The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
Neon has made a valid point about EV charging, but yet again we see the company delving into markets it simply does not understand. With competitors like Tesla, VW and all other motor manufacturers eager to dominate the EV market, there is simply nothing EAAS can offer to match the competition. And relying upon an existing client base, largely comprising SME and schools I believe, is not a business model. The core concern now is about acquisition; with well over 300 million "penny shares" issued, most of which are trading at a loss to their holders, including institutions, it is impossible to see how the company can pursue an equity-based Buy and Build strategy, so essential for growth in shareholder value. Years of dilution have resulted in no increased value for any of us, and there is no realistic prospect for gain, in my opinion. Good luck to those who think otherwise.
In reality, the two major acquisitions by EAAS, namely Utility Team and Beond (which between them provide virtually all Group profits), are both energy brokers and the price cap does indeed present a real challenge to their model as identified by f15jcm. Without doubt they can provide energy consultancy services, but there are many far larger competitors in this sector. More importantly, the Buy and Build strategy of using equity to acquire has been exposed. I very much doubt other business owners will now accept equity for their businesses. This will be a real test for EAAS.
Some very interesting comments being made about the likely success or otherwise of EAAS, but behind the scenes there will be huge arguments taking place, with the former Utility Team and Beond owners still holding shares which are currently trading at a fraction of their promised value. Very unhappy folk, and if they cut and run, the business is lost. The core strategy of "Buy and build" has surely been shattered because of the fall in value since acquisition of both businesses. So where does EAAS go now?
Well said, and sadly not just the destruction of investor's funds, but wildly optimistic claims stretching back for months have now left those recently acquired companies in a potentially ruinous position. Folk who worked hard for years to build their businesses, and sold to EAAS largely in exchange for equity with the expectation the management team would be capable and act prudently.
I am not as impressed as some others may be. For a "buy and build" company at such an early stage in development, it is quite extraordinary to see such large "Sell" transactions. The entire objective of the acquisition strategy is to increase shareholder value through enhanced EPS, but it seems either Directors or other large shareholders do not have much confidence in delivery of this plan. Toli is right to point out the scale of these sell transactions.
Sorry but I struggle to see how a purchase at nearly £9m in cash and stock can be seen as a bargain for a company which only 2 years ago appeared to be losing money, and which even now will only yield £500k or so. The main trades today and over the past week have been SELL, with a bundle of scrappy BUYS to push the price up. Just look back to earlier in the year to see some common sense about this company; missed promises, nothing unique, poor trading. 6.0p was right then and nothing has changed except huge dilution of stock.
Just a couple of comments to put this is perspective.
a) GrowthmanPO, are you suggesting an investor ignores past performance when a company seeks an AIM listing? This company has been trading for more than 2 years (see their accounts and Chairman's statement) and my point is that this model should be cash generative at the outset, if only because their installation costs and finance commission will be paid up front.
b) Scoobyrex, you are presumably familiar with Salix funding for schools, interest free Government funding for the public sector to finance energy efficiency? That's where schools get their money. And as for LED installation, please just look at the big players in this sector. That said, you may well make a profit on your investment, if only because others like a bit of a gamble too. Myself included. Good luck.
The response to my earlier posting was intriguing, in one case resorting to insults rather than grasping the core argument. For my part I tend to look at the business model rather than to repeat verbatim the Company Statement.
The underlying issues are;
a) the company has failed to make a profit in 3 years, for no obvious reason.
b) the "7 year finance" model is very costly for schools, at an excessive APR on an already costly installation.
c) without the finance component, the company will struggle in a highly competitive LED installation market.
I wish the company and their investors well, but abusing critics does reveal an unhealthy naivety, or over-exposure?
Sorry to be a damp squib, but there really is a need to take a reality check on this company. Firstly, there are many far larger LED installers in the market, servicing the needs of Tesco, Morrison and others, so this is not a novel concept and eEnergy is a minnow in the market. More importantly, given the core funding model of eEnergy, the government is now providing £Billions in grants for schools to install LEDs amongst other carbon reduction technologies, so "7 year lease purchase" is fast becoming an obsolete solution in the important schools market. Furthermore, with a model which does not apparently promise to deliver worthwhile savings until years 8,9 and 10 (by which time the LED warranties and the eLight agreements have expired), it is not an attractive solution. LED installations should redeem themselves in 3 or 4 years maximum. Finally, the eEnergy model seems to work on an APR close to 20%; enough said.
This is a huge market, and a properly structured offer has merit, but right now this is a weak company, with weak performance .
Rest assured scoobyrex, I have no wish to devalue shares to enable investment in EAAS; with zero profit to date, after several years' trade, the share value is already overstated in my view. But that's just my opinion. And whilst the title of "Opex efficiency enabler" is impressive (where did you get that one from please?), in reality they fit LEDs and provide funding. Their model is not new and not unique, this solution has been around for a very long time. That said, if EAAS do indeed deliver a no frills EBITDA of 1m euros, their current value would seem about right, but there is certainly no reason to see significant increased value in the immediate future as was inferred by recent commentators. We shall see.
The bullish chat about EAAS shows how very little is understood about this market and the impact of COVID on EAAS' potential clients. Firstly, the majority of SMEs are struggling to survive right now and will remain so right into next year. And although schools are still active, the last thing on their minds is committing to capital projects. Whilst EES may indeed be able to whittle out a small profit this year, given their current market cap, surely this is a requirement not a bonus! EAAS is not capital intensive and has no long-term embedded value in intellectual property to justify the existing valuation. They sell and install LEDs, along with very many others. That's all they do and in my judgement EAAS are already overvalued. As a "penny share" trade, possibly a bit of fun and this presumably explains their decision to have quite so many shares in issue. Easy for the major shareholders to make a "bob or two" as shares bump around on the bottom, but never more than that.
Given the appalling commercial damage caused by COVID 19 and markets still trading far below pre-COVID levels, together with energy consumption dropping so dramatically that oil could not be given away (remember those days..?) the Half Year results from INSE have held up remarkably well. Combined with a successful placing adding strength to the balance sheet, the fundamentals are strong indeed, certainly the basis for future acquisition and profit.
I do tend to agree with Observerbill that companies in the energy sector may not be best suited to be AIM Listed, but it is illogical to brand them all as equals. Utilitywise folded because of extraordinary accounting practices, likewise Quindell, but there will always be rogue traders and INSE is not one. The energy sector is too large to ignore, but investors do need to wise up to understand the strengths and weaknesses of their investments in this sector. I know, because I control one of the most successful competitors in the market, not a public company, pulling apart the old regime. Good luck.
Again, Bargainhunter, you are of course correct in that if companies fail over the coming months, they will not pay their bills and commission will not be paid either, but please name one AIM listed company which presents a better investment than INSE if your assumption is that all companies are doomed to fail? You have a very blinkered view of the energy supply market, perhaps tainted by UTW and their SME client base, but you do seem to be forgetting the huge and ongoing energy consumption of Local Authorities, Schools, Hospitals, food manufacturers, Supermarkets, and the host of organisations which will certainly be active during this period, many of which are to receive governmental support. Clearly you have a bit of a "downer" on INSE and that is your choice. You are looking for a bargain, hence your name. Good luck with that, in which case simply exit INSE and find a better deal; please just let us all know when you have sold. I gather Hospitality is a bargain right now.....
Mindthedip, you are perfectly correct to point out that supplier commission forms a significant part of INSE revenue, but that can also be a positive. For most large energy users, core supply contracts are in place for years to come; as a competitor to INSE, our own clients have contracted out to 2024 and in some cases 2025, we suffer no bad debt (because the largest commercial suppliers are well funded) and clients are blue chip. There are very few AIM listed investments where revenue streams are predictable that far ahead; of course you are also correct in identifying the likelihood of short-term reduced consumption, but the long-term remains strongly upward. More people, more production, more schools, more hospitals. And in such a huge UK market, my team focus on retaining and expanding the client base. No doubt INSE will strive to do the same. UTW was a shocking but entirely predictable failure; INSE is in a different league. Not perfect by any means, but not deserving of a kicking either!
Energy supply is second only to agriculture as the largest market in the World, so to dismiss leading UK players as a poor investment shows a very narrow perspective. And to see ill informed and quite frankly malicious attacks on Inspired Energy shows just how little is understood about the nature of energy services. As founder of a leading and very rapidly expanding energy partner, and as a strong competitor to INSE, I know exactly how INSE generate their revenues. Sorry if some of you lost money on Utilitywise but that is down to your herd instinct to invest without knowledge. Inspired is doing a great job in a difficult market, but one which can deliver great rewards too. So grow up, stop throwing stones. INSE is not UTW.