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
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