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Shore Capital note the H1 results show "good strategic progress".
They've retained their forecast of 1.3p EPS and a 0.3p dividend.
It's also worth noting that the supplier risk from the Gazprom-related entity has largely disappeared now that it's been taken into public ownership by the German government.
A couple of worthwhile extracts:
"Outlook.
Management is retaining its current guidance, noting that the energy Assurance services are set to see challenging markets continuing with energy prices. In the Assurance business, we note that the Group is seeing a mix of churn and new opportunities (Corporates still require energy procurement strategies); we are encouraged to see the order book being maintained at the end of H1 at £67.5m in-line with the FY21 Year-end figure. Optimisation services strong growth continued through H1, over and above pandemic recovery, and we see this continuing into FY23F. ESG services are seeing similarly strong growth, albeit from a smaller base. Encouraging then."
"Valuation thoughts.
Inspired continues to evolve and offers investors solid ESG credentials and regulatory tailwinds in addition to long-term economic growth drivers. The Group is trading based on our current estimates on a FY22F PER of 8.7x (EV/EBITDA 7.0x), offering a progressive dividend yield of 2.4% - funded by a free cash flow yield of 9.4%."
Good results today in the current climate, with trading reiterated to be in line with expectations of 1.3p EPS this year (after 0.55p EPS in H1).
The dividend is increased to 0.13p and so should also be in line with the 0.3p forecast.
Revenues are up 24% and EBITDA is up 10%. ESG Services is booming, with revenues up 215% at £1.2m, and Software Solutions continues to be nicely profitable. Debt is up due to payments of deferred consideration.
Hopefully the new PM's measures to protect business from energy price rises will be strong enough to further strengthen INSE's prospects and customer base.
My buy trade for approx 20,000 @ 11.9 hasn't been reported here or on the LSE. I presume those two trades @ 11.9p were also buys as the spread is 11.8-12.20. No sells and the sp drops!
Thanks for these posts R. I think with Gresham House holding 29% now, the placing at 15p 2 years ago and a progressive div policy currently at 2.5 % 11.9p is a steal I could not resist. How many shares have I said that about recently? Not that many actually. There really has not been any bad news about INSE , just about energy prices which the market seems to continue to be confused by. BTW, Had a few words with DW at SWG. He seems very confident. Lookforward to CNIC update
/presentation EOM. GL
INSE are featured in a new article in the IC about winners from the "electric revolution":
Https://www.investorschronicle.co.uk/ideas/2022/08/11/electrification-s-hidden-winners/
"For investors interested in this space, Inspired (INSE) is also worth a look. Inspired helps companies manage their power bills, quantifying their carbon output and selling energy efficiency advice. Growth has been solid so far, driven largely by its assurance arm, but energy ‘optimisation’ sales are starting to catch up, and are due to overtake assurance revenue in 2023."
Shore Capital have retained their 1.3p EPS and 0.3p dividend forecasts, and summarise:
"Strategic development
The statement confirms that trading has remained strong through H1, coming out of the pandemic challenges seen in FY21. Continued improvement in underlying cash generation is noted. Particularly strong progress is noted in the Energy Optimisation Services business and accelerating demand in the newly formed ESG services division. We note the comment in the statement that: "Energy has become a high priority Board level issue for all businesses. The Group continues to support clients in managing energy prices and reducing energy consumption and carbon emissions". So, critical services to businesses at the current time.
Inspired began an evolutionary drive through FY21, building up its operations in energy optimisation services, successfully building out its software business and launching ESG services to clients, focusing on visible secular growth opportunities. We model organic investment flowing into these operations to drive this development. CEO Mark Dickenson comments: "The transition to Inspired plc a year ago has enabled us to strengthen our platform and leading market position as we support businesses in their response to the ongoing energy crisis and climate emergency".
Valuation thoughts
Inspired offers investors solid ESG credentials and we note regulatory tailwinds in addition to economic growth drivers, Inspired is trading on our current estimates on a FY22F PER of 9.3x (EV/EBITDA 7.4x), offering a progressive dividend yield of 2.2%."
"Strong trading", improved cash generation, and trading nicely in line with expectations of 1.3p EPS this year, so a current year P/E of only 9.46.
ESG demand is "accelerating", and the energy crisis is no doubt fuelling the increased demand for Energy Optimisation services:
Https://uk.advfn.com/stock-market/london/inspired-INSE/share-news/Inspired-PLC-Trading-update-and-notice-of-results/88765557
"Against a challenging market and macroeconomic backdrop, we are pleased to report a period of solid growth, with the Optimisation and ESG divisions gaining particularly good traction in particular, a trend we see continuing into the second half.
"The transition to Inspired plc a year ago has enabled us to strengthen our platform and leading market position as we support businesses in their response to the ongoing energy crisis and climate emergency."
"Management also flagged some risks from the broader energy crisis as well: “Market conditions, including record high commodity prices, have led to some customers delaying renewals of supply contracts, which is predominantly the point at which assurance customers contract with the group”, Inspired said in March. It added this was likely “a point of timing” issue rather than any greater demand drop.
Inspiration
Clear competitors for Inspired aren't obvious – there is eEnergy (EAAS)eEnergy (EAAS), a smaller Aim-traded company that does similar consulting work with a net zero carbon emissions focus. Others include in-house units from engineering giants such as Siemens, although these are focused on selling products internally. eEnergy also noted an uptick in interest because of the energy crisis. Inspired does have plenty of parallels with IT firms. Its software services division had a cash profits margin above 70 per cent last year. Sales are only around £2mn but this is a handy contributor to the overall profits figure, something the ESG division will not be for some years. Investors would be getting a stable company with longstanding clients. The Gazprom risk is clear – although the market reaction was muted after Inspired outlined the sales and profit knock from a potential collapse – and out of management's hands.
The company is on a good path in terms of ESG reporting and has headroom in terms of debt if acquisitions in that space look like an easier way of building scale. As the reality of these new climate reporting guidelines become clearer through this first annual reporting season with them in place, we imagine boards will be running to Inspired's door as well, especially those who already do business with the company."
"Inspired aims to get its enterprise value from around £200mn to £500mn in about five years. Obviously, this could be done by piling on debt and going on an acquisition spree, but Dickinson said he was keen for a “quieter 2022”, after raising equity in 2020 and making a handful of bolt-on acquisitions during the past two years.
The ‘assurance’ division is Inspired’s bread and butter. It has the strongest cash profit margins – near to 50 per cent – and contributes the most in revenue. The ‘optimisation’ unit, which sells energy efficiency advice and equipment, is set to overtake it in terms of sales by 2023, but with a far lower cash profit margin of around 20 per cent. The catch is Inspired sees the assurance market as “mature”. This means it might be good for 5 per cent growth a year in terms of sales, but won’t deliver serious increases. Where added sales are more likely to come from is cross-selling between divisions.
The new environmental, social and governance (ESG) unit is largely built around quantifying companies’ carbon output, a growing slice of Inspired given the tighter and tighter regulations around releasing this kind of data. Sales for the ESG division were under £1mn in 2021, but this was double the year before. House broker Shore Capital sees sales hitting £4mn in 2024. The outlook is very positive for this area. The government brought in new rules around climate risk reporting earlier this year, extending the Task Force on Climate-related Financial Disclosures (TCFD) rules to all listed companies, where previously only those with premium listings in London had to present a higher level of information.
Greater demands for climate risk data is already driving sales at Inspired: Dickinson said companies coming in the door looking for ESG reporting help and then paying for services from the assurance and optimisation divisions afterwards. “Does a company figure out how to comply with legislation themselves? Or do they give it to someone like us to do, when we’ve already got all the data,” Dickinson said.This approach is where Inspired aims to become so invaluable that companies will be unable to unbake the proverbial cake,and choose to go without Inspired’s services.
Contracts remain fairly small compared with overall revenue as well, mitigating risk from bigger clients pulling contracts. There is one significant risk in the wings, however,in the form of Gazprom Energy, the Kremlin-owned UK gas provider. Inspired said in March that 5 per cent of its revenues were linked to Gazprom contracts, through clients' supply agreements. If Gazprom was to go under this would knock up £3mn from 2022 cash profits. Since March, GazpromEnergy has remained trading and now the German government has taken control of its parent company, in an agreement set to last until the end of September."
Here's the full tip FYI:
""IDEAS
Get defensive with Inspired
Energy company orders climb as clients need to find savings on power contracts, while tightening ESG rules mean carbon tracking division is set for growth
Who doesn’t want help with their energy bills? For businesses, which don't have a price ceiling in the UK like households, gas and electricity costs are eroding margins across most sectors, alongside higher labour and transport costs.
In January, we suggested gas producer Serica Energy (SQZ) as a way for investors to make some gains on the back of spiralling energy costs. A significant increase in Serica’s share price has now been wiped away as the market has priced in the new windfall tax (Stifel even knocked its target price from 453p to 350p in response) but strong earnings remain locked in.
The fortunes of Serica are indicative of the risks involved in buying into cyclical and politically volatile industries. Following the energy cost theme, Inspired (INSE), formerly Inspired Energy, offers another ‘inflation winners’ bet. It acts as a middleman for companies negotiating power agreements and also advises companies on cutting their power usage. The recent surge in costs has seen interest rise in its ability to cut power bills, as well as the ‘optimisation’ division, which advises companies on cutting power use. Inspired also puts together carbon emission reports, a growing requirement for listed and private companies, with carbon metrics used increasingly as a performance metric,even being linked to debt costs for some companies.
Bill shock
The chair of Marks & Spencer (MKS),Archie Norman, put it plainly last week:“The cost of doing business is going up,taxes are going up, regulatory pressures are going up”. The winners would be those who“can trade well in the downturn” and have “efficiency opportunities”, he added. This is basically a stump speech for Inspired.
Chief executive Mark Dickinson said one major retail client had paid around £300,000 for his company’s services and saved around £20mn over five years as a result. At the same time as these services have come into higher demand – demonstrated by the order book for January and February almost doubling in value compared with last year – Inspired’s share price has come off a quarter, and the 14p share price level is not far off a 12-month low.
As power prices are set to remain high, this gives investors an opportunity to buy in at a value level.Growth is not spectacular on a year-on-year basis, in terms of sales and cash profits, but zoom out to a five-year horizon and it starts looking flashier: sales CAGR over that period is 26 per cent, while cash profits is 8 per cent. The cash profit tumbled in 2020 due to the pandemic (falling from £16.7mn to £11.2mn) but has quickly rebounded,with the consensus forecast for 2022 at £21.6mn as well. There are growth plans:"
INSE have initiated a money-saving energy efficiency scheme with British Gas for Star Pubs & Bars:
Https://www.morningadvertiser.co.uk/Article/2022/06/22/Star-Pubs-Bars-completes-money-saving-energy-deal-for-licensees
"22-Jun-2022 By Gary Lloyd
Star Pubs & Bars has used its bulk-buying power to thrash out a money-saving energy deal for its licensees that will last for a year.
etc"
INSE have been tipped overnight in the IC. Here's a link -and good to see very small buying now causing a tick up :
Https://www.investorschronicle.co.uk/ideas/2022/05/31/get-defensive-with-inspired/
I saw an interview with one of the fund manager from Gresham. He was talking about having missed out on AFX having sold too early. Originally it sounds like they wanted to buy the whole company, but AFX wanted to IPO. They were hoping AGFX would be a good replacement, which thus far has been a disaster. They certainly like to stick their neck out when they think the market has got it wrong and more than happy to back up with investing their own cash. Hopefully if they ever get fuel supply sorted it should more than compensate, even though INSE don't directly benefit from fuel prices.
Cheers - I missed that rather important RNS!
Https://www.investegate.co.uk/inspired-plc--inse-/rns/holding-s--in-company/202204120913351035I/
So Gresham House bought that huge chunk of BGF's shares - they're now up to 29.72% (from 22.54%), so can barely buy any more without bidding for INSE!
That's a pretty big vote of confidence. And ties up almost a third of the shares in safe hands.
Excellent new coverage in the Daily Mail:
Https://www.thisismoney.co.uk/money/investing/article-10751195/SMALL-CAP-SHARE-IDEAS-Rising-energy-bills-set-boost-Inspired.html
"SMALL CAP SHARE IDEAS: Rising energy bills and ESG concerns set to boost business energy consultant Inspired
By John Harrington, Proactive Investors For Thisismoney.co.uk
Published: 14:15, 25 April 2022 | Updated: 14:15, 25 April 2022"
Conclusion:
"If the company executes well on its foray into ESG Dickinson thinks annual revenues for the division, currently running at around £1million, could increase by 2026 to between £10million and £15million.
The Software Solutions comes across as a nice-have rather than growth driver, but it 'provides the privacy software that underpins our technology-enabled service,' Dickinson said.
Opportunities for further acquisitions in fragmented markets add to the investment case, argues broker Peel Hunt, which has a price target for the stock of 25p.
The shares currently trade at 15p, having recovered from a low of 11p in March 2020 – the month in which the West woke up to the Covid-19 threat.
More recently – August 2021 - the shares hit 21p but concerns over failing energy supply companies have knocked sentiment.
'What normally happens in these situations is that the customers need us more than ever,' Dickinson said, referring to companies needing to find a new supplier when their existing one goes bust.
'They need us to sit there and help them navigate through those difficulties and for us to be able to help find new energy supplies for them, in which case … we'll mitigate a lot of that risk.
As for Inspired itself, 'We need to kind of make sure everyone's clear as to where our business sits,' Dickinson admitted.
This year's volatility has added to the company's experience in dealing with risks, both for its customers and its own business.
And where its business 'sits' is potentially on the threshold of a huge opportunity to help customers navigate the energy crisis and meet increasingly stringent ESG requirements."
Looks like Gresham bought out Pershings 7% holding. Not much director purchasing which is a little disappointing. Not paying themselves enough?
Huge volumes today! 153.2m shares changing hands already...the 74,566,162 trade is the exact amount of the Business Growth Fund's holding in INSE, so I suspect this has been placed out to other holders.
Perhaps the closing of an overhang? Could be good news if so.
Gresham House continue their buying spree - they've bought over another 12m shares, and now have 22.54% of INSE, or 219.8m shares:
Https://www.investegate.co.uk/inspired-plc--inse-/rns/holding-s--in-company/202204060858404562H/
CEO, Mark Dickinson, CFO, Paul Connor and CCO, David ****shott present the full year results for the period ended 31 December 2021.
Watch the video here: https://www.piworld.co.uk/company-videos/inspired-inse-full-year-2021-presentation-march-2022/
Or listen to the podcast here: https://piworld.podbean.com/e/inspired-inse-full-year-2021-presentation-march-2022/
AceTrojan. As assumed energy price rises do not impact INSE other than the market's wrongful interpretation. ESG has 10 fold potential. Very encouraging interview. One to sit tight on and add to I think at this price. I expect it will suddenly rerate when things calm down.
Much improved results announced today, with 1.3p EPS being ahead of 1.2p EPS expectations, a higher Corporate Order Book and an increased dividend.
The outlook is also confident, with Q1 trading in line and particularly as regards "the orderbook values of new customer contracts signed in the first two months of the year being some 93% ahead of the previous year".
Software Solutions and ESG Services are starting to deliver material revenues from a standing start and look to be developing well.
The core business is recovering well as Covid measures disappear, and going forward looks in very good shape.
"At a strategic level, the recently launched ESG consultancy and data measurement services started to gain traction with £1m of revenue delivered over the course of the year. We are encouraged by the operational performance the company to date and look forward to more benign trading conditions, and further strategic progress, in 2022."
INSE are one of Strategic Equity Capital's top holdings, and in today's results they have a very useful summary outlining their current views on INSE:
"Inspired (formerly Inspired Energy)
Description
Is a leading UK B2B corporate energy and ESG services specialist. The company works with their clients, generally large corporates, to procure energy cost effectively, audit and report their usage of it, and help them to optimise their energy efficiency. The company has a strong focus on sustainability with a number of services that help their clients measure, report and improve their ESG performance.
Thesis
Inspired is a leader in the growing, but fragmented, corporate energy services market. The increasing complexity of corporate energy requirements, and increasing regulatory and sustainability imperatives will support continued strong organic growth for the company with a likely ‘flight to quality’ leading to further increases in market share. The business model of the business is strong with high quality of earnings from long term contracts, high margins (40% EBITDA margin) and return on capital and good cash conversion. The fund’s initial investment was made as part of a placing intended to strengthen the balance sheet and provide firepower for the company to undertake a number of bolt on acquisitions to continue to consolidate its position in the market.
Although the company’s revenues were depressed due to lower corporate energy usage over lockdowns, there is significant opportunity for a rebound in revenues, and in the share price, when there is a return to a more normalised environment. Over the medium term there are strategically attractive opportunities, both organic and inorganic, to gain market share and broaden the range of services offered, particularly in ESG-related areas.
Developments in the period
Full year results, reported post period end, were in line with expectations despite a number of short term headwinds. Firstly, ongoing Covid restrictions over the period continue to weigh on corporate energy usage, which has a knock on effect on the financial performance of the company. Corporate energy consumption has now largely returned to pre-pandemic levels, and as such this drag on performance is likely to unwind into 2022. Secondly, extreme conditions in wholesale energy markets impacted the timing of renewals and new customer wins.
Over the medium term however, we believe that conditions only serve to emphasise the value of Inspired’s proposition, namely helping corporate clients optimise their energy usage, procurement and hedging requirements. Within this market context we view the 7% increase in the order book as being a creditable performance and boding well for the outlook into 2022. Recent acquisitions, Businesswise and GEM, were also successfully integrated in the period, adding to the company’s market leading position in its core energy assurance services space."
and now the government have said they may underwrite holding in Gazprom to protect uk firms , so this makes the sp fall even more ludicrous