Inspired Regulatory News (INSE)

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

Operational Highlights

· Record revenues delivered by the Corporate Division, growing 34% to £27.3m (2017: £20.4m), 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 £13.8m, an increase of 43% (2017: £9.6m).

· Corporate Order Book increased 36% to £53.0m (2017: £39.0m) with strong customer retention and robust performance from significant new customer wins.

· The Corporate Order Book provides 12 months secured revenue of £26.0m (2017: £18.6m) for the Corporate Division entering 2019.

· Excellent cash performance with cash generated from operations up 55% to £10.0m (2017: £6.5m), further enhancing cash conversion metrics of the Group.

· SME Division generated EBITDA of £2.4m (2017: £2.5m) 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 £19.5m, funded by a £19.0m placing, completed in December 2018. In the financial year ended 30 June 2018 (being the accounting period prior to acquisition), Inprova generated revenues of £7.8m and EBITDA of £2.9m.

· 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.

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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 £19.0m 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 £27.3m (2017: £20.4m), 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 £13.8m (2017: £9.6m). 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 £53.0m as at 31 December 2018 (2017: £39.0m), representing a year on year increase of 36% and providing 12 months secured revenue of £26.0m (2017: £18.6m) 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 £5.4m (2017: £6.0m), 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 £2.43m (2017: £2.45m).

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. £13m 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 £27.3m (2017: £20.4m), including 8% organic revenue growth (2017: 6%).

· The Corporate Division generated adjusted EBITDA of £13.8m (2017: £9.6m), a 43% year on year increase.

· Corporate Order Book increased by 36% to £53.0m as at 31 December 2018 (FY2017: £39.0m).

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 £5.4m (2017: £6.0m), it continued to contribute strong profits and cash in the period, delivering stable adjusted EBITDA of £2.43m (2017: £2.45m), 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 £2.7m (2017: £2.1m) 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 £970,000 in relation to the acquisition of Horizon in July 2017. The final aggregate consideration paid for Horizon was £12.7m, with Horizon contributing £4.2m and £2.6m 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 £0.4m 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 £0.2m 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 £2.2m and outstanding balances on its senior term debt facilities of £25.7m with a resulting net debt of £23.5m. Net debt increased by £8.8m 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 £6.6m of initial cash consideration (excluding placing proceeds) to the vendors of SystemsLink, ECM, Squareone, PCMG and Inprova and £3.6m 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 £29.6m and €7.0m term loan. £6.3m and €7.0m of the term facilities ("Tranche A and B") amortise over a period of five years. £8.3m ("Tranche C") along with the £15m 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 £2.5m, to be used for the purposes of satisfying future working capital requirements and an acquisition facility of up to £12.5m 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 £5.5m and £1.9m drawn respectively and therefore had £7.0m and £0.6m undrawn respectively

Capital repayments of £1.3m per annum are made on Tranche A, and the Group commenced capital repayments on Tranche B of the Facility from September 2018, of £1.6m 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

Group Statement of Financial Position

At 31 December 2018

Group Statement of Changes in Equity

For the year ended 31 December 2018

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 (£).

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

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:

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:

As a comparison, the restated financial highlights are:

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:

The restated Group statement of financial position is as follows:

The restated Group statement of cash flows is as follows:

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.

3. Exceptional costs/(items)

One-off costs include costs of £935,000 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 £2,345,000 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 £970,000 in relation to the acquisition of Horizon July 2017. The final aggregate consideration paid for Horizon was £12.7m, with Horizon contributing £4.2m and £2.6m to Group revenues and EBITDA respectively in 2018, equating to a multiple of 4.9x EBITDA.

4. Finance expenditure

5. Income tax expense

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

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.

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:

7. Property, plant and equipment

Included within the net book value is £231,000 (31 December 2017: £152,000) 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 £56,000 (31 December 2017: £51,000).

8. Intangible assets and goodwill

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 £953,000 (2017: £656,000). The additional £636,000 (2017: £376,000) charged in the period relates to the amortisation of internally generated computer software. Amortisation of customer databases of £120,000 (2017: £356,000) 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 £3,749,000 (2017: £2,565,000).

9. Trade and other receivables