TIDMINSE
RNS Number : 5407U
Inspired PLC
29 March 2023
29 March 2023
Inspired PLC
("Inspired" or the "Group")
Final Results 2022
Results and FY23 outlook in line with expectations, with robust
operational performance and strong cash generation
Inspired (AIM: INSE), a leading technology-based service
provider supporting businesses to control energy costs and enable
their journey to net-zero, announces its consolidated, audited
final results for the year ended 31 December 2022.
Financial Highlights
%
2022 2021 change
------------------------------- --------- -------- -------
Revenue GBP88.8m GBP67.9m +31%
------------------------------- --------- -------- -------
Gross profit GBP57.7m GBP50.7m +14%
------------------------------- --------- -------- -------
Adjusted EBITDA* GBP21.0m GBP19.8m +6%
------------------------------- --------- -------- -------
Adjusted profit before tax** GBP14.0m GBP13.4m +4%
------------------------------- --------- -------- -------
(Loss)/profit before tax (GBP4.0m) GBP1.1m N/A
------------------------------- --------- -------- -------
Underlying cash generated from
operations*** GBP21.7m GBP10.2m +113%
------------------------------- --------- -------- -------
Adjusted diluted EPS**** 1.31p 1.30p +1%
------------------------------- --------- -------- -------
Diluted basic EPS (0.37p) 0.16p N/A
------------------------------- --------- -------- -------
Net debt GBP37.2m GBP32.9m +13%
------------------------------- --------- -------- -------
Corporate order book GBP69.0m GBP67.5m +2%
------------------------------- --------- -------- -------
Dividend per share 0.27p 0.25p +8%
------------------------------- --------- -------- -------
-- Group revenues increased 31% to GBP88.8 million (2021: GBP67.9
million), with all four of the Group's divisions generating
growth in 2022.
-- Underlying Group cash generated from operations (excluding
non-recurring fees associated with restructuring costs and
deal fees) was GBP21.7 million (2021: GBP10.2 million), up
113% driven by strong working capital management within the
Optimisation Services division.
-- The increase in Group net debt of GBP4.3 million reflects
a year in which the cash generation was offset by the payment
of GBP10.8 million of performance payments, in the form of
contingent cash consideration for acquisitions reflecting
the Group's strategy to pay for EBITDA when delivered, not
on the basis of forecast EBITDA. This strategy has proven
to be effective in protecting shareholders during periods
of volatility in 2020 and 2021.
-- Group Adjusted EBITDA margins reduced to 24% (2021: 29%),
reflecting the change in revenue stream mix and increased
PLC costs.
-- Adjusted profit before tax of GBP14.0 million (2021: GBP13.4
million) reflecting the increase in finance costs from a higher
level of debt over the year and increased interest rates.
-- Under IFRS measures, the Group reported a loss before tax
for the year of GBP4.0 million (2021: profit of GBP1.1 million),
with statutory profit before tax in the year significantly
impacted by charges for changes in the fair value of contingent
consideration, the amortisation of intangible assets as a
result of acquisitions, share-based payment charges and restructuring
costs.
Operational and Strategic Highlights
Strong performance across all four business divisions, which are
underpinned by long term structural growth drivers:
Assurance Services
-- Record year for new business which counteracted an increase
in client churn because of the unprecedented conditions in
UK energy markets.
-- Delivered revenues in line with expectations with increased
overheads to maintain service level quality standards whilst
addressing client needs during the energy crisis, leading
to a modest reduction in margin in the period.
Optimisation Services
-- Revenues grew 64% to GBP47.7 million (2021: GBP29.1 million)
driven by significant demand as the ongoing energy crisis
significantly sharpened clients' focus on the economics of
investment in energy reductions, combined with the drive for
delivering net-zero.
-- Optimisation Services are a key component in increasing the
lifetime value of our clients as the repeatable demand for
solutions to deliver net-zero and reduce costs address the
strong macro themes of ESG and managing responses to climate
change. These macro themes offer the opportunity to significantly
drive absolute EBITDA growth for the Group over the long term
albeit at lower blended Group EBITDA margin.
ESG Services
-- ESG revenue up 167% on FY21, in line with uplifted expectations
post the Group's interim results, as the expanded service
offering continues to gain significant traction.
-- ESG services not only offer an opportunity to increase the
lifetime value of the existing client base but also to bring
new clients to the Group including Videndum plc, Naked Wines
plc, QA Limited, City Electrical Factors (CEF) and John Wiley
& Sons.
Software Services
-- Performed in line with expectations, working with several
flagship clients including Peabody, NHS Property Services,
Laser and SMS plc.
-- A number of significant software solution modules are expected
to be released in 2023, providing opportunity for further
upside growth.
Current Trading and Outlook
-- Trading in Q1 2023 started with considerable momentum across
the business which is consistent with management expectations
of double-digit percentage EBITDA growth in year. Despite
the ongoing macroeconomic and geopolitical uncertainties,
the Board is confident of the Group's continued ability to
deliver full year results in line with expectations.
-- The Group has a substantial addressable market underpinned
by an extensive and blue-chip client base. The 'new normal',
created by the energy crisis, has resulted in increased demand
for the Group's products and services with optimisation and
ESG becoming a revenue centric item for most businesses.
-- For 2023, the Group intends to continue to refine its operating
model in Assurance Services, whilst adapting service levels
to the new environment.
-- Specific focus during the year will also be given to increasing
the 'life-time value' of clients by increasing penetration
across the Group's suite of services.
-- The improved processes for managing working capital within
the Optimisation Services division have continued to operate
well as we start the year providing confidence that cash conversion
for the year should operate in the 80% to 90% range.
Commenting on the results, Mark Dickinson, CEO of Inspired,
said: "I n what has been the most challenging year ever seen in the
UK energy markets, when the need for our services has never been
more apparent, I am incredibly proud of the Group's performance
across all divisions. We delivered significant growth in Group
revenues, adjusted EBITDA and strong underlying cash, demonstrating
the increased demand for our services, which we expect to continue
into the new financial year and beyond.
"The unprecedented conditions in the UK energy markets, which we
believe has started a transition to a 'new normal', have sharpened
our clients' focus on ensuring they have invested effectively in
carbon and energy reduction. The energy crisis has accelerated the
focus on ESG objectives as a key priority at board level across our
client base and our evolving strategy is well aligned to meet the
resulting market demands and requirements.
"Whilst mindful of the current backdrop, the long-term
opportunities for the Group are clear and we have entered FY23 in a
robust position, building on momentum from the prior year. We have
a substantial addressable market, high profile clients, and a
record new business pipeline, underpinning the Board's confidence
in the long-term growth and success of the Group."
Note
*Adjusted EBITDA is earnings before interest, taxation,
depreciation, and amortisation, excluding exceptional items and
share-based payments.
**Adjusted (loss)/profit before tax is earnings before tax,
amortisation of intangible assets (excluding internally generated
amortisation related to computer software and customer databases),
exceptional items, share-based payments, the change in fair value
of contingent consideration and foreign exchange gains/(losses) (A
reconciliation of Adjusted profit before tax to reported
(loss)/profit before tax can be found in note 5)
***Underlying cash generated from operations is cash generated
from operations, as adjusted to remove the impact of restructuring
costs and fees associated with acquisitions.
****Adjusted diluted earnings per share represents the diluted
earnings per share, as adjusted to remove amortisation of
intangible assets (excluding internally generated amortisation
related to computer software and customer databases), exceptional
items, share-based payments, the change in fair value of contingent
consideration and foreign exchange gains/(losses).
Enquiries please contact:
Inspired PLC www.inspiredplc.co.uk
Mark Dickinson, Chief Executive Officer +44 (0) 1772 689250
Paul Connor, Chief Financial Officer
David Cockshott, Chief Commercial Officer
Shore Capital (Nominated Adviser and
Joint Broker)
Patrick Castle
James Thomas
Rachel Goldstein +44 (0) 20 7408 4090
Liberum (Joint Broker)
Edward Mansfield
Will Hall
Antonia Brown +44 (0) 20 3100 2000
Alma PR +44 (0) 20 3405 0205
Justine James inspired@almapr.co.uk
Hannah Campbell
Will Ellis Hancock
Chairman's statement
2022 was a year of significant progress across all business
divisions, with a strengthened platform created, capable of
generating long term growth, against a very challenging backdrop in
UK energy markets. As a Board, we are incredibly proud of what our
team has achieved during these unprecedented times. We continue to
overcome the challenges the UK market faces, positioning the Group
as the leading provider of services to help businesses to respond
to climate change and meet their net-zero targets.
The year started with the impact of the war in Ukraine causing
significant volatility and uncertainty across commodity and energy
markets. The crisis further highlighted energy as an essential
board level priority and the Group continues to take every
opportunity to help all clients mitigate the cost of energy and
manage their energy consumption and carbon emissions during these
unprecedented times.
We are delighted with the resilient revenue and margin
performance of the Assurance Services in 2022. The last three
financial years have been an especially challenging time for our
Assurance Services, with COVID-19 impacting both 2020 and 2021, and
the energy crisis impacting 2022. Our drive to continue to provide
a first-class level of service to our Assurance clients has led to
an increase in our overheads during the year, an investment in our
cost base which we believe is essential if we are to continue to be
the market leader.
Our decision to diversify, firstly into Optimisation Services in
2019 and subsequently into ESG services in 2021, has proven to be
an excellent strategic choice. Optimisation has grown rapidly and
now represents the majority of Group revenues whilst ESG, from a
standing start, is already experiencing rapid growth. Both continue
to provide significant opportunities for long-term growth. Inspired
has the benefit of a substantial client base developed over the
years through its Assurance division. The energy crisis has
provided the additional catalyst to potentially accelerate that
growth through increasing levels of cross selling into our client
base supplementing continued new business generation.
Together with the strong foundation of the performance of the
Assurance operation, we have created the platform for an exciting
period of opportunity for the business.
Environmental, Social & Governance (ESG)
As a service provider helping businesses deliver market leading
ESG disclosures, it is important that the Group is at the forefront
of ESG performance.
During 2022, the Group made the following progress towards its
ESG objectives:
1. Modelled our net-zero pathway.
2. Piloted half hourly monitoring at our head office which will
be rolled out across our estate to drive energy efficiency and
reduce our carbon emissions.
3. Introduced an Electric Vehicle scheme to employees.
4. Introduced a new suite of professional skills development courses for employees.
5. Prepared our third voluntary Task Force on Climate-Related Financial Disclosure (TCFD).
6. Prepared our third voluntary ESG report aligned with the Global Reporting Initiative (GRI).
7. Submitted our first CDP disclosure and achieved a B score.
For 2023, the Group's planned ESG deliverables can be summarised
as:
1. Submit our near-term and net-zero targets for validation to
the Science-Based Targets Initiative (SBTi).
2. Engage with our top suppliers on ESG.
3. Start conducting life cycle assessments (LCA) on top selling products.
4. Develop our STEM scholarship programme.
5. Prepare our first Task Force on Nature-Related Financial Disclosure.
6. Prepare our fourth Task Force on Climate-Related Financial Disclosure (TCFD).
7. Prepare our fourth voluntary ESG Report aligned to the Global Reporting Initiative (GRI).
Dividend
Since IPO, Inspired has established a track record of delivering
profitable and cash-generative growth which has facilitated a
consistent and progressive dividend policy.
Accordingly, the Board is pleased to propose a final dividend of
0.14 pence (2021: 0.13 pence) subject to shareholder approval at
the AGM in June, resulting in a full year dividend of 0.27 pence
(2021: 0.25 pence). The dividend aligns with the Board's stated
policy of a dividend cover of at least 3x earnings, with the
objective of delivering progressive dividend growth over time and
reflects the Board's confidence in the business.
The dividend will be payable on 26 July 2023 to all shareholders
on the register on 16 June 2023 and the shares will go ex-dividend
on 15 June 2023.
Staff
On behalf of the Board, I would like to thank all our employees
who continue to overcome the challenges of these difficult times.
We have continued, throughout, to invest in our valued team and the
business. The Group takes every opportunity to help all clients
mitigate the cost of energy and manage their energy consumption and
carbon emissions during these unprecedented times.
Board update
On 2 March 2023, Sarah Flannigan stepped down from the Board and
we welcomed Peter Tracey, as a Non-Executive Director. I wish to
thank Sarah for her contribution to the Group's achievements since
joining the Board in June 2020. Sarah has been a trusted and valued
member of the Board, providing strong support and guidance
throughout the COVID-19 pandemic and subsequent unprecedented
energy market volatility. Peter adds significant capital markets
experience and brings with him a skill set that complements those
of the existing Non-Executive Board members. The Board looks
forward to benefitting from Peter's knowledge and experience as we
work towards another year of significant growth and
development.
The Board will continue to consist of three Executive Directors
supported by a Non-Executive Chairman and three independent
Non-Executive Directors, representing a broad mix of skills and
diversity to align with the Group's evolving strategy.
Richard Logan
Chairman
28 March 2023
Chief Executive Officer's statement
In what has been the most challenging year ever seen in the UK
energy markets, when the need for our services supporting clients
in their drive to net-zero, controlling energy costs and managing
their response to climate change has never been more apparent,
Inspired's performance has been very strong, both financially and
operationally.
The unprecedented conditions in the UK energy markets, which we
believe has started a transition to a 'new normal', have sharpened
our clients' focus on ensuring they have invested effectively in
carbon and energy reduction. The energy crisis has accelerated the
focus on ESG objectives as a key priority at board level across our
client base and our evolving strategy is well aligned to meet the
resulting market demands and requirements.
The secular market tailwinds are now well established, as the
business represents a pure play investment on the exciting macro
ESG and net-zero themes, providing a significant opportunity for
the Group to grow and capture a larger market share. Our strong
performance this year is testament to our evolving offering within
each of our four divisions and the teams we have working across our
business.
The increased demand delivered a considerable acceleration in
revenue growth of 31% above FY21, at GBP88.8 million, ahead of
previous market expectations. With significant demand for
Optimisation Services, a solid H2 performance in Assurance
Services, combined with encouraging momentum in our ESG Services
division, the Group delivered adjusted EBITDA of GBP21.0 million,
being 6% ahead of FY21. We delivered strong underlying cash
generation in the period, with cash generated from operations
increasing 113% to GBP21.7 million, driven by improved working
capital management within Optimisation Services. The need for
energy efficiency initiatives continued to drive strong demand for
our services and we expect this momentum to continue heading into
the new financial year and beyond.
Whilst mindful of the current backdrop, and in particular the
risk posed by prolonged inflation in energy costs to our clients,
which we constantly look to help them mitigate, the long-term
opportunities for the Group have been made even more apparent in
FY22. As a result, we have entered FY23 with considerable momentum
across the business which is reflected in our FY23 EBITDA growth
expectations. We have a substantial addressable market, high
profile clients, and a high-quality business model driving growth
in revenue, Adjusted EBITDA and cash generation. These factors,
coupled with a record new business pipeline, underpin the Board's
confidence in the long-term growth and success of the Group.
During this period of uncertainty, the Group has continued to
work tirelessly to support clients in the face of such challenges
and, on behalf of the Board, I would like to thank all colleagues,
clients and suppliers for their efforts and collaboration during
these challenging times.
Strategy
In 2021, the Group evolved to Inspired plc, with four key
reporting segments. During 2022, it has become clear that
Optimisation Services are the logical conclusion for clients who
utilise our Assurance Services or our ESG Services, as both lead to
the implementation of a carbon action programme to reduce energy
costs and deliver net-zero. There remains a substantial opportunity
to provide the full suite of services across our client base who
may currently only purchase one of the Group's services. This will
not only embed the Group as a trusted provider and advisor to its
clients but also substantially increase the lifetime value and
level of repeat revenues underpinning the future growth of the
business. All divisions are supported by our proprietary software
provided by our Software Services division.
This focus on client lifetime value ("CLV") has identified the
opportunity to materially change the client lifetime value of
c.2,500 of our 3,500 clients. For example, a retailer that the
group has worked with for 13 years has an Assurance Services CLV of
c. GBP1.5 million. Its CLV from Optimisation Services, where the
Group has received repeat demand on 10 of the last 13 years, is
over GBP20 million, an increase in CLV over the last 13 years of
over 10 times with more to come. This provides a substantial
organic revenue growth opportunity if applied effectively across
the Group's client portfolio.
If we consider the wider portfolio in terms of 10-year CLV
opportunity, we can see that of our 850 larger clients there is the
opportunity to increase their CLV from GBP0.2 m illion to GBP3.1
million and of our 1600 smaller clients there is the opportunity to
increase our CLV from GBP0.05 million to GBP0.5 million. During
2022 we were active on site on a full-service basis with 12 large
clients and 15 smaller clients.
Our focus on CLV affords the Group the opportunity to double
EBITDA organically over the next five years and we believe this
would require us to cycle through c.15% of the client base on a
full-service basis to achieve that objective.
Assurance Services
Our Assurance Services division is at the front line of helping
businesses manage their energy pricing, the importance of which has
never been greater because of the energy crisis, helping them
manage the risks of the energy markets whilst taking advantage of
opportunities to reduce costs as they occur.
To do this effectively, thousands of pieces of data need to be
processed every month, which is made possible by our technology
enabled service. Once this data is collected and audited, it
provides the detail required to identify and deliver effective
carbon action programmes and Optimisation Services.
The Assurance Services division performed resiliently through a
challenging year, with a small reduction in margin driven by
increased operating costs as the energy crisis increased the amount
of re-work needed to place energy supply contracts and the
intensity of client interactions required to meet their needs.
As expected, the division endured higher client churn than
previously experienced during the period. Despite this being
largely offset by record new business wins in the period, the time
lag between a new business win contracting and the contract
commencing, with the Group only starting to recognise revenue at
the point a contract goes live, led to a reduction in organic
growth rates in the year, and we expect this to continue into
2023.
Impact of Macro Environment
The energy crisis saw some businesses facing up to 500%
increases in energy costs during 2022. Whilst energy prices are
significantly lower as we come to the end of Q1 2023, we observe
the elevation of energy costs on board agendas becoming a 'new
normal', as businesses look to professionalise their approach to
managing energy costs and reducing carbon emissions.
Key Developments and Outlook
As the player of scale in the market the Group enjoyed a record
year of new client wins with companies including Aldi, Naked Wines
plc, Arnold Clark LTD, Signature Pubs, Hello Fresh, Moto, Extra
MSA, and Saint-Gobain all becoming clients during the period.
Increasing operating costs in the division have been a function
of increased service needs of clients during the energy crisis and
challenges in supporting business place contracts with energy
suppliers.
As we look at 2023 and beyond, the Group will focus on
increasing the CLV where we can add material value to the client
across all divisions.
ESG Services
The ESG Services division supports businesses with the
production of their ESG disclosures to meet their regulatory
obligations and determining strategies to deliver the ESG impacts
they wish to make.
Once a business has a robust process for making consistent
disclosures, its board has the information it needs to make more
effective decisions and the data required to formulate a carbon
action programme and deliver Optimisation Services.
Following the Group's organic entry into the ESG market during
2021, the division delivered revenue growth of 167% compared to
FY21 and delivered Adjusted EBITDA in line with the upgraded
expectations post interim results.
This exceptional organic growth is testament to the Group
creating a market leading product at a market leading price point
in a market which is still forming in terms of its needs and
requirements.
Whilst there are a range of consultative solutions in the
marketplace, they are often delivered by inexperienced resources
and ultimately do not lead to a functioning deliverable being
produced that meet the client's needs. There are also several
businesses aiming to provide Software-as-a-Service (SaaS) solutions
which purport to meet the client's needs. However, typically these
only solve c.70% of the client's problem and the client doesn't
generally have resources available internally to use such
software.
The Group is increasingly confident it has the most effective
technology enabled data driven solution in the market which is
resonating well with clients and is delighted to be a recipient of
the LSE Green Economy mark.
Impact of Macro Environment
ESG has evolved from a reluctant compliance obligation to a
revenue critical item for many businesses. Even if a business does
not currently have a mandatory compliance obligation, if they want
to win new business from their clients, they invariably need to
have an ESG disclosure and a carbon action programme.
This macro environment makes a robust ESG disclosure service a
non-discretionary requirement for almost any business wishing to
defend or grow its revenue line and is likely to become
increasingly mandatory as most larger organisations are compelled
to make TCFD disclosures by 2025.
Key Developments and Outlook
The ESG division is growing quickly within a new and exciting
market that has become non-discretionary for investors and
businesses alike. The Group now provides full ESG Disclosure
Services for several substantive organisations such as Lookers plc,
Videndum plc, Naked Wines plc, QA Limited, City Electrical Factors
(CEF) and John Wiley & Sons.
The original mandatory ESG disclosures facing businesses in the
UK market were SECR and ESOS where the Group currently has
approximately 282 clients with an average 10-year CLV of GBP0.1
million, of which 16 have been converted to TCFD and ESG disclosure
services with an CLV of GBP0.4 million.
For 2023, the focus of the ESG Services division is increasing
the lifetime value of existing clients and adding new clients to
the Group.
Optimisation Services
Once clients have benefitted from the Group's Assurance Services
to manage the price of their energy and are reporting their ESG
disclosures effectively, their attention quickly turns to how they
can reduce energy and carbon emissions.
The cornerstone of Assurance and ESG Services is data
management, and this data allows the Group to help clients identify
opportunities to reduce carbon emissions and energy consumption,
delivering their response to climate change and further reducing
their energy costs. As a Group, we focus on providing Optimisation
Services to existing clients as a cross-sell service, which
dramatically improves the cost effectiveness and relevance of the
solution as we already understand the client's business intimately.
This is where we can significantly move the dial with respect to
CLV where we expect that the Group would only need to cycle c.15%
of the client base to organically double EBITDA over the next five
years.
We process the data to identify projects that meet the clients
return on capital requirements, or support in identifying financing
solutions and then operate as a 'turn-key' solution provider,
designing the project, procuring the equipment, project managing
the install and quality assuring the outcome for the client.
Optimisation Services has performed ahead of expectations, with
a strong step up in demand as clients focus on the economics of
investments of energy reductions and delivering net-zero. We have
observed this acceleration in performance not only in the number of
active projects on client premises but also in the pipeline of
prospective opportunities that are available, which has surged 500%
since the start of 2021.
As we address the strong macro themes of net-zero and ESG, we
expect Optimisation Services to be a key driver for revenue and
EBITDA growth not only into the near term but for the foreseeable
future as the world strives to meet 2050 targets.
One of the most pleasing things about this achievement is that
it represents the validation of an investment thesis initiated in
2018 and represents only a fraction of the opportunity that is
available to the Group. These results have been achieved by active
on-premise intervention, with only 27 clients from a potential pool
of over 3,500.
Impact of Macro Environment
Businesses have a need to manage their response to climate
change and deliver net-zero, which has been accelerated by the
energy crisis and started the transition to a 'new normal'.
Optimisation Services are a board level agenda item and there is a
desire to work with technology agnostic service providers who
understand the client's business and can deliver in a timely manner
with cost certainty.
The 'learned experience' of the energy crisis means that
businesses are unlikely to ever want to experience the costs shocks
seen during 2022 again and the emergence of ESG as a revenue
generating hygiene factor leads us to believe the demand for
Optimisation Services is likely to continue to accelerate into the
future.
Key Developments and Outlook
Strong data management from our Assurance and ESG Services has
allowed us to help clients identify and evaluate opportunities for
energy and carbon reduction, delivering ever increasing numbers of
on-premise solutions for clients.
During the period, we have been delighted to deliver solutions
for clients including WH Smiths, SSP, IVC, Interfloor, M.I.
Dickson, Ann Summers and Informa.
We have been particularly pleased by the repeatable nature of
this demand, noting that the need we satisfy for clients is not the
one-off implementation of a particular technology, but rather one
of supporting them to deploy marginal units of capital to deliver
incremental carbon or energy reduction. It is iterative in nature
with continued refinement and improvement over time using the
information generated each period which is reported against under a
client's ESG disclosure requirements.
Software Services
Assurance, Optimisation and ESG Services require significant
management and processing of unstructured data which underpins our
service delivery. The technology enablement of these solutions is
provided by our proprietary software which has been significantly
developed over recent years.
Our technology platform is increasingly becoming a market
standard with more than .60 TPIs (where our technology underpins
the services of competing companies) and 200 direct clients
utilising our platform.
Within the TPI market, the energy crisis has led to a reduced
investment in technology which has inhibited the organic growth of
Software Services. However, the division delivered growth in 2022
whilst retaining attractive margins, adding a number of flagship
clients to its user base including NHS Property Services, Peabody,
Laser and SMS plc .
Impact of Macro Environment
The reduction in technology investment caused by the energy
crisis in 2022 appears to have been an issue pertaining to timing
and availability of cash, as opposed to a change in underlying
demand. Whilst this has acted as a dampener for growth, we expect
it to have diminishing impact in 2023 as the world adjusts to the
'new normal' and TPIs require software to meet evolving client
needs.
Key Developments and Outlook
During 2022, additional security features were added to the
software, allowing the division to normalise the prices of the base
software across the client base which we expect to deliver a full
year effect in 2023.
In addition, we expect the release of the software modules
during 2023 to further stimulate the growth potential of this
division during 2023.
Acquisitions
During 2022, the Group acquired Digital Energy Limited and
Information Prophets Compliance Limited, providing software which
has been integrated into our Software Services division, a
portfolio of energy account clients which has been integrated into
Assurance Services, and a selection of building certification
clients that have been integrated into the Optimisation Services
division.
The Group continues to see M&A as a significant route to
creating value for shareholders and we have built a strong track
record of earning enhancing acquisitions and an ability to
successfully integrate those acquisitions. This strategy has
materially contributed to the growth and development of the Group
over the years, both through scaling up the business and expanding
the breadth of services we now provide to our clients, the
acquisition of Ignite Energy LTD to enable the entry into
Optimisation Services being a case in point.
In FY22 the Group paid GBP10.8 million of performance related
payments for past acquisitions. This payment was funded from our
cash generated from operations and existing facilities. In FY23 and
FY24 we fully expect to make further significant cash payments as
past acquisitions perform and deliver against the stringent growth
metrics we set at the time of acquisition, further reducing the
contingent liabilities on our balance sheet.
Our approach to transaction structuring does focus on using
performance payments (in the form of contingent consideration),
this enables us to pay for actual realised EBITDA rather than on
the basis of forecast EBITDA as well other benefits. Our approach
has meant that the 'see through' multiples for the businesses
acquired by the Group has averaged less than four times EBITDA as
the performance-based structures complete, and most importantly it
has been proven to protect our shareholders during periods of
volatility such as in 2020 and 2021 .
We maintain an active pipeline of M&A opportunities which
can enhance our products and services and the value we can deliver
to clients. Together with our focus on organic growth, acquisitions
will form a key part of our overall strategy to create long term
sustainable value for our shareholders.
Strategic priorities and outlook
The 'new normal' created by the energy crisis and ESG becoming a
revenue centric item for most businesses has accelerated demand for
the Group's products and services.
For 2023, we will be focusing on refining our operating model in
Assurance Services, normalising margins and adapting service levels
to the new environment.
Specific focus will be given to increasing the 'lifetime value'
of clients by increasing the number of clients utilising the
Group's Optimisation and ESG Services.
Trading during Q1 2023 has started in line with management
expectations to deliver double digit percentage EBITDA growth in
FY23 as the Group carried positive momentum into the year.
Mark Dickinson
Chief Executive Officer
28 March 2023
Chief Financial Officer's Statement
We are pleased to report strong financial results for the year
ended 31 December 2022, where we have remained agile and alert to
the environment in which we operate. Positive momentum in the
second half enabled the Group to deliver a strong overall trading
performance for FY22, whilst also making clear strategic progress
and navigating unprecedented volatility in the UK energy
markets.
2022 was a year in which we achieved a 31% increase in revenue,
with total revenues of GBP88.8 million compared to GBP67.9m in
2021. The Group's organic revenue increased by 30% (2021: 37%).
Group Adjusted EBITDA increased by 6%, to GBP21.0 million (2021:
GBP19.8 million). In percentage terms the Adjusted EBITDA margin
was 24% (2021: 29%). The reduction was a combination of a greater
contribution from Optimisation services which has a lower
underlying Adjusted EBITDA percentage margin than our other
operating units and a slight reduction of margins within Assurance
Services and increased PLC costs.
Divisional Performance
Assurance Services
The Group anticipated more volatility in Assurance Services
because of the unprecedented conditions in UK energy markets and
whilst client churn has increased, as expected, we have also seen a
record year for new business. Assurance Services delivered revenues
in line with expectations, with increased overheads to deliver our
service as a result of market conditions leading to a reduction in
margin in the period.
Assurance Services generated 41% of total Group revenues in 2022
(2021: 52%) being GBP36.0 million (2021: GBP35.5 million) a 1%
increase.
Assurance Services continues to be the main contributor to the
Group representing 59% of Group EBITDA prior to accounting for PLC
costs and contributed adjusted EBITDA of GBP16.2 million (2021:
GBP17.0 million), a reduction of 5%. The adjusted EBITDA percentage
margin was 45% (2021: 48%). The Board anticipates that margins will
remain impacted in the near term as market volatility remains and
we retain our objective to provide a first-class level of service
to our Assurance clients, which we believe is essential to continue
to be the market leaders in Assurance Services.
ESG Services
ESG Services generated revenues GBP2.6 million (2021: GBP1.0
million), delivering 167% growth organically, reflective of the
growing market for these services. The ESG Services division
delivered an Adjusted EBITDA loss of GBP0.7 million (2021: GBP0.0
million) in line with the upgraded market expectations post our
interim results as we continue to invest in resources in this
division.
The increasing focus of investors and businesses on net-zero
targets, combined with mandatory requirements for businesses to
make ESG disclosures from 2022, provides a favourable backdrop to
continue to invest in the strategy for the ESG Services
division.
Optimisation Services
The ongoing energy crisis has significantly sharpened clients'
focus on the economics of investment in energy reductions, combined
with the drive for delivering net-zero, and this has translated
into a significant step up in demand and activity for the
Optimisation Services division during H2 2022.
Optimisation Services generated 54% of total Group revenues in
2022 (2020: 43%), amounting to GBP47.7 million (2021: GBP29.1
million), an increase of 64%, all of which was organic.
Optimisation services contributed adjusted EBITDA of GBP10.0
million (2021: GBP5.0 million), an increase of 100% and a resulting
improvement in Adjusted EBITDA margin to 21% (2021: 17%) in part as
a result of the adverse impact of COVID-19 restrictions on the
trading performance and resulting reduction in adjusted EBITDA
percentage margins of the division in H1 2021. Subject to product
mix, management's expectation is that the division will
consistently generate Adjusted EBITDA margins of c.20%.
Demand for Optimisation Services continues to increase, with
strong underlying drivers, including the drive to net-zero, and
also further accelerated by the high commodity prices. As the
division continues to represent a greater proportion of Group
revenues, Group margins will reflect the change in business
mix.
Software Services
The Group's Software Services division continues to develop
well, with revenues growing by 5% to GBP2.5 million (2021: GBP2.4
million) and Adjusted EBITDA of GBP1.8 million (2021: GBP1.8
million), with the division producing a strong sustainable adjusted
EBITDA margin of 70% (2021: 74%).
Group results
PLC costs were GBP6.3 million (2021: GBP4.0 million), reflecting
the increased investment in management bandwidth including the
appointment of a Chief Commercial Officer, plus investment into
central functions including Marketing, Finance and HR, to support
the acceleration in growth.
Overall, the Group generated Adjusted EBITDA for the year of
GBP21.0 million (2021: GBP19.8 million) in percentage terms the
Adjusted EBITDA margin was 24% (2021: 29%) and the reduction is due
to underlying sales mix with Optimisation Services generating a
greater proportion of Group revenue, a reduction in the Adjusted
EBITDA margin from Assurance Services, and an increase in PLC
costs. After deducting charges for depreciation, amortisation of
internally generated intangible assets and finance expenditure, the
adjusted profit before tax for the year was GBP14.0 million (2021:
GBP13.4 million). The increase in Adjusted EBITDA was offset in
part by an increase in finance costs. Finance costs were higher
than in 2021 due to a combination of the company carrying a higher
level of debt over the year and increased interest rates.
Under IFRS measures, the Group reported a loss before tax for
the year of GBP4.0 million (2021: profit of GBP1.1 million), with
reported loss before tax in the year impacted significantly by
substantial charges for changes in the fair value of contingent
consideration, the amortisation of intangible assets as a result of
acquisitions, share-based payment charges and restructuring
costs.
A reconciliation of reported (loss)/profit before tax to
adjusted profit before tax is calculated as follows:
2022 2021
GBP000 GBP000
--------------------------------------------------- ------- ------
(Loss)/profit before income tax (3,957) 1,114
Share-based payment cost 1,732 1,030
Amortisation of acquired intangible assets 2,687 4,415
Foreign exchange variance 508 (339)
Exceptional costs:
- fees associated with acquisition 523 1,038
- restructuring cost 1,574 1,280
- Impairment of right of use assets - 113
- change in fair value of contingent consideration 10,936 4,735
--------------------------------------------------- ------- ------
Adjusted profit before tax 14,003 13,386
--------------------------------------------------- ------- ------
Alternative performance measures
Acquisition activity can significantly distort underlying
financial performance from IFRS measures. The Board therefore
considers it appropriate to report adjusted metrics, as well as
IFRS measures, for the benefit of primary users of the Group's
financial statements. Reconciliations to Adjusted Profit Before Tax
and Adjusted Fully Diluted EPS can be found in note 5.
Exceptional costs
Exceptional costs of GBP2.1 million (2021: GBP2.3 million)
incurred in the year predominantly related to restructuring costs,
which related to restructuring programmes associated with the
integration of businesses acquired prior to 2022.
Change in fair value of contingent consideration
The fair value of contingent consideration at the balance sheet
date is a judgement of the contingent consideration which will
become payable based on a weighted average range of performance
outcomes of the acquired business during an earn out period, which
is subsequently discounted for the time value of money and
risk.
The Group recognised a GBP10.9 million loss (2021: loss of
GBP4.7 million) in the period as a result of changes in the fair
value of contingent consideration which was treated as exceptional.
Of the GBP10.9 million loss (2021: GBP4.7 million), GBP7.7 million
(2021: GBP3.0 million) relates to the increase in the liability for
contingent consideration payable, of which GBP0.6 million (2021:
GBP1.9 million) relates to the unwinding of discount rate, with
GBP8.5 million in respect of Ignite Energy LTD and Businesswise
Solutions Limited performing at the higher end of the range of
possible performance outcomes, in particular, Ignite Energy LTD
benefitted from an increase in demand for Optimisation Services as
a result of the energy crisis in both 2022 which is expected to
continue into the next financial year. In addition, the greater
visibility of Businesswise Solutions Limited performance as a
result of the resolution of the uncertainty relating to the future
trading of Gazprom Marketing and Trading Retail Limited contributed
to the increase in contingent consideration payable.
Of the GBP10.9 million loss, GBP3.2 million relates to the
reduction in the expected recovery of the deferred contingent
consideration from the SME disposal completed in December 2020. The
reduction in expected recovery is reflective of the impact of
prolonged under consumption and site closures within the SME
portfolio due to firstly COVID-19, and then subsequently the energy
crisis.
Exceptional costs, amortisation and impairment of internally
generated intangible assets, share based payment charges and
changes in fair value of contingent consideration are considered by
the Directors to be material in nature and non-recurring; they,
therefore, merit separate identification to give a true and fair
view of the Group's result for the period.
Cash and Working Capital
Group cash generated from operations during the period was
GBP19.7 million (2021: GBP7.9 million), a 149% increase in line
with management expectations and driven by strong working capital
management within the Optimisation Services division. Excluding
non-recurring fees associated with restructuring costs and deal
fees, cash generated from operations was GBP21.7 million (2021:
GBP10.1 million).
Underlying operating cash conversion ratios remain a key focus
for management, acknowledging the need to facilitate the
acceleration of growth within the Optimisation Services
division.
Trade and other receivables increased 12% in the period to
GBP37.5 million (2021: 33.4 million), with invoiced trade
receivables reducing 25% to GBP12.3 million (2021: GBP16.5 million)
as a result of strong cash collection within the Optimisation
Services division in H2 2022. Conversely, accrued income increased
in the period 59% to GBP18.6 million (2021: GBP11.7 million)
primarily as a result of increased activity levels and product mix
within the Optimisation Services division in H2 2022, and the
balance is unwinding in 2023 as expected. Working capital
management remains a key focus for the Group in sustaining strong
cash conversion.
Trade and other payables increased 39% to GBP17.1 million (2021:
GBP12.3 million), driven by a 46% increase in deferred income,
primarily within the Optimisation Services division, and a 43%
increase in trade payables to GBP6.0 million (2021: GBP4.2 million)
and accruals increased to GBP3.1 million (2021: GBP1.5 million)
reflecting the increased activity levels.
As detailed in the 2021 CFO statement, during H2 2021, the Group
made an accelerated investment in solutions architecture and CRM,
to ensure our platforms can continue to scale and are interoperable
with other systems. This wasn't repeatable expenditure and led to
the reduction in payments to acquire intangible assets to GBP4.7
million in 2022 (2021: GBP5.9 million).
The Group's net debt (defined as bank borrowings less cash and
cash equivalents) increased by GBP4.3 million (13%) in the year to
GBP37.2 million (2021: GBP32.9 million), equating to 1.77x FY2022
Adjusted EBITDA. This level of net debt is in line with the Board's
objective to maintain net debt to less than 2.00x Adjusted EBITDA,
subject to the short-term impact of acquisition payments.
The increase in Group net debt reflects a year in which the cash
generation of GBP19.7 million was offset by the payment of GBP10.8
million of contingent cash consideration to the vendors of Ignite,
BWS, ECM, LSI and GEM. together with GBP0.7 million of initial cash
consideration payable for Digital Energy Limited and Information
Prophets Compliance Limited. A further GBP13.0 million performance
payments, in the form of contingent cash consideration for
acquisitions expected to be paid in FY23, GBP2.6 million of which
would be payable in ordinary shares of the Group.
Financial position and liquidity
At 31 December 2022, the Group's net debt was GBP37.2 million
(2021: GBP32.9 million). Cash and cash equivalents were GBP12.3
million (2021: GBP12.9 million) on hand. Approximately GBP10.5
million of the Group's GBP60.0 million Revolving Credit Facility
was undrawn, with an additional GBP25.0 million accordion option
available to the Group, subject to covenant compliance.
On entering the current facility agreement with Santander and
Bank of Ireland in October 2019, the Group had an option to extend
the term of the facility from October 2023 to October 2024. The
Group exercised that option in September 2021, taking the term of
the existing facility to October 2024. Subsequently, the Group has
agreed with the lenders to defer by 12 months the tapering, from
2.50:1.00 to 2.00:1.00, of the Adjusted Net Leverage covenant; this
was due to apply in the quarter ending 31 December 2022, but its
application has now been extended to 31 December 2023, to align
with the extension of the facility.
Subsequent to the year end, the Group agreed with its banking
partners in March 2023 a resetting of the adjusted leverage
covenant for quarters ending 31 March 2023 through to 30 June 2024,
increasing the headroom available to the Group from a covenant
perspective through a period in which the Group expects to make
material contingent consideration payments, while facilitating the
acceleration of growth within the optimisation division.
In summary
The strategic and financial initiatives delivered in the year
have ensured the Group is well placed to deliver the effective
implementation of our strategic growth plan, whilst managing the
additional risks created by market volatility. The strong growth of
the Group's revenues, and adjusted EBITDA in the year, in a
challenging environment coupled with a strengthened platform
capable of generating long-term growth position leaves Inspired
well placed to achieve its long-term financial goals.
Paul Connor
Chief Financial Officer
28 March 2023
Group statement of comprehensive income
For the year ended 31 December 2022
2022 2021
Note GBP000 GBP000
---------------------------------------------------- ---- -------- --------
Revenue 88,776 67,941
Cost of sales (31,070) (17,249)
---------------------------------------------------- ---- -------- --------
Gross profit 57,706 50,692
Administrative expenses (58,524) (47,823)
---------------------------------------------------- ---- -------- --------
Analysed as:
Adjusted EBITDA 21,000 19,791
Exceptional costs (2,097) (2,318)
Change in fair value of contingent consideration (10,936) (4,735)
Depreciation, impairment and loss on disposal 6/7 (1,827) (1,870)
Amortisation of acquired intangible assets 8 (2,687) (4,415)
Amortisation and impairment of internally generated
intangible assets 8 (2,539) (2,554)
Share-based payment cost (1,732) (1,030)
---------------------------------------------------- ---- -------- --------
Operating (loss)/profit (818) 2,869
Finance expenditure 3 (3,148) (1,860)
Other financial items 9 105
---------------------------------------------------- ---- -------- --------
(Loss)/profit before income tax (3,957) 1,114
Income tax charge 4 329 524
---------------------------------------------------- ---- -------- --------
(Loss)/profit for the year (3,628) 1,638
---------------------------------------------------- ---- -------- --------
Attributable to:
Equity owners of the company (3,628) 1,638
---------------------------------------------------- ---- -------- --------
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss:
Movement in deferred tax asset as a result of
change in fair value of share options 4 (1,323) -
Exchange differences on translation of foreign
operations 119 (753)
---------------------------------------------------- ---- -------- --------
Total other comprehensive income/(expense)
for the year (1,204) (753)
---------------------------------------------------- ---- -------- --------
Total comprehensive (expense)/income for the
year (4,832) 885
---------------------------------------------------- ---- -------- --------
Attributable to:
Equity owners of the company (4,832) 885
---------------------------------------------------- ---- -------- --------
Basic earnings per share attributable to the
equity holders of the company (pence) 5 (0.37) 0.17
Diluted earnings per share attributable to the
equity holders of the company (pence) 5 (0.37) 0.16
---------------------------------------------------- ---- -------- --------
Group statement of financial position
At 31 December 2022
2022 2021
Note GBP000 GBP000
---------------------------------- ---- -------- --------
ASSETS
Non-current assets
Investments 1,737 1,461
Goodwill 8 76,960 76,111
Other intangible assets 8 17,716 18,291
Property, plant and equipment 6 3,216 2,452
Right of use assets 7 1,428 2,180
Non-current assets 101,057 100,495
---------------------------------- ---- -------- --------
Current assets
Trade and other receivables 9 37,520 33,448
Deferred contingent consideration 1,077 4,529
Inventories 211 300
Cash and cash equivalents 12,270 12,944
---------------------------------- ---- -------- --------
Current assets 51,078 51,221
---------------------------------- ---- -------- --------
Total assets 152,135 151,716
---------------------------------- ---- -------- --------
LIABILITIES
Current liabilities
Trade and other payables 10 17,079 12,315
Lease liabilities 869 860
Contingent consideration 13,056 14,586
Current tax liability 3,091 1,823
---------------------------------- ---- -------- --------
Current liabilities 34,095 29,584
---------------------------------- ---- -------- --------
Non-current liabilities
Bank borrowings 49,462 45,847
Lease liabilities 552 993
Contingent consideration 5,699 7,165
Interest rate swap 17 25
Deferred tax liability 1,282 1,522
---------------------------------- ---- -------- --------
Non-current liabilities 57,012 55,552
---------------------------------- ---- -------- --------
Total liabilities 91,107 85,136
---------------------------------- ---- -------- --------
Net assets 61,028 66,580
---------------------------------- ---- -------- --------
EQUITY
Share capital 1,220 1,219
Share premium account 60,930 60,923
Merger relief reserve 20,995 20,995
Share-based payment reserve 8,111 6,379
Retained earnings (18,447) (11,036)
Investment in own shares (36) (36)
Translation reserve (362) (481)
Reverse acquisition reserve (11,383) (11,383)
---------------------------------- ---- -------- --------
Total equity 61,028 66,580
---------------------------------- ---- -------- --------
Group statement of changes in equity
For the year ended 31 December 2022
Share Merger Share-based Investment Reserve Total
Share premium relief payment Retained in own Translation acquisition shareholders'
capital account reserve reserve earnings shares reserve reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Balance at 1
January
2021 1,202 67,000 20,995 5,349 (10,418) (6,742) 272 (11,383) 66,275
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Profit for the
year - - - - 1,638 - - - 1,638
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Other
comprehensive
expense for the
year - - - - - - (753) - (753)
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Total
comprehensive
income/(expense)
for
the year - - - - 1,638 - (753) - 885
Share-based
payment
cost - - - 1,030 - - - - 1,030
Shares issued (8
April
2021) 13 376 - - - - - - 389
Shares issued (22
June
2021) 1 114 - - - - - - 115
Shares issued (28
July
2021) 1 62 - - - - - - 63
Shares issued (15
September
2021) 1 53 - - - - - - 54
Shares issued (21
December
2021) 1 12 - - - - - - 13
Shares issued to
EBT* - (6,694) - - - 6,706 - - 12
Dividends paid - - - - (2,256) - - - (2,256)
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Total
transactions
with owners 17 (6,077) - 1,030 (618) 6,706 (753) - 305
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Balance at 31
December
2021 1,219 60,923 20,995 6,379 (11,036) (36) (481) (11,383) 66,580
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Loss for the year - - - - (3,628) - - - (3,628)
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Other
comprehensive
income for the
year - - - - (1,323) - 119 - (1,204)
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Total
comprehensive
income/(expense)
for
the year - - - - (4,951) - 119 - (4,832)
Share-based
payment
cost - - - 1,732 - - - - 1,732
Shares issued (12
April
2022) - 7 - - - - - - 7
Shares issued (7
December
2022) 1 - - - - - - - 1
Dividends paid - - - - (2,460) - - - (2,460)
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Total
transactions
with owners 1 7 - 1,732 (7,411) - 119 - (5,552)
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Balance at 31
December
2022 1,220 60,930 20,995 8,111 (18,447) (36) (362) (11,383) 61,028
----------------- ------- ------- ------- ----------- -------- ---------- ----------- ----------- -------------
Merger relief reserve
The merger relief reserve represents the premium arising on
shares issued as part or full consideration for acquisitions, where
advantage has been taken of the provisions of section 612 of the
Companies Act 2006.
Reverse acquisition reserve
The reverse acquisition reserve relates to the reverse
acquisition between Inspired Energy Solutions Limited and Inspired
PLC on 28 November 2011 and arises on consolidation.
Translation reserve
The translation reserve comprises translation differences
arising from the translation of the financial statements of the
Group's foreign entities into GBP (GBP).
Share-based payment reserve
The share-based payment reserve is a reserve to recognise those
amounts in equity in respect of share-based payments.
Investment in own shares equates to 29,115,000 (2021:
29,115,000) shares.
* During 2021, the valuation of the investments in own shares
was reassessed and revised to the nominal value of the shares held.
This resulted in a transfer of GBP6,694,000 from share premium to
investment in own shares. There is no impact upon total equity as a
result of this transfer between reserves.
Group statement of cash flows
For the year ended 31 December 2022
2022 2021
GBP000 GBP000
---------------------------------------------------- -------- --------
Cash flows from operating activities
(Loss)/profit before income tax (3,957) 1,114
Adjustments
Depreciation and impairment 1,827 1,870
Amortisation and impairment 5,226 6,969
Share-based payment cost 1,732 1,030
Finance expenditure 3,139 1,755
Exchange rate variances 151 266
Change in fair value of contingent consideration 10,936 4,735
---------------------------------------------------- -------- --------
Cash flows before changes in working capital 19,054 17,739
Movement in working capital
Decrease/(increase) in inventories 88 (180)
Increase in trade and other receivables (3,995) (9,841)
Decrease in trade and other payables 4,602 185
---------------------------------------------------- -------- --------
Cash generated from operations 19,749 7,903
Income taxes paid (421) (869)
---------------------------------------------------- -------- --------
Net cash flows from operating activities 19,328 7,034
---------------------------------------------------- -------- --------
Cash flows from investing activities
Contingent consideration paid (10,790) (1,086)
Acquisition of subsidiaries and investments, net of
cash acquired (1,233) (7,268)
Disposal of investments 324 -
Repayment/(provision) of working capital facility
to discontinued operation 375 (500)
Payments to acquire property, plant and equipment (1,137) (998)
Payments to acquire intangible assets (4,651) (5,866)
---------------------------------------------------- -------- --------
Net cash outflows from investing activities (17,112) (15,718)
---------------------------------------------------- -------- --------
Cash flows from financing activities
New bank loans 3,500 -
Proceeds from issue of new shares 8 645
Interest paid on financing activities (3,032) (2,069)
Repayment of lease liabilities (1,048) (1,443)
Dividends paid (2,460) (2,256)
---------------------------------------------------- -------- --------
Net cash outflows from financing activities (3,032) (5,123)
---------------------------------------------------- -------- --------
Net decrease in cash and cash equivalents (816) (13,807)
Cash and cash equivalents brought forward 12,994 26,884
Exchange differences on cash and cash equivalents 92 (83)
---------------------------------------------------- -------- --------
Cash and cash equivalents carried forward 12,270 12,994
---------------------------------------------------- -------- --------
Notes to Final Results
Statement of compliance
These Condensed Consolidated Financial Statements do not
constitute statutory financial statements within the meaning of
Section 434 of the Companies Act 2006 for the financial year ended
31 December 2022 but has been extracted from those financial
statements. The annual financial statements for the year ended 31
December 2022 have been prepared in accordance with UK adopted
International Accounting Standards. These Condensed Consolidated
Financial Statements do not include all the disclosures required in
financial statements prepared in accordance with UK adopted
International Accounting Standards and accordingly do not
themselves comply with UK adopted International Accounting
Standards.
The financial information for the period ended 31 December 2021
is derived from the statutory accounts for that year which have
been delivered to the Registrar of Companies. The statutory
accounts for the year ended 31 December 2022 will be delivered to
the Registrar of Companies following the Company's annual general
meeting. The auditors have reported on the financial statements for
the years ended 31 December 2021 and 2022; their reports were
unqualified, did not include any matters to which the auditor drew
attention by way of emphasis and did not contain a statement under
s498(2) or s498(3) of the Companies Act 2006.
The Board of directors approved the Condensed Consolidated
Financial Statements on 28 March 2023.
The Consolidated Financial Statements of the Group as at and for
the year ended 31 December 2022 (2022 Annual Report) are available
upon request from the Company Secretary, Inspired PLC, 29 Progress
Park, Orders Lane, Kirkham, Lancashire, PR4 2TZ.
The principal accounting policies applied in the preparation of
the Group financial statements are set out below.
1. Basis of preparation
The Group financial statements have been prepared in accordance
with the Companies Act 2006 and UK adopted International accounting
standards. They have been prepared on an accrual basis and under
the historical cost convention except for certain financial
instruments measured at fair value.
The Group has taken advantage of the audit exemption for 18 of
its subsidiaries, Independent Utilities Limited (company number
05658810), LSI Independent Utility Brokers Limited (04072919),
Energy Team (UK) Limited (06285279), Energy Team (Midlands) Ltd
(02913371), Waterwatch UK Limited (08854844), Inspired Energy EBT
Limited (10807501), Energy Broker Solutions Limited (07355726),
Flexible Energy Management Limited (10264309), Inspired 4U Limited
(08895906), Squareone Enterprises Limited (05261796), Energy Cost
Management Limited (03377082), STC Energy Management Limited
(03094427), Professional Cost Management Group Limited (06511368),
Energy and Carbon Management Limited (05498141), Inprova Energy
Limited (04729586), General Energy Management Limited (07236859),
I-Prophets Compliance Limited (04194486) and Digital Energy Limited
(07369818) by virtue of s479A of the Companies Act 2006. The Group
has provided parent guarantees to these 18 subsidiaries which have
taken advantage of the exemption from audit.
Going concern
For the purposes of assessing the appropriateness of preparing
the Group's accounts on a going concern basis, the Directors have
considered the current cash position, available banking facilities
and the Group's base case financial forecast through to 31 December
2024, including the ability to adhere to banking covenants.
The Directors believe the Group has a strong balance sheet
position, having refinanced its banking facilities in October 2019
through to October 2023. Furthermore, on entering the current
facility agreement with Santander and Bank of Ireland in October
2019, the Group had an option to extend the term of the facility
from October 2023 to October 2024. The Group exercised that option
in September 2021, taking the term of the existing facility to
October 2024. Whilst a refinancing is not required in order to
conclude on the going concern basis being appropriate given
existing facilities the Group expects to refinance its current
facility during the financial year ending 31 December 2023.
At 31 December 2022, the Group's net debt was GBP37.2 million,
increasing from GBP32.9 million at 31 December 2021. In addition to
cash and cash equivalents of GBP12.3 million on hand as at 31
December 2022, approximately GBP10.5 million of the Group's GBP60.0
million revolving credit facility is undrawn with an additional
GBP25.0 million accordion option available, subject to covenant
compliance. The facility is subject to two covenants, which are
tested quarterly, adjusted leverage to adjusted EBITDA and adjusted
EBITDA to net finance charges.
In March 2022, the Group agreed with the lenders to defer the
tapering of the adjusted net leverage covenant from 2.50:1.00 to
2.00:1.00, which was due to commence in the quarter ending 31
December 2022 for twelve months to 31 December 2023 to align with
the extension of the facility completed in September 2021.
Furthermore, subsequent to the year end, the Group agreed with
its banking partners in March 2023 a resetting of the adjusted
leverage covenant for quarters ending 31 March 2023 through to 30
June 2024, significantly increasing the headroom available to the
Group from a covenant perspective through a period in which the
Group expects to make material contingent consideration payments,
while facilitating the acceleration of growth within the
Optimisation Services division.
The Directors believe that the Group is well placed to manage
its business risks and, after making enquiries including a review
of forecasts and scenarios, taking account of reasonably possible
changes in trading performances in the next twelve months and
considering the available liquidity, including banking facilities,
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the next twelve months
following the date of approval of these financial statements.
Therefore, the Directors continue to adopt the going concern basis
of accounting in preparing the financial statements.
2. Segmental information
Revenue and segmental reporting
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Group's Executive Directors.
Operating segments for the year to 31 December 2022 were determined
on the basis of the reporting presented at regular Board meetings
of the Group. The segments comprise:
Assurance Services
Key services provided are the review, analysis and negotiation
of gas and electricity contracts on behalf of clients in the UK and
ROI. To access this market, we have a professional bid response
team, direct field sales team, and partnership channel.
Optimisation Services
This division focuses on the optimisation of a client's energy
consumption. Services provided include forensic audits, energy
efficiency projects and water solutions.
Software Services
This division comprises the provision of energy management
software to third parties.
ESG Services
Within this division, the Group manages the data collection and
validation of consumption data to provide the resources for the
creation of mandatory ESG disclosures, such as Streamlined Energy
and Carbon Reporting (SECR) and Taskforce on Climate-related
Financial Disclosure (TCFD) reporting.
PLC costs
This comprises the costs of running the PLC, incorporating the
cost of the Board, listing costs and other professional service
costs, such as audit, tax, legal and Group insurance.
Any charges between segments are made in line with the Group's
transfer pricing policy. These amounts have been removed, via
consolidation, for the purposes of the information shown below.
2022 2021
-------------------------------------------------------------- -------------------------------------------------------------
Assurance Optimisation Software ESG PLC Total Assurance Optimisation Software ESG PLC Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- --------- ------------ -------- ------- -------- -------- --------- ------------ -------- ------ -------- --------
Revenue 35,972 47,710 2,514 2,580 - 88,776 35,521 29,059 2,395 966 - 67,941
Cost of sales (3,231) (27,427) (157) (255) - (31,070) (2,856) (14,328) (65) - - (17,249)
--------------- --------- ------------ -------- ------- -------- -------- --------- ------------ -------- ------ -------- --------
Gross profit 32,741 20,283 2,357 2,325 - 57,706 32,665 14,731 2,330 966 - 50,692
Administrative
expenses (17,410) (10,373) (596) (2,935) (20,157) (51,471) (16,407) (9,852) (608) (935) (11,182) (38,984)
--------------- --------- ------------ -------- ------- -------- -------- --------- ------------ -------- ------ -------- --------
EBITDA 15,331 9,910 1,761 (610) (20,157) 6,235 16,258 4,879 1,722 31 (11,182) 11,708
--------------- --------- ------------ -------- ------- -------- -------- --------- ------------ -------- ------ -------- --------
Analysed as:
Adjusted EBITDA 16,177 9,979 1,768 (572) (6,352) 21,000 17,015 4,961 1,770 31 (3,986) 19,791
Share-based
payment
cost - - - - (1,732) (1,732) - - - - (1,030) (1,030)
Exceptional
costs (846) (69) (7) (38) (1,137) (2,097) (757) (82) (48) - (1,431) (2,318)
Change in fair
value of
contingent
consideration - - - - (10,936) (10,936) - - - - (4,735) (4,735)
--------------- --------- ------------ -------- ------- -------- -------- --------- ------------ -------- ------ -------- --------
15,331 9,910 1,761 (610) (20,157) 6,235 16,258 4,879 1,722 31 (11,182) 11,708
--------------- --------- ------------ -------- ------- -------- -------- --------- ------------ -------- ------ -------- --------
Depreciation
and impairment
and loss on
disposal (1,827) (1,870)
Amortisation
and impairment (5,226) (6,969)
Finance
expenditure (3,148) (1,860)
Other financial
items 9 105
--------------- --------- ------------ -------- ------- -------- -------- --------- ------------ -------- ------ -------- --------
(Loss)/profit
before income
tax (3,957) 1,114
--------------- --------- ------------ -------- ------- -------- -------- --------- ------------ -------- ------ -------- --------
Segmental assets and liabilities are not reviewed separately by
operating segment.
3. Finance expenditure
2022 2021
GBP000 GBP000
-------------------------------------- ------ ------
Interest payable on bank borrowings 2,268 1,485
Interest payable on lease liabilities 83 177
Foreign exchange variance 508 (325)
Other interest 20 46
Loan facility fees 153 361
Amortisation of debt issue costs 116 116
-------------------------------------- ------ ------
3,148 1,860
-------------------------------------- ------ ------
4. Income tax credit
The income tax credit is based on the (loss)/profit for the year
and comprises:
2022 2021
GBP000 GBP000
---------------------------------------------------------- ------- -------
Current tax
Current tax expense 2,379 1,757
Adjustments in respect of prior years (1,145) (1,739)
---------------------------------------------------------- ------- -------
1,234 18
---------------------------------------------------------- ------- -------
Deferred tax
Origination and reversal of temporary differences (1,563) (542)
---------------------------------------------------------- ------- -------
(1,563) (542)
---------------------------------------------------------- ------- -------
Total income tax credit (329) (524)
---------------------------------------------------------- ------- -------
Reconciliation of tax credit to accounting (loss)/profit:
(Loss)/profit on ordinary activities before taxation (3,957) 1,114
---------------------------------------------------------- ------- -------
Tax at UK income tax rate of 19% (2021: 19%) (752) 212
Disallowable expenses 2,490 1,142
Exchange rate difference (99) (112)
Share options (628) (820)
Effects of current year events on prior year balances (1,145) (1,739)
Movement in deferred tax asset not recognised (59) (201)
Adjust closing deferred tax to reflect change in tax rate - 645
Excess of taxation allowances over depreciation on all
non-current assets (320) -
Non-eligible intangible assets 184 349
---------------------------------------------------------- ------- -------
Total income tax credit (329) (524)
---------------------------------------------------------- ------- -------
In the prior year the deferred tax asset pertaining to
unexercised share options was valued at the share price as at 31
December 2021. As the share price decreased substantially in 2022
the deferred tax asset also decreased. As the recognition was not
in the current year, the movement on the deferred tax asset was
reversed through other comprehensive income.
5. Earnings per share
The basic earnings per share is based on the net profit for the
year attributable to ordinary equity holders divided by the
weighted average number of ordinary shares outstanding during the
year.
2022 2021
GBP000 GBP000
---------------------------------------------------------- --------- ---------
(Loss)/profit attributable to equity holders of the Group (3,628) 1,638
Fees associated with acquisition 523 1,038
Restructuring costs 1,574 1,280
Changes in fair value of contingent consideration 10,936 4,735
Amortisation of acquired intangible assets 2,687 4,415
Impairment of right of use assets - 113
Foreign exchange variance 508 (339)
Deferred tax in respect of amortisation of intangible
assets (673) (783)
Share-based payment cost 1,732 1,030
---------------------------------------------------------- --------- ---------
Adjusted profit attributable to owners of the Group 13,659 13,127
---------------------------------------------------------- --------- ---------
Weighted average number of ordinary shares in issue (000) 975,071 970,589
Dilutive effect of share options (000) 70,999 40,870
---------------------------------------------------------- --------- ---------
Diluted weighted average number of ordinary shares in
issue (000) 1,046,070 1,011,459
---------------------------------------------------------- --------- ---------
Basic (loss)/earnings per share (pence) (0.37) 0.17
Diluted (loss)/earnings per share (pence) (0.37) 0.16
Adjusted basic earnings per share (pence) 1.40 1.35
Adjusted diluted earnings per share (pence) 1.31 1.30
---------------------------------------------------------- --------- ---------
The weighted average number of shares in issue for the adjusted
diluted earnings per share includes the dilutive effect of the
share options in issue to senior staff of the Group.
Adjusted earnings per share represents the earnings per share,
as adjusted to remove the effect of fees associated with
acquisitions, restructuring costs, the amortisation of intangible
assets (excluding internally generated amortisation related to
computer software and customer databases), deferred tax in respect
of amortisation of intangible assets, exceptional items and
share-based payment costs which have been expensed to the Group
statement of comprehensive income in the year, the unwinding of
contingent consideration and foreign exchange variances. The
adjustments to earnings per share have been disclosed to give a
clear understanding of the Group's underlying trading
performance.
Adjusted profit before tax on continuing operations is
calculated as follows:
2022 2021
GBP000 GBP000
----------------------------------------------------- ------- ------
(Loss)/profit before income tax (3,957) 1,114
Share-based payment cost 1,732 1,030
Amortisation of acquired intangible assets 2,687 4,415
Impairment of right of use assets - 113
Foreign exchange variance 508 (339)
Exceptional costs:
- fees associated with acquisition 523 1,038
- restructuring cost 1,574 1,280
- change in fair value of contingent consideration 10,936 4,735
----------------------------------------------------- ------- ------
Adjusted profit before tax on continuing operations 14,003 13,386
----------------------------------------------------- ------- ------
Acquisitional activity can significantly distort underlying
financial performance from IFRS measures and therefore the Board
deems it appropriate to report adjusted metrics as well as IFRS
measures for the benefit of primary users of the Group financial
statements.
6. Property, plant and equipment
Fixtures Office
and Motor Computer Leasehold
fittings vehicles equipment improvements equipment Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ -------- -------- --------- ------------ --------- ------
Cost
At 1 January 2021 937 158 2,412 592 - 4,099
Acquisitions through business
combinations - - - 222 - 222
Foreign exchange variances (4) (5) (11) (5) - (25)
Additions 15 - 981 2 - 998
Disposals (228) (46) (378) (5) - (657)
------------------------------ -------- -------- --------- ------------ --------- ------
At 31 December 2021 720 107 3,004 806 - 4,637
Transfer between classes (368) 42 92 386 415 567
Foreign exchange variances 5 - 4 - - 9
Additions 8 32 1,094 - 3 1,137
Disposals (30) (66) (60) - - (156)
------------------------------ -------- -------- --------- ------------ --------- ------
At 31 December 2022 335 115 4,134 1,192 418 6,194
------------------------------ -------- -------- --------- ------------ --------- ------
Depreciation
At 1 January 2021 743 70 638 326 - 1,777
Charge for the year 88 4 604 120 - 816
Disposals (167) (36) (200) (5) - (408)
------------------------------ -------- -------- --------- ------------ --------- ------
At 31 December 2021 664 38 1,042 441 - 2,185
Transfer between classes (450) 38 281 70 293 232
Charge for the year 27 22 496 123 56 734
Foreign exchange variances 3 - 4 - (33) (26)
Disposals (30) (3) (60) (29) (25) (147)
------------------------------ -------- -------- --------- ------------ --------- ------
At 31 December 2022 224 95 1,763 605 291 2,978
------------------------------ -------- -------- --------- ------------ --------- ------
Net book value
At 31 December 2022 111 20 2,371 587 127 3,216
------------------------------ -------- -------- --------- ------------ --------- ------
At 31 December 2021 56 69 1,962 365 - 2,452
------------------------------ -------- -------- --------- ------------ --------- ------
7. Right of use assets
Fixtures Motor
and fittings vehicles Property Intangibles Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------- ------------ -------- -------- ----------- ------
Cost
At 1 January 2021 490 314 3,326 - 4,130
Acquisitions through business combinations - 4 44 - 48
Remeasurement of finance lease - - (17) - (17)
Additions 133 106 386 - 625
Disposals - (71) (50) - (121)
------------------------------------------- ------------ -------- -------- ----------- ------
At 31 December 2021 623 353 3,689 - 4,665
------------------------------------------- ------------ -------- -------- ----------- ------
Transfer between classes - (14) (277) - (291)
Foreign exchange variances - 1 (5) - (4)
Additions - 86 360 301 747
Disposals (368) (5) (433) - (806)
-------------------------------------------- ------------ -------- -------- ----------- ------
At 31 December 2022 255 421 3,334 301 4,311
------------------------------------------- ------------ -------- -------- ----------- ------
Depreciation
At 1 January 2021 138 86 1,313 - 1,537
Charge for the year 144 116 681 - 941
Disposals - (56) (50) - (106)
------------------------------------------- ------------ -------- -------- ----------- ------
At 31 December 2021 282 146 1,944 - 2,372
------------------------------------------- ------------ -------- -------- ----------- ------
Transfer between classes - 19 25 - 44
Charge for the year 87 169 742 50 1,048
Foreign exchange variances - (2) 14 - 12
Disposals (211) (22) (473) - (706)
------------------------------------------- ------------ -------- -------- ----------- ------
At 31 December 2022 158 310 2,252 50 2,770
------------------------------------------- ------------ -------- -------- ----------- ------
Impairment
At 1 January 2022 - - 113 - 113
Charge for the year - - - - -
------------------------------------------- ------------ -------- -------- ----------- ------
At 31 December 2022 - - 113 - 113
------------------------------------------- ------------ -------- -------- ----------- ------
Net book value
At 31 December 2022 97 111 969 251 1,428
------------------------------------------- ------------ -------- -------- ----------- ------
At 31 December 2021 341 207 1,632 - 2,180
------------------------------------------- ------------ -------- -------- ----------- ------
8. Intangible assets and goodwill
Computer Customer Customer Total other
Trade
software name contracts relationships intangibles Goodwill Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- -------- ------ --------- ------------- ------------ -------- -------
Cost
At 1 January 2021 16,315 115 18,076 7,511 42,017 63,776 105,793
Additions 5,821 45 - - 5,866 - 5,866
Acquisitions through
business combinations - - 3,491 - 3,491 12,494 15,985
Adjustments to previous
business combinations - - 8 - 8 - 8
Disposals (819) - - - (819) - (819)
Foreign exchange variances - - - - - (159) (159)
--------------------------- -------- ------ --------- ------------- ------------ -------- -------
At 31 December 2021 21,317 160 21,575 7,511 50,563 76,111 126,674
Additions 4,651 - - - 4,651 - 4,651
Acquisitions through
business combinations - - - - - 730 730
Foreign exchange variances - - - - - 119 119
--------------------------- -------- ------ --------- ------------- ------------ -------- -------
At 31 December 2022 25,968 160 21,575 7,511 55,214 76,960 132,174
--------------------------- -------- ------ --------- ------------- ------------ -------- -------
Amortisation
At 1 January 2021 8,829 30 13,582 3,225 25,666 - 25,666
Charge for the year 2,933 7 3,214 815 6,969 - 6,969
Disposals (363) - - - (363) - (363)
--------------------------- -------- ------ --------- ------------- ------------ -------- -------
At 31 December 2021 11,399 37 16,796 4,040 32,272 - 32,272
Charge for the year 2,920 8 1,531 767 5,226 - 5,226
Foreign exchange variances - - - - - - -
At 31 December 2022 14,319 45 18,327 4,807 37,498 - 37,498
--------------------------- -------- ------ --------- ------------- ------------ -------- -------
Net book value
At 31 December 2022 11,649 115 3,248 2,704 17,716 76,960 94,676
--------------------------- -------- ------ --------- ------------- ------------ -------- -------
At 31 December 2021 9,918 123 4,779 3,471 18,291 76,111 94,402
--------------------------- -------- ------ --------- ------------- ------------ -------- -------
Computer software is a combination of assets internally
generated, and assets acquired through business combinations. The
amortisation charge in the period to 31 December 2022 associated
with computer software acquired through business combinations is
GBP381,000 (2021: GBP381,000). The additional GBP2,539,000 (2021:
GBP2,552,000) charged in the period relates to the amortisation of
internally generated computer software. The total amortisation
charged in the period to 31 December 2022 associated with
intangible assets acquired through business combinations is
GBP2,687,000 (2021: GBP4,415,000). Amortisation is charged to
administrative expenses for both financial years.
9. Trade and other receivables
Group
--------------
2022 2021
GBP000 GBP000
---------------------------------- ------ ------
Trade receivables 12,298 16,492
Other receivables 1,078 1,472
Deferred contingent consideration 1,077 4,529
Prepayments 5,524 3,802
Accrued income 18,620 11,682
---------------------------------- ------ ------
38,597 37,997
---------------------------------- ------ ------
Deferred contingent consideration relates to the collection and
run off of the SME division's accrued income balance at
disposal.
The Group does not hold any collateral as security (2021: none).
Group debtor days were 42 days (31 December 2021: 74 days).
10. Trade and other payables
Group
--------------
2022 2021
GBP000 GBP000
-------------------------------- ------ ------
Current
Trade payables 5,952 4,154
Social security and other taxes 5,117 3,504
Accruals 3,141 1,502
Deferred income 1,861 1,268
Other payables 1,008 1,887
-------------------------------- ------ ------
17,079 12,315
-------------------------------- ------ ------
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END
FR JPMLTMTATBBJ
(END) Dow Jones Newswires
March 29, 2023 02:00 ET (06:00 GMT)
Inspired (AQSE:INSE.GB)
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