Good Enrg Regulatory News (GOOD)

 24 September 2015

Good Energy Group PLC ("Good Energy" or the "Group" or the "Company")

Un-audited Interim Results for the six months ended 30 June 2015

Customer numbers grow by more than a third in support of continued growth momentum.

"We're delighted to report good customer growth as more consumers turn to us for renewable electricity. To meet this increasing demand, we continue to invest in our generation capacity and have brought four new solar farms on stream in the first half, delivering 23MW.

"We look forward to making further progress in the remainder of the year and, with a renewed strategy for growth in place, we have every confidence that Good Energy will successfully help tackle climate change and make the UK more energy self-sufficient, for the benefit of consumers and shareholders alike, for years to come.

"The outlook for both the supply and generation businesses remains in line with expectations. However, we anticipate that the costs of our development business are unlikely now to be covered by a site sale, and that the costs of the development business are likely to continue to be incurred at same rate as those incurred in the first half of the year. In addition, we expect to make additional investment in the second half of the year in the business to continue building our capability to support future growth.

 "Our recent success in winning the Big Deal competitive switch initiative is very positive news and will boost customer numbers. This is a further demonstration of Good Energy's appeal to the wider domestic customer base and an important step forward towards our growth strategy."

Juliet Davenport OBE, Chief Executive

Good Energy, the fast growing AIM listed renewable electricity supplier and generator, is pleased to announce its interim results for the six months ended 30 June 2015, delivering a solid financial performance with another period of strong growth in line with expectations, across both supply and generation portfolios.

KEY HIGHLIGHTS

Financial summary

· Electricity customer numbers increased by 20% to around 55,000 (H1 2014: 46,000)

· Gas customer numbers increased by 40% to 28,000 (H1 2014: 20,000)

· Feed-in Tariff (FIT) administration customer numbers increased by 42% to 93,500 (H1 2014: 66,000)

· Completion of four solar farms - Rook Wood and Lower End (Wiltshire); Carloggas (Cornwall), and Crossroads (Dorset) - with a total combined solar capacity of 23MW (H1 2014: 5MW)

· Two additional 5MW sites (Oaklands, Dorset, and Brynwhilach, Wales) , are due to be completed during the last quarter of the year which will bring the Good Energy's total installed solar capacity to 40MW by 31st December 2015

· Delabole and Hampole wind farms continue to perform well, with output during the period higher than anticipated (installed capacity 17.5MW)

· Combined wind and solar installed capacity at 30 June 2015: 47.5MW (H1 2014: 22.5MW)

· As part of its growth strategy Good Energy plans to achieve a fivefold increase in customer numbers (household equivalents) from a total of 176,500 as at June 2015 to approximately 900,000 as at 31 December 2020

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Notes to editors

 - Good Energy is a fast-growing 100% renewable electricity generation and supply company, offering value for money and award-winning customer service. 

- An AIM-listed PLC, and founder member of the Social Stock Exchange, its mission is to support change in the energy market, address climate change and boost energy security. 

- The company has consistently performed well in the annual Which? energy company customer satisfaction survey, winning first or second place in each of the last four years, and topping two consecutive MoneySavingExpert consumer polls. Good Energy's dual fuel tariff is cheaper on average than the standard tariffs sold by the 'Big 6' before discounts. 

- It now has more than 55,000 renewable electricity customers and 28,000 gas customers. It works with a community of 93,500 small and medium scale renewable electricity generators. (All figures as at 30 June 2015.)

- Good Energy is the owner of Delabole Wind Farm, the UK's first commercial wind farm, and owns and operates Hampole Wind Farm, near Doncaster. The company also owns and operates six solar farms.

- The Company has recently won the following: Business Green Awards - Company of the Year 2015; 2015 British Renewable Energy Association Leadership Award; and, for the second year running, Social Impact Company of the Year at the 2015 Small Cap Awards.

Chief Executive's Review

Good Energy remains committed to its mission of tackling climate change and helping deliver a secure energy future for the UK. Its core proposition continues to combine 100% renewable electricity generated from British wind, sunshine, rain and water, with excellent customer service and competitive pricing.

The Company continued to perform in line with expectations in the first half of 2015, delivering customer growth across all market segments, and further expanding its portfolio of owned generation sites.

As of 30 June 2015, the Company had 55,000 electricity customers, an increase of 20% compared with the same period in 2014 (H1 2014: 46,000). Gas customer numbers grew over the same period by 40% to 28,000 (H1 2014: 20,000). 

The Company also saw a 42% rise in Feed-in Tariff (FIT) administration customer numbers, to 93,500 (H1 2014: 66,000).

This represents combined customer growth of 34%, a strong achievement given the continued competitive nature of the energy supply market and the pressure on supply margins.

Good Energy has expanded its focus on the business sector, and has seen the volume of electricity purchased rise by 65% during the first half.

This growth is supported by good customer service, and the Company's efforts in this area have been recognised, not only in consistently good ratings from the consumer organisation Which? but also in recent polls by Martin Lewis's high-profile MoneySavingExpert.com.

At the same time, Good Energy has continued to focus on its programme of investment for future growth. This has included work on customer segmentation and investment in research and development activities.

A number of these R&D activities are helping support the move towards more localised distribution. Current initiatives include working with partners on investigating the potential for battery storage and technology, as well as peer-to-peer energy generation.

The Company has also accelerated its investment in systems, processes and people to support the growth momentum of the business.

The political and regulatory environment has continued to be challenging, with changes to both onshore wind and solar subsidy regimes and an overall lack of clarity on energy policy. This has necessitated a constant review of the Company's longer-term plans, particularly in relation to the timing of its wind and solar asset development pipeline and its appetite for selling sites.

Good Energy expects that the removal of Levy Exemption Certificates (LECs) as part of the Climate Change Levy will have a broadly neutral impact. The consultation over proposed changes to the Feed-in Tariff continues, and the Company is awaiting the final outcome of this process. It does not anticipate any impact on its 2015 results but the outcome may lead to lower growth levels in FIT customer numbers in the future.

The changes made to the Renewables Obligation Certificate (ROC) regime and the lack of direction on the long term support mechanism developed under the Electricity Market Review (EMR) Contracts for Difference is unhelpful, and may damage the UK's ability to hit its renewable energy targets. However, as a small, vertically integrated energy company, Good Energy believes it is well placed to manage this and other policy changes.

Good Energy's supply / generation business model and mixed portfolio also means it is able to take advantage of other opportunities within the energy sector.

There has been considerable change in the market that is driving Good Energy's new strategy. The focus is now on building upon the Company's established, successful business proposition and expanding its sales expertise to deepen its market penetration.

Within domestic supply, the focus will be on creating a platform for growth and driving down the Company's cost to serve. This will be achieved through increased use of digital technology and process efficiencies. The Company will also be testing the potential of scalable customer acquisition channels such as regional radio with a view to a full-scale implementation in 2017.

Good Energy's generation business will continue to concentrate on delivering planned additional solar capacity unaffected by the recent subsidy change. It will then focus on expanding its activity in onshore wind development in the medium term, at the same time, exploring opportunities within the hydro and tidal sectors.

The pursuit of further efficiencies within the Company's Feed-in-Tariff business will continue. Good Energy will also seek innovative propositions that link solar with other technologies.

As part of its growth strategy, Good Energy plans to achieve a fivefold increase in customer numbers (household equivalents) from a total of 176,500 as at June 2015 to approximately 900,000 as at 31 December 2020.

Good Energy largely welcomed the interim findings from the Competition and Market Authority's (CMA) investigation into the energy sector and has responded accordingly to the recommendations as part of the consultation process. The Company understands that the CMA is planning to publish its provisional decision on remedies in January 2016, with the final report due to be issued by late June 2016.

Financial results

Consolidated revenue continued its strong growth in H1 2015, increasing 47% to £32.6m (H1 2014: £22.2m). Supply revenue has increased 43% and reflects the continued customer growth in this segment. Generation asset revenue has grown 146% due to a full period of operation for Hampole wind farm and good power generation from our growing portfolio of solar sites. Four solar sites were energised in the period.

Consolidated gross profit increased by 38% to £10.2m (H1 2014: £7.4m) largely due to strong customer growth in the supply business and contribution from the growing generation asset portfolio. 

Consolidated gross margin reduced slightly to 31% (H1 2014: 33%). The margin on electricity sales declined 3.5% due to more competitive pricing applied to both business and domestic sales which has underpinned growth in customer numbers.

Gas margin remained static despite declining wholesale prices. This was due to excess gas being purchased compared to volumes supplied to customers. The gas purchase system is being addressed by the company and it believes this should be a non-recurring item in 2015.

Administration expenses increased 18% to £7.9m (H1 2014: £6.7m). This included targeted investment of £0.6m into marketing on customer segmentation; technology and on-going investment into people and processes to support Good Energy's offer to customers and improve internal efficiencies. This investment will provide the Company with the capacity needed to grow further in the future.

Net finance costs have increased to £1.7m (H1 2014: £0.4m) due to an increase in borrowings of £26.3m since H1 2014 to support the energisation of three solar farms and the development pipeline of new generation assets. Of the £1.7m of interest cost, £1.3m directly relates to loans drawn down against solar and wind assets in H1 2015 and H2 2014.

Profit before tax increased 67% to £0.5m (H1 2014: £0.3m) largely due to the strong increase in customer numbers and the expansion of the generation asset base.

The Board is therefore pleased to announce an interim dividend of 1p per ordinary share for the period to 30 June 2015. The dividend is payable on 23 October 2015 to shareholders whose names are on the register at close of business on 2 October 2015. The shares will trade ex-dividend on 1 October 2015. 

The Directors have once again decided to offer shareholders the opportunity to elect to receive dividends in the form of new shares in the Company as an alternative to a cash dividend payment.

Total assets have increased by 47% to £88.2m (30 Jun 2014: £59.9m) as investment continues into progressing the generation asset portfolio.

Total borrowings increased 79% to £59.7m (30 Jun 2014: £33.4m), with draw downs in H1 2015 of £14.5m against the existing facility with GCP Infrastructure Investments Limited. The draw down comprised of term loans relating to three energised solar farms. £11.6m of the facility remained un-drawn at 30 June 2015. £4.9m has been drawn on the Lloyds Bank revolving credit facility to fund costs for early stage development assets.

Consolidated cash flow for the period was £4.2m outflow. This reflects the normal seasonal pattern of the supply business cash flows and continued investment in generation development asset work in progress. The cash held at the half year is healthy at £9.5m (30 June 2014: £5.0m) and coupled with existing debt facilities, the Group is well placed to deliver against its objectives.

Generation and development

Good Energy's generation business has performed ahead of expectations during H1 2015, benefiting from the timing of the commissioning of its new solar assets.

No significant site sales were made in the first six months.

Further investment was made in Good Energy's renewable electricity generation site portfolio. During the first half of the year, the Company completed and brought on stream four solar farms - Rook Wood and Lower End in Wiltshire, Carloggas in Cornwall, and Crossroads, in Dorset. These four sites have a total combined installed capacity of 23MW.

Two additional 5MW sites - Oaklands in Dorset, and Brynwhilach in South Wales - are due to be completed during the second half of the year. This will bring Good Energy's total installed solar capacity to 40MW, across eight sites, by 31 December 2015. 

Good Energy's two owned and operated wind farms in Delabole (Cornwall) and Hampole (Yorkshire) have a total combined generation capacity of 17.5MW. Output during the first six months of the year was ahead of expectations due to high wind speeds, particularly during January and May. H1 2015 performance was 66% up on the same period in 2014. However our wind farm at Hampole did not come on stream until late March 2014.

The combined output from Good Energy's own solar and wind sites during H1 totalled 38,196 MWh, an increase of 126%, compared with H1 2014. This represented approximately 28% of the total supply required in H1 2015.

The Tidal Lagoon Swansea Bay project, in which Good Energy has invested, has received planning permission and is scheduled to begin generating electricity in 2019. This investment gives the Company an option to purchase 10% of the forecast 495GWh power per annum.

Although the recent changes in the regulatory environment have increased the challenges associated with the Company's strategy, Good Energy continues to seek support for many of its generation projects through local community dialogue. This takes a variety of forms, including public exhibitions, drop ins and meetings with parish councils and local interest groups.

The Company remains committed to finding ways for local communities to participate in and benefit from its development activities.

Good Energy's local electricity tariffs, windfall payments in relation to Delabole and Hampole wind farms, and the community funds which it has set up for each of its generation projects are all evidence of this commitment in practice.

Ethical and social mission

In the first half of 2015, the Company won a number of awards recognising its achievements. These included the Social Impact Company of the Year (Small Cap) award, Company of the Year in the Business Green Leaders Awards and the leadership category in the British Renewable Energy awards.

As a founder member, Good Energy continues to play an active role in the Social Stock Exchange, and its partnerships with organisations such as the Soil Association, National Trust, Plantlife and 10:10 Solar Schools reflect a shared ethos in creating a greener, more sustainable environment.

Environmental responsibility

Good Energy takes its responsibilities to the environment seriously and ahead of any generation project a thorough environmental impact assessment is undertaken in consultation with the relevant authorities and other stakeholders (including the local community) covering issues such as landscape and visual impacts, noise, ecology and cultural heritage, to ensure the environmental benefit outweighs any potential impacts. 

The Company will provide further details on this area and more technical information on its operational assets in its full-year report.

Outlook

Good Energy anticipates that its full year results will be below original expectations as the costs of the development business are unlikely now to be covered by a site sale (approximate year-end impact £1.5m) and these costs are likely to be incurred at the same rate as was the case in the first half of the year. 

In addition, the Company expects to make a further investment in the business (approximately £0.6m by year-end), to continue building its capability to support future growth.

The outlook for both the supply and generation businesses remains in line with expectations.

The Company expects the marketplace to remain competitive and for supply margins to experience further pressure as a result.

It is anticipated that Good Energy's generation business, which has performed ahead of expectations in H1, will deliver a full-year operating profit in line with the market forecast.

Generation performance in H2 is likely to be lower than that in H1, a reflection of an assumption of normal weather conditions, the removal of LECs, which took effect from 1 August 2015, and the impact of the Company's new solar sites.

As the Company's H1 results demonstrate, Good Energy is continuing to see growing numbers of customers turning to renewable energy for their supply needs.

This increasing demand, combined with the organisation's expanding generation capacity and position as a 100% renewable electricity supplier and generator, gives the Company confidence in its ability to deliver further growth in the years to come.

To achieve this, Good Energy will continue its focus on developing its brand and investing for growth, while reducing its cost to serve and delivering great customer service.

The Company will also continue to invest in its generation portfolio to secure a supply of renewable energy to its growing customer base.

Good Energy will also continue to develop and grow its existing network of small-to-medium sized independent renewable electricity generators with whom it has power purchase agreements.

Good Energy's Research and Product Innovation team has been exploring new opportunities around a decentralised electricity market and the potential for home battery storage.

As part of this work, and in partnership with Open Utility, it expects to launch a trial of Piclo - the UK's first online marketplace for buying and selling renewable electricity - in the autumn.

Management team

The Executive team has been further strengthened and the Company is delighted to formally welcome David Brooks who, as Commercial Director, is responsible for Good Energy's commercial strategy; Fran Woodward, Director of People & Culture and Mark Meyrick, who joins us as Director of Wholesale & Trading.

Summary

I am confident that the Company has the right strategy in place and that it is well-placed to continue to deliver against its plans for growth.

I firmly believe that Good Energy has a strong, committed management team supported by a skilled and enthusiastic workforce, and in spite of the undoubted challenges, can see clear opportunities to continue to progress the Company's strategic objectives.

Good Energy's achievements to date have created a strong base from which to build and I am excited by the future.

Juliet Davenport

Consolidated Statement of Comprehensive Income (Un-audited)

For the 6 months ended 30 June 2015

Consolidated Statement of Financial Position (Un-audited)

As at 30 June 2015

Consolidated Statement of Changes in Equity (Un-audited)

For the 6 months ended 30 June 2015

Consolidated Statement of Cash Flows (Un-audited)

For the 6 months ended 30 June 2015

Notes to the Interim Accounts

For the 6 months ended 30 June 2015

1. General information and basis of preparation

Good Energy Group PLC is an AIM listed company incorporated and domiciled in the United Kingdom under the Companies Act 2006. The Company's registered office and its principal place of business is Monkton Reach, Monkton Hill, Chippenham, Wiltshire, SN15 1EE.

The Interim Financial Statements were prepared by the Directors and approved for issue on 24th September 2015. These Interim Financial Statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2014 were approved by the Board of Directors on 24 March 2015 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain statements under 498 (2) or (3) of the Companies Act 2006 and did not contain any emphasis of matter.

As permitted these Interim Financial Statements have been prepared in accordance with UK AIM rules and the IAS 34, 'Interim financial reporting' as adopted by the European Union. They should be read in conjunction with the Annual Financial Statements for the year ended 31 December 2014, which have been prepared in accordance with IFRS as adopted by the European Union. The accounting policies applied are consistent with those of the Annual Financial Statements for the year ended 31 December 2014, as described in those Annual Financial Statements. Where new standards or amendments to existing standards have become effective during the year, there has been no material impact on the net assets or results of the Group.

Certain statements within this report are forward looking. The expectations reflected in these statements are considered reasonable. However, no assurance can be given that they are correct. As these statements involve risks and uncertainties the actual results may differ materially from those expressed or implied by these statements.

The Interim Financial Statements have not been audited.

 2. Going-concern basis

The Group meets its day to day working capital requirements through its cash resources and bank facilities. The Directors have reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its condensed Interim Financial Statements.

3. Estimates

The preparation of Interim Financial Statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this set of condensed Interim Financial Statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Annual Financial Statements for the year ended 31 December 2014.

4. Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk, currency risk, credit risk and liquidity risk. The condensed Interim Financial Statements do not include all financial risk management information and disclosures required in the Annual Financial Statements. They should be read in conjunction with the Annual Financial Statements as at 31 December 2014.

5. Segmental analysis

Holding Company/Consolidation Adjustments to revenue and cost of sales of £2.0m (H1 2014: £0.8m) due to intercompany electricity sales. These have increased as a result of additional generation sites energised in the period.

6. Earnings per share

The calculation of basic earnings per share at 30 June 2015 was based on a weighted average number of ordinary shares outstanding for the six months to 30 June 2015 of 14,463,037 (for the six months to 30 June 2014: 14,280,948 and for the full year 2014: 14,322,069) after excluding the shares held by Clarke Willmott Trust Corporation Limited in trust for the Good Energy Group Employee Benefit Trust.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary to assume conversion of all potentially dilutive ordinary shares. Potentially dilutive ordinary shares arise from awards made under the Group's share-based incentive plans. When the vesting of these awards is contingent on satisfying a service or performance condition, the number of the potentially dilutive ordinary shares is calculated based on the status of the condition at the end of the period. Potentially dilutive ordinary shares are actually dilutive only when the Company's ordinary shares during the period exceeds their exercise price (options) or issue price (other awards). The greater any such excess, the greater the dilutive effect. The average market price of the Company's ordinary shares over the six month period to June 2015 was 225p (for the six months to 30 June 2014: 258p and for the full year 2014: 243p). The dilutive effect of share-based incentives was 663,466 shares (for the six months to 30 June 2014: 1,222,279 shares and for the full year 2014: 863,326 shares).

7. Net cash flows from operating activities

The operating cash outflow for the six months to 30 June 2015 of £4.1m (for the six months to 30 June 2014: £8.9m and for the full year 2014: £0.6m) includes £2.7m (for the six months to 30 June 2014: £6.7m) of spend on inventory relating to generation projects.

8. Related party transactions

In 2012, the Group entered into an agreement in connection with generation development activities with Shire Oak Energy Limited, a company wholly owned by Mark Shorrock who is the husband of Juliet Davenport.

As at 31 December 2014 Shire Oak Energy Limited was entitled to receive £1,015,200 (2013: £945,000) of which £nil (2013: £945,000) remains outstanding. During 2015, further payments totaling £314,687 were made to Shire Oak Limited.

The agreement was terminated with effect from 10 October 2014 with post termination provisions remaining in place. The maximum remaining outstanding obligation under the post termination provisions is capped at £150,000.

9. Subsequent events

A further debt drawdown of £4.0m completed in August 2015 following commissioning of Crossroads solar farm.

Planning permission on Mapperton was granted in July 2015, but a Judicial Review has subsequently been issued to challenge the outcome of the planning process. The costs to date incurred on Mapperton are included within work in progress on the Statement of Financial Position.