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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Utilitywise | LSE:UTW | London | Ordinary Share | GB00B6WVD707 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.903 | 1.806 | 2.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMUTW
RNS Number : 4451B
Utilitywise plc
04 April 2017
4 April 2017
Utilitywise plc
("Utilitywise", the "Company" or the "Group")
Interim Results
for the six months ended 31 January 2017
Utilitywise, a leading independent utility cost management consultancy, is pleased to announce its financial results for the six months ended 31 January 2017.
Financial highlights
Hot Features
Premium
H1 2017 H1 2016 Change
------------------------ --------- ----------- -------
Revenue GBP46.1m GBP41.6m 11%
------------------------ --------- ----------- -------
Adjusted EBITDA(1) GBP9.7m GBP9.7m -
------------------------ --------- ----------- -------
Adjusted profit before
tax(2) GBP9.4m GBP9.1m(5) 4%
------------------------ --------- ----------- -------
Adjusted fully diluted
earnings per share(3) 9.6p 9.6p(5) -
------------------------ --------- ----------- -------
Interim dividend per
share 2.3p 2.2p 5%
------------------------ --------- ----------- -------
GBP16.8m
Closing net debt GBP9.6m (*)5 (43)%
------------------------ --------- ----------- -------
(*) Closing net debt impacted by prior period adjustments (see 'Financial performance')
Operational highlights
-- Strong performance from Enterprise division:
o Revenue added to order book(4) during the period increased by 24% to GBP50.2m (H1 2016: GBP40.4m), from increase in Energy consultants headcount 6% to 661 (H1 2016: 625)
o Future secured revenue increased 13% to GBP28.0m (H1 2016: GBP24.7m)
-- Investment in 'smart' building energy management technology and services to drive future growth in Corporate division
-- Total group customers increased by 17% to 40,855 (H1 2016: 35,064) -- Customer advocacy remains high with Net Promoter Score of 59 (FY16: 58)
Post period end
-- Geoff Thompson becomes Non-executive Chairman -- Appointment of Kathie Child-Villiers to the Board as non-executive director -- Announcement of refreshed Strategy for Growth
o Commitment to continue to pursue best possible terms with suppliers for procurement price competitiveness
-- De-regulation of water market in England
Brendan Flattery, Chief Executive Officer, commented:
"The Group has continued its sustained progression in the period, whilst investing and preparing the Group for its next phase of growth. With an extensive portfolio of services in place and a focus on providing a great customer experience, Utilitywise has a strong platform for continued growth.
There continues to be an increasing opportunity for us on both sides of the meter - from providing independent advice on tariffs and helping customers get a better deal on their energy procurement, to providing technology that helps them monitor and reduce energy consumption as well as ensuring compliance and saving money.
In order to further strengthen the Group's commercial prospects, the Board has taken the strategic decision to discontinue the practice of taking cash advances from suppliers, as well as increasing the transparency of the balance sheet through a number of prior period restatements and the non-cash impairment of our investment in t-Mac. The decision to discontinue cash advances from suppliers and the prior period adjustments will have a one-off impact on net debt but puts the Group in a stronger position to achieve its future growth ambitions.
Against this market backdrop, the Group's refreshed strategy is aimed at growing customer numbers, cross and upselling its increasing suite of products to those customers, and increasing recurring revenues as a percentage of Group revenues. There are ambitious KPIs in place and the Group is focused on delivery of those.
With clarity of strategy, ambition and focus, Utilitywise enters the period ahead with confidence and looks forward to full year trading in line with expectations and driving longer-term shareholder value."
(1) EBITDA means earnings before interest, taxation, depreciation and amortisation and adjusted EBITDA is stated before exceptional income and costs and non-cash accounting charges for share based payments, as set out in the financial review
(2) Adjusted profit before tax is stated before exceptional income and costs, non-cash accounting charges for share based payments and amortisation of intangible assets acquired through business combinations, as set out in the financial review
(3) Adjusted earnings per share is stated before exceptional income and costs, non-cash accounting charges for share based payments and amortisation of intangible assets acquired through business combinations and the tax impact of those items, as set out in Note 6
(4) Order book means total value of closed transactions in the period, which may either be included within revenue in the period or is included within future secured revenue
(5) Restated, as set out in the financial review and in Note 10.
There will be a meeting for analysts at 9.30am today at the offices finnCap, 60 New Broad Street, London EC2M 1JJ. To register to attend, please contact Redleaf Communications at utilitywise@redleafpr.com or 020 7382 4730.
For further information please contact:
Utilitywise plc 0330 303 0233 Brendan Flattery (CEO) Richard Laker (CFO) finnCap (NOMAD and broker) 020 7220 0500 Matt Goode/Henrik Persson (Corporate Finance) Simon Johnson (Corporate Broking) Liberum (Joint broker) 020 3100 2000 Robert Morton/Steve Pearce Redleaf Communications 020 7382 4730 Rebecca Sanders-Hewett/David Ison/Susie Hudson
About Utilitywise
Utilitywise is a leading independent utility cost management consultancy, which has established trading relationships with a number of major UK and European energy suppliers and provides services to its customers designed to assist them in achieving better value out of their energy contracts, reduced energy consumption and lower carbon footprint. Utilitywise is a UK company quoted on the AIM market of the London Stock Exchange. For more information, please visit www.utilitywise.com.
Strategy
On 2 March 2017, the Group announced its Strategy for Growth, with a target to continue the growth journey of the Group. The key priorities of that refreshed strategy are as follows:
Winning in the market:
Grow the Group's customer base by expanding its service proposition, developing established and new sales channels such as digital to meet changing customer preferences, and continuing to pursue the best possible terms for customers;
Customers for life:
Build on the high levels of customer satisfaction and retention rates through cross and upselling new products and services into our expanding customer base. 70% of Utilitywise customers want a "one-stop shop" that can help manage all utilities;
Revolutionise markets:
Develop and employ the use of disruptive technology platforms such as WiseLife to help customers save money by reducing energy consumption at the point of use;
Colleagues:
Make Utilitywise a great place to work with opportunity for career progression;
One Utilitywise:
Bring the different parts of the business closer together under a single vision, strategy, set of values and brand.
Accordingly, the Group has set itself some challenging targets, to be delivered by the end of the financial year ending 31 July 2021, namely:
-- Increasing its share of the SME and micro SME energy procurement market, by customer number, from 2% to 7%;
-- Increasing UK SME customers to c. 130,000; and -- Developing a 5% share of the GBP1.5bn UK corporate energy controls market.
To this end, the Group intends to gradually introduce new ways of measuring success as the revenue mix evolves over time.
Once progress has been made in implementing the refreshed strategy in the UK, the Group intends to roll it out across certain international markets.
Market
The needs of customers in the Utilities market are growing and diversifying and Utilitywise is well-positioned to capitalise on an increasingly significant opportunity.
Research by Ofgem(6) indicates that 16% of businesses in the UK currently use third-party intermediaries to get a better deal on their energy. Approximately 12% of those businesses are current Utilitywise customers, so despite being the market leader, there remains a clear opportunity for increased penetration.
The same research also indicates that 47% of businesses in the UK switch supplier direct and 37% have never switched. The latter represents c.700,000 businesses and Group estimates, based upon previous BEIS(7) research in respect of residential customers, suggest that savings of up to GBP500 per non-domestic customer are achievable, representing annual savings in excess of c.GBP300m by seeking an improved deal. Engaging with this combined 84% of UK businesses represents a substantial long-term opportunity for the Group.
For many businesses, energy is one of the top three costs alongside people and property. Whilst getting the best price remains the most obvious way for them to save, a backdrop of rising utility and operating costs, growing awareness of the importance of sustainability, and increasingly stringent legislation means that more and more businesses are turning to technology to help them reduce consumption.
With the emergence of the Internet of Things ("IoT") and "smart" buildings, by connecting once-disparate, energy-expending systems and devices together and enabling them to interact with one another, businesses can access a level of monitoring, insight and control over their energy consumption that wasn't previously possible. With high barriers to entry, as the largest business energy consultant in the UK, Utilitywise is uniquely placed to take advantage of this growing opportunity. To this end, the Group has invested heavily in its technological capabilities in the past twelve months. Research from BEIS(7) shows that the aggregate UK SME annual spend on energy is c. GBP20bn, giving a savings opportunity of GBP2bn if energy wastage was improved by 10%.
At the same time, by providing businesses with a straight-forward and compelling way to create savings, the imminent deregulation of the water market presents Utilitywise with new engagement and revenue opportunities.
(6) Office of Gas and Electricity Markets
(7) Department for Business, Energy and Industrial Strategy
Operating review
Group performance
The Group delivered a strong performance in the six months ended 31 January 2017. The overall financial results for the Group showed:
-- An increase in Group revenue of 11% to GBP46.1m (H1 2016: GBP41.6m); -- No change in adjusted EBITDA(1) at GBP9.7m (H1 2016: GBP9.7m);
-- An increase in adjusted profit before tax(2) of 4% to GBP9.4m (H1 2016: GBP9.1m - as restated);
-- Adjusted fully diluted earnings per share(3) unchanged 9.6p (H1 2016: 9.6p - as restated); -- Closing net debt of GBP9.6m (H1 2016: GBP16.8m - as restated).
These results were underpinned by a number of achievements, including:
-- Growth in total customer numbers of 17% to 40,855 (H1 2016: 35,064)
-- Growth in closing order book of Enterprise division of 13% to GBP28.0m (H1 2016: GBP24.7m), representing secured future revenue of the Group
-- An improvement in efficiency from the Group's team of Energy Consultants, with an increase in Gross Enterprise order book additions of 24%, to GBP50.2m (H1 2016: GBP40.4m) from an increase in closing headcount of 6% to 661 Energy Consultants (H1 2016: 625);
-- Energy Consultant attrition reduced to 25% (H1 2016: 39%) -- An increase in the use of WiseLife and SmartDash digital offerings; and
-- A further increase in net promoter score from 58 to 59, reinforcing the Group's position as a trusted advisor to customers.
The Board has proposed an interim dividend of 2.3p per share, a 5% increase compared to the same period last year (H1 2016: 2.2p), reflecting its confidence in the prospects of the business.
Divisional performance
During the period, the Group operated from two principal divisions. The performance of both divisions is reported separately. All references to Adjusted EBITDA below refer to Earnings before interest, taxation, depreciation and amortisation (EBITDA), stated before exceptional income and costs and non-cash accounting charges for share based payments. Divisional revenues are stated before the elimination of intersegment revenue.
Enterprise division
The Enterprise division is the core division of the Group (representing 83% of Group revenue, before intercompany trading). It focuses on small, medium and multi-site organisations and maintains well-established trading relationships with a number of major utility suppliers to provide services to customers, which are designed to assist those customers in achieving better value from their utility contracts. Utilitywise negotiates rates with suppliers on behalf of business customers and provides an account care service where account managers help customers execute a Utility Management Plan to manage their utility contracts more efficiently, as well as aiming to reduce waste and lowering their carbon footprint.
The total number of Enterprise customers increased in the UK and Ireland by 13% to 31,978 and in Europe by 32% to 7,360, equating to an overall Enterprise Division increase of 16% to 39,338.
Revenue in the division grew 20% to GBP39.1m (H1 2016: GBP32.6m), of which the UK business grew by 18% to GBP34.5m (H1 2016: GBP29.2m). Telesales activities contributed 72% of the Enterprise UK revenue (H1 2016: 65%). The UK business delivered a growth of 13% in Adjusted EBITDA to GBP9.1m (H1 2016: GBP8.0m).
The European business also performed well during the period with revenue increasing by 37% to GBP4.6m (H1 2016: GBP3.4m) and Adjusted EBITDA increasing to GBP0.4m (H1 2016: GBPnil). The Adjusted EBITDA margin for the Enterprise division as a whole was 24.2% (H1 2016: 24.6%), with the UK margin of 26.3% (H1 2016: 27.5%) reflecting the investments in people and marketing, to position the business for further revenue growth.
Enterprise revenue added to order book increased by 24% to GBP50.2m (H1 2016: GBP40.4m) in the period. This was from an increase in Energy Consultant headcount of only 6% as at 31 January 2017, compared to the same position in the prior year, demonstrating progress in increasing the efficiency of the division, in line with the aim of the business to move away from a direct correlation between headcount numbers and revenue volumes, upon which an element of the Group's growth had been based in previous years.
Notwithstanding this increased efficiency, significant progress has been made with staff attrition issues in this area, both in terms of retention of staff and in investments in both new and existing colleagues to improve the overall quality of the operation. As such, Energy Consultant staff turnover was 25% compared to 39% in the same period last year.
The Enterprise division derives the majority of its revenue from the placement of customers with new energy suppliers ("Acquisition Contracts") and a minority of its revenue from the renewal of contracts of customers with their existing suppliers ("Same Supplier Renewals"). The mix of this revenue is a function of the pricing offered by the energy suppliers for varying lengths of contracts and hence it is often in our customers' best interest to take advantage of attractive pricing of longer dated energy contracts via either Acquisition Contracts or Same Supplier Renewals. The billing of the majority of commissions for the delivery of Acquisition Contracts typically takes place between one and 12 months after the placement of the contract. As previously announced, the Group successfully negotiated terms with certain suppliers to accelerate cash payment terms in respect of Same Supplier Renewals. Whilst this renegotiation has accelerated a proportion of those terms, on average Same Supplier Renewals typically have longer dated billing profiles than Acquisition Contracts, dependent upon the mix of Same Supplier Renewal business placed across the range of energy partners that the Group deals with. Same supplier renewals made up 23% of the Enterprise division total revenue in the current period (H1 2016: 22%). This has contributed to the net increase in the accrued revenue in the Group's balance sheet, which was GBP46.1m as at 31 January 2017 (H1 2016: GBP39.5m), carried net of appropriate provisions for recoverability and discounting for the time value of money.
The Group has historically obtained significant cash advances from certain major utility suppliers, paid against future contracts delivered by the Group for those suppliers. In the year ended 31 July 2016, those cash advances totalled GBP10.4m, inclusive of VAT. As noted in the Strategy section above, the Group intends to significantly grow its number of customers between 2017 and 2021. In order to deliver that volume growth, the Group must be committed to delivering the most competitive and transparent prices for its customers. It is, therefore, essential that the Group continues to maintain commercial independence from its major utility partners as it delivers upon its strategy. Accordingly, the Board has determined that it is in the best commercial interests of the Group to discontinue the practice of seeking significant cash advances in this manner.
This means that the Group will not seek previously planned cash advances totalling GBP9.2m during the second half of FY17 and, as a result of its commitment, will also repay a further GBP4.5m as the assumed volume of contracts delivered by the Group for certain suppliers will not be met. These amounts, along with associated VAT, will together lead to a one-off impact upon the Group's cash flow during the second half of FY17 of GBP16.4m with a resultant increase in the closing net debt of the Group at 31 July 2017 compared to the previously forecast position.
Whilst the decision to discontinue the practice of seeking cash advances was taken to increase the commercial opportunities open to the Group through continuing to provide customers with the most competitive and transparent prices, it is expected that this will also result in a closer correlation between the Group's profits and operating cash flow, in future periods.
Corporate division
The Corporate division consists of a comprehensive portfolio of products and services designed to assist larger companies with more complex energy needs in managing their energy consumption.
The Corporate offering includes energy procurement ("Corporate Procurement") but there is a much greater emphasis on additional services designed to give customers enhanced control over their energy consumption ("Energy Services"). Through the use of Utilitywise IoT-enabled hardware, developed by its technology partner, Dell, and cloud-based software technology platforms such as SmartDash and WiseLife, corporates are able to connect and monitor the energy consumption of all operational systems in their building, access detailed insight into where energy wastage is taking place, and make the necessary corrections using a dashboard on a computer or mobile phone.
Entering the second half of FY2017, Utilitywise now offers an intelligent platform that can provide customers with a single gateway and control over every operational system within their building, regardless of what devices they comprise. The solution is already producing results for customers. Two major high street retailers, for example, have been able to reduce their energy consumption by 15% and 23% respectively as a result of the solution provided by Utilitywise. In addition, by connecting previously disparate systems, Utilitywise has saved those customers money by removing the need for several software licences. For both, the payback period was less than 12 months. Going forward, the Group's investment in technology will provide it with a growing channel through which to engage with new customers, build long-term relationships and cross-sell its services. Although formative relative to the core procurement offering, the Board anticipates Energy Services becoming progressively more important to the business in the coming years.
The revenue of the Corporate division (17% of Group revenues, before intercompany eliminations) fell by 19% to GBP7.8m, compared to the same period in the prior year (H1 2016: GBP9.5m). This was primarily due to the Energy Services element of the division, which saw a fall in revenue of 30% to GBP3.6m (H1 2016: GBP5.1m). This was due to delays in the rollout of technology across certain customer retail sites, as well as the prior year having the benefit of GBP0.6m of revenue from the ESOS (Energy Savings Opportunity Scheme), which did not recur in the current period. The Corporate Procurement element of this division saw revenue fall by 2% to GBP4.2m (H1 2016: GBP4.3m).
Following the noted revenue delays and ESOS non-recurrence, the Adjusted EBITDA of the division fell by 87% to GBP0.2m (H1 2016: GBP1.7m), with Energy Services Adjusted EBITDA falling from GBP0.6m to a negative EBITDA of GBP0.9m and Corporate Procurement Adjusted EBITDA remaining flat at GBP1.1m (H1 2016: GBP1.1m). The reduction in EBITDA was also impacted by investments to position the business for growth, which commenced in the second half of the previous financial year. The Corporate division delivered an Adjusted EBITDA in the current period GBP0.7m higher than the second half of last year (H2 2016: negative EBITDA GBP0.5m)
The near-term delays in certain revenues has caused the Group to recognise an impairment loss of GBP13.4m against its investment in t-Mac Technologies, which was acquired in 2015. That non-cash accounting loss has been recognised as an exceptional item within the Group's income statement in the current period. The number of utility meters using the Group's SmartDash technology platform increased by 119% to 11,811 compared to the same period last year and the number of customers using the WiseLife technology solution was 193 in the current period (H1 FY16: nil).
The Corporate division, including both the procurement and Energy Services elements, forms a key part of the Group's Strategy for Growth, as announced in March 2017.
Financial performance
Group overview
A summary of the Group's performance, on an adjusted basis excluding exceptional items, amortisation of intangible assets acquired in business combinations and share-based payment charges in the six months ended 31 January 2017, along with the change compared to the same period last year, is as follows:
GBP'm except where 2017 2016 Change stated % -------------------------- ----- --------- ------- Revenue 46.1 41.6 11% -------------------------- ----- --------- ------- Adjusted EBITDA (defined below) 9.7 9.7 - -------------------------- ----- --------- ------- Adjusted profit before tax 9.4 9.1 (*) 4% -------------------------- ----- --------- ------- Cash flow from operating (0.4) activities 2.2 (*) 650% -------------------------- ----- --------- ------- Diluted earnings per share 9.6p 9.6p (*) - -------------------------- ----- --------- -------
(*) Restated, as set out in Note 10
Trading and EBITDA
During the six month period ended 31 January 2017, Group revenue increased by 11% over the corresponding period last year to GBP46.1m (H1 2016: GBP41.6m). Total Enterprise revenue added to the order book in the period totaled GBP50.2m (H1 2016: GBP40.4m) and the secured pipeline (gross secured future revenue) was GBP28.0m compared to GBP24.7m at 31 January 2016.
Adjusted Earnings before interest, taxation, depreciation and amortisation (EBITDA) is calculated as follows:
GBP'm except where 2017 2016 Change stated ------------------------------ ------ --------- ------- (Loss)/profit before taxation (6.0) 11.8 (*) (17.8) ------------------------------ ------ --------- ------- Exceptional items 14.4 (4.0) 18.4 ------------------------------ ------ --------- ------- Share option expense 0.1 0.3 (0.2) ------------------------------ ------ --------- ------- Amortisation of intangible assets acquired through business combinations 0.9 1.0 (0.1) ------------------------------ ------ --------- ------- Adjusted profit before taxation 9.4 9.1 0.3 ------------------------------ ------ --------- ------- Depreciation and other amortisation 0.4 0.4 - ------------------------------ ------ --------- ------- Net finance (income)/expense (0.1) 0.2 (*) (0.3) ------------------------------ ------ --------- ------- Adjusted EBITDA 9.7 9.7 - ------------------------------ ------ --------- ------- EBITDA margin % 21% 23% (2)% ------------------------------ ------ --------- -------
(*) Restated, as set out in Note 10
The Group's EBITDA margin (as a percentage of revenue) has fallen to 21% (H1 2016: 23%), primarily as a result of the reduction in profit from the Corporate division, as explained in the Operating Review above.
Exceptional items
Exceptional charges in the period comprise a GBP13.4m impairment of goodwill and intangible assets in the t-Mac Technologies cash generating unit, as well as GBP1.2m of other charges relating to legal, restructuring and other items, along with a GBP0.2m credit in respect of an adjustment to a historic dilapidations provision.
Earnings per share
Diluted adjusted earnings per share, with Adjusted earnings stated before exceptional items, non-cash accounting charges for share-based payments and amortisation of intangible assets acquired in business combinations and the associated tax impact of these adjustments, remained at 9.6p (H1 2016: 9.6p - as restated).
Adjusted Earnings, stated on the same basis as above, increased 3% to GBP7.6m (H1 2016: GBP7.4m) and the weighted average number of shares in issue, on a diluted basis, increased by 4% from 76,131,000 to 79,019,000 shares.
Dividend
An interim dividend of 2.3p per share has been declared, an increase of 5% on the same period last year (H1 2016: 2.2p) and covered 4.2 times by Adjusted diluted EPS (H1 2016: 4.4 times).
The interim dividend is payable on 20 June 2017 to shareholders on the register at close of business on 19 May 2017, with an associated ex-dividend date of 18 May 2017.
Balance sheet
As at 31 January 2017, the Group had total net assets of GBP48.3m compared to GBP53.5m as at 31 January 2016, summarised as follows:
GBP'm 31 Jan 31 Jan Change
2017 2016
------------------------- ------- ------- -------
Goodwill and intangible
assets 20.4 35.1 (14.7)
------------------------- ------- ------- -------
Property, plant
and equipment 5.4 5.7 (0.3)
------------------------- ------- ------- -------
Net accrued revenue(*) 46.1 39.5 6.6
------------------------- ------- ------- -------
Trade and other
receivables (excluding
accrued revenue) 7.7 9.6 (1.9)
------------------------- ------- ------- -------
Other net assets
(excluding net debt) (21.7) (19.6) (2.1)
------------------------- ------- ------- -------
Net debt (9.6) (16.8) 7.2
------------------------- ------- ------- -------
Net assets 48.3 53.5 (5.2)
------------------------- ------- ------- -------
(*) shown net of supplier advances, which are categorised within trade and other payables in the balance sheet
Net tangible assets, being net assets excluding goodwill and intangible assets, increased to GBP27.9m (31 January 2016: GBP18.4m).
Goodwill and intangible assets decreased primarily due to an impairment loss of GBP13.4m that has been recognised as at 31 January 2017, as explained above.
The increase in accrued revenue at 31 January 2017 was primarily due to the mix of revenue in the Enterprise division, between Acquisition Contracts and Same Supplier Renewals, as explained in the Operating Review above. All accrued revenue balances are carried in the balance sheet net of provisions for expected amounts that will ultimately not be billable by the Group, due to events outside the control of the Group that typically occur between the date of contracts being signed and those contracts concluding. The level of such provisions is based upon the long-term experience of the Group. The balances are further discounted for the time value of money, where those balances are longer dated. The ageing of the billable dates for the carried accrued revenue balance, stated net of provisions and discounts, is summarised as follows:
GBP'm 31 Jan 31 Jan 31 July
2017 2016 2016
(restated) (restated)
---------------------------- --------------------- -------------------- --------------------
Within 12 months of period
end 12.6 12.1 5.8
---------------------------- --------------------- -------------------- --------------------
Within 12 to 24 months
of period end 5.4 8.3 7.0
---------------------------- --------------------- -------------------- --------------------
Within 24 to 36 months
of the period end 6.0 4.8 4.9
---------------------------- --------------------- -------------------- --------------------
More than 36 months after
the period end 20.0 12.4 16.7
---------------------------- --------------------- -------------------- --------------------
Enterprise UK net accrued
revenue 44.0 37.6 34.4
---------------------------- --------------------- -------------------- --------------------
Enterprise Europe and
Corporate division 2.1 1.9 2.1
---------------------------- --------------------- -------------------- --------------------
Group net accrued revenue 46.1 39.5 36.5
---------------------------- --------------------- -------------------- --------------------
29% of the Enterprise UK net accrued revenue balance is billable within 12 months of the period end, compared to 17% at 31 July 2016 and 32% at 31 January 2016. A further 26% is billable within the following two years (July 2016: 34%, January 2016: 35%) and 45% longer dated than that (July 2016: 49%, January 2016: 33%).
Cash flows and net debt
The cash flow of the Group is summarised as follows:
GBP'm 2017 2016 Change -------------------------- ------ ------- ------- Cash flow from operating activities before exceptional items 2.2 (0.4) 2.6 -------------------------- ------ ------- ------- Operating cash flow from exceptional items (0.9) (0.3) (0.6) -------------------------- ------ ------- ------- Cash flow from operating activities 1.3 (0.7) 2.0 -------------------------- ------ ------- ------- Interest and corporate tax payments (1.8) (0.8) (1.0) -------------------------- ------ ------- ------- Capital expenditure (0.7) (0.4) (0.3) -------------------------- ------ ------- ------- Dividend payments (3.3) (2.5) (0.8) -------------------------- ------ ------- ------- Receipts from issue of equity 0.5 0.9 (0.4) -------------------------- ------ ------- ------- Net cash flow (4.0) (3.5) (0.5) -------------------------- ------ ------- ------- Opening net debt - without restatement (0.2) (6.7) 6.5 -------------------------- ------ ------- ------- Restatement of opening (5.3) net debt (#) (6.4) 1.1 -------------------------- ------ ------- ------- Non cash movement in net debt (0.1) (0.2) 0.1 -------------------------- ------ ------- ------- Closing net debt (9.6) (16.8) 7.2 -------------------------- ------ ------- -------
(#) See prior period adjustments below
The closing net debt, comprising total borrowings less cash and cash equivalents, was GBP9.6m (H1 2016: GBP16.8m as restated). The ratio of net debt to Adjusted annual EBITDA was 0.5 times (H1 2016: 0.9 times).
Cash flow from operating activities was generated from underlying trading as follows:
GBP'm 2017 2016 Change -------------------------- ------ ------ ------- Adjusted EBITDA 9.7 9.7 - -------------------------- ------ ------ ------- Change in net accrued revenue (9.6) (8.0) (1.6) -------------------------- ------ ------ ------- Other working capital movements 2.1 (2.1) 4.2 -------------------------- ------ ------ ------- Cash flow from operating activities before exceptional items 2.2 (0.4) 2.6 -------------------------- ------ ------ -------
As noted in the Operating review above, the Group has historically taken significant cash advances from certain major utility companies, paid against future contracts delivered to those suppliers. The impact of those cash advances, in previous financial years, negatively impacted the operating cash flow of the Group in the current period by GBP4.6m (H1 2016: GBP2.4m), such that that the operating cash flow would have been GBP6.7m during the period had the Group not taken the cash advances. This would represent 70% of Adjusted EBITDA in the period, rather than the 23% actually delivered by the Group.
The changes in accrued revenue are explained above, with their consequential impact on the operating cash flows of the Group in the period as set out in the above table. The cash outflow for dividends in the period relates to the final dividend in respect of the year ended 31 July 2016, which was paid to shareholders after the Annual General Meeting in December 2016.
Financing
The activities of the Group are substantially funded by a GBP25m revolving credit facility (RCF) with a single lender, Royal Bank of Scotland plc. The RCF facility matures in April 2019. As at 31 January 2017, the undrawn committed facilities of the Group were GBP20.9m, net of cash and cash equivalents.
Prior period adjustments
The Group has made prior period adjustments in respect of Own shares and Fixed-payment liabilities, as set out in Note 10. The adjustments are not considered to have a material impact on either the profit and loss account or the cash flow statement of the Group but do materially amend the net debt of the Group as follows:
GBP'm 31 Jan 31 Jan 31 Jul
2017 2016 2016
--------------------------------- ------- ------- -------
Net debt (without restatement) 4.1 10.2 0.2
--------------------------------- ------- ------- -------
Reclassification of liabilities
from trade and other
payables 4.7 5.3 4.0
--------------------------------- ------- ------- -------
Correction of loan balances - 0.5 0.5
--------------------------------- ------- ------- -------
Reclassification of own
shares out of cash 0.8 0.8 0.8
--------------------------------- ------- ------- -------
Net debt (as restated) 9.6 16.8 5.5
--------------------------------- ------- ------- -------
Net restatement 5.5 6.6 5.3
--------------------------------- ------- ------- -------
Principal risks and uncertainties
The Group is affected by certain risks, not wholly within its control. The principal risks and uncertainties facing the Group are not considered to have changed from those as set out in the Strategic report on pages 8 to 9 of the 2016 Annual Report and Accounts. Further detail regarding those risks and mitigation can be found in the 2016 Annual Report.
Related parties
During the period there have been no related party transactions that have had a material impact on the financial position or performance of the Group. There have been no significant changes to related party transactions disclosed in the annual report for the year ended 31 July 2016.
Board changes
On 1 October 2016, Brendan Flattery joined the Board as Chief Executive Officer, replacing Geoff Thompson who took up the position of Executive Chairman on the same date. Richard Feigen stepped down as non-executive Chairman on that date, remaining on the Board as a non-executive director.
On 1 November 2016, Simon Waugh joined the Board as a non-executive director.
On 1 January 2017, Richard Laker joined the Board as Chief Financial Officer, replacing Jon Kempster who stood down from the Board on 31 December 2016.
On 1 February 2017, Kathie Child-Villiers joined the Board as a non-executive director. Tom Maxfield stood down from the Board on the same date.
On 4 April 2017, Geoff Thompson will take up the position of Non-Executive Chairman.
Outlook
The Group has continued its sustained progression in the period, whilst investing and preparing the Group for its next phase of growth. With an extensive portfolio of services in place and a focus on providing a great customer experience, Utilitywise has a strong platform for continued growth. There continues to be an increasing opportunity for us on both sides of the meter - from providing independent advice on tariffs and helping customers get a better deal on their energy procurement, to providing technology that helps them monitor and reduce energy consumption as well as ensuring compliance and saving money.
In order to further strengthen the Group's commercial prospects, the Board has taken the strategic decision to discontinue the practice of taking cash advances from suppliers, as well as increasing the transparency of the balance sheet through a number of prior period restatements and the non-cash impairment of our investment in t-Mac. The decision to discontinue cash advances from suppliers and the prior period adjustments will have a one-off impact on net debt but puts the Group in a stronger position to achieve its future growth ambitions.
Against this market backdrop, the Group's refreshed strategy is aimed at growing customer numbers, cross and upselling its increasing suite of products to those customers, and increasing recurring revenues as a percentage of Group revenues. There are ambitious KPIs in place and the Group is focused on delivery of those. With clarity of strategy, ambition and focus, Utilitywise enters the period ahead with confidence and looks forward to full year trading in line with expectations and driving longer-term shareholder value.
By order of the Board
BP Flattery
Chief Executive Officer
3 April 2017
INDEPENT REVIEW REPORT TO UTILITYWISE PLC
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2017 which comprises the condensed consolidated statement of total comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2017 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.
BDO LLP
Chartered Accountants and Registered Auditors
Leeds
United Kingdom
3 April 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Condensed consolidated statement of total comprehensive income
For the six months ended 31 January 2017
Six months Six months
ended ended Year ended
31 January 31 January 31 July
2017 2016 2016
(Unaudited) (Restated) (Restated)
GBP'000 GBP'000 GBP'000
------------- ------------ -------------
Note
Revenue 3 46,082 41,565 84,428
Cost of sales (29,421) (25,000) (51,637)
Gross profit 16,661 16,565 32,791
Other operating
income 423 5,963 6,233
Administrative
expenses (23,124) (10,462) (20,900)
(Loss)/profit from
operations (6,040) 12,066 18,124
------------- ------------ -------------
Analysed as:
Earnings before exceptional
costs, exceptional income,
depreciation, amortisation
and share-based payment
charges 9,693 9,676 18,268
Exceptional income
(Note 4) 249 5,740 5,740
Exceptional charges
(Note 4) (14,609) (1,686) (2,548)
Depreciation (340) (393) (757)
Amortisation of
intangible assets (970) (985) (1,940)
Share-based payment
charges (63) (286) (639)
------------------------------ -------------------- ------------ -------------
(Loss)/profit from
operations (6,040) 12,066 18,124
------------------------------ -------------------- ------------ -------------
Finance income 431 39 858
Finance expense (356) (268) (674)
------------- ------------ -------------
(Loss)/profit before
taxation (5,965) 11,837 18,308
Taxation (596) (1,441) (2,548)
------------- ------------ -------------
(Loss)/profit for
the period attributable
to equity holders
of the parent company (6,561) 10,396 15,760
Other comprehensive
(expense)/income
Items that may
be reclassified
to profit or loss
in subsequent periods
Exchange difference
on translation
of foreign operations (1) (4) 12
------------- ------------ -------------
Total comprehensive
income attributable
to equity holders
of the parent company (6,562) 10,392 15,772
------------- ------------ -------------
(Loss)/earnings
per share for profit
attributable to
the owners of the
parent during the
period
Basic 6 (8.4)p 13.6p 20.5p
Diluted 6 (8.4)p 13.6p 20.2p
------------- ------------ -------------
Condensed consolidated statement of financial position
As at 31 January 2017
31 January 31 January 31 July
2017 2016 2016
(Unaudited) (Restated) (Restated)
GBP'000 GBP'000 GBP'000
------------- ------------ ------------
Non-current assets
Property, plant
and equipment 5,411 5,705 5,591
Goodwill 14,851 23,808 23,808
Intangible assets 5,574 11,291 10,426
Accrued revenue 33,901 25,707 29,650
Total non-current
assets 59,737 66,511 69,475
------------- ------------ ------------
Current assets
Inventories 528 508 559
Trade and other
receivables 24,182 23,407 19,656
Cash and cash equivalents 12,310 6,185 12,237
Total current assets 37,020 30,100 32,452
------------- ------------ ------------
Total assets 96,757 96,611 101,927
------------- ------------ ------------
Current liabilities
Trade and other
payables 20,233 12,157 19,346
Loans and other
borrowings 1,707 5,390 1,572
Current tax liability 1,205 1,646 1,199
Current provisions - 711 526
------------ ------------
Total current liabilities 23,145 19,904 22,643
------------- ------------ ------------
Non-current liabilities
Trade and other
payables 3,492 3,642 2,884
Loans and other
borrowings 20,184 17,549 16,187
Deferred tax liability 1,647 1,996 2,180
Total non-current
liabilities 25,323 23,187 21,251
------------- ------------ ------------
Total liabilities 48,468 43,091 43,894
------------- ------------ ------------
Net assets 48,289 53,520 58,033
------------- ------------ ------------
Equity attributable
to equity holders
of the company
Called up share
capital 79 78 78
Share premium 14,599 13,812 14,130
Merger reserve 9,532 9,532 9,532
Share option reserve 904 1,069 1,359
Own shares reserve (748) (748) (748)
Foreign currency
reserve (31) (46) (30)
Retained earnings 23,954 29,823 33,712
Total equity 48,289 53,520 58,033
------------- ------------ ------------
Condensed consolidated statement of changes in equity
For the six months ended 31 January 2017
Share Own Foreign
Share Share Merger option shares Retained currency
capital premium reserve reserve reserve earnings reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- --------- --------- ---------- ---------- --------
At 1 August
2015 (as originally
stated) 77 12,873 9,532 1,600 - 22,081 (42) 46,121
Prior period
adjustments - - - - (748) (548) - (1,296)
--------- --------- --------- --------- --------- ---------- ---------- --------
At 1 August
2015 (Restated) 77 12,873 9,532 1,600 (748) 21,533 (42) 44,825
Profit for
the period
(Restated) - - - - - 10,396 - 10,396
Other comprehensive
income - - - - - - (4) (4)
--------- --------- --------- --------- --------- ---------- ---------- --------
Total comprehensive
income - - - - - 10,396 (4) 10,392
Dividends
paid - - - - - (2,514) - (2,514)
Share-based
payment expense - - - 286 - - - 286
Deferred tax
on share options - - - (409) - - - (409)
Issue of shares 1 939 - - - - - 940
Reserve transfer
relating to
share based
payment - - - (408) - 408 - -
At 31 January
2016 78 13,812 9,532 1,069 (748) 29,823 (46) 53,520
At 1 August
2016 (as originally
stated) 78 14,130 9,532 1,359 - 34,320 (30) 59,389
Prior period
adjustments - - - - (748) (608) - (1,356)
--------- --------- --------- --------- --------- ---------- ---------- --------
At 1 August
2016 (Restated) 78 14,130 9,532 1,359 (748) 33,712 (30) 58,033
Loss for the
period - - - - - (6,561) - (6,561)
Other comprehensive
income - - - - - - (1) (1)
--------- --------- --------- --------- --------- ---------- ---------- --------
Total comprehensive
income - - - - - (6,561) (1) (6,562)
Dividends
paid - - - - - (3,342) - (3,342)
Share-based
payment expense - - - 63 - - - 63
Deferred tax
on share options - - - (373) - - - (373)
Issue of shares 1 469 - - - - - 470
Reserve transfer
relating to
share based
payments - - - (145) - 145 - -
At 31 January
2017 79 14,599 9,532 904 (748) 23,954 (31) 48,289
--------- --------- --------- --------- --------- ---------- ---------- --------
Condensed consolidated cash flow statement
For the six months ended 31 January 2017
Six months Six months Year
ended ended ended
Note 31 January 31 January 31 July
2017 2016
(Unaudited) (Restated) 2016
GBP'000 GBP'000 (Restated)
GBP'000
Net cash flows (used
in)/ from operating
activities 7 (139) (1,363) 11,807
------------- ------------ ------------
Investing activities
Purchase of property,
plant and equipment (161) (199) (467)
Purchase of intangible
assets (528) (229) (318)
Interest received 9 7 18
Net cash used in investing
activities (680) (421) (767)
------------- ------------ ------------
Financing activities
Issue of shares 470 940 1,257
Loans repaid (5,200) - (5,025)
Loans received 9,200 4,000 4,000
Interest paid (235) (197) (672)
Dividends paid (3,342) (2,514) (4,218)
------------- ------------ ------------
Net cash flows from/(used
in) financing activities 893 2,229 (4,658)
------------- ------------ ------------
Net increase in cash
and cash equivalents 74 445 6,382
Translation (loss)/gain
on cash and cash equivalents (1) (4) 110
Cash and cash equivalents
at beginning of period 12,237 5,744 5,745
------------- ------------ ------------
Cash and cash equivalents
at end of period 12,310 6,185 12,237
------------- ------------ ------------
Notes
1 Accounting policies
The condensed consolidated interim financial information should be read in conjunction with the financial statements for the year ended 31 July 2016, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.
The interim financial information for each of the six-month periods ended 31 January 2017 and 31 January 2016 has not been audited and does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The information for the year ended 31 July 2016 does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006, but is based on the statutory financial statements for that year, on which the auditors have reported, as subsequently restated as set out in Note 10. Their audit report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498 (2) or (3) Companies Act 2006.
The principal accounting policies have been applied consistently to all years and are set out in the 2016 Annual Report and Accounts.
2 Basis of preparation
Utilitywise plc is incorporated and domiciled in the United Kingdom.
The accounts for the periods have been prepared in accordance with IAS 34 (Interim Financial Reporting) and the accounting policies are consistent with those of the annual financial statements for the year ended 31 July 2016 and those envisaged for the financial statements for the year ending 31 July 2017. The Group has not adopted any standards or interpretation in advance of the required implementation dates.
The Board is considering the requirements of the following forthcoming accounting standards:
-- IFRS 9 (Financial Instruments); -- IFRS 15 (Revenue From Contracts with Customers); and -- IFRS 16 (Leases)
If material, the Board will confirm the outcomes by no later than the date of approval of the Group's financial statements for the year ended 31 July 2017.
The financial statements have been prepared on a going concern and historical cost basis as stated in the accounting policies. There have been no changes in accounting policies. All policies are in line with the year ended 31 July 2016.
3 Segment information
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker ("CODM") has been identified as the management team, including the Chief Executive Officer and Chief Financial Officer.
During the current period the Group serviced both Enterprise and Corporate businesses. The Board considers that the services were offered from two distinct segments in the current period.
Operating segments are determined based on the internal reporting information and management structure within the Group. Information regarding the results of the reportable segment is included below. Performance is based on segment Adjusted Earnings before income taxation, depreciation and amortisation (EBITDA), which is operating profit or loss stated before depreciation, amortisation, share-based payment expenses and any exceptional items, as reported in the internal management reports that are reviewed by the CODM. The segment EBITDA, as defined above, is used to measure performance. Revenues disclosed below represent revenues to external customers.
The Enterprise Division derives its revenues from energy procurement by negotiating rates with energy suppliers for small and medium sized business customers throughout the UK, Republic of Ireland and certain European markets. The Corporate Division derives its revenues from energy procurement of larger industrial and commercial customers, providing an account care service and offering a variety of utility management products and services designed to assist customers in managing their energy consumption.
Revenue Six months Six months Year ended
ended ended
31 January 31 January 31 July
2017 2016 (Unaudited) 2016
(Unaudited) GBP'000 (Audited)
GBP'000 GBP'000
------------- ------------------- -----------
Enterprise 39,131 32,578 68,797
Corporate 7,752 9,553 17,104
Intersegment revenue (801) (566) (1,473)
------------- ------------------- -----------
Total Group revenue 46,082 41,565 84,428
------------- ------------------- -----------
3 Segment information (continued)
Six months ended 31 January Enterprise Corporate Total
2017
GBP'000 GBP'000 GBP'000
----------- ---------- ---------
Segment Adjusted EBITDA 8,668 1,025 9,693
Intersegment revenue/(costs) 801 (801) -
----------- ---------- ---------
Segment Adjusted EBITDA
after intercompany adjustments 9,469 224 9,693
Share option expense (51) (12) (63)
Exceptional income 249 - 249
Exceptional charges (1,232) (13,377) (14,609)
Finance income 430 1 431
Finance expense (356) - (356)
Depreciation (275) (65) (340)
Amortisation (9) (70) (79)
Taxation (1,427) (157) (1,584)
----------- ---------- ---------
Segment profit after tax 6,798 (13,456) (6,658)
----------- ---------- ---------
Six months ended 31 Enterprise Corporate Total
January 2016
(Restated) GBP'000 GBP'000 GBP'000
----------- ---------- --------
Segment Adjusted EBITDA 7,448 2,228 9,676
Intersegment revenue/(costs) 566 (566) -
Segment Adjusted EBITDA
after intercompany adjustments 8,014 1,662 9,676
Share option expense (208) (78) (286)
Exceptional income - 5,740 5,740
Exceptional charges (371) (1,315) (1,686)
Finance income 37 2 39
Finance expense (268) - (268)
Depreciation (287) (106) (393)
Amortisation (9) (2) (11)
Taxation (1,431) (205) (1,636)
----------- ---------- --------
Segment profit after
tax 5,477 5,698 11,175
----------- ---------- --------
Included in the above is a segment restatement in relation to exceptional income and exceptional charges reported in respect of the six months ended 31 January 2016. Exceptional income of GBP5.7m in relation to the release of deferred consideration and exceptional charges of GBP1.3m have been reallocated to the Corporate segment from the Enterprise segment. There is no change to the Group total.
3 Segment information (continued)
Profit after tax Six months Six months Year ended
ended ended
31 January 31 January 31 July
2017 2016 (Restated) 2016
(Unaudited) GBP'000 (Restated)
GBP'000 GBP'000
------------- ------------------ -------------
Enterprise before exceptional
items 7,781 5,848 13,624
Corporate before exceptional
items (79) 1,273 332
Exceptional income 249 5,740 5,740
Exceptional charges (14,609) (1,686) (2,548)
(6,658) 11,175 17,148
Group deferred tax adjustments 988 195 521
Amortisation (891) (974) (1,909)
------------- ------------------ -------------
Total Group profit after
tax (6,561) 10,396 15,760
------------- ------------------ -------------
4 Exceptional items
Exceptional income and charges, stated before applicable taxation effects, are as follows:
Six months Six months Year ended
ended ended
31 January 31 January 31 July
2017 2016 (Unaudited) 2016
(Unaudited) GBP'000 (Audited)
GBP'000 GBP'000
------------- ------------------- ------------
Exceptional income:
Dilapidation provision 249 - -
release
Contingent consideration
release - 5,740 5,740
------------- ------------------- ------------
249 5,740 5,740
------------- ------------------- ------------
Exceptional charges:
Impairment loss (Note
9) 13,367 1,315 1,315
Legal, restructuring and
other charges 1,242 371 1,233
------------- ------------------- ------------
14,609 1,686 2,548
------------- ------------------- ------------
Exceptional charges in the period comprise an impairment charge in connection to the cost of t-mac Technologies Limited, as explained further in Note 9, and charges in relation to various legal, restructuring and other costs. Exceptional income in the period relates to an adjustment to a historic dilapidations provision. Exceptional income items are included within other operating income and exceptional cost items are included within administrative expenses in the income statement.
5 Taxation
The taxation charge includes a credit of GBP1.1m (H1 2016: GBP0.1m) in respect of exceptional items. The remaining charge of GBP1.7m (H1 2016: GBP1.5m) is in respect of profit before tax before exceptional items, and has been charged at a rate of 20%. The rate applied of 20% is consistent with the expected rate for the year ended 31 July 2017 (2016: 20%).
6 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume the conversion of all potentially dilutive ordinary shares. The Group has potentially dilutive ordinary shares, being those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. Own shares held are excluded from the average number of shares used to calculate basic and diluted EPS.
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2017 2016
(Restated)
(Unaudited) GBP'000 2016
(Restated)
GBP'000 GBP'000
------------- ------------ -------------
Total comprehensive income (6,562) 10,392 15,772
Adjustments
Exceptional income (249) (5,740) (5,740)
Exceptional charges 14,609 1,686 2,548
Amortisation of intangible
assets acquired in
business combinations 891 974 1,909
Share-based payment expense 63 286 639
Tax impact of above adjustments (1,142) (245) (678)
------------- ------------ -------------
Earnings for Adjusted EPS 7,610 7,353 14,450
------------- ------------ -------------
Number of shares
Weighted average number of
shares for the purpose of
basic earnings per share 77,815 76,385 76,889
Effect of: Employee share
options and warrants 1,204 (254) 1,210
Weighted average number of
shares for the purpose of
diluted earnings per share 79,019 76,131 78,099
------------- ------------ -------------
Earnings per share for profit
attributable to the owners
of the parent during the
period
------------- ------------ -------------
Basic (8.4)p 13.6p 20.5p
Diluted (8.4)p* 13.6p 20.2p
Adjusted Basic 9.8p 9.6p 18.8p
Adjusted Diluted 9.6p 9.6p 18.5p
------------- ------------ -------------
* In accordance with IAS 33, a diluted loss per share cannot be a lower loss per share than a basic loss per share.
7 Reconciliation of operating (loss)/profit to net cash flow (used in)/from operating activities
Six months Six months Year ended
ended ended
31 January 31 January 31 July
2017 2016 2016
(Unaudited) (Restated) (Restated)
GBP'000 GBP'000 GBP'000
------------------ --------------- -----------------
Operating (loss)/profit (6,040) 12,066 18,124
Depreciation of property,
plant and equipment 340 393 757
Share option expense 63 286 639
Loss on disposal of
fixed assets - - 21
Amortisation of intangible
fixed assets 970 985 1,940
Exceptional release
of contingent consideration - (5,740) (5,740)
Impairment loss 13,367 1,315 1,315
8,700 9,305 17,056
Change in trade and
other receivables (8,354) (10,197) (9,615)
Change in inventories 30 135 84
Change in trade and
other payables 1,507 173 6,441
Change in provisions (526) (160) (345)
------------------ --------------- ---------------
Cash flow (used in)/from
operating activities 1,357 (744) 13,621
Income taxes paid (1,496) (619) (1,814)
Net cash flow (used
in)/from operating
activities (139) (1,363) 11,807
------------------ --------------- ---------------
The net cash flow from operating activities includes a net cash outflow of GBP0.9m in respect of exceptional items (H1 2016: GBP0.3m, FY16: GBP1.2m).
8 Reconciliation of net debt
1 August
Exchange Other
2016 Cash non-
differences cash changes 31 January
(Restated) Flows GBP'000 2017
GBP'000 GBP'000 GBP'000 GBP'000
------------ --------- -------------- --------------- -----------
Cash and cash
equivalents 12,237 74 (1) - 12,310
Borrowings (17,759) (4,000) - (132) (21,891)
------------ --------- -------------- --------------- -----------
Net debt (5,522) (3,926) (1) (132) (9,581)
------------ --------- -------------- --------------- -----------
9 Impairment loss
As a result of a significant shortfall in financial performance against previous expectations, a potential impairment was identified in the t-mac cash generating unit (CGU), which forms part of the Corporate division segment but has been determined as a separate CGU.
Accordingly, a discounted cash flow was carried out to determine the value in use of the assets of the t-mac CGU, in accordance with IAS 36 (Impairment of Assets).
The following key assumptions were made in the value in use calculation:
-- Five-year forecast period;
-- Revenues and costs based on past experience and cost estimates, with growth rates based on management estimates and forecasts, from internal and external market information;
-- Pre-tax discount rate of 12.9%, based upon the weighted average cost of capital, appropriately adjusted to take account of any risks not already accounted for in the forecast future undiscounted cash flows;
-- Terminal growth rate of 2.5%
The resulting value in use calculation was lower than the fair value of those assets less costs to sell, which itself was lower than the carrying value of the assets of the t-mac CGU.
Accordingly, an impairment was identified and the carrying value of the assets was written down to the fair value of those assets less costs to sell, being higher than the value in use, as an impairment loss.
The pre-tax value of the impairment loss was GBP13,367,000 which has been recognised as an exceptional item, as set out in Note 4. The impairment loss was allocated first against the goodwill of GBP8,957,000. The residual balance of the impairment was then allocated against the remaining assets on a pro-rata basis, which resulted in an impairment of GBP4,410,000 being allocated against intangible assets, as all other assets were already carried at their net realisable value in the balance sheet.
No other risks of impairment were identified and, therefore, no further value in use calculations were deemed necessary as at the 31 January 2017 balance sheet date.
10 Prior period adjustments
The Group has made prior period adjustments in respect of the following items:
Own shares
In 2013, the Group purchased certain of its own shares through an employee benefit trust, as a hedge against share option exercises. The value of the shares purchased was GBP748,000. As at 31 January 2017, those shares are still held by the Group. The shares have historically been shown within "cash and cash equivalents" in the statement of financial position. In accordance with IAS 32 (Financial Statements: Presentation), those shares are required to be shown within equity.
Accordingly, a prior period adjustment has been made, which has the following impacts on the consolidated statement of financial position as at 31 January 2016 and 31 July 2016.
-- Reduction in cash and cash equivalents of GBP748,000; and -- Creation of "Own shares reserve" in equity with a balance of GBP748,000.
There is no impact on the consolidated income statement or consolidated cash flow statement of the Group in the year ended 31 July 2016 or the six months ended 31 January 2016.
Fixed-payment liabilities
The Group has maintained certain liabilities within "trade and other payables" within the statement of financial position, which include cash repayments to the counterparty, where the timing and amount of those repayments are not within the control of the Group and which include implicit financing charges. It is now concluded that it is more appropriate to classify those liabilities as "borrowings" rather than "trade and other payables" in the statement of financial position. It was further determined that those liabilities were understated due to the incorrect application of the effective interest rate method as at 31 January 2016 and 31 July 2016 and, therefore, their carrying value should also be corrected. Accordingly, prior period adjustments have been made, which have the following impacts:
31 January 31 July
2016 2016
GBP'000 GBP'000
----------- ---------
Statement of financial
position:
Increase in borrowings 5,764 4,584
Decrease in trade and other
payables 5,065 3,850
Decrease in opening retained
earnings 548 548
Decrease in current period
retained earnings 48 60
Decrease in corporation
tax liability 103 125
Income statement:
Increase in interest expense 71 104
Decrease in taxation charge 22 44
Cash flow statement:
(Decrease)/increase in
operating cash flow - 1,245
Increase in interest payments - 220
Increase in repayment of
loans - 1,025
----------- ---------
10 Prior period adjustments (continued)
Earnings per share impact of prior period adjustments
The prior period adjustments, noted above, have the following impacts:
31 January 31 July
2016 2016
GBP'000 GBP'000
----------- ---------
Earnings for Basic and
Diluted EPS:
As originally stated 10,440 15,832
Adjustment - Fixed-payment
liabilities (48) (60)
----------- ---------
As restated 10,392 15,772
----------- ---------
Earnings for Adjusted Basic
and Adjusted Diluted EPS:
As originally stated 7,401 14,510
Adjustment - Fixed-payment
liabilities (48) (60)
----------- ---------
As restated 7,353 14,450
----------- ---------
Average number of shares
for Basic EPS:
As originally stated 76,885 77,389
Adjustment - Own shares (500) (500)
----------- ---------
As restated 76,385 76,889
----------- ---------
Average number of shares
for Diluted EPS:
As originally stated 76,631 78,599
Adjustment - Own shares (500) (500)
----------- ---------
As restated 76,131 78,099
----------- ---------
Basic EPS
As originally stated 13.6p 20.5p
As restated 13.6p 20.5p
Diluted EPS
As originally stated 13.6p 20.1p
As restated 13.6p 20.2p
Adjusted Basic EPS
As originally stated 9.6p 18.7p
As restated 9.6p 18.8p
Adjusted Diluted EPS
As originally stated 9.6p 18.5p
As restated 9.6p 18.5p
----------- ---------
In accordance with IAS 33 (Earnings per Share), own shares held are required to be excluded from the average number of shares used in the calculation of basic and diluted EPS.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR IJMRTMBMMBPR
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April 04, 2017 02:00 ET (06:00 GMT)
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