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Inspired Energy PLC 2018 Preliminary Results

27/03/2019 7:01am

UK Regulatory (RNS & others)


INSPIRED ENERGY (NEX:INSE.GB)
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RNS Number : 1404U

Inspired Energy PLC

27 March 2019

27 March 2019

Inspired Energy plc

("Inspired" or the "Group")

Preliminary Results for the year ended 31 December 2018

Inspired (AIM: INSE), a leading UK energy procurement consultant to UK and Irish corporates, announces record preliminary results for the year ended 31 December 2018.

HIGHLIGHTS

 
 Financial Highlights                   2018           2017   Movement 
                                                Restated(1) 
 Revenue                           GBP32.69m      GBP26.36m        24% 
                                  ==========  =============  ========= 
 Gross Profit                      GBP27.67m      GBP21.76m        27% 
                                  ==========  =============  ========= 
 Adjusted EBITDA(2)                GBP13.75m      GBP10.44m        32% 
                                  ==========  =============  ========= 
 Adjusted Profit Before Tax(3)     GBP11.38m       GBP8.40m        35% 
                                  ==========  =============  ========= 
 Profit Before Tax                  GBP4.20m       GBP2.99m        40% 
                                  ==========  =============  ========= 
 Cash Generated From Operations    GBP10.01m       GBP6.45m        55% 
                                  ==========  =============  ========= 
 Adjusted Diluted EPS(4)               1.61p          1.29p        25% 
                                  ==========  =============  ========= 
 Diluted Basic EPS                     0.53p          0.37p        43% 
                                  ==========  =============  ========= 
 Net Debt                          GBP23.54m      GBP14.79m        59% 
                                  ==========  =============  ========= 
 Full Year Dividend Per Share          0.65p          0.55p        18% 
                                  ==========  =============  ========= 
 Corporate Order Book              GBP53.00m      GBP39.00m        36% 
                                  ==========  =============  ========= 
 

Operational Highlights

-- Record revenues delivered by the Corporate Division, growing 34% to GBP27.3m (2017: GBP20.4m), contributing 84% of Group revenue for the period (2017: 77%). 8% of the Corporate Division revenue growth in the year was organic (2017: 6%).

-- Corporate Division contributed Adjusted EBITDA of GBP13.8m, an increase of 43% (2017: GBP9.6m).

-- Corporate Order Book increased 36% to GBP53.0m (2017: GBP39.0m) with strong customer retention and robust performance from significant new customer wins.

-- The Corporate Order Book provides 12 months secured revenue of GBP26.0m (2017: GBP18.6m) for the Corporate Division entering 2019.

-- Excellent cash performance with cash generated from operations up 55% to GBP10.0m (2017: GBP6.5m), further enhancing cash conversion metrics of the Group.

-- SME Division generated EBITDA of GBP2.4m (2017: GBP2.5m) with EBITDA margins increasing to 45% (2017: 41%) following streamlining of the division.

-- Completed the restructuring of the Corporate service offering by client category under a unified "Inspired" brand, which the Board believes creates a more streamlined platform to deliver organic and acquisitive growth.

-- Launch of three-year capital investment programme to raise the level of digitisation in the energy markets to ensure clients services and solutions evolve to meet future market needs over the next 3 to 5 years

Acquisition Highlights

Completion of five strategic acquisitions in 2018, further enhancing growth opportunities and client service offering:

-- Acquisition of Inprova Finance Limited ("Inprova") for a consideration of GBP19.5m, funded by a GBP19.0m placing, completed in December 2018. In the financial year ended 30 June 2018 (being the accounting period prior to acquisition), Inprova generated revenues of GBP7.8m and EBITDA of GBP2.9m.

-- Acquisition of Inprova increased the Corporate Order Book and will provide a material contribution to Group revenues from the Corporate Division in 2019, increasing the Corporate market share and significantly strengthening the Group's position as market leader in the UK.

   --      Integration of Inprova has started well and is in line with management's expectations. 

-- Integration of Squareone Limited and Professional Cost Management Group Limited, acquired in August and September 2018 respectively, is progressing well.

-- SystemsLink 2000 Limited ("SystemsLink") and Energy Cost Management Limited, both acquired in March 2018, are now fully integrated into the Group.

Board Transition

-- Matthew Thornton today steps down as Non-Executive Director and has entered into an orderly market agreement in relation to his holding expiring 31 March 2020.

-- The Board is now composed of two Executive Directors, supported by a Non-Executive Chairman and two Independent Non-Executive Directors.

Mark Dickinson, CEO of Inspired, commented on the results: "We are delighted to deliver such a strong set of results for 2018. We accelerated our next growth phase with five complementary and value-enhancing acquisitions, whilst continuing to deliver sustained organic growth in the Corporate Division.

Our acquisitions have further broadened our service offering and materially increased the level of the Group's client meters under management. We continue to systematically engage with clients to quantify cross-selling opportunities and increase the accessible revenue at each meter point.

"Ensuring we continue to evolve our services for our clients is a key focus for the business, simultaneously broadening the service offering we provide and optimising the value of every pound our clients spend on utilities, so that they can focus on running their businesses.

"Following an excellent 2018, we have had an encouraging start to 2019 and I am confident that the team will deliver another year of significant growth."

Note

1. The Group's 2017 comparative financials restated to revise the date from which Horizon Energy Group Limited ("Horizon") was consolidated. This timing adjustment does not change the cash position of the Group, the 2018 results or future forecasts of the Group. See Updates to Accounting Policies within the Chief Executive Officer's Statement.

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

3. Adjusted profit before tax is earnings before tax, amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), exceptional items, share-based payments, the unwinding of contingent consideration and foreign exchange variances (a reconciliation of this can be found in note 6 of the preliminary statements).

4. Adjusted diluted earnings per share represents the diluted earnings per share, as adjusted to remove amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), exceptional items, share-based payments, the unwinding of contingent consideration and foreign exchange variances.

For further information, please contact:

 
Inspired Energy plc                         www.inspiredplc.co.uk 
 Mark Dickinson (Chief Executive Officer)    +44 (0) 1772 689250 
 Paul Connor (Finance Director) 
 
Shore Capital (Nominated Adviser and 
 Joint Broker) 
 Dru Danford 
 Edward Mansfield 
 James Thomas                                +44 (0) 20 7408 4090 
Peel Hunt LLP (Joint Broker) 
 Mike Bell 
 Sam Cann                                   +44 (0) 20 7418 8900 
Gable Communications 
 Justine James                                +44 (0) 20 7193 7463 
 John Bick                                    +44 (0) 7525 324431 
                                              inspired@gablecommunications.com 
 

CHAIRMAN'S STATEMENT

I am delighted to report another record year for Inspired in 2018 in which the Group completed five complementary and value-enhancing acquisitions, including the completion of a GBP19.0m placing in December. In addition, the Group continued to deliver sustained organic growth in the core Corporate Division, delivering results in line with management's expectations.

We have today completed the transition of the Board composition to two Executive Directors, supported by a Non-Executive Chairman and two Non-Executive Directors, with the appointment of Gordon Oliver as an independent non-executive in January 2018 and the resignation of Matthew Thornton who is today stepping down as Non-Executive Director. On behalf of all shareholders and the Board, I would like to thank Matthew for his years of dedication to the Group since its founding over 18 years ago. Matthew was a member of the Board on the IPO of the business on AIM in 2011 and has been an intrinsic part of the Group's success to date.

The strong financial performance and the strategic initiatives delivered during the period provide an excellent platform for continued organic and acquisitive growth, further establishing Inspired's market leading position as a third-party intermediary ("TPI") in the Industrial & Commercial ("I&C") sector.

The Board was pleased to announce the grant of awards under the Long-Term Incentive Plan ("LTIP") for the benefit of the Senior Management Team ("SMT") in May. The structure of the LTIP tracks the award to the Executive Directors in July 2017, albeit for an extended period to FY2023. The SMT is comprised of key senior directors of the Group, who are important to the long-term success and value of the Company, and the Board believes that the Group will continue to benefit from their drive and energy in the future.

The financial results highlight continued organic growth in our core Corporate Division, which has been achieved whilst also executing the Group's acquisition strategy and completing the restructuring of the service offering within the Corporate Division by client category under a unified "Inspired " brand. The Board believes this client category led structure positions the Corporate Division with the best platform to facilitate future organic and acquisitive growth.

Contribution from the 2017 and 2018 acquisitions, in conjunction with sustained organic growth, increased Corporate Division revenue to GBP27.3m (2017: GBP20.4m), an increase of 34% and representing 84% of Group revenue. The contribution from the Corporate Division to Group revenues is anticipated to increase further in 2019, with further organic growth expected together with a full year contribution from Inprova. The restructuring of the service offering in the Corporate Division has assisted in increasing the focus on driving organic growth which continues to be a primary objective of the Board.

Organic growth is calculated by reference to revenue growth of the Group, excluding current year acquisitions and taking into account the growth of previously acquired business from the last financial year prior to their acquisition by the Group. The Board are pleased to note that organic revenues in the Corporate Division grew by 8% in the period (2017: 6%). Adjusted EBITDA for the Corporate Division for the period was GBP13.8m (2017: GBP9.6m). This growth underpins the strong fundamentals of the Board's stated strategy to focus on growing the Corporate Division both organically and through further acquisitions.

The Corporate Order Book has increased to GBP53.0m as at 31 December 2018 (2017: GBP39.0m), representing a year on year increase of 36% and providing 12 months secured revenue of GBP26.0m (2017: GBP18.6m) for the Corporate Division entering 2019. This remains a consistent guide to the future performance of the Group, providing strong visibility of revenues for FY2019 and the next three years, enabling the Board to look forward with great confidence over the short to medium term.

The acquisition of Inprova in December was a significant milestone in the development of the Group, both strategically and financially, and the Board is pleased to report that its integration has started well. The five acquisitions completed in 2018 reinforce the focus of the Group delivering on its well-established acquisition strategy, being complementary to the Corporate Division, broadening the service offering and customer base of the Group and increasingly enabling the Group to benefit from operational leverage.

In the first half of 2018, the Board took the decision to streamline the focus of the SME Division and discontinue the non-profit generating revenue streams, including the affiliate channel. This has shown to be a prudent decision as although revenue for the SME Division for the year was down 10% at GBP5.4m (2017: GBP6.0m), margins have improved and the EBITDA contribution was maintained, such that the SME Division has continued to contribute strong profits and cash during 2018. Adjusted EBITDA generated by the division was stable at GBP2.43m (2017: GBP2.45m).

Accordingly, the Board is pleased to propose a final dividend of 0.46 pence (2017: 0.39 pence), subject to shareholder approval at the AGM in June, resulting in a full year dividend of 0.65 pence per share, an 18% increase (2017: 0.55 pence). The dividend increase in the year is a demonstration of the Board's confidence in the future for the enlarged Group.

Inspired had an excellent 2018 and I am confident that 2019 will be another year of significant progress for the Group with trading in the year so far in line with expectations.

Mike Fletcher

Chairman

27 March 2019

CHIEF EXECUTIVE OFFICER'S STATEMENT

Following the Group's achievements in 2018 we have carried that momentum into 2019. Ensuring we maintain a market leading position for our clients is key as we drive the business forward combined with broadening our service offering through strategic acquisitions in order to enhance the service we provide.

The five acquisitions completed in 2018 underpin this strategy. With each acquisition complementing and broadening the service we provide our Corporate clients as well as increasing our client base. The Board remains focused on delivering continued organic growth and strives to maintain and build on the excellent performance of the Group for the year ahead.

Having established a strong and scalable platform for expansion, we have a clear strategy that will enable us to continue to build on the growth of the Group. We achieve this through four primary service lines:

   1)   Procurement: supporting clients with the selection of the best energy supply contracts 

2) Energy Accounting: supporting clients with the validation of their energy invoices and accounting processes

3) Compliance: supporting clients with their compliance obligations with respect to energy and environmental reporting

4) Optimisation Services: supporting clients to increase the effectiveness of their energy consumption

As the largest energy procurement consultant in the UK, we continue to benefit from a highly fragmented market with attractive dynamics for acquisitive growth which we expect to continue during FY2019, with a particular focus on businesses that complement our existing services and increase our market share in the Optimisation Services space.

Our organic growth engine is targeted to deliver 6% to 8% organic revenue growth per annum and is driven by focusing on three primary Key Performance Indicators. During FY2018 we have achieved the following:

1) Units of Opportunity: The number of meters in the market place, owned by clients with whom we have a transactional relationship, increased from c.100,000 to 350,000 during FY2018 (250% increase)

2) Meters Under Management: the number of meters (Unit of Opportunity) covered by our core services of Energy Procurement and Energy Accounting in the UK increased from c.75,000 to 129,000 during FY2018 (72% increase)

3) White Space Bank: the quantified value of cross selling our broader Compliance and Optimisation Services to existing Meters Under Management clients is currently identified at c. GBP13m of annual revenue.

As set out above, significant progress has been made in 2018, particularly in expanding our Units of Opportunity through the acquisitions of SystemsLink and Inprova. The acquisitions of ECM and PCMG have created a more robust platform for the Optimisation Services offering and the Board continues to actively review and assess organic and acquisitive opportunities for further growth in this area, as the business continues to evolve as a leading player in the sector.

As with any business, the effectiveness of the organic growth engine and the ability of the business to improve its services to clients requires systematic investment to increase the quality of the client experience.

Whilst the business continues to deliver excellent year on year performance the energy markets are a notable laggard in their adoption of technology. The Board is cognisant that it is not just important to deliver results today, but also to ensure the business platform is robust and capable of supporting such growth in the medium-term (3 to 5 years).

To this end, FY2019 will see the launch of a capital investment programme which will run for the next three years. The programme has been designed to ensure that the services received by our customers in 2022 and beyond are underpinned by the same level of technological excellence as comparable products in areas such as telecoms and financial services. The Board believes that this level of investment is unrivalled in the sector and continues to demonstrate our commitment to adding value to clients by ensuring our services remain state of the art and relevant to our clients evolving needs.

Corporate Division

Overview

The Corporate Division's core services now operate under a unified "Inspired" brand and it currently provides the review, analysis, negotiation and energy accounting for gas and electricity contracts with the service offering segmented into four broad categories of customer focus being:

   --      Energy intensive 
   --      Commercial/estate intensive 
   --      Public services 
   --      Corporate 

The Group continues to develop its product suite to meet the individual energy management requirements of clients following the key themes we focus on in order to simplify, verify, protect, inform and optimise. The Group's current focus is on the following strategic areas:

Optimisation Services: Expansion of our Optimisation Services Division to match client needs which are becoming increasingly sophisticated with respect to monitoring, targeting and efficiency.

Software Solutions: Further developing the Software Services Division to provide software solutions across the energy value chain. SystemsLink, acquired in March 2018, is central to the development of the Group's software solutions.

Research and Development: Continuing to develop the 'Inspired Incubator' to allow Inspired to support early stage energy and utility solutions which have the potential to add value to energy consumers in the future.

Corporate Division Financial Highlights

Highlights in the year include:

-- Revenue increased 34% to GBP27.3m (2017: GBP20.4m), including 8% organic revenue growth (2017: 6%).

-- The Corporate Division generated adjusted EBITDA of GBP13.8m (2017: GBP9.6m), a 43% year on year increase.

-- Corporate Order Book increased by 36% to GBP53.0m as at 31 December 2018 (FY2017: GBP39.0m).

The Corporate 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, or Inspired and a client in the instance of direct client fees, 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 Corporate Order Book only relates to the Corporate Division, and does not include any SME revenue or contracts within it. The growth of the Corporate Order Book provides an indicator of the latent growth of the business which has yet to be recognised as revenue of the Group.

SME Division

Within the SME Division, the Group's energy consultants contact prospective SME clients to offer price comparison services and contract arrangement service based on the unique situation of the customer.

The division continues to mature, with management focusing on margin and cash generation to support the Group's continued growth. In the first half of 2018, the Board took the decision to streamline the focus of the division and discontinue the non-profit generating revenue streams, including the affiliate channel. As a result of the reorganisation of the division, whilst revenue for the SME Division in the year was down 10% at GBP5.4m (2017: GBP6.0m), it continued to contribute strong profits and cash in the period, delivering stable adjusted EBITDA of GBP2.43m (2017: GBP2.45m), with increased margins enabling the division to continue to contribute materially to the cash generation of the Group.

The SME Division has now been structured to focus on the provision of complementary services that add value to SME consumers which is expected during 2019 to include proof of concept expansion into Merchant Services, Insurance and Telecoms.

Acquisition Strategy

The Board continues to evaluate opportunities for the Group to participate in further industry consolidation. With a strong focus on building an enlarged and improved business, as demonstrated by the acquisitions to date, we believe that potential targets should offer one or more of the following criteria:

   --       Additional technical and/or service capability increasing our Accessible Revenue; 
   --       Sector specialism and diversification increasing our Accessible Revenue; 
   --       Increased geographic footprint building our Units of Opportunity; 

-- Increased number of meter points we have a commercial relationship with building our Units of Opportunity; and

-- Significant opportunities for sales or cost synergies to generate further economies of scale.

The Board continues to explore acquisition opportunities which fit with the Group's strategy in order to augment the Group's services, products or markets.

Alternative performance measures

Acquisitional activity can significantly distort underlying financial performance from IFRS measures and therefore the Board deems it appropriate to report adjusted metrics as well as IFRS measures for the benefit of primary users of the Group financial statements.

Exceptional costs/(items)

Exceptional costs of GBP2.7m (2017: GBP2.1m) have been incurred in the year, which primarily relate to fees associated with the five acquisitions in the year, the Board transition, the restructuring associated with the integration of the Corporate Division from trading subsidiaries to a customer focused structure and the change in the fair value of contingent consideration. Exceptional costs/(items) also includes a gain on revaluation of contingent consideration of GBP970,000 in relation to the acquisition of Horizon in July 2017. The final aggregate consideration paid for Horizon was GBP12.7m, with Horizon contributing GBP4.2m and GBP2.6m to Group revenues and EBITDA respectively in 2018, equating to a multiple of 4.9x EBITDA. These costs are considered by the Directors to be neither material in nature or non-recurring and therefore require separate identification to give a true and fair view of the Group's result for the period.

Updates to Accounting Policies

IFRS 15 - Revenue from Contracts with Customers

A key financial focus of the Group since IPO in 2011 remains to deliver a prudent set of financial statements, with an important focus on achieving a close alignment of revenues and cash, whilst adopting all appropriate accounting standards.

The financial statements reported for the year ended 31 December 2018 is the first year in which the Group have adopted the new revenue recognition accounting standard, IFRS15. In preparation for adopting the standard, management have completed an extensive review of their revenue recognition policies in all divisions of the Group.

The 2018 results herein adopt IFRS15, the impact of which is a GBP0.4m increase in revenue in 2018. As outlined in the interim statement, the adoption of IRFS15 has not had a significant impact on the Group's financial statements, and therefore future forecasts of the Group remain unchanged. The impact in 2017, an increase of GBP0.2m in revenue, has been adjusted through reserves.

IFRS 16 - Leases

The Group is currently undertaking a review of the leases in place, and assessing the impact of adopting IFRS16. Although the review remains ongoing, management currently expect the impact of adopting IFR16 on the Group financial statements for the year ending 31 December 2019 to be minimal.

Accounting for Acquisitions

We have restated the Group's 2017 comparative financials to revise the date from which we consolidated Horizon. In the financial statements for the year ended 31 December 2017, we consolidated Horizon from 31 March 2017 (the "Locked Box Date"), which was the date the economic benefits and risks of the trading of Horizon accrued to the Group. However, management have re-considered the relevant accounting rules and deemed Horizon should have been consolidated from legal completion of the acquisition being the 17 July 2017. All FY2018 acquisitions have been consolidated from the legal completion date.

This timing adjustment does not change the cash position of the Group, the 2018 results or future forecasts of the Group. The Group still retains the cash generated from operations from the Locked Box Date and the FY2017 impact is set out in note 1.2.

Cash and Borrowings

As at 31 December 2018, the Group had a cash balance of GBP2.2m and outstanding balances on its senior term debt facilities of GBP25.7m with a resulting net debt of GBP23.5m. Net debt increased by GBP8.8m during the period under review. The increase in net debt reflects a year in which the cash generation of the Group was offset by the payment of GBP6.6m of initial cash consideration (excluding placing proceeds) to the vendors of SystemsLink, ECM, Squareone, PCMG and Inprova and GBP3.6m of deferred cash consideration to the vendors of Informed and Horizon.

In July 2017, the Group entered into a facility agreement ("Facility") with Santander UK plc ("Santander"). The Facility incorporates a GBP29.6m and EUR7.0m term loan. GBP6.3m and EUR7.0m of the term facilities ("Tranche A and B") amortise over a period of five years. GBP8.3m ("Tranche C") along with the GBP15m balance (described further below) is repayable by way of a bullet repayment on 19 October 2022. The Facility has an interest rate of 2.75% over LIBOR in respect of Tranches A and B and 3.00% over LIBOR in respect of Tranche C. There are no ongoing monitoring fees.

The Group also entered into a revolving credit facility (RCF) with Santander, for the sum of GBP2.5m, to be used for the purposes of satisfying future working capital requirements and an acquisition facility of up to GBP12.5m to fund future Group acquisitions ("Acquisition Facility"). The Acquisition Facility can be drawn on the same commercial terms as the Facility at the election of the Group and subject to bank approval of any proposed acquisition. The RCF has an interest rate of 2.75% over LIBOR, and the Acquisition Facility has an interest rate of 3.25% over LIBOR. There are no ongoing monitoring fees.

As at 31 December 2018, the Acquisition Facility and the RCF had GBP5.5m and GBP1.9m drawn respectively and therefore had GBP7.0m and GBP0.6m undrawn respectively

Capital repayments of GBP1.3m per annum are made on Tranche A, and the Group commenced capital repayments on Tranche B of the Facility from September 2018, of GBP1.6m per annum.

Dividends

The Board is delighted to propose a final dividend of 0.46 pence per share, subject to shareholder approval at the annual general meeting of the Group. Following the payment of an interim dividend of 0.19 pence per share, the total dividend payable for the year ended 31 December 2018 is 0.65 pence per share (2017: 0.55 pence per share) representing an increase of 18% in respect of the previous year. The continuing trend of improvement in cash generation of the Group, supports our progressive Dividend policy applied.

The dividend will be payable on 25 July 2019 to all shareholders on the register on 14 June 2019 and the shares will go ex-dividend on 13 June 2019.

Focus on our people

We firmly believe that investment in staff development and welfare builds a stronger business and we are committed to continuing to make appropriate investment in order to further develop our team and our environment. The Board was pleased to announce the grant of awards under the LTIP the benefit of the SMT in May.

The structure of the LTIP tracks the award to the Executive Directors in July 2017, albeit for an extended period to FY2023. The Board believes it is crucial to retain and incentivise its senior management to enable the Board to deliver long-term value creation for shareholders and the Board believes that the Group will continue to benefit from their drive and energy in the future.

In addition, the Group continues to support its employees through professional qualifications and work-based learning. National Vocational Qualifications (NVQs) continue to be a great success. Finally, a number of staff are undertaking professional qualifications, including ACCA/AAT qualifications, to support their development within the business.

Throughout the year, the directors of the Group provide guidance and mentor employees, engaging in consultation with them to ensure that their views are heard and considered.

Outlook

The momentum created in 2018 has continued into Q1 2019, with the integration of our five acquisitions broadening our service offering and materially increasing the Group's client meters under management (units of opportunity). We will continue to systematically engage with clients to quantify cross-selling opportunities and increase the accessible revenue at each meter point across our growing number of clients throughout the UK and Ireland.

Ensuring we maintain a market leading position for our clients is key as we drive the business forward combined with continually refining our service offering in order to optimise the service we provide.

Our sector remains fragmented, highlighted by the five acquisitions completed in 2018 alone and there is significant scope for growth, as we continue to strengthen our Corporate Division and demonstrate the significant benefit we can provide clients optimising the value of every pound spent on utilities.

We value our team and the 2018 results are testament to their commitment and hard work which shows no sign of abating as we increase momentum across the Group. We are very encouraged by developments in the first quarter and look forward to another year of sustainable growth in line with market expectations.

Mark Dickinson

Chief Executive Officer

27 March 2019

Group statement of comprehensive income

For the year ended 31 December 2018

 
                                                      2018        2017 
                                                              Restated 
                                           Note    GBP'000     GBP'000 
---------------------------------------   -----  ---------  ---------- 
 Revenue                                            32,692      26,356 
 Cost of sales                                     (5,018)     (4,596) 
----------------------------------------  -----  ---------  ---------- 
 Gross profit                                       27,674      21,760 
 Administrative expenses                          (22,171)    (17,819) 
----------------------------------------  -----  ---------  ---------- 
 Operating profit                                    5,503       3,941 
----------------------------------------  -----  ---------  ---------- 
 
 Analysed as: 
 Earnings before exceptional 
  costs/(items), depreciation, 
  amortisation and share-based 
  payments costs                                    13,752      10,442 
 Exceptional costs/(items)                    3    (2,704)     (2,117) 
 Depreciation                                 7      (569)       (495) 
 Amortisation of acquired intangible 
  assets                                      8    (3,749)     (2,565) 
 Amortisation of internally 
  generated intangible assets                 8      (756)       (732) 
 Share-based payment costs                           (471)       (592) 
                                                 ---------  ---------- 
                                                     5,503       3,941 
 ---------------------------------------  -----  ---------  ---------- 
 Finance expenditure                          4    (1,380)       (955) 
 Other financial items                                  76           5 
----------------------------------------  -----  ---------  ---------- 
 Profit before income tax                            4,199       2,991 
 Income tax expense                           5      (960)       (958) 
----------------------------------------  -----  ---------  ---------- 
 Profit for the year                                 3,239       2,033 
 Other comprehensive income: 
 Exchange differences on translation 
  of foreign operations                                112         210 
----------------------------------------  -----  ---------  ---------- 
 Total other comprehensive 
  income for the year                                  112         210 
----------------------------------------  -----  ---------  ---------- 
 Total comprehensive income 
  from continuing operations                         3,351       2,243 
 Attributable to: 
 Equity owners of the company                        3,351       2,243 
----------------------------------------  -----  ---------  ---------- 
 
 Basic earnings per share attributable 
  to the equity holders of the 
  company (pence)                             6       0.55        0.39 
 Diluted earnings per share 
  attributable to the equity 
  holders of the company (pence)              6       0.53        0.37 
 Adjusted basic earnings per 
  share attributable to the 
  equity holders of the company 
  (pence)                                     6       1.68        1.33 
 Adjusted diluted earnings 
  per share attributable to 
  the equity holders of the 
  company (pence)                             6       1.61        1.29 
----------------------------------------  -----  ---------  ---------- 
 

Group Statement of Financial Position

At 31 December 2018

 
                                             2018        2017 
                                                     Restated 
                                  Note    GBP'000     GBP'000 
-------------------------------  -----  ---------  ---------- 
 ASSETS 
 Non-current assets 
 Goodwill                            8     44,366      22,190 
 Other intangible assets                   14,978      11,662 
 Property, plant and equipment       7      2,083       1,407 
                                        --------- 
 Non-current assets                        61,427      35,259 
-------------------------------  -----  ---------  ---------- 
 Current assets 
 Trade and other receivables         9     21,906      15,877 
 Cash and cash equivalents                  2,190       5,183 
-------------------------------  -----  ---------  ---------- 
 Current assets                            24,096      21,060 
-------------------------------  -----  ---------  ---------- 
 Total assets                              85,523      56,319 
-------------------------------  -----  ---------  ---------- 
 LIABILITIES 
 Current liabilities 
 Trade and other payables           10      7,037       2,532 
 Bank borrowings                            3,047       2,037 
 Contingent consideration                   1,479       3,619 
 Current tax liability                      2,857       3,022 
-------------------------------  -----  ---------  ---------- 
 Current liabilities                       14,420      11,210 
-------------------------------  -----  ---------  ---------- 
 Non-current liabilities 
 Bank borrowings                           22,393      17,809 
 Trade and other payables                      92          33 
 Contingent consideration                   1,379       1,375 
 Interest rate swap                            68         144 
 Deferred tax liability                     1,856       1,126 
-------------------------------  -----  ---------  ---------- 
 Non-current liabilities                   25,788      20,487 
-------------------------------  -----  ---------  ---------- 
 Total liabilities                         40,208      31,697 
-------------------------------  -----  ---------  ---------- 
 Net assets                                45,315      24,622 
-------------------------------  -----  ---------  ---------- 
 EQUITY 
 Share capital                                892         711 
 Share premium account                     37,422      14,203 
 Merger relief reserve                     15,535      14,914 
 Share-based payment reserve                1,361       1,231 
 Retained earnings                          7,908       7,354 
 Investment in own shares                 (6,742)     (2,618) 
 Translation reserve                          322         210 
 Reverse acquisition reserve             (11,383)    (11,383) 
-------------------------------  -----  ---------  ---------- 
 Total equity                              45,315      24,622 
-------------------------------  -----  ---------  ---------- 
 

Group Statement of Changes in Equity

For the year ended 31 December 2018

 
 
                           Share   Merger  Share-based       Retained   Investment                   Reverse          Total 
                  Share  premium   relief      payment       earnings       In own  Translation  acquisition  shareholders' 
                capital  account  reserve      reserve  (as restated)       Shares      reserve      reserve         equity 
                GBP'000  GBP'000  GBP'000      GBP'000        GBP'000      GBP'000      GBP'000      GBP'000        GBP'000 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Balance at 1 
 January 
 2017               607    2,319   14,914          794          7,623            -            -     (11,383)         14,874 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Profit and 
 total 
 comprehensive 
 income 
 for the 
 period               -        -        -            -          2,533            -          210            -          2,743 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Prior period 
 adjustment 
 (note 1)             -        -        -            -          (500)            -            -            -          (500) 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Shares issued 
 (30 
 March 2017)          2      169        -            -              -            -            -            -            171 
Shares issued 
 (20 
 April 2017)          4      496        -            -              -            -            -            -            500 
Shares issued 
 (24 
 April 2017)          1       50        -            -              -            -            -            -             51 
Shares issued 
 (12 
 July 2017)          77    8,396        -            -              -            -            -            -          8,473 
Shares issued 
 (20 
 July 2017)          18    2,600        -            -              -            -            -            -          2,618 
Shares issued 
 (29 
 August 2017)         2      173        -            -              -            -            -            -            175 
Share-based 
 payment 
 cost                 -        -        -          592              -            -            -            -            592 
Share options 
 exercised            -        -        -        (155)            155            -            -            -              - 
Purchase of 
 own 
 shares               -        -        -            -              -      (2,618)            -            -        (2,618) 
Dividends paid        -        -        -            -        (2,457)            -            -            -        (2,457) 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Total 
 transactions 
 with owners 
 (as 
 restated)          104   11,884        -          437          (269)      (2,618)          210            -          9,748 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Balance at 31 
 December 
 2017 (as 
 restated)          711   14,203   14,914        1,231          7,354      (2,618)          210     (11,383)         24,622 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Profit and 
 total 
 comprehensive 
 income 
 for the 
 period               -        -        -            -          3,239            -          112            -          3,351 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Prior year 
 IFRS 
 15 impact            -        -        -            -            222            -            -            -            222 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Shares issued 
 (22 
 March 2018)          4        -      621            -              -            -            -            -            625 
Shares issued 
 (29 
 March 2018)          2      145        -            -              -            -            -            -            147 
Shares issued 
 (24 
 May 2018)           29    4,095        -            -              -            -            -            -          4,124 
Shares issued 
 (7 
 June 2018)           1       37        -            -              -            -            -            -             38 
Shares issued 
 (7 
 September 
 2018)                1       86        -            -              -            -            -            -             87 
Shares issued 
 (31 
 December 
 2018)              144   18,856        -            -              -            -            -            -         19,000 
Share-based 
 payment 
 cost                 -        -        -          471              -            -            -            -            471 
Share options 
 exercised            -        -        -        (341)            341            -            -            -              - 
Purchase of 
 own 
 shares               -        -        -            -              -      (4,124)            -            -        (4,124) 
Dividends paid        -        -        -            -        (3,248)            -            -            -        (3,248) 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Total 
 transactions 
 with owners        181   23,219      621          130            554      (4,124)          112            -         20,693 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
Balance at 31 
 December 
 2018               892   37,422   15,535        1,361          7,908      (6,742)          322     (11,383)         45,315 
--------------  -------  -------  -------  -----------  -------------  -----------  -----------  -----------  ------------- 
 

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.

Translation reserve

The translation reserve comprises translation differences arising from the translation of the financial statements of the Group's foreign entities into GBP (GBP).

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 2018

 
                                                          2018       2017 
                                                                 Restated 
                                                       GBP'000    GBP'000 
 
 Cash flows from operating activities 
 Profit before income tax                                4,199      2,991 
 Adjustments 
 Depreciation                                              569        495 
 Amortisation                                            4,505      3,297 
 Share- based payment cost                                 471        592 
 Finance expenditure                                     1,304        950 
 Exchange rate variances                                 (249)       (92) 
 Other financial items                                   (576)        407 
 Cash flows before changes in working capital           10,223      8,640 
 Movement in working capital 
 Increase in trade and other receivables               (1,689)    (2,391) 
 Increase in trade and other payables                    1,479        202 
---------------------------------------------------  ---------  --------- 
 Cash generated from operations                         10,013      6,451 
 Income taxes paid                                     (1,853)    (1,418) 
---------------------------------------------------  ---------  --------- 
 Net cash flows from operating activities                8,160      5,033 
---------------------------------------------------  ---------  --------- 
 Cash flows from investing activities 
 Contingent consideration paid                         (3,625)    (2,550) 
 Acquisition of subsidiaries net of cash 
  acquired                                            (25,479)   (10,210) 
 Payments to acquire property, plant and 
  equipment                                              (869)      (455) 
 Payments to acquire intangible assets                 (1,509)    (1,222) 
 Net cash used in investing activities                (31,482)   (14,437) 
---------------------------------------------------  ---------  --------- 
 Cash flows from financing activities 
 New bank loans (net of debt issue costs)                7,400     23,960 
 Proceeds from issue of new shares                      19,272      8,870 
 Repayment of bank loans                               (2,044)   (16,149) 
 Interest on bank loans paid                           (1,049)      (627) 
 Dividends paid                                        (3,248)    (2,457) 
 Net cash flows from financing activities               20,331     13,597 
---------------------------------------------------  ---------  --------- 
 Net (decrease)/increase in cash and cash 
  equivalents                                          (2,991)      4,193 
 Cash and cash equivalents brought forward               5,183        985 
 Exchange differences on cash and cash equivalents         (2)          5 
---------------------------------------------------  ---------  --------- 
 Cash and cash equivalents carried forward               2,190      5,183 
---------------------------------------------------  ---------  --------- 
 

NOTES TO PRELIMINARY RESULTS

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 2018. The audit of the statutory accounts of Inspired Energy Plc for the year ended 31 December 2018 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement. The statutory accounts for the year ended 31 December 2018 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). They have been prepared on an accrual basis and under the historical cost convention except for certain financial instruments measured at fair value. 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 2018.

Going concern

The Group's forecasts, which have been prepared for the period to 31 December 2021 after taking into account the contracted order 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 Company and 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 IFRSs, requires 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

The below represents the impact of the adoption of IFRS 15 revenue from contracts with customers:

 
 Previous accounting policy               Policy applied from 1 January 
                                           2018 
---------------------------------------  ------------------------------------------------ 
 Revenue                                  Revenue 
  Revenue is comprised of commissions      Revenue is comprised of commissions 
  received from energy suppliers,          received from energy suppliers 
  net of value-added tax, for              and fees received from customers, 
  the procurement as an agent              net of value-added tax, for the 
  of fixed, flexible or risk-managed       review, analysis and negotiation 
  energy contracts with Corporate          of gas and electricity contracts 
  and SME customers. The Group             on behalf of UK and Irish businesses. 
  recognises revenue for services          To the extent that invoices are 
  provided where the amount of             raised to a different pattern 
  revenue can be reliably measured         than the revenue recognition described 
  and it is probable that future           below, appropriate adjustments 
  economic benefits will flow              are made through deferred and 
  to the Group.                            accrued revenue to account for 
                                           revenue when performance obligations 
                                           have been met. 
 Revenue - Corporate Division                  Revenue - Corporate Division 
  Commissions received from the                 The Corporate division core services 
  energy suppliers are based upon               are the review, analysis and negotiation 
  the energy usage of the Corporate             of gas and electricity contracts 
  customer at agreed commission                 on behalf of UK and Irish Corporate 
  rates with the energy suppliers.              clients (Procurement Revenue). 
  Commission income is recognised               Additional services provided include 
  in line with the energy usage                 bill validation, cost recovery 
  of the Corporate customer over                and optimisation services (Optimisation 
  the term of the contract, which               Revenue). 
  is considered to be the point                 Procurement Revenue 
  at which commission income can                Procurement revenue is generated 
  be reliably measured. This is                 by way of commissions received 
  due to the impact of the observed             from energy suppliers, based upon 
  variability of actual to estimated            energy usage of the Corporate 
  energy usage on Corporate customer            customer, and fees received directly 
  contracts on the substantial                  from customers. 
  order book of the Corporate                   The Group subcategorises the Corporate 
  division.                                     division into the following sectors, 
  The majority of contracts are                 and given the differing service 
  entered into as 'direct billing'              offerings provided by each, the 
  contracts, whereby commissions                measurement and recognition of 
  are received in cash terms in                 procurement revenue should be 
  line with the billing profile                 assessed individually: 
  of the ultimate customer, which               1. Estate intensive clients. 
  can be on a monthly or quarterly              2. Energy intensive clients. 
  basis. For a minority of suppliers,           3. Public sector clients. 
  'up-front payment' contracts                  4. Corporate clients. 
  are entered into, whereby the 
  supplier pays a percentage of                 Estate intensive, energy intensive 
  the commission on the contract                and public sector clients: 
  commencement date, with the                   Within these sectors, there are 
  remaining percentage on contract              a number of promises made within 
  reconciliation at a future specified          a contract, including, but not 
  date.                                         limited to, development of a risk 
  Accrued income for the Corporate              management strategy, budgeting 
  division represents commission                and forecasting, bill validation, 
  income recognised at the year-end             ongoing market intelligence and 
  in respect of customer energy                 ongoing account management. The 
  usage prior to the year-end                   various promises made within each 
  which has not been settled by                 contract are not distinct and 
  the energy supplier at that                   each of the promises made are 
  point.                                        inputs into the combined output 
  For risk-managed contracts,                   that each customer has contracted 
  where a number of services are                for, being a cost-effect energy 
  provided to the Corporate customer            management solution. Thus there 
  over the term of the contract,                is considered to be one performance 
  commission income is similarly                obligation within each contract. 
  recognised in line with the                   Estate intensive, energy intensive 
  energy usage of the customer                  and public sector clients are 
  which approximates to recognition             provided with an outsourcing arrangement 
  on a straight-line basis over                 that requires significant input 
  the contract period.                          over the life of a contract. The 
  In respect of contracts for                   customer receives and consumes 
  ongoing services billed directly              the benefits of the services provided 
  to the Corporate customer, including          as Inspired perform, and revenue 
  bureau services (range of services            is recognised evenly over time. 
  tailored to a client's specific               Thus the change in accounting 
  requirement), revenue represents              policy has no impact on revenue 
  the value of work done in the                 recognition within the estate 
  year. Revenue in respect of                   intensive, energy intensive and 
  contracts for ongoing consultancy             public sectors. 
  services is recognised as it                  Corporate clients: 
  becomes unconditionally due                   Corporate clients require less 
  to the Group as services are                  input from Inspired over the life 
  delivered and is measured by                  of the contract than the outsourcing 
  reference to stage of completion              arrangements provided to estate 
  as determined by cost profile.                intensive, energy intensive and 
                                                public sector clients. Corporate 
                                                clients are provided with energy 
                                                reviews, bill validation and account 
                                                management, which are implied 
                                                services, over the life of a contract. 
                                                These promises are not distinct 
                                                from the promise to provide procurement 
                                                and therefore are combined into 
                                                a single performance obligation. 
                                                The profile of revenue recognition, 
                                                using a cost-based input method, 
                                                should reflect the performance 
                                                of the company, with the more 
                                                labour-intensive contract negotiation 
                                                being recognised up front. 
                                                After assessment of the costs 
                                                to serve a corporate customer, 
                                                we judged that an element of revenue 
                                                proportional to the progress towards 
                                                complete satisfaction of the performance 
                                                obligation, should be recognised 
                                                upon contract live date. 
                                                The revenue recognised is constrained 
                                                by the proportion of the revenue 
                                                that is expected to reverse over 
                                                the life of the contract, due 
                                                to consumption variances and contract 
                                                attrition. This amount is calculated 
                                                by comparing total amount realised 
                                                versus total amount expected across 
                                                all completed contracts within 
                                                the portfolio. 
                                                The expected value of the contract 
                                                recognised on the go-live date 
                                                of the contract is 10% of the 
                                                total contract value. 
                                                This represents a change in policy. 
                                                Optimisation Revenue 
                                                Optimisation revenue encompasses 
                                                separate works carried out for 
                                                customers, including, but not 
                                                limited to, energy audits, infrastructure 
                                                and metering services and legislative 
                                                compliance. Each assignment is 
                                                a separate engagement and each 
                                                engagement is a separate performance 
                                                obligation. 
                                                Revenue is generated by way of 
                                                fees received directly from customers 
                                                and recognised as the service 
                                                is provided. 
                                                Thus the change in accounting 
                                                policy has no impact on Optimisation 
                                                revenue recognition. 
 Revenue - SME Division                   Revenue - SME Division 
  The SME division provides services       The SME division provides services 
  through procuring contracts              through procuring contracts with 
  with energy suppliers on behalf          energy suppliers on behalf of 
  of SME customers and generates           SME customers and generates revenues 
  revenues by way of commissions           by way of commissions received 
  received directly from the energy        directly from the energy suppliers. 
  suppliers. No further services           No further services regarding 
  regarding procurement are performed      procurement are performed once 
  once the contract is authorised          the contract is authorised by 
  by the supplier. Commissions             the supplier. 
  earned by the SME division fall          Commissions are based upon the 
  into two broad categories:               energy usage of the SME customer 
  For other SME agreements, commissions    at agreed commission rates with 
  are based upon the energy usage          the energy suppliers. The expected 
  of the SME customer at agreed            commission over the full term 
  commission rates with the energy         of the contract is recognised 
  suppliers. The expected commission       at the point the contract is authorised 
  over the full term of the contract       by the supplier as this is the 
  is recognised at the point the           point at which control of the 
  contract is authorised by the            service is seen to transfer to 
  supplier. Where actual energy            the customer. 
  use by the business differs              The revenue recognised is constrained 
  to that calculated at the date           by the proportion of the revenue 
  the contract goes live, an adjustment    that is expected to reverse over 
  is made to revenue once the              the life of the contract, due 
  actual data is known.                    to consumption variances and contract 
  The cash received profile relating       attrition. This amount is calculated 
  to these revenues varies according       by comparing total amount realised 
  to the contract terms in place           versus total amount expected across 
  with the energy supplier engaged         all completed contracts within 
  and can be received before the           the portfolio. 
  date the contract goes live              The cash received profile relating 
  or spread over the terms of              to these revenues varies according 
  the contract between the energy          to the contract terms in place 
  supplier and the end customer,           with the energy supplier engaged 
  which can be for a period of             and can be received before the 
  up to three years. This amount           date the contract goes live or 
  is not discounted as the impact          spread over the terms of the contract 
  is immaterial. Accrued revenue           between the energy supplier and 
  relates to commission earned,            the end customer, which can be 
  not yet received or paid.                for a period of up to five years. 
                                           This amount is not discounted 
                                           as the impact is immaterial. Accrued 
                                           revenue relates to commission 
                                           earned, not yet received or paid. 
                                           The above assessment under IFRS 
                                           15 mirrors the Group's recognition 
                                           of revenue under IAS 18, and as 
                                           a result, the change in accounting 
                                           policy has no impact on revenue 
                                           recognition within this division. 
 Cost of Sales                            Cost of Sales 
  Cost of sales represents internal        Cost of sales represents internal 
  or external commissions paid             or external commissions paid in 
  in respect of sales made and             respect of sales made and is recognised 
  is recognised as follows:                as follows: 
  Corporate Division                       Corporate Division 
  Sales commissions paid in respect        Commissions paid in respect of 
  of the Corporate division are            the Corporate division are capitalised 
  recognised in profit or loss             and released over the length of 
  on a straight-line basis over            the contract to which they relate. 
  the life of the contract, being          The value of capitalised commissions 
  a reasonable approximation of            as at 31 December 2018 is GBP741,000. 
  how the relative revenues are            SME Division 
  recognised.                              Commissions paid in respect of 
  SME Division                             the SME division are recognised 
  Sales commissions paid in respect        in profit or loss at the point 
  of both COTS and other SME agreements    when the contract is authorised 
  are recognised in profit or              with the supplier, thus mirroring 
  loss at the point when the contract      the recognition of the associated 
  is authorised with the supplier,         revenue. 
  and is therefore recognised 
  in the same period as the associated 
  commission income. 
 

1.2 Prior Year Restatement - Business Combinations

The Group's financial statements for the year ended 31 December 2017 were sampled by the Financial Reporting council as part of the thematic review of smaller listed and AIM quoted companies report and accounts, with a focus on the Group's Statement of Cash Flows and Accounting Policies, including Critical Judgements and Estimates. As a result of the review, management were challenged on the Basis of preparation note in the 2017 financial statements, in particular, the date from which the Group consolidated Horizon.

In the financial statements for the year ended 31 December 2017, management judged the date at which control of Horizon passed to the Group, to be the date at which the locked box mechanism was entered into, being 31 March 2017 (the "Locked Box Date"), between the vendors and the Group. Where a deal subsequently completes, the Locked Box Date is the date at which the economic risks and benefits of ownership transferred to Group. Legal completion occurred on 17 July 2017.

As detailed in the Chief Executive's Statement, management have re-considered this accounting policy and concluded it was not consistent with the requirements of IFRS 10. Management acknowledges, that whilst there are significant indicators of control such as economic measures, including the benefit of all cash generated by the trading of the acquired entity from locked box date, in its current form, the share purchase agreement did not contain sufficient substantive rights to conclude the ability to control the acquired entity from the Locked Box Date.

As such, the financial statements for the year ended 31 December 2017 have been restated. Full details of the restated Group statement of comprehensive income are included below.

This change in date of consolidation had no impact on the acquired cash reserves or the financial statement for Horizon for the full year. The restatement has no impact on the 2018 statement of comprehensive income or future forecasts of the Group. The restatement had no impact on the organic growth of the Group in 2017.

All FY2018 acquisitions have been consolidated from the legal completion date.

Prior to the restatement the financial highlights comparison would be as follows:

 
 Financial Highlights                   2018        2017   Movement 
 Revenue                           GBP32.69m   GBP27.46m        19% 
                                  ==========  ==========  ========= 
 Gross Profit                      GBP27.67m   GBP22.81m        21% 
                                  ==========  ==========  ========= 
 Adjusted EBITDA(2)                GBP13.75m   GBP11.00m        25% 
                                  ==========  ==========  ========= 
 Adjusted Profit Before Tax(3)     GBP11.38m    GBP8.96m        27% 
                                  ==========  ==========  ========= 
 Profit Before Tax                  GBP4.20m    GBP3.55m        18% 
                                  ==========  ==========  ========= 
 Cash Generated from Operations    GBP10.01m    GBP6.91m        45% 
                                  ==========  ==========  ========= 
 Adjusted Diluted EPS(4)               1.61p       1.38p        17% 
                                  ==========  ==========  ========= 
 Diluted Basic EPS                     0.53p       0.46p        22% 
                                  ==========  ==========  ========= 
 

As a comparison, the restated financial highlights are:

 
 Financial Highlights                   2018           2017   Movement 
                                                Restated(1) 
 Revenue                           GBP32.69m      GBP26.36m        25% 
                                  ==========  =============  ========= 
 Gross Profit                      GBP27.67m      GBP21.76m        28% 
                                  ==========  =============  ========= 
 Adjusted EBITDA(2)                GBP13.75m      GBP10.44m        34% 
                                  ==========  =============  ========= 
 Adjusted Profit Before Tax(3)     GBP11.38m       GBP8.40m        38% 
                                  ==========  =============  ========= 
 Profit Before Tax                  GBP4.20m       GBP2.99m        48% 
                                  ==========  =============  ========= 
 Cash Generated From Operations    GBP10.01m       GBP6.45m        54% 
                                  ==========  =============  ========= 
 Adjusted Diluted EPS(4)               1.61p          1.29p        26% 
                                  ==========  =============  ========= 
 Diluted Basic EPS                     0.53p          0.37p        51% 
                                  ==========  =============  ========= 
 

Note

   1.     Restated to revise the date from which Horizon was consolidated. 

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

3. Adjusted profit before tax is earnings before tax, amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), exceptional items, share-based payments, the unwinding of contingent consideration and foreign exchange variances.

4. Adjusted diluted earnings per share represents the diluted earnings per share, as adjusted to remove amortisation of intangible assets (excluding internally generated amortisation related to computer software and customer databases), exceptional items, share-based payments, the unwinding of contingent consideration and foreign exchange variances.

The restated Group statement of comprehensive income is as follows:

 
                                              Previously      Restated  Reclassification  Restated 
                                                Reported   Adjustments              (1.) 
                                                  GBP000        GBP000            GBP000    GBP000 
--------------------------------------------  ----------  ------------  ----------------  -------- 
Revenue                                           27,458       (1,102)                 -    26,356 
Cost of sales                                    (4,645)            49                 -   (4,596) 
--------------------------------------------  ----------  ------------  ----------------  -------- 
Gross profit                                      22,813       (1,053)                 -    21,760 
Administrative expenses                         (17,703)           491             (607)  (17,819) 
--------------------------------------------  ----------  ------------  ----------------  -------- 
Operating profit                                   5,110         (562)             (607)     3,941 
--------------------------------------------  ----------  ------------  ----------------  -------- 
 
Analysed as: 
Earnings before exceptional costs/(items), 
 depreciation, amortisation and share-based 
 payment costs                                    11,004         (562)                 -    10,442 
Exceptional costs/(items)                        (1,510)             -             (607)   (2,117) 
Depreciation                                       (495)             -                 -     (495) 
Amortisation of intangible assets                (3,297)             -                 -   (3,297) 
Share-based payment cost                           (592)             -                 -     (592) 
                                                   5,110         (562)             (607)     3,941 
--------------------------------------------  ----------  ------------  ----------------  -------- 
Finance expenditure                              (1,562)             -               607     (955) 
Other financial items                                  5             -                 -         5 
--------------------------------------------  ----------  ------------  ----------------  -------- 
Profit before income tax                           3,553         (562)                 -     2,991 
Income tax expense                               (1,020)            62                 -     (958) 
--------------------------------------------  ----------  ------------  ----------------  -------- 
Profit for the year                                2,533         (500)                 -     2,033 
--------------------------------------------  ----------  ------------  ----------------  -------- 
Other comprehensive income: 
Exchange differences on translation 
 of foreign operations                               210             -                 -       210 
--------------------------------------------  ----------  ------------  ----------------  -------- 
Total other comprehensive income 
 for the year                                        210             -                 -       210 
--------------------------------------------  ----------  ------------  ----------------  -------- 
Total comprehensive income from 
 continuing operations                             2,743         (500)                 -     2,243 
--------------------------------------------  ----------  ------------  ----------------  -------- 
Attributable to: 
Equity owners of the Company                       2,743         (500)                 -     2,243 
--------------------------------------------  ----------  ------------  ----------------  -------- 
 
Basic earnings per share attributable 
 to the equity holders of the Company 
 (pence)                                            0.48        (0.09)                 -      0.39 
Diluted earnings per share attributable 
 to the equity holders of the Company 
 (pence)                                            0.46        (0.09)                 -      0.37 
Adjusted basic earnings per share 
 attributable to the equity holders 
 of the company (pence)                             1.43        (0.10)                 -      1.33 
Adjusted diluted earnings per share 
 attributable to the equity holders 
 of the company (pence)                             1.38        (0.09)                 -      1.29 
--------------------------------------------  ----------  ------------  ----------------  -------- 
 

The restated Group statement of financial position is as follows:

 
                                Previously      Restated         Final fair  Restated 
                                  Reported   Adjustments   value adjustment 
                                                                 (goodwill) 
                                                                       (2.) 
                                    GBP000        GBP000             GBP000    GBP000 
------------------------------  ----------  ------------  -----------------  -------- 
ASSETS 
Non-current assets 
Goodwill                            21,680         (500)              1,010    22,190 
Other intangible assets             11,662             -                  -    11,662 
Property, plant and equipment        1,407             -                  -     1,407 
------------------------------  ----------  ------------  -----------------  -------- 
Non-current assets                  34,749         (500)              1,010    35,259 
------------------------------  ----------  ------------  -----------------  -------- 
Current assets 
Trade and other receivables         16,304             -              (427)    15,877 
Cash and cash equivalents            5,183             -                  -     5,183 
------------------------------  ----------  ------------  -----------------  -------- 
Current assets                      21,488             -              (427)    21,060 
------------------------------  ----------  ------------  -----------------  -------- 
Total assets                        56,237         (500)                583    56,319 
------------------------------  ----------  ------------  -----------------  -------- 
LIABILITIES 
Current liabilities 
Trade and other payables             2,532             -                  -     2,532 
Bank borrowings                      2,037             -                  -     2,037 
Contingent consideration             3,036             -                583     3,619 
Current tax liability                3,022             -                  -     3,022 
------------------------------  ----------  ------------  -----------------  -------- 
Current liabilities                 10,627             -                583    11,210 
------------------------------  ----------  ------------  -----------------  -------- 
Non-current liabilities 
Bank borrowings                     17,809             -                  -    17,809 
Trade and other payables                33             -                  -        33 
Contingent consideration             1,375             -                  -     1,375 
Interest rate swap                     144             -                  -       144 
Deferred tax liability               1,126             -                  -     1,126 
------------------------------  ----------  ------------  -----------------  -------- 
Non-current liabilities             20,487             -                  -    20,487 
------------------------------  ----------  ------------  -----------------  -------- 
Total liabilities                   31,114             -                583    31,697 
------------------------------  ----------  ------------  -----------------  -------- 
Net assets                          25,122         (500)                  -    24,622 
------------------------------  ----------  ------------  -----------------  -------- 
EQUITY 
Share capital                          711             -                  -       711 
Share premium account               13,707             -                  -    13,707 
Merger relief reserve               15,410             -                  -    15,410 
Share-based payment reserve          1,231             -                  -     1,231 
Retained earnings                    7,854         (500)                  -     7,354 
Investment in own shares           (2,618)             -                  -   (2,618) 
Translation reserve                    210             -                  -       210 
Reverse acquisition reserve       (11,383)             -                  -  (11,383) 
------------------------------  ----------  ------------  -----------------  -------- 
Total equity                        25,122         (500)                  -    24,622 
------------------------------  ----------  ------------  -----------------  -------- 
 

The restated Group statement of cash flows is as follows:

 
                                            Previously      Restated  Reclassification  Restated 
                                              Reported   Adjustments              (1.) 
                                                GBP000        GBP000            GBP000    GBP000 
------------------------------------------  ----------  ------------  ----------------  -------- 
Cash flows from operating activities 
Profit before income tax                         3,553         (562)                 -     2,991 
Adjustments 
Depreciation                                       495             -                 -       495 
Amortisation                                     3,297             -                 -     3,297 
Share-based payment cost                           592             -                 -       592 
Finance expenditure                              1,557             -             (607)       950 
Exchange rate variances                           (92)             -                 -      (92) 
Other financial items                            (200)             -               607       407 
------------------------------------------  ----------  ------------  ----------------  -------- 
Cash flows before changes in working 
 capital                                         9,202         (562)                 -     8,640 
Movement in working capital 
Increase in trade and other receivables        (2,441)            50                 -   (2,391) 
Increase in trade and other payables               152            50                 -       202 
------------------------------------------  ----------  ------------  ----------------  -------- 
Cash generated from operations                   6,913         (462)                 -     6,451 
Income taxes paid                              (1,418)             -                 -   (1,418) 
------------------------------------------  ----------  ------------  ----------------  -------- 
Net cash flows from operating activities         5,495         (462)                 -     5,033 
------------------------------------------  ----------  ------------  ----------------  -------- 
Cash flows from investing activities 
Contingent consideration paid                  (2,550)             -                 -   (2,550) 
Acquisition of subsidiaries, net 
 of cash acquired (note 11)                   (10,672)           462                 -  (10,210) 
Payments to acquire property, plant 
 and equipment                                   (455)             -                 -     (455) 
Payments to acquire intangible assets          (1,222)             -                 -   (1,222) 
------------------------------------------  ----------  ------------  ----------------  -------- 
Net cash used in investing activities         (14,899)           462                 -  (14,437) 
------------------------------------------  ----------  ------------  ----------------  -------- 
Cash flows from financing activities 
New bank loans (net of debt issue 
 costs)                                         23,960             -                 -    23,960 
Proceeds from issue of new shares                8,870             -                 -     8,870 
Repayment of bank loans                       (16,149)             -                 -  (16,149) 
Interest on bank loans paid                      (627)             -                 -     (627) 
Dividends paid                                 (2,457)             -                 -   (2,457) 
------------------------------------------  ----------  ------------  ----------------  -------- 
Net cash flows from financing activities        13,597             -                 -    13,597 
------------------------------------------  ----------  ------------  ----------------  -------- 
Net increase in cash and cash equivalents        4,193             -                 -     4,193 
Cash and cash equivalents brought 
 forward                                           985             -                 -       985 
Exchange differences on cash and 
 cash equivalents                                    5             -                 -         5 
------------------------------------------  ----------  ------------  ----------------  -------- 
Cash and cash equivalents carried 
 forward                                         5,183             -                 -     5,183 
------------------------------------------  ----------  ------------  ----------------  -------- 
 

1. The reclassification column within the restated primary statements relates to the reclassification of the change in fair value of contingent consideration from finance expenditure to administrative expenses. This has now been included as an exceptional item and has no impact on adjusted EBITDA, profit before income tax, the balance sheet and cash generated from operations.

2. In accordance with IFRS 3, where provisional fair value assessments are made at the date of acquisition, and are subsequently updated, such adjustments have been reflected in the comparative period.

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 2018 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, Direct Energy Purchasing Limited, Wholesale Power UK Limited, STC Energy and Carbon Holdings Limited, Informed Business Solutions Limited, Flexible Energy Management Limited, Churchcom Limited, Horizon Energy Group Limited, Energy Cost Management Limited, SystemsLink 2000 Limited, Professional Cost Management Group Limited, Squareone Enterprises Limited and Inprova Finance Limited. Corporate's core services are in the review, analysis and negotiation of gas and electricity contracts on behalf of UK and Irish Corporate clients. Additional services provided include energy review and benchmarking, negotiation, bill validation, cost recovery, optimisation services and software solutions. The Group's Corporate division benefits from a market-leading trading team, which actively focuses on energy intensive and public sector customers, providing more complex, long-term energy frameworks based on agreed risk management strategies.

The SME division ("SME")

This sector comprises the operations of EnergiSave Online Limited, KWH Consulting Limited and Simply Business Energy Limited. 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.

 
                                             2018                                2017 Restated 
                            ---------------------------------------  ------------------------------------- 
                                                                                             PLC 
                            Corporate      SME  PLC costs     Total  Corporate      SME    costs     Total 
                              GBP'000  GBP'000    GBP'000   GBP'000    GBP'000  GBP'000  GBP'000   GBP'000 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
Revenue                        27,311    5,381          -    32,692     20,358    5,998        -    26,356 
Cost of sales                 (1,923)  (3,095)          -   (5,018)    (2,180)  (2,416)        -   (4,596) 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
Gross profit                   25,388    2,286          -    27,674     18,178    3,582        -    21,760 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
Administrative expenses      (13,848)    (157)    (8,166)  (22,171)   (10,078)  (1,533)  (6,208)  (17,819) 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
 
Operating profit               11,540    2,129    (8,166)     5,503      8,100    2,049  (6,208)     3,941 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
Analysed as: 
EBITDA                         13,769    2,431    (2,448)    13,752      9,635    2,454  (1,647)    10,442 
Depreciation                    (514)     (36)       (19)     (569)      (460)     (35)        -     (495) 
Amortisation                    (727)    (120)    (3,658)   (4,505)      (375)    (357)  (2,565)   (3,297) 
Share-based payments            (157)     (19)      (295)     (471)      (278)     (13)    (301)     (592) 
Exceptional costs/(items)       (831)    (127)    (1,746)   (2,704)      (422)        -  (1,695)   (2,117) 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
                               11,540    2,129    (8,166)     5,503      8,100    2,049  (6,208)     3,941 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
Finance expenditure                                         (1,380)                                  (955) 
Other financial items                                            76                                      5 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
Profit before income 
 tax                                                          4,199                                  2,991 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
Total assets                   26,134    6,938     52,451    85,523     20,017    4,420   31,882    56,319 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
Total liabilities               7,641      684     31,883    40,208      3,703      462   27,532    31,697 
--------------------------  ---------  -------  ---------  --------  ---------  -------  -------  -------- 
 
 

3. Exceptional costs/(items)

 
                                                        2018      2017 
                                                     GBP'000   GBP'000 
 Fees associated with acquisition                      2,345       896 
 Restructuring costs                                     935       614 
 Change in fair value of contingent consideration      (576)       607 
                                                       2,704     2,117 
--------------------------------------------------  --------  -------- 
 

One-off costs include costs of GBP935,000 relating to restructuring programmes associated with the Board transition, integration of the Corporate division from trading subsidiaries to a customer-focused structure, and the integration of businesses acquired in 2017 and 2018. These costs are considered by the Directors to be either material in nature or non-recurring and therefore require separate identification to give a true and fair view of the Group's result for the year. Costs associated with business combinations of GBP2,345,000 have been incurred which would not normally be seen as costs or income relating to the underlying principal activities of the Group.

Change in the fair value of contingent consideration includes a gain on revaluation of contingent consideration of GBP970,000 in relation to the acquisition of Horizon July 2017. The final aggregate consideration paid for Horizon was GBP12.7m, with Horizon contributing GBP4.2m and GBP2.6m to Group revenues and EBITDA respectively in 2018, equating to a multiple of 4.9x EBITDA.

4. Finance expenditure

 
                                         2018     2017 
                                      GBP'000  GBP'000 
------------------------------------  -------  ------- 
Interest payable on bank borrowings     1,071      627 
Foreign exchange variance                 254      136 
Amortisation of debt issue costs           55      192 
------------------------------------  -------  ------- 
                                        1,380      955 
------------------------------------  -------  ------- 
 

5. Income tax expense

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

 
                                                       2018        2017 
                                                               Restated 
                                                    GBP'000     GBP'000 
-------------------------------------------------  --------  ---------- 
 Current tax 
 Current tax charge                                   1,584       1,337 
 Adjustments in respect of prior periods               (87)          88 
-------------------------------------------------  --------  ---------- 
                                                      1,497       1,425 
-------------------------------------------------  --------  ---------- 
 Deferred tax 
 Origination and reversal of temporary timing 
  differences                                         (537)       (600) 
 Adjustments in respect of prior periods                  -         133 
                                                      (537)       (467) 
 Total income tax charge                                960         958 
 Reconciliation of tax charge to accounting 
  profit: 
 Profit on ordinary activities before taxation        4,199       2,991 
-------------------------------------------------  --------  ---------- 
 Tax at UK income tax rate of 19% (2017: 19.25%)        798         576 
 Disallowable expenses                                  319         318 
 Share options                                         (70)        (50) 
 Adjust closing deferred tax to reflect change 
  in tax rate                                             -       (107) 
 Effects of current period events on current 
  tax prior period balances                            (87)         221 
 Total income tax charge                                960         958 
-------------------------------------------------  --------  ---------- 
 

6. 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.

 
                                                        2018        2017 
                                                                Restated 
                                                     GBP'000     GBP'000 
--------------------------------------------------  --------  ---------- 
 Profit attributable to equity holders of the 
  Group                                                3,239       2,033 
 Fees associated with acquisition                      2,345         896 
 Restructuring costs                                     935         614 
 Change in fair value of contingent consideration      (576)         607 
 Amortisation of acquired intangible assets            3,749       2,565 
 Foreign exchange variance                               254         136 
 Deferred tax in respect of amortisation of 
  intangible assets                                    (536)       (407) 
 Share-based payment costs                               471         592 
--------------------------------------------------  --------  ---------- 
 Adjusted profit attributable to owners of the 
  Group                                                9,881       7,036 
--------------------------------------------------  --------  ---------- 
 Weighted average number of ordinary shares 
  in issue                                           587,602     528,034 
 Dilutive effect of share options                     27,679      16,756 
--------------------------------------------------  --------  ---------- 
 Diluted weighted average number of ordinary 
  shares in issue                                    615,281     544,790 
--------------------------------------------------  --------  ---------- 
 Basic earnings per share (pence)                       0.55        0.39 
 Diluted earnings per share (pence)                     0.53        0.37 
 Adjusted basic earnings per share (pence)              1.68        1.33 
 Adjusted diluted earnings per share (pence)            1.61        1.29 
--------------------------------------------------  --------  ---------- 
 

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 (excluding internally generated amortisation related to computer software and customer databases), exceptional items and share-based payment costs which have been expensed to the Group statement of comprehensive income in the year, the unwinding of contingent consideration and foreign exchange variances. The adjustments to earnings per share have been disclosed to give a clear understanding of the Group's underlying trading performance. Adjusted profit before tax is calculated as follows:

 
                                                         2018        2017 
                                                                 Restated 
                                                      GBP'000     GBP'000 
---------------------------------------------------  --------  ---------- 
 Profit before tax                                      4,199       2,991 
 Share-based payment cost                                 471         592 
 Amortisation of acquired intangible assets             3,749       2,565 
 Foreign exchange variance                                254         136 
 Exceptional costs/(items): 
  Fees associated with acquisition                      2,345         896 
  Restructuring costs                                     935         614 
  Change in fair value of contingent consideration      (576)         607 
 Adjusted profit attributable to owners of the 
  Group                                                11,377       8,401 
---------------------------------------------------  --------  ---------- 
 

7. Property, plant and equipment

 
                                             Fixtures 
                                                  and     Motor   Computer     Leasehold 
                                             fittings  vehicles  equipment  improvements    Total 
                                              GBP'000   GBP'000    GBP'000       GBP'000  GBP'000 
-------------------------------------------  --------  --------  ---------  ------------  ------- 
Cost 
At 1 January 2017                                 615        13      1,229           313    2,170 
Acquisitions through business combinations         31        55         18            14      118 
Foreign exchange variances                          1         2          1             -        4 
Additions                                          96        21        224           114      455 
Disposals                                           -      (22)          -             -     (22) 
-------------------------------------------  --------  --------  ---------  ------------  ------- 
At 31 December 2017                               743        69      1,472           441    2,725 
Acquisitions through business combinations        156        15        228            12      411 
Foreign exchange variances                          -         1          1             -        2 
Additions                                          62        88        460           258      868 
Disposals                                           -      (40)          1             -     (39) 
-------------------------------------------  --------  --------  ---------  ------------  ------- 
At 31 December 2018                               961       133      2,162           711    3,967 
-------------------------------------------  --------  --------  ---------  ------------  ------- 
Depreciation 
At 1 January 2017                                 265         4        506            64      839 
Charge for the year                               108        14        335            38      495 
Disposals                                           -      (16)          -             -     (16) 
-------------------------------------------  --------  --------  ---------  ------------  ------- 
At 31 December 2017                               373         2        841           102    1,318 
Charge for the year                               121        26        370            52      569 
Disposals                                           -       (3)          -             -      (3) 
-------------------------------------------  --------  --------  ---------  ------------  ------- 
At 31 December 2018                               494        25      1,211           154    1,884 
-------------------------------------------  --------  --------  ---------  ------------  ------- 
Net book value 
At 31 December 2018                               467       108        951           557    2,083 
-------------------------------------------  --------  --------  ---------  ------------  ------- 
At 31 December 2017                               370        67        631           339    1,407 
-------------------------------------------  --------  --------  ---------  ------------  ------- 
At 31 December 2016                               350         9        723           249    1,331 
-------------------------------------------  --------  --------  ---------  ------------  ------- 
 
 

Included within the net book value is GBP231,000 (31 December 2017: GBP152,000) relating to assets held under hire purchase agreements. The depreciation charged to the financial statements in the period in respect of such assets amounted to GBP56,000 (31 December 2017: GBP51,000).

8. Intangible assets and goodwill

 
                            Computer            Customer   Customer       Customer   Total other 
                                        Trade 
                            software     name  databases  contracts  relationships   intangibles  Goodwill    Total 
                             GBP'000  GBP'000    GBP'000    GBP'000        GBP'000       GBP'000   GBP'000  GBP'000 
--------------------------  --------  -------  ---------  ---------  -------------  ------------  --------  ------- 
Cost 
At 1 January 
 2017                          4,762      115      1,320      4,405          1,989        12,591    12,987   25,578 
Additions                      1,043        -        178          -              -         1,221         -    1,221 
Acquisitions 
 through business 
 combinations                      -        -          -      6,182              -         6,182     8,626   14,808 
Prior year adjustment              -        -          -          -              -             -     (500)    (500) 
Fair value adjustment 
 to business combinations          -        -          -          -              -             -     1,010    1,010 
Foreign exchange 
 variances                         -        -          -        164              -           164        67      231 
--------------------------  --------  -------  ---------  ---------  -------------  ------------  --------  ------- 
At 31 December 
 2017                          5,805      115      1,498     10,751          1,989        20,158    22,190   42,348 
Additions                      1,411        -         98          -              -         1,509         -    1,509 
Acquisitions 
 through business 
 combinations                  2,134        -          -      3,848            242         6,224    22,140   28,364 
Foreign exchange 
 variances                         -        -          -         88              -            88        36      124 
-------------------------- 
At 31 December 
 2018                          9,350      115      1,596     14,687          2,231        27,979    44,366   72,345 
--------------------------  --------  -------  ---------  ---------  -------------  ------------  --------  ------- 
Amortisation 
At 1 January 
 2017                          1,241        6        961      2,435            556         5,199         -    5,199 
Charge for the 
 year                          1,032        6        356      1,406            497         3,297         -    3,297 
--------------------------  --------  -------  ---------  ---------  -------------  ------------  --------  ------- 
At 31 December 
 2017                          2,273       12      1,317      3,841          1,053         8,496         -    8,496 
Charge for the 
 year                          1,589        6        120      2,246            544         4,505         -    4,505 
--------------------------  --------  -------  ---------  ---------  -------------  ------------  --------  ------- 
At 31 December 
 2018                          3,862       18      1,437      6,087          1,597        13,001         -   13,001 
--------------------------  --------  -------  ---------  ---------  -------------  ------------  --------  ------- 
Net book value 
At 31 December 
 2018                          5,488       97        159      8,600            634        14,978    44,366   59,344 
--------------------------  --------  -------  ---------  ---------  -------------  ------------  --------  ------- 
At 31 December 
 2017                          3,532      103        181      6,910            936        11,662    22,190   33,852 
--------------------------  --------  -------  ---------  ---------  -------------  ------------  --------  ------- 
At 31 December 
 2016                          3,521      109        359      1,970          1,433         7,392    12,987   20,379 
--------------------------  --------  -------  ---------  ---------  -------------  ------------  --------  ------- 
 

Computer software is a combination of assets internally generated and assets acquired through business combinations. Amortisation charged in the period to 31 December 2018 associated with computer software acquired through business combinations is GBP953,000 (2017: GBP656,000). The additional GBP636,000 (2017: GBP376,000) charged in the period relates to the amortisation of internally generated computer software. Amortisation of customer databases of GBP120,000 (2017: GBP356,000) is also in relation to internally generated intangible assets. The total amortisation charged in the period to 31 December 2018 associated with intangible assets acquired through business combinations is GBP3,749,000 (2017: GBP2,565,000).

9. Trade and other receivables

 
 
                         2018      2017 
                      GBP'000   GBP'000 
-------------------  --------  -------- 
 Trade receivables      5,671     3,272 
 Other receivables        667       144 
 Prepayments            1,346     1,419 
 Accrued income        14,222    11,042 
-------------------  --------  -------- 
                       21,906    15,877 
-------------------  --------  -------- 
 

10. Trade and other payables

 
 
                                                  2018      2017 
                                               GBP'000   GBP'000 
--------------------------------------------  --------  -------- 
 Trade payables                                  1,629       963 
 Social security and other taxes                 1,844     1,239 
 Accruals                                        2,484       237 
 Deferred income                                   949         - 
 Amounts due under hire purchase agreements        131        93 
--------------------------------------------  --------  -------- 
                                                 7,037     2,532 
--------------------------------------------  --------  -------- 
 

11. Business combinations

SystemsLink 2000 Limited (SL2000)

On 21 March 2018, the Group acquired 100% of the issued share capital and voting rights of SystemsLink 2000 Limited, a company based in the United Kingdom. SL2000 is a supplier of energy management software, enabling customers to effectively monitor and manage their utilities consumption. SL2000's energy management platform 'Energy Manager' is licensed to public and private sector energy users, energy consultancies and third party intermediaries. Inspired has been a licensee of Energy Manager since the Group's IPO in 2011, to support its service offering and energy management needs of the core Corporate Division. This acquisition brings this capability in-house, providing security of access.

The acquisition of SL2000 was completed for a total consideration of GBP4,154,000. The payment was satisfied by GBP3,529,000 cash and the issue of 2,948,113 ordinary shares (with an aggregate fair value at completion of GBP625,000) of Inspired Energy PLC.

The acquisition was financed through the drawdown on the Group's existing acquisition facility with Santander. The details of the business combination are as follows:

Recognised amounts of identifiable net assets

 
                                                              Provisional 
                                                        Book   fair value  Provisional 
                                                       value   adjustment   fair value 
                                                         GBP          GBP          GBP 
-----------------------------------------------------  -----  -----------  ----------- 
Property, plant & equipment                               12            -           12 
Intangible assets                                          -        2,146        2,146 
Trade and other receivables                              295         (44)          251 
Cash and cash equivalents                                359            -          359 
Total assets                                             666        2,102        2,768 
-----------------------------------------------------  -----  -----------  ----------- 
Trade and other payables                                 114          401          515 
Current tax liability                                    131         (51)           80 
Deferred tax liability                                     -          365          365 
-----------------------------------------------------  -----  -----------  ----------- 
Total liabilities                                        245          715          960 
-----------------------------------------------------  -----  -----------  ----------- 
Provisional fair value of identifiable net 
 assets                                                                          1,808 
Provisional goodwill                                                             2,346 
-----------------------------------------------------  -----  -----------  ----------- 
Fair value of consideration transferred                                          4,154 
-----------------------------------------------------  -----  -----------  ----------- 
Satisfied by: 
- cash consideration paid                                                        3,529 
- fair value of shares issued on 22 March 
 2018                                                                              625 
                                                                                 4,154 
-----------------------------------------------------  -----  -----------  ----------- 
Net cash outflow arising from business combinations: 
- cash consideration paid                                                        3,529 
- cash and cash equivalents acquired                                             (359) 
-----------------------------------------------------  -----  -----------  ----------- 
Net cash outflow                                                                 3,170 
-----------------------------------------------------  -----  -----------  ----------- 
 

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to SL2000 has been carried out. Fair values are provisional as they are still within the twelve-month hindsight period to adjust fair values.

The fair value of the acquired longstanding customer relationships was calculated as GBP242,000. The excess earnings approach was used in valuing SL2000's existing customer relationships. The value of the customer relationships is calculated as the sum of the present value of the projected cash flow, in excess of returns on contributory assets over the life of the relationship with the customer.

The fair value of the software development Intangible at acquisition was calculated to be GBP1,904,000 on a reproduction cost basis and is to be amortised on a straight-line basis over five years In line with its expected economic life.

The Group estimates costs incurred in relation to the transaction to be GBP235,000. These costs are included within exceptional costs/items in the Group statement of comprehensive income.

Energy Cost Management Limited (ECM)

On 21 March 2018, the Group acquired 100% of the issued share capital and voting rights of Energy Cost Management Limited, a company based in the United Kingdom. ECM is a niche operator of water and energy management services, specialising in water engineering solutions. ECM provides a range of water management services to corporate customers, including water procurement, bill validation, retrospective audit of water bills, leak detection and repair and compliance services, broadening Inspired's service offering within its core Corporate Division.

The acquisition of ECM was completed for a total consideration of GBP1,772,000. The initial GBP934,000 was satisfied in cash. The additional GBP1,150,000 is contingent upon ECM achieving a challenging EBITDA target until 31 December 2020 payable on 31 March 2021. The range of potential outcomes of consideration payable varied from GBP0.3m to GBP1.5m.

The acquisition was financed through the drawdown on the Group's existing facility with Santander. The details of the business combination are as follows:

Recognised amounts of identifiable net assets

 
                                                          Provisional 
                                                    Book   fair value  Provisional 
                                                   value   adjustment   fair value 
                                                     GBP          GBP          GBP 
-------------------------------------------------  -----  -----------  ----------- 
Property, plant and equipment                         62            -           62 
Intangible assets                                      -          130          130 
Trade and other receivables                          149           26          175 
Cash and cash equivalent                             450            -          450 
Total assets                                         661          156          817 
-------------------------------------------------  -----  -----------  ----------- 
Trade and other payables                             181            -          181 
Current tax liability                                 17         (14)            3 
Deferred tax liability                                11           22           33 
-------------------------------------------------  -----  -----------  ----------- 
Total liabilities                                    209            8          217 
-------------------------------------------------  -----  -----------  ----------- 
Provisional fair value of identifiable 
 net assets                                                                    600 
Provisional goodwill                                                         1,172 
-------------------------------------------------  -----  -----------  ----------- 
Fair value of consideration transferred                                      1,772 
-------------------------------------------------  -----  -----------  ----------- 
Satisfied by: 
- cash consideration paid                                                      934 
- contingent consideration                                                   1,150 
- discounting impact on contingent consideration                             (312) 
                                                                             1,772 
-------------------------------------------------  -----  -----------  ----------- 
Net cash outflow arising from business 
 combinations: 
- cash consideration paid                                                      934 
- cash and cash equivalents acquired                                         (450) 
Net cash outflow                                                               484 
-------------------------------------------------  -----  -----------  ----------- 
 

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to ECM has been carried out. Fair values are provisional as they are still within the twelve-month hindsight period to adjust fair values. The fair value of the customer contracts was calculated as GBP130,000, which includes only values ascribed to existing customer contracts ECM has in place. No value was ascribed to the customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be GBP95,000. These costs are included within exceptional costs/items in the Group statement of comprehensive income.

Squareone Enterprises Limited (SQ1)

On 8 August 2018, the Group acquired 100% of the issued share capital and voting rights of Squareone Enterprises Limited, a company based in the UK. SQ1 provides energy consultancy and procurement services to a range of corporate customers, with a strong presence on the education and manufacturing sectors. SQ1 benefits from a strong secured order book and retention rates and is a complementary addition to Inspired's core Corporate Division.

The acquisition of SQ1 was completed for a total consideration of GBP1,267,000. The initial GBP820,000 was satisfied in cash. The additional GBP525,000 is contingent upon SQ1 achieving challenging revenue targets until 31 March 2020 payable in two instalments payable on 30 April 2019 and 30 April 2020. The range of potential outcomes of consideration payable varied from GBP0.4m to GBP0.6m.

The acquisition was financed through the drawdown on the Group's existing facility with Santander. The details of the business combination are as follows:

Recognised amounts of identifiable net assets

 
                                                              Provisional 
                                                        Book   fair value  Provisional 
                                                       value   adjustment   fair value 
                                                         GBP          GBP          GBP 
-----------------------------------------------------  -----  -----------  ----------- 
Property, plant and equipment                              9            -            9 
Intangible assets                                          -          113          113 
Trade and other receivables                               46         (33)           13 
Cash and cash equivalent                                 125            -          125 
Total assets                                             180           80          260 
-----------------------------------------------------  -----  -----------  ----------- 
Trade and other payables                                  33            -           33 
Current tax liability                                      -           19           19 
Deferred tax liability                                    48           15           63 
-----------------------------------------------------  -----  -----------  ----------- 
Total liabilities                                         81           34          115 
-----------------------------------------------------  -----  -----------  ----------- 
Provisional fair value of identifiable net 
 assets                                                                            145 
Provisional goodwill                                                             1,122 
-----------------------------------------------------  -----  -----------  ----------- 
Fair value of consideration transferred                                          1,267 
-----------------------------------------------------  -----  -----------  ----------- 
Satisfied by: 
- cash consideration paid                                                          820 
- contingent consideration                                                         525 
- discounting impact on contingent consideration                                  (78) 
                                                                                 1,267 
-----------------------------------------------------  -----  -----------  ----------- 
Net cash outflow arising from business combinations: 
- cash consideration paid                                                          820 
- cash and cash equivalents acquired                                             (125) 
Net cash outflow                                                                   695 
-----------------------------------------------------  -----  -----------  ----------- 
 

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to SQ1 has been carried out. Fair values are provisional as they are still within the twelve-month hindsight period to adjust fair values. The fair value of the customer contracts was calculated as GBP113,000, which includes only values ascribed to valid energy supply contracts and letters of authority granting SQ1 exclusivity to negotiate future energy supply contracts. No value was ascribed to the customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be GBP63,000. These costs are included within exceptional costs/items in the Group statement of comprehensive income.

Professional Cost Management Group Limited (PCMG)

On 10 September 2018, the Group acquired 100% of the issued share capital and voting rights of Professional Cost Management Group Limited, a company based in the UK. PCMG provides a forensic auditing service to identify and recover overpayments of utilities and telecoms bills on behalf of its clients and provides optimisation analysis to enable customers to improve their tariff and billing structure. Whilst Inspired provides cost recovery services to Its clients, the integration of PCMG to the Group creates a market leading capability, allowing the Group's existing customer base to further benefit from PCMG's specialism, and conversely, providing PCMG customers with the opportunity to benefit from the broad service offering of the enlarged Group.

The acquisition of PCMG was completed for a total consideration of GBP1,072,000. The initial GBP800,000 was satisfied in cash. The additional GBP550,000 is contingent upon PCMG achieving challenging EBITDA targets until 31 December 2028 payable in nine instalments payable on 31 March 2019, 31 March 2020, 31 March 2021, 31 March 2022, 31 March 2023, 31 March 2024, 31 March 2025, 31 March 2026 and 31 March 2027. The contingent consideration is based on forecasted EBITDA for the period through to 31 December 2028.

The acquisition was financed through the drawdown on the Group's existing facility with Santander. The details of the business combination are as follows:

Recognised amounts of identifiable net assets

 
                                                              Provisional 
                                                        Book   fair value  Provisional 
                                                       value   adjustment   fair value 
                                                         GBP          GBP          GBP 
-----------------------------------------------------  -----  -----------  ----------- 
Property, plant and equipment                             16            -           16 
Trade and other receivables                            1,004        (428)          576 
Cash and cash equivalent                                 151            -          151 
Deferred tax asset                                         3            -            3 
Total assets                                           1,174        (428)          746 
-----------------------------------------------------  -----  -----------  ----------- 
Trade and other payables                                 482            -          482 
-----------------------------------------------------  -----  -----------  ----------- 
Total liabilities                                        482            -          482 
-----------------------------------------------------  -----  -----------  ----------- 
Provisional fair value of identifiable net 
 liabilities                                                                       264 
Provisional goodwill                                                               808 
-----------------------------------------------------  -----  -----------  ----------- 
Fair value of consideration transferred                                          1,072 
-----------------------------------------------------  -----  -----------  ----------- 
Satisfied by: 
- cash consideration paid                                                          800 
- contingent consideration                                                         550 
- discounting impact on contingent consideration                                 (278) 
                                                                                 1,072 
-----------------------------------------------------  -----  -----------  ----------- 
Net cash outflow arising from business combinations: 
- cash consideration paid                                                          800 
- cash and cash equivalents acquired                                             (151) 
Net cash outflow                                                                   649 
-----------------------------------------------------  -----  -----------  ----------- 
 

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to PCMG has been carried out. No value was ascribed to customer contracts or customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be GBP139,000. These costs are included within exceptional costs/items in the Group statement of comprehensive income.

Inprova Finance Limited (IFL)

On 6 December 2018, the Group acquired 100% of the issued share capital and voting rights of Inprova Finance Limited, a company based in the UK. IFL provides energy procurement services to its customers analysing usage data to recommend the appropriate options on either flexible procurement arrangements or a fixed price basis. IFL also provides consultancy services to its customers to enable customers to buy energy efficiently and monitor and reduce their carbon footprint. IFL is a significant operator within the UK TPI market with access to 19,000 meter points through over 1,000 customers. IFL has a strong presence in four sectors which it believes have attractive long term growth dynamics being: data centres, social housing, education and construction, which the Board believe with further extend the Group's sector specialism.

The acquisition of IFL was completed for a total consideration of GBP21,096,000 satisfied in cash.

The acquisition was financed through the issue of shares in the Group and the drawdown on the Group's existing facility with Santander. The details of the business combination are as follows:

Recognised amounts of identifiable net assets

 
                                                              Provisional 
                                                        Book   fair value  Provisional 
                                                       value   adjustment   fair value 
                                                         GBP          GBP          GBP 
-----------------------------------------------------  -----  -----------  ----------- 
Property, plant and equipment                            307            -          307 
Intangible assets                                        231        3,605        3,836 
Trade and other receivables                            3,631        (395)        3,236 
Cash and cash equivalent                                 615            -          615 
Total assets                                           4,784        3,210        7,994 
-----------------------------------------------------  -----  -----------  ----------- 
Trade and other payables                               1,792            -        1,792 
Current tax liability                                    366            -          366 
Deferred tax liability                                    18          613          631 
-----------------------------------------------------  -----  -----------  ----------- 
Total liabilities                                      2,176          613        2,789 
-----------------------------------------------------  -----  -----------  ----------- 
Provisional fair value of identifiable net 
 assets                                                                          5,205 
Provisional goodwill                                                            15,891 
-----------------------------------------------------  -----  -----------  ----------- 
Fair value of consideration transferred                                         21,096 
-----------------------------------------------------  -----  -----------  ----------- 
Satisfied by: 
- cash consideration paid                                                       21,096 
                                                                                21,096 
-----------------------------------------------------  -----  -----------  ----------- 
Net cash outflow arising from business combinations: 
- cash consideration paid                                                       21,096 
- cash and cash equivalents acquired                                             (615) 
Net cash outflow                                                                20,481 
-----------------------------------------------------  -----  -----------  ----------- 
 

Goodwill

The goodwill arising on this acquisition is attributable to niche market expertise enabling cross-selling opportunities achieved from combining the acquired customer bases and trade with the existing Group.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to PCMG has been carried out. Fair values are provisional as they are still within the twelve-month hindsight period to adjust fair values. The fair value of the customer contracts was calculated as GBP3,605,000, which includes only values ascribed to existing customer contracts IFL has in place. No value was ascribed to the customer relationships themselves, or any likely renewals of contracts outside of a period of exclusivity.

The Group estimates costs incurred in relation to the transaction to be GBP1,435,000. These costs are included within exceptional costs/items in the Group statement of comprehensive income.

Horizon Energy Group Limited (HEG)

As disclosed in the 31 December 2017 annual report and accounts, on 17 July 2017, the Group acquired an initial 90% of the issued share capital and voting rights of HEG, a company based in Cork, Ireland.

Identifiable net assets

A provisional fair value exercise to determine the fair value of assets and liabilities acquired in relation to HEG was carried out. Within the twelve-month hindsight period, the Group has re-assessed the provisional fair values and which have now been adjusted as per the table below:

Recognised amounts of identifiable net assets

 
                                                             Book  Fair value       Final 
                                                            value  adjustment  Fair value 
                                                       (restated) 
                                                           GBP000      GBP000      GBP000 
-----------------------------------------------------  ----------  ----------  ---------- 
Property, plant and equipment                                 116           -         116 
Intangible assets                                               -       5,478       5,478 
Trade and other receivables                                 1,394       (427)         967 
Cash and cash equivalent                                    1,303           -       1,303 
Total assets                                                2,813       5,051       7,864 
-----------------------------------------------------  ----------  ----------  ---------- 
Trade and other payables                                      927           -         927 
Deferred tax liability                                          -         685         685 
-----------------------------------------------------  ----------  ----------  ---------- 
Total liabilities                                             927         685       1,612 
-----------------------------------------------------  ----------  ----------  ---------- 
Fair value of identifiable net liabilities                                          6,252 
Goodwill                                                                            5,505 
-----------------------------------------------------  ----------  ----------  ---------- 
Fair value of consideration transferred                                            11,757 
-----------------------------------------------------  ----------  ----------  ---------- 
Satisfied by: 
- cash consideration paid                                                           7,960 
- contingent consideration                                                          4,194 
- discounting impact on contingent consideration                                    (397) 
                                                                                   11,757 
-----------------------------------------------------  ----------  ----------  ---------- 
Net cash outflow arising from business combinations: 
- cash consideration paid                                                           7,960 
- cash and cash equivalents acquired                                              (1,303) 
-----------------------------------------------------  ----------  ----------  ---------- 
Net cash outflow                                                                    6,657 
-----------------------------------------------------  ----------  ----------  ---------- 
 

12. Preliminary Announcement

This preliminary announcement was approved by the board of directors on 27 March 2019. It is not the Group's statutory accounts. Copies of the Group's audited statutory accounts for the year ended 31 December 2018 will be available at the company's website shortly and a printed version will be dispatched to shareholders thereafter.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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March 27, 2019 03:01 ET (07:01 GMT)

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