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ENERAQUA TECHNOLOGIES PLC
Earnings Release • Oct 11, 2023
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Earnings Release
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National Storage Mechanism | Additional information 
RNS Number : 7031P
Eneraqua Technologies PLC
11 October 2023
The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
11 October 2023
Eneraqua Technologies plc
("Eneraqua", the "Company" or the "Group")
Interim Results
Solid performance in H1 with headwinds expected to impact near-term outlook
Eneraqua Technologies plc, a specialist provider of energy and water efficiency solutions, is pleased to announce its interim results for the six months ended 31 July 2023.
Financial Highlights
- Revenue increased 7% to £26.0m (H1 23: £24.2m), reflecting contract wins and project completions in the period.
- Gross profit of £8.9m (H1 23: £9.9m), at a margin of 34.1% reflecting the project mix in the period.
- Adjusted EBITDA1 £0.79m (H1 23: £3.98m) as a result of continued investment in both the team and ongoing research and development work.
- Adjusted loss before tax (£0.4m) (H1 23: £3.0m) which includes the increased costs of borrowing in H1.
- Adjusted diluted EPS: 0.47p (H1 23: 6.48p).
- Net cash* of £0.5m (H1 23: net debt of £0.2m) as working capital investment in FY23 unwound.
- Group's order book2 across Energy and Water stands at £146.2m and, taking a prudent view, approximately 25% is now anticipated to be delivered in the remainder of H2 FY24.
Operational and Strategic Highlights
- First major NHS Trust energy project secured with the award of an £11.3m contract with Kingston NHS, following the acquisition of Mathewson (in 2022), validating Group approach on strategic acquisitions to unlock new markets.
- Solid performance in Water as a result of new student housing and care home customer wins in Spain, and greater awareness and adoption of water technologies in UK.
- Following first agritech contract for the State of Uttarakhand, two further states have now adopted the solution, with Indian Government now trialling our technologies in its domestic water programmes.
- Completed global production facility in Toledo, Spain, where product assembly is now under way with manufacturing of key components to commence in Q4.
Post period end and Outlook
We have seen a marked change in some customer behaviours post-period end as Local Authorities and social housing landlords have experienced further pressure on their capital budgets, as a result of continuing increases in building costs and required spend on Government-mandated cladding and insulation projects.
These challenges are reflected in the recent report by the Regulator for Social Housing[3] which highlights that approximately half of all social landlords intend to re-phase projects.
Since the half-year end the Company has won a number of new contracts for heat-pump systems including a £12.7m contract with Royal Borough of Kensington & Chelsea and a £7.2m contract to supply a district system for a museum, gallery and leisure centre.
However, following our clients' half-year budget reviews in September we have been approached regarding the phasing of work. On a prudent basis we anticipate that there will be a re-phasing of work to meet their in-year budget pressures. This is expected to materially impact second half revenues and margins. No contracts have been cancelled but the timing of revenues on some is expected to move into FY25.
Separately as set out in the 31 August trading update, the unexpected policy decision by the UK Government on net nutrient neutrality rules has resulted in certain Water customers deferring investment decisions pending regulatory clarity.
As a result of these challenges and the anticipated delays, we expect our revenues and profit for FY24 to be substantially below market expectations. These clients have planned multi-year programmes, and while no requests to look at phasing have been made, we believe, given their fixed in-year budgets, the knock-on impact means it is prudent to expect lower revenues and profits in FY25 than currently forecast.
The Company returned to a net cash position at the end of H1 FY24. As at 30 September, over 83% of the accrued income had been collected as cash with the remaining balance due in the coming weeks. Overall, we expect to end FY24 in profit and with a net cash positive position.
*excluding IFRS 16 liabilities
Commenting on the results, Eneraqua Technologies CEO, Mitesh Dhanak, said: "During the period the Group performed in line with our expectations notwithstanding the inflationary pressure on our energy client budgets. Post-period end the Group has faced dual headwinds. The continued and increased budgetary pressures on local government are leading to discussions on slowing down project delivery and deferring works into FY25. This compounds the impact of the recent unexpected Government policy change in relation to net nutrient neutrality. As a result, the Board now expects some projects to be delivered more slowly with revenues moving into next year and reduced operational leverage affecting margins. As a result we expect to see a material reduction in revenues and outturn in profitability during FY24. This is extremely disappointing given the underlying imperative to transition to Net Zero.
"The Group continues to be cash generative and retain a net cash position as it manages through these near-term headwinds. The Board remains confident that the longer-term opportunity for the business driven by the social and economic imperatives driving the carbon transition remains in place."
An overview of the interim results is available to watch here: https://bit.ly/ETP_H12023overview
Analyst Presentation
A presentation for analysts will be held today at 9:00am via webinar. Analysts wishing to attend should contact [email protected].
Investor Presentation
A presentation to retail investors will be hosted at 11am this morning. Investors are invited to sign up for the presentation via the PI World platform using the following link: https://bit.ly/ETP_FY24_H1_webinar. Questions can be submitted during the presentation.
1 Adjusted EBITDA - Adjusted for share based payment charges (prior year also excludes IPO costs).
2 Order Book defined as Contracted + Secured. Contracted = project contract issued and signed, with work started or ready to start. Secured = sum of a) tender process successful, awaiting project contract, and b) Directors' assumed win rate on Framework opportunities.
For more information, please contact:
| Eneraqua Technologies plc | Via Alma PR |
| Mitesh Dhanak, CEO | www.eneraquatechnologies.com |
| Iain Richardson, CFO | |
| Liberum - Nominated Adviser and Broker | +44(0)203 100 2000 |
| Edward Mansfield | |
| Benjamin Cryer | |
| Anake Singh | |
| Singer Capital Markets (Joint Broker) | +44 (0)20 7496 3000 |
| Sandy Fraser | |
| Justin McKeegan | |
| Asha Chotai | |
| Alma (Financial PR and IR) | +44(0)20 3405 0205 |
| Justine James | [email protected] |
| Sam Modlin | |
| Will Ellis Hancock |
Notes to editors
Eneraqua Technologies (AIM:ETP) is a specialist in energy and water efficiency. The Group designs and delivers improved energy and water systems which utilise its wholly owned intellectual property, Control Flow HL2024. Energy was the first market the Company entered and this is the larger sector, with the Company focused on clients with end of life gas, oil or electric heating and hot water systems. The Group provides turnkey retrofit district or communal heating systems based either on high-efficiency gas or ground/air source heat pump solutions that support Net Zero and decarbonisation goals.
Water is a growing service offering focused on water efficiency upgrades for utilities and commercial clients including hotels and care homes. It has also expanded into agritech systems.
The activities in both areas are underpinned by the Company's wholly-owned intellectual property, the Control Flow HL2024 family of products which reduce water wastage and improve the performance of heating and hot water systems.
The Company's main country of operation is the United Kingdom. The Company's head office is in London with additional offices in Leeds, Washington (Sunderland), India, Spain and the Netherlands. The Company has 191 employees, with the majority employed within the UK. Eneraqua Technologies has received the London Stock Exchange's Green Economy Mark.
To find out more, please visit: www.eneraquatechnologies.com
CEO Statement
The first half of the financial year has been solid and in-line with our expectations. We have continued to grow revenues and returned to a net cash position.
The underlying longer term drivers of our end markets clearly remain strong with significant opportunities in both Energy and Water in the UK and in our other regions of operation. Cost effectiveness and energy efficiency remains at the forefront of our clients' priorities alongside meeting net zero goals. Similarly, our water efficiency technology offers a proven solution to the challenges of drought that are being seen in the UK and Europe.
Whilst we delivered a solid performance in water and post period end secured new student housing and care home customer wins in Spain, the unexpected UK Government announcement on net nutrient neutrality at the end of August has impacted our water business, as announced on 31 August, due to the regulatory uncertainty for clients and this is discussed in detail below.
On Energy, we previously saw signs of a return to normality for FY25 with recent contract awards including the Group's first NHS Trust and the Royal Borough of Kensington & Chelsea being evidence of renewed commitment from clients.
Notwithstanding this, from the end of September we have seen a marked change in the behaviour of some customers. Local Authorities and social housing landlord capital budgets continue to be under pressure with the Regulator of Social Housing, now reporting that approximately half of these organisations are planning to re-phase works to manage their annual budgets. The Regulator also highlighted that the expected low-point cash position for the sector will be in mid-2024. The substantial increase in costs on Government-mandated cladding and insulation projects and other works has seen landlords over-commit their annual capital budgets and as a result seek to slow down spend in the second half of their financial year (October - March) to manage their budgets.
Following their half-year budget reviews at end-September, we have recently received requests to review delivery plans and phasing on a number of material contracts due for delivery in our current financial year. While the final outcomes remain uncertain, we have taken the prudent view that a number of these contracts will be re-phased to move spend into FY25.
As a result of these anticipated delays, we envisage that revenue and profit for the current year will be materially lower than previously expected. With H1 revenue of £26.0m, the Group's order book stands at £146.2m of which taking a prudent view, approximately 25% is now anticipated to be delivered in the remainder of H2 FY24. Outturn margins are also expected to fall as the slowing of project delivery reduces the operational leverage that we have traditionally benefitted from as teams are required to stay on the project for longer periods. We continue to see strong cash conversion and expect to report a net cash position at the FY24 year end.
Importantly, no contracts have been cancelled and work continues, but we anticipate that there will be a need to slow down delivery against initial project plans, to enable a higher proportion of expenditure to fall into our clients' following financial year (April 2024 - March 2025).
The clients concerned are all long-term relationships with planned works across a number of years. While they have not discussed any changes to their future plans with us, given the analysis from the Regulator of Social Housing, we believe that it is prudent to assume there will also be slippage in their spending plans for FY25 and we are planning accordingly to ensure that both operating profit and net cash within the business are protected.
Financial performance
Our half year trading demonstrated the solid performance of the Group amidst an ongoing challenging economic environment. Revenue for the half increased by 7% to £26.0m (H123: £24.2m), demonstrating the Group's ability to convert our new business pipeline into contract wins and realised revenue.
In the period, average contract size was £2.45m (H123: £3.5m), reflecting growth in our water business, which has smaller individual contracts. Gross margin at 34.1% is in line with management expectations, reflecting the project mix in the period.
Adjusted EBITDA was £0.79m (H1 FY22: £3.98m), whilst PBT moved to an adjusted loss before tax of (£0.4m) (H123: profit £3.0m) reflecting the expected H2 bias for the year.
As we have noted previously, due to the nature of our customers and their procurement calendars, our contract delivery and revenues are traditionally weighted to the second half of our financial year.
As at 30 September, the Group's order book across Energy and Water stood at £146.2m
The Company remains well capitalised to fund growth in executing its order book through existing resources and operating cash generation. The Group saw a cash inflow in the first half of the year as it saw the unwind of its working capital investment at FY23. As at 30 September 2023, over 83% of accrued income at the FY23 year-end had been converted to cash. Net cash (excluding IFRS 16 liabilities) at the H1 period end was £0.5m.
Operational and strategic progress
Despite the challenges in the current economic environment, Eneraqua remains on course to deliver growth, albeit at a reduced pace to that anticipated in late August. We have seen improved cash generation as working capital begins to unwind and we expect this to continue for the remainder of the year. Recent contract awards evidence the significant opportunity for us to build further growth, while noting that many clients will continue to navigate significant budgetary constraints.
We have seen orders from new and existing clients which reflect the quality of service and value for money that our team delivers.
We have also completed our global production facility in Toledo, Spain, where product assembly is now under way with manufacturing of key components to commence in Q4. As previously outlined, this production facility will be responsible for the assembly and supply of the Control Flow product range. Having a central facility allows us better quality control, and also reduces production costs by 12% per unit.
Energy
In Energy, our turnkey retrofit district and communal heating systems, including ground and air source heat pump solutions, are an important tool for clients in meeting their sustainability and net zero goals. Ongoing wins across our geographies and product lines give confidence of continued environmental and political tailwinds supporting the Group's growth.
The acquisition of Mathewson Holdings in 2022 opened up new opportunities in the health and commercial sectors, which has resulted in the Group securing its first NHS Trust award with a £11.3m contract with the Kingston NHS Trust. Delivery will commence in late Q4 with the majority of revenue recognised in FY25.
The Mathewson team were instrumental in the winning of the contract through a competitive tender process. At the time of the acquisition, we flagged the opportunity to expand into the healthcare sector as a new opportunity thanks to their expertise in the area. This contract is a clear demonstration of our successful acquisition strategy in practice. We continue to pursue further contracts in healthcare and look forward to further growth in this sector.
In addition, post period end, we secured a £12.7m contract with the Royal Borough of Kensington & Chelsea for the replacement of an end of life gas-fired district heating system with a low-carbon heat-pump based system, underscoring the continued demand for our solutions in public, multi-occupancy buildings, where there is a need to retrofit and upgrade end-of-life heating systems that burn fossil fuels with a green alternative.
We also secured a £7.2m contract with a world-class museum, art gallery, and leisure centre complex for the replacement of an old gas-fired system again with a new low-carbon heat pump solution. These awards reflect the ongoing investment in low-carbon solutions, and the continued demand from both private and public bodies to transition towards heating systems that are cleaner, cost-effective and less damaging to the environment.
Water
Water harnesses the patented Control Flow HL2024 technologies which reduce water wastage and improve the efficiency of heating and hot water systems. Clients include water companies, developers, hotels, schools and leisure centres, with the products installed in both domestic and commercial applications.
By reducing water wastage, we can cut water consumption by up to 26% in homes and deliver energy bill savings through improved performance of heating and hot water systems. The benefits of the technology are becoming better understood by clients and we experienced growing demand in H1 FY24.
As reported, on 29 August 2023, the UK Government ("Government") announced its intention to change the legislation that governs development in nitrate-sensitive areas. While the initial proposals were blocked in Parliament, the Government has made clear its plan to press ahead with the proposed changes through a specific Parliamentary Bill later this year. This is expected to remove existing responsibilities and instead set up a centralised management scheme.
As communicated in the trading update, the continuing policy uncertainty has led clients to pause projects until there is greater clarity on their responsibilities and the details of the proposals are finalised. We believe this will be complete during FY25.
Notwithstanding this, the benefits of our water efficiency technologies are becoming better understood in terms of both reducing water wastage and cutting household utility bills. We expect this to create greater opportunities in the future.
Away from the UK, we have seen success and continued interest in our water technologies in both India and Spain.
In Spain we have completed installing Control Flow HL2024 in four hospitals and a number of student accommodation and care home sites and we have a healthy pipeline of new projects with interested parties in a variety of sectors.
In India, following our first agritech contract to provide clean energy, water efficient irrigation systems for the State of Uttarakhand, two further states have now adopted the solution. Follow-on discussions with Uttarakhand have been delayed due to the substantial flooding that has affected that state. Separately, the Indian Government is trialling our technologies in its domestic water programmes.
Acquisition Strategy
The acquisition of Mathewson Holdings completed in August 2022 brought complementary technical capability and a market presence in the health and commercial sectors. As already mentioned, this facilitated the award of our first major NHS Trust contract award of £11.3m. This substantiates our approach in making acquisitions that enhance our capabilities and enable access to new markets.
This was followed by our acquisition of the Installatiebedrijf Vriend B.V ("Vriend") business in Holland. The integration of this highly skilled and well-established team gives us a springboard for our Energy and Water solutions in the Netherlands. The growth opportunity in North Western Europe is large, with strong market drivers thanks to clearly defined targets and commitments to achieve Net Zero from governments in the region. Following the acquisition, we now have the requisite local accreditations which will enable us to access new tender opportunities and accelerate our growth strategy in an area where we see exciting potential.
People
The current labour market in the UK and Europe remains tight. We are increasingly utilising offshore solutions using our engineering team in India in order to manage workflows and costs.
As noted earlier, there is a risk of potential slippage in our energy projects due to client budgetary pressures. If these occur, then we will delay our planned recruitment and review existing teams to ensure they are right-sized. We maintain a constant review to ensure that staffing levels reflect our needs.
Outlook
The demand for our energy and water solutions remains strong. Whilst the recent award of several major contracts indicates that some client capital budgets are starting to return to normal, the increased inflation which started to impact in 2022/23 is continuing to have a negative impact and create budgetary pressures for others.
As noted above, this is expected to see some clients seek to delay project delivery resulting in revenue slippage into FY25, with continuing pressure in that year anticipated given the cautionary tone of the report from the Regulator of Social Housing. This is clearly disappointing as it follows the unexpected Government announcement on nutrient neutrality that affected our water business.
Despite the impact of these two issues, the Group expects to remain profitable for FY24 and report a net cash positive position at year end.
In both energy and water we are well placed to capitalise on growth, although for both FY24 and FY25 we anticipate this will be at a slower pace than previously expected. The Board remains confident that the longer-term opportunity for the business driven by the social and economic imperatives driving the carbon transition is unaffected. Our proven expertise in these areas offers important assurance to clients on the quality and performance of installations, thereby providing the confidence to make the move to low-carbon and water efficient solutions. This remains the inevitable direction of travel given the climate and water challenges that are now becoming apparent.
CFO Statement
I am pleased to report on Eneraqua's unaudited interim results for the six months ended 31 July 2023 which marked a return to a net cash position (excluding IFRS16 liabilities).
KPIs
The Group's financial Key Performance Indicators, which are aligned with its growth strategy, are revenue growth, adjusted EBITDA, adjusted EBITDA margin, adjusted PBT, R&D spend, cash conversion and ROCE.
| 31 Jul 2023 | 31 Jul 2022 | |
| Revenue | £26.0m | £24.2m |
| Revenue growth | 7% | 92% |
| EBITDA | £0.74m | £3.92m |
| Adjusted EBITDA | £0.79m | £3.98m |
| Adjusted EBITDA margin | 3.0% | 16.2% |
| Adjusted PBT | (£0.4m) | £3.0m |
| R&D spend | £0.5m | £1.07m |
| Cash conversion* | 640% | (56%) |
| ROCE | (0.4%) | 13.4% |
*Cash from operating activities/EBITDA
Revenue
Group revenues increased by 7% to £26.0m, (H1 2023: £24.2m). International revenues grew from £0.16m in H1 2023 to £0.57m in H1 2024.
As a result of the anticipated delays in both energy and water, we envisage that revenue and profit for the current year will be materially lower than previously expected.
The Group's order book stands at £146.2m of which, taking a prudent view, approximately 25% is now anticipated to be delivered in the remainder of H2 FY24.
Profits
The growth in revenue was offset by investment in headcount and infrastructure. Adjusted EBITDA was £0.8m, (H1 2023: £3.9m), with the Group achieving Adjusted EBITDA margins of 3%.
The Group reported a small statutory operating loss of £0.1m (H1 2023: £3.1m operating profit) and a statutory loss before tax of £0.4m (H1 2023: £2.9m profit before tax).
Cash flow & net cash
The Group saw a cash inflow in the first half of the year through the unwind of its working capital investment during FY23. As at 30 September over 83% of accrued income at the FY23 year-end had converted to cash.
Capital expenditure was limited in H1, being £0.4m of plant and equipment associated with the establishment of the manufacturing facility in Toledo, Spain. Intangible asset additions reflect the continued development of the HL2024 family of products. In addition, there was a further outflow of £0.3m for the acquisition of Vriend.
The Group ended the period with net cash (excluding IFRS 16 liabilities) of £0.5m compared with £0.2m of net debt at 31 July 2022 and £3.0m of net debt at end-FY23. The Group expects to end FY24 in a net cash position.
Acquisitions
On 3 April 2023 the Group acquired Vriend a business incorporated in the Netherlands, for total consideration of €0.522m. Vriend is a multidisciplinary installer of sustainable energy solutions with a focus on residential and commercial projects. The acquisition represents the Group's first step on their European acquisition strategy, providing the necessary accreditations and foundations to expand the Group offering into Northern Europe.
Adjusting Items
The only adjusting item in the period was share based payment charges of £0.1m (H1 2023: £0.1m).
Headcount
The Group's full time equivalent (FTE) employees at 31 July 2023 were 191 (31 July 22: 144). This growth reflects the addition of Vriend to the Group as well as continued recruitment in key areas to support the Group's growth strategy and ensure the management of key projects during the year.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 July
| Note | Six months to 31 Jul 2023 £'000 |
Six months to 31 Jul 2022 £'000 |
Twelve months to 31 Jan 2023 £'000 |
|
| Continuing operations | ||||
| Revenue | 3 | 26,047 | 24,246 | 55,074 |
| Cost of sales | (17,174) | (14,327) | (31,995) | |
| Gross profit | 8,873 | 9,919 | 23,079 | |
| Administrative expenses | (8,973) | (6,868) | (12,774) | |
| Other operating income | - | - | - | |
| Included within administrative expenses are: | ||||
| - Share based payment charge | (58) | (58) | (117) | |
| - Depreciation of property, plant and equipment | (297) | (666) | (655) | |
| - Depreciation of right-of-use assets | (204) | (14) | (196) | |
| - Amortisation of intangible assets | (333) | (191) | (573) | |
| Adjusted administrative expenses | (8,081) | (5,939) | (11,233) | |
| Adjusted EBITDA1 | 792 | 3,980 | 11,846 | |
| Operating profit | (100) | 3,051 | 10,305 | |
| Interest payable and similar expenses | (341) | (100) | (370) | |
| Profit before taxation | (441) | 2,951 | 9,935 | |
| Income tax | 540 | (757) | (1,420) | |
| Profit for the period from continuing operations | 99 | 2,194 | 8,515 | |
| Total profit for the period attributable to equity holders of the parent | ||||
| Total comprehensive income for the period attributable to equity holders of the parent | 99 | 2,194 | 8,515 | |
The accompanying notes form part of the condensed interim consolidated financial statements
1Adjusted EBITDA is considered to be a Key Performance Indicator and consistent with how the Group measures trading and cash generative performance. Note this is an Alternative Performance Measure and is a non-IFRS measure.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| Note | 31 Jul 2023 £'000 |
31 Jul 2022 £'000 |
31 Jan 2023 £'000 |
|
| Non-current assets | ||||
| Intangible assets | 9,255 | 8,505 | 8,703 | |
| Property, plant and equipment | 3,251 | 2,868 | 3,441 | |
| Right-of-use assets | 1,319 | 207 | 1,213 | |
| Deferred tax asset | - | - | - | |
| Total non-current assets | 13,825 | 11,580 | 13,357 | |
| Current assets | ||||
| Inventory | 2,924 | 1,236 | 2,557 | |
| Trade and other receivables | 6 | 26,825 | 13,148 | 29,226 |
| Cash and cash equivalents | 5,963 | 6,521 | 3,224 | |
| Total current assets | 35,712 | 20,905 | 35,007 | |
| TOTAL ASSETS | 49,537 | 32,485 | 48,364 | |
| Equity attributable to owners of the parent | ||||
| Called up share capital | 332 | 344 | 332 | |
| Share premium account | 10,113 | 10,113 | 10,113 | |
| Merger reserve | (5,490) | (5,490) | (5,490) | |
| Other reserves | 7 | (624) | 269 | |
| Retained earnings | 20,055 | 13,963 | 19,791 | |
| Total equity | 25,017 | 18,306 | 25,015 | |
| Current liabilities | ||||
| Borrowings | 7 | 1,457 | 2,310 | 2,793 |
| Trade and other payables | 16,866 | 7,248 | 15,154 | |
| Lease liabilities | 428 | 118 | 543 | |
| Total current liabilities | 18,751 | 9,676 | 18,490 | |
| Non-current liabilities | ||||
| Borrowings | 7 | 4,023 | 4,404 | 3,408 |
| Lease liabilities | 1,442 | 32 | 1,183 | |
| Deferred tax liability | 305 | 67 | 268 | |
| Total non-current liabilities | 5,769 | 4,503 | 4,859 | |
| Total liabilities | 24,520 | 14,179 | 23,349 | |
| TOTAL EQUITY AND LIABILITIES | 49,537 | 32,485 | 48,364 |
The accompanying notes form part of the condensed interim consolidated financial statements
CONSOLIDATED STATEMENT OF CASHFLOWS
For the six months ended 31 July
| GROUP | Six months to 31 Jul 2023 £'000 |
Six months to 31 Jul 2022 £'000 |
Twelve months to 31 Jan 2023 £'000 |
| Cash flow from operating activities | |||
| Profit for the financial period | 99 | 2,194 | 8,515 |
| Adjustments for: | |||
| Amortisation of intangible assets | 204 | 191 | 573 |
| Depreciation of property, plant and equipment | 297 | 666 | 655 |
| Depreciation on right-of-use assets | 333 | 14 | 196 |
| Interest payable | 367 | 100 | 313 |
| Lease liability finance charge | 13 | 19 | 57 |
| Taxation charge / (credit) | (540) | 756 | 1,420 |
| Corporation tax received / (paid) | (61) | - | 25 |
| Foreign exchange | (426) | - | (392) |
| Share based payment charge | 58 | 58 | 117 |
| Changes in working capital: | |||
| Increase in inventory | (3,150) | (50) | (1,371) |
| Decrease / (increase) in trade and other receivables | 8,430 | (759) | (16,837) |
| (Decrease) / increase in trade and other payables | (723) | (5,386) | 3,685 |
| Net (outflow) / increase from operating activities | 4,901 | (2,197) | (3,044) |
| Cash flow from investing activities | |||
| Purchase of intangible assets | (393) | (285) | (269) |
| Purchase of property, plant and equipment | (425) | (113) | (882) |
| Sale of property, plant and equipment | - | - | 3 |
| Acquisition of businesses - net of cash acquired | (312) | (1,319) | (1,620) |
| Net cash outflow from investing activities | (1,130) | (1,717) | (2,768) |
| Cash flows from financing activities | |||
| Proceeds from borrowings | - | 7,340 | 7,249 |
| Repayment of borrowings | (759) | (786) | (1,369) |
| Reduction of share capital | - | - | (12) |
| Interest paid | (177) | (100) | (313) |
| Repayment of lease liabilities | (96) | (89) | (261) |
| Dividends paid | - | - | (328) |
| Net cash (outflow) / inflow from financing activities | (1,032) | 6,365 | 4,966 |
| Net increase / (decrease) in cash and cash equivalents | 2,739 | 2,451 | (846) |
| Cash and cash equivalents at beginning of period | 3,224 | 4,070 | 4,070 |
| Cash and cash equivalents at the end of the period | 5,963 | 6,521 | 3,224 |
The accompanying notes form part of the condensed interim consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 July
| Share Capital | Share Premium | Merger Reserve | Other Reserves | Retained Earnings | Total Equity | ||
| £000 | £000 | £000 | £000 | £000 | £000 | ||
| At 1 February 2022 | 344 | 10,113 | (5,490) | (294) | 11,769 | 16,442 | |
| Profit for the period | - | - | - | - | 2,194 | 2,194 | |
| Total comprehensive profit for the period | - | - | - | - | 2,194 | 2,194 | |
| Other1 | - | - | - | (330) | - | (330) | |
| Total transaction with owners | - | - | - | (330) | - | (330) | |
| Balance at 31 July 2022 | 344 | 10,113 | (5,490) | (624) | 13,963 | 18,306 |
| At 1 August 2022 | 344 | 10,113 | (5,490) | (624) | 13,963 | 18,306 | |
| Profit for the period | - | - | - | - | 6,321 | 6,321 | |
| Total comprehensive profit for the period | - | - | - | - | 6,321 | 6,321 | |
| Reduction in share capital | (12) | - | - | - | - | (12) | |
| Dividends paid | - | - | - | - | (328) | (328) | |
| Other1 | - | - | - | 728 | - | 728 | |
| Total transaction with owners | (12) | - | - | 728 | (328) | 388 | |
| Balance at 31 January 2023 | 332 | 10,113 | (5,490) | 104 | 19,956 | 25,015 |
| At 1 February 2023 | 332 | 10,113 | (5,490) | 104 | 19,956 | 25,015 | |
| Profit for the period | - | - | - | - | 99 | 99 | |
| Other comprehensive income | - | - | - | - | - | - | |
| Total comprehensive profit for the period | - | - | - | - | 99 | 99 | |
| Other1 | - | - | - | (97) | - | (97) | |
| Total transaction with owners | - | - | - | (97) | - | (97) | |
| Balance at 31 July 2023 | 332 | 10,113 | (5,490) | 7 | 20,055 | 25,017 |
1Other includes share based payments, foreign exchange and other items
The accompanying notes form part of the condensed interim consolidated financial statements.
Notes to the financial information
1. BASIS OF PREPARATION
The figures for the six months ended 31 July 2023 and 31 July 2022 are unaudited and do not constitute statutory accounts.
As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing this Interim Financial Information. The accounting policies adopted are consistent with those applied by the Group in the preparation of the annual consolidated financial statements for the year ended 31 January 2023.
The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2023, but these do not have a material impact on the interim condensed consolidated financial statements of the Group. The financial information for the year ended 31 January 2023 set out in this interim report does not comprise the Group's statutory accounts as defined in section 434 of the Companies Act 2006.
The statutory accounts for the year ended 31 January 2023, which were prepared under international accounting standards in conformity with the requirements of the Companies Act 2006, have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.
1.1 Critical accounting judgements and key sources of estimation uncertainty
The preparation of condensed Interim Financial Information requires the Directors to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. There are no changes to critical accounting judgements and key sources of estimation uncertainty from those disclosed in the annual accounts for the year ended 31 January 2023.
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. Management has determined the operating segment based on the reports reviewed by the Board.
The Board considers that during the period ended 31 July 2023 the Group operated in the three business segments according to the geographical location of its operations and those being:
- United Kingdom
- Europe; and
- India
| Six months to 31 July 2023 | United Kingdom | Europe | India | 2023 | ||
| £'000 | £'000 | £'000 | £'000 | |||
| Revenue | 25,476 | 371 | 200 | 26,047 | ||
| Cost of sales | (16,802) | (283) | (89) | (17,174) | ||
| Gross Profit | 8,674 | 89 | 111 | 8,873 | ||
| Administrative expenses | (7,722) | (1,092) | (159) | (8,973) | ||
| Included within administrative expenses are: | ||||||
| - Share based payment charge | (58) | - | - | (58) | ||
| - Depreciation of property, plant and equipment | (143) | (151) | (3) | (297) | ||
| - Depreciation of right-of-use assets | (204) | - | - | (204) | ||
| - Amortisation of intangible assets | (268) | (65) | - | (333) | ||
| Adjusted administrative expenses | (7,049) | (876) | (156) | (8,081) | ||
| Adjusted EBITDA1 | 1,625 | (787) | (45) | 792 | ||
| Operating profit/(loss) | 952 | (1,003) | (49) | (100) | ||
| Interest payable and similar expenses | (325) | (18) | 3 | (341) | ||
| Profit/(Loss) before tax | 626 | (1,021) | (46) | (441) | ||
| Taxation | 464 | 82 | (6) | 540 | ||
| Profit/(Loss) after tax | 1,090 | (940) | (51) | 99 | ||
| Net Assets as at 31 July 2023 | ||||||
| Assets: | 37,373 | 11,647 | 517 | 49,537 | ||
| Liabilities | (12,254) | (11,702) | (564) | (24,520) | ||
| Net assets / (liabilities) | 25,119 | (55) | (47) | 25,017 |
| Six months to 31 July 2022 | United Kingdom | Europe | India | 2022 | ||
| £'000 | £'000 | £'000 | £'000 | |||
| Revenue | 24,087 | 66 | 93 | 24,246 | ||
| Cost of sales | (14,231) | (80) | (16) | (14,327) | ||
| Gross Profit | 9,856 | (14) | 77 | 9,919 | ||
| Administrative expenses | (5,976) | (801) | (91) | (6,868) | ||
| Included within administrative expenses are: | ||||||
| - Share based payment charges | (58) | - | - | (58) | ||
| - Depreciation of property, plant and equipment | (348) | (306) | (12) | (666) | ||
| - Depreciation of right-of-use assets | (14) | - | - | (14) | ||
| - Amortisation of intangible assets | (191) | - | - | (191) | ||
| Adjusted administrative expenses | (611) | (306) | (12) | (929) | ||
| Adjusted EBITDA1 | 4,491 | (509) | (2) | 3,980 | ||
| Operating profit/(loss) | 3,880 | (815) | (14) | 3,051 | ||
| Interest payable and similar expenses | (83) | (17) | - | (100) | ||
| Profit/(Loss) before tax | 3,797 | (832) | (14) | 2,951 | ||
| Taxation | (756) | - | (1) | (757) | ||
| Profit/(Loss) after tax | 3,041 | (832) | (15) | 2,194 | ||
| Net Assets as at 31 July 2022 | ||||||
| Assets: | 27,679 | 3,748 | 242 | 31,669 | ||
| Liabilities | (11,998) | (1,348) | (17) | (13,363) | ||
| Net assets / (liabilities) | 15,681 | 2,400 | 225 | 18,306 |
| Twelve months to 31 January 2023 | United Kingdom | Europe | India | 2023 | ||
| £'000 | £'000 | £'000 | £'000 | |||
| Revenue | 54,546 | 77 | 451 | 55,074 | ||
| Cost of sales | (32,525) | 718 | (188) | (31,995) | ||
| Gross profit | 22,021 | 795 | 263 | 23,079 | ||
| Administrative expenses | (11,249) | (1,232) | (293) | (12,774) | ||
| Included within administrative expenses are: | ||||||
| - Share based payment charges | (117) | - | - | (117) | ||
| - Depreciation of property, plant and equipment | (350) | (288) | (17) | (655) | ||
| - Depreciation of right-of-use assets | (196) | - | - | (196) | ||
| - Amortisation of intangible assets | (505) | (68) | - | (573) | ||
| Adjusted administrative expenses | (10,081) | (876) | (276) | (11,233) | ||
| Adjusted EBITDA1 | 11,940 | (81) | (13) | 11,846 | ||
| Operating profit/(loss) | 10,772 | (437) | (30) | 10,305 | ||
| Interest payable and similar expenses | (98) | (271) | (1) | (370) | ||
| Profit/(Loss) before tax | 10,674 | (708) | (31) | 9,935 | ||
| Taxation | (1,378) | (40) | (2) | (1,420) | ||
| Profit/(Loss) after tax | 9,296 | (748) | (33) | 8,515 | ||
| Net Assets | ||||||
| Assets: | 36,995 | 10,840 | 529 | 48,364 | ||
| Liabilities | (12,869) | (9,955) | (525) | (23,349) | ||
| Net assets | 24,126 | 885 | 4 | 25,015 | ||
3. REVENUE
| Six months to 31 Jul 2023 £'000 |
Six months to 31 Jul 2022 £'000 |
Twelve months to 31 Jan 2023 £'000 |
||
| United Kingdom | 25,476 | 24,087 | 54,546 | |
| Europe | 371 | 66 | 77 | |
| Rest of the World | 200 | 93 | 451 | |
| 26,047 | 24,246 | 55,074 |
4. OPERATING PROFIT
Operating profit from continued operations is stated after charging / (crediting):
| Six months to 31 Jul 2023 £'000 |
Six months to 31 Jul 2022 £'000 |
Twelve months to 31 Jan 2023 £'000 |
||
| Depreciation of property, plant and equipment | 297 | 666 | 655 | |
| Depreciation of right-of-use assets | 333 | 14 | 196 | |
| Amortisation of fixed assets | 204 | 191 | 573 | |
| Share based payments | 58 | 58 | 117 | |
| Exchange differences | - | 75 | - |
5. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is calculated by dividing the profit or loss for the year by the weighted average number of ordinary shares in issue during the period.
| Six months to 31 Jul 2023 | Six months to 31 Jul 2022 | Twelve months to 31 Jan 2023 | ||
| Profit for the period from continuing operations - £'000 | 99 | 2,194 | 8,515 | |
| Weighted number of ordinary shares in issue | 33,388,788 | 34,438,730 | 33,388,788 | |
| Weighted number of fully diluted ordinary shares in issue | 332,673 | 332,673 | 332,673 | |
| Basic earnings per share from continuing operations - pence | 0.30 | 6.37 | 25.50 | |
| Diluted earnings per share from continuing operations - pence | 0.30 | 6.31 | 25.25 |
6. TRADE AND OTHER RECEIVABLES
| 31 Jul 2023 £'000 |
31 Jul 2022 £'000 |
31 Jan 2023 £'000 |
||
| Trade receivables | 4,895 | 4,916 | 3,492 | |
| Contract assets | 3,119 | - | 459 | |
| Other debtors | 2,671 | 1,894 | 2,352 | |
| Prepayments and accrued income | 16,140 | 6,338 | 22,778 | |
| Tax recoverable | - | - | 145 | |
| 26,825 | 13,148 | 29,226 |
7. BORROWINGS
| 31 Jul 2023 £'000 |
31 Jul 2022 £'000 |
31 Jan 2023 £'000 |
||
| Current | 1,457 | 2,310 | 2,793 | |
| Non-current | 4,023 | 4,404 | 3,408 | |
| 5,480 | 6,714 | 6,201 |
Analysis of maturity of loans is given below:
| 31 Jul 2023 £'000 |
31 Jul 2022 £'000 |
31 Jan 2023 £'000 |
||
| Amounts falling due within one year | ||||
| Other loans | 1,457 | 2,310 | 1,469 | |
| Amounts falling due 1-2 years | ||||
| Other loans | 1,821 | 1,612 | 1,821 | |
| Amounts falling due 2-5 years | ||||
| Other loans | 2,202 | 2,792 | 2,911 | |
| 5,480 | 6,714 | 6,201 |
Other loans relate to a £6,000,000 facility provided by HSBC to Cenergist Limited and a €1,500,000 facility provided to Cenergist Spain SL by Instituto De Finanzas De Castilla-La Mancha S.A.U. ("CLM") and are secured by fixed and floating charges over the assets of the Company and by cross guarantees from the Company's subsidiary undertakings.
Interest on the HSBC facility is at a rate of 3.450% over the Bank of England Base Rate with the repayment period being 48 months from date of individual tranche drawdown.
Interest on the CLM facility is at a rate of 3.50% with the repayment period being 84 months from date of individual tranche drawdown.
8. RECONCILIATION OF MOVEMENT IN NET DEBT
| At 1 February 2022 | Non-cash changes | Cashflow | At 31 July 2022 | |
| £'000 | £'000 | £'000 | £'000 | |
| Cash at bank | 4,070 | - | 2,451 | 6,521 |
| Borrowings - current | - | - | (2,310) | (2,310) |
| Borrowings - non-current | - | - | (4,404) | (4,404) |
| Lease liability - current & non current | (191) | (48) | 89 | (150) |
| Net Cash / (Debt) | 3,879 | (48) | (4,174) | (343) |
| Adjusted Net Cash / (Debt)2 | 4,070 | - | (4,263) | (193) |
| At 1 August 2022 | Non-cash changes | Cashflow | At 31 January 2023 | |
| £'000 | £'000 | £'000 | £'000 | |
| Cash at bank | 6,521 | - | (3,297) | 3,224 |
| Borrowings - current | (2,310) | - | 841 | (1,469) |
| Borrowings - non-current | (4,404) | - | (328) | (4,732) |
| Lease liability - current & non current | (150) | (1,226) | (350) | (1,726) |
| Net Cash / (Debt) | (343) | (1,226) | (3,134) | (4,703) |
| Adjusted Net Cash / (Debt)2 | (193) | - | (2,784) | (2,977) |
| At 1 February 2023 | Non-cash changes | Cashflow | At 31 July 2023 | |
| £'000 | £'000 | £'000 | £'000 | |
| Cash at bank | 3,224 | - | 2,739 | 5,963 |
| Borrowings - current | (2,793) | - | 1,336 | (1,457) |
| Borrowings - non-current | (3,408) | - | (615) | (4,023) |
| Lease liabilities - current & non-current | (1,726) | 31 | (175) | (1,870) |
| Net Cash / (Debt) | (4,703) | 31 | 3,285 | (1,387) |
| Adjusted Net Cash / (Debt)2 | (2,977) | - | 3,460 | 483 |
2Adjusted Net Cash / (Debt) is considered to be a Key Performance Indicator and consistent with how the Group measures net cash / debt. It is calculated as cash at bank less borrowings. Note this is an Alternative Performance Measure and is a non-IFRS measure.
9. BUSINESS COMBINATION
On 3 April 2023 Cenergist Spain SL acquired all of the share capital of Installatiebedrijf Vriend B.V. ("Vriend"). Vriend provides low carbon solutions to customers in the Netherlands.
Background and Rationale
Vriend is a renowned multidisciplinary installer of sustainable energy solutions with a focus on residential and commercial projects. The acquisition represents the Group's first step on their European acquisition strategy, providing the necessary accreditations and foundations to expand the Group offering into Northern Europe.
Consideration
The total consideration for the acquisition was €0.522 million. The consideration was structured as follows:
Initial consideration, payable in cash on completion of €0.485 million; and
Working capital adjustment of €0.037 million, paid within three months of acquisition.
The initial estimates of the fair value of the assets acquired and liabilities assumed of Vriend at the date of acquisition give rise to goodwill of €0.376m, relating to accumulated "know how" and expertise of the business and its staff. None of the goodwill is expected to be deducted for income tax purposes.
Note that this assessment is not yet finalised.
10. EVENTS SUBSEQUENT TO PERIOD END
The Group has not identified any subsequent event to be reported.
[3] https://www.gov.uk/government/publications/quarterly-survey-for-q1-april-to-june-2023-to-2024/quarterly-survey-for-q1-april-to-june-2023-to-2024-summary-accessible-version
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IR FLFEAIELILIV