately from goodwill and then amortised over their estimated useful lives. An external expert is engaged to assist with the identification of the intangible assets and their estimated useful lives. These include items such as brand names and customer lists, to which value is first attributed at the time of acquisition. The capitalisation of these assets and the related amortisation charges are based on judgements about the value and economic life of such items.

The economic lives for customer relationships, trade names and computer software are estimated at between five and eleven years. The value of intangible assets, excluding goodwill, at 30 June 2021 is GBP1,890,000 (2020: GBPnil).

Contingent consideration

An element of consideration relating to certain business acquisitions made is contingent on the future EBITDA targets being achieved by the acquired businesses. On acquisition, estimates are made of the expected future EBITDA based on forecasts prepared by management. These estimates are reassessed at each reporting date and adjustments are made where necessary. Amounts of deferred and contingent consideration payable after one year are discounted. The carrying value of contingent consideration at 30 June 2021 is GBPnil (2020: GBPnil).

Any gain or loss on revaluation of contingent consideration does not adjust the carrying value of goodwill and is treated as an exceptional item in the income statement.

Procurement services revenue

When assessing the recognition of Procurement Services revenue within the Energy Management division the Group estimates the degree to which expected energy consumption is constrained by reductions in energy consumption over the term of the contract when compared to the historical energy consumption of the client and by the risk of supply contracts being terminated by clients before the end of the contract term. These constraints reduce the extent to which Procurement Service revenue is recognised on signing whether the client contract is purely for Procurement Services or a combination of Procurement and Energy Management Services.

2. SEGMENT REPORTING

The following information is given about the Group's reportable segments:

The Chief Operating Decision Maker is the Board of Directors. The Board reviews the Group's internal reporting in order to assess performance of the Group and has determined that in the year ended 30 June 2021 the Group had three operating segments, being Energy Efficiency, Energy Management and Group.

The Board considers that during the year ended 30 June 2020 the Group operated in the single business segment of LED lighting solutions, which is now part of the Energy Efficiency segment.

 
                             Energy Management    Energy Efficiency       Group 
--------------------------                      --------------------  ---------  --------- 
 2021                                              United 
                                United Kingdom    Kingdom    Ireland    Central       2021 
                                       GBP'000    GBP'000    GBP'000    GBP'000    GBP'000 
--------------------------  ------------------  ---------  ---------  ---------  --------- 
  Revenue                                2,187      8,511      2,898          -     13,596 
  Cost of sales                          (590)    (5,679)    (1,790)          -    (8,059) 
                            ------------------  ---------  ---------  ---------  --------- 
  Gross Profit                           1,597      2,832      1,108          -      5,537 
 Operating expenses                      (862)    (1,820)      (730)    (1,295)    (4,707) 
                            ------------------  ---------  ---------  ---------  --------- 
 Adjusted EBITDA                           735      1,012        378    (1,295)        830 
 Depreciation and 
  amortisation                           (233)        (7)       (93)          -      (333) 
 Finance and similar 
  charges                                 (14)        (6)      (410)          4      (426) 
 Profit (loss) before 
  tax and exceptional 
  items                                    488        999      (125)    (1,291)         71 
 Exceptional items                           -          -          -      (248)      (248) 
                            ------------------  ---------  ---------  ---------  --------- 
 Loss before tax                           488        999      (125)    (1,539)      (177) 
 Income tax                                170          -          -         35        205 
                            ------------------  ---------  ---------  ---------  --------- 
 Profit (loss) after 
  tax and exceptional 
  items                                    658        999      (125)    (1,504)         28 
                            ==================  =========  =========  =========  ========= 
 Net Assets 
 Assets                                  9,197      6,003      2,678      3,141     21,019 
 Liabilities                           (2,322)    (3,739)    (4,081)    (1,004)   (11,146) 
 Net assets (liabilities)                6,875      2,264    (1,403)      2,137      9,873 
                            ==================  =========  =========  =========  ========= 
 
 
                                  Energy Efficiency      Group 
-----------------------------                        ---------  --------------- 
 2020                             United 
                                 Kingdom    Ireland    Central 
                                 GBP'000    GBP'000    GBP'000     2020 GBP'000 
-----------------------------  ---------  ---------  ---------  --------------- 
  Revenue                          2,241      2,260          -            4,501 
  Cost of sales                  (1,607)    (1,502)          -          (3,109) 
                               ---------  ---------  ---------  --------------- 
  Gross Profit                       634        758          -            1,392 
 Operating expenses                (849)    (1,190)      (878)          (2,917) 
                               ---------  ---------  ---------  --------------- 
 Adjusted EBITDA                   (215)      (432)      (878)          (1,525) 
 Depreciation                        (3)       (64)        (5)             (72) 
 Finance and similar charges        (24)       (52)      (201)            (277) 
 Profit before exceptional 
  items                            (242)      (548)    (1,084)        (1,874) 
 Exceptional item - Reverse 
  acquisition expenses                 -          -    (1,320)          (1,320) 
                               ---------  ---------  ---------  --------------- 
 Loss before and after tax         (242)      (548)    (2,404)          (3,194) 
                               =========  =========  =========  =============== 
 Net Assets 
 Assets                              978      2,037      1,335            4,350 
 Liabilities                     (1,256)    (2,896)    (1,959)          (6,111) 
 Net assets (liabilities)          (278)      (859)      (624)          (1,761) 
                               =========  =========  =========  =============== 
 

3. EARNINGS PER SHARE

Basic and diluted earnings per share are calculated by dividing the profit or loss for the year by the weighted average number of ordinary shares in issue during the year.

 
                                                          2021          2020 
------------------------------------------------  ------------  ------------ 
   Loss for the year from continuing operations 
    - GBP'000                                               28       (3,194) 
   Weighted number of ordinary shares in 
    issue                                          199,038,204   108,080,337 
------------------------------------------------  ------------  ------------ 
   Basic earnings per share from continuing 
    operations - pence                                    0.01        (2.96) 
------------------------------------------------  ------------  ------------ 
   Weighted number of dilutive instruments 
    in issue                                        11,504,993             - 
                                                  ------------  ------------ 
   Weighted number of ordinary shares and 
    dilutive instruments in issue                  210,543,197 
------------------------------------------------  ------------  ------------ 
   Diluted earnings per share from continuing 
    operations - pence                                    0.01        (2.96) 
------------------------------------------------  ------------  ------------ 
 

Share options and warrants could potentially dilute basic earnings per share in the future but were not included in the calculation of diluted earnings per share in the prior year as they are anti-dilutive.

4. BORROWINGS

 
                       Group                Company 
               --------------------  -------------------- 
                    2021       2020       2021       2020 
                 GBP'000    GBP'000    GBP'000    GBP'000 
-------------  ---------  ---------  ---------  --------- 
 Current 
 Borrowings          601        304          -          - 
-------------  ---------  ---------  ---------  --------- 
                     601        304          -          - 
-------------  ---------  ---------  ---------  --------- 
 Non-current 
 Borrowings        1,245      1,120          -          - 
                   1,245      1,120          -          - 
-------------  ---------  ---------  ---------  --------- 
 

-- During the prior year eLight Group Holdings Limited (the Borrower) entered into a loan agreement to borrow EUR1,556,000 over a four year term. During the year, eLight Group Holdings borrowed a further EUR275,000 on the loan facility.

-- The loan principal is repayable in equal instalments commencing in December 2020 whilst interest charged at 13.50% per annum is paid monthly. In the event that the loan is repaid early an additional fee is payable in cash. It includes covenants relating to total contracted orders, revenue and operating EBITDA all measured over a rolling 12 month period plus a covenant requiring us to retain a minimum level of cash in the eLight Group.

-- At the year end the loan is guaranteed by the trading subsidiaries of the Borrower and is secured through debentures issued by the Borrower and the Guarantors.

-- The Group drew down an unsecured GBP50,000 Bounce Back loan for one of its subsidiaries during the year. The Bounce Back loan is interest free for the first twelve months and is then repaid in instalments over the following three years. The interest rate on the Bounce Back loan is 2.5% per annum.

-- In addition, at acquisition Beond had a term loan of GBP48,000 and CBILS loans of GBP484,000 both of which are secured over the assets of Beond. The CBILS loans are interest free for the first twelve months and are then repaid in instalments over the following five years. The interest rate on the CBILS loans is 3.4% per annum.

 
                                                   2021       2020 
 Maturity on the borrowings are as follows:     GBP'000    GBP'000 
 Current                                            589        304 
 Due between 1-2 years                              913        456 
 Due between 2-5 years                              300        664 
 Due beyond 5 years                                  44          - 
--------------------------------------------  ---------  --------- 
                                                  1,846      1,424 
--------------------------------------------  ---------  --------- 
 

5. BUSINESS COMBINATION

Renewable Solutions Lighting Limited

On 1 July 2020 the Company completed the acquisition of all of the share capital of Renewable Solutions Lighting Limited ("RSL").

RSL specialises in providing the UK education sector with fully funded LED lighting solutions.

The consideration, paid entirely in new eEnergy shares, was structured as follows:

-- Initial consideration, paid on completion, was satisfied by the issue of 13.3 million new ordinary shares of eEnergy with a market value at issue of GBP784,000;

-- Contingent consideration, payable after one year of up to 16.0 million new ordinary shares of eEnergy. The amount of contingent consideration depended upon RSL achieving predefined thresholds for adjusted EBITDA.

Although the RSL business performed strongly through the year the thresholds to trigger the contingent consideration were not achieved and therefore no contingent consideration has been paid or is payable. As a result, the provision created for the value of the shares that might have been issued has been released through the profit and loss account as an exceptional item.

In addition to the consideration payable, RSL will make payments equal to 3% of revenue generated during the earn-out period to an RSL director as settlement of historical obligations agreed between RSL and the director plus RSL will repay an existing loan of GBP250,000 due to an RSL director. GBP130,000 was paid on completion and GBP120,000 on the first anniversary of completion.

The fair value of the assets acquired and liabilities assumed of RSL at the date of acquisition are as follows:

 
                                                          GBP'000 
-------------------------------------------------------  -------- 
  Property, plant and equipment                                 2 
  Cash at bank                                                 11 
  Inventory                                                     7 
  Trade and other receivables                                  81 
  Trade and other payables                                  (625) 
                                                         -------- 
  Total identifiable net assets (liabilities) acquired      (524) 
  Goodwill                                                  2,762 
-------------------------------------------------------  -------- 
 Consideration (all shares) 
 Initial consideration (recorded at the market value 
  of the shares issued and stamp duty paid)                   794 
 Contingent consideration                                   1,444 
 Total consideration                                        2,238 
-------------------------------------------------------  -------- 
 

Goodwill relates to the accumulated 'know-how' and expertise of the business and its staff. None of the goodwill is expected to be deducted for income tax purposes.

Since acquisition RSL contributed GBP3.5 million of revenue and GBP0.4 million of operating EBITDA. Acquisition related costs that have been expensed were GBP0.2 million.

Beond Group Limited

On 15 December 2020 the Company completed the acquisition of Beond Group Limited ("Beond").

Beond specialise in renewable energy consulting and procurement with operations in the UK.

The total consideration for the acquisition (which included GBP0.7m of surplus cash in the business) was approximately GBP2.4m in cash and the issue of 64.9 million new eEnergy shares. 63.8 million shares were issued on 15 December 2020 ("Completion") and a further 1.2 million shares following the completion of the compulsory purchase of the remaining minority interest on 14 January 2021.

There is no further consideration due.

The initial estimate of the fair value of the assets acquired and liabilities assumed of Beond at the date of acquisition are as follows:

 
                                                               GBP'000 
------------------------------------------------------------  -------- 
  Property, plant and equipment                                     41 
  Separately identifiable intangible assets                      1,790 
  Other assets                                                      67 
  Cash at bank                                                   1,207 
  Trade and other receivables                                      953 
  Prepayments                                                      216 
  Deferred tax asset                                               171 
  Deferred tax liability                                         (340) 
  Borrowings                                                     (527) 
  Trade and other payables                                     (1,273) 
                                                              -------- 
  Total identifiable net assets (liabilities) acquired           2,305 
  Goodwill                                                       6,830 
------------------------------------------------------------  -------- 
 Consideration 
 Cash paid                                                       2,385 
 Shares issued (recorded at the market value at Completion)      6,750 
------------------------------------------------------------  -------- 
 Total consideration                                             9,135 
------------------------------------------------------------  -------- 
 

Goodwill relates to the accumulated 'know-how' and expertise of the business and its staff. None of the goodwill is expected to be deducted for income tax purposes.

All of the Energy Management division results disclosed in Note 4 relate to Beond's contribution to the Group since acquisition. Acquisition related costs that have been expensed were GBP0.7 million.

6. EVENTS SUBSEQUENT TO PERIOD END

Acquisition of UtilityTeam Topco Limited and related Placing

On 17 September 2021 the Company completed the acquisition of all of the share capital of UtilityTeam TopCo Limited ("UTT"). At the same time the Company completed the Placing of 80 million shares which were issued at 15 pence per share which raised GBP12.0 million for the Company. The Placing proceeds have been primarily used to settle the initial cash consideration for the acquisition of UTT.

UTT is a UK-based, top 20 energy consulting and procurement business, whose services aim to reduce costs and support clients' transition to Net Zero.

The initial consideration of GBP14.5 million was satisfied as follows:

-- cash consideration of GBP9.5 million, payable on completion with further cash consideration of GBP2 million, payable on or before 31 December 2021; and

-- the issue of 18.0 million Ordinary Shares, which had a fair value of GBP3.0 million based on the closing share price on the day prior to completion.

Further Earn-Out Consideration of up to a maximum of GBP5.1 million may be payable, based on a multiple of 7.0x UTT's EBITDA, for the year ending 31 December 2021. eEnergy will pay GBP7 for every GBP1 of EBITDA generated in excess of GBP2.3 million, up to a maximum EBITDA of GBP3.0 million ("Earn-Out Consideration").

The Earn-Out Consideration would be satisfied as follows:

   --    the first GBP1.5m of Earn-Out Consideration will be paid in cash; and 

-- any balance, up to GBP3.6 million, will be satisfied by the issue of new Ordinary Shares at a price that is the higher of 24p and the 30 day volume weighted average price prior to 31 December 2021.

The initial estimate of the fair value of the assets acquired and liabilities assumed of UTT at the date of acquisition based upon the UTT consolidated balance sheet at 31 July 2021 are as follows:

 
                                                          GBP'000 
------------------------------------------------------  --------- 
  Property, plant and equipment                               309 
  Intangible assets                                           313 
  Cash at bank                                              2,886 
  Inventory                                                    15 
  Trade and other receivables                               6,166 
  Trade and other payables                                (7,167) 
  Loans and other borrowings                              (1,836) 
                                                        --------- 
  Total identifiable net assets acquired                      686 
  Goodwill                                                 18,916 
------------------------------------------------------  --------- 
  Consideration 
  Initial consideration (recorded at the market value 
   of the shares issued)                                   14.457 
  Contingent consideration                                  5,145 
  Total consideration                                      19,602 
------------------------------------------------------  --------- 
 

Goodwill relates to the accumulated 'know-how' and expertise of the business and its staff. None of the goodwill is expected to be deducted for income tax purposes. As we complete the purchase price allocation the Company expects to recognise specific identifiable intangible assets which may be deductible for income tax purposes. Any separately identified intangible assets will reduce the value attributed to goodwill.

The initial accounting for the acquisition of UTT is incomplete as at the date of these financial statements given the short period of time since the acquisition was completed.

Glossary

The following table provides an explanation of certain technical terms and abbreviations used in this announcement. The terms and their assigned meanings may not correspond to standard industry meanings or usage of these terms.

 
 "EEaaS"   Energy Efficiency-as-a-Service; 
 "EMaaS"   Energy Management-as-a-Service; 
 "IoT"     Internet of Things; 
 "LaaS"    Lighting-as-a-Service. 
 

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(END) Dow Jones Newswires

October 07, 2021 02:00 ET (06:00 GMT)

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