TIDMEAAS
RNS Number : 4228A
eEnergy Group PLC
22 January 2024
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF REGULATION 2014/596/EU AS IT FORMS PART OF THE LAW
OF ENGLAND AND WALES BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL)
ACT 2018.
22 January 2024
eEnergy Group plc
("eEnergy", "the Company" or "the Group")
Disposal of Energy Management Division
and
Notice of General Meeting to approve the Disposal
eEnergy (AIM: EAAS), the net zero digital energy services
provider, is pleased to announce that it has entered into an
agreement to sell the Company's wholly owned energy management
division (the "Energy Management Division") to Flogas Britain
Limited ("Flogas") for initial consideration of GBP29.1 million
(the "Transaction" or "Disposal"), and additional contingent
consideration based on the trading performance of the Energy
Management Division for the period to 30 September 2025.
Flogas is part of DCC Energy and a subsidiary of DCC plc, a
leading international sales, marketing and support services
group.
Highlights:
-- Initial total consideration of GBP29.1 million, comprising
GBP25.0 million cash ("Initial Cash Consideration) being received
by the Group with the balance of GBP4.1 million being used to repay
amounts due from the Group to the Energy Management Division
-- Initial Cash Consideration will be paid on completion
following approval of the Transaction by eEnergy shareholders at a
General Meeting to be held on or about 7 February 2024
-- Initial total consideration equates to an enterprise value of
GBP30 million after customary adjustments reflecting net debt and
normalised working capital
-- Additional contingent consideration, estimated by the Company
to be in the range of GBP8 million to GBP10 million, subject to the
Energy Management Division achieving strong growth in line with its
business plan, linked to net cash generated by the Energy
Management Division from completion to 30 September 2025 (the
"Earnout Period"),
-- Net proceeds will be used to pay down the Group's debt
facilities of GBP8.1 million in full, to reinvest into high growth
energy services division which grew 87% in the 12-month period up
to 30 June 2023 and for general working capital purposes
-- Transaction delivers an immediate return on GBP23.4 million
invested into the Energy Management Division since December 2020,
with potential to benefit from the performance of the division
through the Earnout Period
-- Disposal unlocks significant value for shareholders and will
enable eEnergy to focus on its dedicated energy services business,
driving the continued roll out of its EV and Solar products and
enabling investment into other high growth opportunities
-- Strengthened balance sheet will remove cash constraints which
have held back growth in recent periods, as a result of which the
Board currently expect trading for the period to 31 December 2023
to be at the lower end of market expectations.
The Company expects to announce a trading update for the
18-month period ended 31 December 2023 in the second half of
February 2024.
Harvey Sinclair, eEnergy CEO, comments: "I am pleased to
announce this agreement to sell our Energy Management Division to
Flogas. Once approved by Shareholders, the Transaction will unlock
significant immediate cash for eEnergy and give the opportunity to
deliver significant additional value to shareholders through the
Earnout Period. Whilst Energy Management is the smaller by revenue
of our two divisions, the initial transaction proceeds alone will
be c. 90% of eEnergy's current market capitalisation.
"The sale of the Energy Management Division will allow us to
focus entirely on our similar sized, high growth Energy Services
Division which grew 87% in the past 12 month period despite being
undercapitalised. The sale will simplify our business, strengthen
our balance sheet and will bring the opportunity to invest further
in the higher growth segments of Solar and EV Charging across the
UK.
"I would like to thank our colleagues in the Energy Management
Division. They will have an excellent new owner in Flogas who is in
an ideal position to take the business forward."
Ivan Trevor, Managing Director, Flogas Britain comments: "Flogas
are delighted to welcome the Energy Management Division of eEnergy
Group plc to DCC Energy. Together with Certas and the recent
acquisitions of Protech, Centreco and DTGen, this acquisition
further expands our capability in energy management services,
providing a comprehensive range of products and services to partner
with our customers on their journey to Net Zero and supporting our
ambition to halve the carbon emissions of the energy we supply by
2030. "
Background to the Transaction
As announced on 8 November 2023, in early 2023, the Board
received a number of unsolicited approaches expressing an interest
in acquiring the Energy Management Division. As a result, the Board
engaged professional advisers to conduct a strategic review of the
Energy Management Division and evaluate these approaches.
Following further evaluation of these approaches, the Board
resolved that the offer from Flogas represented the best option to
unlock significant potential value for shareholders. In coming to
this decision, the Board also recognised the long-term proposition
to create further value for the Group by re-investing the net
proceeds into its high growth energy services division ("Energy
Services Division").
Both the Group's Energy Management Division and Energy Services
Division are high growth businesses with strong market positions in
attractive growth markets. The Energy Management Division, for the
12-month interim period to 30 June 2023, reported revenues of
GBP13.6 million (up 17% on FY 2022) and Adj EBITDA* of GBP4.4
million (up 20% on FY 2022).
The Initial Cash Consideration of GBP25.0 million delivers an
immediate return on the GBP23.4 million invested into the Energy
Management Division since the initial acquisition of Beond Group
Limited in December 2020. As at 30 June 2023 the reported unaudited
net asset value in the Group of the Energy Management Division was
GBP26.7 million (including goodwill created on acquisition).
Payments of contingent consideration through the Earnout Period
(estimated by the Company to be in the range of GBP8 million to
GBP10 million, subject to the Energy Management Division achieving
strong growth in line with its business plan ) would further
enhance returns to eEnergy Group shareholders.
Going forward, eEnergy will focus on accelerating growth in the
Energy Services Division, supported by re-investment of t he
majority of the cash received, following debt paydown. During the
same 12-month period to 30 June 2023, the Energy Services Division
reported revenues of GBP19.5 million and Adj EBITDA* of GBP2.3
million, up 87% and 131% respectively on FY 2022, demonstrating
significant and growing demand.
* Adj EBITDA is Earnings before interest, tax, depreciation and
amortisation, excluding exceptional items. 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 Energy Management Division's
ongoing business and include transaction related items,
restructuring and integration costs .
Transaction and Use of Proceeds
The Transaction will be effected through the sale of the entire
issued share capitals of eEnergy Consultancy Limited, eEnergy
Insights Limited and eEnergy Management Limited (the "EM
Subsidiaries"). Completion is expected to occur, subject to
shareholder approval as detailed further below, within three
business days of the General Meeting ("Completion").
The Initial Cash Consideration, payable by Flogas on Completion,
will be GBP25 million. Under the terms of the Transaction
agreement, a further GBP4.1 million of the initial consideration
will be used to repay amounts due from the Group to the Energy
Management Division, bringing the initial total consideration to
GBP29.1 million. The Initial Consideration reflects an estimate of
the financial position of the EM Subsidiaries at Completion and may
be subject to certain subsequent adjustments to take account of the
actual financial position of the EM Subsidiaries at Completion,
with the intention that they are being sold on a debt free/cash
free basis and with a normalised level of working capital. In
addition, further amounts in relation to certain historical
contingent liabilities of the EM Subsidiaries may be paid to
eEnergy as additional consideration to the extent that such
liabilities do not crystallise.
As set out in its latest interim results, the Board identified a
need to strengthen the Group's balance sheet.
Part of the Initial Cash Consideration will be applied to the
repayment of the Group's debt facilities with HSBC Innovation
Finance (previously known as Silicon Valley Bank) in the amount of
GBP5m and which are due for repayment in February 2024, and its
other subordinated debt comprising secured discounted capital
bonds, also due for repayment in May 2024. The repayment of these
aggregate GBP8.1 million of Group borrowings (inclusive of accrued
interest) will significantly strengthen the balance sheet, making
the Group debt free. The Company has continued discussions with
various parties as an alternative option to refinance these
facilities. In the unlikely event that the Disposal did not proceed
for any reason, the Directors are confident that the Company would
be able to extend its debt facilities to allow those alternative
options to be concluded and would be required to strengthen the
balance sheet on a timely basis to support the growth in the
Group's combined operations and for general working capital
purposes.
The balance of the net proceeds of the Initial Cash
Consideration will be reinvested to support accelerated growth in
the Energy Services Division, including through retaining increased
interests in long-term revenue generating assets to improve overall
returns to the Group.
As part of the Transaction, further contingent cash
consideration may also be payable on the following basis and
subject to the EM Subsidiaries delivering an agreed minimum level
of earnings during the period:
-- an amount equal to the free cashflow generation from the EM
Subsidiaries (excluding the impact of My ZeERO from completion to
30 September 2025; and
-- a payment per successfully completed My ZeERO Installation during the same period as above.
The contingent consideration is estimated by the Company to be
in the range of GBP8 million to GBP10 million, subject to the
Energy Management Division achieving strong growth in line with its
business plan, and is capped at GBP20 million.
Any contingent consideration will be payable in two instalments,
covering the period from completion to 30 September 2024, and the
12-month period to 30 September 2025.
The Group has provided certain warranties and indemnities to
Flogas regarding, inter alia, the business and tax affairs of the
Energy Management Division and has entered into certain restrictive
covenants.
On Completion, the Company will enter into certain agreements,
as set out below:
-- The Company and Flogas will enter into a transitional
services agreement ("TSA") under which the Company will provide
Flogas with certain services as previously provided by the Company
to the Energy Management Division; and Flogas will provide the
Company with certain reverse services as previously provided by the
Energy Management Division to the Group. Under the terms of the
TSA, the parties will migrate the relevant services as soon as
reasonably practicable and in any event both parties must migrate
and cease to use the services within 12 months of Completion.
-- The Company and the EM Subsidiaries will enter into a brand
licence agreement, under which the Company will grant the EM
Subsidiaries a non-exclusive, royalty-free, non-transferable
licence to use certain trademarks owned by the Company, for a
period of two years from Completion, for the purpose of the EM
Subsidiaries carrying on each of their respective businesses.
-- The Company and EML will also enter into a cross-referral and
licensing agreement (the "CLA"), under which the Company and EML
shall cross-refer the other party's services to their own client
base with a referral fee being paid for successful referrals. EML
shall licence to the Company the use of MY ZeERO, including the
right permit the Company to sell up to an agreed number of MY ZeERO
eMeters per year to its client base. The CLA is for an initial
period of two years, following which it may be extended further by
mutual agreement. The CLA provides for non-compete provisions
between the Company and EML, in which the Company and EML are
prohibited from canvassing, soliciting or endeavouring to sell to
or entice away any person who is or was a client of the other party
in respect of the relevant services as at the date of the CLA.
Strategy of the continuing Group following the Disposal
The Disposal will allow the Group to focus entirely on its high
growth Energy Services Division, which grew 87% in the past
12-month period despite being undercapitalised. The Disposal will
simplify the Group's business, strengthen its balance sheet and
will bring the opportunity to invest further in the higher growth
segments of solar and EV charging across the UK.
Notice of General Meeting
In view of the size of the Energy Management Division relative
to the Company, the Disposal will result in a fundamental change in
the business of the Company for the purpose of Rule 15 of the AIM
Rules and it is therefore conditional upon the approval of
Shareholders, amongst other matters.
Accordingly, that approval will be sought at a general meeting
of the Company to be held at 9.00 am on or about 7 February 2024 at
Fieldfisher's offices, 9th Floor, Riverbank House, 2 Swan Lane,
London EC4R 3TT, United Kingdom (the "General Meeting").
Certain Shareholders (which include the following Directors:
Nigel Burton, Crispin Goldsmith, Andrew Lawley, David Nicholl,
Harvey Sinclair and Gary Worby) have irrevocably undertaken to vote
or procure to vote in favour of the resolution to be proposed at
the General Meeting in respect of 165,902,704 Ordinary Shares, in
aggregate, representing approximately 42.8% of the issued ordinary
share capital of the Company.
The Directors believe that the Transaction will promote the
success of the Company for the benefit of shareholders as a whole.
Accordingly, they unanimously recommend shareholders vote in favour
of the resolution to approve the Disposal at the General Meeting as
they have irrevocably undertaken to do in respect of their own
beneficial holdings, amounting to (in aggregate) 39,185,333
Ordinary Shares representing 10.1% of the share capital of the
Company.
Shareholders are reminded that the Disposal is conditional,
amongst other things, on the passing of the Resolution to be
proposed at the General Meeting. Should the Resolution not be
passed, the Disposal will not proceed. In such an event, the
Company would be required to settle Flogas' third party costs and
expenses relating to the Disposal, capped at GBP0.9 million.
A circular containing the notice of the General Meeting will be
made available shortly on the Company's website at
www.eenergyplc.com .
Analyst and Investor Call
Following completion, Harvey Sinclair, CEO, and Crispin
Goldsmith, CFO, will be hosting an online presentation, open to all
existing and potential shareholders via Investor Meet Company the
day after Completion. Questions can be submitted pre-event via the
Investor Meet Company dashboard up until 9.00 am the day before the
meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add
to meet eEnergy Group plc via:
https://www.investormeetcompany.com/eenergy-group-plc/register-investor
eEnergy will also be hosting an online analyst briefing on the
morning after Completion at 11.00 am. Analysts wishing to attend
should contact eEnergy@tavistock.co.uk to register.
For further information, please visit www.eenergyplc.com or
contact:
eEnergy Group plc Tel: +44 20 7078 9564
Harvey Sinclair, Chief Executive info@eenergyplc.com
Officer
Crispin Goldsmith, Chief Financial
Officer
Strand Hanson Limited (Nominated Tel: +44 20 7409 3494
Adviser)
Richard Johnson, James Harris
Canaccord Genuity Limited (Joint Tel: +44 20 7523 8000
Broker)
Max Hartley, Harry Pardoe (Corporate
Broking)
Turner Pope Investments (Joint Tel: +44 20 3657 0050
Broker)
Andy Thacker, James Pope info@turnerpope.com
Tavistock Tel: +44 207 920 3150
Jos Simson, Simon Hudson, Katie eEnergy@tavistock.co.uk
Hopkins
About eEnergy Group plc
eEnergy (AIM: EAAS) is a net zero energy services provider,
empowering organisations to achieve net zero by tackling energy
waste and transitioning to clean energy, without the need for
upfront investment. It is making net zero possible and profitable
for all organisations in four ways:
-- Transition to the lowest cost clean energy through the
Group's digital procurement platform and energy management
services.
-- Tackle energy waste with granular data and insight on
energy use and dynamic energy management.
-- Reduce energy use with the right energy efficiency solutions
without upfront cost.
-- Reach net zero with onsite renewable generation and
electric vehicle (EV) charging.
eEnergy is a Top 5 B2B energy company and has been awarded the
Green Economy Mark by London Stock Exchange.
About Flogas Britain Limited
Flogas is one of the largest distributors of off-grid energy in
the UK and has over 30 years' experience of providing innovative
energy solutions to both commercial and domestic customers. The
business is at the forefront of the energy transition having
developed a prominent track record in converting customers from
higher emissions fuels to lower carbon and cleaner solutions for
the last decade.
Headquartered in Leicestershire, Flogas has revenues in excess
of GBP300 million and employs over 1,200 people across its
multi-sited operation across Britain.
-ends-
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