Strategic Equity - large holding in INSE part 125 Mar 2022 07:38
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."
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