Utilitywise plc Trading update (5079M)

TIDMUTW

RNS Number : 5079M

Utilitywise plc

31 July 2017

31 July 2017

Utilitywise plc

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

Trading update

Utilitywise, a leading independent utility cost management consultancy, today announces an update on trading for the financial year ended 31 July 2017.

Based upon trading in July 2017 to date and under the Group's existing revenue recognition policy, IAS 18 (Revenue) the Group now anticipates that its revenue for the year ended 31 July 2017 will be GBP4.0 million to GBP4.5 million below previous management expectations. The revenue shortfall primarily comprises revenue from same supplier renewals contracts ("Renewals Contracts") which form a substantial proportion of the revenue secured by the Group in the final months of the financial year.

Investors should note that the Group has also announced today that it will adopt the new accounting standard, IFRS 15 (Revenue from Contracts with Customers) on 1 August 2017, as a result of which it will change its accounting policy in respect of timing of recognition of revenue related to Renewals Contracts. For the reasons set out below, had the Group adopted IFRS 15 as at 1 August 2016, the fall in signed Renewal Contracts against expectations would not have materially impacted Group revenue or profits for the year ended 31 July 2017.

Under IAS 18, the Group currently recognises revenue upon the signature by a customer of a Renewal Contract with their existing supplier. Furthermore, the Group currently recognises revenue upon the commencement of a new customer contract under IAS 18.

During the later months of the Group's financial year, a substantial proportion of the revenue secured by the Group relates to Renewal Contracts, as revenue from Renewal contracts will be immediately recognised under current accounting policies, whereas revenue from any new customer contract signed is less likely to be recognised in the same financial period as the new contract is signed, as a new contract would typically commence one to four months later. Additionally, the Group's monthly revenue has historically been weighted towards the end of each calendar month. Given the Group's relatively fixed cost base, substantially all of the shortfall in revenue will impact the profit before tax of the Group. Notwithstanding the reduction in profitability, the Group will remain in compliance with the financial covenant requirements of its banking facility.

The financial year ended 31 July 2017 will be the final year for which the Group will present its financial results with revenue accounted for under the existing accounting standard, IAS 18. As a result of the adoption of IFRS 15, the results for the year ended 31 July 2017, expected to be announced on 17 October 2017, will also be restated to reflect the position as if IFRS 15 had always been in place.

Under IFRS 15, revenue in respect of Renewal Contracts will be recognised upon the commencement of the contract, rather than upon signature. Accordingly, revenue associated with such contracts signed at a late stage of the year would be much less likely to be recognised in the same financial period under IFRS 15, as the contract would commence in a later financial year. This would then increase the closing order book at the end of the financial period in which the Renewal Contract was signed, which represents future revenue secured, to be recognised in later periods. Consequently, had the Group adopted IFRS 15 as at 1 August 2016, the fall in signed Renewal Contracts against expectations would not have materially impacted Group revenue or profits for the year ended 31 July 2017

The Group expects to report gross order book additions in the year ended 31 July 2017 which are c. 18% higher than in the year to 31 July 2016.

The Group will issue a further trading update in respect of the year ended 31 July 2017, including in respect of closing revenue pipeline, still to "go-live", on 24 August 2017.

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 
 Robin Tozer/David Ison 
 

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.

This information is provided by RNS

The company news service from the London Stock Exchange

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July 31, 2017 02:01 ET (06:01 GMT)