Utilitywise Regulatory News (UTW)

Under embargo until 7am, 16 April 2013

Utilitywise plc

("Utilitywise" or the "Company")

Half Year Results

for the six months ended 31 January 2013

Utilitywise, a leading independent utility cost management consultancy, is pleased to announce its half year results for the period to 31st January 2013.

Geoff Thompson, CEO commented:

"We are delighted to have achieved a 44% increase in revenues, which underlines the exciting growth opportunities available to the Company. Particularly encouraging has been the level of profitability given the costs absorbed by the business in terms of new premises, investment in energy consumption management products, services and headcount growth as outlined at the time of our IPO. We have good visibility over future revenue and our pipeline of new secured and as yet unrecognised revenue has increased since period end. This, combined with the growing sales momentum from our recently expanded team of energy consultants, leaves us confident in the future prospects of the business.

"Our interim results are in line with our expectations and we remain on course to meet full year targets."

Financial Highlights

·; Revenue increased 44% to £10.2m (H2 2012: £7.3m, H1 2012: £7.1m)

·; Gross profit increased 34% to £4.3m (H2 2012: £3.0m, H1 2012: £3.2m)

·; Adjusted EBITDA* of £2.3m (H2 2012: £1.6m, H1 2012: £2.6m)

·; Adjusted Pre-tax profit* of £2.1m (H2 2012: £1.4m, H1 2012: £2.5m)

·; Adjusted fully diluted EPS* 2.4p

·; Proposed interim dividend of 0.8p

·; Net Cash of £5.0m (31 January 2012; £0.0m)

·; Acquisition of Clouds for £1m

Given the major corporate changes effected in the business a more meaningful comparison is provided below against the last 6 month period ending 31 July 2012.

*Adjusted for share based payments of £87k (H1 2012: no adjustments)

** Adjusted for a one off lease termination fee of £75k and £316k of IPO costs

Corporate Highlights

·; Continued growth in contracted meters to 35,400; as at 31 January 2013 a 39% increase since IPO.

·; Further expansion of Energy Consultants team to 259 consultants as at 31 January 2013, an increase of 92% since 31 January 2012 and 38% since 31 July 2012.

·; Over £13m of new business secured in H1, of which in excess of £8.5m was still to go live as at 31 January 2013.

·; Successful acquisition and integration of Clouds, broadening the Energy Management Products and Services offering to include a range of Carbon Reporting and Legislative Compliance services.

·; On-going development of proprietary I.T. Systems, including enhancement of the Darwin CRM platform and development of utility insight into a multi utility reporting solution.

·; Creation of a new Business Development and Account Management function including the development of a Risk Management and Flexible Buying capability.

Richard Feigen, Chairman, commented:

 "I am pleased to report that Utilitywise has continued to make impressive progress and remains on track to achieve full year targets.

"Our interim results continue to 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."

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 manages over 35,500 energy meters which have an overall energy consumption of approaching 4 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 strong performance of the Group in the first half of the year, delivering another period of growth for the business and making steady progress on a number of strategic goals. The growth we achieved during the period is driven by the controlled expansion of our team of energy consultants. We have grown this team by 38% over the prior six month period, bringing the total number of energy consultants to 259 as at the end of January 2013. The majority of the recent hires have now completed our internal training academy and we would expect them to provide a net profit contribution during the second half of the year.

Given the growth defined above, our core energy procurement offering to commercial customers has continued to scale as evidenced by the volume of new customers we contracted in the six months to end of January. In the period our contracted customers increased to 13,287, an increase of 33% since IPO. We have also seen a continued improvement in our renewal rate to 69% by meter volume from 53% at IPO.

In addition to this core offering, we have continued to expand our unique suite of energy management products and services. Further investment in Energy Services has been made in the period, including improvements to our proprietary Edd:e sub metering solution and the associated utility insight reporting platform. This development has led to the creation of a multi utility reporting solution for gas, power and water as well as our own unique circuit level sub metering data.

The investment in the Group's IT systems and processes, which form the foundation of our scalable business model, has resulted in the development of 'Quantum' an enhancement to the Group's Darwin CRM System which will improve the functionality of the current system and integrate the Energy Management products and services.

Internal product development remains a key strategic focus for us and we have further product upgrades planned for H2. Our Voltage Optimisation product, which has been designed to deliver value to customers at a competitive price and with functionality not available elsewhere, has undergone final testing in March 2013 and is planned for full product launch in the Autumn following client testing in July.

The creation of a revised Business Development and Account Management function has been completed. This structure will promote our Risk management and Flexible Buying solution as well as our broader Energy Management Services. It is pleasing that, whilst in its infancy, this structure has already led to a number of important Risk Management and Flexible Buying contract wins in the period under review.

Our relationships with the UK Energy supply companies remain strong and we enjoy an enviable position as a partner who they can rely upon to deliver customer volume and an innovative approach to solving business customers' energy management needs.

KPIs

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 from the quality of service we provide. As detailed at the time of our IPO, a key focus in the first half has been the recruitment of Energy Consultants and we have added a further 71 Energy Consultants in the first half.

Our new training academy has ensured 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.

The Board is pleased to announce, as separately disclosed, the acquisition of Aqua Veritas Consulting Ltd a water consultancy business based in Leicester.

Our acquisition of Clouds, an independent consultancy specialising in energy management services based in Portsmouth, is proving successful with the integration of the businesses now complete. Please refer to note 8.

The Clouds acquisition has broadened the range of Energy Management products and services offered by the Group to include Carbon Management Services and Legislative Compliance Services.

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 2012.

Outlook

Our interim results continue to 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. 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 2013 revenue increased by 44% over the corresponding period last year to £10.2 million including £0.3 million from Clouds Environmental Services acquired in September 2012. This growth is further put into context when compared to the previous six months trading with revenue increasing 40% on the six months ending 31 July 2012. This is supported by an increase of 26% in the volume of contracts going live in the period compared to the previous six months.

Energy consultant headcount continues to grow from 135 at the end of January 2012 to 188 at the end of July 2012 and to 259 at this period end. It is this growth that will form the basis for future increases in revenue and profitability as the new energy consultants complete training and their performance improves with length of service. This is illustrated by the increase in contracts secured going live, which has steadily grown throughout the period from £8.2 million in the 6 month period ending 31 January 2012 to £8.8 million in the 6 month period ending 31 July 2012 to £11.0 million for the six month period ending 31 January 2013.

This momentum is further evidenced by the growth in the value of contracts secured but not gone live i.e. the future secured revenue stream which has grown from £6.8 million as at 31 January 2012 to £7.1 million as at 31 July 2012 to £8.5 million as at 31 January 2013.

Gross margins remained strong through the period at 42% against the backdrop of a 38% increase in energy consultant headcount during the period. This compares to a margin of 45% for six months ended 31 January 2012, a period of relatively static energy consultant headcount, and 39% for the 6 months ended 31 July 2012, a period which enjoyed a similar increase in energy consultant headcount.

Adjusted EBITDA, defined as EBITDA adjusted for share based payments for the period was £2.3 million, a slight decrease of £0.3 million compared to the 6 month period to 31 January 2012 as a result of the investment made in staff and infrastructure during the period. However when compared to the 6 month period to 31 July 2012 adjusted EBITDA increased by 44% from £1.6 million. 2012 adjusted EBITDA is defined as EBITDA adjusted for a one off lease termination fee and IPO costs. Following the relocation of the Group to new offices at Market Dock South Shields in January 2012 administrative expenses have increased in line with expectations as the business has expanded its infrastructure and support functions to support further organic growth.

Cash and Borrowings

The Group has invested £1.9 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 energy management products and services. This has resulted in a period end net cash balance of £5.0 million, in line with expectations allowing for the £0.4 million expended in the acquisition of Clouds.  This trend will improve in the second half as revenues and cashflow from this investment in talent and infrastructure follow.

Balance Sheet

As at 31 January 2013 the Group had total non-current assets of £7.2 million (£3.8 million 31 January 2012) including £3.4 million of goodwill (£2.4 million 31 January 2012). PPE asset investment of £0.3 million was incurred to support the increased headcount.

Inventories of £53,000 relate to stock of Edd:e energy monitoring units. Trade receivables stood at £4.4 million as at 31 January 2013, £0.5 million lower than 31 January 2012. Total liabilities stand at £4.4 million, a £0.9 million increase on the period to 31 July 2012 and a reduction of £0.5 million on the 6 months to 31 January 2012. Net current assets remain strong at £5.09 million (£0.37 million 31 January 2012).

Dividend

The Board is proposing an interim dividend of 0.8p per share payable to shareholders on the register at close of business on 22 May 2013 to shareholders on the register at 3 May 2013.

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 2013 which comprises 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 2013 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

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 2012, 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 2013 and 31 January 2012 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 2012 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.

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.

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 2012 and we do not anticipate any further changes for the year ended 31 July 2013. .

2. 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.

During the current period the Group offered both energy procurement and energy management services. The Board considers that due to the aggregation criteria in IFRS 8 that the services offered form one segment for the current period. As the energy management revenues grow a reassessment of operating segments will take place.

The Board considers that the Group's project activity constitutes one operating and one reporting segment, as defined under IFRS 8. Management reviews the performance of the Group by reference to total results against budget.

Other information

3. Exceptional items

Exceptional items in the year ended 31 July 2012 relate to a one off lease termination fee of £75,000 and £316,398 of listing fees incurred on admission to the AIM. £316,398 was considered to be the listing fee value attributable to shares in issue prior to the AIM listing. Costs associated with new shares issued on admission were taken to the share premium account. Please see the Consolidated Statement of Changes in Equity. Exceptional items are included in administrative expenses in the income statement.

4. 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. 

1 The number of shares in issue at 31 January 2012 was 10,000. However, in line with IAS 33 the comparative weighted average number of shares for the calculation of earnings per share where there has not been any concomitant change in the resources. As a result, the number of weighted average shares has been adjusted for the movements in the number of shares in the period ended 31 July 2012. During that period the company capitalised reserves of £49,900 to give a revised share capital of £50,000. Share capital was then changed from £0.01 to £0.001 per share.

5. Property, plant and equipment

During the six months ended 31 January 2013 the group incurred property, plant and equipment additions of £291,215.

6. Acquisition

Utilitywise Plc acquired the entire share capital of Clouds Environmental Consultancy Limited on 1 October 2012 for £1,040,821 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 Clouds Environmental Consultancy Limited to 31 July 2013. 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.

Since the date of acquisition Clouds Environmental Consultancy Limited has generated revenue of £315,027 and a profit before tax of £73,140 which is included in the consolidated statement of comprehensive income.

Assuming Clouds Environmental Consultancy Limited was acquired at the beginning of the annual reporting period, group revenue would be £10,320,997 and profit before tax £2,098,305.

In the year ended 31 July 2012 Utilitywise Plc acquired the entire share capital of Eco Monitoring Utility Systems Limited which gave rise to goodwill of £2,356,960.

Reconciliation of Goodwill:

9. 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 2013 as part of the consideration payable on the acquisition of Clouds Environmental Consultancy Limited the company issued 394,736 shares at 76p per share, which resulted in a merger reserve of £299,605 and additions to share capital of £395.

The addition of £253 to shares to be issued represents the maximum nominal value of shares to be issued as part of the contingent consideration on the acquisition of Clouds Environmental Consultancy Limited. The issue of these shares will result in addition to the merger reserve of £192,247. This balance is currently held in merger reserve of shares to be issued.

10. Post balance sheet events

On 15 April 2013 the Company acquired the entire issued share capital of Aqua Veritas Consulting Limited for total initial consideration of £162,000 payable in cash upon completion (subject to adjustment on the basis of completion accounts) with a further deferred amount payable based upon 4 times Aqua Veritas' adjusted EBITDA to April 2014 capped at £4 million.