Preliminary Results

Eneraqua Technologies PLC

23 May 2023

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

23 May 2023

Eneraqua Technologies plc

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

Preliminary Results for the year ended 31 January 2023

Eneraqua Technologies plc, a provider of specialist energy and water efficiency solutions, is pleased to announce its preliminary results for the year ended 31 January 2023.

Highlights

	FY to Jan 2023	FY to Jan 2022	change
Revenue	£55.1m	£36.2m	52%
EBITDA	£11.7m	£5.6m	112%
Adjusted EBITDA1	£11.8m	£6.7m	76%
Adjusted EBITDA margin	21.5%	18.6%
Adjusted PBT	£10.1m	£5.6m	79%
Adjusted diluted EPS	25.60p	24.91p	2.9%
Cash generated from operations	(£3.4m)	£3.0m	n.a.
Cash conversion2	(26%)	66%
ROCE	34.5%	26.6%
Dividend per share	1.2p	1.0p	20%

·	Significant revenue and adjusted PBT growth of 52% and 79% respectively driven by repeat customer orders, new client wins, geographic expansion and the entering of new markets.  This is despite impact of high inflation on client budgets during year.
·	Delivered 42% gross margin due to a change in the mix of projects, with certain higher margin projects moving from FY24 into the latter part of FY23, in addition to management initiatives to tighten control of direct costs and the pass through of costs to customers.
·	Group working capital profile changed during the year, as lead times for key components increased significantly, requiring the Group to bulk purchase items ahead of payment from clients. In addition, impact of inflation led clients to make late changes to project plans leading to a heavy Q4 bias on project delivery resulting in an increased level of trade receivables at the year end. Both of these factors contributed to the Group ending the year with net debt of £3.0m (FY22: net cash £4.1m), excluding IFRS 16 liabilities.
·	Energy clients continue to seek a move to heat pump systems to reduce carbon emissions and exposure to fossil fuel markets.
·	Water emerging as an increasingly exciting opportunity with significant wins in agritech and net water-neutrality demonstrating the multi-faceted abilities of our Control Flow HL2024 products.
·	Global production facility at Toledo, Spain progressing well and due for completion in October 2023.
·	Board recommending increase in dividend of 20% to 1.2p per share.

Current trading and outlook

·	Record order book3 of £130.4m of which 62% is currently anticipated to be delivered in FY24.
·	Unwind of working capital, with approximately 54% of accrued income at the year-end has now been converted into cash.
·	Increased investment in R&D to c£2.4m, reflecting the increased product development and trials planned which are essential to ensure long-term growth, in addition to planned expansion on the IP portfolio.
·	Unexpected inflation spike in other building works areas during calendar 2022 affected client programmes.  This saw some urgent smaller value, higher margin projects move into FY23 with larger, lower margin projects moved to FY24.  As a result, we expect to see FY24 revenues significantly ahead of previous management expectations with high-single digit PBT margins, before reverting to a more balanced mix of projects and margins in FY25.
·	Improved working capital as the investment in Q4 FY23 unwinds with cash conversion expected to exceed 100% during FY24.

Acquisitions

·	Acquired Mathewson Holdings in August 2022, which has complementary technical capability and a market presence in the health and commercial sectors, which is already creating new market opportunities.
·	Post period end completed the acquisition of the Dutch business, Installatiebedrijf Vriend B.V. ("Vriend"). This acquisition provides a springboard to accelerate European growth strategy.

Commenting on the results, Eneraqua Technologies CEO, Mitesh Dhanak, said: "FY23 was another year of solid progress for Eneraqua, as the Group successfully executed against its growth strategy.  Within the context of the energy crisis and wider macro-economic uncertainty, Eneraqua, thanks to the hard work of our team, has in many cases exceeded the Board's expectations and continued to deliver cutting edge cleantech technologies and solutions to customers, globally.

"This year saw substantial growth across the business, with new customer wins and geographic expansion contributing to considerable growth in both revenue and profit. The high inflation seen towards the end of 2022 impacted client budgets and led them to re-prioritise and focus on heating systems that had, or were about to break down.  Importantly, no contracts were cancelled underscoring the strength of our client relationships and the value of the solutions we provide.  The re-prioritisation of client budgets resulted in some movement in project mix with some smaller, higher margin projects moved into FY23 and larger, lower margin projects now expected to fall into the current year, anticipated to result in revenues ahead of our expectations with high-single digit PBT margins, before moving to a more balanced mix of projects and PBT margin in FY25.

"The opportunities facing the Group remain substantial. We are in a strong position with proven products and solutions and our geographic expansion plans into continental Europe remain on course with growth in Water exceeding our original expectations at IPO. As a result, we are confident in the future prospects for the Group." 

An overview of the results is available to watch here: https://bit.ly/ETP_FY23_overview

Analyst Presentation

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

Investor Presentation

A presentation to retail investors will be hosted at 11am this morning. Investors are invited to sign up for the presentation via the PI World platform using the following link: https://bit.ly/ETP_FY23_results_webinar. Questions can be submitted during the presentation.

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.

²Cash from operating activities/EBITDA

³Order Book defined as Contract + Secured. Contracted = project contact 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 further information please contact: Eneraqua Technologies plc Mitesh Dhanak, Chief Executive Officer Iain Richardson, Chief Financial Officer	Via Alma PR
Liberum (Nomad and Joint Broker) Edward Mansfield Benjamin Cryer	Tel: [phone]
Singer Capital Markets (Joint Broker) Sandy Fraser Justin McKeegan Asha Chotai	Tel: [phone]
Alma PR (Financial PR) Justine James Sam Modlin Will Ellis Hancock	Tel: [phone] [e-mail]

Notes to editors

Eneraqua Technologies (AIM:ETP) is a specialist in energy and water efficiency. The Group has two divisions energy and water. Energy is the larger division, 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.

The water division is a growing service offering focused on water efficiency upgrades for utilities and commercial clients including hotels and care homes.  

The activities in both divisions 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 based in London with additional offices in Leeds, Washington (Sunderland), India, Spain and the Netherlands. The Company has 168 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

Chairman's statement

At the time of our IPO in November 2021, we set out our strategy for growth. Growth in scale and operating capability, geographic reach, technical excellence, customer base, revenue and profit. Our strategy was predominantly based on organic growth, complemented by targeted acquisitions to enter new markets or secure key capabilities.

I am pleased to report that in the year ended 31 January 2023, our first full financial year as an AIM quoted company, we have delivered on that growth strategy notwithstanding the substantial inflation seen in the second half of the year and the inevitable impact on the scheduling of our clients' projects.     

Revenues increased by 52% over the prior year, to £55.1m (FY22: £36.2m). Adjusted profit before tax was up by 79% to £10.1m (FY22: £5.6m) and adjusted EBITDA¹ was up 76% to £11.9m (FY22: £6.7m) and the Group's order book has grown to £130.4m. This excellent performance was the result of strong executive leadership and outstanding effort and execution across the whole company.  On behalf of the Board and shareholders I give every colleague our thanks.

Developing the business

We were determined that in addition to delivering excellent growth in FY23, we should continue building for the future, and with this in mind we have invested heavily in both people and R&D to enhance our ability to deliver for FY24 and beyond.

In the UK we won new clients for our energy and water products and services, while also gaining repeat orders from existing customers. In Leeds, we installed one of the first high temperature air source heat pump systems in a UK residential setting. This testifies to the technical skills of our people and underscores the demand for our technologies.

Our commercial energy work with new clients increased in the year, an example being Oxford County Council, for which we are helping deliver an ambitious decarbonisation project.

In Water, our products are now being recognised as a range of proven solutions for water efficiency and related areas, including water and nitrate neutrality and reducing utility bills. 

In India, we continue to develop our offering, both commercially and technically.  The high-quality engineering skills of our team in Kolkata have developed new water efficiency products for which patents have been applied.  These new products build on our core HL2024 technology and create another new exciting growth opportunity in agritech.

Acquisitions

The addressable market in the UK and Europe continues to expand, supported by regulatory growth drivers. In line with our strategy, we continue to review opportunities with the objective of expanding our capabilities and reach through acquisition.

In August 2022 we acquired Mathewson Holdings, which has a technical capability that complements our own and a market presence in the health and commercial sectors, which is creating new market opportunities for the Group. 

Post-period end, in April, we acquired Vriend, a business incorporated in the Netherlands. This exciting acquisition, of a highly skilled and well-established team, gives us a springboard for our Energy and Water solutions in the Netherlands, with the correct local accreditations which will enable us to access new tender opportunities and accelerate our growth strategy in continental Europe.

Further afield, we successfully established our new global manufacturing site in Spain, which will further support our drive into wider European markets by allowing us to expand the range of products that we offer, while enhancing our manufacturing capability and reducing production costs by some 12% per unit.  This included reviewing the assets transferred from HGP in Holland.  Our focus is on countries which have similar Net Zero and water stress issues as the UK and allow us to replicate our approach.  For Energy, we are looking at countries in north-west Europe that are on a similar journey as the UK on heat pump deployment.  For Water, we are focussing initially on expanding our offering in Europe and India but water stress is a global problem and the longer term opportunity is therefore much greater.  

The drive towards Net Zero energy continues with the imperative of increased pace towards that goal becoming more obvious each year and creating significant, long-lasting opportunities for the Company.

Growing strength

The funds raised at IPO gave us the financial resources to accelerate growth. In what was a challenging year in terms of supply chain disruption, inflation and changes to the regulatory environment, we had the ability to invest in our own capabilities, ensuring we were able to support our customers and meet their needs while simultaneously improving the capabilities and capacities of our market leading solutions.

Being an AIM quoted company has given us other tangible benefits with existing and potential clients reacting positively to the transparency and governance required. In addition, we can use equity incentives throughout the business to motivate our people and align their interests with those of shareholders.

The capital raised enabled the Group to grow its headcount with a particular focus on sales and project management roles. The number of colleagues working for the Group was 168 at the year-end, compared with 113 the previous year, an increase of 48%.  This places the Group in a strong position from which to support its growth ambitions.  

A key factor in enabling us to realise opportunities both last year and those which lie ahead, is building and retaining a skilled and motivated workforce.  We operate in fields where there is strong competition for talent.  We have increased our Human Resources capabilities and focus on providing not only good financial rewards for our staff, but an exciting and enjoyable place to work where people can contribute all their talents in a diverse, team-orientated environment. 

Shareholder value and dividend

We operate in an attractive growth market in which we believe we are doing good for society and the environment around us. These factors support our drive to create value for shareholders.  

In FY22, we announced our maiden dividend, of 1 penny per share, which was paid in September 2022.  We recognise the importance of income as a component of shareholder returns. The Board is, therefore, establishing a progressive dividend policy and recommending a dividend of 1.2 pence per share payable in September 2023, representing a 20% increase on the previous year.

The current year and outlook

The current year has seen work commence on a number of new projects for clients including the London Borough of Lambeth.  As outlined above, the very high inflation seen towards the end of calendar 2022 impacted our client budgets and led them to re-prioritise, causing individual projects to move between financial years. As a result of the shift of larger, lower margin projects into the current year, the Group now expects revenues to be significantly ahead of its earlier expectations, with high-single digit PBT margins in FY24, before reverting to a more normal mix of projects and margin in FY25.  Importantly, however, no contracts were cancelled or are expected to be cancelled, underscoring the strength of our client relationships and the value of the solutions we provide.  

In the current financial year, we expect to extend both our geographical reach and our expansion into new growth sectors, through both organic development and through further acquisitions.

This year we have delivered against the ambitious targets we set ourselves as we laid out our path to growth. Looking ahead, we are confident of continuing to deliver against our clear growth strategy and in being able to grasp successfully the opportunities ahead of us, which in turn will deliver increased value for our customers and shareholders.

Guy Stenhouse

Chairman

22 May 2023

CEO Statement

Strong performance across year

Our goal remains to be a leading clean energy and water specialist.  The year saw very encouraging progress as the Group successfully executed its growth strategy and delivering cutting edge cleantech technologies and solutions to our UK and international clients. 

We saw substantial growth in revenue and adjusted PBT of 52% and 79% respectively with repeat orders, new client wins, geographic expansion and the entering of new markets.  This growth underlines the strength of the technologies and solutions we offer our clients.  Our products are now gaining acceptance as proven solutions to help clients meet their regulatory, climate change and cost reduction goals. 

These outcomes were also pleasing given the significant inflationary, supply chain and labour market challenges during the year.  Our success in managing these reflects the resilience of our business model. 

As a result of the inflationary pressures in late calendar 2022, client budgets came under strain with some needing to reprioritise their project schedules to focus on the most urgent projects where heating systems had or were about to break down.   This saw lower value, higher margin projects prioritised into FY23 with larger, lower margin projects pushed beyond the period end.  The late changes affected overall cash conversion but this is recovering post year-end.  By showing our ability to manage and support our clients, we were able to deepen our relationships as a trusted, agile partner. 

Our markets

There is an increasing need, globally, for the solutions we provide. Governments and organisations are committed to reducing global carbon emissions as quickly as possible. It is this long-term commitment to the reduction of emissions that serves as our key growth driver as public and private bodies seek ways to meet the carbon reduction targets that have been set by international bodies. 

COP27 saw the reaffirmation of the commitment, by nations from around the world, to limit the global temperature increase to 1.5°c above pre-industrial levels. To reach this target, greenhouse gas emissions need to be reduced by 45% compared to levels in 2010, by 2030.[1]

Outside of the broader environmental commitments there is a growing financial imperative for carbon transition. The International Monetary Fund (IMF)[2] noted in September that UK households, as a result of the energy crisis brought on by the events in Ukraine, were the worst hit in western Europe.  Both our Energy and Water solutions emerged in the period as effective options to help lower energy costs, cut carbon emissions and reduce water wastage. 

Net Zero targets require the decarbonisation of heating, moving away from using gas or oil. We are experts in the design and implementation of heating systems which leverage our Control Flow HL2024 technology to deliver high efficiency outcomes, often utilising heat pump systems.

Water stress remains a high profile, global issue and there are growing regulatory factors designed to ensure improved efficiency of water collection and usage. The effects are seen across the UK, Europe, India and North America and include inhibiting development and impacting economic growth.

This year also saw the emergence of another key growth driver, the cost of living crisis. Early in the year energy prices rose dramatically and the need to reduce energy costs both for consumers and organisations became imperative. Public and private organisations as well as consumers were forced to take action to reduce costs.

Financial performance

In FY23 the Group delivered a robust financial performance, with Group revenues up 52% to £55.1m (FY22: £36.2m) and adjusted profit before tax by 79% to £10.1m (FY22: £5.6m). Adjusted EBITDA was up 76% to £11.9m (FY22: £6.7m).

Gross margin improved to 41.7% due to the change in the planned mix of projects, with certain higher margin projects moving from FY24 into the latter part of FY23.  It is also a reflection of tight control of direct costs and the pass through of costs to customers.

The order book remains strong at £130.4m with 62% due to occur in FY24.  Our revenues remain second-half weighted reflecting client procurement processes.  While wider market inflationary and cost pressures affected the capital budgets of clients leading them to focus on priority projects, it is important to note that no contracts have been cancelled, with delivery of other planned projects moving out.

The business remains well funded with a closing cash balance of £3.2m (FY22: £4.1m). Net debt at the year end was £4.7m (£3.0m excluding IFRS16 Lease Liabilities) (FY22 net cash £4.1m excluding IFRS16 Lease Liabilities) reflecting the investment in materials and working capital in Q4 combined with the deferral in client contract start dates.   An enhanced assurance process introduced by the Government in November 2022 was initially under-resourced caused backlogs in the approval process of completed projects increasing the level of accrued income at the year end.  The issue is now unwinding following additional resourcing by the Government in the approval process.  Following the period end, 54% of accrued income has unwound and been received as cash by the Company.

Our debt facilities and improved working capital in the first few months of FY24 give us a good base from which to execute our investment roadmap, continuing to build out and integrate our acquired businesses and support growth, globally.

Operational and Strategic Progress

Significant progress was achieved during the year towards our goal of being a recognised leader in the clean energy and water sectors.  The performance of our product solutions for both energy and water in particular gaining greater recognition.  

In the Energy sector we continued to see clients seeking a move to heat pump systems to reduce carbon emissions and exposure to fossil fuel markets.  In late calendar 2022, an inflationary spike on other types of capital works such as building cladding created pressure on our clients' cash budgets.  Our clients responded by changing their planned project programmes to reduce their overall in-year cash spend.  This saw a focus on the most urgent projects where heating systems had or were about to break down with other projects delayed into later years.  This change resulted in lower value, higher margin projects moved into FY23 and higher value, lower margin projects moved into FY24.  No contracts were cancelled in this process reflecting the need for the work to be completed and the strength of our relationships.  The impact of this inflationary pressure has stabilised and we expect a return to a normal mix of projects in FY25. 

We continued to secure new projects and clients during the year and in H2 FY23 the Group announced the award of multiple, multi-year contracts with both new and existing social housing and private sector clients to provide heat pump solutions, with a total contract value of up to £36m, to be phased across the next three years. These wins and the continued delivery of our energy projects, despite the wider macroeconomic conditions, underpin our confidence in our Energy offerings and the opportunities facing the Group. 

Water saw substantial progress during the year.  In India we secured and delivered our first agritech contract for £0.9m to provide clean energy, water efficient irrigation systems for the State of Uttarakhand.  This is a major new sector that we highlighted at the time of IPO.  Our products are also currently undergoing trials in Spain to confirm their performance on the types of irrigation systems used in the EU. 

In August, we completed a successful water neutrality pilot at Crawley.  This was based on the long-term water savings offered by our Control Flow products, which allowed for the complete offset of demand from new build housing by improving water efficiency in existing homes.  This is an important solution that could help unlock the c120,000 new build houses currently held in the planning phase, in the UK due to concerns on water and nitrate neutrality.   

The pilot in Crawley also showed that the products significantly improved energy use and overall, reduced resident utility bills.  Further trials are underway to determine the value of Control Flow in helping address the risks from fuel poverty.  Separately we have an early-stage B2C offering in trial to determine the potential to offer the Control Flow solution directly to all householders.   

The successes achieved in Energy were supported by our acquisition of Mathewson, in August 2022, which improved our access to the healthcare and commercial sectors.  Since the Mathewson acquisition, we have seen an increased pipeline of opportunities in this area further supporting our confidence in this side of the business.

Post-period end we completed the acquisition of Vriend in the Netherlands.  This is a small, targeted acquisition that provides us with the credentials and base to offer our apartment-block heat pump solutions to the Dutch market.  Our choice of Holland was based on experience of working in the country and the similarity in approach on Net Zero.  Holland has set a target of reducing carbon emissions by 49% by 2030 with a strong emphasis on using heat pump systems. 

Our research and development work is also ongoing, with new patents applied for in connection with our agritech products.  We also refined the design of some of our existing products to ease installation and improve performance.  This ongoing effort ensures that we maintain our performance lead on competitors.   

The global production facility is nearing completion at Toledo, Spain.  Going forward this will be responsible for the assembly and supply of the Control Flow product range. Having a central facility, allows us better quality control and also reduces production costs by 12% per unit. 

ESG

ESG remains at the heart of our business ethos and runs through the core of our strategy.  Based on Scope 1 and 2 emissions, we are a Net Zero company.

As a company with a global presence our ESG approach is coordinated across the Group and focuses on the issues affecting our business and stakeholders to reinforce our commitment to responsible business practices.  

We collaborate with our internal and external stakeholders to develop, implement, and refine our sustainability strategy. We are very proud of our London Stock Exchange Green Economy Mark, signposting that we, as a business, derived 83% of our FY23 revenues from products and services that contribute to environmental objectives such as climate change mitigation and adaptation, waste and pollution reduction, and the circular economy.

Working with an independent ESG consultancy, we have developed our ESG strategy, improving data collection to more accurately and consistently report our progress and credentials.

In FY23 we completed the measurement and reporting of our Scope 1 and 2 emissions across our global operations in the UK, Spain, India, and The Netherlands. Our total carbon emissions for the period were 714 tCO₂e.

In FY23 the Group saved over 209,000 tCO₂e through our Control Flow technology and renewable heating solutions designed to deliver our clients net carbon zero strategies. This is a significant saving and more than offsets the level of carbon generated by the Group in its Scope 1 and 2 activities. 

We understand the importance of strong governance as a foundation for achieving our ESG objectives. We believe effective governance practices are essential to maintaining the trust and confidence of our stakeholders, including our customers, employees, shareholders, and the communities where we operate.

Our governance framework is designed to promote ethical conduct, accountability, and transparency across our operations.

People

Our employees are at the heart of our Company and are the reason for our success.  During the year we continued to invest in the development of existing staff as well as recruiting people to meet the demand for our products and services.  Our recruitment and development process strongly emphasises our corporate culture and we promote equal opportunities and diversity to create an inclusive working environment.  Our last staff survey showed that 95% of our employees agree/strongly agree that Eneraqua is a great place to work; a fact that underpins our low staff turnover of 7%, excluding those who left during their probation period,

Outlook

Our products and services offer proven solutions to help clients meet their climate change and water stress challenges.  We continue to enter new territories with the recent acquisition of Vriend, now enabling us to offer our Energy and Water solutions in the Netherlands.

Our Water solutions, in particular, are attracting much international interest: for example in India with multiple states expressing strong interest in similar agritech projects to Uttarakhand.  In Spain we are carrying out trials of the agritech product and also the domestic water saving products, opening up new markets. 

Following the acquisition of Vriend, we plan to carry out trials to demonstrate the net water and net nitrate neutrality benefits of Control Flow.  This builds on the experience of the net neutrality project in Crawley in unlocking development. 

In Energy, we continue to be UK-focused with a strong public sector client emphasis.  The recent contract wins show that our solutions and quality of work are widely recognised.  With the acquisition of Vriend, we will expand our Energy offering into Holland as part of our wider strategy for northwest Europe.  Our choice of Holland was based on long experience with the country and the fact that it is on a similar Net Zero journey as the UK.

Our R&D spend is expected to rise from £1.8m in FY23 to £2.4m in the coming year, reflecting the increased product development and trials planned which are essential to ensure our long-term growth.  We also expect to expand our intellectual property portfolio. We expect to maintain this level of investment going forward in order both to meet the individual country certification requirements and also widen our range of product offerings. 

As previously stated, the working capital position at year end is unwinding as expected with 54% of accrued income converting into cash post period end. 

The order book for FY24 stands at £130.4m, of which we currently anticipate 62% to occur in the current year. As set out earlier, the unexpected inflation spike did create pressure on Energy client budgets and resulted in them re-phasing their project plans.  The mix of Energy projects in FY24 are more heavily weighted towards higher value and lower margins with revenues to be ahead of our expectations with high-single digit PBT margins.  Based on client programmes, we expect to revert to a more normal mix of projects and margins in FY25.         

The opportunities facing the Group remain significant. We are in a strong position with proven products and solutions and our geographic expansion plans remain on course with growth in Water exceeding our original expectations at IPO. As a result, we are confident in the future prospects for the Group. 

Mitesh Dhanak

CEO

22 May 2023

CFO Statement

I am pleased to report on our first full financial year as an AIM quoted company, for the year to 31 January 2023. 

2023 was a year in which we achieved strong growth with a 52% increase in revenue to £55.1m with the growth driven by strong operational and strategic process with strong growth in new business for both Energy and Water. 

Strategy

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

KPI's

The Group's financial Key Performance Indicators, which are aligned with its growth strategy, are revenue growth, adjusted EBITDA, adjusted EBITDA margin, adjusted Profit before Tax, R&D spend, cash conversion and ROCE. These non-IFRS measures are consistent with how the Group measures trading and cash generative performance and are reported to the Board.  Of these KPIs, five delivered well in the year to 31 January 2023.

Cash conversion was lower than anticipated due to a number of factors including:

·	Increased lead times for key components, requiring these items to be purchased before projects started rather than during the life of a project.
·	The enhanced assurance process introduced by the Government caused backlogs in the approval process of completed projects. This backlog resulted in an increase in accrued income at the year end, which is now unwinding.
·	Inflationary price pressures across our supplier base, not all of which could be passed on to our customers.
·	Cost pressures on the capital budgets of certain clients, causing certain projects to start later than anticipated, increasing the bias of Group project delivery weighting to H2. As a result we saw an increase in trade receivables at the year end.

	2023	2022
Revenue	£55.1m	£36.2m
Revenue growth	52%	148%
EBITDA1	£11.7m	£5.6m
Adjusted EBITDA2	£11.8m	£6.7m
Adjusted EBITDA margin3	21.5%	18.6%
Adjusted PBT	£10.1m	£5.6m
R&D spend	£1.8m	£1.4m
Cash conversion4	(26%)	66%
ROCE5	34.5%	26.6%

Revenue

Group revenues increased by 52% to £55.1m, (FY22: £36.2m). Excluding the Mathewson acquisition, UK revenues grew by 50% to £54.0m (2022: £35.9m). International revenues grew by 105% from £0.26m in 2022.

Profits

The improvement in revenue supported strong growth in profits and profitability. Adjusted EBITDA² increased 76% to £11.8m, (2022: £6.7m), with the Group achieving Adjusted EBITDA margins³ of 21.5%, up from 18.6% in 2022. Adjusted PBT for the year was £10.1m an increase of 79% from 2022.

Statutory operating profit increased to £10.3m (2022: £4.4m) and statutory profit before tax was £9.9m (FY22: £4.1m).

Acquisitions

On 29 July 2022 the Group acquired Mathewson Holdings Limited ("Mathewson"). The total consideration for the acquisition, including deferred consideration, is £1.7m. The acquisition was the continuation of our clear growth strategy in the UK, laid out at the time of our IPO, to acquire bolt-on opportunities which provide access to new markets. For the period following acquisition, Mathewson recorded revenues of £0.6m and operating profit of £0.2m.

Following the successful completion of the HaGePe International B.V. acquisition last year and the transfer of its assets, including stock, to Cenergist Spain S.L., in November 2022 the Board reviewed the value of the assets transferred and, in particular, the provision made against stock and concluded that this provision was no longer required. The value of the provision released in the year was £0.7m.

I am pleased to announce that post-year end, on 3 April 2023, the Group acquired Vriend. The total consideration for the acquisition, is €521,928. The acquisition is part of our European growth strategy and now gives the Group delivery capabilities in the Netherlands. The Board considers that this acquisition delivers value to shareholders by accelerating the growth opportunity in continental Europe.

Adjusting Items

The total pre-tax adjusting items in the year were £0.1m. These were £0.1m of charges for share-based payments (2022: £0.3m).

Earnings per share

Basic earnings were 25.50p (2022: 18.28p) and diluted earnings per share were 25.25p (2022: 18.16p).

Dividends

For the financial year ended 31 January 2023, following a strong performance the Board is delighted to recommend a final dividend for the year of 1.2p per share, subject to shareholder approval. This is a 20% increase from 2022 and establishes the Board's progressive dividend policy.

Headcount

The Group's full time equivalent (FTE) employees at 31 January 2023 were 168 (FY22: 113). This increase reflects the acceleration in recruitment, to support the Group's growth strategy.

Share capital and share options

No share options were issued during the year under the Long Term Incentive Plan with the total share options in issue at the yearend remaining at 332,673.

Intangible assets

Following the Group's admission on AIM, the Board carried out a review of the Group's accounting estimates to ensure that they were appropriate given the recent growth of the Company and the increased levels of compliance the Group is now subject to. As a result of this review, it was concluded that the previous useful economic life of 5-years assumed for patents was not appropriate for intangible assets of this nature. The Board believe that a useful economic life of 15 years was realistic, and the amortisation of these assets has been adjusted accordingly. The adjustment resulted in a positive impact to the profit & loss account of £0.4m.

Cash flow and net debt

Cash conversion declined significantly from last year with a cash outflow from operations of £3.4m (FY22: £3.0m inflow). This was as a result of a change in the working capital profile during the year. The lead times for key components on a number of projects increased significantly, requiring the Group to bulk purchase these items at the start of these projects, ahead of receiving funding from clients, rather than during the project life, to ensure project delivery timescales were met. In addition, a heavy Q4 bias on project delivery has seen an increased level of trade and other receivables at the year end (FY23: £29.2m, FY22: 12.4m), negatively impacting working capital. The Board is pleased that, post period end, 54% of the accrued income balance has been received by the Company as cash.

Total capital expenditure on property, plant and equipment amounted to £0.9m (FY22: £2.7m). In addition, there was a further outflow of £1.6m for the acquisition of Mathewson Holdings Limited.

The Group ended the year with net debt (excluding IFRS 16 liabilities) of £3.0m compared with £4.1m of net cash at 31 January 2022.

Post-year end the Group has secured £2.5m of additional banking facilities with HSBC UK Plc.  The new facility will support the Group in its growth strategy, both in terms of working capital requirements and acquisition opportunities.

Outlook

The Group is in a strong position with a healthy balance sheet and order book which stands at £130.4m of which we currently anticipate 62% to be delivered in the current year. The accrued income at January is unwinding as expected, with the majority of this having already converted into cash. We expect cash conversion to exceed 100% during the year and return to a net cash position by the year end.

¹Operating profit prior to depreciation of property, plant and equipment, depreciation of right-of-use assets and amortisation of intangible assets

²Operating profit prior to exceptional costs, depreciation of property, plant and equipment, depreciation of right-of-use assets and amortisation of intangible assets

³Adjusted EBITDA as a proportion of revenue

⁴Cash from operating activities/EBITDA

⁵Operating profit as a percentage of total assets less current liabilities

Iain Richardson

CFO

22 May 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 January 2023

	Note	2023 Unaudited £'000	2022 £'000
Continuing operations
Revenue	4	55,074	36,176
Cost of sales		(31,995)	(21,572)
Gross profit		23,079	14,604
Administrative expenses		(12,774)	(10,171)
Other operating income		-	-
Included within administrative expenses are:
-    Exceptional costs		-	(1,178)
-    Share based payment charge		(117)	-
-    Depreciation of property, plant and equipment		(655)	(618)
-    Depreciation of right-of-use assets		(196)	(113)
-    Amortisation of intangible assets		(573)	(381)
Adjusted administrative expenses		(11,233)	(7,881)
Adjusted EBITDA		11,846	6,723
Operating profit	6	10,305	4,433
Interest receivable and similar income		-	-
Interest payable and other similar expenses		(370)	(366)
Profit before taxation		9,935	4,067
Income tax	7	(1,420)	(8)
Profit for the year from continuing operations		8,515	4,059
Total profit for the year attributable to equity holders of the parent
Other comprehensive income		-	-
Total comprehensive profit for the year attributable to equity holders of the parent		8,515	4,059
Basic earnings per share from continuing operations - pence	5	25.50	18.28
Diluted earnings per share from continuing operations - pence	5	25.25	18.16

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 January 2023

	Note	2023 Unaudited £'000	2022 £'000
Non-current assets
Intangible assets	8	8,703	7,218
Property, plant and equipment		3,441	3,095
Right-of-use assets		1,213	243
Deferred tax asset		-	-
Total non-current assets		13,357	10,556
Current assets
Inventory		2,557	1,186
Trade and other receivables	9	29,226	12,389
Cash and cash equivalents		3,224	4,070
Total current assets		35,007	17,645
TOTAL ASSETS		48,364	28,201
Equity attributable to owners of the parent
Called up share capital		332	344
Share premium account		10,113	10,113
Merger reserve		(5,490)	(5,490)
Other reserves		269	(294)
Retained earnings		19,791	11,769
Total equity		25,015	16,442
Current liabilities
Borrowings	10	1,469	-
Trade and other payables		15,154	11,426
Lease liabilities		543	82
Total current liabilities		17,166	11,508
Non-current liabilities
Borrowings	10	4,732	-
Lease liabilities		1,183	109
Deferred tax liability		268	142
Total non-current liabilities		6,183	251
Total liabilities		23,349	11,759
TOTAL EQUITY AND LIABILITIES		48,364	28,201

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 January 2023

	Note	2023 Unaudited £'000	2022 £'000
Cash flow from operating activities
Profit for the financial year		8,515	4,059
Adjustments for:
Amortisation of intangible assets		573	381
Depreciation of property, plant and equipment		655	618
Depreciation on right-of-use assets		196	113
Interest payable		313	330
Lease liability finance charge		57	36
Taxation charge		1,420	8
Corporation tax received		25	380
Foreign exchange		(392)	(38)
Share based payment charge		117	333
Changes in working capital:
Increase in inventory		(1,371)	(295)
Increase in trade and other receivables		(16,837)	(9,540)
Increase in trade and other payables		3,685	7,278
Net cash (outflow) / inflow from operating activities		(3,044)	3,663
Cash flow from investing activities
Purchase of intangible assets		(269)	(549)
Purchase of property, plant and equipment		(882)	(2,722)
Sale of property, plant and equipment		3	-
Acquisition of businesses - net of cash acquired		(1,620)	(5,111)
Net cash outflow from investing activities		(2,768)	(8,382)
Cash flows from financing activities
Proceeds from borrowings		7,249	-
Repayment of borrowings		(1,369)	(4,972)
Net proceeds from issue of shares		-	9,998
Reduction of share capital		(12)	-
Interest paid		(313)	(330)
Repayment of lease liabilities		(261)	(191)
Dividends paid		(328)	-
Net cash inflow from financing activities		4,966	4,505
Net decrease in cash and cash equivalents		(846)	(214)
Cash and cash equivalents at beginning of period		4,070	4,284
Cash and cash equivalents at the end of the period	11	3,224	4,070

CONSOLIDATED STATEMENT OF CHANGE IN EQUITY

For the year ended 31 January 2023

	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 year	-	-	-	-	4,059		4,059
Other comprehensive income	-	-	-	-	-		-
Total comprehensive income for the year attributable to equity holders of the parent	-	-	-	-	4,059		4,059
Merger reserve	(3)	(456)	(5,490)	-	5,949		-
Issue of shares	344	11,996	-	-	-		12,340
Share issue costs	-	(1,883)	-	-	-		(1,883)
Other1	-	-	-	(350)	-		(350)
Total transaction with owners	341	9,657	(5,490)	(350)	5,949		10,107
Balance at 31 January 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 year	-	-	-	-	8,515		8,515
Total comprehensive income for the year attributable to equity holders of the parent	-	-	-	-	8,515		8,515
Reduction in share capital	(12)	-	-	-	-		(12)
Dividends paid	-	-	-	-	(328)		(328)
Other1	-	-	-	398	-		398
Total transaction with owners	(12)	-	-	398	(328)		58
Balance at 31 January 2023	332	10,113	(5,490)	104	19,956		25,015

¹Other reserves include share based payments, foreign exchange and other items.

NOTES TO THE FINANCIAL INFORMATION

For the year ended 31 January 2023

1              GENERAL INFORMATION

Eneraqua Technologies plc ("the Company") was incorporated and registered in England and Wales on 19 August 2021 as a private limited company, Eneraqua Technologies Limited, with its registered office at 2 Windmill Street, Fitzrovia, London, W1T 2HX.  On 8 November 2021 the company was re-registered as a public limited company. The Company's registered number is 13575021.

The Group's principal activities are the provision of turnkey solutions for water efficiency and decarbonisation, the latter through district heating and ground source heat pump systems for social housing, commercial clients, and the residential sector. These activities are underpinned by our proprietary water savings technology,  Control Flow HL2024 , which improves the efficiency of heating and water systems for customers across the UK and Europe.

2      ACCOUNTING POLICIES

2.1          Basis of preparation

The preliminary results (unaudited) (referred to as the 'preliminary results') have been prepared in accordance with International accounts standards in conformity with the requirements of the Companies Act 2006 (UK-adopted IAS).

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 information for the year ended 31 January 2023 does not constitute statutory accounts for the purposes of section 435 of the Companies Act 2006. The audit of the statutory accounts for the year ended 31 January 2023 is not yet complete. These accounts will be finalised on the basis of the information presented by the Directors in these preliminary results and will be delivered to the Registrar of Companies following the Company's annual general meeting.

Whilst the financial information included in this announcement has been computed in accordance with the recognition and measurement requirements of international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards, this announcement does not itself contain sufficient disclosures to comply with IFRS.

The accounting policies included herein are aligned with those presented in the Admission Document and are consistent with those in the prior year. 

There have been no changes in estimates and critical judgements in the year, with the exception of the useful economic life of patents, which was extended from 5 years to 15 years straight line to better reflect the longer term nature of the benefits of such patents.  This has resulted in a like-for-like reduction in amortisation by £0.4m.

3.            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 31 January 2023 the Group operated in the three business segments according to the geographical location of its operations, those being:

-     United Kingdom,

-     Europe; and

-     India.

2023		United Kingdom	Europe	India		2023
		£'000	£'000	£'000		£'000
Revenue		54,546	77	451		55,074
Cost of sales1		(32,525)	718	(188)		(31,995)
Gross profit		22,021	795	263		23,079
Administrative expenses		(11,249)	(1,232)	(293)		(12,774)
Included within administrative expenses are:
-     Share based payment charge	-	(117)	-	-	-	(117)
-     Depreciation of property, plant and equipment		(350)	(288)	(17)		(655)
-     Depreciation of right-of-use assets		(196)	-	-		(196)
-     Amortisation of intangible  assets		(505)	(68)	-		(573)
Adjusted administrative expenses		(10,081)	(876)	(276)		(11,233)
Adjusted EBITDA		11,940	(81)	(13)		11,846
Operating profit/(loss)		10,772	(437)	(30)		10,305
Interest payable and similar expenses		(98)	(271)	(1)		(370)
Profit/(Loss) before tax		10,674	(708)	(31)		9,935
Taxation		(1,378)	(40)	(2)		(1,420)
Profit/(Loss) after tax		9,296	(748)	(33)		8,515
Net Assets
Assets:		36,995	10,840	529		48,364
Liabilities		(12,869)	(9,955)	(525)		(23,349)
Net assets		24,126	885	4		25,015

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 EBITDA		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

¹Europe cost of sales in 2023 includes £0.7m credit relating to release of a stock provision. 

4.            REVENUE

		2023 £'000	2022 £'000
United Kingdom		54,546	35,918
Europe		77	216
India		451	42
		55,074	36,176

Within the sales revenue, there was one customer in the United Kingdom that accounted for greater than 10% of total revenue of the Group contributing £20,197,000 (2022: 2 customers - £24,049,000).

5.            EARNINGS PER SHARE

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

		2023	2022
Profit for the year from continuing operations - £'000		8,515	4,059
Weighted number of ordinary shares in issue		33,388,788	22,204,677
Weighted number of fully diluted ordinary shares in issue		332,673	147,183
Basic earnings per share from continuing operations - pence		25.50	18.28
Diluted earnings per share from continuing operations - pence		25.25	18.16

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

6.            OPERATING PROFIT

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

		2023 £'000	2022 £'000
Depreciation of property, plant and equipment		655	618
Depreciation of right-of-use assets		196	113
Amortisation of fixed assets		573	381
Inventories recognised as an expense		-	1
Share based payments		117	-
Exchange differences		-	(20)

7.            TAXATION

		2023 £'000	2022 £'000
The (charge) / credit for year is made up as follows:
Corporation tax
Corporation taxation on the results for the year		(1,317)	(99)
Adjustments in respect of previous periods		-	233
		(1,317)	134
Deferred tax
Origination and reversal of temporary differences		(183)	(336)
Changes to tax rates		-	-
Adjustments in respect of previous periods		80	194
		(103)	(142)
Taxation (charge) / credit on profits on ordinary activities		(1,420)	(8)

Factors affecting tax (charge) / credit for the year

The tax assessed for the year is lower than (2022: lower than) the standard rate of corporation tax in the UK of 19% (2022: 19%). The differences are explained below:

		2023 £'000	2022 £'000
Profit on ordinary activities before tax		9,935	4,067
Tax on ordinary activities at the standard rate of corporation tax in the UK of 19% (2022: 19%)		(1,888)	(773)
Effects of:
Expenses not deductible for tax purposes		164	(192)
Additional R&D tax relief		371	371
Adjustments to tax charges in respect to prior periods1		77	429
Losses carried forward not recognised		(79)	(175)
Effect of profits subject to tax in a previous period		-	352
Tax rate changes		(65)	(20)
Taxation charge on profits on ordinary activities		(1,420)	(8)

There are total tax losses of £1,053,000 available for carry forward against future tax liabilities in the UK and overseas (2022: £649,000). A deferred tax asset has not been recognised on these losses to the extent that they are expected to be utilised in future periods.

¹Primarily relates to the effect of a prior year R&D tax claim.

8.            INTANGIBLE ASSETS

	Goodwill £'000	Development Costs £'000	Customer Relationships £'000	Patents £'000	Licences £'000		Total        £'000
Cost
At 1 February 2021	-	-	-	370	377		747
Additions	4,369	1,647	671	-	370		7,057
Disposals	-	-	-	(36)	-		(36)
At 31 January 2022	4,369	1,647	671	334	747		7,768
Additions	1,184	444	161	269	-		2,058
Disposals	-	-	-	-	-		-
At 31 January 2023	5,553	2,091	832	603	747		9,826
Amortisation
At 1 February 2021	-	-	-	-	169		169
Charge for the year	-	190	-	41	150		381
At 31 January 2022	-	190	-	41	319		550
Charge for the year	-	356	-	67	150		573
At 31 January 2023	-	546	-	108	469		1,123
Net book value
31 January 2022	4,369	1,457	671	293	428		7,218
31 January 2023	5,553	1,545	832	495	278		8,703

Amortisation of patents commence once they are granted.

Goodwill additions relates to goodwill generated through one acquisition in the current year and two acquisitions during the prior year being:

-     Acquisition of Mathewson Holdings Limited (July 2022) = £1.2m;

-     Acquisition of HaGePe International B.V. (June 2021) = £4.0m; and

-     Acquisition of Welltherm Drilling Limited (September 2021) = £0.3m

9.            TRADE AND OTHER RECEIVABLES

Group		2023 £'000	2022 £'000
Trade receivables		3,492	5,606
Contract assets		459	-
Other debtors		2,352	472
Prepayments and accrued income		22,778	6,189
Tax recoverable		145	122
		29,226	12,389

All trade receivables fall within their due date.  Accordingly, no provisions have been made.

10.          BORROWINGS

		2023 £'000	2022 £'000
Current		1,469	-
Non-current		4,732	-
		6,201	-

Analysis of maturity of loans is given below:

		2023 £'000	2022 £'000
Amounts falling due within one year
Other loans		1,469	-
Amounts falling due 1-2 years
Other loans		1,821	-
Amounts falling due 2-5 years
Other loans		2,911	-
		6,201	-

Other loans relate to a £6,000,000 facility provided by HSBC to Cenergist Limited and a €1,500,000 facility provided to Cenergist Spain SL by Instituto De Finanzas De Castilla-La Mancha S.A.U. ("CLM") and are secured by fixed and floating charges over the assets of the Company and by cross guarantees from the Company's subsidiary undertakings.

Interest on the HSBC facility is at a rate of 3.45% 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.

11.          RECONCILIATION OF MOVEMENT IN NET DEBT

2023	At 1 February 2022	Non-cash changes	Cashflow	At 31 January 2023
	£'000	£'000	£'000	£'000
Cash at bank	4,070	-	(846)	3,224
Borrowings - current	-	-	(1,469)	(1,469)
Borrowings - non-current	-	-	(4,732)	(4,732)
Lease liabilities - current & non-current	(191)	(1,274)	(261)	(1,726)
Net Debt	3,879	(1,274)	(7,308)	(4,703)

2022	At 1 February 2021	Non-cash changes	Cashflow	At 31 January 2022
	£'000	£'000	£'000	£'000
Cash at bank	4,284	-	(214)	4,070
Borrowings - current	(4,081)	-	4,081	-
Borrowings - non-current	(891)	-	891	-
Lease liabilities - current & non-current	(211)	(171)	191	(191)
Net Debt	(899)	(171)	4,949	3,879

12.          EVENTS SUBSEQUENT TO PERIOD END

On 3 April 2023, Cenergist Spain acquired 100% share capital of Installatiebedrijf Vriend B.V., a business incorporated in the Netherlands, for total consideration of €0.5 million.

---

[1]UN Africa Renewal: COP27 outcome: Reflections on the progress made, opportunities missed, Fazal Issa

[2] IMF: Surging Energy Prices in Europe in the Aftermath of the War: How to Support the Vulnerable and Speed up the Transition Away from Fossil Fuels, Anil Ari et al.

 

END