Utilitywise Regulatory News (UTW)

Under embargo until 7am, 29 April 2014

Utilitywise plc

("Utilitywise" or the "Company")

Interim Results

for the six months ended 31 January 2014

Utilitywise, a leading independent utility cost management consultancy is pleased to announce its financial results for the 6 months ended 31st January 2014.

Financial Highlights

· Revenue increased 105% to £21m (H1 2013: £10.2m)

· Gross profit increased 110% to £9.0m (H1 2013: £4.3m)

· Adjusted EBITDA* increased 135% to £5.4m (H1 2013: £2.3m)

· Adjusted Pre-tax profit** increase of 133% to £4.9m (H1 2013: £2.1m)

· Adjusted fully diluted EPS*** 5.1p (H1 2013: 2.4p)

· Proposed interim dividend of 1.2p, in line with progressive policy

· Like-for-like revenue increased 65% to £16.8m (H1 2013: £10.2m) and adjusted EBITDA increased 78% to £4.1m* (H1 2013: £2.3m*), after removing the effect of the acquisitions of Energy Information Centre Ltd and Aqua Veritas Consulting Ltd.

*Adjusted for share based payments of £411k (H1 2013: adjusted for share based payments of £87k)

** Adjusted for share based payments of £411k and amortisation of IFRS3 intangibles of £452k (H1 2013: adjusted for share based payments of 87k)

*** Adjusted for share based payments of £411k, amortisation of IFRS3 intangibles of £452k and the tax impact of those adjustments of (£181k) (H1 2013: adjusted for share based payments of 87k)

Corporate Highlights

· Continued growth in customer base to 17,903 an increase of 36% on 31 January 2013

· Further expansion of Energy Consultants team to 347 consultants as at 31 January 2014, an increase of 34% since 31 January 2013 and 23% since 31 July 2013.

· Over £27m of new business secured in H1 2014 a 107% increase on H1 2013, with gross unrecognised secured revenue of £23.8m (31 January 2013: £8.5m) waiting to go live

· Successful integration of the recent acquisitions to create a new Utility Management Services Division, delivering £4.5m of revenue (H1 2013: £0.4m), representing 21% of total Group revenue

· Strengthening the Group's business development resource to support the recently created Utility Management Services Division

· Continued investment in the Group's IT systems and products and services with the launch of Quantum to enhance the functionality of Darwin, our in house CRM platform

Geoff Thompson, Chief Executive of Utilitywise, commented:

 "Utilitywise has continued to make impressive progress, with improvement in all of our key metrics. With our current positive momentum, we now anticipate our performance for the full year will be slightly ahead of current market expectations.

"These results demonstrate the strength of our proposition, our continued ability to scale our business model and the important differentiation we have achieved through our on-going development of our energy management products and services.

"Alongside the impressive organic growth achieved we have successfully created value through strategic acquisitions. We continue to investigate potential acquisitions to broaden our energy services offering and increase shareholder value.

"In light of the on-going debate over energy costs, and the keen interest being shown in the sector by government and the regulator, Utilitywise is well positioned to provide commercial customers of all sizes with the right energy solutions to meet their individual needs."

For further information:

About Utilitywise

Utilitywise is a leading independent utility cost management consultancy based in South Shields, Tyne and Wear. The Company 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 high street shops to multinationals with thousands of sites and cover the whole of the UK. In total, Utilitywise has over 17,000 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.

Chief Executive's Statement

I am pleased to report on the continued strong performance of the Group delivering another period impressive revenue and profit growth and making good progress on a number of strategic goals.

The growth we achieved during the period demonstrates the importance of our proposition to commercial customers and is driven by the continued controlled expansion of our team of energy consultants to meet the demand. We have grown this team by 34% over the prior six month period, bringing the total number of energy consultants to 347 as at the end of January 2014.

We continued to increase our contracted customers during the period increasing the total customer base to 17,903 as at 31 January 2014. This represents an increase of 36% when compared to 31 January 2013. We have seen a continued improvement in our renewal rate to 74% by meter volume for our SME customers and 89% for our Industrial and Commercial (I&C) customers serviced from our newly created Utility Management Services Division.

Investment in our products and services has continued during the period. Our IP is an integral part of our business proposition and we remain committed to the ongoing development and innovation of our unique energy management solutions portfolio. In particular we have:

· Launched Quantum, the next generation of our CRM solution Darwin

· Continued to improve Utility Insight, our multi-utility reporting solution, which now has extensive functionality providing customers with alarms and alerts when consumption thresholds and erroneous patterns of consumption are detected

· Initiated patents pending on Volthammer the Group's new Voltage Optimisation solution

· Further improved our proprietary Energy Auditing Software

Following our successful acquisitions over the last 18 months, the Group now operates as two distinct divisions; namely our Procurement Services division and our Utility Management Services division. As such, the Board are required under International Financial Reporting Standard 8: Operating Segments (IFRS 8) to provide segmental analysis on the two divisions within the Group.

Procurement Services

Our Procurement Services division is the foundation of the Utilitywise business. We have well established trading relationships with a number of major UK energy suppliers and provide services to our customers designed to assist them achieve better value from their energy contracts. Utilitywise negotiates rates with energy suppliers on behalf of business customers and provides an account care service.

Utility Management Services

The Utility Management Services division consists of a broad array of products and services designed to assist companies of all sizes manage their energy consumption. This division has achieved growth in the period following the successful acquisitions of utility management businesses, and now accounts for 21% of the Group's total revenue.

We have continued to invest in the Utility Management Services division, created from the integration of Clouds, Aqua Veritas and EIC, with additional business development and energy solution resource. It is pleasing to see this division performing in line with our expectations with a growing number of new business wins.

Our relationship with the UK Energy Supply companies remains strong and as a result we have secured important new commercial terms with a number of suppliers during the period. We continue to work closely with them to provide innovative energy solutions for the benefit of our customers. Work has been ongoing during the period to create exciting new products that provide SME customers with a more flexible approach to energy procurement combined with integrated consumption management advice. These new product innovations branded 'The Energy Alliance' are due for launch early in H2 2014.

KPIs

* where gross secured future unrecognised revenue does not take into account the time value of money, and as such may not be fully released to the income statement

People

We remain committed to attracting the right talent and to developing the skills of our people so that our customers benefit from our knowledge and experience and the quality of service we provide. As detailed previously, a key focus in the first half has been the continued recruitment of Energy Consultants to support our organic growth and we have added a further 88 Energy Consultants in the first half.

Our new training academy continues to ensure that all of our people have the appropriate knowledge and skills to service our clients with our full range of products and services.

Acquisitions

 It is our aim to enhance our organic growth with selected acquisitions to broaden and develop our product and service offering. Progress has been made in this regard with a clear strategic focus on Energy Control and Demand Response as capabilities we intend to develop via acquisition.

Additionally, we intend to further develop our European capabilities to leverage the opportunities we have identified in France, Germany and other key European markets.

Compliance and Quality Assurance Process

Given the current scrutiny of the wider energy market, Utilitywise remains committed to ensuring that its compliance and quality assurance processes are best in class standard. We have a number of procedures in place to ensure that our sales processes and staff behaviours are compliant with our quality assurance requirements and meet energy suppliers' compliance procedures. This includes training, coaching and documentation of our compliance procedures, as well as checks on all sales documentation and random checks on call recordings. A percentage of our sales documentation, including call recordings, is also quality checked by energy suppliers. We remain focused on both our internal and external procedures and thereby maintain our status of trusted partners to energy suppliers and customers alike.

Principal Risks and Uncertainties

There have been no changes to the principal risks and uncertainties identified in the annual financial statements for the year ended 31 July 2013.

Outlook

These interim results demonstrate the strength of our proposition, our continued ability to scale our business model and the important differentiation we have achieved through our on-going development of our energy management products and services. Despite this growth, we believe we still only have market penetration of under 2%.

We have good visibility over future revenue and a healthy pipeline of new business, which, combined with the growing sales momentum from our recently expanded team of energy consultants, leaves us confident in the future prospects of the business and a successful outcome for the full year.

Financial Review

Income Statement

During the six month period ended 31 January 2014 revenue increased by 105% over the corresponding period last year to £21.0 million. A like for like comparison (excluding the impact of the acquisitions of Energy Information Centre Ltd and Aqua Veritas Consulting Ltd) further illustrates the growth in the business with revenues increasing by 65% to £16.8m reflecting the continued investment in energy consultant expansion with heads growing by 34% in the six months to 347.

The successful strategy of increasing energy consultant headcount is further evidenced by the increase in gross secured future revenue rising to £23.8 million from £8.5 million at January 2013, a 180% increase and £16.6 million at July 2013, a 43% increase. Approximately 76% of gross secured future revenue as at January 2014 will be recognised over the next 12 months.

Gross Margins are at 43% remaining in line with H1 2013 (42%), after another period of energy consultant growth. The increase in the secured future unrecognised revenue is a direct function of the productivity of these energy consultants.

Adjusted EBITDA, defined as EBITDA adjusted for share based payments for the period was £5.4 million, an increase of £3.1 million (135%) on the period to 31 January 2013 - with a like for like increase of £1.8 million (78%). The business has been reported on a segmental basis for the first time reflecting the increasing utility management services delivered to customers by the enlarged group. As at the half year £4.5 million (21%) of group revenue and £1.0 million (25%) of group adjusted profit before tax was attributable to our newly formed Utility Management Services Division. Our Procurement Services Division produced revenue of £16.5million and adjusted profit before tax of £3.9 million.

Cash and Borrowings

The Group has invested £2.3 million of cash for operations during the six month period as it pursues its energy consultant headcount growth, the infrastructure to support future growth and investment in utility management products and services. This has resulted in a period end net negative cash balance of £0.1 million, in line with expectations.  This trend will improve in the second half as revenues and cashflow from this investment in talent and infrastructure follow and the effects of second half supplier tranche payments take effect.

Balance Sheet

As at 31 January 2014 the Group had total non-current assets of £35.9 million (£9.6 million as at 31 January 2013) which include £13.7 million of goodwill (£3.4 million as at 31 January 2013) and £6.5 million of intangible assets (£0.0 million 31 January 2013) following investment in acquisitions. The balance also includes fixed assets of £4.8 million (£0.9 million as at 31 January 2013) and £11.0 million trade and other receivables (£5.2 million as at 31 January 2013) reflecting the above investment in continued business expansion.

Inventory increases reflect expansion in the utility management services division and include holding stock of eddie energy monitoring units. Current trade and other receivables stood at £11.7 million as at 31 January 2014, (£4.3 million at 31 January 2013) including £3 million of trade debtors (£1.8 million 31 January 2013) .Total current liabilities stood at £14.8 million (£4.3 million 31 January 2013).

Net assets were £29.3 million as at 31 January 2014, compared to £12.5 million as at 31 January 2013.

Dividend

The Board is proposing an interim dividend of 1.2p per share payable on 9th June 2014 to shareholders on the register at close of business on 9 May 2014, with an associated ex-dividend date of 7 May 2014

INDEPENDENT REVIEW REPORT TO UTILITYWISE PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2014 which comprises the condensed consolidated statement of total comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2014 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

BDO LLP

Chartered Accountants and Registered Auditors

United Kingdom

28 April 2014

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Condensed consolidated statement of total comprehensive income - Unaudited

Condensed consolidated statement of financial position - Unaudited

Condensed consolidated statement of changes in equity - Unaudited 

Condensed consolidated cash flow statement - Unaudited 

Notes

1. Accounting policies

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 July 2013, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

The interim financial information for each of the six month periods ended 31 January 2014 and 31 January 2013 has not been audited and does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The information for the year ended 31 July 2013 does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006, but is based on the statutory financial statements for that year, on which the auditors have reported. Their audit report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498 (2) or (3) Companies Act 2006.

During the preparation of the financial statements for the year ended 31 July 2013, management reviewed the discount rate applied to the expected future cash flows from revenue. After due consideration, management now believe that the discount rate of 9% previously applied was a misstatement and did not appropriately reflect the risk associated with this revenue. The discounting rate has therefore been revised to 3% to more accurately reflect the risk of trading with blue-chip energy companies. Management consider it appropriate to reflect this as a prior period adjustment to the financial position in the prior period interim results. There is no impact on actual cash flows.

The principle accounting policies have been applied consistently to all years and are set out below.

2. Basis of preparation

Utilitywise Plc is incorporated and domiciled in the United Kingdom.

The accounts for the periods have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and the accounting policies are consistent with those of the annual financial statements for the year ended 31 July 2013 and those envisaged for the financial statements for the year ending 31 July 2014. The Group has not adopted any standards or interpretation in advance of the required implementation dates. It is not anticipated that the adoption in the future of the new or revised standards or interpretations that have been issued by the International Accounting Standards Board will have a material impact on the Group's earnings or shareholders' funds.

The financial statements have been prepared on a going concern and historical cost basis as stated in the accounting policies. There have been no changes in accounting policies. All policies are in line with the year ended 31 July 2013 and we do not anticipate any further changes for the year ended 31 July 2014.

3. Segment information

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 below adjustments to take results to IFRS are made for the purpose of reporting to the Board and external reporting.

During the current period the Group offered both procurement and utility management services. The Board considers that the services were offered form two distinct segments in the current period.

Operating segments are determined based on the internal reporting information and management structure within the Group. Information regarding the results of the reportable segment is included below. 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 disclosed below represent revenues to external customers.

Other information

4. Exceptional items

Exceptional items in the year ended 31 July 2013 relate to the costs incurred in the acquisitions of Clouds Environmental Consultancy Limited, Aqua Veritas Consulting Limited and Energy Information Centre Limited. Costs associated with share issues have been taken to the share premium account. Please see the Consolidated Statement of Changes in Equity. Exceptional items are included in the administrative expenses in the income statement.

5. Dividends

6. Earnings per share

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

Diluted earnings 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.

The Group has potentially dilutive ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. 

7. Property, plant and equipment

During the six months ended 31 January 2014 the group incurred property, plant and equipment additions of £292,204 (HY 2013: £291,215).

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.

During the period ending 31 January 2014 333,332 warrants were exercised, which resulted in additions to share capital of £333 and additions to share premium of £199,667.

During the period ending 31 January 2014 253,289 were issued as deferred consideration on the acquisition of Clouds Environmental Consultancy Limited which took place in October 2012.This resulted in additions to share capital of £253 and additions to share premium of £192,247.

During the period ending 31 January 2014 the company set up a further Save As You Earn scheme (SAYE), Long Term Incentive Plan (LTIP) and Company Share Option Plan (CSOP). A total of 2,181,348 options were issued. These carry an average exercise price of £1.403 per share.