Final Results

RNS Number : 2485I

Inspired Energy PLC

24 March 2015

 



24 March 2015

Inspired Energy plc

("Inspired" or the "Group")

Final Results for the year ended 31 December 2014

Inspired Energy plc (AIM: INSE), a leading energy procurement consultant to UK corporates and SME's, announces record final results for the year ended 31 December 2014.

HIGHLIGHTS

Financial Highlights

	2014	2013	2014 % Increase
Revenue	£10.84m	£7.62m	42%
Gross profit	£8.52m	£6.61m	29%
Adjusted EBITDA*	£4.56m	£3.55m	28%
Adjusted Profit Before Tax	£4.27m	£3.27m	31%
Profit Before Tax	£2.98m	£1.75m	70%
Net Debt	£3.08m	£2.13m	45%
Dividend per share	0.25p	0.17p	47%
Adjusted EPS	0.89p	0.68p	31%
Basic EPS	0.59p	0.35p	69%
Corporate Order Book	£14.0m	£11.0m	27%

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

·      Corporate Order Book grew 27% to £14.0 million (2013: £11.0 million)

·      The SME division revenue increased significantly by 152% to £3.6 million (2013: £1.4 million)

·      Final dividend proposed of 0.18 pence per share (2013: 0.12p), resulting in a total dividend for the year of 0.25p (2013: 0.17p), an overall increase of 47%

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

Operational Highlights

·      Strong growth in the Corporate division, delivering record revenue, profits and Order Book Sales

·      Continued rapid growth in the SME division, particularly in H2 as a result of:

o  Strong uptake of EnergiSave product

o  Acquisitions of KWH Consulting and Simply Business Energy in March, which added an online platform and broadened the client base

·      Further diversification of customer base into new sectors

·      Headcount increased by 56% to 103 staff as a result of investment in both divisions and SME acquisitions

·      High client retention levels maintained:

o Renewals across the Group at 85%

o Risk Management division achieved 100% client retention

·      Board strengthened with the appointment of Paul Connor as Finance Director with David Foreman taking the position of Corporate Development Director on a consultative basis

Commenting on the results, Janet Thornton, Managing Director, said: "Inspired went from strength to strength in 2014 with the Corporate division delivering exceptional results, achieving significant new customer wins whilst maintaining high customer retention levels which has resulted in a strong uplift in revenue and Order Book Sales.  This momentum has continued into 2015. The momentum gained in the second half of 2014 in the SME division as a result of organic growth and strategic acquisitions, has continued, with the division outperforming our expectations in the current year.

"The Board continues to see a strong, structural growth trend within the energy consultancy sector which will further benefit the Group in the years to come. Businesses in both the larger corporate arena and SME's increasingly look to energy consultancies to help them with their energy procurement negotiations and strategies.

"On behalf of the Board, I would like to thank all of the Inspired team for their hard work over the past year, and we look forward to another exciting year of growth and development of the Group."

For further information, please contact:   

Inspired Energy plc Janet Thornton, Managing Director Paul Connor, Finance Director David Foreman, Corporate Development Director	www.inspiredenergy.co.uk [phone] [phone]
Shore Capital Bidhi Bhoma Edward Mansfield	[phone]
Gable Communications Justine James John Bick	[phone] [phone] [e-mail]

CHAIRMAN'S STATEMENT

I am delighted to present another set of record results for the Group for the year ended 31 December 2014, which has seen a year of significant growth for the Group. I am particularly pleased to report that the financial results achieved have beaten consensus market forecasts for the year.  This is all the more impressive given that the Group profit forecasts for FY14 were upgraded as we released our results for the year to 31 December 2013 in March 2014. Inspired has continued to deliver its growth strategy within the Corporate sector and has achieved rapid expansion within the SME division

The results represent a record year with Group revenue increasing by 42% to £10.84 million (2013: £7.62 million) and adjusted EBITDA increasing by 28% to £4.56 million (2013: £3.55 million). Profit before tax increased by 70% to £2.98 million (2013: £1.75 million).

The Board is delighted to propose a final dividend of 0.18 pence per share subject to shareholder approval at the AGM in June. This combined with the interim dividend payment of 0.07 pence per share, results in a full year dividend of 0.25 pence per share, a 47% increase on 2013 (2013: 0.17 pence).  The Group has demonstrated market leading margins in its time as a public company whilst achieving compound organic revenue growth of 44% supplemented by selective acquisitions.  The dividend increase in the year of 47% is a demonstration of the Board's confidence for the future.

The Corporate division has continued to deliver strong growth, achieving record Order Book Sales of £10.0 million in the year (2013: £8.8 million). This strong sales performance is reflected in our Corporate Order Book standing at £14.0 million as at 31 December 2014, representing growth of 27% in the year (2013: £11.0 million). We believe the continued growth of the Order Book demonstrates our position as a market leader to UK corporates in the energy consultancy sector.

In the SME division, the acquisitions of KWH Consulting Limited ("KWH") and Simply Business Energy Limited ("SBE") in March 2014 have proved highly successful and both businesses have been integrated well. The acquisitions enhanced the range of SME services providing customers with a more rounded service and expanding the Groups expertise and knowledge of the sector. The year was a significant period for this division, as we added expertise, headcount, and infrastructure. As a result, this fast growing division has, for the first time, made a significant contribution to the performance of the Group.

We continue to review acquisition targets which can enhance the business adding to our service capability, sector specialism and geographical spread, whilst continuing to deliver strong organic growth rates.

The current year has started well and the Group is trading ahead of Board expectations in the early part of the year. We entered 2015 in an excellent position and with confidence for the year ahead.

Bob Holt

Chairman

24 March 2015

MANAGING DIRECTOR'S STATEMENT

Performance

The Board is delighted with the performance of the Group in the year to 31 December 2014, with every part of the business delivering impressive growth rates. The Group has achieved an adjusted EBITDA compound annual growth rate of 31% in the two years to 31 December 2014 and we are delighted to report that we have beaten the consensus forecasts at both revenue and profit levels for the year ended 31 December 2014.

The growth achieved by the Group both in 2014 and during its time as a public company is a testament to the hard work and talent of our staff and to the strength of our customer proposition. The Group has a strong and established platform from which to continue the organic growth of the business further strengthened where appropriate by acquisitions. We look forward the coming year with confidence and enthusiasm.

Corporate Division

Overview

The Group's Corporate division comprises Inspired Energy Solutions and DEP and delivers core services which are the review, analysis and negotiation of gas and electricity contracts.

In 2014 this division had an excellent year and delivered record revenue, profits and Order Book Sales.  This was achieved by continuing to deliver a high level of service to meet Corporates needs, through ensuring clients are offered market leading supplier terms and products, thereby maintaining strong client retention in tandem with growing this division with key corporate wins including: Formica Group, ECOPlastics Recycling Limited and infrastructure services group FM Conway.

In the year:

•           Revenue increased 16% to £7.2 million (2013: £6.2 million)

•           Order Book increased 27% to £14.0 million (2013: £11.0 million)

•           Order Book Sales increased 14% to £10.0 million (2013: £8.8 million)

•           High customer retention rates maintained,85% across the Group (100% in Risk Managed),whilst delivering strong new customer win performance.

Corporate Order Book

The Group is proud to be able to report further Corporate Order Book growth in the year to a record £14.0 million. This represents an increase of 27% and £3.0 million in the year in absolute terms.

Order Book Analysis	£m
Order Book b/f at 31 December 2013	11.0
Add: Order Book Sales in period	10.0
Less: Revenue recognised from Order Book in the period	(7.0)
Order Book c/f at 31 December 2014	14.0

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

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

Order Book Sales

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

An Order Book Sales value which is in excess of revenue recognised, within a defined period, will increase the Order Book of the Group, providing an indicator of expected future growth already secured by the Group. In 2014, Order Book Sales were 39% in excess of revenue recognised in the year, which is manifested in the increase of the Order Book of £3.0 million. 

SME Division

Overview

The Group's SME division includes: EnergiSave Online Limited ("Energisave"), KWH and SBE. Within the SME division, the group's energy consultants contact prospective SME clients to offer reduced tariffs and contracts based on the unique situation of the customer.

 

The SME division has achieved rapid growth in 2014, with revenue increasing 152% to £3.6 million from £1.4 million in 2013. Following an initial period of investment in the first half of 2014, the division has delivered rapid growth in the second half of the year.  In March 2014, the Group acquired KWH and SBE, with the business and key personnel acquired adding value to the existing division through the addition of technical capability and more established supplier relationships within the SME market.

The Group made a significant investment in SME sales and administration staff at the beginning of 2014 in order to establish a robust platform for the division.  This investment has now been concluded and we believe that the division is in a strong position to continue its growth without the need for significant additional investment in staff. As forecast in the interim statement for the Group, the maturing of the division has resulted in positive cash flow in the second half of 2014, following a period of investment in the first half of the year.

Operations

The Group has recently finalised the implementation of a complete, end to end, CRM and contracts management system within the SME division.  Leads and opportunities are managed efficiently and accurately to enable strong new client conversion and retention rates.

Acquisitions

The board continues to investigate opportunities for the Group to participate in industry consolidation. To create an enlarged and improved business, we believe that potential targets should offer one or more of the following criteria:

•           Additional technical and/or service capability

•           Sector specialism and diversification

•           Increased geographic footprint

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

Cash and Borrowings

As at 31 December 2014, the Group had cash balances of £0.77 million. As at this date, the Group had outstanding balances on its senior term debt of £2.36 million, for which annual capital repayments are £0.70 million.

During the year, the Group extended its borrowing with Santander by drawing down £1.50 million of the committed RCF facility made available to the Group at the time of the re-financing in March 2013. The drawdown was undertaken in order to provide additional working capital to the Group which was used, primarily, to invest in the continued growth of the SME division.

As at 31 December 2014, net debt stood at £3.08 million, which is an increase of £0.95 million in comparison to 31 December 2013. The increase in net debt reflects a year in which the cash generation of the Group was offset by the payment of £0.85 million of contingent consideration to the vendors of Direct Energy Purchasing Limited and £0.25 million consideration in respect of the acquisition of KWH Consulting Limited.

Dividends

The Board is delighted to propose a final dividend of 0.18 pence per share subject to approval at the Annual General Meeting of the Group. Following the payment of an interim dividend of 0.07 pence per share, the total dividend payable for the year ended 31 December 2014 is 0.25 pence per share. This represents an increase of 47% over the dividend payable in respect of 31 December 2013, being 0.17 pence per share.

The dividend will be payable to all shareholders on the register as at 6 June 2015 and will be paid on 4 July 2015.

Outlook

Inspired has gone from strength to strength over the past year and has achieved a record year of revenue and profits, beating consensus forecasts for the year following an upgrade in March 2014.

The Corporate division has, once again, delivered exceptional results, achieving new customer wins and maintaining strong customer retention which results in a highly impressive uplift in revenue and Order Book Sales.

The momentum gained in the second half of 2014 in the SME division, as a result of strategic acquisitions, has continued. For the first time, the division has made a significant contribution to the profitability of the Group and will, in 2015, begin to deliver meaningful cash generation. This division continues to outperform our expectations in the current year.

On behalf of the Board, I would like to thank all of the Inspired team for the hard work over the past year, and we look forward to another exciting year of growth and development of the business.

Janet Thornton

Managing Director

24 March 2015

INSPIRED ENERGY PLC

 

The Group

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

Customers

Through optimising energy procurement on behalf of its clients Inspired enables them to achieve greater certainty of their energy costs and in many cases delivers significant savings. The Group currently manages and negotiates gas and electricity supply agreements for approximately 15,000 meters across the UK, operating on behalf of c.6,500 customers.

Corporate division

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

Energy Review and Benchmarking

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

Negotiation

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

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

Bill Validation

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

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

Additional Services

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

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

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

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

Risk Managed Trading

Managed Frameworks

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

Comprehensive Approach

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

Market Leading Terms

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

'Whole of Market' Access

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

Budget Clarity

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

SME Division

The SME division was launched in October 2012 and has grown rapidly since its launch, SME energy consultants contact prospective clients to offer reduced tariffs and contracts based on the unique situation of the customer.

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

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

Group Income Statement

For the year ended 31 December 2014

		2014	2013
	Note	£	£
Revenue		10,835,322	7,618,325
Cost of sales		(2,311,683)	(1,009,291)
Gross profit		8,523,639	6,609,034
Administrative expenses		(5,363,347)	(4,629,475)
Operating profit		3,160,292	1,979,559
Analysed as:
Earnings before exceptional costs, depreciation, amortisation and share-based payments costs		4,556,228	3,548,680
Exceptional costs	3	(458,302)	(358,700)
Depreciation		(116,798)	(49,857)
Amortisation of intangible assets		(521,102)	(948,466)
Share-based payment costs		(299,734) 3,160,292	(212,098) 1,979,559
Finance expenditure		(168,832)	(224,004)
Other financial items		(10,147)	(9,743)
Profit before income tax		2,981,313	1,745,812
Income tax expense	4	(508,550)	(324,462)
Profit for the year and total comprehensive income from continuing operations		2,472,763	1,421,350
Attributable to:
Equity owners of the company		2,472,763	1,421,350
Basic earnings per share attributable to the equity holders of the company (pence)	5	0.59	0.35
Diluted earnings per share attributable to the equity holders of the company (pence)	5	0.57	0.33

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

Group Statement of Financial Position

At 31 December 2014

		2014	2013
	Note	£	£
ASSETS
Non-current assets
Intangible assets	6	3,119,578	2,332,828
Property, plant and equipment		560,230	296,792
Deferred tax asset		50,076	-
Non-current assets		3,729,884	2,629,620
Current assets
Trade and other receivables		6,199,883	3,369,000
Cash and cash equivalents		774,822	930,481
Current assets		6,974,705	4,299,481
Total assets		10,704,589	6,929,101
LIABILITIES
Current liabilities
Trade and other payables		892,163	707,099
Bank borrowings		2,200,000	700,000
Deferred consideration		50,000	-
Contingent consideration		-	608,145
Current tax liability		1,159,998	621,079
Current liabilities		4,302,161	2,636,323
Non-current liabilities
Bank borrowings		1,656,746	2,356,746
Trade and other payables		184,235	313,225
Deferred consideration		300,000	-
Interest rate swap		14,913	4,766
Deferred tax liability		-	58,895
Non-current liabilities		2,155,894	2,733,632
Total liabilities		6,458,055	5,369,955
Net assets		4,246,534	1,559,146
EQUITY
Share capital		529,602	512,162
Share premium account		1,596,028	1,203,970
Merger relief reserve		8,925,737	8,623,237
Share based payment reserve		457,728	291,616
Retained earnings		4,120,212	2,310,934
Reverse acquisition reserve		(11,382,773)	(11,382,773)
Total equity		4,246,534	1,559,146

Group Statement of Changes In Equity

For the year ended 31 December 2014

		Share	Merger	Share- based		Reverse	Total
	Share	Premium	Relief	payment	Retained	Acquisition	Shareholders
	Capital	Account	Reserve	reserve	Earnings	Reserve	Equity
	£	£	£	£	£	£	£
Balance at 1 January 2013	505,190	1,043,606	8,623,237	212,098	1,406,529	(11,382,773)	407,887
Profit and total comprehensive income for the period	-	-	-	-	1,421,350	-	1,421,350
Shares issued (26 March 2013)	1,162	26,726	-	-	-	-	27,888
Shares issued (20 August 2013)	3,486	80,183	-	-	-	-	83,669
Shares issued (24 September 2013)	2,324	53,455	-	-	-	-	55,779
Share- based payment cost	-	-	-	212,098	-	-	212,098
Share options lapsed/exercised	-	-	-	(132,580)	132,580	-	-
Dividends paid	-	-	-	-	(649,525)	-	(649,525)
Total transactions with owners	6,972	160,364	-	79,518	(516,945)	-	(270,091)
Balance at 31 December 2013	512,162	1,203,970	8,623,237	291,616	2,310,934	(11,382,773)	1,559,146
Profit and total comprehensive income for the period	-	-	-	-	2,472,763	-	2,472,763
Shares issued (18 March 2014)	2,500	-	302,500	-	-	-	305,000
Shares issued (10 April 2014)	1,437	39,481	-	-	-	-	40,918
Shares issued (29 April 2014)	1,814	46,410	-	-	-	-	48,224
Shares issued (4 June 2014)	3,472	95,311	-	-	-	-	98,783
Shares issued (2 Sept 2014)	8,217	210,856	-	-	-	-	219,073
Share- based payment cost	-	-	-	299,734	-	-	299,734
Share options lapsed/exercised	-	-	-	(133,622)	133,622	-	-
Dividends paid	-	-	-	-	(797,107)	-	(797,107)
Total transactions with owners	17,440	392,058	302,500	166,112	(663,485)	-	214,625
Balance at 31 December 2014	529,602	1,596,028	8,925,737	457,728	4,120,212	(11,382,773)	4,246,534

Merger relief reserve

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

Reverse acquisition reserve

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

Share-based payment reserve

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

Group Statement of Cash Flows

For the year ended 31 December 2014

		Restated*
	2014	2013
	£	£
Cash flows from operating activities
Profit before income tax	2,981,313	1,745,812
Adjustments
Depreciation	116,798	49,857
Amortisation	521,102	948,466
Share- based payment costs	299,734	212,098
Contingent consideration	141,855	207,000
Finance expenditure	168,832	224,004
Other financial items	10,147	9,743
Cash flows before changes in working capital	4,239,781	3,396,980
Movement in working capital
Increase in trade and other receivables	(2,553,399)	(931,268)
Increase in trade and other payables	50,358	328,757
Cash generated from operations	1,736,740	2,794,469
Income taxes paid	(133,102)	(768,419)
Net cash flows from operating activities	1,603,638	2,026,050
Cash flows from investing activities
Contingent consideration paid	(750,000)	(1,100,000)
Acquisition of subsidiaries net of cash acquired	(223,569)	-
Payments to acquire property, plant and equipment	(380,236)	(114,811)
Payments to acquire intangible assets	(627,414)	(388,338)
Net cash used in investing activities	(1,981,219)	(1,603,149)
Cash flows from financing activities
New bank loans (net of debt issue costs)	1,500,000	3,500,000
Proceeds from equity fundraising	406,998	167,336
Repayment of bank loans	(700,000)	(3,339,121)
Interest on bank loans paid	(178,979)	(228,982)
Dividends paid	(797,107)	(649,525)
Repayment of hire purchase agreements	(8,990)	(12,596)
Net cash from/(used in) financing activities	221,922	(562,888)
Net decrease in cash and cash equivalents	(155,659)	(139,987)
Cash and cash equivalents brought forward	930,481	1,070,468
Cash and cash equivalents carried forward	774,822	930,481

*The cash flows previously reported for 2013 presented the repayment of loan facility and proceeds from new bank loans on a net basis. This presentation has now been corrected to disclose the transactions on a gross basis.

NOTES TO THE GROUP FINANCIAL STATEMENTS

1. Basis of preparation

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the year ended 31 December 2014. The auditors reported on those accounts; their report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2014 will be delivered to the registrar of Companies following the Company's Annual General Meeting.

Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), this announcement in itself does not contain sufficient information to comply with IFRS. Details of the accounting policies are those set out in the annual report for the year ended 31 December 2013. These accounting policies have remained unchanged for the financial year ended 31 December 2014.

Going Concern

The Group's forecasts, which have been prepared for the period to 31 December 2016 after taking into account the contracted orders book, future sales performance, expected overheads, capital expenditure and debt service costs, show that the Group should be able to operate profitably and within the current financial resources available to the Group.

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

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

1.1 Revenue recognition

Revenue is comprised of commissions received from energy suppliers, net of value added tax, for the procurement as an agent of fixed, flexible or risk managed energy contracts with corporate and SME customers. The Group recognises revenue for services provided where the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the Group. Commission income has been recognised as follows:

Corporate division

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

No amounts of revenue are separately recognised in respect of further services provided once the contract has gone live e.g. bill validation.  This would have no impact on the amount of revenue recognised given that commission income is recognised in line with energy usage.

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

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

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

SME division

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

Change of Tenancy Agreements ('COTS')

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

Other SME Agreements

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

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

2. Segmental information

Revenue and segmental reporting

The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the group's executive directors. Operating segments for the year to 31 December 2014 were determined on the basis of the reporting presented at regular board meetings of the group which is by nature of customer and level of procurement advice provided. The segments comprise:

The Corporate division ("Corporate")

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

The SME division ("SME")

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

Plc costs

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

		2014				2013
	Corporate		SME	PLC costs	Total	Corporate	SME	PLC costs	Total
		£	£	£	£	£	£	£	£
Revenue		7,200,811	3,634,511	-	10,835,322	6,174,921	1,443,404	-	7,618,325
Cost of sales		(460,503)	(1,851,180)	-	(2,311,683)	(340,117)	(669,174)	-	(1,009,291)
Gross profit		6,740,308	1,783,331	-	8,523,639	5,834,804	774,230	-	6,609,034
Administration expenses		(3,150,782)	(786,240)	(1,426,325)	(5,363,347)	(2,758,573)	(402,664)	(1,468,238)	(4,629,475)
Operating profit		3,589,526	997,091	(1,426,325)	3,160,292	3,076,231	371,566	(1,468,238)	1,979,559
Analysed as:
EBITDA		4,012,219	1,155,422	(611,413)	4,556,228	3,274,977	440,276	(166,573)	3,548,680
Depreciation		(110,802)	(5,996)	-	(116,798)	(45,857)	(4,000)	-	(49,857)
Amortisation		(92,317)	(152,335)	(276,450)	(521,102)	(67,889)	(64,710)	(815,867)	(948,466)
Share based payments		-	-	(299,734)	(299,734)	-	-	(212,098)	(212,098)
Exceptional costs		(219,574)	-	(238,728)	(458,302)	(85,000)	-	(273,700)	(358,700)
		3,589,526	997,091	(1,426,325)	3,160,292	3,076,231	371,566	(1,468,238)	1,979,559
Finance expenditure					(168,832)				(224,004)
Other financial items					(10,147)				(9,743)
Profit before income tax					2,981,313				1,745,812
Total assets		5,122,235	2,901,759	2,680,595	10,704,589	4,144,401	826,494	1,958,206	6,929,101
Total liabilities		1,587,214	337,358	4,533,483	6,458,055	681,865	47,972	4,640,118	5,369,955

3. Exceptional costs

	£	£
Fees associated with acquisition	49,270	-
Additional consideration in relation to acquisition*	141,855	207,000
Restructuring costs**	267,177	151,700
	458,302	358,700

*Relates to additional consideration in respect of the acquisition of Direct Energy Purchasing Limited in 2012 (note 17).

**Restructuring costs in the current year relate to costs incurred outside the course of normal business activity and therefore deemed exceptional. They relate to the relocation of Direct Energy Purchasing Limited and Inspired Energy (Ireland) Limited to the Inspired Energy Plc head office.

4. Income Tax Expense

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

	2014	2013
	£	£
Current tax
Current tax charge	568,656	510,633
Adjustments in respect of prior periods	103,365	8,546
	672,021	519,179
Deferred tax
Origination and reversal of temporary timing differences	(163,471)	(187,109)
Effect of tax rate change on opening balance	-	(7,608)
	(163,471)	(194,717)
Total income tax charge	508,550	324,462
Reconciliation of tax charge to accounting profit:
Profit on ordinary activities before taxation	2,981,313	1,745,812
Tax at UK income tax rate of 21.50% (2013: 23.25%)	640,982	405,901
Disallowable expenses	109,723	113,161
Share options	(248,766)	(203,146)
Movement of deferred tax not provided for	(96,754)	-
Effects of current period events on current tax prior period balances	103,365	8,546
Total income tax charge	508,550	324,462

5. Earnings per share

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

		Restated *
	2014	2013
	£	£
Profit attributable to equity holders of the Group	2,472,763	1,421,350
Consideration in relation to acquisition	141,855	207,000
Fees associated with acquisition	49,270	-
Restructuring costs	267,177	151,700
Amortisation of intangible assets	521,102	948,466
Deferred tax in respect of amortisation of intangible assets	(55,290)	(194,717)
Share-based payment costs	299,734	212,098
Adjusted profit attributable to owners of the Group	3,696,611	2,745,897
Weighted average number of ordinary shares in issue	416,871,033	406,243,554
Dilutive effect of share options	18,324,125	20,226,136
Diluted weighted average number of ordinary shares in issue	435,195,158	426,469,690
Basic earnings per share (pence)	0.59	0.35
Diluted earnings per share (pence)	0.57	0.33
Adjusted basic earnings per share (pence)	0.89	0.68
Adjusted diluted earnings per share (pence)	0.85	0.64

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

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

*The restatement of the 2013 adjusted earnings per share is due to a clerical error. The impact of the restatement is to increase the adjusted profit attributable to owners of the Group by £42,916 and the adjusted basic/diluted earnings per share by 0.01 pence.

6. Intangible assets and goodwill

	Computer	Customer	Customer
	Software	databases	contracts	Goodwill	Total
	£		£	£	£
Cost
At 1 January 2013	182,666	-	1,835,850	1,667,801	3,686,317
Additions	388,338	-	-	-	388,338
At 31 December 2013	571,004	-	1,835,850	1,667,801	4,074,655
Reclassification	(161,800)	161,800	-	-	-
Additions	273,199	354,215	-	-	627,414
Acquisitions through business combinations	272,500	-	-	407,938	680,438
At 31 December 2014	954,903	516,015	1,835,850	2,075,739	5,382,507
Amortisation
As at 1st January 2013	8,953	-	784,408	-	793,361
Charge for the year	132,599	-	815,867	-	948,466
At 31 December 2013	141,552	-	1,600,275	-	1,741,827
Reclassification	(64,710)	64,710	-	-	-
Charge for the year	133,194	152,333	235,575	-	521,102
At 31 December 2014	210,035	217,044	1,835,850	-	2,262,929
Net Book Value
At 31 December 2014	744,868	298,971	-	2,075,739	3,119,578
At 31 December 2013	429,452	-	235,575	1,667,801	2,332,828

7. Trade and other receivables

	Group			Company
	2014	2013		2014	2013
	£	£		£	£
Trade receivables	1,019,616	678,172		-	-
Other receivables	3,238	23,689		70,009	50,394
Prepayments	356,759	589,756		16,543	12,169
Accrued income	4,820,270	2,077,383		-	-
	6,199,883	3,369,000		86,552	62,563

All the trade and other receivables were receivable under normal commercial terms. Accrued income has not been discounted as doing so would not result in a material adjustment to the financial statements.

The Group does not hold any collateral as security. Group debtor days were 39 days (31 December 2013: 64 days).

8. Business Combinations

On 18 March 2014, the Group acquired 100 per cent of the issued share capital and voting rights of KWH Consulting Limited and Simply Business Energy Limited, companies based in the United Kingdom. The principal reason for the acquisitions was to strengthen the Group's existing service offering within the SME division.

KWH Consulting Limited (KWH)

The acquisition of KWH was completed for a total consideration of £300,000. The initial £250,000 payment was satisfied by cash. In addition, £50,000 was deferred until 31 January 2015. The deferred consideration has been paid since the year end. The acquisition was financed by cash held by the Group. The details of the business combination are as follows

Recognised amounts of identifiable net assets	Book value £	Provisional fair value adjustment £	Provisional fair value £
Accrued income	-	268,336	268,336
Trade and other receivables	8,523	-	8,523
Cash and cash equivalents	25,638	-	25,638
Total assets	34,161	268,336	302,497
Trade and other payables	8,702	-	8,702
Deferred tax liability	11,358	-	11,358
Total liabilities	20,060	-	20,060
Provisional fair value of identifiable net assets			282,437
Provisional goodwill			17,563
Fair value of consideration transferred			300,000
Satisfied by
- cash consideration paid			250,000
- deferred cash consideration payable			50,000
			300,000
Net cash outflow arising from business combinations
- cash consideration paid			250,000
- cash and cash equivalents acquired			(25,638)
Net cash outflow			224,362

Goodwill

The goodwill arising on this acquisition is attributable to SME market expertise and sector supplier network knowledge acquired through the management team of KWH Consulting Limited.

Identifiable Net Assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to KWH Consulting Limited has been carried out. An adjustment has been made to align revenue recognition with SME division accounting policy for the Group.

The Group estimates costs incurred in relation to the transaction to be £24,635. These costs are included within exceptional costs in the Group income statement.

Disclosures have not been provided in respect of the trading performance of KWH since the date of acquisition, as the trading activity of KWH has been absorbed within the existing SME divisional performance and cannot therefore be separately identified.

Simply Business Energy Limited (SBE)

The acquisition of Simply Business Energy Limited was completed for a total consideration of up to £605,000. The initial £305,000 payment was satisfied by the issue of 2,000,000 ordinary shares of Inspired Energy Plc. In addition, two deferred payments to the value of £300,000 are to be satisfied by the issue of a variable number of further ordinary shares of Inspired Energy Plc, due in 31 March 2015 and 31 March 2016. This represents fixed consideration and therefore has been recognised as a liability. The details of the business combination are as follows:         

Recognised amounts of identifiable net assets	Book value £	Provisional fair value adjustment £	Provisional fair value £
Intangible assets	-	272,500	272,500
Trade and other receivables	625	-	625
Cash and cash equivalents	793	-	793
Total assets	1,418	272,500	273,918
Trade and other payables	4,793	-
Deferred tax liability	-	54,500	54,500
Total liabilities	4,793	54,500	59,293
Provisional fair value of identifiable net assets			214,625
Provisional goodwill			390,375
Fair value of consideration transferred			605,000
Satisfied by
- shares issued 18 March 2014			305,000
- deferred shares to be issued			300,000
			605,000

The Group paid no cash in consideration for SBE. It acquired net cash of £793 in completing the acquisition of Simply Business Energy Limited.

Goodwill

The goodwill arising on this acquisition is attributed to SME market expertise and sector supplier network knowledge acquired through the management team of Simply Business Energy Limited.

Identifiable Net Assets

In acquiring SBE, the Group acquired a fully automated, operational online quoting platform for SME customers looking to switch their energy supplier and it has agreements in place with the majority of energy suppliers within the SME sector. The web enabled capability has been implemented throughout the SME division. The fair value of the software development cost intangible at acquisition was calculated to be £272,500 on a reproduction cost basis and is to be amortised on a straight line basis over 5 years in line with its expected economic life.

Consideration Transferred

The fair value of the shares issued in the acquisition of Simply Business Energy Limited has been determined with reference to the Company's share price on the acquisition date.

The remaining £300,000 of consideration at the date of acquisition was contingent upon certain performance targets being achieved. These targets were subsequently waived prior to the year end and therefore the consideration became deferred. There was no adjustment in the fair value of the consideration as a result of the change.

The Group estimates costs incurred in relation to the transaction to be £24,635. These costs are included within exceptional costs in the Group income statement.

Disclosures have not been provided in respect of the trading performance of SBE since the date of acquisition, as the trading activity of SBE has been absorbed within the existing SME divisional performance and cannot therefore be separately identified.

8. Preliminary Announcement

This preliminary announcement, which has been agreed with the auditors, was approved by the board of directors on 23 March 2015.  It is not the Group's statutory accounts.  Copies of the Group's audited statutory accounts for the year ended 31 December 2014 will be available at the company's website on Friday 27 March 2015 and a printed version will be dispatched to shareholders on 30 March 2015. 

 

END

 

 

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