Good Energy Group PLC

Un-audited Preliminary Results for the 12 months ended 31 December 2020

Underlying strong business performance and continued delivery against our strategic goals with investment in technology

Good Energy Group PLC, the 100% renewable electricity supplier and innovative energy services provider ("Good Energy" or "the Company"), today announces its preliminary results for the twelve months ended 31 December 2020.

Financial highlights - continuing operations
 

·    A positive financial performance from the core business despite the ongoing macro conditions impacted by COVID.

·    Revenue increased by 5.1% to £130.6m, driven by growth in Business supply and FIT customers, more than offsetting a decline in Domestic supply customers.

·    Gross profit of £29.6m decreased 6.6% with a gross profit margin of 22.6% (FY 2019: 25.5%) in line with the strategic shift toward longer term, lower gross margin Business supply and selling back excess contracted power and higher network reconciliation costs.

·    On a fully comparable basis, normalised profit before tax of £2.4m (FY 2019: £2.1m).

·    Underlying profit before tax of £0.4m and reported loss before tax £0.1m, included:

o  Non underlying costs of £0.5m associated with restructuring costs,

o  Increased non-cash costs of £1.7m, driven by additional depreciation on the revalued generation portfolio and the write down in value of the small Creathorne solar site,

o  Additional £0.8m expected credit loss provision reflecting the Group's best estimate of the impact of the COVID-19 pandemic on the Group's customer and client base. 

·    Basic earnings per share decreased to 0.4p, with reported earnings per share also 0.4p (FY 2019: reported profit per share 7.5p).

·    Strong operating cashflow of £7.8m leading to a gross cash balance of £18.3m (2019: 13.7m), funding investment across the business, and providing increased capital flexibility.

·    In April 2021 we restructured the financing on our renewable generation asset portfolio providing an additional £7.8m of unrestricted cash.

·    Net debt decreased to £34.6m, with revaluation of 47.5MW generation portfolio resulting in £13.3m uplift to reserves. Gearing ratio decreased significantly to 51.6% (2019: 68.9%).

·    The Board recognises the importance of the dividend to our shareholders and therefore intends to resume dividend payments in 2021. In order to maintain the appropriate level of near-term flexibility, the Board has decided not to declare or pay a final dividend.

Operational highlights

·    Notwithstanding the challenges of the coronavirus pandemic, Good Energy delivered a positive performance in 2020. The Group continued to invest across the business in the development of energy services propositions and a range of innovation projects to drive future profit growth and supporting the journey to a zero-carbon Britain.

·    Good underlying business growth mitigating COVID impact, with overall customer numbers increased by 1.8% to 271k. Total Business customers increased 9.0%, with Business FIT customers increasing 8.8% and Business supply customers increasing 12.3%. Total Domestic customers decreased by 4.7%, with Domestic FIT customers growing by 1.1%.

·    Continued focus on delivering profitable returns alongside continued investment in people, processes, and technology to enable customers to take control of their energy usage in the future.

o  Kraken implementation and rollout complete with 100% of customers migrated. The system implementation and associated operating model transformation has delivered significant cost savings in 2020, continued improvements in customer experience and is on track to payback within 18 months as forecast.

o  Zap - Map recently launched Zap - Pay, a ground-breaking payment solution across EV charging point networks. Good Energy converted its initial investment into a majority 50.1% equity stake in June 2020. 

o  Mobility as a Service offering developed to provide solutions for the electrification of transport for Business and Domestic customers, with key partnerships signed.

o  SMART meter rollout impacted by COVID restrictions. Demand and installation numbers improving as lockdown restrictions ease and in line with expectations, with clear targets for 2021 rollout plan.

o  A market leading business billing platform (Ensek) integrated, to offer a more digital service for Business customers.

Financial performance for the twelve months to 31 December 2020

Juliet Davenport, Founder and Chief Executive Officer of Good Energy, said:

"Good Energy has shown strength and weathered the COVID 19 storm well. Total customer numbers are up, driven by continued Business and Feed in Tariff growth. Despite the obvious challenges that 2020 brought, Good Energy has remained financially and operationally resilient with a strong cash position.

"We have made good progress with our strategy and continued to invest across the business - in the development of energy service propositions, innovation projects, our people, processes and technology.

"The economy is now opening up, consumer and business confidence is returning with an appetite to 'build back greener'. With our solid business performance and a clear strategy supporting us, Good Energy is in a great place to provide the products and services that people and businesses need to help them achieve net-zero."

* Due to rounding, figures in the table above may not cast. Figures are correct to the nearest £0.1m

Enquiries:

Analyst Briefing:

A briefing for Analysts will be held at 9:30am today via web conference. Analysts wishing to join should contact investor.relations@goodenergy.co.uk.

Notes to editors:

About Good Energy www.goodenergy.co.uk

Good Energy is a generator and supplier of 100% renewable power and an innovator in energy services. It currently owns two wind farms, six solar farms and sources electricity from a community of 1,600 independent UK generators.

Since it was founded 20 years ago, the company has been at the forefront of the charge towards a cleaner, distributed energy system. Its mission is to support UK households and businesses generate, store and share clean power.

Good Energy is recognised as a leader in this market, through our green kite accreditation with the London Stock Exchange and as a top-rated Green energy supplier by Which?.

Chairman's statement
In 2020 we witnessed one of the most tumultuous years in recent history, with the onset of a global pandemic and national lockdowns. Despite the impact of this, I am incredibly proud of the resilience and performance from all of our colleagues to be able to react so effectively at all levels within our organisation. Regardless of these challenges we had another good year of progress, as we delivered on a number of key projects and milestones which are the foundation for growth in 2021. We remain well positioned both financially and operationally and our strong cash performance in the year is a reflection of both of these factors. Despite being prudent on cost control, we were still able to make tangible investments in our future strategy, progressing in our transition towards technology enabled energy services for the generation, supply and sharing of 100% renewable clean power for all.

Our market: opportunities and challenges

In 2019, I said that the UK economy remained buoyant but highly sensitive due to the ongoing uncertainty caused by Brexit negotiations and macroeconomic volatility. It transpired that 2020 was a year unlike any we had ever witnessed. The global pandemic (COVID-19) caused national lockdowns throughout the UK and Europe, with an impact to the UK economy not witnessed since the second world war leading to unprecedented actions from the UK Government in an attempt to limit the impact on UK businesses and individuals through the furlough scheme and other job retention and stimulus packages. Despite the initial shock of the pandemic, we are beginning to see light at the end of the tunnel as a nation.

As a business, we have proven that our financial and operational resilience allowed us to react to these market challenges. We remain highly cash generative and have seen improvements in cash collection and billing rates in 2020. Operationally, our UK focused business has been well placed to respond.

These strong fundamentals of our business have meant that whilst we have obviously seen an impact from COVID, this impact has been limited. Especially to other companies in the market. We have made positive strides in addressing the changing nature to our industry, especially given the reduced consumption in business energy and a more volatile wholesale energy market.

Strategic developments

Despite COVID, we have not rested on our laurels in 2020. We have continued to make excellent progress in positioning ourselves as a business, to benefit from the transition to the new world of energy as a service. The implementation of our new customer technology platforms, for domestic and business customers, has been a success and has provided us with further flexibility to operate and deliver all our products and services to customers.

Decentralisation, digital products and data analytics will help us thrive and deliver energy as a service to our customers. We remain focused on technology, strategic partnerships and our people. Our investments in both Kraken and Zap-Map continue to progress at pace and allow us to have the technological capabilities to play in the right markets and deliver our vision of a zero-carbon future.

Board update

In February 2021, we announced that Juliet Davenport had decided to transition from her role as CEO and take up a Non-Executive Director position with the business, as well as remaining Chair of subsidiary Zap-Map. This transition is part of the continuing evolution of Good Energy from its roots as a simple green energy provider to a newer world green energy services and 'mobility as a service' provider. With Good Energy now well established as a leading renewable energy provider and following a period of significant internal investment and progress, Juliet has decided that now is the appropriate time to bring in a new CEO to take the business forward.

Juliet is a recognised and influential industry figure, and her experience and insights will continue to play an important role in the continuing growth of both Good Energy and Zap-Map. Juliet's ongoing commitment as a Non - Executive Director of Good Energy and Zap-Map will provide a strong platform to support both the Board and new CEO moving forward.

I would like to personally thank Juliet for her commitment over the past 20 years to Good Energy and celebrate her achievement of growing the business into what it has become today. She will continue to play an important role in both Good Energy and Zap-Map and I look forward to this next stage of the company's growth.

CEO appointment

In April 2021 we announced the appointment of Nigel Pocklington as Chief Executive Officer. Nigel is a widely experienced senior executive with a strong commercial, digital, and operational track record spanning over 25 years. Nigel has strong, relevant, and current commercial experience at a senior management level in a variety of global digital businesses, ranging from global e-commerce to financial technology.

Nigel most recently served as Chief Commercial Officer of Moneysupermarket.com Group plc. Prior to this, he held a variety of senior roles within Expedia Inc., including President of eBookers and Chief Marketing Officer of Hotels.com. He spent a decade of his early career at Pearson plc, including a period leading the digital operations of the Financial Times. Nigel is also a Non-Executive Director for Kin and Carta plc, a global digital transformation business focused on helping make the journey to becoming a digital business tangible, sustainable and profitable, where he chairs the Remuneration Committee and is a member of the Audit and Nomination Committees.

We are delighted to welcome Nigel to the Group as our new Chief Executive Officer. Following an extensive search and a thorough evaluation of high-quality candidates, we are confident that Nigel's digital and transformation experience will help to lead Good Energy in the next stage of the Group's development. This experience will help to accelerate innovation and drive growth across all of our businesses specifically in the new markets of energy and mobility as a service, in which we are already positioned strongly.

Good energy bonds

In April 2021, we announced the successful restructuring of the financing on our renewable generation asset portfolio, which we undertook to consolidate and simplify funding facilities. Together with a strong net cash position gives us greater capital flexibility going forwards.

Longer term, the transaction also provides on-going improved visibility of cash flows and frees up future cash generated by the generation portfolio to be utilised by the Company.

The upfront cash provided, combined with existing strong levels of cash on the balance sheet gives the Company the ability to wholly repay Good Energy Bonds II. It is anticipated that this will be completed during FY2022.

We recognise the importance of optimising our balance sheet, which this move allows us to do. We are in a strong position to continue making investments across the Group and consider all relevant funding sources when appropriate.

Dividend

Alongside our ongoing investments, we aim to deliver a progressive dividend policy. The policy has the objective of increasing the dividend over time as profitability grows to provide an appropriate return to shareholders. We remain mindful of maintaining and balancing the ability to invest in long term growth opportunities.

The Board recognises the importance of dividends to many shareholders, but it is important that we retain a prudent approach to balance sheet management at this stage. The Board has determined that due to the strong underlying performance of the business in 2020, and the continued improvement of macroeconomic conditions, that the dividend policy will resume in 2021.

Will Whitehorn,

Chairman
 

CEO REPORT
 

MARKET ENVIRONMENT

A year like no other

The impact of 2020 will go down as one of the most unique in our history as a nation. COVID-19 has been felt throughout the economy in a political, economic and societal sense.

The market in the first two months of 2020 began in line with expectations with the underlying business performing strongly. However, from March, the breadth and depth of COVID-19 began to be felt across the economy, as a result of the first national lockdown. Business premises largely closed and employees shifted to a remote working model. We witnessed Business energy supply demand reduce by almost 35% vs our expectations. We saw signs of recovery throughout the summer, following the first lockdown easing in May. Despite a second national lockdown in the second half of the year, the UK economy managed to avoid a contraction in the fourth quarter of 2020 as individuals and businesses were better prepared for the impact of a lockdown and remote working business models. Despite the adaptability of many UK businesses, it had a negative impact on growth momentum with the economy contracting by 9.9% overall in 2020.

Nevertheless, it is pleasing that despite these challenges, our business has responded well and had a strong performance in context of the new normal.

The macroeconomic, consumer and competitive backdrop contain considerable uncertainties. A more prolonged lockdown than the first quarter of 2021 will inevitably see GDP contract, although by much less than 2020. A rapid roll out of the vaccine is now underway and expected to facilitate relatively strong growth from Q2 2021 onwards, whilst Brexit related frictions are also expected to ease in the second half of the year.

Many economic forecasts continue to outline a muted outlook on growth and employment levels, given the ongoing uncertainty surrounding the virus. However, as lockdowns ease, we are seeing energy demand starting to recover. Without a second wave, we expect this to continue back to more normalised levels. However, we remain aware of the impact any subsequent lockdown and impact this could have on the sector in general.

Continued green momentum despite COVID and macroeconomic conditions

Despite the continued impact of COVID - 19, the desire for a green recovery and to build back better continues to gather momentum. The concept of a green recovery has quickly gathered strong support from the business community. Tangible investments have already been made in schemes committed to low carbon homes, low carbon transport infrastructure and investments dedicated to support green innovation. Both corporations and investment and pension fund managers are now also placing increasing scrutiny on green credentials as key investment requirements.

Despite COVID, 2020 has been a seminal year for policy and investment decisions in green technology. The government set out their Ten Point Plan for a Green Revolution. This Ten Point Plan to get there will mobilise £12 billion of government investment, and potentially three times as much from the private sector, to create and support up to 250,000 green jobs. The ambition is to turn the UK into the world's number one centre for green technology and finance, laying the foundations for decades of economic growth by delivering net zero emissions in a way that creates jobs and allows us to carry on living our lives.

Focus has been put on development of offshore wind and the electrification of transport and heat, including bringing the ban on petrol and diesel cars forward from 2040 to 2030, with accelerated plans for EV charge points, grants and incentives as well as mass scale production of EV batteries.

It may be too soon to talk about market recovery, but resilience and adaptability are key. With the Green recovery at the forefront of climate conscious Brits, pressure from Ed Miliband to bring the Green recovery forward to align and prove it at COP26 in November 2021 and pressure on the UK to match Joe Biden's clean energy goals to 2035, building back better could be a fantastic opportunity and reality to give hope to the challenging year that is 2020.

Green accreditation

In March 2021, we were named as the first and only energy supplier to date awarded 'Gold' in USwitch's green tariff accreditation scheme. The comparison and switching service's independent panel judged our electricity and gas tariffs to be 'market leading in their environmental credentials'. We have been awarded the highest standard on a ground-breaking new green accreditation scheme for energy tariffs. The 'first of its kind' scheme from a comparison and switching site categorises green energy tariffs into Bronze, Silver and Gold, with Good Energy the only supplier awarded Gold.

The Uswitch Green Accreditation* aims to provide transparency to customers looking to switch to a green tariff. Research from the comparison service found that whilst a third of households are now on a 'green' tariff, more than half (52%) of UK consumers are confused about what actually makes up the many 'green' deals on the market.

Criteria verified by an independent panel of experts require Gold standard tariffs to be backed with 100% renewable electricity purchased from renewable generators direct, and 10% of green gas. Good Energy, which is also rated 'excellent' on customer service reviews site Trustpilot, was awarded the standard for all tariffs it submitted.

There are more than 6 million domestic energy customers who switch supplier every year, the majority via switching and comparison sites, of which Uswitch is the most popular. The site receives over 5 million visits per month.

This is a watershed moment for transparency around green tariffs. For years now energy suppliers have been able to mis-lead customers who are trying to do the right thing in choosing green. So it's brilliant to see Uswitch take action, and do it in the right way by asking independent experts. We hope to see other comparison and switch services follow suit.

The UK cannot achieve net zero without bringing everyone along, and being dishonest with the very people trying to help is not the way to go about that. In order to build a greener future together, we have to give people the facts about the renewable choices they are making. As we build towards COP26 in the second half of 2021, decisions like this will only help to address the underlying issues we need to fix as a nation.

STRATEGIC UPDATE

Good Energy is a next-generation energy company, founded on a deep green domestic offering, with over 20 years' experience. We have a vertically integrated business model, with a strong and competitive core business, with a mature wind & solar generation portfolio, and an increasing focus on small businesses and electric mobility which helps to separate us in an increasingly crowded marketplace.  

Our 47.5MW generation portfolio consists of 2 wind farms and 6 solar sites, powering approximately 15% of our customer base. Whilst the power purchase agreements (PPAs), that we have with over 1,600 small generators means that on average our customers are never more than 4 miles away from a generator. This foundation allows us to be more than just an energy supplier, and coupled with our experience and expertise will see us be at the forefront of the transition from the old world of passive energy supply into the new world of energy as a service, with the consumer at the heart.

Building blocks in place

We have spent 2020 ensuring that the fundamental building blocks of the business are in place, and that the core business is able to operate at a high level, even with the impact of COVID. These building blocks are crucial to unlocking the future growth opportunities, and we have been delighted with the operational execution in the year. We have implemented two new customer service and billing platforms for domestic and business customers, continued the roll out of smart meters for our customers and begun to develop a pipeline of innovative propositions to leverage these core skills and drive long term value into the business. Given the disruption across all industries, delivering all of these tasks has put the business in a strong position to scale in 2021, as the economy begins to recover, the green revolution continues to gather momentum and EV adoption increases.

Kraken customer services platform

The investment in Kraken is a fundamental steppingstone towards achieving our strategic goals. Not only will Kraken enable us to better serve our customers through a scalable and more efficient customer services platform, it will also increase our capacity to deliver future growth in our Domestic business. It provides the core functionality, but also acts as a technology platform enabling our ambitions on smart tariffs and adaptability to the changing landscape, which is highly scalable for future organic and inorganic growth opportunities.

·    Integration

·    Integration in 2020 has been implemented successfully, with 100% of customer accounts now migrated. We are already seeing the benefits, from both an investment case and customer service perspective.
 

·    Service

·    Our service levels have continued to shift online, which has increased the speed and efficiency of response times with the average response time being halved from 48 hours to 24 hours. We have seen positive impacts on our net promoter score (NPS), which has been consistently +30, whilst our Trust Pilot reviews have hit their highest ever level or 4.3 stars.
 

·    Building scalable performance

·    Increased digitalisation will be a hallmark of success as we grow. The platform increases the use of paperless billing planned from 82% to 90%, whilst driving an increased usage of the customer app and portal. Whilst we already have a high percentage of our customers on direct debit (DD), it is anticipated that the platform allows us to have more than 85% on DD by the end of 2021. Alongside our planned smart meter rollout, it accelerates our digital offering and is a building block for energy services. This platform has provided us with the ability to design multiple new, smart enabled tariffs, which promote further innovation and improves the speed of our product launches. The Zap flash tariff launched today, is the first example of this and a step towards genuinely smart products including half hourly settlement for domestic customers.
 

·    Financial returns

·    We previously communicated that the total forecast investment of £4m would be split approximately equally between cash and non-cash elements. In 2020, operating cost savings have already been realised, relating to lower headcount and service efficiencies. In 2020, we had lower staff costs of £2.7m and are on track to achieve payback of the forecast investment in Kraken within 18 months of the April 2020 full implementation.  Efficiency savings and benefit of future operating leverage benefits will be reinvested in both price and further proposition development and roll-out, principally within our Domestic supply business. This will enhance existing products, services and competitiveness.

Smart meter rollout

Our SMART meter rollout was impacted by the COVID lockdown restrictions implemented in March. As a result, we were unable to visit customers' homes to install new devices. However, we have seen both demand and installation numbers improve as lockdown restrictions eased, with SMART meter installs restarting in July. Without further lockdowns, we expect to see this trend continue and installations are now back on track and in line with our expectations.

To date we have 5,100 smart meters installed, but our ambition is to roll out 20-30,000 smart meters by the end of 2021. We expect to see the number of installations increase throughout the year as lockdown restrictions are eased. Not only do Smart meters help customers better understand their energy consumption and how to make behavioural changes, but they are key to enabling many of the future smart enabled product's key to a zero-carbon future. Half hourly settlement, optimised time of use tariffs and flexibility services will all help customers make a tangible impact in the fight against climate change.

Ensek business billing platform

In the second half of the year, we partnered with one of the leading software suppliers to UK energy providers by moving our entire B2B supply business onto Ensek's Ignition platform.

The move will enhance customer experience and support the launch of new services for our business customers, which enables a more digital experience for our business customers. The platform enables us to service a large range of electricity and gas customers, from small businesses to large industrial consumers, with greater speed and more accuracy.

We have created a new customer portal for our B2B customers, which will provide a fully digital, self-serve experience, allowing customers to actively manage their account without needing to speak to anyone, providing the flexibility and efficiency to serve a large range of business customers. Ensek's highly automated software as a service platform allows us to better focus on our SME and Industrial & Commercial customers' needs. Ensek's feature-rich platform simplifies the experience by providing a single customer view; from complex billing and pricing to import and PPA. The platform will support our growth plans by reducing the cost to serve and improving customer experience.

We have currently migrated over 80% of our business customers to the new platform and aim to fully transition all business customers by the end of Q2 2021.

Proposition development

Our ambition is to provide customers with the tools to achieve a zero-carbon footprint across electricity, transport and heat in both Business and Domestic settings.

o             In electricity, our aim is to provide electricity from decentralised renewable energy sources which support decentralised generation for homes and businesses. Alongside a range of smart time of use tariffs, we are continuing to develop our One Home proposition, which will incorporate our FIT export rate (FER) and Smart export guarantee (SEG) tariffs, supported by our GenEx SMART metering solutions, bundled with a supply offering and the installation of EV charging hardware, solar panels and eventually storage solutions.           

o             In transport, we must be part of the electric vehicle revolution and electrification of the infrastructure network through providing homes and businesses with charging hardware and solutions. We continue to build and develop our mobility as a service solution, focused on supply, EV hardware and services to help businesses and consumers with the transition to and adoption of EVs.

o             In heat, our focus is on the electrification of heating systems and movement to renewable heat by providing access to heating care products and heat demand reduction technologies. In September we announced a new specialised heat pump tariff, which generated positive demand. In 2021, we will roll out smart time of use tariffs for heat solutions and continue to evolve our overall solution to the electrification of heat.

Using our expertise, we will help customers to better understand the energy requirements and uses. Knowing where, when, and how you consume energy is the first hurdle. Providing accurate live data on device usage through consumer access devices and SMART metering technology will empower customers to be part of the zero-carbon journey.

Energy as a service

Our aim remains to help households and businesses generate, store and share clean power. We use our deep green credentials and demonstrated expertise as a leader in 100% renewable energy supply to create sustainable value for our stakeholders. Green momentum continues to grow through both societal and regulatory changes, with a growing market of business and domestic changes looking to make an impact on climate change.

But as the energy sector moves rapidly from being about Megawatts to Megabytes, we recognise that it will be consumers who will be responsible for over 60% of the activities that will drive this change. Our business model has evolved to reflect this.

·    Purpose brand - Helping customers make a tangible choice in the fight against climate change

·    Renewable electrification - 100% renewable electricity and innovative services to aid in the electrification of mobility and heat

·    Proven credentials - Deep long-term relationships at all levels of supply chain, based on over 20 years' experience

·    Data & digitalisation - underpinning highly scalable, modular platform linking users to energy services throughout the value chain and ecosystem

·    Evolution - Increasingly agile organization, using innovation and acquisitions to complement growth

Scaling the business through innovation

This customer centric model is being applied to our mobility as a service offering, but can be replicated across heat, solar, storage and demand side flexibility to provide an innovative and unique offering to a broad range of integrated customers, in an ever-increasing market. Good Energy has the tools in place to replicate this offering in multiple verticals and solidify its place at the heart of the energy ecosystem.

Corporate development in this space will focus around understanding the right approach to building our own capabilities, investing in proven technologies and skills, or forming strategic partnerships to take advantage of growing markets.

IN FOCUS: MOBILITY & EV

Good Energy as an EV supply business

The UK's announced plans for decarbonisation as presented in the Prime Minister's 10-point plan in November 2020, include an expectation of roughly a doubling of electricity demand over the next 20 years, driven by the combination of increased demand to run heating systems, and increased demand for transportation. This presents Good Energy with a huge opportunity to address a completely new market - that of transportation. EV adoption is moving remarkably fast, with recent months seeing more than 20% of new vehicles sold with battery - electric or hybrid.

Increased EV adoption will be a catalyst for a wider electrification revolution across the mobility ecosystem. EV adoption will lead to a shift in how consumers view mobility. The traditional vehicle-centric (petrol/diesel) system will be replaced by a more flexible, customer-centric (electric) system, where mobility-as-a-service dominates; direct vehicle ownership declines, but the customer will be all to play for, with the customer falling into three clear categories, from direct vehicle ownership, decentralised or hybrid fleets and traditional centralised fleets.

With UK electricity demand expected to double by 2050, of which c. 40% could be directly attributed to transport, every B2C and B2B energy mobility customer now presents a potential electricity customer growth opportunity for Good Energy. Energy Retailers have typically focused less on B2B EV business models, creating a clear gap for us to lead the way. A focus on centralised and decentralised B2B mobility customers fits with Good Energy's strategic ambitions and creates an opportunity to scale their mobility platform, whilst, continuing to supply energy to both domestic and non-domestic customers. Operating as a B2B2C model. Engaging with the business, fleet manager, vehicle drivers and employees.

EV market outlook

EVs are expected to be the prevailing zero emissions powertrain for passenger cars, with 91% of UK new car sales expected to be EV by 2030. Drivers for adoption include favourable regulation/policy, growing auto industry investment, increasing EV model availability and continued UK infrastructure development. Declining battery manufacturing costs suggest that EV total cost of ownership (TCO) will be favourable vs. ICE by 2021-23 (varying by vehicle and use case), providing the tipping point for mass adoption by consumers and fleets.

EVs in use are expected to grow at ~47% CAGR through to 2026, as UK EV sales ramp-up prior to an anticipated 2030 ICE ban. EVs in company keepership are expected to form a significant share of the early fleet as companies are disproportionately responsible for purchasing new vehicles (~60% of new car registrations today) and can take advantage of specific UK EV incentives (e.g., 0% BiK and 100% first year capital deductions).

Overall power demand from EVs is set to grow dramatically at a rate of 52% CAGR 2020-26, linked to EV parc growth, reaching nearly 14TWh of annual demand by 2026. B2B customer segments represent the largest share of power usage, reflecting the relatively high proportion of company vehicles, as well as comparatively higher mileages for company vehicles. This balance will shift more towards retail customers over time as more used EVs filter into private hands.

Future ecosystem

Future energy and mobility customer needs should merge to form an intricate ecosystem and unlock new innovative ways to grow market share. As customers demand more flexibility over their transport options, the mobility system will shift from a vehicle-centric to a customer-centric one, whilst trusted relationships between customer and mobility providers will serve as a platform for players in the emerging EV value chain to place themselves in the centre of the mobility market.

Energy suppliers, who already have strong capabilities in the highly regulated energy value chain, are ideally placed to enter this market.

As we move from this vehicle-centric to customer-centric world, energy suppliers have the unique opportunity to sit at the heart of the future mobility ecosystem and provide customers with a suite of interconnected services spanning the four main mobility value chains: Energy, EV infrastructure, asset management / services and EVs.

Mobility as a service

To build a customer centric 'Mobility as a Service' proposition, Good Energy will couple its own core skills as a 100% renewable electricity supplier and services provider, with several strategic partnerships to enhance the offering for its customers.

In December 2020, we announced the first of several partnerships with leading companies to help build out our offering. We will continue to develop this range of services, through internal development, partnerships and inorganic options.

·    Mina Energy

·    Mina's innovative and unique technology solution helps to make home charging cost effective and simple for fleets and their drivers. By integrating with drivers' home charging infrastructure and energy providers, Mina supports fleets with paying for work vehicles charged from home.

·    Horizon Energy Infrastructure

·    Horizon provide innovative funding and partnership solutions for the UK energy revolution, supporting the road to zero carbon by 2050 through the funding and deployment of low carbon assets.

·    Horizon provides Good Energy customers with asset-backed funding for their charging infrastructure, which is a key financial service as part of Good Energy's 'One Point' charging hardware solution.

·    This provides businesses with the financial flexibility to manage the initial cost of installing the required EV infrastructure.

·    Select Car Leasing

·    One of the UK's largest independent specialists for car and van leasing, Select works closely with manufacturers, large motor groups and key finance partners to offer competitive services for drivers and fleets.

·    Good Energy will be Select's green energy partner, providing Select customers with smart, 100% renewable energy tariffs to assist them on their green journey.

Zap-Map: the UK's leading EV mapping app

In 2019, we made a strategic investment, for a majority share in the UK's leading EV mapping service, as part of the development of GE's own mobility propositions. This investment was predicated on the planned electrification of transport.

EV charging made simple

Zap-Map remains the voice of the EV driver, developed through deep relationships with customers, as the trusted voice of the EV user and go to brand for all things EV. A capital light, technology agnostic platform business, which focuses on three core areas in the EV industry: Mapping, payment and data insights.

·    Mapping

·    Mapping functionality core to the platform and EV driver experience. Making EV charging simple for all

·    Payment

·    Technology leadership interoperable payment solution, providing payment solutions for all EV drivers and accelerating adoption.

·    Data & insights

·    Over 10 years of unique data sets to help understand EV adoption and driver behaviours. Provide insights across the EV ecosystem on utilisation, adoption and behaviour to help future proof solutions.

Zap-Map is playing a key role for all EV drivers in this transition, by enabling them to search, plan and pay for EV charging in one app, whilst receiving real time updates in car.

 Zap-Map currently has over 95% of the UK's public points on its network, with live dynamic data for over 70% of the UK EV charging network and is the number one app used by EV drivers to locate chargers. Over 75% of the UK EV drivers have downloaded Zap - Map, which have grown over 50% in 2020 in line with the UK EV market. With over 180k registered users, 140k cross platform users, 130k saved route plans and over 12k user comments per month, Zap-Map has continued to position itself as the voice of the EV driver, and an indispensable tool for new and existing drivers.

Commercial milestones

As the EV market continues to grow, Zap is focused on providing further value add services to customers across its core segments of mapping, payment and data services. These critical business milestones underpin investment strategy, driving customer loyalty and maintaining engaged userbase.

'Zap-Pay', released by Zap-Map in September 2020, is a new service that enables EV drivers to use a single, interoperable, app to pay for charging across different networks. The key challenge for many EV drivers and businesses, has been the number of different payment systems and memberships required in order to charge. Zap-Pay solves this issue, removing a key drawback for many potential EV drivers. Zap-Pay will be rolled out across UK networks in 2021, providing unique and unrivalled coverage across the whole country. Zap-Pay is a genuine innovation that makes payment on any EV charging network simple and will help accelerate EV adoption. Providing a seamless charging experience is crucial to mass adoption and this new service allows EV drivers to search, plan and pay all in one app. We continue to make good progress partnering with an increasing number of charge-point operators and will continue to grow the network of Zap-Pay enabled chargers.

The business continues to innovate and will be launching a new fleet payment solution, improved routing and a 'freemium' subscription model of the app for both consumers and fleet users. In 2021, the business will continue to invest to leverage its market leading position, commercialise existing products and services and cement itself as a leading player in the EV market.

Commercial partnership with Fleetcor UK

As part of making charging simple for all EV drivers, Zap-Map have entered into a heads of terms agreement with Fleetcor UK, part of Fleetcor a worldwide leader in business payments, to integrate its Zap-Pay solution with the Allstar payment platform. This will cover commercial fleets of vehicles, aimed at delivering a solution to remove the payment complexities for businesses and commercial fleets.

As part of an on the road solution, the Allstar One Electric fuel card enables fleet operators to manage all fuel types, whether traditional (petrol or diesel) or an alternative such as electric, hydrogen or hybrid, on one payment card. Allstar has already partnered with nine leading EV charging providers, including Chargepoint services, ESB Energy, Engenie, and Source London, to create the one of the largest multi-branded EV fuel networks in the UK. It now provides fleet operators and drivers with access to more than 4,277 charging points across 1,700 locations throughout the UK. Allstar is continually working to grow its electric charging network, easing access to charging points and lowering range anxiety.

Zap flash tariff

Leveraging Zap's market leading position in the EV industry, Zap and Good Energy have launched a new smart EV tariff, designed by input from Zap users. The tariff powered by Good Energy will allow EV drivers to be powered by 100% renewable energy on an innovative time of use tariff.

By utilising smart meters, the tariff will provide a peak and an off-peak rate, with weekly four-hour 'flash' windows where customers can charge their EV's for free. The 'flash' windows are based on times of abundant renewable energy feeding into the electricity grid and signalled to customers in advance. Making it easier for customers to benefit from cost effective, greener EV charging. 

Good Energy will use its core capabilities as a renewable energy supplier and smart technology, utilising Zap Map's customer base as an effective route to market. Good Energy will be rolling out smart EV chargers and an updated app to work alongside this tariff and whilst initially the tariff will be a beta, further evolutions will allow Good Energy to transition to more sophisticated smart tariffs and technology aimed at optimising energy consumption for customers.

OPERATING REVIEW

Wholesale energy market conditions

Demand

Our revenues are sensitive to changes in the demand for electricity and gas. At the outset of the pandemic, market trends showed a 15% increase in Domestic electricity demand and a reduction close to 35% in overall Business demand.

However, we saw the impact of lockdown easing, as a result of partial return to the office and businesses adapting to new working conditions. Towards the end of 2020 we saw that domestic demand has dropped relative to earlier in the pandemic, trending around 7.5% above normalised levels, while Business demand had picked up and was closer to a 10-15% reduction on normalised levels. We continue to monitor the data closely.

We also witnessed a warmer winter than average which has further impacted energy demand, followed by a very sunny and warm spring. In H1, average temperatures were 0.95 degrees warmer than seasonal averages for 5 out of the first 6 months of the year. This has led to a downward impact on gas demand in the first half of the year, with a less material impact on electricity volumes.

Power prices & supply volume

In the first half of the year, wholesale power prices dropped significantly. Following global trends in the fossil fuel markets, during the initial lockdown period electricity prices had fallen by 42% from H1 2019 and gas prices had fallen by 52% from H1 2019. As a result of decreased demand, excess forward bought power was sold back into this market at a loss.

In the second half of the year, we have seen a more bullish market, with power prices rising back towards pre-COVID levels. Longer term pricing depends on the worldwide changes in demand sentiment.

We have reviewed our traded positions and feel comfortable that we are sufficiently procured in gas and electricity to manage this position over this winter.

Overall supply volumes were 2.9% down, an improvement on the first half of the year when volumes were 6% down. Total gas supply volumes decreased 8.5% to 486 Mwh (FY 2019: 532Mwh), driven by the warmer weather. Electricity volumes increased 2.7%, driven by growth in Business supply volumes, following an increase in contracted business in late 2019. Half hourly (larger) business volumes increased 12.6% to 292 Mwh whilst our combined SME & Domestic supply volumes decreased 6.4%.

A STRONG AND GROWING CORE BUSINESS

Total customer numbers in the period increased 1.8% to 271.3k, driven by continued business and FIT growth which was pleasing to see. The impact of COVID, warmer weather and accounting adjustments in the first half has masked the underlying good performance of the core business.

Business

Total Business customers increased 9.0% to 139.3k. Business FIT customers increased 8.8% to 130.5k, as we continue to maintain our position as one of the market leaders in operating the feed in tariff scheme. Total Business supply customers increased by 12.3% to 8.8k.

Growth in Business customers has underpinned our strategy in recent years, and this planned shift towards Business provides us with greater stability through longer term contracts and higher retention levels compared to Domestic supply. Whilst we saw gross margins fall because of this shift, operating margins have the potential to increase over time due to the lower cost per acquisition and cost to serve these customers. We continue to partner with a growing number of like-minded businesses, ranging from small, owner managed businesses to large corporates, providing confidence for the future.

Domestic

Total Domestic customers decreased by 4.7% to 132.0k. Domestic FIT customers numbers increased by 1.1% to 47.1k. Whilst domestic supply customers decreased by 7.7% to 84.9k.

In the domestic supply market, we continue to avoid the price war that a growing number of companies remain engaged in. We do not see the race to bottom in price a viable long-term business model. However, we remain committed to ensuring that we have a highly competitive price point for our unique proposition. Whilst we know that a significant number of customers remain highly price sensitive, there are an expanding number who want a truly green energy provider. The recognition from OFGEM, Uswitch and Which? of Good Energy as a genuinely 100% green supplier, is evidence of our credentials in this space.

We remained focused on reducing churn and improving the cost to acquire new customers. Our recent investment and migration onto the new Kraken system will address these points and provide the platform for a return to growth in future years. Domestic customer churn is currently approximately 14.9%, significantly lower than mid - 20's industry average and is an improvement on our 2019 level of 16%. We are targeting significant further progress in this area.

Feed in tariff (FIT)

As described above, we witnessed further strong growth across our FIT business in the first half of 2020 and we continue to have one of the largest market shares in this industry. FIT remains an important aspect of our business, as it provides the foundation of our 'energy as a service' business model.

Despite the FIT scheme closing to new entrants in March 2019, we continue to administer the scheme for both our domestic and business customers. We saw domestic customer numbers increase 1.1% to 47.1k and business customers increase 8.8% to 130.5k in the period. We look to make further incremental market share gains in future periods.

Generation performance

Our 47.5MW generation portfolio consists of 6 solar (30.1MW) and 2 wind sites (17.4 MW).

We saw an exceptional summer from a renewable generation point of view, with all sites exceeding their P50 performance, with the exception of Creathorne, our smallest site, which experienced transformer issues.

More generally, wind and solar have performed well during lockdown and recently wind energy alone powered 59% of the UK's energy needs, as a result of the tail end of Storm Ellen. We expect these high renewable days to be increasingly part of the trading landscape that we will have to navigate.

Generation revaluation

Our focus remains to delivering value from our generation sites, which continue to perform well. We are committed to working on our existing sites and delivering value to stakeholders.

In the first half of the year, we undertook a revaluation exercise on the entire generation portfolio. We have historically marked the assets at cost less accumulated depreciation. We have also noted that over recent years the relative values of the generation assets and the long-term loans that finance them have become more disconnected, given that the generation sites are depreciated on a straight-line basis whilst the loan repayments are scheduled on an amortising basis, with the majority of the total cash payments in the earlier years allocated to interest costs. The revaluation therefore provides greater transparency of the generation sites current value on the balance sheet, notably gross assets, total equity and gearing.

The revaluation, which was planned for H1 2020 included the impact of the current, COVID impacted, power price market.

Restructure and refinance of generation portfolio

In April 2021 we announced the restructuring of the financing on our renewable generation asset portfolio to consolidate and simplify funding facilities. The restructuring consolidates the generation assets into one portfolio that will be solely financed by funds managed by Gravis.

Whilst headline gearing will not change on completion, the restructuring and refinancing provide a number of real benefits to Good Energy, both short term and long term.

Initially, it will provide £7.8m of unrestricted cash on completion, of which:

o             £4.7m relates to the release of various reserve accounts and other restricted cash balances which form part of the existing facilities,

o             £3.1m of additional debt raised against the Delabole windfarm, associated with mirroring the terms of Delabole in line with the rest of the portfolio.

Longer term, the transaction also provides on-going improved visibility of cash flows, with a rebalancing of the performance covenants over the entire generation portfolio. This frees up future cash generated by the generation portfolio to be utilised by the Company.

The upfront cash provided, combined with existing strong levels of cash on the balance sheet gives the Company the ability to wholly repay Good Energy Bonds II. It is anticipated that this will be completed during FY2022. At the end of December 2020, the outstanding capital on Good Energy Bonds II was £16.8m, while associated interest costs are £0.8m per annum.

FINANCIAL OUTLOOK

The Group has had a positive financial performance from the core business in the year despite the impact of COVID-19, maintaining a strong cash balance. This includes a reduction in operating costs from the implementation of new digital platforms. Customer numbers have remained stable, whilst cash collections have been strong and the overall working capital position has remained healthy. The implementation of our Kraken technology platform is complete and the SMART meter roll-out remains on track. We remain vigilant to the potential impacts of the withdrawal of various government support schemes to individuals and businesses later in 2021, and therefore plan to retain a cash buffer through to the end of winter 2021/22 as a result.

The first quarter of 2021 has seen power price volatility, most notably in January, and periods of colder than average weather which has led to domestic customer demand being higher. The Delabole site has experienced outages following storms at the start of the year together with some delays to parts being available from Europe as a result of Brexit. Availability at the Delabole site in 2021 to date is slightly under 80% as a result. These factors do not affect managements' expectations of the performance of the business for the full year.

FINANCIAL UPDATE

Profit bridge for the period 31 December 2019 to 31 December 2020

Below, are the key profit before tax movements between 31 December 2019 and 31 December 2020

Overview

Performance in the year can be broadly split into three key areas. Good internal cost management of factors within our control, external market factors outside of our control and proactive decisions made on structural changes.

Underlying profit before tax would have seen year on year growth, after normalising to exclude the impact of the generation revaluation and one-off restructuring costs associated with the Kraken customer services technology platform integration.

Internal cost management

Combatting the ongoing COVID impact, Kraken investment returns and prudent cost control across the business has helped to deliver cash cost reduction of £2.7m in the period. Normalised admin costs are £2.3m better. These values are after removing the additional COVID related ECL provision, Creathorne write down, HQ cancellation and Brynwhilach profit on disposal in 2019.

External market factors

Electricity margin has been negatively impacted by reduction in HH volumes, the sale of excess power back to the market at a time of reduced prices and additional network charges, all because of reduced COVID demand. In aggregate these account for a £1.9m negative impact to gross margin. There was some compensation from £0.7m additional PPA benefits on account of the lower power prices.

Gas margin is flat year on year, with the impact of lower demand at the start of 2020 being reversed with higher margins in the second half with home working demand and lower prices providing upside.

An incremental £0.8m expected credit loss provision was taken, driven by the macroeconomic outlook. In 2020 this is a non-cash impact.

Structural changes

We commenced our planning for the revaluation of our generation asset portfolio at the end of 2019 and completed the exercise in H1 2020. We have historically marked the assets at cost less accumulated depreciation. We have also noted that over recent years the relative values of the generation assets and the long-term loans that finance them have become more disconnected, given that the generation sites are depreciated on a straight-line basis whilst the loan repayments are scheduled on an amortising basis, with the majority of the total cash payments in the earlier years allocated to interest costs. The revaluation therefore provides greater transparency of the generation sites current value on the balance sheet, notably gross assets, total equity and gearing.

 Generation asset revaluation delivered net upwards asset value of £15.9m. Comprising, uplift on seven assets totalling £16.4m, and further £0.5m write down on the small Creathorne solar site There is also an incremental ongoing £1.1m depreciation charge, which does not impact on retained earnings.  

As planned, there has been a realisation of a further £0.5m on restructuring costs relating to the new customer services technology platform. There was an initial £0.9m recognised in 2019.

FINANCIAL PERFORMANCE

Profit and loss

Revenue increased by 5.1% in the period to £130.6m (2019: £124.3m) driven by business supply volume growth offset by lower domestic supply customers. The impact of COVID masked an underlying increase in contracted business.

Cost of sales increased by 9.2% to £101.1m (2019: £92.6m). Gross profit decreased by 6.6% to £29.6m (2019: £31.7m). Gross profit margin decreased to 22.6% (2019: 25.5%).

Administration costs excluding non-underlying administration costs decreased 0.7% to £25.0m (2019: £25.2m). This was primarily driven by Kraken cost savings of £2.7m mostly offset by an incremental £0.8m charge for expected credit loss provisioning, Creathorne write down, HQ cancellation and Brynwhilach profit on disposal in 2019.

Underlying operating margin decreased to 3.5% (2019: 5.2%).

Net finance costs decreased by 3.3% to £4.1m, as overall debt paydown continued to be offset by an increase in reported finance costs following the implementation of IFRS16.

Non underlying costs of £0.5m associated with restructuring costs, delivered a loss before tax from continuing operations of £0.1m. Overall £0.1m of profit is attributable to the Group, after removing the losses attributable to NCI (minority shareholders of Zap Map).

Cash Flow and Cash Generation

Our business model remains highly cash generative with £11.4m cash generated from operations (2019: £8.1m), with £10.6m generated before movements in working capital (2019: £10.0m). Working capital movements remain in line with seasonal trends, despite the impact in the year of COVID.

There was a net increase in cash of £4.6m, delivering a strong cash balance of £18.3m (2019: £13.7m) funding investment across the business, continued paydown of debt and capital flexibility.

Funding and Debt

Net debt decreased 16.8% to £34.6m (FY 2019: £41.6m) following further debt repayment and good cash generation. Gearing reduced to 51.6% in the period (2019: 68.9%) primarily as a result of the upward valuation of the generation portfolio.

Following the repayment of Bond I in June 2019, Group finance costs have been lower and this is a positive step towards lowering the Company's ongoing financing costs and continuing to reduce the gearing ratio over the medium term. There is a change since the interim accounts in that the Good Energy bond is now reported mostly within non-current liabilities. This is due to an annual redemption request window for bondholders in December of each year, with upcoming bond redemptions set at June 2021 or June 2022.

The Group continues to maintain a robust financial position. We look to ensure we optimise our use of capital by continually reviewing the returns on our assets, balancing operating requirements, investment for growth, and payment of dividends back to shareholders.

The Group is currently evolving its strategy towards energy services and remains mindful of the need to capitalise on strategic business development and investment opportunities. Prudent balance sheet management remains a key priority.

Earnings

Basic underlying profit per share decreased to 3.3p. Reported profit per share decreased to 0.4p (2019: profit per share 7.5p).

Dividend

Due to the need to appropriately balance between investment in the core business and shareholder returns, no final dividend has been proposed for 2020. The Board recognises the importance of the dividend to many shareholders, therefore the Board will resume the company dividend from 2021.

Non underlying costs

An amount of £0.5m has been incurred as non-underlying costs within the period. These relate to the one-off expenditure relating to the implementation of the Kraken technology platform and accelerated depreciation.

Expected credit loss

The Group's outlook and base case economic scenario used to calculate expected credit loss (ECL) allowance has been updated since both the 2019 year-end and H1 2020, to reflect the Group's best estimate of the impact of the COVID-19 pandemic on the Group's customer and client base, has resulted in an incremental provision charge of £0.8 million in the period. The Group's ECL allowance continues to reflect a probability-weighted view of future economic scenarios where future macroeconomic forecasts deteriorate further from the 2020 year-end. We remain mindful of the potential economic impact on both our SME and domestic customers. The provision reflects external benchmarks of future macroeconomic performance, as well as our own internal debt collection performance in year.

Strategic investment

The Group converted its equity position in Zap - Map (Next Green Car Limited) to take a majority 50.1% position in the period. As a result, Zap-map has been consolidated as a subsidiary under IFRS 3 from the date control was obtained. Non-controlling interests have been recognised at their share of the fair value of net assets.

Generation portfolio

Our 47.5MW generation portfolio consists of 6 solar and 2 wind sites.

In the period we have revalued the entire generation portfolio to accurately reflect the current value of these assets. As outlined in our 2019 Annual Report, we undertook a review to ensure that our valuation was reflective of market conditions.

Generation asset revaluation delivered upwards asset value of £16.4m. However, there is an incremental ongoing £1.1m depreciation charge, and further £0.5m write down on the small Creathorne solar site. The revaluation includes the impact of current, COVID impacted, power price market.

Subsequent events

There have been three events subsequent to the year-end which may be of note to users of the financial statements.

On 2 February, the Group announced that Juliet Davenport would be stepping down as CEO and would move into a non-executive director position on the Group's board, as well as remaining Chair of the Zap Map board. A settlement agreement has been reached regarding this change. On 7 April Nigel Pocklington was announced as new Group CEO, with his role starting from 1 May 2021.

On 1 April 2021, the Group announced the restructuring of the financing on its renewable generation asset portfolio to consolidate and simplify funding facilities. At the year end the Group had two secured bank loans against its 50MW of wind and solar assets, comprising: £4.5m secured against Good Energy's Delabole wind farm financed by the Cooperative Bank ("Co-Op") and £32.6m secured against the rest of the solar and wind asset portfolio, financed by funds managed by Gravis Capital Management Limited ("Gravis").

This refinancing and restructuring consolidates the generation assets into one portfolio, with a transfer of direct ownership of Delabole to Good Energy Generation Assets No.1 Limited, from Good Energy Group PLC. This portfolio will be solely financed by a revised facility of £39.8m managed by Gravis and will amortise through to June 2035. The Co-Op Facility was previously used to finance the 9MW Delabole windfarm on a standalone basis. The cost of settling the Co-Op debt is de minimis.

On completion, the transaction provides £7.8m of unrestricted cash, this relates to the release of reserve accounts and other restricted cash balances which form part of the existing facilities (£4.7m), and additional debt raised against the Delabole windfarm, associated with mirroring the terms of Delabole in line with the rest of the portfolio (£3.1m). The transaction also rebalances the performance covenants over the entire generation portfolio. This frees up future cash generated by the generation portfolio to be utilised by the Company.

On 8 April, the Group announced a further £1m strategic investment into Zap Map's parent company Next Green Car Ltd, via a convertible loan note. The loan note comprises three broadly equal and separate tranches of investment throughout 2021, and the Good Energy can exercise the conversion of the loan at the earlier of subsequent funding rounds, or a longstop date of 12 months from the date of agreement, at a material discount.

Notes: To present the performance of the company in a clear and consistent format, unless otherwise stated, all references to revenue, profit, costs, tax and EPS refer to the underlying continuing operations.   

Consolidated Statement of Comprehensive Income (Unaudited)

For the year ended 31 December 2020

Consolidated Statement of Financial Position (Unaudited)

As at 31 December 2020

Consolidated Statement of Changes in Equity (Unaudited)

For the year ended 31 December 2020

Consolidated Statement of Cash Flows (Unaudited)

For the year ended 31 December 2020

Notes to the Financial Information (Unaudited)

For the year ended 31 December 2020

1.  Basis of Preparation

Good Energy Group PLC is an AIM listed company, incorporated in England and Wales and domiciled in the United Kingdom, under the Companies Act 2006.

The principal activity of Good Energy Group PLC is that of a holding and management company to the Group. More detailed information on the Group's activities is set out in the Chairman's statement, the Chief Executive's review and the Finance Director's review.

The unaudited Preliminary Report has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and interpretations in issue at 31 December 2020.

The Preliminary Report was approved by the Approvals Committee and the Audit Committee and adopted by the Board of Directors. The Preliminary Report does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006 and has not been audited.

The Group re-assessed its accounting for property, plant and equipment with respect to measurement of a certain class of property, plant and equipment after initial recognition. The Group had previously measured all property, plant and equipment using the cost model whereby, after initial recognition of the asset classified as property, plant and equipment, the asset was carried at cost less accumulated depreciation and accumulated impairment losses.

On 1 January 2020, the Group elected to change the method of accounting for its generation assets classified as property, plant and equipment, as the Group believes that the revaluation model provides more relevant information to the users of its financial statements.

The generation assets are a key part of the Group's Electricity Generation segment and underpin the majority of the Group's long-term debt. The election to adopt the revaluation model for these assets provides more accurate information on the value of the future economic benefits expected to be realised from these assets. These assets have been pledged as security for the debt against them and therefore the revaluation policy provides more accurate and transparent picture of the asset value against its related debt obligations. The adoption of revaluation policy will only provide users with additional information with which to assess the Group's position, and will not remove any information previously presented to users. In addition, available valuation techniques provide reliable estimates of the generation assets' fair value. The Group applied the revaluation model prospectively.

The accounting policies adopted, other than as documented above, are consistent with those of the annual financial statements for the year ended 31 December 2019, as described in those financial statements.

The Preliminary Report is presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.

The Preliminary Report will be announced to all shareholders on the London Stock Exchange and published on the Group's website on 13 April 2021 . Copies will be available to members of the public upon application to the Company Secretary at Good Energy, Monkton Park Offices, Monkton Park, Chippenham, Wiltshire, United Kingdom, SN15 1GH.

2. Segmental Analysis

The chief operating decision-maker has been identified as the Board of Directors (the 'Board'). The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. The Board considers the business from a business class perspective, with each of the main trading subsidiaries accounting for each of the business classes. The main segments are:

·    Supply companies (including electricity supply, FiT administration and gas supply);

·    Electricity generation companies (including wind and solar generation companies);

·    Energy as a service (including Zap-map and nextgreencar.com);

·    Generation development (including early-stage development companies);

·    Holding companies, being the activity of Good Energy Group PLC.

The Board assesses the performance of the operating segments based primarily on summary financial information, extracts of which are reproduced below. An analysis of profit and loss, assets and liabilities and additions to non-current assets, by class of business, with a reconciliation of segmental analysis to reported results follows:

Segmental analysis: 31 December 2020 (Unaudited)

All turnover arose within the United Kingdom.

Consolidation adjustments relate to intercompany sales of generated electricity and the elimination of intercompany balances.

Segmental analysis: 31 December 2019 (Audited)

All turnover arose within the United Kingdom.

Consolidation adjustments relate to intercompany sales of generated electricity and the elimination of intercompany balances.

3. Non-underlying costs

Non-underlying costs in the year relate to our investment in a new customer services technology platform with Kraken Technologies Ltd. These costs comprise of the costs of the Kraken system implementation of £476,746.

Capitalised expenditure on the Kraken system implementation in the year totaled £317,538; these are additions to intangible assets.

4. Finance Income and Finance Costs

5. Earnings per Ordinary Share

Basic

Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares during the year, after excluding 268,270 (2019: 293,270) shares held by Clarke Willmott Trust Corporation Limited in trust for the Good Energy Group Employee Benefit Trust.

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares to assume conversion of all potentially dilutive ordinary shares. Potentially dilutive ordinary shares arise from awards made under the Group's share-based incentive plans.

Where the vesting of these awards is contingent on satisfying a service or performance condition, the number of potentially dilutive ordinary shares is calculated based on the status of the condition at the end of the period.

Potentially dilutive ordinary shares are dilutive only when the average market price of the Company's ordinary shares during the period exceeds their exercise price (options) or issue price (other awards). The greater any such excess, the greater the dilutive effect.

The average market price of the Company's ordinary shares during the year was 184p (2019: 138p).

5. Earnings per Ordinary Share (continued)

The dilutive effect of share-based incentives was 395,679 shares (2019: 513,596 shares). The dilutive effect of share-based incentives for continuing operations was 395,679 shares (2019: 513,596 shares).

6. Plant, Property and Equipment

6. Plant, Property and Equipment (continued)

The group changed the accounting policy with respect to the measurement of Generation assets as at 1 January 2020 on a prospective basis. Therefore, the fair value of the generation assets was not measured at 1 January 2019. The effective date of the revaluation was 1 January 2020. the properties' fair values are based on valuations performed by Jones Lang LaSalle Limited, an accredited independent valuer who has extensive valuation experience in wind and solar assets. The fair values were determined using a Discounted Cashflow method.

If the generation assets were measured using the cost model, the carrying amounts would be, as follows:

7. Intangible Assets

7. Intangible Assets (continued)

7.1 Acquisition of Next Green Cars Ltd

On 29th March 2020 Good Energy Group PLC identified it gained effective control of its associate, Next Green Cars Ltd, owner of the Zap-Map brand. This effective control was identified as a result of the drawdown of the final tranche of convertible loan notes, granting the Group the right to convert the loan notes to obtain a controlling stake in the company. The Group has assessed there are no material differences between the date of the final tranche drawdown and the 31st March 2020, it has therefore designated the 31st March as the acquisition date in line with IFRS standards.

Next Green Cars Ltd was previously accounted for as an equity associate, with Good Energy Group PLC owning a 12.9% stake in the business and a director appointed to the board granting 33% of the boards voting rights. This was identified as constituting significant influence to direct the relevant activities of NGCL. As part of the initial purchase of shares in Next Green Cars Ltd a contingent consideration was agreed. Contingent consideration was payable dependant on the satisfaction of product milestones in July 2020 and stretching financial milestone targets in December 2021. The product milestones were not met in July 2020 and this contingent consideration was written to the profit and loss. The maximum possible deferred consideration is £0.6m. The value of the remaining contingent consideration liability is disclosed in Note 19.

At 31 December 2019 the group held £600,000 of the authorised £800,000 secured convertible loan notes in NGCL, carried at a fair value of £614,000. At the drawdown date of the final tranche of convertible loan stock, the entire loan stock was valued at £821,000.

£410,000 of separately identifiable intangible assets were acquired on 31 March 2020 as part of the acquisition of NGCL. A valuation of these internally developed intangible assets was performed by the Group using the replacement cost as the basis for valuation. The goodwill arising on the acquisition of the above company is attributable to the anticipated profitability of NGCLs software in the EV market and the synergies expected as part of the Group's wider Energy as a Service offering.

Good Energy Group PLC on the 25 June 2020 formally converted the loan notes into a combined total 50.1% equity holding.

The net assets at the date of acquisition are stated at their fair value as set out below.

8. Borrowings

The Group has undrawn bank overdraft facilities of £nil (2019: £10,000,00) as at 31 December 2020.

The current portion of the bond repayment represents the interest accrued and the amount of principal repayments requested prior to the end of the year. The next redemption request deadline is in December 2021, for repayment of the remaining bond in June 2022.

At 31 December 2020, £4,585,297 (2019: £5,449,283) of the bank loans relate to the Company's subsidiary, Good Energy Delabole Wind Farm Limited and is secured by a mortgage debenture on that company.

At 31 December 2020, £32,644,636 inclusive of £nil of accrued interest (2019: £33,882,698 inclusive of £nil of accrued interest) of the bank loans relate to the Company's subsidiary, Good Energy Generation Assets No. 1 Limited. Repayments of capital and interest are scheduled quarterly over a remaining period of 14 years. Interest is payable at 6.85% and the outstanding principal balance is partially exposed to annual RPI inflation over 3%. Costs incurred in raising finance were £2,754,299 (2019: £2,754,299) and are being amortised over the life of the loan in accordance with IFRS 9.

9. Cash Generated from Operations

For the year ended 31 December 2020