Inspired Regulatory News (INSE)

22 March 2018

Inspired Energy plc

("Inspired" or the "Group")

Acquisitions of SystemsLink 2000 Limited and Energy Cost Management

Issue of Equity

Inspired Energy (AIM: INSE), a leading energy procurement consultant to UK and Irish corporates, is delighted to announce that it has today completed the acquisitions of SystemsLink 2000 Limited ("SystemsLink") and Energy Cost Management Limited ("ECM").

HIGHLIGHTS

SystemsLink acquisition

· SystemsLink is a supplier of energy management software, enabling customers to effectively monitor and manage their utilities consumption

· SystemsLink's energy management platform "Energy Manager" is licensed to public and private sector energy users, energy consultancies and third party intermediaries

· Inspired has been a licensee of Energy Manager since the Group's IPO in 2011, to support its service offering and energy management needs of the core Corporate Division. This acquisition brings this capability in-house, providing security of access

· Consideration of £3.875 million to be satisfied in cash and shares

ECM acquisition

· ECM is a niche operator of water and energy management services, specialising in water engineering solutions

· ECM provides a range of water management services to corporate customers, including water procurement, bill validation, retrospective audit of water bills, leak detection and repair and compliance services, broadening Inspired's service offering within its core Corporate Division

· ECM is based in Kirkham, Lancashire, close to Inspired's head office, facilitating an easier integration into the Group

· Consideration to be satisfied by an initial cash payment of £0.5 million to the shareholders of ECM, with a potential further deferred consideration of up to £1.5 million to be satisfied by up to £1.0 million of cash and the issue of up to £0.5 million of new ordinary shares in the Group

Highlights of the transactions

· Both acquisitions broaden the service offering and customer base of Inspired's core Corporate Division

· Acquisitions financed from the Group's existing financial resources, with funding provided by a drawdown of the Group's existing £12.5 million acquisition facility with Santander

· Both acquisitions are expected to be earnings enhancing in FY2018

Commenting on the acquisitions, Mark Dickinson, CEO of Inspired Energy said: "We are delighted to conclude the acquisitions of SystemsLink and ECM, which are highly complementary additions to Inspired's core Corporate Division. These acquisitions broaden our customer base and further enhance our sector specialisms and service offering.

"We look forward to working closely with the highly experienced and knowledgeable teams of both businesses and welcoming them into our core Corporate Division as we continue to advance our position as a market leader."

Information on SystemsLink and rationale for the acquisition

SystemsLink was founded in 1996 as a supplier of energy management software. It has developed the Energy Manager software platform, which it licenses to energy consumers and energy consultancy providers, with the objective of providing a fully-featured energy monitoring and targeting system.

Energy Manager has been refined and developed over 20 years of customer engagement. Energy Manager now serves multi-site organisations in both the public and private sector, in order to monitor, control and target energy usage.

The business has a large portfolio of customers including public sector bodies, multi-site private sector estate intensive energy consumers and energy consultancy providers such as Inspired.

The Board believes that the acquisition will further enhance Inspired's core Corporate Division, complementing the Group's existing offering through its subsidiary STC Energy and Carbon Holdings Limited and broadening its service offering and sector specialism. In addition, acquiring SystemsLink brings a key licenced software resource in-house, ensuring security of access.

The Group intends to use Systemslink as a platform to provide software solutions across the energy value chain. The business will be run as a stand-alone business unit, providing software that facilitates the procurement of energy, the validation of invoices, monitoring & targeting and other environmental compliance and sustainability activities

For the financial year ended 31 August 2017, SystemsLink delivered revenues of £1.28 million and profit before tax of £0.47, as well as generating operating cash of £0.36 million. Net assets as at 31 August 2017 stood at £0.15 million.

The founder director of SystemsLink has sold the business in order to retire and will leave SystemsLink on completion. SystemsLink's senior management team has been in place for over three years, including a Managing Director, Head of Development and Head of Operations ("Senior Management"). The Board will grant Senior Management 2.35 million options in the Group on completion, vesting in three years' time, to retain and incentivise Senior Management and ensure they are aligned with the wider Group.

Terms of the SystemsLink acquisition

The consideration for the acquisition of SystemsLink is £3.875 million, to be satisfied by a cash payment of £3.25 million and the issue of 2,948,113 new ordinary shares in the capital of Inspired Energy (the "Consideration Shares"). The Consideration Shares are being issued to the shareholders of SystemsLink subject to a 12 month lock-in from the date of admission of the Consideration Shares (the "First Lock-in Period"). Further, on expiry of the First Lock-in Period, 50% of the Consideration Shares will remain subject to a lock-in for a further 12 months with the balance subject to orderly market provisions for 12 months.

Application for admission

The Consideration Shares will rank pari passu in all respects with the existing ordinary shares. Application has been made to London Stock Exchange plc for the Consideration Shares to be admitted to trading on AIM. Admission of the Consideration Shares to trading on AIM is expected to take place on 28 March 2018. On admission of the Consideration Shares, the enlarged issued share capital of the Group will be 572,064,687 ordinary shares of 0.125p each.

Information on ECM and rationale for the acquisition

ECM was incorporated in 1997 by Stephen Casson, who has 30 years of relevant industry experience, to provide an integrated range of water, electric and gas management services to the commercial marketplace. ECM has grown organically since incorporation through referrals and its reputation.

ECM provides a range of water and energy management services across three main categories:

· Water Procurement;

· Additional services - utility bill audit, leak detection and repair and compliance; and

· Energy Procurement.

ECM also holds two trademarked products:

· ECM Remote - a remote energy and water management and monitoring system for residential and commercial customers; and

· PoolProPlus - an integrated energy and water management and monitoring system for residential and commercial customers.

The Board believes ECM can accelerate its growth with the support of Inspired's sales function and brand by extending the technical energy services for the benefit of Inspired's Corporate Division's customers.

For the financial year ended 31 May 2017, ECM delivered revenues of £0.74 million, EBITDA of £0.15 million and generated operating cash of £0.13 million. Net assets as at 31 May 2017 stood at £0.57 million. 

Terms of the ECM acquisition

The consideration for the acquisition is up to £2.0 million. An initial cash payment of £0.5 million will be paid on completion. Further contingent consideration of up to £1.5 million ("Deferred Consideration") may be payable, in cash of up to £1.0 million and shares of up to £0.5 million, subject to the achievement of certain financial performance criteria for the period ending 31 December 2020. The Deferred Consideration, if payable, is expected to be funded from future cash-flows generated by the enlarged Group based on the challenging financial targets set. Founder Stephen Casson will remain with the Group to maximise the potential value of ECM's capabilities within the enlarged Group.

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