Interim Results

RNS Number : 4081C

Eneraqua Technologies PLC

11 October 2022

 

11 October 2022 

Eneraqua Technologies plc

("Eneraqua", the "Company" or the "Group")

Interim Results

92% uplift in H1 revenue and full revenue cover for FYJan23

Investment in people and infrastructure underpins growth strategy

Eneraqua Technologies plc, a specialist provider of energy and water efficiency solutions, is pleased to announce its interim results for the six months ended 31 July 2022.

H1 FYJan23  Financial Highlights

-  Revenue increased 92% to £24.2m (H1 FYJan22: £12.6m), reflecting growth in contract wins and project completions.

-  Gross profit increased 64% to £9.9m (H1 FYJan22: £6.1m), reflecting growth in revenue with increased contract sizes and, as expected, reduction in gross margin reflecting larger contract wins and maturing market compared to H1 FYJan22.

-  Adjusted EBITDA¹ £3.98m (H1 FYJan22: £3.23m) reflecting the continued investment in the team and our delivery capabilities.

-  Adjusted profit before tax £3.07m (H1 FYJan22: £2.98m).

-  Gross cash of £6.5m and net debt of £0.2m (H1 FYJan22: Gross cash of £4.5m and net cash of £0.03m) following significant planned investment to manage increase in project delivery.

-  Adjusted diluted EPS: 6.48p.

Operational and Strategic Highlights

-  Delivered on plan to move into agritech with first contract secured to provide ClimateSmart Irrigation solution to the State of Uttarakhand in India.

-  Awarded multiple contracts with new and existing social housing and private sector clients to provide heat pump solutions. These will help them meet their sustainability and net zero goals and reduce residents' energy bills.

-  Awarded two English local authority contracts to deliver net water neutrality pilot programmes, for residential new build, using Control Flow products. 

-  Completed the acquisition of Mathewson Holdings Ltd (Mathewson) on 29 July 2022, for an initial consideration of £1.3m.

Post period end and Outlook

-  The Group continues to trade well and expects to benefit from the traditional H2 weighting of client procurement calendars.

-  Strong pipeline of opportunities for the current year and beyond with an order book² providing full revenue cover for the Group's FYJan23 revenue target.

-  Having reviewed the performance to date, the Board has evaluated prospects for FYJan24 and increased its revenue target by 14% to £80 .1m, materially ahead of prior management expectations.  

-  This increased FYJan24 revenue target is already 72% covered by the order book² (82% based on prior FYJan24 revenue target).

-  Pre-launch costs of £0.5m to be incurred in the current period to facilitate the move into a new B2C revenue stream via the launch of our Control Flow HL2024 technology direct to consumers in FYJan24.

Commenting on the results, Eneraqua Technologies CEO, Mitesh Dhanak, said:  "I am pleased to report on a solid first half, which has positioned the Group to deliver on its targets for FYJan23 with confidence.  Our performance underpins the Company's growth plans in the domestic and commercial energy markets as well as the water sector. We are pleased to have increased revenue visibility through our order book², with the current financial year remaining fully covered.  We have increased the revenue target for FYJan24 to £80.1m, materially ahead of prior management expectations, and have 72% of this already covered.

"Looking forward, we expect to launch our water efficiency product direct to consumers later this year.  This has been proven to reduce domestic water and energy consumption and utility bills.   We remain confident in our products and in our valued team and have a clear strategy focused on expanding our current offering and nurturing our strong client relationships. This strategy coupled with our strong order book and trading in the first months of the second half, leave the Group feeling confident for the future, as demonstrated by the 14% revenue upgrade for FYJan24, and focused on the next stage of its development."

An overview of the interim results is available to watch here: https://bit.ly/ETP_H123o

Analyst Presentation

A presentation for analysts will be held today at 9:00am via webinar. Analysts wishing to attend should contact  [e-mail].

¹   Adjusted EBITDA -  Adjusted for share based payment charges (prior year also excludes IPO costs).

²   Order Book defined as Contracted + Secured. Contracted = project contract issued and signed, with work started or ready to start. Secured = sum of a) tender process successful, awaiting project contract, and b) Directors' assumed win rate on Framework opportunities.

For more information, please contact:

Eneraqua Technologies plc Mitesh Dhanak, CEO  Iain Richardson, CFO	Via Alma PR www.eneraquatechnologies.com
finnCap Limited - Nominated adviser and Joint Broker Ed Frisby / Charlie Beeson - Corporate Finance Andrew Burdis / Sunila de Silva - ECM	[phone]
Singer Capital Markets - Joint Broker Sandy Fraser / Justin McKeegan / Rachel Hayes	[phone]
Alma PR - Financial PR and IR    Justine James / Sam Modlin / Will Ellis Hancock	[phone]  [e-mail]

Notes to editors

Eneraqua Technologies (AIM:ETP) is a specialist in energy and water efficiency. The Group designs and delivers improved energy and water systems which utilise its wholly owned intellectual property, Control Flow HL2024.  Energy was the first market the Company entered and this is the larger sector, with the Company focused on clients with end of life gas, oil or electric heating and hot water systems. The Group provides turnkey retrofit district or communal heating systems based either on high-efficiency gas or ground/air source heat pump solutions that support Net Zero and decarbonisation goals.

Water is a growing service offering focused on water efficiency upgrades for utilities and commercial clients including hotels and care homes.  It has also expanded into agritech systems.

The activities in both areas are underpinned by the Company's wholly-owned intellectual property, the Control Flow HL2024 family of products which reduce water wastage and improve the performance of heating and hot water systems.

The Company's main country of operation is the United Kingdom. The Company's head office is in London with additional offices in Leeds, Washington (Sunderland), India, Spain and the Netherlands. The Company has 144 employees, with the majority employed within the UK. Eneraqua Technologies has received the London Stock Exchange's Green Economy Mark.

To find out more, please visit:     www.eneraquatechnologies.com

Operational Review

In the first half of the financial year, Eneraqua made strong progress in delivering on its growth strategy with energy efficiency clearly at the forefront of our clients' priorities both in terms of carbon emissions and cost.  Our success is due to the great work of our team in delivering our client goals, enabling us to continue to focus on delivering on the Group's strategic objectives.

Having successfully raised funds at IPO last November, the business has further strengthened its position in its target sectors.  The current macroeconomic environment, while difficult for all, creates opportunities for the Group as the technologies we provide are becoming increasingly important solutions in the mission to reduce global carbon emissions and cut utility bills.  With a clear strategic plan for growth, we are well positioned to help our customers navigate the issues of today by improving the efficiency of their heating and water systems.

In Energy, our turnkey retrofit district and communal heating systems, including ground and air source heat pump solutions, are an important tool for clients in meeting their sustainability and net zero goals.  For their residents, it cuts their energy bills substantially.  Our public and private sector clients rely on and welcome our impartial advice and ability to deliver the best solution for their buildings. 

Water harnesses the patented Control Flow HL2024 technologies that reduce water wastage and improve the efficiency of heating and hot water systems.  Clients include water companies, developers, hotels, schools and leisure centres, with the products installed in both domestic and commercial settings.  By reducing water wastage, we can cut water consumption by up to 26% in homes and deliver energy bill savings through improved performance of heating and hot water systems. 

Financial performance

Our half year trading was robust and demonstrated the solid performance of the Group amidst a challenging economic environment. Revenue for the half increased by 92% to £24.2m, demonstrating the Group's ability to convert our new business pipeline into contract wins and realised revenue.  This has seen the average contract size increase from £2.25m in H1 FYJan22 to £3.5m in H1 FYJan23.  As expected at IPO, alongside this growth in contract size there has also been a reduction in gross margin compared to the previous period. We expect gross margin to stabilise at or around 34% during FYJan24.

Through the contract wins secured in the second half of FY22, adjusted EBITDA¹ increased to £3.98m (H1 FYJan22: £3.23m), whilst PBT increased to £2.95m (H1 FYJan22: £2.75m).

As we have noted previously, due to the nature of our customers and their procurement calendars, our contract delivery and revenues are weighted to the second half of our financial year.

As planned, we have invested in our teams and infrastructure to deliver contracts this year and allow for future growth next year.  This is reflected in the increase in administrative expenses in the period. 

The phasing of contract delivery and the full impact of the larger contracts is expected to deliver a strong second half of this financial year.  We expect a larger working capital requirement at the year end due to the timing of contract payment terms and need for early ordering of key components.  The latter is required on a growing number of contracts to ensure project delivery remains in line with agreed timetables.  The Company remains well capitalised to fund growth in executing its order book through existing resources and operating cash generation.

The strength of the Group's orderbook, which already provides full revenue cover for its FYJan23 revenue target and 72% cover for the increased FYJan24 target (82% based on prior FYJan24 revenue target) , underpins the Board's positive outlook for the year.

Operational and strategic progress

Despite the challenges in the current economic environment, Eneraqua remains on course to deliver substantial growth, with strong performances from both the Energy and Water sectors in the financial year to date.  In Energy, the period saw major contract wins with growing demand for our air and ground source based systems.  This was further highlighted by the announcement of our post-period contract wins and extensions with new and existing social housing and private sector clients, to provide heat pump based solutions over a three-year period.  The decision of clients to extend existing contracts to cover additional buildings is a great reflection of the quality of service and value for money that our team delivers.  Our strong company culture of delivering high quality outcomes helps form and support strong relationships with clients. 

Water has continued to grow, with a focus on helping clients improve their water efficiency.  Alongside our core programmes to improve domestic and commercial buildings, we also completed our planned expansion into the agritech sector with a first contract win in India, delivering our ClimateSmart Irrigation programme for the State of Uttarakhand.  Following the success of this project, we are now in discussion with other states in India.

Water also saw the award of contracts with two English local authorities to deliver net water neutrality programmes. Within the UK there are 74 local authorities where there are concerns about water stress and nitrate levels in the local area.  This has led to applications to build over 120,000 new homes becoming stuck in the planning process.  By using Control Flow HL2024 in existing homes in the area, the pilot schemes showed it was possible to save enough water to meet the needs of the new homes and thereby avoid placing any additional demand on local water resources.  Following the success of the pilot programmes we are now in discussion with other local authorities and developers that face this same issue. 

The water neutrality pilot also demonstrated the substantial energy and water bill savings for domestic households through Control Flow HL2024.  On average each household would save an equivalent of c£360 per annum.  Following this success, the Board has decided to invest in a direct B2C offering.  With pre-launch costs of approximately £0.5m in the second half, this will create a new and exciting revenue stream for the business. 

Our Research and Development teams in Europe and India remain focused on developing new, innovative solutions that help reduce carbon emissions and water consumption in both buildings and agriculture.  We are on track to launch our new MeterSave product later this year which allows for easier installation of the Control Flow technology alongside the water meter.  Our R&D teams have submitted new patent applications and are now focused on the design and development of follow-on products for new sectors.

Following the two acquisitions last year, we were delighted to complete at the end of H1 FYJan23 the acquisition of Mathewson, an established provider of underfloor heating solutions for the health and commercial sectors. This acquisition extends our reach into the healthcare sector and deepens our offering in the commercial sector by broadening the services we offer clients. The integration of Mathewson is underway and we expect a positive benefit from FY24 onwards. 

The integration of Welltherm has continued during the period and this has helped ensure that we continue to deliver key ground source heat pump projects on time and in line with client expectations as well as mitigating increasing costs in the sub-contract drilling market.  We have invested in additional capacity in Welltherm in order to meet demand. 

Expanding our growth opportunities

Our growth strategy continues to be underpinned by expanding our offerings within both the Energy and Water sectors, whether that be organically or inorganically. As previously discussed, Energy continues to grow with a strong pipeline and healthy order book.

Water is also seeing substantial growth, following recent contract wins and the two ongoing net water neutrality pilot programmes. Both these pilots and the agritech contract in India, highlight the effect that investing in increasing the efficiency of existing water systems can have on the local environment. With water stress continuing to be a risk, compounded by the high temperatures seen in many geographies in recent months, Water and the solutions it provides will continue to help reduce water wastage around the globe.

Market dynamics

Energy continues to see increasing demand for low-carbon solutions from both existing and new clients.  With greater familiarity in the technology, most clients are now seeking to replace old district heating systems with ground-source heat pump systems.  As well as reducing carbon emissions, these also offer lower energy bills for tenants making them particularly attractive in the current climate.

For commercial buildings, the drive for low carbon heating remains strong.  Due to the nature of these buildings, the typical package is based on large air-source heat pumps to provide the bulk of demand with gas boilers providing top-up heating and hot water.

In Energy, our technology-agnostic approach allows us to identify and advise clients on the best solution for their building.  This can be pure heat pump solutions as well as hybrid gas-heat pump systems depending on the individual circumstance.  Coupled with our ability to provide turnkey technical and financial design and delivery, this creates an important point of differentiation to our competitors.  For Water, our patented technology offers a performance edge for clients.

Regulatory and financial stability is an important consideration for us and our clients.  A stable environment supports the long-term investment required to address climate change and water stress issues.

  People and culture

As expected, in order to deliver our order book for this year and beyond, we are investing in the growth of our team.  During H1, the Group grew from 113 to 144 full time equivalent team members.  We are now more than double in size compared to the 71 members at the end of H1 FYJan22. 

We take great care in recruitment and whilst it has been a challenging job market, we are proud to offer an opportunity to join an exciting business operating in an accelerating market environment. This has paid dividends for the business and was reinforced in our latest annual staff survey where over 95% of staff responded.  Key highlights included:

-  96% agreed or strongly agreed that they find the work they do meaningful;

-  96% were confident in the Company's direction; and

-  92% agreed or strongly agreed that the Company has a good culture.

Our Company purpose and core values were drawn up by a cross-company group and these have been adopted and are owned by our team.  This has created a strong company culture based on delivering quality outcomes that has under-pinned our success to date.   

Purpose: To inspire and deliver innovative solutions to support our clients' needs

and create a sustainable planet.

Outlook

The Company continues to make great strides forward. We have seen momentum in our order book pipeline and new client wins in Energy and Water; we have seen existing customers sign new contracts and extend their working relationships with us; and we have seen the roll out of exciting new products and a further business acquisition.

Despite the challenges being faced globally, our business has moved to mitigate these through the identification of multiple suppliers and diligent recruitment, leaving it well positioned to navigate these unprecedented times of economic disruption. Our customers remain focused on reducing their climate impact and we continue to support them, as they too adapt to the current financial environment.

In terms of our inorganic growth strategy, we are very pleased with the success of our recent acquisitions and how they are integrating within the Group. We continue to look for opportunities which meet our strict investment criteria and will accelerate the growth of our business technologically, geographically or through the enhancement of our delivery and service.

We remain confident in our products and our team and have a clear strategy focused on expanding our current offering and nurturing our strong, existing client relationships. This strategy coupled with our significant order book and robust trading in the first months of the second half, leave the Directors feeling confident for the future and, noting the performance to date, the Board has reviewed prospects for FYJan24 and increased its revenue target by 14% to £80.1m, materially ahead of prior management expectations.

Financial Review

Strategy

The Group's strategy is based on developing and delivering profitable solutions and products which help our clients reduce their carbon consumption and improve their water efficiency.

In addition, we have continued with our inorganic growth strategy outlined at the time of IPO, focussing on the acquisition of strategic, bolt-on opportunities in the UK, such as the acquisition of Mathewson Limited, and the exploration and identification of targets in North West Europe, which would give the Group the relevant accreditations and credentials to operate in these areas.

KPIs

The Group's financial Key Performance Indicators, which are aligned with its growth strategy include Revenue growth, gross profit, Adjusted EBITDA, adjusted EBITDA margin and R&D spend.

	31 Jul 2022	31 Jul 2021
Revenue	£24.2m	£12.6m
Revenue growth Gross profit	92% £9.9m	53% £6.1m
EBITDA	£3.92m	£3.00m
Adjusted EBITDA	£3.98m	£3.23m
Adjusted EBITDA margin	16.4%	25.6%
R&D spend	£1.07m	£0.7m

Revenue

Group revenues increased by 92% to £24.2m, (H1 FYJan22: £12.6m). International revenues grew from £0.09m in H1 FYJan22 to £0.159m in H1 FYJan23. Group revenues include £0.7m from Welltherm Drilling Limited, following its acquisition last year.

Profits

As the Group has secured and delivered larger value contracts, gross margins, as expected, have reduced reflecting the nature of larger client contracts.  The Group has experienced inflationary price pressure from its subcontractor cost base, which it has been able to be passed on to the client in most cases.

The strong growth in revenue supported the investment in headcount and infrastructure required for those projects starting in the current financial year. Adjusted EBITDA increased 23% to £4.0m (H1 FYJan22: £3.2m), with the Group achieving Adjusted EBITDA margins of 16%, as expected, after allowing for significant investment in team and infrastructure to deliver the larger contracts commencing in H2 FYJan23.  This investment supports both our current operations and future growth. 

Statutory operating profit increased to £3.1m (H1 FYJan22: £2.9m) and statutory profit before tax was £2.9m (H1 FYJan22: £2.8m).

Acquisitions

On 29 July 2022, the Group acquired Mathewson Holdings Ltd and its trading subsidiary, Mathewson Ltd, an established provider of underfloor heating solutions for the health and commercial sectors, for an initial consideration of £1.3m with further consideration of £0.35m payable over two years.

Headcount

The Group's full time equivalent (FTE) employees at 31 July 2022 were 144 (31 July 21: 71). This growth reflects the acceleration in recruitment in order to support the Group's growth strategy. Headcount also includes 12 Welltherm Drilling Limited employees, following the acquisition of this business in September 2021.

Cash flow & cash position

The Group saw a cash outflow in the first half of the year as it managed its project delivery timetable, requiring the forward purchasing of key items on a number of projects.

Gross cash at 31 July 2022 was £6.5m (H1 FYJan22 £4.5m) with net debt £0.2m (H1 FYJan22 net cash £0.03m).

The Group experienced a working capital outflow in the period due to the timing of a number of trade creditor payments at the start of the financial year. As a result of the global supply chain issues, the Group has continued to forward order key material components for its larger contracts, which are passed on to and paid for by clients once the materials have been delivered, impacting on working capital.

Capital expenditure was limited in H1, being £0.1m of deposits for new drill rigs, due for delivery by the end of the calendar year. In addition, there was a further outflow of £1.3m for the acquisition of Mathewson.

During the period the Group secured new banking facilities with HSBC UK Plc for an aggregate of £6.0m. The new facility will support the Group in its growth strategy, both in terms of working capital requirements and acquisition opportunities.

The Group ended the period with net debt (excluding IFRS 16 right of use lease liabilities) of £0.2m compared with £0.03m of net cash at 31 July 2021, following the drawdown of the Group's new debt facility.

Outlook

The Group is in a strong position with a healthy balance sheet, well funded to be able to execute on its strong order book and growth strategy. The Group is well placed to deliver another set of strong results, as we continue to benefit from continued organic growth.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 July

	Note	Six months to 31 Jul 2022 £'000	Six months to 31 Jul 2021 £'000	Twelve months to 31 Jan 2022 £'000
Continuing operations
Revenue	3	24,246	12,633	36,176
Cost of sales		(14,327)	(6,578)	(21,572)
Gross profit		9,919	6,057	14,604
Administrative expenses		(6,868)	(3,206)	(10,171)
Other operating income		-	-	-
Included within administrative expenses are:
-  Exceptional items	4	-	(225)	(1,178)
-  Share based payments		(58)	-	-
-  Depreciation of property, plant and equipment		(666)	(30)	(618)
-  Depreciation of right-of-use assets		(14)	(44)	(113)
-  Amortisation of intangible assets		(191)	(82)	(381)
Adjusted administrative expenses		(5,939)	(2,825)	(7,881)
Adjusted EBITDA1		3,980	3,232	6,723
Operating profit		3,051	2,851	4,433
Interest payable and similar expenses		(100)	(100)	(366)
Profit before taxation		2,951	2,751	4,067
Income tax		(757)	159	(8)
Profit for the period from continuing operations		2,194	2,910	4,059
Total profit for the period attributable to equity holders of the parent
Other comprehensive income		-	(66)	-
Total comprehensive income for the period attributable to equity holders of the parent		2,194	2,844	4,059

Other comprehensive income relates to the translation of foreign operations.

The accompanying notes form part of the condensed interim consolidated financial statements

¹ Adjusted EBITDA is considered to be a Key Performance Indicator and consistent with how the Group measures trading and cash generative performance.  Note this is an Alternative Performance Measure and is a non-IFRS measure.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Note	31 Jul 2022 £'000	31 Jul 2021 £'000	31 Jan 2022 £'000
Non-current assets
Intangible assets		8,505	6,736	7,218
Property, plant and equipment		2,868	3,061	3,095
Right-of-use assets		207	330	243
Deferred tax asset		-	44	-
Total non-current assets		11,580	10,172	10,556
Current assets
Inventory		1,236	921	1,186
Trade and other receivables		13,148	3,856	12,389
Cash and cash equivalents		6,521	4,459	4,070
Total current assets		20.905	9,236	17,645
TOTAL ASSETS		32,485	19,408	28,201
Equity attributable to owners of the parent
Called up share capital		344	3	344
Share premium account		10,113	457	10,113
Merger reserve		(5,490)	-	(5,490)
Other reserves		(624)	(10)	(294)
Retained earnings		13,963	4,671	11,769
Total equity		18,306	5,120	16,442
Current liabilities
Borrowings	7	2,310	812	-
Trade and other payables		7,248	9,507	11,426
Lease liabilities		118	119	82
Total current liabilities		9,676	10,438	11,508
Non-current liabilities
Borrowings	7	4,404	3,612	-
Lease liabilities		32	238	109
Deferred tax liability		67	-	142
Total non-current liabilities		4,503	3,850	251
Total liabilities		14,179	14,288	11,759
TOTAL EQUITY AND LIABILITIES		32,485	19,408	28,201

The accompanying notes form part of the condensed interim consolidated financial statements

CONSOLIDATED STATEMENT OF CASHFLOWS

For the six months ended 31 July

GROUP	Six months to 31 Jul 2022 £'000	Six months to 31 Jul 2021 £'000	Twelve months to 31 Jan 2022 £'000
Cash flow from operating activities
Profit for the financial period	2,194	2,910	4,059
Adjustments for:
Amortisation of intangible assets	191	82	381
Depreciation of property, plant and equipment	666	30	618
Depreciation on right-of-use assets	14	44	113
Interest payable	100	1	330
Lease liability finance charge	19	13	36
Taxation charge / (credit)	756	(159)	8
Corporation tax received / (paid)	-	380	380
Foreign exchange	-	33	(38)
Share based payment charge	58	-	333
Changes in working capital:
Increase in inventory	(50)	(30)	(295)
Increase in trade and other receivables	(759)	(949)	(9,540)
(Decrease) / increase in trade and other payables	(5,386)	570	7,278
Net (outflow) / increase from operating activities	(2,197)	2,927	3,663
Cash flow from investing activities
Purchase of intangible assets	(285)	(354)	(549)
Purchase of property, plant and equipment	(113)	(350)	(2,722)
Acquisition of businesses - net of cash acquired	(1,319)	(1,665)	(5,111)
Interest received	-	-	-
Net cash outflow from investing activities	(1,717)	(2,369)	(8,382)
Cash flows from financing activities
Proceeds from borrowings	7,340	-	9,998
Repayment of borrowings	(786)	(383)	(4,972)
Interest paid	(100)	-	(330)
Repayment of lease liabilities	(89)	-	(191)
Net cash inflow from financing activities	6,365	(383)	4,505
Net increase / (decrease) in cash and cash equivalents	2,451	175	(214)
Cash and cash equivalents at beginning of period	4,070	4,284	4,284
Cash and cash equivalents at the end of the period	6,521	4,459	4,070

The accompanying notes form part of the condensed interim consolidated financial statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 July

	Share Capital	Share Premium	Merger Reserve	Other Reserves	Retained Earnings		Total  Equity
	£000	£000	£000	£000	£000		£000
At 1 February 2021	3	456	-	56	1,761		2,276
Profit for the period	-	-	-	-	2,910		2,910
Other comprehensive income	-	-	-	(66)	-		(66)
Total comprehensive income for the period	-	-	-	(66)	2,910		2,844
Balance at 31 Jul 2021	3	456	-	(10)	4,671		5,120
At 1 Aug 2021	3	456	-	(10)	4,671		5,120
Profit for the period	-	-	-	-	1,149		1,149
Other comprehensive income	-	-	-	66	-		66
Total comprehensive income for the period	-	-	-	66	1,149		1,215
Merger reserve	(3)	(456)	(5,490)	-	5,949		-
Issue of shares	344	11,996	-	-	-		12,340
Share issue costs	-	(1,883)	-	-	-		(1,883)
Other, including share based payments and foreign exchange reserves	-	-	-	(350)			(350)
Total transaction with owners	341	9,657	(5,490)	(350)	5,949		10,107
Balance at 31 Jan 2022	344	10,113	(5,490)	(294)	11,769		16,442
At 1 February 2022	344	10,113	(5,490)	(294)	11,769		16,442
Profit for the period	-	-	-	-	2,194		2,194
Other comprehensive income	-	-	-	-	-		-
Total comprehensive profit for the period	-	-	-	-	2,194		2,194
Other, including share based payments and foreign currency reserves	-	-	-	(330)	-		(330)
Total transaction with owners	-	-	-	(330)	2,194		1,864
Balance at 31 July 2022	344	10,113	(5,490)	(624)	13,963		18,306

The accompanying notes form part of the condensed interim consolidated financial statements

Notes to the financial information

1.  BASIS OF PREPARATION

The figures for the six months ended 31 July 2022 and 31 July 2021 are unaudited and do not constitute statutory accounts.

As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing this Interim Financial Information.  The accounting policies adopted are consistent with those applied by the Group in the preparation of the annual consolidated financial statements for the year ended 31 January 2022.

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2022, but these do not have a material impact on the interim condensed consolidated financial statements of the Group. The financial information for the year ended 31 January 2022 set out in this interim report does not comprise the Group's statutory accounts as defined in section 434 of the Companies Act 2006.

The statutory accounts for the year ended 31 January 2022, which were prepared under international accounting standards in conformity with the requirements of the Companies Act 2006, have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

1.1  Critical accounting judgements and key sources of estimation uncertainty

The preparation of condensed Interim Financial Information requires the Directors to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. There are no changes to critical accounting judgements and key sources of estimation uncertainty from those disclosed in the annual accounts for the year ended 31 January 2022.

2.  SEGMENT REPORTING

The following information is given about the Group's reportable segments:

The Chief Operating Decision Maker is the executive Board of Directors. The Board reviews the Group's internal reporting in order to assess performance of the Group. Management has determined the operating segment based on the reports reviewed by the Board.

The Board considers that during the period ended 31 July 2022 the Group operated in the three business segments according to the geographical location of its operations and those being:

-  United Kingdom

-  Europe; and

-  India

Six months to 31 July 2022		United Kingdom	Europe	India		2022
		£'000	£'000	£'000		£'000
Revenue		24,087	66	93		24,246
Cost of sales		(14,231)	(80)	(16)		(14,327)
Gross Profit		9,856	(14)	77		9,919
Administrative expenses		(5,976)	(801)	(91)		(6,868)
Included within administrative expenses are:
-  Exceptional costs		-	-	-		-
-  Share based payments		(58)	-	-		(58)
-  Depreciation of property, plant and equipment		(348)	(306)	(12)		(666)
-  Depreciation of right-of-use assets		(14)	-	-		(14)
-  Amortisation of intangible  assets		(191)	-	-		(191)
Adjusted administrative expenses		(5,365)	(495)	(79)		(5,939)
Adjusted EBITDA1		4,491	(509)	(2)		3,980
Operating profit/(loss)		3,880	(815)	(14)		3,051
Interest receivable and similar income		-	-	-		-
Interest payable and similar expenses		(83)	(17)	-		(100)
Profit/(Loss) before tax		3,797	(832)	(14)		2,951
Taxation		(756)	-	(1)		(757)
Profit/(Loss) after tax		3,041	(832)	(15)		2,194
Net Assets as at 31 July 2022
Assets:		27,679	3,748	242		31,669
Liabilities		(11,998)	(1,348)	(17)		(13,363)
Net assets / (liabilities)		15,681	2,400	225		18,306

Six months to 31 July 2021		United Kingdom	Europe	India		2021
		£'000	£'000	£'000		£'000
Revenue		12,624	-	9		12,633
Cost of sales		(6,523)	(50)	(3)		(6,576)
Gross Profit		6,102	(50)	6		6,058
Administrative expenses		(2,989)	(211)	(7)		(3,206)
Other operating income		-	-	-		-
Operating profit		3,113	(261)	(1)		2,851
Interest receivable and similar income		-	-	-		-
Interest payable and similar expenses		(94)	(6)	-		(100)
Profit before tax		3,019	(267)	(1)		2,751
Taxation		159	-	-		159
Profit after tax		3,178	(267)	(1)		2,910
Net Assets as at 31 July 2021
Assets:		9,512	9,848	48		19,408
Liabilities		(10,240)	(4,031)	(17)		(14,288)
Net assets / (liabilities)		(728)	5,817	31		5,120

Twelve months to 31 January 2022		United Kingdom	Europe	India		2022
		£'000	£'000	£'000		£'000
Revenue		35,918	216	42		36,176
Cost of sales		(21,350)	(187)	(35)		(21,572)
Gross profit		14,568	29	7		14,604
Administrative expenses		(8,974)	(1,079)	(118)		(10,171)
Included within administrative expenses are:
-  Exceptional costs		(1,178)	-	-		(1,178)
-  Depreciation of property, plant and equipment		(132)	(485)	(1)		(618)
-  Depreciation of right-of-use assets		(113)	-	-		(113)
-  Amortisation of intangible  assets		(339)	(42)	-		(381)
Adjusted administrative expenses		(7,212)	(552)	(117)		(7,881)
Adjusted EBITDA1		7,356	(523)	(110)		6,723
Operating profit/(loss)		5,594	(1,050)	(111)		4,433
Interest receivable and similar income		-	-	-		-
Interest payable and similar expenses		(366)	-	-		(366)
Profit/(Loss) before tax		5,228	(1,050)	(111)		4,067
Taxation		(7)	(1)	-		(8)
Profit/(Loss) after tax		5,221	(1,051)	(111)		4,059
Net Assets
Assets:		24,847	3,245	109		28,201
Liabilities		(9,208)	(2,538)	(13)		(11,759)
Net assets		15,639	707	96		16,442

3.  REVENUE

		Six months to 31 Jul 2022 £'000	Six months to 31 Jul 2021 £'000	Twelve months to 31 Jan 2022 £'000
United Kingdom		24,087	12,624	35,918
Europe		66	-	216
Rest of the World		93	9	42
		24,246	12,633	36,176

4.  EXCEPTIONAL COSTS

Exceptional costs of £nil (six months to 31 July 2021: £224,900; twelve months to 31 January 2022: £1,178,000) relate to non-incremental costs associated with the initial public offering of the Group.

5.  OPERATING PROFIT

Operating profit from continued operations is stated after charging / (crediting):

		Six months to 31 Jul 2022 £'000	Six months to 31 Jul 2021 £'000	Twelve months to 31 Jan 2022 £'000
Depreciation of property, plant and equipment		666	30	618
Depreciation of right-of-use assets		14	44	113
Amortisation of fixed assets		191	82	381
Inventories recognised as an expense		-	-	1
Research and development costs		67	-	-
Share based payments		58	-	17
Exchange differences		75	33	(20)

Research and development costs in H1 FYJan2023 relate to the development of new applications for HL2024 products.  These were incurred in the United Kingdom and were written off to the statement of comprehensive income.

6.  EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is calculated by dividing the profit for the period by the weighted average number of ordinary shares in issue during the period.

		Six months to 31 Jul 2022	Six months to 31 Jul 2021	Twelve months to 31 Jan 2022
Profit for the period from continuing operations - £'000		2,194	2,910	4,059
Weighted number of ordinary shares in issue		33,558,207	253,774	22,204,677
Weighted number of fully diluted ordinary shares in issue		33,890,880	-	147,183
Basic earnings per share from continuing operations - pence		6.54	1,146.69	18.28
Diluted earnings per share from continuing operations - pence		6.48	1,146.69	18.16

Prior to the IPO, the number of shares is based on Cenergist Limited. From the date of the IPO, the number of shares is based on the Company.

7.  BORROWINGS

		31 Jul 2022 £'000	31 Jul 2021 £'000	31 Jan 2022 £'000
Current		2,310	812	-
Non-current		4,404	3,612	-
		6,714	4,424	-

Analysis of maturity of loans is given below:

		31 Jul 2022 £'000	31 Jul 2021 £'000	31 Jan 2022 £'000
Amounts falling due within one year
Other loans		2,310	812	-
Amounts falling due 1-2 years
Other loans		1,612	899	-
Amounts falling due 2-5 years
Other loans		2,792	2,713	-
		6,714	4,424	-

Other loans relate to a £6,000,000 facility provided by HSBC to Cenergist Limited and a €1,500,000 facility provided to Cenergist Spain SL by CLM, and are secured by fixed and floating charges over the assets of the Company and by cross guarantees from the Company's subsidiary undertakings.

Interest on the HSBC facility is at a rate of 3.450% over the Bank of England Base Rate with the repayment period being 48 months from date of individual tranche drawdown.

Interest on the CLM facility is at a rate of 3.50% with the repayment period being 84 months from date of individual tranche drawdown.

8.  BUSINESS COMBINATION

On 29 July 2022 Cenergist Limited acquired all of the share capital of Mathewson Holdings Limited  ("Mathewson"). Mathewson provides a complete service in underfloor heating solutions from original specification, planning and drawings through to final surface finish.

Background and Rationale

Mathewson and its subsidiary, Mathewson Limited are an established provider of underfloor heating solutions in the health and commercial sectors.

The acquisition extends the Group's low carbon offering into the healthcare sector and strengthens its offering in other commercial sectors where Mathewson provides underfloor heating solutions.

For the 10 months ended 30 June 2022, Mathewson recorded revenues of £813,000 with a net profit before tax of £205,000.

Consideration

The total consideration for the acquisition, assuming all earn-out payments are made, will be £1.7 million. The consideration, is structured as follows:

Initial consideration, payable in cash on completion of £1.3 million; and

Contingent consideration of £0.4m, payable over the course of 24 months, in 3-monthly instalments. The first instalment is payable on 30 September 2022.

The initial estimates of the fair value of the assets acquired and liabilities assumed of Mathewson Limited at the date of acquisition are as follows:

		£'000
Cash at bank		313
Inventory		60
Other receivables		676
Trade and other payables		(132)
Total identifiable net assets / (liabilities) acquired		917
Goodwill		817
		1,734
Consideration
Initial consideration		1,320
Deferred consideration		414
Total consideration		1,734

Note that the above assessment is not yet finalised.

Goodwill relates to the accumulated "know how" and expertise of the business and its staff. None of the goodwill is expected to be deducted for income tax purposes.

9.  EVENTS SUBSEQUENT TO PERIOD END

The Group has not identified any subsequent event to be reported.

 

END

 

 

IR FLFSAIALILIF