Unaudited results for the year ended 30 June 2020
17 September 2020
eEnergy Group plc
("eEnergy" or "the Group")
Unaudited results for the year ended 30 June 2020
Trading Update for the period from 1 July to 11 September 2020
eEnergy (AIM: EAAS), the leading "Energy Efficiency-as-a-Service" (EEaaS) business in the UK and Ireland, today provides its unaudited results for the year ended 30 June 2020 as well as an update on Group trading from 1 July to 11 September 2020. The Group's subsidiary eLight provides "Light-as-a-Service" ("LaaS") to businesses and schools to help them switch to LED lighting for a fixed monthly service fee, avoiding any upfront payments.
Financial Highlights for the year ended 30 June 2020:
· Revenue up 14% to £4.5 million (2019: £3.9 million)
· Gross margin increased 510 bps to 35.5% (2019: 30.4%)
· Adjusted EBITDA loss reduced to £647,000 (2019: loss of £799,000)
· Positive operating EBITDA for each month in the fourth quarter
· Loss before tax of £3.2 million (including reverse takeover costs of £1.3 million) (2019: loss of £1.4 million)
· Cash at bank £1.5 million (2019: £196,000) and net debt (including IFRS 16 lease liabilities) of £528,000 (2019: £424,000).
Operational Highlights:
· The Group successfully completed its readmission to AIM on 9 January raising £2.0 million (before expenses)
· Number of LED lighting installations completed at schools and businesses in the UK & Ireland: 125 (2019: 109)
· Expanded eLight operations into Northern Ireland
· New relationships with suppliers led to efficiency gains and boosted gross margins
· Formed partnership with Irish smart energy supplier Pinergy to create a new sales channel.
Trading Update - 1 July 2020 to 11 September 2020
· 64 installations delivered so far in Q1 with revenue of £4 million, nearly 6 times the comparable quarter of FY20 (250% organic revenue growth)
· Significant uplift in new business wins and installation momentum, boosted by installation from contracts won before and during lockdown worth over £1 million
· Positive monthly operating EBITDA (before corporate overheads) has continued into Q1 making it five consecutive months
· Completed first acquisition: Renewable Solutions Lighting Limited ("RSL"), a specialist in providing the UK education sector with fully funded LED lighting solutions
· Secured new project funding partner SUSI Partners AG ("SUSI"). SUSI has provided a facility of up to €15 million to fund LaaS projects in Ireland, giving the Group's Irish business a significantly enhanced competitive advantage
· The Board continues to expect to achieve breakeven profit after tax for the Group for the six months to 31 December 2020.
Harvey Sinclair, CEO of eEnergy, commented :
"The Company has enjoyed a strong start since its readmission to AIM in January, notwithstanding the challenges and also opportunities presented by COVID-19. In addition to the UK government's net zero target by 2050, we have seen accelerating interest in Light-as-a-Service, especially from the education sector, as schools seek to reduce costs and carbon emissions. Furthermore, the acquisition of RSL in July has broadened the Group's exposure to the Academy and state school sector and made eEnergy the market leader in providing Energy Efficiency-as-a-Service to the UK education sector."
"We are pleased to report that, throughout the lockdown, none of our contracts were cancelled, however a number of installations expected to be completed in the fourth quarter were delayed into the summer. As the Group only recognises revenue at the point of installation, the revenue from these contracts has provided a further boost to the strong first quarter we have experienced. Since 1 July we have completed 64 installations, resulting in a 500% uplift in revenue, 250% organic, compared to the equivalent period of last year and we expect significant comparable growth to continue into the second quarter. Consequently the Board continues to expect the Group to achieve breakeven profit after tax in the six months to 31 December 2020."
"As well as making progress in growing our LaaS business, eLight, we will continue to assess strategic acquisition opportunities, including exploring new opportunities in expanding our offer in the energy management sector."
The Group published its last annual accounts for the year to 31 December 2019, covering the period before the reverse takeover of eLight in January 2020 when it was known as Alexander Mining plc. As indicated at the time of the reverse, the financial year-end for the Group was changed from 31 December to 30 June, in line with the financial year-end of the eLight business.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
Contacts:
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eEnergy Group plc |
Tel: +44 20 7078 9564 |
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Harvey Sinclair, Chief Executive Officer
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N+1 Singer (Nominated Adviser and Joint Broker) |
Tel: +44 20 7496 3000 |
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Peter Steel / Justin McKeegan / Carlo Spingardi (Corporate Finance) Tom Salvesen (Corporate Broking)
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Turner Pope Investments (Joint Broker) |
Tel: +44 20 3657 0050 |
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Andy Thacker / Zoe Alexander
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Newgate Communications |
Tel: +44 7540 106 366 |
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Giles Croot / Robin Tozer |
About eEnergy Group plc
eEnergy is an established "Energy Efficiency-as-a-Service" (EEaaS) business currently focused on providing "Light-as-a-Service" to customers through its eLight and RSL subsidiaries. We help businesses and schools switch to LED lighting for a fixed monthly service fee, avoiding any upfront payments. For customers, the energy savings are greater than the monthly service fee, allowing them to unlock free cashflow from day one as well as to improve the quality of their lighting and reduce carbon emissions. eLight procures, funds, installs and maintains the LED lighting, meaning the customer has no risk.
eEnergy was admitted to AIM in January 2020. The Board's strategy is to develop eEnergy as a broader energy services company and acquire other businesses in the energy management sector. The market in the EU for energy efficiency services was approximately €25 billion in 2017 and is expected to double by 2025.
eEnergy has been awarded The Green Economy Mark by the London Stock Exchange, which recognises a company's work on sustainability.
Chairman's Statement
Overview
We have been delighted with the progress that we have made since coming to the market. The Group successfully completed its admission to the AIM market of the London Stock Exchange on 9 January 2020 via the reverse takeover of the Company, previously known as Alexander Mining plc and at the same time raising £2.0 million (before expenses) via a placing of new ordinary shares.
Notwithstanding the inevitable operational challenges of COVID-19, the Group responded quickly and has made significant financial and strategic progress in a short time, particularly in the education sector in the UK and Ireland.
Strategy
As well as our continued focus on driving the organic growth of eLight, both in the education and commercial sectors, the Board's strategy is to develop eEnergy as a broader energy services company and acquire other businesses in the energy management sector. In keeping with that strategy, we completed our first acquisition of Renewable Solutions Lighting Limited on 1 July 2020. In line with our previously stated "buy and build" strategy, we continue to assess a number of further strategic acquisition opportunities that meet our criteria.
Brexit
On 31 January 2020, the UK left the European Union. Whilst we continue to assess the evolving situation carefully, the Board does not believe the impact of Brexit will be material as, while we operate in the UK and Ireland, the level of cross-border trading and associated supply chain management is low.
People
I would like to thank everyone at eEnergy for their commitment in supporting the continued progress of the Group despite the challenges they have faced over the last few months due to the COVID-19 pandemic.
During the last six months, we have strengthened our operational management team. In January, Martyn Sheridan was appointed as eLight's UK Sales Director to manage and grow our sales channels. Martyn brings considerable industry experience to the Group. He joined from E.ON where he spent eight years, most recently as Head of National Sales for E.ON's Energy Solutions Division.
Furthermore, in July, eLight appointed Lee Mason as its UK Operations Director. Lee increases eLight's engineering capability and capacity to meet the growing demand for LaaS, particularly in the education sector. A qualified engineer, he previously worked for three years at GE Current, where he completed one of the biggest LED retrofit programmes in Europe across 220 Sainsbury's superstores and distribution centres in the UK.
The Board has also sought to retain and incentivise key management personnel. In July, we implemented a new management incentive plan ("MIP"). The rationale and detail of the MIP were outlined at the time of the Group's readmission to AIM. The Group's Remuneration Committee sought the advice of a "Big 4" accounting firm to ensure that incentives were granted on terms which incentivise sustainable long-term growth and align Directors' and employees' interests with the interests of shareholders.
Outlook
The past six months have presented challenges for many businesses, including eEnergy, however, the pandemic has also created opportunities for growth and we remain optimistic about the future. Over the longer term, and in-line with government strategy, we believe energy efficiency will become an increasing focus for companies and the public sector, not only to increase efficiency and save money but to help meet increasingly ambitious environmental goals. For example, in his recent budget statement, the UK Chancellor of the Exchequer announced plans and funding to improve the energy efficiency of UK public buildings, including schools.
As well as rapidly growing our LaaS business, we are encouraged by the momentum of our pipeline. In addition, we continue to explore options to increase our ability to meet all the energy efficiency needs of our clients, such as proactive energy management and heating, including through acquisition as part of our "buy and build" strategy. The Board believes that market trends and its strategy mean the Group is well-positioned to execute on our ambitious growth plans and deliver significant value to shareholders in the coming years.
David Nicholl
Chairman
17 September 2020
Chief Executive's Statement
Overview
The Group has seen strong financial progress, despite the challenges created by COVID-19. Overall, Group revenue was up 14% to £4.5 million (2019: £3.9 million) and our adjusted EBITDA loss reduced to £647,000 (2019: loss £799,000).
Reflecting the one-off costs of the reverse takeover in January 2020 of £1.3 million, the incremental costs of being a public company and the investment we have made in growing our sales and operational capability in the year, our loss before tax grew to £3.2 million (2019: loss of £1.4 million). However, the underlying growth means that the core operating business, before corporate overheads, has been profitable in each of the last 5 months.
We have a strong balance sheet with cash of £1.5 million (2019: £196,000) and net debt (including IFRS 16 lease liabilities) of £528,000 (2019: £424,000).
Since the year end, and in support of our focused growth strategy, the Group has experienced a significant acceleration in growth, generating revenues of £4 million, a 6-fold increase on the equivalent period of the prior year. In that time, we completed over 64 installations and have a current pipeline of qualified and engaged education and commercial opportunities (where we have issued a formal proposal) for several significant opportunities.
While the COVID-19 crisis resulted in the delay of a number of installations, none were cancelled, and they were ultimately completed over the summer before schools had to manage the complex return of pupils this month. The Group takes the prudent approach of only recognising revenue at the point of installation. The delays in starting installations, which also applied to RSL, have had the effect of pushing over £1m of revenue from the fourth quarter of FY20 into the first quarter of the new financial year.
We continue to expect the Group to achieve breakeven profit after tax in the six-month period to 31 December 2020.
COVID-19 Update
Like many businesses, coronavirus has created operational challenges but we have worked hard to adapt quickly to provide an uninterrupted and enhanced service to our customers, including a new sanitising package. All 32 of our employees were able to work remotely as needed, and the Group's installation partners observed all social distancing precautions when they worked.
In Ireland, we took advantage of the wage support programmes offered by the government but we did not furlough any eLight staff in the UK.
The decision by the UK and Irish governments to close schools led to a spike in interest in the Company's LaaS proposition. During this period, many schools took time to consider maintenance and upgrade projects, including switching to LED lighting. To help support businesses and schools, eEnergy offered new LaaS clients a three-month payment rebate as an incentive to accelerate their transition to LED lighting. This incentive was combined with a deep hygiene clean to reduce the risk of future COVID-19 infections, which proved popular with schools.
In Ireland, the sales strategy has been rebalanced away from the commercial SME sector, which has been hit hardest by COVID-19, towards public sector schools in Ireland and Northern Ireland where we have delivered our first 2 large school projects over the summer.
M&A
RSL Acquisition
In line with our stated strategy, we completed our first acquisition in July 2020. Founded in 2016, Renewable Solutions Lighting Limited ("RSL") provides fully funded, turnkey LED lighting solutions to the education sector across the UK.
The Board believes that the combination of eEnergy and RSL has created the UK's market leader in providing EEaaS solutions to the education sector. There is currently limited overlap between the two businesses, which provides an opportunity for eEnergy to expand deepen its exposure to the state school and Academy sector.
RSL focuses on the state school sector and completed 32 projects last year with an average contract value of over £50,000. RSL has built a market-leading position in the Academy sector, which serves almost four million pupils across England. Since RSL joined the Group on 1 July, it has completed 28 projects across England & Wales.
The total consideration for the acquisition, assuming all earn-out payments are made, is £2.2 million, which is to be paid to the existing shareholders of RSL entirely in new eEnergy shares. The initial consideration was satisfied by the issue of 13.3m new ordinary shares and the contingent consideration, which is based upon six times the adjusted EBITDA generated by RSL in excess of £296,000 in the year following acquisition.
The maximum number of shares to be issued, including the initial consideration and assuming all earn-out payments are made, is approximately 29.3 million new eEnergy shares, or approximately 18.3% of the share capital, as enlarged by the maximum consideration shares.
In addition to the consideration payable, RSL will make payments equal to 3% of revenue generated during the earn-out period to an RSL director as settlement of historical obligations agreed between RSL and the director plus RSL will repay an existing loan of £250,000 due to an RSL director, with £130,000 paid on completion and £120,000 due on the first anniversary of completion.
M&A Strategy
In addition to driving organic growth, the Group continues to evaluate other targeted acquisition opportunities as it aims to broaden its offer to customers. Our "buy and build" strategy is focused on strategically significant businesses in adjacent sectors, including energy management. We are pleased with the development of the pipeline of opportunities under consideration and will continue to use the same disciplined approach in order to create long-term shareholder value.
Our targets are businesses that provide integrated energy management solutions (including software) and an established corporate or public sector customer base where we believe our capability to offer energy reduction through LaaS and broader EEaaS offerings gives us genuine synergy opportunities.
Education Sector
The Board believes that schools represent a substantial growth opportunity where the pressing needs to save money and fight climate change mean energy efficiency is topping the agenda with support from Government. Analysis by eEnergy of the energy consumption of state schools across England has shown that lighting costs account for approximately 50% of energy costs, with over £326 million being wasted every year because of the failure to switch to more efficient LED lighting.
Through eLight, and the acquisition of RSL, the Group is now a leading supplier of energy efficiency services to the education sector in the UK and Ireland.
The Group has completed LED lighting installations at more than 250 schools over the last four years, with 88 undertaken in 2020 alone. eLight has been especially successful in working with the independent school sector. In 2020, the Group installed LED lighting at several leading independent schools, including Marlborough College, Wycliffe College and Kings Ely. RSL focuses on academies and other state funded schools and completed 32 projects last year, plus a further 28 since it joined the Group.
In addition to completing committed projects, the Group continues to generate a strong pipeline and has a significant number of qualified and engaged opportunities with completed proposals.
With more than 27,000 schools in the UK, the Board believes the education sector represents a significant opportunity for the Group. The Directors estimate that over 80% of UK schools have not yet transitioned to energy-efficient lighting, which represents a market opportunity of over £1.5 billion.
Commercial sector
Much of the Commercial sector has been hit hard by the COVID-19 pandemic and the resultant recession, particularly in Ireland. However, there are areas, for instance, in food services, distribution / logistics and healthcare, where the pandemic has led to a significant increase in demand and therefore energy consumption. This has prompted a number of larger businesses in these niche sectors to look at energy reduction strategies, including LED replacement and LaaS. The Group is currently involved in several large, multi-site tender processes for LED lighting roll outs in the commercial sector and will continue to target these opportunities.
New Funding Agreement
In August 2020, the Group announced a major agreement with a new project funding partner, SUSI Partners AG ("SUSI"). The agreement will underpin our market-leading proposition in Ireland and allow us to grow revenues as we take on significantly more projects over the next three years to meet the increasing demand from schools and businesses.
Under the agreement, SUSI, via its Energy Efficiency Fund II, has provided a dedicated funding facility (the "Facility") to the Group of up to €15 million.
The terms of the Facility provide for SUSI to purchase the future receivables arising from new LaaS projects in the Republic of Ireland. The Facility will cover new projects installed for the next three years or until the Facility has been fully utilised, whichever is earlier.
This new funding structure provides the Group with a significantly enhanced competitive advantage, relative to the previous funding arrangements. The Facility provides the Group's Irish business with greater flexibility to deploy capital, to extend the length of contracts offered to customers and improves the economics for the Group.
The Group will have control over the implementation and management of contracts and retain an economic interest over the life of each contract, thereby improving returns.
Northern Ireland expansion
While eLight is already well established in the Republic of Ireland, we believe the Northern Ireland energy efficient lighting market is underdeveloped. The Board sees significant growth potential, particularly in the education sector, where schools tend to be larger than in the Republic of Ireland. Accordingly, in March, eLight expanded its operations into Northern Ireland, adding to its presence in Dublin and London. The first installations in Northern Ireland at Wallace High School and Sperrin Integrated College have been completed over the summer and the sales team is in advanced discussions with several educational bodies in Northern Ireland.
Partnerships
The Group announced in March that it had formally agreed a partnership with the Irish smart energy supplier, Pinergy. This partnership creates a significant new sales channel for eLight, which will provide a LaaS product to Pinergy's business customers. Pinergy supplies its business customers with 100% renewable energy, meaning its customers are focussed not only on cost but also on sustainability, ensuring close alignment between the two businesses.
eLight has already delivered lighting solutions for a number of Pinergy clients and the partnership is expected to improve eLight's development pipeline. Pinergy joins Lynch Interact which formed a partnership with eLight in December 2019. Lynch Interact is the leading Irish owned company specialising in the provision of complete Facility Support and Building Fabric Services for the built environment.
Outlook
We are cautiously optimistic about the next six months, supported by the number of orders that have been secured since the beginning of the calendar year, a reduction in lead times and an increase in proposal activity. Interest and awareness in LaaS is growing, in particular in the education sector, as schools look to cut costs and reduce their carbon emissions in-line with government strategy. However, we perceive a growing opportunity in the commercial and wider public sector arenas and have a clear plan in place to raise awareness of LaaS and complement this with adjacent energy efficiency revenue streams over the coming years.
Since the beginning of July, we have completed 64 energy efficiency projects, generating over £4 million of revenue. We are excited about the prospect for organic and inorganic growth opportunities and making further financial progress on last year, with the Board continuing to expect the Group to achieve breakeven profit after tax in the six months to 31 December 2020.
Harvey Sinclair
Chief Executive Officer
17 September 2020
Chief Financial Officer's Statement
I am delighted to present my first report since we completed the reverse takeover that created eEnergy in January 2020. We had a strong start to 2020 and have been able to robustly respond to the demands and challenges of the COVID-19 pandemic. The Board remains confident for the year ahead and we are able to evaluate opportunities in the challenging business environment.
Key performance indicators
· Total Contract Value (TCV) secured in FY20 was £7.0 million (FY19: £6.5 million)
· Order Book of £2.2 million at 30 June 2020 was 94% higher than the prior year (£1.2 million)
· Revenue increased 14% to £4.5m from £3.9m
· Gross margin at 35.5% in FY20 was 510 bps better than the 30.4% gross margin achieved in FY19
· Positive operating EBITDA in each month of the fourth quarter (which has continued into the first quarter of FY21)
· Operating EBITDA improved from a loss of £799,000 in FY19 to a loss of £647,000 in FY20
· The loss before and after tax for the year was £3.3 million (after £1.3 million of reverse takeover expense) compared to £1.4 million in the prior year
· Cash at bank increased to £1,478,000 at 30 June 2020 from £196,000 at 30 June 2019
· Net debt (including IFRS 16 lease liabilities) increased to £528,000 from £424,000 at 30 June 2019
Financial position and liquidity
Having successfully completed our Placing and raised £1.66m of net proceeds in January we have been able to manage our financial position well. At period end, we had cash of £1.5m and we have recently increased our debt facility, originally agreed in September 2019, and deferred the start of our principal repayments by a quarter.
In August 2020 we agreed a €15 million committed facility with SUSI Partners for our Euro denominated business in Ireland, which provides sufficient funding for our projects for up to 3 years. This facility increases our revenue and cash generation from each project compared to the previous facility we had in place.
We have modelled a number of potential scenarios that management believe are reasonably likely for the ongoing impact of COVID-19 on our financial performance and cash generation and the Board is confident that the Group has sufficient financial resources and headroom within its debt covenants for the foreseeable future should the worst of these scenarios be realised.
The Board continues to focus actively on cash management, taking proactive steps to preserve our cash position.
Reverse acquisition accounting and financial presentation
On 9 January 2020, we completed the reverse acquisition of Alexander Mining to create eEnergy Group plc. Although eEnergy Group plc (then known as Alexander Mining plc) was the legal acquirer of eLight Group Holdings Limited, the consolidated results that are presented within our June 2020 financial statements are as if eLight had acquired the plc. Therefore, we present a full twelve month profit and loss and cash flows for the year ended 30 June 2020 together with comparatives for the period ended 30 June 2019.
In addition, the accounting for the reverse itself is deemed to be the issue of shares to the original plc shareholders by eLight and this is accounted for as a "share based payment" which gives rise to a charge in the P&L for the year of £1.1m, which is included within the reverse acquisition expense.
The Reverse Acquisition accounting is described in more detail in Note 3 to the financial statements.
Due to the change of year-end of eEnergy Group plc, the Company only financial statements are for the six-month period from 1 January to 30 June 2020.
We are also presenting eEnergy's results in Pounds Sterling, whereas the historical results for eLight Group have been presented in Euro. This is because Pounds Sterling is now the principal functional currency of the Group as a whole due to the underlying growth in the UK and Northern Ireland being higher than in the Republic of Ireland and the increase in Sterling denominated suppliers.
Financial highlights
eLight UK
The 11% progression in revenue reported year on year masks the momentum that is continuing to be seen in the second half of the calendar year as the focus pivots to the education sector. This has made our financial performance more resilient to COVID-19 as we were able to complete scheduled installations in schools during and after the Easter holidays. As at 30 June 2020 our order book of contracts won but not yet installed was at £1.5 million (2019 - £0.4 million), predominantly for schools scheduled to be installed before the start of the autumn term when all the students returned.
Our gross margin for eLight UK improved from 28% to 36% reflecting the benefit of new and improved relationships with our OEM partners secured during the year. Our operating costs increased £0.2m year on year as we invested in our sales and marketing team after the reverse takeover. This investment in sales and marketing was a significant contributing factor to the increased sales momentum and the improvement in our order book.
eLight Ireland
Revenue improved year on year by 18% largely due to migrating away from the historical project funding relationship when the exclusivity term expired which has enabled us to retain a higher proportion of the value of each project that we install. At 30 June 2020 our order book for contracts won but not yet installed was £0.7m (2019 - £0.7m) of which schools were 63% compared to 33% in the prior year.
The impact of COVID-19 in Ireland on businesses has been more severe than in the UK and during lockdown we were unable to complete any installations. We availed ourselves of the Irish Government support for our staff, all of whom we have retained, to partially mitigate the impact on revenue and as a result we held our operating costs flat year on year. We successfully started up in Northern Ireland and secured two large school contracts for installation over the summer holidays, both of which were completed on schedule.
Central costs
The eLight central costs reflected that we had been building the business for growth and had targeted a reverse takeover from the summer of 2019. Therefore, the year on year increase in our central costs was in line with our expectations, including the resultant additional overheads required from being a public company for half of the period presented, primarily from the increased Board and the additional legal and professional costs.
Cash generation
The nature of our business model means that each individual installed project will be cash generative for us. Since 1 April we have generated positive operating EBITDA within eLight in each month, although COVID-19 has pushed back when we expect to achieve our Group profit after tax breakeven point into the first half of the current financial year (FY21).
Acquisitions
On 1 July 2020 we completed the acquisition of Renewable Solutions Lighting Limited ("RSL"). As a post balance sheet event it had no impact on the FY20 financial statements. The initial consideration was paid entirely in eEnergy shares and eEnergy loaned RSL the funds to make a scheduled repayment of a director's loan note.
RSL was a loss-making business when we acquired it but it comes with a healthy order book and a strong pipeline to complement our education focused business in the UK.
Borrowings
In September 2019, eLight Group Holdings entered into a loan agreement for €1.6 million. The whole balance was drawn at the time to fund investment in our technology and fund working capital. The loan facility is secured on the assets of eLight Group Holdings and is guaranteed by the eLight trading companies. It includes covenants relating to total contracted orders, revenue and operating EBITDA, all measured over a rolling 12 month period, plus a covenant requiring us to retain a minimum level of cash in the eLight Group. In September 2020 we increased the loan to €1.8 million and our acquisition, Renewable Solutions Lighting Limited, became a guarantor of the facility. Principal repayments commence in December 2020 and will be made monthly over the next three years.
Working capital
Our acceleration in trading during the fourth quarter has contributed to the increase in our working capital balances at 30 June 2020 when compared to the prior year.
Trade and other receivables (predominantly accrued income) have increased to £1.1 million from £149,000 reflecting the timing of completion and funding of projects at the year end.
Inventories have increased to £356,000 from £224,000 due to technology product being held at the client sites for installations starting in July 2020.
Financial assets at fair value through profit and loss are the energy credits earned on projects completed in Ireland. Although the value has increased, during the year we entered into a contract that enables us to monetise the energy credits we earn on a more timely basis. However we also recorded a write down of £78,000 in the carrying value of historical energy credits at the beginning of the year due to a softening in the market price.
Trade and other payables have increased by £1.4 million to £4.0 million reflecting the balances due to our suppliers for installations completed in the fourth quarter and the value of technology product ordered for installations starting in July.
Project Funding
Our business model depends upon working with a range of project funding partners to finance our client projects and we actively work to identify the best partners to work with. There is no doubt that the COVID-19 pandemic has made project funders more cautious and selective and we have built that caution into our own credit assessment processes. In Ireland we have completed the migration from our principal historical relationship to the committed €15 million facility with SUSI Partners, announced in August 2020, which increases our share of each contract we install and provides us with access to 7 or even 10-year contracts. In the UK we continue to enjoy strong relationship with our primary funding partners and have created new relationships to broaden the range of our offering.
Changes to accounting policies
From 1 July 2019 the Group has adopted IFRS 16: Accounting for Leases. On adoption, IFRS 16 gives rise to the recognition of Right of Use assets and lease liabilities for future lease payments. The Right of Use asset is depreciated on a straight-line basis over the life of the lease and interest is recognised on the lease liabilities. On transition we have recognised Right of Use assets and lease liabilities of £522,000, predominantly for our property in Ireland. There is no adjustment to our opening reserves as it is immaterial. The impact on our income statement has been to reduce operating costs by £79,000 which is offset by increases in depreciation and interest so there is no net effect on the income statement.
There is no impact on actual cash flow from the adoption of IFRS 16 although the presentation within the cash flow statement mirrors the changes to the income statement.
Summary
Having completed the reverse takeover, we are well placed to address the economic uncertainty which has arisen due to COVID-19 and we expect to deliver on the strategy set out in the Admission Document in December 2019.
Ric Williams
Chief Financial Officer
17 September 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2020
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| Year to 30 June 2020 | Period to 30 June 2019 £'000 |
Continuing operations |
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|
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Revenue from contracts with customers |
| 4,501 | 3,943 |
Cost of sales |
| (2,913) | (2,746) |
Gross profit |
| 1,588 | 1,197 |
Operating expenses |
| (4,433) | (2,562) |
Included within operating expenses are: |
|
|
|
- Group central costs |
| 878 | 503 |
- Reverse acquisition expenses |
| 1,320 | - |
- Other exceptional items |
| - | 63 |
Adjusted operating expenses |
| (2,235) | (1,996) |
Adjusted earnings before interest, taxation, depreciation and amortisation |
| (647) | (799) |
Earnings before interest, taxation, depreciation and amortisation |
| (2,845) | (1,365) |
Depreciation |
| (72) | (19) |
Finance costs |
| (277) | (4) |
Loss before taxation |
| (3,194) | (1,388) |
Income tax |
| - | - |
Loss for the year from continuing operations attributable to the owners of the company |
| (3,194) | (1,388) |
Other comprehensive income - items that may be reclassified subsequently to profit and loss |
|
|
|
Translation of foreign operations |
| (82) | (33) |
Total other comprehensive loss |
| (82) | (33) |
Total comprehensive loss for the year attributable to the owners of the company |
| (3,276) | (1,421) |
|
|
|
|
Basic and diluted loss per share from continuing operations (p) |
| (2.96)p | (1.60)p |
.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
|
|
|
As at 30 June 2020 |
As at 30 June 2019 |
|
NON-CURRENT ASSETS |
|
|
|
|
Property, plant and equipment |
|
130 |
75 |
|
Intangible asset |
|
211 |
211 |
|
Right of use asset |
|
538 |
- |
|
Total non-current assets |
|
879 |
286 |
|
Inventories |
|
356 |
224 |
|
Trade and other receivables |
|
1,073 |
149 |
|
Financial assets at fair value through profit or loss |
|
414 |
351 |
|
Cash and cash equivalents |
|
1,478 |
196 |
|
Total current assets |
|
3,321 |
920 |
|
TOTAL ASSETS |
|
4,200 |
1,206 |
|
NON-CURRENT LIABILITIES |
|
|
|
|
Lease liability |
|
506 |
- |
|
Borrowings |
|
1,120 |
- |
|
Total non-current liabilities |
|
1,626 |
- |
|
CURRENT LIABILITIES |
|
|
|
|
Trade and other payables |
|
3,955 |
2,558 |
|
Lease liability |
|
76 |
- |
|
Borrowings |
|
304 |
51 |
|
Total current liabilities |
|
4,335 |
2,609 |
|
TOTAL LIABILITIES |
|
5,961 |
2,609 |
|
|
|
|
|
|
NET ASSETS (LIABILITIES) |
|
(1,761) |
(1,403) |
|
Equity attributable to owners of the parent |
|
|
|
|
Issued share capital |
|
15,725 |
18 |
|
Share premium |
|
22,375 |
- |
|
Other reserves |
|
82 |
- |
|
Reverse acquisition reserve |
|
(35,246) |
- |
|
Foreign currency translation reserve |
|
(115) |
(33) |
|
Accumulated losses |
|
(4,582) |
(1,388) |
|
Total equity |
|
(1,761) |
(1,403) |
CONSOLIDATED STATEMENTS OF CASHFLOWS
For the year ended 30 June 2020
|
|
|
Year to 30 June 2020 |
Period to 30 June 2019 |
|
|
Cash flow from operating activities |
|
|
|
|
|
Operating loss - continuing operations |
|
(3,194) |
(1,388) |
|
|
Adjustments for: |
|
|
|
|
|
Depreciation |
|
72 |
20 |
|
|
Finance cost (net) |
|
277 |
(3) |
|
|
Share issue to settle expenses |
|
100 |
- |
|
|
Share option charge |
|
8 |
- |
|
|
Finance charge on lease liabilities |
|
53 |
- |
|
|
Foreign exchange movement |
|
(14) |
- |
|
|
Reverse acquisition expense |
|
1,052 |
- |
|
|
Operating cashflow before working capital movements |
|
(1,646) |
(1,371) |
|
|
(Increase) in trade and other receivables |
|
(998) |
(446) |
|
|
Increase in trade and other payables |
|
1,236 |
1,655 |
|
|
Increase in inventories |
|
(187) |
(161) |
|
|
Increase in deferred income |
|
- |
421 |
|
|
Net cash (outflow) inflow from operating activities |
|
(1,595) |
98 |
|
|
Cash flow from investing activities |
|
|
|
|
|
Cash acquired on acquisition of business |
|
105 |
147 |
|
|
Proceeds from disposal of subsidiary |
|
150 |
- |
|
|
Purchase of property, plant and equipment |
|
(82) |
(94) |
|
|
Net cash inflow (outflow) from investing activities |
|
173 |
53 |
|
|
Cash flows from financing activities |
|
|
|
|
|
Interest (paid) received |
|
(225) |
3 |
|
|
Repayment of lease liabilities |
|
(40) |
- |
|
|
Net proceeds from the issue of shares |
|
1,664 |
- |
|
|
Proceeds from loans and borrowings |
|
1,342 |
- |
|
|
Net cash inflow from financing activities |
|
2,741 |
3 |
|
|
Net (decrease) increase in cash and cash equivalents |
|
1,319 |
154 |
|
|
Effect of exchange rates on cash |
|
14 |
(9) |
|
|
Cash and cash equivalents at the beginning of the period |
|
145 |
- |
|
|
Cash and cash equivalents at the end of the year |
|
1,478 |
145 |
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
|
|
Share Capital |
Share Premium |
Reverse Acqn. Reserve |
Other Reserve |
CTA Reserve |
Accum |
Total Equity |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
At incorporation |
- |
- |
- |
- |
- |
- |
- |
|
Other comprehensive loss |
- |
- |
- |
- |
(33) |
- |
(33) |
|
Loss for the period |
- |
- |
- |
- |
- |
(1,388) |
(1,388) |
|
Total comprehensive loss for the period attributable to equity holders of the parent |
- |
- |
- |
- |
(33) |
(1,388) |
(1,421) |
|
Shares issued in period |
18 |
- |
- |
- |
- |
- |
18 |
|
Total transaction with owners |
18 |
- |
- |
- |
- |
- |
18 |
|
Balance at 30 June 2019 |
18 |
- |
- |
- |
(33) |
(1,388) |
(1,403) |
|
Other comprehensive loss |
- |
- |
- |
- |
(82) |
- |
(82) |
|
Loss for the year |
- |
- |
- |
- |
- |
(3,194) |
(3,194) |
|
Total comprehensive loss for the year attributable to equity holders of the parent |
- |
- |
- |
- |
(82) |
(3,194) |
(3,276) |
|
Shares issued in period |
51 |
- |
- |
- |
- |
- |
51 |
|
Transfer to reverse acquisition reserve |
(69) |
- |
69 |
- |
- |
- |
- |
|
Recognition of plc equity at acquisition date |
15,376 |
14,461 |
(28,741) |
- |
- |
- |
1,096 |
|
Issue of consideration shares for reverse acquisition |
263 |
6,311 |
(6,574) |
- |
- |
- |
- |
|
Issue of shares for cash |
80 |
1,920 |
- |
- |
- |
- |
2,000 |
|
Issue of shares in lieu of cash |
6 |
144 |
- |
- |
- |
- |
150 |
|
Issue of warrants |
- |
- |
- |
82 |
- |
- |
82 |
|
Cost of share issue |
- |
(461) |
- |
- |
- |
- |
(461) |
|
Total transaction with owners |
15,707 |
22,375 |
(35,246) |
82 |
- |
- |
2,918 |
|
Balance at 30 June 2020 |
15,725 |
22,375 |
(35,246) |
82 |
(115) |
(4,582) |
(1,761) |
SELECTED NOTES TO THE FINANCIAL INFORMATION
For the year ended 30 June 2020
1 GENERAL INFORMATION
eEnergy Group plc ("the Company") (formerly Alexander Mining plc) is a public limited company with its shares traded on the AIM Market of the London Stock Exchange. eEnergy Group plc is a holding company of a group of companies (the "Group"), the principal activities of which are the provision of energy efficient LED lighting solutions to commercial clients in both Ireland and the United Kingdom.
The Company is incorporated and domiciled in England and Wales with its registered office at Salisbury House, London Wall, London, England, EC2M 5PS. The Company's registered number is 05357433.
2 ACCOUNTING POLICIES
IAS 8 requires that management shall use its judgement in developing and applying accounting policies that result in information which is relevant to the economic decision-making needs of users, that are reliable, free from bias, prudent, complete and represent faithfully the financial position, financial performance and cash flows of the entity.
2.1 Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretations Committee ("IFRS IC") as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under the historical cost convention as modified by financial assets at fair value through profit or loss, and the recognition of net assets acquired under the reverse acquisition at fair value.
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts in the financial statements. The areas involving a higher degree of judgment or complexity, or areas where assumptions or estimates are significant to the financial statements, are disclosed in note 2.19.
The financial statements present the results for the Group for the year ended 30 June 2020. The comparative period is for the period from 8 June 2018 (when eLight Group Holdings Limited was incorporated) to 30 June 2019. The Group commenced trading on 1 July 2018.
The principal accounting policies are set out below and have, unless otherwise stated, been applied consistently in the financial statements. The consolidated financial statements are prepared in Pounds Sterling, which is the Group's and Company's functional and presentation currency, and presented to the nearest £'000.
2.2 New standards, amendments and interpretations
The Group and parent Company have adopted all of the new and amended standards and interpretations issued by the International Accounting Standards Board that are relevant to its operations and effective for accounting periods commencing on or after 1 July 2019.
IFRS 16 Leases became applicable to the current reporting period, replacing IAS 17 Leases. The key change under IFRS 16 is that most leases designated as "operating leases" under IAS 17 now qualify for balance sheet recognition, subject to certain exceptions.
The Group reviewed all its leasing arrangements and identified three contracts previously classified as operating leases which have been recognised as lease liabilities in the 1 July 2019 balance sheet. An associated right-of-use asset was recognised for each lease.
Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate, which averaged 10% across the Group.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
- Use of a single discount rate to a portfolio of leases with reasonably similar characteristics; and
- The accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short term leases.
On 1 July 2019, the Group recognised the following lease liabilities:
|
|
|
£'000 |
|
Current |
|
67 |
|
Non-current |
|
455 |
|
Total |
|
522 |
The right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 30 June 2019.
There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application. Right-of-use assets recognised on 1 July 2019 were:
|
|
|
£'000 |
|
Properties |
|
492 |
|
Motor vehicles |
|
30 |
|
Total |
|
522 |
No other standards or Interpretations that came into effect for the first time for the financial year beginning 1 July 2019 have had an impact on the Group or Company.
2.3 New standards and interpretations not yet adopted
At the date of approval of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not been adopted by the EU):
· Amendments to References to Conceptual Framework in IFRS Standards - effective from 1 January 2020
· Definition of Material (Amendments to IAS 1 and IAS 8) - effective from 1 January 2020
· Amendment to IFRS 3 Business Combinations - effective 1 January 2020*
· Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current - effective 1 January 2022*
*subject to EU endorsement
The effect of these new and amended Standards and Interpretations which are in issue but not yet mandatorily effective is not expected to be material.
2.4 Going concern
The financial information has been prepared on a going concern basis, which assumes that the Group and Company will continue in operational existence for the foreseeable future. In assessing whether the going concern assumption is appropriate, the Directors have taken into account all relevant information about the current and future position of the Group and Company, including the current level of resources and the ability to trade within the terms and covenants of its loan facility over the going concern period of at least 12 months from the date of approval of the financial statements. The Group meets its working capital requirements from its cash and cash equivalents and its loan facility, which is secured by a debenture over the trading subsidiaries and assets of eLight.
The Directors note that COVID-19 has had a significant negative impact on the global economy and has resulted in the Group's clients and prospects delaying orders. Since the lockdown restrictions started to be lifted the Group has seen a strong rebound of orders and the Directors expect the Group to trade strongly over the foreseeable future. Having prepared budgets and cash flow forecasts covering the going concern period which have been stress tested for the negative impact of possible scenarios from COVID-19, the Directors believe the Group has sufficient resources to meet its obligations for a period of at least 12 months from the date of approval of these financial statements. Discretionary expenditure will be curtailed, if necessary, in order to preserve cash for working capital purposes and ensure compliance with covenants.
Taking these matters into consideration, the Directors consider that the continued adoption of the going concern basis is appropriate having prepared cash flow forecasts for the coming 18 months. The financial statements do not reflect any adjustments that would be required if they were to be prepared on a non going concern basis.
2.5 Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Please refer to note 3 for information on the consolidation of eLight Group Holdings Limited and the application of the reverse acquisition accounting principles.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquire on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated.
2.6 Foreign currency translation
(i) Functional and presentation currency
Items included in the individual financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in £ Sterling, which is the Company's presentation and functional currency. The individual financial statements of each of the Company's wholly owned subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional currency). IAS 21 The Effects of Changes in Foreign Exchange Rates requires that assets and liabilities be translated using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions (i.e. the average rate for the period). The foreign exchange differences on translation is recognised in other comprehensive income (loss).
(ii) Transactions and balances
Transactions denominated in a foreign currency are translated into the functional currency at the exchange rate at the date of the transaction. Assets and liabilities in foreign currencies are translated to the functional currency at rates of exchange ruling at balance date. Gains or losses arising from settlement of transactions and from translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement for the period.
(iii) Group companies
The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;
- income and expenses for each income statement are translated at the average exchange rate; and
- all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders' equity. When a foreign operation is partially disposed or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.
2.7 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. The chief operating decision maker, who are responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive Board of Directors.
2.8 Impairment of non-financial assets
Non-financial assets and intangible assets not subject to amortisation are tested annually for impairment at each reporting date and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment review is based on discounted future cash flows. If the expected discounted future cash flow from the use of the assets and their eventual disposal is less than the carrying amount of the assets, an impairment loss is recognised in profit or loss and not subsequently reversed.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows (cash generating units or 'CGUs').
2.9 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, and demand deposits with banks and other financial institutions and bank overdrafts.
2.10 Financial instruments
IFRS 9 requires an entity to address the classification, measurement and recognition of financial assets and liabilities.
a) Classification
The Group classifies its financial assets in the following measurement categories:
· those to be measured at amortised cost.
The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows.
The Group classifies financial assets as at amortised cost only if both of the following criteria are met:
· the asset is held within a business model whose objective is to collect contractual cash flows; and
· the contractual terms give rise to cash flows that are solely payment of principal and interest.
b) Recognition
Purchases and sales of financial assets are recognised on trade date (that is, the date on which the Group commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
c) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Debt instruments
Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or loss.
d) Impairment
The Group assesses, on a forward looking basis, the expected credit losses associated with any debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
2.11 Revenue recognition
Under IFRS 15, Revenue from Contracts with Customers, five key points to recognise revenue have been assessed:
Step 1: Identity the contract(s) with a customer;
Step 2: Identity the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the contract; and
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity, and specific criteria have been met for each of the Group's activities, as described below.
The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Where the Group makes sales relating to a future financial period, these are deferred and recognised under 'contract liabilities' on the Statement of Financial Position.
The Group derives revenue from the transfer of goods and services overtime and at a point in time in the major product and service lines detailed below.
Revenues from external customers come from the provision of "Light as a Service" (LaaS) agreements where the Group delivers lighting outcomes to its customers over time and from the supply and installation of lighting equipment. The Group may assign the majority or all of its right and obligations under a LaaS agreement to a Finance Partner in accordance with the terms of the agreement and will recognise revenue at the time of assignment.
a) Light as a Service
The Group will undertake to provide Lighting Outcomes to customers over the term of a contract, typically 3, 5 or 7 years. The Group will design the installation of lighting equipment to meet the Lighting Outcomes over the contract term, source and then install that equipment. Once the installation has been accepted the customer will make payments monthly over the contract term. Where a contract is assigned to a Finance Partner, then revenue will be recognised at the point of assignment. Where a contract is not assigned, the transaction price will be adjusted for the time value of money and the revenue will be recognised rateable over the term.
Included within the LaaS contract is an undertaking to ensure that the agreed Lighting Outcomes are delivered and this may require the repair or replacement of faulty products. This performance obligation is not a material element of the LaaS contract and accordingly revenue is not separately recognised and an accrual for the expected future costs is recognised pro rata to the revenue that is recognised.
b) Supply and installation of lighting equipment
The Group will supply and install lighting equipment for customers. Payment of the transaction price is typically due in instalments between the customer order and the installation being accepted or upon installation acceptance. Revenue is only recognised upon installation acceptance as the Group does not consider the supply of equipment and its installation as distinct performance obligations.
The Group's obligation to repair or replace faulty products under the standard warranty terms is recognised as a provision.
c) Management services
The Group provides management services to customers and certain other parties under fixed fee arrangements. Efforts to satisfy the performance obligation are expended evenly throughout the performance period and so the performance obligation is considered to be satisfied evenly over time and accordingly the revenue is recognised evenly over time.
d) Energy credits
From time to time the Group will receive consideration for both LaaS and supply & install contracts in Ireland in the form of energy credits. Energy credits are financial assets that are valued at fair value through profit or loss and their initial estimated value is included as part of the transaction price recognised as revenue. Energy credits are validated by the SEAI (the Irish regulator) and once validated are transferred to an undertaking that needs those energy credits, typically a power generation company. Any changes in the fair value of the energy credits between initial recognition and their realisation for cash are recorded as other gains or losses.
e) Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
2.12 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
When the Group acquires any plant and equipment it is stated in the financial statements at its cost of acquisition.
Depreciation is charged to write off the costs less estimated residual value of plant and equipment on a straight line basis over their estimated useful lives at the following annual rates:
- Plant and equipment 25%
- Computer equipment 25%
Estimated useful lives and residual values are reviewed each year and amended as required.
2.13 Intangible assets
Intangible assets acquired as part of a business combination or asset acquisition, other than goodwill, are initially measured at their fair value at the date of acquisition. Intangible assets acquired separately are initially recognised at cost.
Indefinite life intangible assets comprising goodwill are not amortised and are subsequently measured at cost less any impairment. The gains and losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset.
Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.
2.14 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour and other direct costs. It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
2.15 Leases
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
- Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
- Variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date;
- Amounts expected to be payable by the Group under residual value guarantees;
- The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
- Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period. Right-of-use assets are measured at cost which comprises the following:
- The amount of the initial measurement of the lease liability;
- Any lease payments made at or before the commencement date less any lease incentives received;
- Any initial direct costs; and
- Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.
Payments associated with short-term leases (term less than 12 months) and all leases of low-value assets (generally less than $5k) are recognised on a straight-line basis as an expense in profit or loss.
2.16 Equity
Share capital is determined using the nominal value of shares that have been issued.
The Share premium account includes any premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from the Share premium account, net of any related income tax benefits.
Retained losses includes all current and prior period results as disclosed in the income statement.
2.17 Taxation
Taxation comprises current and deferred tax.
Current tax is based on taxable profit or loss for the period. Taxable profit or loss differs from profit or loss as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The asset or liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
2.18 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs. Borrowings are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings, using the effective interest method. Fees paid on the establishment of loan facilities are capitalised as a prepayment for liquidity services and amortised over the period of the loan to which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.
2.19 Exceptional items and non-GAAP performance measures
Exceptional items are those items which, in the opinion of the Directors, should be excluded in order to provide a consistent and comparable view of the underlying performance of the Group's ongoing business. Generally, exceptional items include those items that do not occur often and are material.
In the current period exceptional items relate to the share based payment recognised on the reverse acquisition, together with legal and professional fees on readmission to AIM. In the prior period exceptional items related to the professional fees incurred in forming the Group in 2018, including the acquisition of ELUK.
We believe the non-GAAP performance measures presented, along with comparable GAAP measurements, are useful to provide information with which to measure the Group's performance, and its ability to invest in new opportunities. Management uses these measures with the most directly comparable GAAP financial measures in evaluating operating performance and value creation. The primary measure is Earnings before Interest, Tax, Depreciation and Amortisation ("EBITDA") and Adjusted EBITDA, which is the measure of profitability before accounting for the central administration function's costs which has been incurred across the Group (and which are disclosed as a separate operating segment in note 3) and expenses relating to the reverse acquisition transaction. These measures are also consistent with how underlying business performance is measured internally.
The Group separately reports exceptional items within their relevant income statement line as it believes this helps provide a better indication of the underlying performance of the Group. Judgement is required in determining whether an item should be classified as an exceptional item or included within underlying results. Reversals of previous exceptional items are assessed based on the same criteria.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP.
2.20 Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the entity's accounting policies, management makes estimates and assumptions that have an effect on the amounts recognised in the financial information. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. The following is the critical judgement the Directors have made in the process of applying the Group's accounting policies.
Impairment assessment
In accordance with its accounting policies, each CGU is evaluated annually to determine whether there are any indications of impairment and a formal estimate of the recoverable amount is performed. The recoverable amount is based on value in use which require the Group to make estimates regarding key assumptions regarding forecast revenues, costs and pre-tax discount rate. Uncertainty about these assumptions could result in outcomes that require a material adjustment to the carrying amount of goodwill in future periods.
Energy credits
Energy credits are valued based on management's assessment of market price fair value underlying the energy credit. Such assessment are derived from valuation techniques that include inputs for the energy credit asset that are not based on observable market data. Uncertainty about the market price fair value used in valuing the energy credit assets could result in outcomes that require a material adjustment to the value of these energy credits assets in future periods.
3. REVERSE ACQUISTION
On 9 January 2020, the Company acquired through a share for share exchange the entire share capital of eLight Group Holdings Limited, whose principal activity is the provision of energy efficient LED lighting solutions to education and commercial clients in the United Kingdom and Ireland.
Although the transaction resulted in eLight Group Holdings Limited becoming a wholly owned subsidiary of the Company, the transaction constitutes a reverse acquisition as the previous shareholders of eLight Group Holdings Limited own a substantial majority of the Ordinary Shares of the Company and the executive management of eLight Group Holdings Limited became the executive management of eEnergy Group plc
In substance, the shareholders of eLight Group Holdings Limited acquired a controlling interest in the Company and the transaction has therefore been accounted for as a reverse acquisition. As the Company's activities prior to the acquisition were purely the maintenance of the AIM Listing, acquiring eLight Group Holdings Limited and raising equity finance to provide the required funding for the operations of the acquisition it did not meet the definition of a business in accordance with IFRS 3.
Accordingly, this reverse acquisition does not constitute a business combination and was accounted for in accordance with IFRS 2 "Share-based Payments" and associated IFRIC guidance. Although, the reverse acquisition is not a business combination, the Company has become a legal parent and is required to apply IFRS 10 and prepare consolidated financial statements. The Directors have prepared these financial statements using the reverse acquisition methodology, but rather than recognising goodwill, the difference between the equity value given up by the eLight Group Holding Limited's shareholders and the share of the fair value of net assets gained by the eLight Group Holdings Limited shareholders is charged to the statement of comprehensive income as a share based payment on reverse acquisition, and represents in substance the cost of acquiring an AIM listing.
In accordance with reverse acquisition accounting principles, these consolidated financial statements represent a continuation of the consolidated statements of eLight Group Holdings Limited and its subsidiaries and include:
- The assets and liabilities of eLight Group Holdings Limited and its subsidiaries at their pre-acquisition carrying value amounts and the results for both years; and
- The assets and liabilities of the Company as at 9 January 2020 and its results from the date of the reverse acquisition (9 January 2020) to 30 June 2020
On 9 January 2020, the Company issued 87,651,000 ordinary shares to acquire the 2,023,000 ordinary shares of eLight Group Holdings Limited. At 9 January 2020, the quoted share price of the Company was £0.075 and therefore valued the investment in eLight Group Holdings at £6,574,000.
Because the legal subsidiary, eLight Group Holdings Limited, was treated as the accounting acquirer and the legal Parent Company, eEnergy Group plc, was treated as the accounting subsidiary, the fair value of the shares deemed to have been issued by eLight Group Holdings Limited was calculated at £1,096,000 based on an assessment of the purchase consideration for a 100% holding of eEnergy Group plc.
The fair value of the net assets of eEnergy Group plc at acquisition was as follows:
|
|
|
£'000 |
|
Cash and cash equivalents |
|
105 |
|
Other assets |
|
103 |
|
Liabilities |
|
(165) |
|
Net Assets |
|
43 |
The difference between the deemed cost (£1,096,000) and the fair value of the net assets assumed of £43,000 resulted in £1,052,000 having been expensed in accordance with IFRS 2, Share Based Payments, reflecting the economic cost to eLight Group Holdings Limited shareholders of acquiring a quoted entity.
The reverse acquisition reserve arose from the reverse takeover is made up as follows:
|
|
|
£'000 |
|
Pre-acquisition equity1 |
|
(29,793) |
|
eLight Group Holdings Limited share capital at acquisition 2 |
|
69 |
|
Investment in eLight 3 |
|
(6,574) |
|
Reverse acquisition expense 4 |
|
1,052 |
|
|
|
35,246 |
1. Recognition of pre-acquisition equity of eEnergy Group plc as at 9 January 2020.
2. eLight Group Holdings Limited had issued share capital of £69,000. As these financial statements present the capital structure of the legal parent entity, the equity of eLight Group Holding Limited is eliminated.
3. The value of the shares issued by the Company in exchange for the entire share capital of eLight Group Holdings Limited. The above entry is required to eliminate the balance sheet impact of this transaction.
4. The reverse acquisition expense represents the difference between the value of the equity issued by the Company, and the deemed consideration given by eLight Group Holdings Limited to acquire the Company.
4. SEGMENT REPORTING
The following information is given about the Group's reportable segments:
The Chief Operating Decision Maker is the Board of Directors. The Board reviews the Group's internal reporting in order to assess performance of the Group. Management has determined the operating segment based on the reports reviewed by the Board.
The Board considers that during the year ended 30 June 2020 the Group operated in the single business segment of LED lighting solutions.
|
2020 |
|
United Kingdom £'000 |
Ireland £'000 |
Central £'000 |
|
2020 £'000 |
|
Revenue |
|
2,241 |
2,260 |
- |
|
4,501 |
|
Cost of sales |
|
(1,429) |
(1,484) |
- |
|
(2,913) |
|
Gross Profit |
|
812 |
776 |
- |
|
1,588 |
|
Operating expenses |
|
(1,027) |
(1,208) |
|
|
(2,235) |
|
Operating EBITDA |
|
(215) |
(432) |
- |
|
(647) |
|
Central management costs |
|
- |
- |
(878) |
|
(878) |
|
Depreciation |
|
(3) |
(64) |
(5) |
|
(72) |
|
Finance and similar charges |
|
(24) |
(52) |
(201) |
|
(277) |
|
Reverse acquisition expenses |
|
- |
- |
(1,320) |
|
(1,320) |
|
Loss before and after tax |
|
(242) |
(548) |
(2,404) |
|
(3,194) |
|
|
|
|
|
|
|
|
|
Net Assets |
|
|
|
|
|
|
|
Assets: |
|
978 |
2,037 |
1,335 |
|
4,350 |
|
Liabilities |
|
(1,256) |
(2,896) |
(1,959) |
|
(6,111) |
|
|
|
|
|
|
|
|
|
Net assets (liabilities) |
|
(278) |
(859) |
(624) |
|
(1,761) |
|
|
|
|
|
|
|
|
2019 |
| United Kingdom £'000 | Ireland £'000 | Central £'000 |
| 2019 £'000 |
Revenue |
| 2,027 | 1,916 | - |
| 3,943 |
Cost of sales |
| (1,452) | (1,294) | - |
| (2,746) |
Gross Profit |
| 575 | 622 | - |
| 1,197 |
Operating expenses |
| (833) | (1,222) | (4) |
| (2,059) |
Operating EBITDA |
| (258) | (600) | (4) |
| (862) |
Central management costs |
| - | - | (503) |
| (503) |
Depreciation |
| - | (19) | - |
| (19) |
Finance and similar charges |
| - | (3) | - |
| (3) |
Loss before and after tax |
| (258) | (622) | (507) |
| (1,387) |
|
|
|
|
|
|
|
Net Assets |
|
|
|
|
|
|
Assets: |
| 271 | 714 | 221 |
| 1,206 |
Liabilities |
| (614) | (1,883) | (112) |
| (2,609) |
|
|
|
|
|
|
|
Net assets (liabilities) |
| (343) | (1,169) | 109 |
| (1,403) |
|
|
|
|
|
|
|
5. BORROWINGS
|
| Group |
| |
|
| 2020 | 2019 |
|
Current |
|
|
|
|
Borrowings |
| 304 | 51 |
|
|
| 304 | 51 |
|
Non-current |
|
|
|
|
Borrowings |
| 1,120 | - |
|
|
| 1,120 | - |
|
During the prior period, eLight Group Holdings Limited obtained a bank overdraft facility that attracted an interest rate of 7.85%. This was settled in full in the current year.
During the year eLight Group Holdings Limited (the Borrower) entered into a loan agreement to borrow €1,556,000 over a four-year term. The loan principal is repayable in instalments commencing in December 2020 whilst interest charged at 13.50% is paid monthly. In the event that the loan is repaid early an additional fee is payable in cash. It includes covenants relating to total contracted orders, revenue and operating EBITDA all measured over a rolling 12 month period plus a covenant requiring us to retain a minimum level of cash in the eLight Group. The loan is guaranteed by E-Light Ireland Limited and eLight U.K Limited and is secured through debentures issued by the Borrower and the Guarantors.
Maturity on the borrowings are as follows:
|
| £'000 |
Current |
| 304 |
Due between 1-2 years |
| 456 |
Due between 2-5 years |
| 664 |
Due beyond 5 years |
| - |
|
| 1,424 |
6. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is calculated by dividing the profit or loss for the year by the weighted average number of ordinary shares in issue during the year
|
| 2020 | 2019 |
Loss for the year from continuing operations - £ |
| 3,194,000 | 1,388,000 |
Weighted number of ordinary shares in issue |
| 108,080,337 | 86,654,469 |
Basic earnings per share from continuing operations - pence |
| (2.96) | (1.60) |
There is no difference between the diluted loss per share and the basic loss per share presented. Share options and warrants could potentially dilute basic earnings per share in the future, but were not included in the calculation of diluted earnings per share as they are anti-dilutive for the year presented.
The Weighted number of ordinary shares in issue for 2019 is calculated as the number of consideration shares issued by the Company in exchange for the number of eLight Group Holdings shares in issue for 2019.
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