Inspired PLC — Earnings Release 2013

Mar 24, 2014

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RNS Number : 9758C

Inspired Energy PLC

24 March 2014

24th March 2014

Inspired Energy plc

("Inspired" or the "Group")

Final Results for the year ended 31 December 2013

Inspired Energy plc (AIM: INSE), a leading energy procurement consultant to UK corporates, announces its final results for the year ended 31 December 2013.

HIGHLIGHTS

Financial Highlights

·              Revenue increased 45% to £7.62 million (2012: £5.26 million)

·              EBITDA before exceptional costs and share-based payment costs increased 34% to £3.55 million (2012: £2.64 million)

·              Operating profit for the year was £1.98 million (2012: £1.17 million)

·              Adjusted EPS* increased 40% to 0.67 pence (2012: 0.48 pence)

·              Profit before tax of £1.75 million (2012: £0.89 million)

·              Record period of new sales, continuing into the new year

·              Order book grew 23% to £11.0 million (2012: £8.9 million)

·              The SME division contributed revenue in the year of £1.35 million (2012: £0.17 million)

·              Final dividend proposed of 0.12 pence per share (interim dividend of 0.05 pence per share)

* Excluding amortisation, acquisition cost, share based payments and restructuring cost.

Operational Highlights

·              Strong organic growth within the SME sector following launch of EnergiSave, which has continued into 2014

·              Further diversification of customer base into new sectors

·              Significant investment in staffing to drive revenue growth with average headcount in year increasing 22% to 66 (31 December 2012: 54)

·              Additional investment in bespoke core IT platform to optimise sales and client servicing

·              Successful introduction of new products in the year, including the new product set within the SME division and the Multi-Customer Management Solution in the Corporate division

·              High client retention levels maintained

§  Renewals across the Group at 85%

§  Risk Management division achieved 100% retention

·              Post period end acquisition of two SME focused businesses, adding an online platform and broadening the client base, complementing the existing EnergiSave business.

Commenting on the results, Janet Thornton, Managing Director, said:  "2013 was a stellar year for Inspired, one which has put the Group in a very strong position to build on this solid growth into 2014. The team grew by 22% and the record results we have delivered are testament to their hard work and commitment to the business. The current year has started well and the Group is ahead of the Board's expectations, with a strong pipeline for the year ahead.

"Inspired is in a leading position to continue to take advantage of the strong, structural growth trend we are witnessing in the energy consultancy sector, which will further benefit the Group in the years to come as businesses increasingly look to energy consultancies to help them with their energy procurement negotiations and strategies.

"We look forward to a successful 2014 and the opportunities of building the Group organically and through further acquisitions within the sector."

For further information, please contact:   

Inspired Energy plc Janet Thornton, Managing Director David Foreman, Finance Director	www.inspiredenergy.co.uk +44 (0) 1772 689250 +44 (0) 7717 707 201
Shore Capital Bidhi Bhoma Edward Mansfield	+44 (0) 20 7408 4090
Gable Communications Justine James John Bick	+44 (0) 20 7193 7463 +44 (0) 7525 324431 [email protected]

CHAIRMAN'S STATEMENT

I am pleased to report on the final results for the year ended 31 December 2013, which has been a significant year for Inspired Energy. Having set out to continue to deliver on our growth strategy, the team has once again exceeded expectations, achieving record turnover and profits through significantly increasing the customer base by continuing to deliver an excellent level of service and strategic advice.

The positive work across the entire team is clearly demonstrated in the financial results as the Group has achieved record results with profits before tax increasing by 96% to £1.75 million (2012: £0.89 million and revenue increasing by 45% to £7.62 million (2012: £5.26 million). Earnings before interest, taxation, exceptional costs, depreciation, amortisation and share-based payments have increased by 34% to £3.55 million (2012: £2.64 million).

On the back of this performance, the board is delighted to propose at final dividend of 0.12 pence per share, subject to approval at the AGM in June. This, combined with the interim dividend payment of 0.05 pence per share, will provide a total dividend for the year of 0.17 pence per share, a 55% increase on 2012 (2012: 0.11 pence per share).

As part of the ongoing growth strategy the Board continues to review acquisition targets which can enhance the business adding to our technical or service capability, sector specialism and geographic footprint. Post the financial year end, in March 2014, we concluded the acquisition of two SME focused businesses which we believe will enhance the Group's SME division and complement the existing EnergiSave business. The two businesses, Simply Business Energy Limited and KWH Consulting Limited are expected to be earnings neutral in year one and earnings enhancing thereafter.

The current year has started well and the Group is ahead of Board expectations in the early part of the year. The Corporate Order Book continues to grow and as at 28 February 2014, the Order Book has increased by a further £0.3 million to £11.3 million. The SME division has also continued to perform strongly.

Finally I would like to thank the board and the Inspired Group staff for their hard work in 2013 and we look forward to building on this success in 2014.

Bob Holt

Chairman

24 March 2014

MANAGING DIRECTOR'S STATEMENT

Performance

The Board is delighted with the performance of the Group in the year to 31 December 2013.

Financial Highlights

	2013 (£'000)	2012 (£'000)	Change (%)
Revenue	7,618	5,261	45%
Gross profit	6,609	4,977	33%
EBITDA*	3,548	2,641	34%
Profit Before Tax	1,746	890	96%
Net Debt	2,126	1,825	16%
Corporate Order Book	10,972	8,893	23%

The Group's Corporate division went from strength to strength, demonstrating impressive growth:

•      Turnover increased 22% to £6.2 million (2012: £5.1 million)

•      Clients increased 32% to 825 (2012: 625)

•      Order Book increased 23% to £11.0 million (2012: £8.9 million)

In addition, the relatively new SME division has performed extremely well and has grown rapidly following the introduction of the new business stream in EnergiSave in the middle of 2013. Turnover for SME division increased to £1.3 million from £0.2 million in 2012.

The Group has introduced several new products in the year, including the new product set within the SME division and the Multi-Customer Management Solution in the Corporate Division. Both have been well received and have outperformed initial Management expectations in the period.

Significant investment in staff has also been made possible by the strong performance of the Group and additional members of staff have been added within central functions such as finance, administration, marketing and HR as well as significant sales force additions, particularly within the SME division.

These results demonstrate the strong growth curve that the business is on and represent an ideal platform from which to continue the organic growth of the business. The Board believes that the growth is a testament to the hard work and talent of our staff and to the strength of our customer proposition.

Cash and Borrowings

As at 31 December 2013, the Group had cash balances of £0.93 million. As at this date, the Group had outstanding balances on its senior term debt of £3.06 million, for which annual capital repayments are £0.70 million.

Net debt stood at £2.13 million, which is an increase of £0.3 million in comparison to 31 December 2012. The increase in net debt reflects a year in which the cash generation of the Group was offset by the payment of £1.10 million of contingent consideration to the vendors of DEP.

Following the year end, the Group extended its borrowings with Santander by drawing down £1.5 million of the committed revolving credit facility made available to the Group at the time of the re-financing of the Group in March 2013. The drawdown was undertaken in order to provide additional working capital to the Group which will be used, primarily, to invest in the continued growth of the SME division.  Underlying cash generation from the Corporate division is expected to remain strong and will fund the final deferred consideration due to the vendors of DEP and the consideration in respect of the acquisition of KWH.  Finally, the Group is due to move to quarterly corporation tax payments during the current year.

Dividends

The Board is delighted to propose a final dividend of 0.12 pence per share subject to approval at the Annual General Meeting of the Group. Following the payment of an interim dividend of 0.05 pence per share, the total dividend payable for the year ended 31 December 2013 is 0.17 pence per share. This represents an increase of 55% over the dividend payable in respect of 31 December 2012, being 0.11 pence per share.

The ex-dividend date is 4 June 2014 with a record date of 6 June 2014. The dividend will be paid to shareholders on 4 July 2014.

Corporate Order Book

Order Book Value

The Group is proud to be able to report further Corporate Order Book growth in the year to a record £11.0 million. This represents an increase of £2.1 million in the year in absolute terms and shows a CAGR of 53 per cent over the two years since IPO.

The Order Book is defined as the aggregate revenue expected by the Group in respect of signed contracts between an Inspired client and an energy supplier for the remainder of such contracts (where the contract is live) or for the duration of such contracts (where the contract has yet to commence). No value is ascribed to expected retentions of contracts.

The Order Book only relates to the Corporate Division, and does not include any SME revenue or contracts within it. The growth of the Order Book provides an indicator of the latent growth of the business which has yet to be recognised as revenue of the Group. This is because no revenue is recognised by Inspired's Corporate Division until the energy is physically consumed by the client.

Order Book Sales

Order Book Sales values represent the aggregate expected revenue due to the Group from contracts secured within a defined period. Expected revenue is calculated as the expected commission due to the Group from signed contracts between a client and an energy supplier for an agreed consumption value at an agreed commission rate.

An Order Book Sales value which is in excess of revenue recognised, within a defined period, will increase the Order Book of the Group, providing an indicator of expected future growth already secured by the Group. In 2013, Order Book Sales were 42% in excess of revenue recognised in the year, which is manifested in the increase of the Order Book of £2.1 million.  

Acquisitions

In order to create an enlarged and improved business, we believe that potential acquisition targets should offer one or more of the following criteria:

•     Additional technical and/or service capability

•     Sector specialism and diversification

•     Increased geographic footprint

The Board continues to seek acquisition opportunities which fit with the strategy above and augment the Group's services, products or markets and was delighted to complete the acquisitions of SBE and KWH in March 2014. We look forward to integrating these businesses in 2014.

Outlook

The Board believes that the Group is in a very strong position to continue with the impressive organic growth demonstrated in 2013. The current year has started well and the Group is ahead of Board expectations in the early part of the year. The Corporate Order Book continues to grow and as at 28 February 2014, the Order Book has increased by a further £0.3 million to £11.3 million. The SME division has also continued to perform strongly.

The Board further believes that there remains a strong, structural growth trend within the energy consultancy sector which will further benefit the Group in the years to come as businesses increasingly look to energy consultancies to help them with their energy procurement negotiations and strategies.

In addition, the Board expects to see further consolidation of the market and believes that the Group can benefit from this as a consolidator within the UK market.

The Board looks forward to another year of growth and development of the business.

Janet Thornton

Managing Director

24 March 2014

INSPIRED ENERGY PLC

The Group

Inspired Energy Plc provides energy procurement consultancy to a range of UK business customers. The Group's core services are primarily the review, analysis and negotiation of gas and electricity contracts on behalf of our clients. In addition to providing expert consultancy on the negotiation of energy contracts, the Group provides ongoing services to our clients throughout the life of each contract; validating customer bills and advising of unexpected usage trends. Furthermore, the Group provide, a variety of additional services such as advice in relation to Power Purchasing Agreements for customers who produce their own energy, retrospective billing audits and energy reduction and management strategies.

Customers

Through optimising energy procurement on behalf of its clients Inspired enables them to achieve greater certainty of their energy costs and in many cases delivers significant savings. The Inspired Group currently manages and negotiates gas and electricity supply agreements for approximately 11,000 meters across the UK, operating on behalf of c.3,200 customers.

Corporate Division

The Corporate Division, which includes Inspired Energy Solutions and DEP delivers core services which are the review, analysis and negotiation of gas and electricity contracts on behalf of corporate clients. In addition, a number of ancillary services are offered to clients.

Energy Review and Benchmarking

The Group's team of energy analysts review the historical energy consumption and purchasing on behalf of clients in order to understand and analyse the client's energy needs. Following this review and in-depth discussions with clients regarding their individual requirements, energy purchasing goals and appetite for risk, a bespoke, tailored energy purchasing strategy is designed.

Negotiation

Based on the agreed tailored purchasing strategy the analyst team will negotiate, on the client's behalf, with energy suppliers ensuring that the client has a choice of the most appropriate energy contracts available in the market. The choice of contracts available to Inspired clients include a number of contracts that are exclusive to the Group which have created in partnership with the energy suppliers. Typically these include a range of caveats, carve outs or options which offer the client increased flexibility within a fixed price framework - allowing our clients to fix their budget at the time of purchase but with the opportunity to benefit from any fall in commodity prices.

All tenders also include a thorough review and explanation of the additional pass through charges applicable on an energy contract, ensuring that the client is fully informed and aware of all costs prior to signing an energy contract. The contracts run for between 12 and 36 months.

Bill Validation

Within the Group the bureau team is responsible for the administration of new energy contracts. In addition, the Group offers a bill validation service to all clients. Experienced bureau managers, utilising a bespoke end-to-end contract management IT platform, analyse each client's energy bills throughout the period of their contract, confirming that usage, pass through charges and tariffs are all correctly charged to their energy supplier.

In instances of dispute, the bureau team act on behalf of the client to resolve queries and ensure that only valid charges are paid.

Additional Services

In addition to the above core services, a number of additional services are offered to customers.

•      CRC Reporting - production of management information for customers to comply with Carbon Reduction Commitment legislation.

•      Historical Auditing - review of last six years' energy procurement charges to ensure no over-charges have been made. The Group operates on a share of savings revenue model in respect of rebates achieved.

•      Power Purchasing Agreements - the Group is able to trade green energy certificates on behalf of renewable energy producers.

Risk Managed Trading

Managed Frameworks

The Group's Corporate division benefits from a market leading trading team of six analysts, who actively focus on high volume consumers and allow customers to operate more complex, long term, energy 'frameworks' based on agreed risk management strategies.

Comprehensive Approach

Inspired's approach to Risk Management is comprehensive. The team actively manages the entire energy procurement process from wholesale commodity level to total cost at meter. This is necessary in order to create a succinct, robust and dynamic risk policy tailored to each individual client. Prior to commencement, Inspired undertakes a strategy workshop with clients to establish financial objectives, risk parameters and market engagement rules.

Market Leading Terms

Inspired's risk management team ensures clients are offered market leading supplier terms which supports the trading strategy, ensuring each client meets their specific procurement objectives.

'Whole of Market' Access

Combined with the team's considerable industry experience and knowledge, the trading team uses all of the LEBA broker platforms and exchanges for the energy markets across the UK & Europe, which ensures all opportunities to mitigate price risk are identified and utilised. In addition to these platforms, the team also has access to leading-edge news and commentary, technical analysis, statistical models and other proprietary tools which helps provide clients with clear views on market behaviour and what future movements could be.

Budget Clarity

All of our risk managed products are supported by sophisticated internal systems which generate pricing automatically so clients are always aware of their total budgetary position.

SME Division

EnergiSave

EnergiSave was launched in October 2012 and forms the majority of the Group's SME division. EnergiSave's energy consultants contact prospective clients to offer reduced tariffs and contracts based on the unique situation of the customer.

Leads are generated and managed by the Group's internally generated, bespoke CRM and case management IT system. Tariffs are offered from a range of suppliers and the Group is actively working with new suppliers to increase the range of products available to SME clients.

KWH Consulting & Simply Business Energy

On 17 March 2014, the Group added to the SME division through the acquisition of two complementary businesses, Simply Business Energy Limited ("SBE") and KWH Consulting Limited ("KWH"). The businesses and key personnel acquired add value to the existing division through their technical capability, management of data and existing supplier relationships within the SME market.

SBE is a relatively new business which has developed a fully automated, fully operational online quoting platform for SME customers looking to switch their energy supplier and it has agreements in place with the majority of energy suppliers within the SME sector. The web enabled capability will enhance both our offering to prospective new, online, customers, and the operations internally of the EnergiSave business as it will replace the internally generated, developmental pricing matrix currently used by the division. It is believed that this will significantly simplify the process of providing quotes to EnergiSave customers and provide efficiencies throughout the SME division.

KWH operates in the SME sector, with a focus on serving mid-market SME clients. This complements EnergiSave, which has a focus on SMEs with 1 to 25 employees. In addition, KWH operates an umbrella broker scheme for British Gas and other energy suppliers, which will further accelerate the development of EnergiSave.

By filling out the areas in which the Group can operate in the SME space through online capability, broker channels and in different customer segments, the enlarged division will benefit from increased saturation of customer data purchased. This should see the return on investment from acquired leads increase over time as each customer targeted has a specific product set suited to its individual needs.

In addition to the complementary nature of the two businesses, the Group will benefit significantly from the expertise and industry knowledge of the founders and co-shareholders in Simply, Steve Fletcher and Paul Fox. Steve was formerly Managing Director of Npower and Bizzenergy and brings with him a wealth of energy supply side knowledge and insight. Paul was previously an executive at Npower and Sales Director at Bizzenergy and provides significant expertise in the operation of dealer channels and provides excellent links to energy suppliers in the SME space.

GROUP INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2013

		Year	Year
		ended	ended
		31 December	31 December
		2013	2012
	Note	£	£
Revenue		7,618,325	5,260,518
Cost of sales		(1,009,291)	(283,540)
Gross profit		6,609,034	4,976,978
Administrative expenses		(4,629,475)	(3,804,087)
Operating profit		1,979,559	1,172,891
Analysed as:
Earnings before exceptional costs, depreciation,
amortisation and share-based payments costs		3,548,680	2,641,307
Exceptional costs	3	(358,700)	(429,499)
Depreciation		(49,857)	(33,458)
Amortisation of intangible assets		(948,466)	(793,361)
Share based payment costs		(212,098)	(212,098)
		1,979,559	1,172,891
Finance expenditure		(224,004)	(256,123)
Other financial items		(9,743)	(26,358)
Profit before income tax		1,745,812	890,410
Income tax expense	4	(324,462)	(251,242)
Profit for the period and total
comprehensive income		1,421,350	639,168
Attributable to:
Equity holders of the company		1,421,350	639,168
Basic earnings per share attributable to the
equity holders of the company (pence)	5	0.35	0.16
Diluted earnings per share attributable to the
equity holders of the company (pence)	5	0.33	0.16

The profit for the period per the income statement is also the total comprehensive profit for the period and consequently no separate statement of comprehensive income is presented.

GROUP STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2013

		31 December	31 December
		2013	2012
	Note	£	£
ASSETS
Non-current assets
Intangible assets	7	2,332,828	2,892,956
Property, plant and equipment	6	296,792	198,266
		2,629,620	3,091,222
Current assets
Trade and other receivables		3,369,000	2,437,732
Cash and cash equivalents		930,481	1,070,468
		4,299,481	3,508,200
Total assets		6,929,101	6,599,422
LIABILITIES
Current liabilities
Trade and other payables		707,099	541,275
Bank borrowings		700,000	524,000
Contingent consideration		608,145	1,000,000
Current tax liability		621,079	870,319
		2,636,323	2,935,594
Non-current liabilities
Bank borrowings		2,356,746	2,371,867
Trade and other payables		313,225	102,959
Contingent consideration		-	501,145
Interest rate swap		4,766	26,358
Deferred tax liability	8	58,895	253,612
		2,733,632	3,255,941
Total liabilities		5,369,955	6,191,535
Net assets		1,559,146	407,887
EQUITY
Share capital		512,162	505,190
Share premium account		1,203,970	1,043,606
Merger relief reserve		8,623,237	8,623,237
Share based payment reserve		291,616	212,098
Retained earnings		2,310,934	1,406,529
Reverse acquisition reserve		(11,382,773)	(11,382,773)
Total equity		1,559,146	407,887

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2013

				Share-			Total
		Share	Merger	based		Reverse	Shareholders
	Share	Premium	Relief	payment	Retained	Acquisition	Equity/
	Capital	Account	Reserve	reserve	Earnings	Reserve	(Deficit)
	£	£	£	£	£	£	£
Balance at
1 January 2012	442,690	137,950	7,900,023	-	767,361	(11,382,773)	(2,134,749)
Profit and total
comprehensive income
for the period	-	-	-	-	639,168	-	639,168
Shares issued (4 April 2012)	35,714	964,286	-	-	-	-	1,000,000
Share issue expenses	-	(58,630)	-	-	-	-	(58,630)
Share based payment cost	-	-	-	212,098	-	-	212,098
Shares issued in respect
of consideration
(16 April 2012)	26,786	-	723,214	-	-	-	750,000
Total Transactions
with owners	62,500	905,656	723,214	212,098	-	-	1,903,468
Balance at
31 December 2012	505,190	1,043,606	8,623,237	212,098	1,406,529	(11,382,773)	407,887
Profit and total
comprehensive income
for the period	-	-	-	-	1,421,350	-	1,421,350
Shares issued (26 March 2013)	1,162	26,726	-	-	-	-	27,888
Shares issued (20 August 2013)	3,486	80,183	-	-	-	-	83,669
Shares issued (24 September
2013)	2,324	53,455	-	-	-	-	55,779
Share based payment cost	-	-	-	212,098	-	-	212,098
Share options lapsed/
exercised				(132,580)	132,580		-
Dividends Paid	-	-	-	-	(649,525)	-	(649,525)
Total Transactions
with owners	6,972	160,364	-	79,518	(516,945)	-	(270,091)
Balance at
31 December 2013	512,162	1,203,970	8,623,237	291,616	2,310,934	(11,382,773)	1,559,146

Merger relief reserve

Merger relief reserve represents the premium arising on shares issued as part or full consideration for acquisitions.

Reverse acquisition reserve

The reverse acquisition reserve relates to the reverse acquisition between Inspired Energy Solutions Limited and Inspired Energy plc on 28 November 2011.

Share based Payment Reserve

The share based payment reserve is a reserve to recognise those amounts in equity in respect of share-based payments.

GROUP STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2013

	Year	Year
	ended	ended
	31 December	31 December
	2013	2012
	£	£
Cash flows from operating activities
Profit before income tax	1,745,812	890,410
Adjustments
Depreciation	49,857	33,458
Amortisation	948,466	793,361
Share based payment costs	212,098	212,098
Contingent consideration	207,000	-
Finance expenditure	224,004	256,123
Other financial items	9,743	26,358
Cash flows before changes in working capital	3,396,980	2,211,808
Movement in working capital
Increase in trade and other receivables	(931,268)	(1,131,870)
Increase in trade and other payables	328,757	44,176
Cash generated from operations	2,794,469	1,124,114
Income taxes paid	(768,419)	(414,333)
Net cash flows from operating activities	2,026,050	709,781
Cash flows from investing activities
Contingent consideration paid	(1,100,000)	-
Acquisition of a subsidiary, net of cash acquired	-	(844,922)
Payments to acquire property, plant and equipment	(137,847)	(83,389)
Payments to acquire intangible assets	(388,338)	(182,666)
Net cash used in investing activities	(1,626,185)	(1,110,977)
Cash flows from financing activities
New bank loans (net of debt issue costs)	510,879	-
Proceeds from equity fundraising	167,336	941,370
Repayment of bank loans	(350,000)	(507,000)
Interest on bank loans paid	(228,982)	(212,829)
Dividends paid	(649,525)	-
Repayment of hire purchase agreements	10,440	(8,280)
Net cash (used in)/from financing activities	(539,852)	213,261
Net decrease in cash and cash equivalents	(139,987)	(187,935)
Cash and cash equivalents brought forward	1,070,468	1,258,403
Cash and cash equivalents carried forward	930,481	1,070,468

NOTES TO THE GROUP FINANCIAL STATEMENTS

1.   Basis of preparation

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the year ended 31 December 2013. The auditors reported on those accounts; their report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2013 will be delivered to the registrar of Companies following the Company's Annual General Meeting.

Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), this announcement in itself does not contain sufficient information to comply with IFRS. Details of the accounting policies are those set out in the annual report for the year ended 31 December 2012. These accounting policies have remained unchanged for the financial year ended 31 December 2013.

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement, Managing Director's Statement and Inspired Energy Group Report. The financial position of the Group, its cash flows and liquidity position are described in the Managing Director's Statement.

The Group has sufficient financial resources to continue to operate for the foreseeable future. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully.

The Group's forecasts, which have been prepared for the period to 31 December 2015 after taking into account the contracted orders book, future sales performance, expected overheads, capital expenditure and debt service costs, show that the Group should be able to operate profitably and within the current financial resources available to the Group.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Group financial statements.

2.   Segmental information

Revenue and segmental reporting

The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the group's executive directors. Operating segments for the year to 31 December 2013 were determined on the basis of the reporting presented at regular board meetings of the group. The segments comprise:

The corporate division ("corporate")

This sector comprises the operations of Inspired Energy Solutions Limited and Direct Energy Purchasing. The corporate's core services are primarily in the review, analysis and negotiation of gas and electricity contracts on behalf of corporate clients. Services provided include Energy Review and Benchmarking, Negotiation and Bill Validation. The Group's corporate division benefits from a market leading trading team, who actively focus on high volume customers, providing more complex, long term energy frameworks based on agreed risk management strategies.

The SME division ("SME")

This sector comprises the operations of the EnergiSave Online Limited operating subsidiary. Within the SME division, the group's energy consultants contact perspective clients to offer reduced tariffs and contracts based on the unique situation of the customer. Leads are generated and managed by the Group's internally generated, bespoke CRM and case Management IT system. Tariffs are offered from a range of suppliers and the Group is actively working with new suppliers to increase the range of products available to SME clients.

Plc costs

This comprises the costs of running the plc, incorporating the cost of the board, listing costs and other professional service costs such as audit, tax, legal and group insurance.

	2013				2012
	Corporate	SME	PLC costs	Total	Corporate	SME	PLC costs	Total
	£	£	£	£	£	£	£	£
Revenue	6,174,921	1,348,278	95,126	7,618,325	5,086,894	173,624	-	5,260,518
Cost of sales	(340,117)	(669,174)	-	(1,009,291)	(248,678)	(34,862)	-	(283,540)
Gross profit	5,834,804	679,104	95,126	6,609,034	4,838,216	138,762		4,976,978
Administration   expenses	(2,758,573)	(402,664)	(1,468,238)	(4,629,475)	(2,162,897)	(81,302)	(1,559,888)	(3,804,087)
Operating   profit	3,076,231	276,440	(1,373,112)	1,979,559	2,675,319	57,460	(1,559,888)	1,172,891
Analysed as:
EBITDA	3,274,977	345,150	(71,447)	3,548,680	2,708,777	57,460	(124,930)	2,641,307
Depreciation	(45,857)	(4,000)		(49,857)	(33,458)	-	-	(33,458)
Amortisation	(67,889)	(64,710)	(815,867)	(948,466)			(793,361)	(793,361)
Share based   payments			(212,098)	(212,098)			(212,098)	(212,098)
Exceptional   costs	(85,000)		(273,700)	(358,700)			(429,499)	(429,499)
	3,076,231	276,440	(1,373,112)	1,979,559	2,675,319	57,460	(1,559,888)	1,172,891
Total assets	4,144,401	826,494	1,958,206	6,929,101	3,257,838	121,055	3,220,529	6,599,422
Total liabilities	681,865	47,972	4,640,118	5,369,955	1,227,558	63,648	4,900,329	6,191,535

3.   Exceptional Costs:

	Year ended	Year ended
	31 December	31 December
	2013	2012
	£	£
Fees associated with acquisition	-	195,404
Consideration in relation to acquisition	207,000	-
Restructuring costs	151,700	234,095
	358,700	429,499

4.   Income Tax Expense

The income tax charge is based on the profit for the period and comprises:

	Year ended	Year ended
	31 December	31 December
	2013	2012
	£	£
Current tax
Current tax charge	510,633	522,278
Adjustments in respect of prior periods	8,546	(58,249)
	519,179	464,029
Deferred tax
Origination and reversal of temporary timing differences	(187,109)	(210,985)
Effect of tax rate change on opening balance	(7,608)	(1,802)
	(194,717)	(212,787)
Total income tax charge	324,462	251,242
Reconciliation of tax charge to accounting profit:
Profit on ordinary activities before taxation	1,745,812	890,410
Tax at UK income tax rate of 23.25% (2012: 24.5%)	405,901	218,150
Disallowable expenses	113,161	315,271
Surplus of capital allowances over depreciation	(8,429)	(11,143)
Movement in deferred tax	(194,717)	(212,787)
Effects of current period events on current tax prior
period balances	8,546	(58,249)
Total income tax charge	324,462	251,242

5.   Earnings per share

The earnings per share is based on the net profit for the year attributable to ordinary equity holders divided by the weighted average number of ordinary shares outstanding during the year.

	Year ended	Year ended
	31 December	31 December
	2013	2012
	£	£
Profit attributable to equity holders of the Group	1,421,350	639,168
Consideration in relation to acquisition	207,000	-
Fees associated with acquisition	-	195,404
Restructuring costs	151,700	234,095
Amortisation of intangible assets	948,466	793,361
Deferred tax in respect of amortisation of intangible assets	(237,633)	(198,772)
Share-based payment costs	212,098	212,098
Adjusted profit attributable to equity holders of the Group	2,702,981	1,875,354
Weighted average number of ordinary shares in issue	406,243,554	387,485,179
Dilutive effect of share options	20,226,136	18,711,304
Diluted weighted average number of ordinary shares
in issue	426,469,690	406,196,483
Basic earnings per share (pence)	0.35	0.16
Diluted earnings per share (pence)	0.33	0.16
Adjusted basic earnings per share (pence)	0.67	0.48
Adjusted diluted earnings per share (pence)	0.63	0.46

The weighted average number of shares in issue for the basic and adjusted diluted earnings per share include the dilutive effect of the share options in issue to senior staff of the Group.

Adjusted earnings per share represents the earnings per share, as adjusted to remove the effect of fees associated with acquisition, the amortisation of intangible assets and share- based payment costs which have been expensed to the Group Income Statement in the year.

6.   Property, Plant and Equipment

	Fixtures			Leasehold
	and	Motor	Computer	Improve-
	Fittings	Vehicles	Equipment	ments	Total
Cost	£	£	£	£	£
As at 1st January 2012	14,061	23,037	103,330	22,876	163,304
Acquisitions through business
combinations	17,540	-	18,750	-	36,290
Additions	37,712	-	44,477	1,200	83,389
At 31st December 2012	69,313	23,037	166,557	24,076	282,983
Additions	59,245	38,325	39,468	23,845	160,883
Disposals	-	(23,036)	-	-	(23,036)
At 31 December 2013	128,558	38,326	206,025	47,921	420,830
Depreciation
As at 1st January 2012	6,640	3,720	40,899	-	51,259
Charge for the Period	10,480	4,824	16,053	2,101	33,458
At 31st December 2012	17,120	8,544	56,952	2,101	84,717
Charge for the year	23,500	6,781	16,402	3,174	49,857
Disposals	-	(10,536)	-	-	(10,536)
At 31st December 2013	40,620	4,789	73,354	5,275	124,038
Net Book Value
At 31st December 2013	87,938	33,537	132,671	42,646	296,792
At 31st December 2012	52,193	14,493	109,605	21,975	198,266

Included within the net book value is £33,537 (31 December 2012: £14,493) relating to assets held under line purchase agreements. The depreciation charged to the financial statements in the period in respect of such assets amounted to £6,781 (31 December 2012: £4,824).

7.   Intangible assets and goodwill

	Computer	Customer
	Software	contracts	Goodwill	Total
Cost	£	£	£	£
At 1 January 2012	-	-	-	-
Additions	182,666	-	-	182,666
Acquisitions through business
combinations	-	1,835,850	1,667,801	3,503,651
At 31st December 2012	182,666	1,835,850	1,667,801	3,686,317
Additions	388,338	-	-	388,338
At 31 December 2013	571,004	1,835,850	1,667,801	4,074,655
Amortisation
As at 1st January 2012	-	-	-	-
Charge for the Period	8,953	784,408	-	793,361
At 31st December 2012	8,953	784,408	-	793,361
Charge for the year	132,599	815,867	-	948,466
At 31st December 2013	141,552	1,600,275	-	1,741,827
Net Book Value
At 31st December 2013	429,452	235,575	1,667,801	2,332,828
At 31st December 2012	173,713	1,051,442	1,667,801	2,892,956

8.   Deferred Tax Liability

Deferred taxation is calculated at a tax rate of 20 per cent (2012: 23 per cent) and is set out below:

		31 December	31 December
		2013	2012
		£	£
Provision brought forward		253,612	17,292
Credited to income for the
period		(194,717)	(214,357)
Movement arising from
business combinations		-	450,677
Provision carried forward		58,895	253,612
		31 December	31 December
		2013	2012
		£	£
Excess of taxation allowances
over depreciation on all
non-current assets		11,780	11,780
Temporary differences on
intangible assets		47,115	241,832
		58,895	253,612

Corporation tax for the year ended 31 December 2013 was calculated at 23.25 per cent of profits for the year. During the year ended 31 December 2012, as a result of the reduction in the UK corporation tax rate to 24 per cent from 26, corporation tax has been calculated at an effective rate of 24.5 per cent.

During the year ended 31 December 2013 a further reduction in the UK corporation tax rate to 20 per cent was substantively enacted into law and will be effective from 1 April 2015, the relevant deferred tax balances have been re-measured at this rate.

Deferred taxation at the period end is analysed as follows:

	2013 £		2012 £
Deferred tax liability	58,895		253,612
	58,895		253,612

9.   Post Balance Sheet Event

On 17 March 2014, the Group completed the acquisitions of Simply Business Energy Limited ("Simply Business") and KWH Consulting Limited ("KWH") for a maximum consideration of £900,000.

Both the results and net assets of each entity acquired, individually and in aggregate, are immaterial to the group at 31 December 2013. As such no disclosure has been made in these financial statements in relation to the provision fair value and related goodwill assessment.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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