Utilitywise Regulatory News (UTW)

Under embargo until 7am, 21 April 2015

Utilitywise plc

("Utilitywise" or the "Company")

Interim Results

for the six months ended 31 January 2015

Utilitywise, a leading independent utility cost management consultancy, is pleased to announce its financial results for the six months ended 31 January 2015.

Financial Highlights

· Revenue increased 42% to £29.9m (H1 2014: £21.0m)

· Adjusted EBITDA* increased 42% to £7.7m (H1 2014: £5.4m)

· Adjusted Pre-tax profit** increase of 49% to £7.3m ( H1 2014: £4.9m)

· Adjusted fully diluted EPS*** increased 41% to 7.2p (H1 2014: 5.1p)

· Proposed interim dividend increased 55% to 1.7p (H1 2014: 1.1p)

· Net cash of £1.6m (H1 2014: (£0.1m))

*Adjusted for share based payments of £366k (H1 2014: adjusted for share based payments of £411k)

** Adjusted for share based payments of £366k and amortisation of IFRS3 intangibles of £531k (H1 2014: adjusted for share based payments of 411k and amortisation of IFRS3 intangibles of £452k)

*** Adjusted for share based payments of £366k (H1 2014: £411k), amortisation of IFRS3 intangibles of £531k (H1 2014: £452k) and the tax impact of those adjustments of (£162k) (H1 2014: £181k)

Corporate Highlights

· Successful move to new corporate headquarters

· Energy consultants increased 29% to 449 (H1 2014: 347)

· Total group headcount up 16% to 884 (H1 2014: 761)

· New initiatives such as ESOS and water de-regulation in Scotland resourced to drive new revenue opportunities

Post period highlights

· Energy consultants increased to 549 (22% increase post period end)

· Total group headcount up 14% to 1,011

· Secured revenue as at 31 March 2015 at £26m

· Group customer numbers at 23,109 at 31 March 2015

· Acquisition of T-mac announced today

Geoff Thompson, Chief Executive of Utilitywise, commented:

"The Group has continued to make progress with impressive growth in both revenue and EBITDA. During the period, we both extended contracts for existing customers and continued to secure new customers, providing further validation of the strength of our proposition and the important differentiation we have achieved through the on-going development of our energy management products and services.

"The move to our new Head Office was completed on schedule and on budget in November 2014, enabling us to accelerate the recruitment of additional staff in order to drive future growth and the progress with this is in line with our plans. New customer acquisition remains an important priority and, in line with this, we are pleased to report that March 2015 represented the highest monthly customer acquisition performance for the Group in its history.

"A significant market opportunity exists for continued profitable growth and we look forward to a second half of continued positive momentum."

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 high street shops to multinationals with thousands of sites and cover the whole of the UK. In total, Utilitywise has over 23,000 customers.

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 of impressive revenue and profit growth and making good progress on a number of strategic goals whilst driving growth in all of our KPIs.

Alongside driving our financial and operational performance, we ensure that we do not lose sight of continued quality assurance for our customers. Our focus on operational excellence has continued with our Trusted Advisor strategy being deployed, a strong positive Net Promoter Score which is independently managed, and a continued focus on the customer journey.

KPIs

We also regard the main financial indicators such as revenue, gross profit and EBITDA as important measures and these are disclosed as such throughout.

Progress by division

During the period the Group operated from two distinct divisions. The performance of both divisions is reported separately and as such we have chosen to discuss our Enterprise and Corporate divisions in turn below.

Enterprise

Our Enterprise division is the foundation of the Utilitywise business, focusing on small, medium and multi-site opportunities. We have well established trading relationships with a number of major UK energy suppliers and provide services to our customers designed to assist them in achieving better value from their energy contracts. Utilitywise negotiates rates with energy suppliers on behalf of business customers and provides an account care service.

Revenue in the division grew 47% to £24.3m (H1 2014: £16.5m) with gross profit increasing 51% to £10.6m (H1 2014: £7.0m). This growth was despite operating from a similar revenue generating average headcount as the increase in Energy Consultants was made after we moved offices and towards the end of the reporting period. EBITDA increased 37% to £5.8m (H1 2014: £4.2m). In addition, we have seen a consistent renewal rate above 80% by meter volume for our Enterprise customers.

During the period, recruitment plans are in line with expectations with the number of Energy Consultants increasing to 449 as at 31 January 2015, and 549 as at 31 March 2015.

The longer term growth in our Enterprise Division is supported by the continued development of our multi-channel approach to the market ensuring we give the business customer the choice of how to engage with us when assisting them on a variety of utility management needs. 

Extensions

A feature of the first half was an increase in revenue from extensions compared to the first half last year. As detailed in the 13 February 2015 trading update, following the introduction of new, longer term energy supply contracts by several energy suppliers, Utilitywise focused on extending and renewing energy contracts for its existing customers during the period. We successfully extended contracts for existing customers which both strengthened customer relationships whilst securing revenue, profit and cash flow over the longer term for the Company. These extensions both secured further price certainty for customers and generated revenue for the Group in the period. Renewal and extension revenue represented approximately 42% of Enterprise revenue in the period up from 32% in H1 2014.

With this type of contract, 85% of revenue is recognised when the contract is renewed or extended. These contracts are not included in the Company's secured pipeline.

Although extensions will continue to be a feature going forward, post period end we have increased our efforts towards the acquisition of new customers, which we have been successful in converting.

New customer acquisition

We continued to increase our contracted customers during the period, increasing the total customer base to 22,048 as at 31 January 2015 (H1 2014: 17,903). This represents an increase of 23% when compared to 31 January 2014. 58% of revenues in the period came from new customers.

The value of the Company's new contracts are added to its secured pipeline once the contract is signed, and on its go live date, 85% of the value of the contract is recognised as revenue and up to 80% of the cash associated with the contract is due.

New customer acquisition has continued to be an important priority for the Group. I am pleased to report that as at the 31 March 2015 we have secured 1,061 new customers since the period end. March represented the highest monthly customer acquisition performance for the Group in its history.

Corporate

The Corporate division consists of a broad array of products and services designed to assist companies with greater energy needs to manage their energy consumption.

During the period, the Corporate division enjoyed good revenue growth with revenue in the division increasing 37% to £6.1m (H1 2014: £4.5m) and gross profit increasing 43% to £2.9m (H1 2014: £2.0m). This growth was supported by significant customer wins in the medium sized business space. EBITDA increased 61% to £1.9m (H1 2014: £1.2m). The renewal rate by meter volume increased to 98%.

Group

Investment

During the period, we successfully completed the move to new, larger premises in Newcastle which we invited institutional investors to visit in January. The increased capacity has enabled the Company to grow its headcount and measures are in place to ensure that the infrastructure of the Company is sufficiently scalable to cope with its recruitment strategy.

Investment in our products and services has continued during the period. Our Intellectual Property 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.

People

We are 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. Our 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.

Compliance and Quality Assurance Process

In order to maintain our status of trusted advisor to energy suppliers and customers alike, we remain committed to ensuring that our compliance and quality assurance processes are best in class. We have a number of procedures in place to ensure that our sales processes meet energy suppliers' compliance procedures, including training, coaching and documentation of our compliance procedures, as well as checks on all sales documentation, emails and checks on call recordings. A percentage of our sales documentation, including call recordings, is also quality checked by energy suppliers. We also adhere to our own stringent set of internally formulated quality assurance requirements.

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.

Related Parties

During the period there have been no related party transactions which have had a material impact on the financial position or performance of the Group. There have been no significant changes to related party transactions disclosed in the annual report for the year ended 31 July 2014.

Outlook

Post period end, we are pleased to report further KPI progress with Group headcount increasing to 1,011, the Company's secured revenue pipeline at £26m and 23,109 Group customers as at 31 March 2015.

We are still at an early stage in terms of the growth potential in this sector and, with the reputation and resources we have built, firmly believe that Utilitywise is now ideally positioned to capitalise on it.

We see exciting opportunities ahead of us as the market evolves and related service opportunities emerge, for example in the water market when it fully de-regulates in 2017. In the meantime, we continue to build our Energy Services capability and recent Government initiatives such as the Energy Savings Opportunity Scheme (ESOS) have presented superb opportunities to engage with many large corporate customers to assist them not only in their regulatory compliance but also in their desire to reduce energy consumption.

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.

Our end customers and our desire to engage with them on all utility related matters is at the heart of what we do and we are focused on ensuring that we continue to cement our position as their trusted advisor in the second half of the year and beyond.

We are confident about the future prospects of the business and we have started the second half well, in particular in meeting our targets to increase Consultant headcount and to acquire new customers. Our second half performance will be predicated on the continuation of this momentum.

Acquisition of T-mac Technologies Limited (T-mac)

We continue to be focused on providing a comprehensive utility solution to all sizes of customer and are committed to developing further capabilities that respond to our customers' needs.

In line with this strategy, we have announced this morning the acquisition of T-mac. Further details are contained in a separate announcement released earlier today.

Financial Review

Income Statement

During the six month period ended 31 January 2015 revenue increased by 42% over the corresponding period last year to £29.9 million. A key driver of growth has been the addition of revenue generating Energy Consultants. At the end of January the headcount had increased to 449 up from 347 at the end of January 2014, 15% of which were recruited following the office move in November. The additional heads came in at the end of the six month period following the move to new offices to allow for further expansion and as such the average revenue generating headcount was approximately flat when comparing the two periods.

Despite this, revenue grew significantly which can be attributed in part to a commercially attractive opportunity to extend contracts with existing end consumers for longer terms. This has coincided with a period of low energy prices thus enabling the end consumer to lock in to these lower prices.

The secured pipeline (gross secured future revenue) was £23.5 million compared to £23.8 million at January 2014. The static headcount that contributed to the revenue and the fact that an extension will be recognised in revenue immediately means that the gross secured future revenue held at c£24m. As at 31 March 2015, the secured pipeline has increased to £26m as we refocused on new customer acquisition.

Overall Gross Margins are 45%, up on the prior period of 43%.

Adjusted EBITDA, defined as EBITDA adjusted for share based payments for the period was £7.7 million, an increase of £2.3 million (42%) on the period to 31 January 2014.

At the divisional results level we are pleased to see both divisions progress from the prior period. Of the EBITDA increase of £2.3m, £1.6m (68%) was attributable to the growth in the Enterprise division, with the remainder reflecting strong growth in the Corporate segment. The two segments have differing growth prospects with the Enterprise growth being fuelled by the addition of headcount as we acquire new customers in a market that remains extremely large compared to our current customer count. The Corporate Division operates in a much more mature market as far as procurement is concerned and some of the growth initially is driven by our desire to transfer some of the larger Enterprise customers in to the Corporate account managed customer function as their contracts come up for renewal. This together with some exciting opportunities to engage more fully with this customer base provides exciting growth prospects for the division as we continue to strengthen the non-procurement offering with our wide range of energy services.

Cash and Borrowings

The Group ended the half year with a net cash balance excluding finance leases of £2.2m compared to a small net debt figure at 31 January 2014 of £0.1m. The cash flow in the period has seen capital expenditure on the new offices of £1.6m which was paid out of a £2m cash contribution to cover this that was received prior to the year ended 31 July 2014. Other significant cash flows included a share award related PAYE payment of £4m that was made immediately after the year end. The main trading related item is the increase in the net accrued revenue balance in the period. This is to a large extent a result of the contract extension business undertaken that has seen revenue recognised shown as accrued revenue. The net accrued revenue balances are discounted at the cost of debt of our customers which in our case is 3%.

Balance Sheet

As at 31 January 2015 the Group had total net assets of £39.6m compared to £29.3m at the end of January 2014. As mentioned above, property, plant and equipment (PPE) have increased following the fit out costs associated with the new Head Office. There was no acquisition activity in the six months and as such the Goodwill and Intangible Assets balances remained at brought forward levels with the latter suffering the normal level of amortisation.

The growth in net assets with the exception of the PPE investment has seen the net accrued revenue balance increase from £10.1m to £21.6m. This represents future cash flows which are contracted by a utility provider with our end user business customers and which are paid to the Group by the underlying Utility provider. To a large extent the increase in net accrued revenue has arisen as a result of the contract extension business undertaken in our Enterprise division. The net accrued revenue balance has a maturity profile which has c41% due within one year and the balance of 59% extending in to the future with c40% due after 31 July 2017. As we are not an energy supplier, any variability over the cash flows receivable from the utility provider will only arise if an end business user defaults or consumes less than 85% of the energy consumption anticipated at the start of its contract. This is because the Group recognises 85% of the expected revenue from energy supply to a business end user at the start of each contract.

Dividend

The Board is proposing an interim dividend of 1.7p per share payable on 20th June 2015 to shareholders on the register at close of business on 22 May 2015, with an associated ex-dividend date of 21 May 2015.

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 2015 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.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

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 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the rules of the London Stock Exchange for companies trading securities on AIM.

BDO LLP

Chartered Accountants and Registered Auditors

Location

United Kingdom

Date

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 2014, 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 2015 and 31 January 2014 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 2014 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 2014, management considered the loss of the Initial Recognition Exemption on the property acquired as part of the acquisition of Energy Information Centre Limited. This 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 considered it appropriate to reflect this as a prior period adjustment to the financial position and results of 2013 and the period ending 31 January 2014. There was no impact on actual cash flows or net assets.

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 2014 and those envisaged for the financial statements for the year ending 31 July 2015. 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 2014 and we do not anticipate any further changes for the year ended 31 July 2015.

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, Deputy Chief Executive 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 serviced both Corporate and Enterprise businesses. The Board considers that the services were offered form two distinct segments in the current period. These distinct operating segments have arisen from a restructure in the prior year of previously acquired businesses. Given the reorganisation in the prior year the Board have undertaken to restate the corresponding items of the segment information below.

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.

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.

Other information

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 £469k, costs of £167k incurred in the set up of a new Head Office was occupied in November 2014, as well as a dilapidations provision and an onerous lease provision for the South Tyneside premises of £422k and £772k respectively.

There is also a credit of £2m offsetting these costs which arose 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 six months ending 31 January 2015 relate to the release of an unutilised provision from the year ended 31 July 2014, originally made in relation to restructuring costs.

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 2015 the group incurred property, plant and equipment additions of £2,120,852 (HY 2014: £292,204).

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 2015 a further 219,884 were issued pursuant to the exercise of options over such shares, which resulted in additions to share capital of £220 and additions to share premium of £260,401.

During the period ending 31 January 2015 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 1,686,269 options were issued. These carry an average exercise price of £2.21 per share.

9. Post balance sheet events

Since the period end the Company has acquired T-mac Technologies Limited. Further details are contained in a separate announcement released earlier today.