Inspired PLC

Earnings Release • Mar 22, 2018

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RNS Number : 5283I

Inspired Energy PLC

22 March 2018

22 March 2018

Inspired Energy plc

("Inspired" or the "Group")

Final Results for the year ended 31 December 2017

Inspired Energy (AIM: INSE), a leading UK energy procurement consultant to UK and Irish corporates and SMEs, announces record final results for the year ended 31 December 2017.

HIGHLIGHTS

# Financial Highlights	2017	2016	Movement
Revenue	£27.46m	£21.51m	28%
Gross Profit	£22.81m	£17.31m	32%
Adjusted EBITDA*	£11.00m	£8.26m	33%
Adjusted Profit Before Tax**	£9.70m	£7.02m	38%
Profit Before Tax	£3.55m	£4.02m	(12%)
Adjusted EPS	1.57p	1.27p	24%
Basic EPS	0.48p	0.71p	(32%)
Cash Generated From Operations	£6.91m	£4.98m	39%
Net Debt	£14.79m	£10.79m	37%
Dividend Per Share***	0.55p	0.45p	22%
Procurement Corporate Order Book****	£39.00m	£28.00m	39%

* Adjusted EBITDA is earnings before interest, taxation, depreciation and amortisation, excluding exceptional items and share based payments.

**Adjusted Profit Before Tax is earnings before amortisation, excluding exceptional items, share based payments, the unwinding of deferred consideration and foreign exchange variances.

***Full year dividend of 0.55p, includes interim dividend of 0.16p (2016: 0.13p), and 0.39p final dividend (2016: 0.32p).

**** Refer to Chief Executive Officer's statement for definition of Procurement Corporate Order Book.

	2017	2016
Profit Before Tax	£3.55m	£4.02m
Share-based payment costs	£0.59m	£0.32m
Exceptional costs	£1.51m	£0.53m
Amortisation - acquired intangibles	£2.57m	£1.57m
Amortisation - internally generated	£0.73m	£0.58m
Unwinding of deferred consideration	£0.61m	-
Foreign exchange variance	£0.14m	-
**Adjusted Profit Before Tax	£9.70m	£7.02m

Operational Highlights

·      Record revenues delivered by the Corporate Division, growing 32% to £21.5m (2016: £16.3m), with the division contributing EBITDA of £10.2m, an increase of 34% (2016: £7.6m).

·      Procurement Corporate Order Book increased 39% to £39.0m (2016: £28.0m) with strong customer retention at 85% and robust performance from significant new customer wins.

·      SME Division has matured, generating record EBITDA of £2.46m (2016: £1.75m) with EBITDA margins up 7% to 41% (2016: 34%)

·      Excellent cash performance with cash generated from operations of £6.9m (2016: £5.0m)

·      Initiated process of restructuring the Corporate service offering by client category under a unified "Inspired" brand, which is due to complete in H1 2018.

Acquisition Highlights

·      Integration of Flexible Energy Management Limited ("FEML") and Churchcom Limited ("Churchcom"), acquired in April 2017, is progressing well and in line with expectations.

·      Acquisition of Horizon Energy Group Limited ("Horizon") completed in July 2017, increasing the geographical presence of the Group and strengthening its position as a market leader in Ireland.

·      Horizon traded in line with Board expectations in H2 2017, and trading in 2018 has started strongly.

Final settlement, in cash, of the outstanding consideration due to the vendors of STC Energy, Carbon Holdings Limited, Wholesale Power UK and Informed Business Solutions, reflecting their strong post-acquisition performance.

Board Transition

·      Mark Dickinson appointed Chief Executive Officer ("CEO") of the Group in October 2017, having joined Inspired as a Non-Executive Director in September 2016 and before subsequently becoming COO in June 2017.

·      Richard Logan, Group Finance Director of Iomart Group PLC, appointed as an Independent Non-Executive Director in March 2017.

·      Gordon Oliver, Group Finance Director of James Halstead plc, appointed as an Independent Non-Executive Director in January 2018.

·      Matthew Thornton today steps down as Sales Director and moves to Non-Executive Director, completing the transition of the Board composition to two Executive Directors, supported by a Non-Executive Chairman and three Non-Executive Directors (two of whom are independent).

Mark Dickinson, CEO of Inspired Energy, commented on the results:

"I am delighted to report on a very strong period of growth for the Group across all key areas: financially, operationally and strategically, which is a testament to the value of our customer proposition and the talent and dedication of our staff. In 2017, the Group completed three value-enhancing acquisitions within our core Corporate Division, a debt refinancing and a £9.0m equity placing, providing an excellent platform for the business to continue to deliver on our stated growth strategy. I am pleased to report the integration of all three acquisitions concluded in 2017 is progressing well and they are each performing in line with expectations.

"Inspired Energy had an excellent 2017 and I am confident that 2018 will be another year of significant progress for the Group, with strong trading in the current year to date."

For further information, please contact:   

Inspired Energy plc Mark Dickinson (Chief Executive Officer) Paul Connor (Finance Director)	www.inspiredenergy.co.uk +44 (0) 1772 689250
Shore Capital (Nominated Adviser and Joint Broker) Dru Danford Edward Mansfield James Thomas	+44 (0) 20 7408 4090
Peel Hunt LLP (Joint Broker) Mike Bell Sam Cann	+44 (0) 20 7418 8900
Gable Communications Justine James John Bick	+44 (0) 20 7193 7463 +44 (0) 7525 324431 [email protected]

CHAIRMAN'S STATEMENT

I am delighted to report another record year for Inspired in 2017. The Group delivered on all strategic fronts in the year. We have strengthened the Board with the appointment of Mark Dickinson as CEO and Richard Logan and Gordon Oliver as independent Non-Executive Directors; implemented a new Long Term Incentive Plan ("LTIP") for the benefit of the Executive Directors; announced three corporate acquisitions; entered into new c. £35 million banking facilities with Santander; and further enhanced the Group's institutional shareholder register through an over-subscribed £9.0 million placing.

The strong financial performance and the strategic initiatives delivered during the period provide an excellent platform for continued organic and acquisitive growth, further establishing Inspired's position as a market leading energy consultant to UK and Irish corporates and SMEs.

In October 2017, Mark Dickinson took the helm as CEO. Mark initially joined the Board as a Non-Executive Director in September 2016, before becoming Chief Operating Officer in June 2017. Mark brings over 20 years' experience of leading and advising companies in the energy sector. His expertise as an energy consultancy specialist continues to be invaluable, as we enter the next growth phase for the Group.

July 2017 saw the implementation of the LTIP, established to retain, motivate and reward the Executive Directors on delivery of sustainable and managed growth for the Company, creating alignment with shareholder interests over the long term. The Board believes that the Company will benefit significantly from their drive, energy and experience over the next six years. 

The financial results set out herein represent another excellent year of profitable growth, with Group revenue increasing by 28% to £27.46 million (2016: £21.51 million) and adjusted EBITDA increasing by 33% to £11.00 million (2016: £8.26 million). Adjusted profit before tax increased by 38% to £9.70 million (2016: £7.02 million) and adjusted EPS increased by 24% to 1.57 pence (2016: 1.27 pence). Importantly, the Group generated cash from operations of £6.91m, an increase of 39% from £4.98m in 2016. On a reported basis, profit before tax and basic EPS were lower at £3.55 million (2016: £4.02 million) and 0.48 pence (2016: 0.71 pence), respectively, reflecting non-trading items including the amortisation charge acquired through business combinations, the unwinding of deferred consideration, the exceptional costs of £1.51 million (2016: £0.53 million) associated with the three strategic acquisitions and a higher share base payments charge of £0.59 million (2016: £0.32 million) as a result of the initial awards under the LTIP.

Inspired's strategy to build out and further enhance the service offering of the Corporate Division, whilst also expanding our geographical reach via both organic and acquisitive growth, continues to generate momentum. The core Corporate Division now contributes c.78% of Group revenues (2016: 76%), with divisional revenue increasing by 31% to £21.46 million (2016: £16.32 million) and adjusted EBITDA increasing by 34% to £10.20 million (2016: 7.60 million).

The Procurement Corporate Order Book has increased to £39.0m as at 31 December 2017 (2016: £28.0m) representing a year on year increase of 39%. This remains a consistent guide to the future performance of the Group, providing strong visibility of revenues for FY 2018 and the next three years, enabling the Board to look forward with great confidence over the short to medium term.

The acquisition of Horizon in Cork was a significant milestone in the development of the Group, both strategically and financially, and the Board is pleased to report that integration is progressing well, with both UK and Irish operations benefiting from the sharing of regional knowledge and expertise. The three acquisitions completed in 2017 have all strengthened Inspired's service offering, further broadened the client base and extended the geographical reach within the Corporate Division. Importantly, we are pleased to report that all three acquired businesses are trading in line with management's expectations.

In addition to the robust performance from the Corporate Division, the Group's SME Division also performed strongly in the year. The division continues to make a material contribution to cash generation for the Group, which is reflected in the strong operating cash generated by the Group during the year. We have benefitted further in the year from previous investments made to infrastructure and operational expertise, resulting in the SME Division reporting year on year increases of 16% in revenue and 41% in EBITDA.

Accordingly, the Board is pleased to propose a final dividend of 0.39 pence (2016: 0.32 pence), subject to shareholder approval at the AGM in June, resulting in a full year dividend of 0.55 pence per share, a 22% increase (2016: 0.45 pence). The dividend increase in the year is a demonstration of the Board's confidence in the future for the enlarged Group.

Inspired had an excellent year in 2017 and I am confident that 2018 is set to be another year of significant progress for the Group with strong trading in the current year to date.

Michael Fletcher

Chairman

22 March 2018

CHIEF EXECUTIVE OFFICER'S STATEMENT

The Board is delighted with the performance of the Group in the year to 31 December 2017, delivering record growth, enhanced by the three complementary and strategic acquisitions of FEML, Churchcom and Horizon.

The growth achieved by the Group in 2017 is a testament to the value of our customer proposition and the talent and dedication of our staff. The enlarged Group has a very strong platform from which to continue to build on the organic growth of the business, onto which we can add new service lines and sector specialisms via acquisition, as demonstrated during 2017. We look forward to the coming year with confidence.

Corporate Division

Overview

The Group's Corporate Division comprises of the following trading subsidiaries:

·      Inspired Energy Solutions (founder business);

·      DEP (acquired in 2012);

·      WPUK (acquired in 2015);

·      STC (acquired in 2015);

·      Informed (acquired in 2016);

·      FEML (acquired in April 2017);

·      Churchcom (acquired in April 2017); and

·      Horizon (acquired in July 2017)

The Corporate Division's core services include the review, analysis, negotiation and bureau of gas and electricity contracts.

Organic growth and integration of division

Whilst 2017 was an outstanding year for our Corporate Division, delivering record revenue and profits, we believe there is scope to leverage specialist knowledge and improve efficiency by streamlining the business and re-focusing the commercial structure. During the year, the Board initiated the process of consolidating the Corporate service offering from subsidiary brands, to operating under a unified "Inspired" brand with the service offering segmented into five broad categories of customer focus being:

·      Energy intensive

·      Commercial/estate intensive

·      Public services

·      Corporate

·      Ireland

The customer focused structure of the Corporate Division ensures the delivery of a high level of tailored service to corporate customers, combined with the continuous development of the product suite, to meet the individual energy management requirements of the clients. 

The integration of the businesses is well progressed, and the Board expect the exercise to be completed in H1 of 2018.

In addition, through increased utilisation and optimisation of integrated IT platforms, which continue to be developed, the Corporate Division has been able to increase efficiency whilst delivering increased levels of service to our valued clients. This is demonstrated by continued superb client retention rates in excess of 85%.

2017 acquisitions

FEML

FEML was founded in 2012 and is a public sector procurement and energy services specialist, based in Manchester. FEML has a strong presence in the public sector, having been spun out of the NHS at the time of its foundation, and the two directors of FEML have over 20 years' experience in the NHS. 

The business has a large portfolio of customers including NHS Trusts/hospitals, academic and sporting institutions which can now benefit from Inspired's energy procurement expertise and breadth of service offering. The acquisition of FEML enhanced Inspired's presence and credentials within the public sector, further augmenting the organic growth and presence established as a result of the STC acquisition. The Board believes the NHS sponsored OJEU frameworks provide a vehicle to accelerate growth in the sector as the frameworks can be increased in size significantly from sales leads generated by the Group's public sector team, access to which has historically been a barrier to growth in the sector.

Churchcom

Churchcom is an energy procurement consultant based in Peterlee, County Durham. Churchcom operates under two trading divisions, Church Energy Purchasing Group, which specialises in energy procurement for churches, and Energy Partners, offering energy procurement services for commercial customers, complementing Inspired's core Corporate Division.

The business benefits from a strong order book and has a long history of retaining customers and growing revenues within both divisions. The acquisition has added a new sector specialism.

Horizon

Horizon was the Group's first international acquisition. Based in Cork, Ireland, Horizon is a corporate energy procurement consultant with customers including large corporates, public sector bodies and SMEs. Horizon brings high earnings visibility and offers synergies with Inspired's core Corporate Division and its strong Procurement Corporate Order Book. Horizon's sales team is also benefiting from the cross-selling opportunities and access to Inspired's broader capabilities.

Ireland's energy procurement sector is relatively underdeveloped compared to the UK marketplace, and this has provided a significant opportunity for Inspired to deploy its expertise to secure increased market share in a growing market.

The Board is pleased to report Horizon traded in line with expectations in H2 2017, and trading in 2018 has started strongly.

Corporate Division Financial Highlights

Highlights In the year include:

·      Revenue increased 32% to £21.46 million (2016: £16.32 million)

·      The Corporate Division generated adjusted EBITDA of £10.20 million (2016: £7.60 million), a 34% year on year increase

·      High customer retention rates maintained at 85% across the Corporate Division, whilst delivering strong new customer win performance

Procurement Corporate Order Book

The Group is proud to be able to report organic and acquisitive Procurement Corporate Order Book growth in the year to a record £39.0 million, representing a year on year increase of 39%.

The Procurement Corporate 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 Procurement Corporate Order Book only relates to the Corporate Division and does not include any revenue or contracts within the SME Division. The growth of the Procurement Corporate 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 consumed by the client.

Procurement Corporate Order Book Sales

Procurement Corporate Order Book Sales values represent the aggregated 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 energy supplier for an agreed consumption value at an agreed commission rate.

SME Division

The Group's SME Division includes:

·      EnergiSave Online ("EnergiSave")

·      KWH Consulting ("KWH") and

·      Simply Business Energy ("SBE").

Within the SME Division, the Group's energy consultants contact prospective SME clients to offer reduced tariffs and contracts based on the situation of the customer.

The SME Division has delivered another strong set of results in 2017. Following a period of investment in the team and operational infrastructure, the SME Division has become a strong, mature and consistent performer within the Group. The division has delivered a 16% increase in revenue to £6.0 million (2016: £5.19 million) and 41% increase in EBITDA to £2.46 million (2016: £1.75 million) in 2017, resulting in an increase in EBITDA margin to 41% (2016: 34%). The increase in EBITDA Margin has resulted from continued improvement in operational leverage within the division and a small increase in headcount in the period. The division continues to provide material cash generation to the Group.

Acquisition strategy

The Board continues to investigate opportunities for the Group to participate in industry consolidation. To create an enlarged and improved business, as demonstrated with the nine acquisitions since admission to trading on AIM, we believe that potential targets should offer one or more of the following criteria:

·      additional technical and/or service capability;

·      sector specialism and diversification; and

·      a broader geographic footprint.

The Board continues to seek acquisition opportunities in line with the Group's strategy to augment its services, products or markets.

Exceptional deal related costs

Exceptional costs of £1,510,370 (2016: £530,285) have been incurred in the year, which primarily relate to fees associated with the three acquisitions in the year and the restructuring associated with the integration of the Corporate Division from trading subsidiaries to a customer focused structure. These costs are considered by the Directors to be either material in nature or non-recurring and therefore require separate identification to give a true and fair view of the Group's result for the period.

Cash and Borrowings

As at 31 December 2017, the Group had a cash balance of £5.18 million and outstanding balances on its senior term debt facilities of £19.84 million with the acquisition facility and revolving credit facility within the Group's debt facilities remaining undrawn.

As at 31 December 2017, net debt stood at £14.79 million, which is an increase of £4.00 million in comparison to 31 December 2016.

The increase in net debt reflects a year in which the cash generation of the Group was offset by the payment of £3.6 million of initial cash consideration to the vendors of FEML and Churchcom and £2.55 million of deferred cash consideration to the vendors of STC, WPUK and Informed.

To finance the acquisition of Horizon in July 2017, the Group entered into a new facility agreement with Santander UK plc ("Santander"), replacing the £10.0 million term loan, £1.5 million of drawn revolving credit facilities and £5.1 million of drawn acquisition facility.

The new facility agreement ("facility") was for a £29.6 million and €7.0 million term loan. £6.3 million and €7.0 million of the term facilities ("Tranche A and B") amortise over a period of five years with the balance, and the remaining £8.3 million ("Tranche C"), repayable by way of a bullet repayment on 19 October 2022. The facility has an interest rate of 2.75% over LIBOR in respect of Tranches A and B and 3.00% over LIBOR in respect of Tranche C.  There are no ongoing monitoring fees.

In addition, the Group has also entered into a new revolving credit facility with Santander, for the sum of £2.5 million, to be used for the purposes of satisfying future working capital requirements (the "RCF") and an acquisition facility of up to £12.5 million to fund future Group acquisitions ("Acquisition Facility"). The Acquisition Facility can be drawn on the same commercial terms as the facility at the election of the Group and subject to bank approval of any proposed acquisition. The RCF has an interest rate of 2.75% over LIBOR, and the Acquisition Facility has an interest rate of 3.25% over LIBOR. There are no ongoing monitoring fees.

Capital repayments of £1.26 million per annum are made on Tranche A, and the Group will start to make capital repayments on Tranche B from September 2018, of £1.75 million per annum.

Dividends

The Board is delighted to propose a final dividend of 0.39 pence per share, subject to shareholder approval at the annual general meeting of the Group. Following the payment of an interim dividend of 0.16 pence per share, the total dividend payable for the year ended 31 December 2017 is 0.55 pence per share. This represents an increase of 22% over the dividend payable in respect of 31 December 2016, being 0.45 pence per share. The continuing trend of improvement in cash generation of the Group, supports the progressive Dividend policy applied.

The dividend will be payable on 13 July 2018 to all shareholders on the register on 8 June 2018 and the shares will go ex-dividend on 7 June 2018.

Focus on our people

The Group believes that investment in staff development and welfare builds a stronger business and we will continue to make appropriate investment in order to further develop our team and our environment. In July 2017 the Board implemented the LTIP for the executive directors. The Board believes it is crucial to retain and incentivise its senior management to enable the Board to deliver long-term value creation for shareholders. It is therefore the Board's intention to grant 24.3 million shares to its wider senior management team under a long term incentive plan (the "Plan") extending over 6 years, further details on the Plan will be announced following the grant of the shares.

In addition, the Group continues to support its employees through professional qualifications and work based learning. National Vocational Qualifications (NVQs) continue to be a great success. Finally, a number of staff are undertaking professional qualifications, including ACCA/AAT qualifications, to support their development within the business.

Throughout the year, the directors of the Group provide guidance and mentor employees, engaging in consultation with them to ensure that their views are heard and considered.

Outlook

I am delighted to report on a very strong period of growth for the Group across all key areas: financially, operationally and strategically. In 2017, the Group completed three value-enhancing corporate acquisitions, a debt refinancing and a £9.0m placing, providing an excellent platform for the business to continue to deliver on our stated growth strategy. I am pleased to report all three acquisitions concluded in 2017 are performing in line with expectations and the integration process is progressing well.

Inspired Energy had an excellent 2017, and I am confident that 2018 will be another year of significant progress for the Group.  In addition to continuing our focus on developing sustainable organic growth for 2018 the Group intends to focus on the following strategic areas:

Optimisation Services: Expansion of our Optimisation Services Division to match client needs which are becoming increasingly sophisticated with respect to monitoring, targeting and efficiency.

Software Solutions: Creation of a Software Services Division to provide software solutions across the energy value chain.

Research and Development: Creation of an 'Inspired Incubator' to allow Inspired to support early stage energy and utility solutions which have the potential to add value to energy consumers in the future.

It is an exciting time for the Group which has started the year with strong trading in line with expectations.

Mark Dickinson

Chief Executive Officer

22 March 2018

The Group

Inspired 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. The Group generates the majority of its income from commissions received from energy suppliers.

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, including energy bureau, billing and management services.

Customers

Our size and reputation enable us to partner with UK energy suppliers to offer exclusive contracts to our customers.

Through optimising energy procurement on behalf of our clients, Inspired enables them to achieve greater certainty of their energy costs and in many cases delivers significant savings. The Group currently manages and negotiates gas and electricity supply agreements for more than 100,000 meters across the UK, operating on behalf of c.11,500 customers.

Corporate Division

The Corporate Division, which includes Inspired Energy Solutions, DEP, Wholesale Power UK, STC Energy and Carbon Holdings, Informed Business Solutions, FEML, Churchcom and Horizon, delivers core services, which are the review, analysis and negotiation of gas and electricity contracts on behalf of Corporate clients. In addition, the division provides customers with leading energy bureau, billing and management services.

Energy review and benchmarking

The Group's team of energy analysts reviews the historical energy consumption and purchasing on behalf of clients in order to understand and analyse the clients' 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 with energy suppliers, on the client's behalf, 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 includes a number of contracts that are exclusive to the Group and have been 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 twelve and thirty six months.

Bureau and bill validation

In addition, the Group offers a market-leading energy bureau and 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 acts 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.

·      Retrospective 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, 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 support 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 and 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

The SME Division has grown rapidly since its launch in October 2012. SME 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.

Following the acquisitions made in 2014, the division has developed a fully automated, online quoting platform for SME customers looking to switch their energy supplier. In addition, the division has agreements in place with the majority of energy suppliers within the SME sector. Web-enabled capability is offered to new online customers, and is also used by the sales agents in the division.

Group statement of comprehensive income

For the year ended 31 December 2017

				2017	2016
		Note		£	£
Revenue				27,458,397	21,514,911
Cost of sales				(4,645,550)	(4,205,931)
Gross profit				22,812,847	17,308,980
Administrative expenses				(17,702,755)	(12,470,995)
Operating profit				5,110,092	4,837,985
Analysed as:
Earnings before exceptional costs, depreciation, amortisation and share-based payments costs				11,004,142	8,257,775
Exceptional costs		3		(1,510,370)	(530,285)
Depreciation		7		(495,080)	(422,279)
Amortisation of intangible assets		8		(3,297,120)	(2,149,198)
Share-based payment costs				(591,480)	(318,028)
				5,110,092	4,837,985
Finance expenditure		4		(1,561,833)	(742,085)
Other financial items				4,668	(77,315)
Profit before income tax				3,552,927	4,018,585
Income tax expense		5		(1,020,374)	(616,430)
Profit for the year				2,532,553	3,402,155
Other comprehensive income:
Exchange differences on translation of foreign operations				210,432	-
Total other comprehensive income for the year				210,432	-
Total comprehensive income from continuing operations				2,742,985	3,402,155
Attributable to:
Equity owners of the company				2,742,985	3,402,155
Basic earnings per share attributable to the equity holders of the company (pence)		6		0.48	0.71
Diluted earnings per share attributable to the equity holders of the company (pence)		6		0.46	0.68
Adjusted basic earnings per share attributable to the equity holders of the company (pence)		6		1.57	1.27
Adjusted diluted earnings per share attributable to the equity holders of the company (pence)		6		1.52	1.22

Group Statement of Financial Position

At 31 December 2017

		2017	2016
	Note	£	£
ASSETS
Non-current assets
Goodwill	8	21,680,234	12,987,651
Other intangible assets		11,662,173	7,390,982
Property, plant and equipment	7	1,405,642	1,331,603
Non-current assets		34,748,049	21,710,236
Current assets
Trade and other receivables	9	16,305,545	12,408,789
Cash and cash equivalents		5,182,633	984,403
Current assets		21,488,178	13,393,192
Total assets		56,236,227	35,103,428
LIABILITIES
Current liabilities
Trade and other payables		2,532,086	1,712,175
Bank borrowings		2,036,984	3,337,500
Contingent consideration		3,035,996	2,460,354
Current tax liability		3,022,319	2,413,464
Current liabilities		10,627,385	9,923,493
Non-current liabilities
Bank borrowings		17,808,507	8,286,462
Trade and other payables		32,500	61,866
Contingent consideration		1,374,627	797,433
Interest rate swap		144,452	149,120
Deferred tax liability		1,126,300	1,010,869
Non-current liabilities		20,486,386	10,305,750
Total liabilities		31,113,771	20,229,243
Net assets		25,122,456	14,874,185
EQUITY
Share capital		711,397	606,987
Share premium account		14,202,921	2,318,619
Merger relief reserve		14,913,911	14,913,911
Share-based payment reserve		1,230,669	794,120
Retained earnings		7,853,954	7,623,321
Investment in own shares		(2,618,055)	-
Translation reserve		210,432	-
Reverse acquisition reserve		(11,382,773)	(11,382,773)
Total equity		25,122,456	14,874,185

Group Statement of Changes In Equity

For the year ended 31 December 2017

			Share	Merger	Share-based		Investment		Reverse	Total
		Share	premium	relief	payment	Retained	In own	Translation	acquisition	shareholders'
		capital	account	reserve	reserve	earnings	Shares	reserve	reserve	equity
		£	£	£	£	£	£	£	£	£
Balance at 1 January 2016	589,505		1,901,747	13,675,249	631,023	5,892,456	-	-	(11,382,773)	11,307,207
Profit and total comprehensive income for the period	-		-	-	-	3,402,155	-	-	-	3,402,155
Shares issued (19 January 2016)	2,188		131,565	-	-	-	-	-	-	133,753
Shares issued (3 May 2016)	1,672		122,859	-	-	-	-	-	-	124,531
Shares issued (23 May 2016)	6,906		-	743,094	-	-	-	-	-	750,000
Shares issued (2 September 2016)	1,347		97,760	-	-	-	-	-	-	99,107
Shares issued (28 September 2016)	4,432		-	495,568	-	-	-	-	-	500,000
Shares issued (3 November 2016)	937		64,688	-	-	-	-	-	-	65,625
Share-based payment cost	-		-	-	318,028	-	-	-	-	318,028
Share options exercised	-		-	-	(154,931)	154,931	-	-	-	-
Dividends paid	-		-	-	-	(1,826,221)	-	-	-	(1,826,221)
Total transactions with owners	17,482		416,872	1,238,662	163,097	1,730,865	-	-	-	3,566,978
Balance at 31 December 2016	606,987		2,318,619	14,913,911	794,120	7,623,321	-	-	(11,382,773)	14,874,185
Profit and total comprehensive income for the period	-		-	-	-	2,532,553	-	210,432	-	2,742,985
Shares issued (30 March 2017)	2,000		169,250	-	-	-	-	-	-	171,250
Shares issued (20 April 2017)	3,742		496,258	-	-	-	-	-	-	500,000
Shares issued (24 April 2017)	563		50,063	-	-	-	-	-	-	50,626
Shares issued (12 July 2017)	77,586		8,396,382	-	-	-	-	-	-	8,473,968
Shares issued (20 July 2017)	18,563		2,599,493	-	-	-	-	-	-	2,618,056
Shares issued (29 August 2017)	1,956		172,856	-	-	-	-	-	-	174,812
Share-based payment cost	-		-	-	591,480	-	-	-	-	591,480
Share options exercised	-		-	-	(154,931)	154,931	-	-	-	-
Purchase of own shares	-		-	-	-	-	(2,618,055)	-	-	(2,618,055)
Dividends paid	-		-	-	-	(2,456,851)	-	-	-	(2,456,851)
Total transactions with owners	104,410		11,884,302	-	436,549	230,633	(2,618,055)	210,432	-	10,248,271
Balance at 31 December 2017	711,397		14,202,921	14,913,911	1,230,669	7,853,954	(2,618,055)	210,432	(11,382,773)	25,122,456

Merger relief reserve

Merger relief reserve represents the premium arising on shares issued as part or full consideration for acquisitions, where advantage has been taken of the provisions of section 612 of the Companies Act 2006.

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 and arises on consolidation.

Translation reserve

The translation reserve comprises translation differences arising from the translation of the financial statements of the Group's foreign entities into GBP (£).

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 year ended 31 December 2017

	2017	2016
	£	£
Cash flows from operating activities
Profit before income tax	3,552,927	4,018,585
Adjustments
Depreciation	495,080	422,279
Amortisation	3,297,120	2,149,198
Share- based payment costs	591,480	318,028
Finance expenditure	1,557,165	742,085
Exchange rate variances	(92,269)	-
Other financial items	(200,000)	77,315
Cash flows before changes in working capital	9,201,503	7,727,490
Movement in working capital
Increase in trade and other receivables	(2,441,252)	(2,948,615)
Increase in trade and other payables	152,373	199,551
Cash generated from operations	6,912,624	4,978,426
Income taxes paid	(1,417,807)	(532,786)
Net cash flows from operating activities	5,494,817	4,445,640
Cash flows from investing activities
Contingent consideration paid	(2,550,000)	(1,250,000)
Acquisition of subsidiaries net of cash acquired	(10,671,960)	(1,374,189)
Payments to acquire property, plant and equipment	(455,251)	(368,873)
Payments to acquire intangible assets	(1,221,690)	(1,071,274)
Net cash used in investing activities	(14,898,901)	(4,064,336)
Cash flows from financing activities
New bank loans (net of debt issue costs)	23,960,003	2,623,750
Proceeds from issue of new shares	8,870,444	423,015
Repayment of bank loans	(16,149,554)	(1,509,375)
Interest on bank loans paid	(626,858)	(712,921)
Dividends paid	(2,456,851)	(1,826,221)
Net cash inflow/(outflow) financing activities	13,597,184	(1,001,752)
Net increase/(decrease) in cash and cash equivalents	4,193,100	(620,448)
Cash and cash equivalents brought forward	984,403	1,604,851
Exchange differences on cash and cash equivalents	5,130	-
Cash and cash equivalents carried forward	5,182,633	984,403

.

NOTES TO PRELIMINARY RESULTS

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 2017. 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 2017 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). They have been prepared on an accrual basis and under the historical cost convention except for certain financial instruments measured at fair value. 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 2016. These accounting policies have remained unchanged for the financial year ended 31 December 2017.

Going Concern

The Group's forecasts, which have been prepared for the period to 31 December 2019 after taking into account the contracted order 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.

The preparation of financial statements, in conformity with Generally Accepted Accounting Principles under IFRSs, requires management to make estimates and assumptions that affect the reporting amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates.

1.1 Revenue recognition

Corporate Division

Commissions received from the energy suppliers are based upon the energy usage of the corporate commissions received from the energy suppliers are based upon the energy usage of the corporate customer at agreed commission rates with the energy suppliers. Commission income is recognised in line with the energy usage of the corporate customer over the term of the contract, which is considered to be the point at which commission income can be reliably measured. This is due to the impact of the observed variability of actual to estimated energy usage on corporate customer contracts on the substantial order book of the Corporate Division.

The majority of contracts are entered into as 'direct billing' contracts, whereby commissions are received in cash terms in line with the billing profile of the ultimate customer, which can be on a monthly or quarterly basis. For a minority of suppliers, 'up-front payment' contracts are entered into, whereby the supplier pays a percentage of the commission on the contract commencement date, with the remaining percentage on contract reconciliation at a future specified date.

Accrued income for the Corporate Division represents commission income recognised at the year end in respect of customer energy usage prior to the year end which has not been settled by the energy supplier at that point.

For risk-managed contracts, where a number of services are provided to the Corporate customer over the term of the contract, commission income is similarly recognised in line with the energy usage of the customer which approximates to recognition on a straight-line basis over the contract period.

In respect of contracts for ongoing services billed directly to the Corporate customer, including bureau services (range of services tailored to a client's specific requirement), revenue represents the value of work done in the year. Revenue in respect of contracts for ongoing consultancy services is recognised as it becomes unconditionally due to the Group as services are delivered and is measured by reference to stage of completion as determined by cost profile.

SME Division

The SME Division provides services through procuring contracts with energy suppliers on behalf of SME customers and generates revenues by way of commissions received directly from the energy suppliers. No further services regarding procurement are performed once the contract is authorised by the supplier. Commissions earned by the SME division fall into two broad categories:

Change of tenancy agreements (COTS)

COTS agreements are largely entered into by customers on moving into new premises. Revenue relates to an up-front fixed commission received from the energy supplier on setting up a new supply agreement. The commission received has no linkage to future energy usage and hence revenue can be reliably measured at the point the contract has been authorised by the energy supplier. Revenue is recognised at the point the contract has been authorised by the energy supplier.

Other SME agreements

For other SME agreements, commissions are based upon the energy usage of the SME customer at agreed commission rates with the energy suppliers. The expected commission over the full term of the contract is recognised at the point the contract is authorised by the supplier. Where actual energy use by the business differs to that calculated at the date the contract goes live, an adjustment is made to revenue once the actual data is known.

The cash received profile relating to these revenues varies according to the contract terms in place with the energy supplier engaged and can be received before the date the contract goes live or spread over the terms of the contract between the energy supplier and the end customer, which can be for a period of up to three years. This amount is not discounted as the impact is immaterial. Accrued revenue relates to commission earned, not yet received or paid.

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 2017 were determined on the basis of the reporting presented at regular Board meetings of the Group which is by nature of customer and level of procurement advice provided. The segments comprise:

The Corporate Division ("Corporate")

This sector comprises the operations of Inspired Energy Solutions Limited, Direct Energy Purchasing Limited, Wholesale Power UK Limited, STC Energy and Carbon Holdings Limited, Informed Business Solutions Limited, Flexible Energy Management Limited, Churchcom Limited and Horizon Energy Group Limited. Corporate's core services are primarily in the review, analysis and negotiation of gas and electricity contracts on behalf of Corporate clients. Additional 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 Energisave Online Limited, KWH Consulting Limited and Simply Business Energy Limited. Within the SME Division, the Group's energy consultants contact prospective SME 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.

	2017					2016
	Corporate	SME	PLC costs	Total	Corporate		SME	PLC costs	Total
	£	£	£	£	£		£	£	£
Revenue	21,460,206	5,998,191	-	27,458,397	16,320,105		5,194,806	-	21,514,911
Cost of sales	(2,229,926)	(2,415,624)	-	(4,645,550)	(1,752,147)		(2,453,783)	-	(4,205,930)
Gross profit	19,230,280	3,582,567	-	22,812,847	14,567,958		2,741,023	-	17,308,981
Administrative expenses	(10,568,731)	(1,532,827)	(5,601,197)	(17,702,755)	(7,838,521)		(1,437,217)	(3,195,258)	(12,470,996)
Operating profit	8,661,549	2,049,740	(5,601,197)	5,110,092	6,729,437		1,303,806	(3,195,258)	4,837,985
Analysed as:
EBITDA	10,196,512	2,455,077	(1,647,447)	11,004,142	7,596,048		1,751,987	(1,090,259)	8,257,776
Depreciation	(460,105)	(34,975)	-	(495,080)	(387,334)		(34,945)	-	(422,279)
Amortisation	(374,916)	(357,097)	(2,565,107)	(3,297,120)	(169,459)		(405,026)	(1,574,713)	(2,149,198)
Share-based payments	(277,872)	(13,265)	(300,343)	(591,480)	(309,818)		(8,210)	-	(318,028)
Exceptional costs	(422,070)	-	(1,088,300)	(1,510,370)	-		-	(530,286)	(530,286)
	8,661,549	2,049,740	(5,601,197)	5,110,092	6,729,437		1,303,806	(3,195,258)	4,837,985
Finance expenditure				(1,561,833)					(742,085)
Other financial items				4,668					(77,315)
Profit before income tax				3,552,927					4,018,585
Total assets	20,016,955	4,420,161	31,799,111	56,236,227	15,150,679		3,142,071	16,810,678	35,103,428
Total liabilities	3,703,144	461,673	26,948,954	31,113,771	2,394,173		653,166	17,181,904	20,229,243

3. Exceptional costs

	2017	2016
	£	£
Fees associated with acquisition	896,217	407,750
Restructuring costs	614,153	122,535
	1,510,370	530,285

One-off costs include costs of £614,153 relating to restructuring programmes associated with the integration of the Corporate Division from trading subsidiaries to a customer focused structure. These costs are considered by the Directors to be either material in nature or non-recurring and therefore require separate identification to give a true and fair view of the Group's result for the year. Costs associated with business combinations of £896,217 have been incurred which would not normally be seen as costs or income relating to the underlying principal activities of the Group.

4. Finance expenditure

	2017	2016
	£	£
Interest payable on bank borrowings	626,858	712,921
Unwinding of deferred consideration	607,039	-
Foreign exchange variance	136,108	-
Amortisation of debt issue costs	191,828	29,164
	1,561,833	742,085

5. Income tax expense

The income tax expense is based on the profit for the year and comprises:

	2017	2016
	£	£
Current tax
Current tax charge	1,399,169	1,212,067
Adjustments in respect of prior periods	88,073	65,050
	1,487,242	1,277,117
Deferred tax
Origination and reversal of temporary timing differences	(600,152)	(489,625)
Adjustments in respect of prior periods	133,284	(171,062)
	(466,868)	(660,687)
Total income tax charge	1,020,374	616,430
Reconciliation of tax charge to accounting profit:
Profit on ordinary activities before taxation	3,552,927	4,018,585
Tax at UK income tax rate of 19.25% (2016: 20.00%)	683,938	803,717
Disallowable expenses	271,618	33,805
Share options	(50,132)	(46,050)
Adjust closing deferred tax to reflect change in tax rate	(106,407)	(69,030)
Effects of current period events on current tax prior period balances	221,357	(106,012)
Total income tax charge	1,020,374	616,430

6. Earnings per share

The basic 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.

	2017	2016
	£	£
Profit attributable to equity holders of the Group	2,532,553	3,402,155
Fees associated with acquisition	896,217	407,750
Restructuring costs	614,153	122,536
Amortisation of intangible assets	3,297,120	2,149,198
Unwinding of deferred consideration	607,039	-
Foreign exchange variance	136,108	-
Deferred tax in respect of amortisation of intangible assets	(407,265)	(299,195)
Share-based payment costs	591,480	318,028
Adjusted profit attributable to owners of the Group	8,267,405	6,100,472
Weighted average number of ordinary shares in issue	528,034,301	478,910,478
Dilutive effect of share options	16,756,254	20,216,912
Diluted weighted average number of ordinary shares in issue	544,790,555	499,127,390
Basic earnings per share (pence)	0.48	0.71
Diluted earnings per share (pence)	0.46	0.68
Adjusted basic earnings per share (pence)	1.57	1.27
Adjusted diluted earnings per share (pence)	1.52	1.22
Alternate adjusted basic earnings per share (pence)	1.43	1.15
Alternate adjusted diluted earnings per share (pence)	1.38	1.11

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 acquisitions, restructuring costs, the amortisation of intangible assets and share-based payment costs which have been expensed to the Group Income Statement in the year. The adjustments to earnings per share have been disclosed to give a clear understanding of the Group's underlying trading performance.

Alternate adjusted earnings per share represents the earnings per share, as adjusted to remove the effect of the fees associated with acquisition/listing, amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), share based payments and exceptional items which have been expensed to the income statement in the period.

7. Property, plant and equipment

		Fixtures and	Motor	Computer	Leasehold
	fittings		vehicles	equipment	improvements	Total
	£		£	£	£	£
Cost
At 1 January 2016	448,443		13,100	1,096,880	218,659	1,777,082
Acquisitions through business combinations	15,929		-	8,777	-	24,706
Additions	150,930		-	123,733	94,210	368,873
Disposals	-		-	-	-	-
At 31 December 2016	615,302		13,100	1,229,390	312,869	2,170,661
Acquisitions through business combinations	30,385		54,754	17,626	14,519	117,284
Foreign exchange variances	639		1,641	528	435	3,243
Additions	96,229		21,325	224,115	113,582	455,251
Disposals	-		(22,197)	-	-	(22,197)
At 31 December 2017	742,555		68,623	1,471,659	441,405	2,724,242
Depreciation
At 1 January 2016	166,962		2,276	208,623	38,918	416,779
Charge for the year		98,035	1,456	297,902	24,886	422,279
Disposals		-	-	-	-	-
At 31 December 2016		264,997	3,732	506,525	63,804	839,058
Charge for the year		107,690	13,563	335,640	38,187	495,080
Disposals		-	(15,538)	-	-	(15,538)
At 31 December 2017		372,687	1,757	842,165	101,991	1,318,600
Net book value
At 31 December 2017		369,868	66,866	629,494	339,414	1,405,642
At 31 December 2016		350,305	9,368	722,865	249,065	1,331,603
At 31 December 2015		281,481	10,824	888,257	179,741	1,360,303

Included within the net book value is £151,707 (31 December 2016: £147,330) relating to assets held under hire purchase agreements. The depreciation charged to the financial statements in the period in respect of such assets amounted to £51,585 (31 December 2016: £31,695).

8. Intangible assets and goodwill

	Computer		Customer	Customer	Customer	Total other
	software	Trade name	databases	contracts	relationships	intangibles	Goodwill	Total
	£	£	£	£	£	£	£	£
Cost
At 1 January 2016	4,065,390	115,000	944,300	3,473,850	1,989,000	10,587,540	9,400,834	19,988,374
Additions	696,084	-	375,190	-	-	1,071,274	-	1,071,274
Alteration to initial recognition	-	-	-	-	-	-	605,726	605,726
Acquisitions through business combinations	-	-	-	931,000	-	931,000	2,981,091	3,912,091
At 31 December 2016	4,761,474	115,000	1,319,490	4,404,850	1,989,000	12,589,814	12,987,651	25,577,465
Additions	1,043,419	-	178,271	-	-	1,221,690	-	1,221,690
Acquisitions through business combinations	-	-	-	6,182,445	-	6,182,445	8,625,805	14,808,250
Foreign exchange variances	-	-	-	164,176	-	164,176	66,778	230,954
At 31 December 2017	5,804,893	115,000	1,497,761	10,751,471	1,989,000	20,158,125	21,680,234	41,838,359
Amortisation
At 1 January 2016	469,605	677	556,062	1,964,710	58,580	3,049,634	-	3,049,634
Charge for the year	771,259	5,750	405,026	469,913	497,250	2,149,198	-	2,149,198
At 31 December 2016	1,240,864	6,427	961,088	2,434,623	555,830	5,198,832	-	5,198,832
Charge for the year	1,032,216	5,750	356,097	1,405,807	497,250	3,297,120	-	3,297,120
At 31 December 2017	2,273,080	12,177	1,317,185	3,840,430	1,053,080	8,495,952	-	8,495,952
Net book value
At 31 December 2017	3,531,813	102,823	180,576	6,911,041	935,920	11,662,173	21,680,234	33,342,407
At 31 December 2016	3,520,610	108,573	358,402	1,970,227	1,433,170	7,390,982	12,987,651	20,378,633
At 31 December 2015	3,595,785	114,323	388,238	1,509,140	1,930,420	7,537,906	9,400,834	16,938,740

Computer software is a combination of assets internally generated and assets acquired through business combinations. Amortisation charged in the period to 31 December 2017 associated with computer software acquired through business combinations is £656,300 (2016: £601,800). The additional £375,916 (2016: £169,459) charged in the period relates to the amortisation of internally generated computer software. Amortisation of customer databases of £356,097 (2016: £405,026) is also in relation to internally generated intangible assets. The total amortisation charged in the period to 31 December 2017 associated with intangible assets acquired through business combinations is £2,565,107 (2016: £1,574,713).

9. Trade and other receivables

	2017	2016
	£	£
Trade receivables	3,347,413	2,610,360
Other receivables	145,195	57,276
Prepayments	1,418,852	819,463
Accrued income	11,394,085	8,921,690
	16,305,545	12,408,789

10. Business combinations

Flexible Energy Management Limited (FEML)

On 20 April 2017, the Group acquired the trade and assets of Flexible Energy Management Limited, a company based in the United Kingdom. FEML is a public sector energy procurement specialist, servicing a customer base comprising of NHS foundation trusts/hospitals and academic and sporting institutions, through two sponsored OJEU frameworks. The OJEU frameworks will allow the Group to accelerate its growth into the public sector and increase the strength of the Inspired Public Sector team which was created in 2016.

The acquisition of FEML was completed for a total consideration of £2,700,000. The payment was satisfied by £2,200,000 cash and the issue of 2,993,653 ordinary shares (with an aggregate fair value at completion of £500,000) of Inspired Energy PLC.

The acquisition was financed through the drawdown on the Group's existing acquisition facility with Santander. The details of the business combination are as follows:

Recognised amounts of identifiable net assets

			Provisional
		Book	fair value	Provisional
		value	adjustment	fair value
		£	£	£
Intangible assets	-		349,300	349,300
Total assets	-		349,300	349,300
Deferred tax liability	-		59,381	59,381
Total liabilities	-		59,381	59,381
Provisional fair value of identifiable net assets				289,919
Provisional goodwill				2,410,081
Fair value of consideration transferred				2,700,000
Satisfied by:
- cash consideration paid				2,200,000
- fair value of shares issued on 20 April 2017				500,000
				2,700,000
Net cash outflow arising from business combinations:
- cash consideration paid				2,200,000
Net cash outflow				2,200,000

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to FEML has been carried out. Fair values are provisional as they are still within the 12 month hindsight period to adjust fair values. The fair value of the customer1contracts was calculated as £349,300, which includes only values ascribed to valid energy supply contracts and letters of authority granting FEML exclusivity to negotiate future energy supply contracts. No value was ascribed to the customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be £96,882. These costs are included within exceptional costs in the Group statement of comprehensive income.

Churchcom Limited

On 20 April 2017, the Group acquired 100% of the issued share capital and voting rights of Churchcom Limited, a company based in the United Kingdom. Churchcom is an energy procurement consultancy operating through two principal divisions, the Church Energy Purchasing Group, which specialises in serving the church sector, and Energy Partners, a growing commercial energy procurement business. Churchcom benefits from a strong secured order book and strong retention rates and is a complementary addition to the Group's core Corporate Division.

The acquisition of Churchcom was completed for a total consideration of £1,642,595 satisfied in cash.

The acquisition was financed through the drawdown on the Group's existing facility with Santander. The details of the business combination are as follows:

Recognised amounts of identifiable net assets

		Provisional
	Book	fair value	Provisional
	value	adjustment	fair value
	£	£	£
Property, plant and equipment	9,060	-	9,060
Intangible assets	-	355,000	355,000
Trade and other receivables	25,064	-	25,064
Cash and cash equivalent	339,474	-	339,474
Total assets	373,598	355,000	728,598
Trade and other payables	57,160	27,872	85,032
Current tax liability	-	60,350	60,350
Deferred tax liability	76,878	-	76,878
Total liabilities	134,038	88,222	222,260
Provisional fair value of identifiable net assets			506,338
Provisional goodwill			1,136,257
Fair value of consideration transferred			1,642,595
Satisfied by:
- cash consideration paid			1,642,595
			1,642,595
Net cash outflow arising from business combinations:
- cash consideration paid			1,642,595
- cash and cash equivalents acquired			(339,474)
Net cash outflow			1,303,121

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to Churchcom has been carried out. Fair values are provisional as they are still within the 12 month hindsight period to adjust fair values. The fair value of the customer contracts was calculated as £355,000, which includes only values ascribed to valid energy supply contracts and letters of authority granting Churchcom exclusivity to negotiate future energy supply contracts. No value was ascribed to the customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be £78,909. These costs are included within exceptional costs in the Group statement of comprehensive income.

Horizon Energy Group Limited (HEG)

On 17 July 2017, the Group acquired Horizon Energy Limited, a company based in Cork, Ireland. HEG is a corporate energy procurement consultant with customers including large corporates, public sector bodies and SMEs.

The acquisition of HEG was completed for an initial consideration of €9,000,000 satisfied in cash to acquire 90% of the issued share capital of HEG. Inspired has a put and call option to acquire the outstanding 10% of the share capital of HEG for a payment of €1,000,000 in cash.

To finance the acquisition, the Group entered into a new facility agreement with Santander UK plc.  The details of the business combination are as follows:

Recognised amounts of identifiable net assets

			Provisional
		Book	fair value	Provisional
		value	adjustment	fair value
	£		£	£
Property, plant and equipment	108,224		-	108,224
Intangible assets	-		5,478,145	5,478,145
Trade and other receivables	1,409,384		-	1,409,384
Cash and cash equivalent	842,018		-	842,018
Total assets	2,359,626		5,478,145	7,837,771
Trade and other payables	973,005		-	973,005
Deferred tax liability	-		684,769	684,769
Total liabilities	973,005		684,769	1,657,774
Provisional fair value of identifiable net assets				6,179,997
Provisional goodwill				5,029,486
Fair value of consideration transferred				11,209,483
Satisfied by:
- cash consideration paid				7,960,857
- contingent consideration				3,645,458
- discounting impact on contingent consideration				(396,832)
				11,209,483
Net cash outflow arising from business combinations:
- cash consideration paid				7,960,857
- cash and cash equivalents acquired				(842,018)
Net cash outflow				7,118,839

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to HEG has been carried out. Fair values are provisional as they are still within the 12 month hindsight period to adjust fair values. The fair value of the customer contracts was calculated as £5,478,145, which includes only values ascribed to valid energy supply contracts and letters of authority granting HEG exclusivity to negotiate future energy supply contracts. No value was ascribed to the customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be £363,122. These costs are included within exceptional costs in the Group statement of comprehensive income.

11. Post balance sheet events

On 21 March 2018 the Group completed the acquisitions of 100% of the share capital of Systemslink 2000 Limited (Systemslink) and Energy Cost Management Limited (ECM).

The consideration for the acquisition of Systemslink is £3.875 million, to be satisfied by a cash payment of £3.25 million and the issue of 2,948,113 new ordinary share in the capital of Inspired Energy plc.

The consideration for the acquisition of ECM is up to £2.0m million. An initial cash payment of £0.5 million will be paid on completion. Further contingent consideration of up to £1.5 million may be payable, in cash of up to £1.0 million and shares of up to £0.5 million, subject to the achievement of certain financial performance criteria for the period ending 31 December 2020.

12. Preliminary Announcement

This preliminary announcement, which has been agreed with the auditors, was approved by the board of directors on 21 March 2018.  It is not the Group's statutory accounts.  Copies of the Group's audited statutory accounts for the year ended 31 December 2017 will be available at the company's website shortly and a printed version will be dispatched to shareholders thereafter. 

This information is provided by RNS

The company news service from the London Stock Exchange

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