Utilitywise Regulatory News (UTW)

28 October 2014

Utilitywise plc

("Utilitywise" or the "Group")

Final Results

Utilitywise PLC (AIM: UTW), a leading independent utility cost management consultancy, is pleased to announce its audited full year results for the year ended 31 July 2014.

Financial Highlights:

*Excluding exceptional items relating to acquisition costs of £0.1m, (2013: £0.8m), share based payment expenses of £0.7m (2013: £0.2m), restructuring and reorganisation costs of £1.9m (2013: £nil) and exceptional credit of £2m (2013: £nil) relating to the release of contingent consideration.

** As above, but excluding amortisation relating to acquired intangibles of £0.9m (2013: £0.2m).

# As above, but including the tax impact of the above adjustments.

Highlights:

· 62% increase in like for like revenue growth, largely driven by increased energy consultant headcount to 363 (2013: 281)

· Secured revenue pipeline increased 70% on 2013 to £28.2 million, representing visible revenue streams secured by the Group but not yet recognised in the financial statements

· New additions to the Partner Channel including the British Chamber of Commerce

· Acquisition and integration of Icon Communication Centres, providing a platform into continental Europe

· Creation of an Operational board and changes to PLC Board to provide optimum support for further growth

Geoff Thompson, Chief Executive of Utilitywise, commented: "I am very pleased to report on another year of significant growth for the Group, demonstrating the momentum we have established as a result of both organic growth and the successful integration of our recent acquisitions. Utilitywise procures, monitors, reduces and manages the three essential utilities of power, gas and water for SME's through to multi-national corporate organisations and our new divisional structure ensures the optimal support for each client. Our continued strong performance is evidence of the strength of our proposition, the hard work of our people and most importantly the value we add to our customers. We enter the new financial year with a very healthy level of contracted revenue as well as a strong pipeline and, as a result, the Board remains confident in the Group's continued success."

For further information:

About Utilitywise

Utilitywise is a leading independent utility cost management consultancy based in North Tyneside. The Group has established trading relationships with a number of major UK energy suppliers and provides services to its customers designed to assist them in achieving better value out of their energy contracts, reduced energy consumption and lower carbon footprint.

Businesses large and small rely on Utilitywise for their energy management needs. Clients range in size from single site SME's to multinationals with thousands of sites and cover the whole of the UK. In total, Utilitywise has over 20,000 customers and manages an overall energy consumption of approaching 20 terra watt hours per annum.

Utilitywise is a UK company quoted on the AIM market of the London Stock Exchange. For more information, please visit www.utilitywise.com.

Strategic Report

Chairman's Statement

I am delighted to report another year of strong performance and excellent operational progress. Revenue increased by 93% in the year to £48.6 million, delivering EBITDA of £14.2 million and Adjusted Profit Before Tax of £13.1 million, increases of 82% and 76% respectively. As a result of the acquisitions made over the past two years and the increasing scope of the Group's business, Utilitywise has been re-organised into two divisions, Enterprise and Corporate. The former concentrates on the provision of our energy procurement services to the SME market, whilst the latter's focus is on the larger, industrial and commercial ("I&C") segment as well as the provision of utility management services. I am pleased that both have performed well throughout the year. Icon Communication Centres s.r.o was also acquired in April in order to facilitate international expansion and in particular into certain European markets.

During the year the Company welcomed both Jeremy Middleton and Jon Kempster to the Board of Directors, with Jon having now taken on an executive role following his initial appointment as a Non-Executive Director.

As a result of the new divisional structure and to provide the support necessary for further growth, the Company is taking the opportunity to restructure the PLC Board and to create an Operational Board to handle the day to day operations of the Company.

As a result of these changes Andrew Richardson has taken on an enhanced role as Deputy Chief Executive and Jon Kempster has become Chief Financial Officer, a role he previously held at Wincanton Plc. Adam Thompson and Michael Dent will both step down from the PLC Board but assume roles as Managing Director of Utilitywise Enterprise and Sales Director respectively on the newly formed Operational Board and will be joined by Claire Waterson, Group Director of People and HR; Nigel Hudson, Marketing Director and Ashley Guise, Managing Director of Utilitywise Corporate. The Operational Board will be chaired by Geoff Thompson, Chief Executive.

As well as providing the best balance for the business, these changes will ensure the Company is committed to maintaining a high standard of corporate governance, a duty the Board continues to take very seriously.

Utilitywise will shortly be moving into its new head office at Cobalt Business Park, North Tyneside, which will enable us to grow Group headcount to 1,400 in the next two years to drive further organic growth.

Given the dynamic and ever changing environment in which we operate, I believe that the increasing diversity of our offering and the strategic decisions taken to further broaden our products and services auger well for the future. We are well placed to take advantage of opportunities as well as face any challenges which may present themselves as we continue to grow.

With the continued strong performance the Board is pleased to recommend a final dividend payment of 2.7p per share, making a total of 4.0p for the year, and continues to view the future with confidence.

I would like to thank all of the staff for their continued hard work. It is as a result of their strenuous efforts that Utilitywise continues to thrive and prosper.

Richard Feigen

Our Strategy

Utilitywise was established to assist the SME market to procure their gas and electricity. It was a poorly served market with traditional consultants and brokers focusing on large customers. It became apparent that the SME market was very conducive to assistance and we have continued to expand our ability to service this market with increases in personnel and capabilities.

As we developed the business we started to build further capabilities that allowed our customers to monitor their usage and provided a reporting platform in order to aid better consumption management.

The strategy of the Group has been reinforced via acquisitions which brought in more capabilities and expertise including the procurement of utilities for I&C customers, the ability to monitor water consumption via our O box product and an audit and compliance capability. These acquisitions typically targeted the larger customer but we have used these skills to enhance our offering in to our core historic SME customer.

Our strategy is to provide a comprehensive utility solution to all sizes of customer. We can procure their energy, we can monitor and report their usage, identify efficiency savings and project manage the solutions in order to realise identified savings.

Business Model

Utilitywise continues to specialise in energy procurement and energy management services for businesses. The Company negotiates rates with energy suppliers on behalf of business customers, provides an account care service and offers a range of products and services designed to assist customers in managing their energy consumption. Customers are based throughout the UK, the Republic of Ireland and most recently certain European markets, across a variety of industry sectors and the public sector, and range in size from small single site customers to large multi-site customers.

The Company has further developed its routes to market as follows:

· The Company continues to employ energy consultants who contact prospective customers identified by the Company's bespoke IT search system to offer a potentially reduced energy tariff and various energy management products and services designed to assist in identifying ways to reduce that customer's overall energy consumption.

· Secondly, the Company operates a "partner channel" where organisations refer customers to Utilitywise and commissions generated from those customers are shared between Utilitywise and the referring organisation. We are pleased to have secured the British Chamber of Commerce as an important addition to this channel.

· The company also employs 'field based' energy consultants who target organisations that cannot be effectively reached via the core telemarketing channel.

· Additionally, the company has now grown its business development team who target larger I&C prospective customers. For these prospective customers the process is more consultative and bespoke and whilst it may lead with an energy procurement discussion, it often includes a range of the broader service elements.

The Group has continued to develop in all of these areas and has re-organised to ensure the Group's products and services are presented to target customers in the most efficient way. As a result the Group is now organised into two divisions, Enterprise and Corporate.

The Enterprise Division services SME and mid-market customers.

Following integration of all three newly acquired businesses namely Clouds Environmental Consultancy Limited, Aqua Veritas Consulting Limited and Energy Information Centre Limited (EIC), the Corporate Division has been created to service the larger I&C customers.

These structural changes reflect the Directors' comments at the end of 2013 when we stated "there will be more focus on providing both energy procurement and energy management services to the full customer portfolio in the future and the Directors expect to provide further analysis of the activities in the next reporting period as the reporting systems are updated and the Group develops."

The Directors continue to believe that the UK market fragmentation, the low penetration of third party intermediaries (TPIs) in the UK commercial market and the Company's current share of the total potential market, means that there is an opportunity to increase the Company's market share through organic growth and acquisitions.

In addition to the Company's aim to grow its market share of both SME and I&C customers, the Directors believe that there is an opportunity to capitalise on the Company's established relationships with energy suppliers who continue to show an interest in some of the Company's energy management products and services for sale into the supplier's customer base.

Consequently the Group's strategy remains focused on three key areas:

(1) Organic growth

The scaling and investment in the UK procurement and services business model will continue and the number of energy consultants is now planned to increase to over 700 by 2016.

(2) Acquisition

The Group continues to evaluate acquisitions which will add to the overall proposition, including acquisitions in the controls and demand management sectors;

(3) European expansion

Recent trials have proven successful. A clear market opportunity exists and the acquisition of Icon Communication Centres s.r.o was announced at our half year results marking the start of the Group's expansion of its model into other geographies.

Business Review

The Group has developed in all areas of its operations and delivered a 62% increase in like for like revenue growth (adjusted for acquired businesses), largely driven by increased headcount in line with our stated

strategy.

Financial Highlights

*Excluding share based payment expenses of £0.7m (2013: £0.2m), exceptional items relating to acquisition costs of £0.1m, (2013: £0.8m), , restructuring and reorganisation costs of £1.9m (2013: £nil) and exceptional credit of £2m (2013: £nil) relating to the release of contingent consideration.

** As above, but excluding amortisation relating to acquired intangibles of £0.9m (2013: £0.2m).

# As above, but including the tax impact of the above adjustments.

Adjusted EBITDA is defined as profit from operations plus depreciation, amortisation, share based payment expenses and exceptional items. Exceptional items relate to costs associated with the acquisition of Icon Communication Centres s.r.o, restructure and reorganisation costs and the release of contingent consideration where the earn out criteria was not met.

Key Performance Indicators

Some of the key performance indicators used by the Directors are as follows:

*where future secured revenue is contracts which have been won but are not currently live, and therefore have not contributed to these financial statements.

The Group has performed well against its key performance objectives with the continued investment in new energy consultants throughout this and prior periods driving a 36% increase in contracts secured for 2014 at 37,824. This increase in secured contracts in turn has driven up the secured revenue pipeline to £28.2 million, an increase of 70% on 2013. This is a very positive metric as it represents visible revenue streams secured by the group but not yet recognised in the financial statements.

These results demonstrate the momentum we have established, as we continue to grow headcount to support organic growth and successfully integrate our recent acquisitions, but more fundamentally continue to show the strength of our proposition, the hard work of our people and most importantly the value we add to our customers.

Revenue generated in 2014 at £48.6 million represents an increase of 93% on the year ended 2013 and a like for like comparison, adjusting for acquired businesses, results in an increase of 62%. The value of contracts going live in the period, a core driver of revenue, at £42.6 million is 65% higher than 2013. Energy consultant head count in the Enterprise Division continues to increase through the year to a total of 363 (an increase of 82 or 29%), a statistic that underpins the £40.1 million revenue generated by the Enterprise Division in 2014 (an increase of 68% on 2013). The Corporate Division servicing larger customers on a more consultative basis continues to perform well and represents 18% of Group revenue.

Gross margin has stabilised at 45.3% for the year against 48.1% for 2013 reflecting a first half margin of 43.1% where a majority of the energy consultancy recruitment took place and a second half margin of 47.5% reflecting the maturity of these recruits.

Customer Growth

Our core energy intermediary offering to commercial customers has continued to scale throughout this reporting period as evidenced by the volume of new customers we contracted in 2014. As at our IPO in June 2012 we had over 10,000 contracted customers and this grew to over 15,333 customers and over 44,361 meters by July 2013, incorporating EIC customers and meters. On a like for like basis this now stands at 20,826 customers and 63,451 meters as at the year end.

This has been principally driven by the increased energy consultant headcount to 363 at 31 July 2014, up from 281 at the previous year end. Given the sophistication of our leading software based analysis tools, headcount remains the greatest driver of our core offering in order to convert the vast number of opportunities identified. As such, we will continue to add further to our staffing levels over the course of the current year. The success of this approach can be further seen through the level of contracts waiting to go live, one of our key forward looking metrics, which was £28.2 million at 31 July 2014, compared with £16.6 million at the prior year end.

Proprietary Systems and Solutions

Investment has continued in the Group's IT systems and processes to support further growth and this has included the development of Quantum, our core CRM solution. In addition the Group has developed the system to support our presence in the French and German markets.

Our acquisitions have allowed us to invest further in Energy Services with improvements to our Edd:e sub-metering solution that is now fully integrated to our multi-utility reporting platform - Utility Insight.

During the year under review Utilitywise added Icon Communication Centres s.r.o to the Group which supports our stated strategy to develop our business model in certain European markets.

Acquisitions

The Directors are pleased to report that each of the previously acquired businesses is integrating well, as part of the newly formed Corporate Division, with revenues of £8.6m, 860 customers and 19,258 meters. The division's strength lies within the large enterprise, industrial and commercial market, complementing Utilitywise's leading position in the SME market. As a result, Utilitywise has a much broader offering and expertise in providing the right products for any company's wider energy needs, be they large or small. We have also increased our geographical reach, with locations in Portsmouth, Redditch and Bury St Edmunds as well as our Head Office in North Tyneside, enabling us to service clients in any part of the UK more easily.

The Group remains alert to further opportunities in this highly fragmented market which could bring additional products, services or expertise to our existing capability. In particular the Group continues to seek opportunities in the controls and demand management space.

The Board of Directors has a strong expertise in M&A activity and our Chairman in particular will continue to work closely with the Executive team to assess the viability of potential targets and the benefits that they could bring to the Group.

Principal risks and uncertainties

The principle risks and uncertainties faced by the group are as follows:

Exposure to energy suppliers

A significant proportion of the Group's revenues are derived from commissions paid by a small number of energy suppliers. Should these energy suppliers decide in future not to engage with the Group or with TPIs generally and, instead, engage directly with customers, the Group would suffer a loss in revenues related to the commission payable by such energy suppliers. The Group ensures that it is in constant dialogue and has trading with all of the major energy suppliers to help mitigate this risk.

Exposure to underlying customers

The Group's customers pay the energy supplier directly for the energy consumed, with the Group receiving its commissions from the energy supplier. The Group is, however, at risk should the customer cease trading or fail to pay the energy supplier. Should this occur, the Group would suffer a loss in future revenues related to the commissions associated with the future energy consumption by that customer. It should be noted, however, that the energy supplier usually undertakes credit checks on customers prior to entering into a contract to supply energy and there is limited individual customer concentration in revenue terms.

Competition

The Group has a number of competitors. These competitors may announce new services, or enhancements to existing services, that better meet the needs of customers or changing industry standards. Management continue to develop and offer a full range of energy services products to help mitigate customer risk.

Legislation

Legislation may change in a manner that may require more strict or additional standards of compliance than those currently in effect thereby creating additional costs. In addition, the Government may implement legislation requiring changes to current fee structures for TPIs. Should such legislation be passed, there may be a material adverse effect on its financial condition and operating results of the Group.

Regulatory

Currently, energy procurement is an unregulated market. Should regulation be introduced to cover the Group's activities, the increased regulatory burden could impact on the profits of the Group. However, it should be noted that the Board believe that the Group operates in line with best market practice, including the provisions of the OFGEM retail market review, and in their view any such regulation would initially impact on the smaller energy consultancy and brokering businesses.

Dividend

The Board is proposing a final dividend of 2.7p per share subject to the approval of the shareholders at the Annual General Meeting. The dividend per share will be paid on 18 December 2014 to shareholders on the register at close of business on 14 November 2014. The associated ex-dividend date is 13 November 2014.

Outlook

The new financial year has started well, in line with management expectations. The increasing diversity of our offering and commitment to further broaden our products and services auger well for the future. Our plans remain to continue to grow headcount to support organic growth; we have successfully integrated our recent acquisitions and we continue to show the strength of our proposition with the value we add to our customers.

We are well placed to take advantage of opportunities as we continue to grow.

Approved by the Board of Directors and signed on behalf of the Board on 28 October 2014.

Andrew RichardsonCompany secretary

Consolidated statement of total comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity 

Consolidated cash flow statement 

Notes to financial statements

1. The financial information set out herein does not constitute the Group's statutory accounts for the year ended 31 July 2014 or the year ended 31 July 2013 within the meaning of section 435 of the Companies Act 2006, but is derived from those accounts. The information has been derived from the audited statutory accounts for each of those years upon which an unqualified audit opinion was expressed and which did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The audited accounts will be posted to all shareholders in due course and will be available upon request by contacting the Company Secretary at the Company's registered office.

2. Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs"), as adopted by the European Union (EU).

Utilitywise Plc is incorporated and domiciled in the United Kingdom.

Prior period adjustment

During the preparation of the current year financial statements management has considered the loss of the Initial Recognition Exemption on the property acquired as part of the acquisition of Energy Information Centre Limited. This has resulted in the tax base of this property reducing to £nil. A deferred tax liability of £584,651 should have been recognised, with a corresponding increase in goodwill. Management consider it appropriate to reflect this as a prior period adjustment to the financial position and results of 2013. There is no impact on actual cash flows or net assets. Further narrative has been provided in note 14 of the financial statements.

The principal accounting policies have been applied consistently to all years and are detailed in the Group's statutory accounts.

3. Operating Segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer. The Group reports to the Board under both UK GAAP and IFRS. Underlying accounting information is prepared under UK GAAP and the adjustments noted within this report taking results to IFRS are made for the purpose of reporting to the Board and external reporting.

During the current year the Group serviced both corporate and enterprise businesses. The Board considers that the services were offered from two distinct segments in the current year, and as such have taken the decision to report separately on these operating segments. These distinct operating segments have arisen from a restructure in the current year of previously acquired businesses. Given the reorganisation in the year the Board have undertaken to restate the corresponding items of the segment information, see note 4.

Operating segments are determined based on the internal reporting information and management structure within the Group. Information regarding the results of the reportable segments is included within this report. Performance is based on segment operating profit or loss before share-based payment charges, depreciation, amortisation and acquisition costs, as reported in the internal management reports that are reviewed by the CODM. The segment operating profit or loss is used to measure performance. Revenues represent revenues to external customers.

The Enterprise Division derives its revenues from energy procurement by negotiating rates with energy suppliers for small and medium sized business customers throughout the UK, Republic of Ireland and certain European markets. The Corporate Division derives its revenues from energy procurement of larger industrial and commercial customers, providing an account care service and offering a variety of utility management products and services designed to assist customers manage their energy consumption.

4. Exceptional Items

Exceptional items in the year ended 31 July 2014 relate to the costs incurred in the acquisition of Icon Communication Centres s.r.o and other aborted acquisition costs. Also included are restructuring and reorganisation costs such as settlement payments of £456k, costs of £167k incurred in the set up of a new Head Office which will be occupied in the next financial year, as well as a dilapidations provision and an onerous lease provision for the current premises of £422k and £772k respectively.

There is also a credit of £2m offsetting these costs which has arisen from the release of deferred consideration where earn out criteria were not met. Exceptional items are included in administrative expenses and other operating income in the income statement.

Exceptional items in the year ended 31 July 2013 related to the costs incurred in the acquisitions of Clouds Environmental Consultancy Limited, Aqua Veritas Consulting Limited and Energy Information Centre Limited and other aborted acquisitions. Costs associated with share issues were taken to the share premium account. Please see the Consolidated Statement of Changes in Equity.

5. Tax expense

5. Tax expense (continued)

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to profit for the year as follows:

6. Earnings per Share

Basic profit per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.

Diluted profit per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume the conversion of all potentially dilutive ordinary shares.

7. Acquisition

Utilitywise Plc acquired the entire share capital of Icon Communication Centres s.r.o on 28 April 2014 for £1,981,294 in order to enhance the service offering provided by the Group.

Consideration consisted of both cash payments and the issue of shares, an element of which is contingent on the performance of Icon Communication Centres s.r.o to 31 December 2014. Contingent consideration has been included as a best estimate of amounts payable.

Goodwill on consolidation has been calculated as follows:

The goodwill reflects expected synergies from combining the two businesses and is not tax deductible.

The total value of the contingent consideration is based on a multiple of expected EBITDA capped at £985,384. This is split between cash and shares. All of the contingent consideration is included in trade and other payables as it meets the definition of a financial liability. The share consideration is deemed a financial liability as it represents the settlement of a specific cash amount rather than a specific number of shares.

Since the date of acquisition Icon Communication Centres s.r.o has generated revenue of £866,825 and a loss before tax of £65,140 which is included in the consolidated statement of comprehensive income.

Assuming Icon Communication Centres s.r.o was acquired at the beginning of the annual reporting period, group revenue would be £52,200,249 and profit before tax £10,885,967.

Included within receivables above are gross contractual amounts receivable of £436,589. These are expected to be collected in full.

8. Share Capital

Ordinary shares carry the right to one vote per share at general meetings of the Company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up.

On 15 August 2013 a further 166,666 shares were issued pursuant to the exercise of warrants over such shares, leading to additions of £167 to share capital and £99,833 to share premium.

On 15 November 2013 a further 253,290 shares were issued in part settlement of deferred consideration due on the acquisition of Clouds Environmental Consultancy Limited, as announced on 1 October 2013, leading to additions to share capital of £253 and additions to share premium of £192,247.

On 26 November 2013 a further 166,666 shares were issued pursuant to the exercise of warrants over such shares, leading to additions of £167 to share capital and £99,833 to share premium.

On 28 April 2014 a further 30,701 shares were issued at 321.7p per share for consideration in the investment in Icon Communication Centres s.r.o. The investment has been recognized at fair value in the consolidated financial statements which resulted in additions to merger reserve of £98,734 and additions to share capital of £31.

On 20 June 2014 a further 2,038,750 shares were issued pursuant to the exercise of options over such shares, leading to additions to share capital of £2,039 and additions to share premium of £1,221,211.