Source - LSE Regulatory
RNS Number : 4081C
Eneraqua Technologies PLC
11 October 2022
 

11 October 2022 

Eneraqua Technologies plc

("Eneraqua", the "Company" or the "Group")

 

Interim Results

92% uplift in H1 revenue and full revenue cover for FYJan23

Investment in people and infrastructure underpins growth strategy

 

Eneraqua Technologies plc, a specialist provider of energy and water efficiency solutions, is pleased to announce its interim results for the six months ended 31 July 2022.

H1 FYJan23 Financial Highlights

Revenue increased 92% to £24.2m (H1 FYJan22: £12.6m), reflecting growth in contract wins and project completions.

Gross profit increased 64% to £9.9m (H1 FYJan22: £6.1m), reflecting growth in revenue with increased contract sizes and, as expected, reduction in gross margin reflecting larger contract wins and maturing market compared to H1 FYJan22.

Adjusted EBITDA1 £3.98m (H1 FYJan22: £3.23m) reflecting the continued investment in the team and our delivery capabilities.

Adjusted profit before tax £3.07m (H1 FYJan22: £2.98m).

Gross cash of £6.5m and net debt of £0.2m (H1 FYJan22: Gross cash of £4.5m and net cash of £0.03m) following significant planned investment to manage increase in project delivery.

Adjusted diluted EPS: 6.48p.

Operational and Strategic Highlights

Delivered on plan to move into agritech with first contract secured to provide ClimateSmart Irrigation solution to the State of Uttarakhand in India.

Awarded multiple contracts with new and existing social housing and private sector clients to provide heat pump solutions. These will help them meet their sustainability and net zero goals and reduce residents' energy bills.

Awarded two English local authority contracts to deliver net water neutrality pilot programmes, for residential new build, using Control Flow products. 

Completed the acquisition of Mathewson Holdings Ltd (Mathewson) on 29 July 2022, for an initial consideration of £1.3m.

Post period end and Outlook

The Group continues to trade well and expects to benefit from the traditional H2 weighting of client procurement calendars.

Strong pipeline of opportunities for the current year and beyond with an order book2 providing full revenue cover for the Group's FYJan23 revenue target.

Having reviewed the performance to date, the Board has evaluated prospects for FYJan24 and increased its revenue target by 14% to £80.1m, materially ahead of prior management expectations. 

This increased FYJan24 revenue target is already 72% covered by the order book2 (82% based on prior FYJan24 revenue target).

Pre-launch costs of £0.5m to be incurred in the current period to facilitate the move into a new B2C revenue stream via the launch of our Control Flow HL2024 technology direct to consumers in FYJan24.

Commenting on the results, Eneraqua Technologies CEO, Mitesh Dhanak, said: "I am pleased to report on a solid first half, which has positioned the Group to deliver on its targets for FYJan23 with confidence.  Our performance underpins the Company's growth plans in the domestic and commercial energy markets as well as the water sector. We are pleased to have increased revenue visibility through our order book2, with the current financial year remaining fully covered.  We have increased the revenue target for FYJan24 to £80.1m, materially ahead of prior management expectations, and have 72% of this already covered.

"Looking forward, we expect to launch our water efficiency product direct to consumers later this year.  This has been proven to reduce domestic water and energy consumption and utility bills.   We remain confident in our products and in our valued team and have a clear strategy focused on expanding our current offering and nurturing our strong client relationships. This strategy coupled with our strong order book and trading in the first months of the second half, leave the Group feeling confident for the future, as demonstrated by the 14% revenue upgrade for FYJan24, and focused on the next stage of its development."

An overview of the interim results is available to watch here: https://bit.ly/ETP_H123o

 

Analyst Presentation

A presentation for analysts will be held today at 9:00am via webinar. Analysts wishing to attend should contact eneraqua@almapr.co.uk.

 

1 Adjusted EBITDA -  Adjusted for share based payment charges (prior year also excludes IPO costs).

2 Order Book defined as Contracted + Secured. Contracted = project contract issued and signed, with work started or ready to start. Secured = sum of a) tender process successful, awaiting project contract, and b) Directors' assumed win rate on Framework opportunities.

For more information, please contact:

Eneraqua Technologies plc

Mitesh Dhanak, CEO 

Iain Richardson, CFO 

Via Alma PR

www.eneraquatechnologies.com

 





finnCap Limited - Nominated adviser and Joint Broker

Ed Frisby / Charlie Beeson - Corporate Finance

Andrew Burdis / Sunila de Silva - ECM

+44(0)20 7220 0500





Singer Capital Markets - Joint Broker

Sandy Fraser / Justin McKeegan / Rachel Hayes

+44(0)20 7496 3000



Alma PR - Financial PR and IR  

Justine James / Sam Modlin / Will Ellis Hancock

+44(0)20 3405 0205 

eneraqua@almapr.co.uk





 

Notes to editors

Eneraqua Technologies (AIM:ETP) is a specialist in energy and water efficiency. The Group designs and delivers improved energy and water systems which utilise its wholly owned intellectual property, Control Flow HL2024.  Energy was the first market the Company entered and this is the larger sector, with the Company focused on clients with end of life gas, oil or electric heating and hot water systems. The Group provides turnkey retrofit district or communal heating systems based either on high-efficiency gas or ground/air source heat pump solutions that support Net Zero and decarbonisation goals.

Water is a growing service offering focused on water efficiency upgrades for utilities and commercial clients including hotels and care homes.  It has also expanded into agritech systems.

The activities in both areas are underpinned by the Company's wholly-owned intellectual property, the Control Flow HL2024 family of products which reduce water wastage and improve the performance of heating and hot water systems.

The Company's main country of operation is the United Kingdom. The Company's head office is in London with additional offices in Leeds, Washington (Sunderland), India, Spain and the Netherlands. The Company has 144 employees, with the majority employed within the UK. Eneraqua Technologies has received the London Stock Exchange's Green Economy Mark.

To find out more, please visit:   www.eneraquatechnologies.com



 

Operational Review

In the first half of the financial year, Eneraqua made strong progress in delivering on its growth strategy with energy efficiency clearly at the forefront of our clients' priorities both in terms of carbon emissions and cost.  Our success is due to the great work of our team in delivering our client goals, enabling us to continue to focus on delivering on the Group's strategic objectives.

Having successfully raised funds at IPO last November, the business has further strengthened its position in its target sectors.  The current macroeconomic environment, while difficult for all, creates opportunities for the Group as the technologies we provide are becoming increasingly important solutions in the mission to reduce global carbon emissions and cut utility bills.  With a clear strategic plan for growth, we are well positioned to help our customers navigate the issues of today by improving the efficiency of their heating and water systems.

In Energy, our turnkey retrofit district and communal heating systems, including ground and air source heat pump solutions, are an important tool for clients in meeting their sustainability and net zero goals.  For their residents, it cuts their energy bills substantially.  Our public and private sector clients rely on and welcome our impartial advice and ability to deliver the best solution for their buildings. 

Water harnesses the patented Control Flow HL2024 technologies that reduce water wastage and improve the efficiency of heating and hot water systems.  Clients include water companies, developers, hotels, schools and leisure centres, with the products installed in both domestic and commercial settings.  By reducing water wastage, we can cut water consumption by up to 26% in homes and deliver energy bill savings through improved performance of heating and hot water systems. 

Financial performance

Our half year trading was robust and demonstrated the solid performance of the Group amidst a challenging economic environment. Revenue for the half increased by 92% to £24.2m, demonstrating the Group's ability to convert our new business pipeline into contract wins and realised revenue.  This has seen the average contract size increase from £2.25m in H1 FYJan22 to £3.5m in H1 FYJan23.  As expected at IPO, alongside this growth in contract size there has also been a reduction in gross margin compared to the previous period. We expect gross margin to stabilise at or around 34% during FYJan24.

Through the contract wins secured in the second half of FY22, adjusted EBITDA1 increased to £3.98m (H1 FYJan22: £3.23m), whilst PBT increased to £2.95m (H1 FYJan22: £2.75m).

As we have noted previously, due to the nature of our customers and their procurement calendars, our contract delivery and revenues are weighted to the second half of our financial year.

As planned, we have invested in our teams and infrastructure to deliver contracts this year and allow for future growth next year.  This is reflected in the increase in administrative expenses in the period.   

The phasing of contract delivery and the full impact of the larger contracts is expected to deliver a strong second half of this financial year.  We expect a larger working capital requirement at the year end due to the timing of contract payment terms and need for early ordering of key components.  The latter is required on a growing number of contracts to ensure project delivery remains in line with agreed timetables.  The Company remains well capitalised to fund growth in executing its order book through existing resources and operating cash generation.

The strength of the Group's orderbook, which already provides full revenue cover for its FYJan23 revenue target and 72% cover for the increased FYJan24 target (82% based on prior FYJan24 revenue target), underpins the Board's positive outlook for the year.



 

Operational and strategic progress

Despite the challenges in the current economic environment, Eneraqua remains on course to deliver substantial growth, with strong performances from both the Energy and Water sectors in the financial year to date.  In Energy, the period saw major contract wins with growing demand for our air and ground source based systems.   This was further highlighted by the announcement of our post-period contract wins and extensions with new and existing social housing and private sector clients, to provide heat pump based solutions over a three-year period.  The decision of clients to extend existing contracts to cover additional buildings is a great reflection of the quality of service and value for money that our team delivers.  Our strong company culture of delivering high quality outcomes helps form and support strong relationships with clients. 

Water has continued to grow, with a focus on helping clients improve their water efficiency.  Alongside our core programmes to improve domestic and commercial buildings, we also completed our planned expansion into the agritech sector with a first contract win in India, delivering our ClimateSmart Irrigation programme for the State of Uttarakhand.  Following the success of this project, we are now in discussion with other states in India.

Water also saw the award of contracts with two English local authorities to deliver net water neutrality programmes. Within the UK there are 74 local authorities where there are concerns about water stress and nitrate levels in the local area.  This has led to applications to build over 120,000 new homes becoming stuck in the planning process.  By using Control Flow HL2024 in existing homes in the area, the pilot schemes showed it was possible to save enough water to meet the needs of the new homes and thereby avoid placing any additional demand on local water resources.  Following the success of the pilot programmes we are now in discussion with other local authorities and developers that face this same issue.   

The water neutrality pilot also demonstrated the substantial energy and water bill savings for domestic households through Control Flow HL2024.  On average each household would save an equivalent of c£360 per annum.  Following this success, the Board has decided to invest in a direct B2C offering.  With pre-launch costs of approximately £0.5m in the second half, this will create a new and exciting revenue stream for the business. 

Our Research and Development teams in Europe and India remain focused on developing new, innovative solutions that help reduce carbon emissions and water consumption in both buildings and agriculture.  We are on track to launch our new MeterSave product later this year which allows for easier installation of the Control Flow technology alongside the water meter.  Our R&D teams have submitted new patent applications and are now focused on the design and development of follow-on products for new sectors.

Following the two acquisitions last year, we were delighted to complete at the end of H1 FYJan23 the acquisition of Mathewson, an established provider of underfloor heating solutions for the health and commercial sectors. This acquisition extends our reach into the healthcare sector and deepens our offering in the commercial sector by broadening the services we offer clients. The integration of Mathewson is underway and we expect a positive benefit from FY24 onwards. 

The integration of Welltherm has continued during the period and this has helped ensure that we continue to deliver key ground source heat pump projects on time and in line with client expectations as well as mitigating increasing costs in the sub-contract drilling market.  We have invested in additional capacity in Welltherm in order to meet demand. 

Expanding our growth opportunities

Our growth strategy continues to be underpinned by expanding our offerings within both the Energy and Water sectors, whether that be organically or inorganically. As previously discussed, Energy continues to grow with a strong pipeline and healthy order book.

Water is also seeing substantial growth, following recent contract wins and the two ongoing net water neutrality pilot programmes. Both these pilots and the agritech contract in India, highlight the effect that investing in increasing the efficiency of existing water systems can have on the local environment. With water stress continuing to be a risk, compounded by the high temperatures seen in many geographies in recent months, Water and the solutions it provides will continue to help reduce water wastage around the globe.

Market dynamics

Energy continues to see increasing demand for low-carbon solutions from both existing and new clients.  With greater familiarity in the technology, most clients are now seeking to replace old district heating systems with ground-source heat pump systems.  As well as reducing carbon emissions, these also offer lower energy bills for tenants making them particularly attractive in the current climate.

For commercial buildings, the drive for low carbon heating remains strong.  Due to the nature of these buildings, the typical package is based on large air-source heat pumps to provide the bulk of demand with gas boilers providing top-up heating and hot water.

In Energy, our technology-agnostic approach allows us to identify and advise clients on the best solution for their building.  This can be pure heat pump solutions as well as hybrid gas-heat pump systems depending on the individual circumstance.  Coupled with our ability to provide turnkey technical and financial design and delivery, this creates an important point of differentiation to our competitors.  For Water, our patented technology offers a performance edge for clients.

Regulatory and financial stability is an important consideration for us and our clients.  A stable environment supports the long-term investment required to address climate change and water stress issues.

 People and culture

As expected, in order to deliver our order book for this year and beyond, we are investing in the growth of our team.  During H1, the Group grew from 113 to 144 full time equivalent team members.  We are now more than double in size compared to the 71 members at the end of H1 FYJan22. 

We take great care in recruitment and whilst it has been a challenging job market, we are proud to offer an opportunity to join an exciting business operating in an accelerating market environment. This has paid dividends for the business and was reinforced in our latest annual staff survey where over 95% of staff responded.  Key highlights included:

-      96% agreed or strongly agreed that they find the work they do meaningful;

-      96% were confident in the Company's direction; and

-      92% agreed or strongly agreed that the Company has a good culture.

 

Our Company purpose and core values were drawn up by a cross-company group and these have been adopted and are owned by our team.  This has created a strong company culture based on delivering quality outcomes that has under-pinned our success to date.    

Purpose: To inspire and deliver innovative solutions to support our clients' needs

and create a sustainable planet.

 

Outlook

The Company continues to make great strides forward. We have seen momentum in our order book pipeline and new client wins in Energy and Water; we have seen existing customers sign new contracts and extend their working relationships with us; and we have seen the roll out of exciting new products and a further business acquisition.

Despite the challenges being faced globally, our business has moved to mitigate these through the identification of multiple suppliers and diligent recruitment, leaving it well positioned to navigate these unprecedented times of economic disruption. Our customers remain focused on reducing their climate impact and we continue to support them, as they too adapt to the current financial environment.

In terms of our inorganic growth strategy, we are very pleased with the success of our recent acquisitions and how they are integrating within the Group. We continue to look for opportunities which meet our strict investment criteria and will accelerate the growth of our business technologically, geographically or through the enhancement of our delivery and service.

We remain confident in our products and our team and have a clear strategy focused on expanding our current offering and nurturing our strong, existing client relationships. This strategy coupled with our significant order book and robust trading in the first months of the second half, leave the Directors feeling confident for the future and, noting the performance to date, the Board has reviewed prospects for FYJan24 and increased its revenue target by 14% to £80.1m, materially ahead of prior management expectations.



 

Financial Review

Strategy

The Group's strategy is based on developing and delivering profitable solutions and products which help our clients reduce their carbon consumption and improve their water efficiency.

In addition, we have continued with our inorganic growth strategy outlined at the time of IPO, focussing on the acquisition of strategic, bolt-on opportunities in the UK, such as the acquisition of Mathewson Limited, and the exploration and identification of targets in North West Europe, which would give the Group the relevant accreditations and credentials to operate in these areas.

KPIs

The Group's financial Key Performance Indicators, which are aligned with its growth strategy include Revenue growth, gross profit, Adjusted EBITDA, adjusted EBITDA margin and R&D spend.


31 Jul 2022

31 Jul 2021

Revenue

£24.2m

£12.6m

Revenue growth

Gross profit

92%

£9.9m

53%

£6.1m

EBITDA

£3.92m

£3.00m

Adjusted EBITDA

£3.98m

£3.23m

Adjusted EBITDA margin

16.4%

25.6%

R&D spend

£1.07m

£0.7m

 

Revenue

Group revenues increased by 92% to £24.2m, (H1 FYJan22: £12.6m). International revenues grew from £0.09m in H1 FYJan22 to £0.159m in H1 FYJan23. Group revenues include £0.7m from Welltherm Drilling Limited, following its acquisition last year.

Profits

As the Group has secured and delivered larger value contracts, gross margins, as expected, have reduced reflecting the nature of larger client contracts.  The Group has experienced inflationary price pressure from its subcontractor cost base, which it has been able to be passed on to the client in most cases.

The strong growth in revenue supported the investment in headcount and infrastructure required for those projects starting in the current financial year. Adjusted EBITDA increased 23% to £4.0m (H1 FYJan22: £3.2m), with the Group achieving Adjusted EBITDA margins of 16%, as expected, after allowing for significant investment in team and infrastructure to deliver the larger contracts commencing in H2 FYJan23.  This investment supports both our current operations and future growth. 

Statutory operating profit increased to £3.1m (H1 FYJan22: £2.9m) and statutory profit before tax was £2.9m (H1 FYJan22: £2.8m).

Acquisitions

On 29 July 2022, the Group acquired Mathewson Holdings Ltd and its trading subsidiary, Mathewson Ltd, an established provider of underfloor heating solutions for the health and commercial sectors, for an initial consideration of £1.3m with further consideration of £0.35m payable over two years.

Headcount

The Group's full time equivalent (FTE) employees at 31 July 2022 were 144 (31 July 21: 71). This growth reflects the acceleration in recruitment in order to support the Group's growth strategy. Headcount also includes 12 Welltherm Drilling Limited employees, following the acquisition of this business in September 2021.

Cash flow & cash position

The Group saw a cash outflow in the first half of the year as it managed its project delivery timetable, requiring the forward purchasing of key items on a number of projects.

Gross cash at 31 July 2022 was £6.5m (H1 FYJan22 £4.5m) with net debt £0.2m (H1 FYJan22 net cash £0.03m).

The Group experienced a working capital outflow in the period due to the timing of a number of trade creditor payments at the start of the financial year. As a result of the global supply chain issues, the Group has continued to forward order key material components for its larger contracts, which are passed on to and paid for by clients once the materials have been delivered, impacting on working capital.

Capital expenditure was limited in H1, being £0.1m of deposits for new drill rigs, due for delivery by the end of the calendar year. In addition, there was a further outflow of £1.3m for the acquisition of Mathewson.

During the period the Group secured new banking facilities with HSBC UK Plc for an aggregate of £6.0m. The new facility will support the Group in its growth strategy, both in terms of working capital requirements and acquisition opportunities.

The Group ended the period with net debt (excluding IFRS 16 right of use lease liabilities) of £0.2m compared with £0.03m of net cash at 31 July 2021, following the drawdown of the Group's new debt facility.

Outlook

The Group is in a strong position with a healthy balance sheet, well funded to be able to execute on its strong order book and growth strategy. The Group is well placed to deliver another set of strong results, as we continue to benefit from continued organic growth.

 



 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 31 July


 

 

Note

Six months to 31 Jul 2022
£'000

Six months to 31 Jul 2021
£'000

Twelve months to 31 Jan 2022

£'000

Continuing operations





  Revenue

3

24,246

12,633

36,176

  Cost of sales


(14,327)

(6,578)

(21,572)

Gross profit


9,919

6,057

14,604

  Administrative expenses


(6,868)

(3,206)

(10,171)

  Other operating income


-

-

-

Included within administrative expenses are:





-     Exceptional items

4

-

(225)

(1,178)

-     Share based payments


(58)

-

-

-     Depreciation of property, plant and equipment


(666)

(30)

(618)

-     Depreciation of right-of-use assets


(14)

(44)

(113)

-     Amortisation of intangible assets


(191)

(82)

(381)

Adjusted administrative expenses


(5,939)

(2,825)

(7,881)

Adjusted EBITDA1


3,980

3,232

6,723

Operating profit


3,051

2,851

4,433

  Interest payable and similar expenses


(100)

(100)

(366)

Profit before taxation


2,951

2,751

4,067

  Income tax


(757)

159

(8)

Profit for the period from continuing operations


2,194

2,910

4,059

Total profit for the period attributable to equity holders of the parent





Other comprehensive income


-

(66)

-

Total comprehensive income for the period attributable to equity holders of the parent


2,194

2,844

4,059






Other comprehensive income relates to the translation of foreign operations.

The accompanying notes form part of the condensed interim consolidated financial statements

 

1Adjusted EBITDA is considered to be a Key Performance Indicator and consistent with how the Group measures trading and cash generative performance.  Note this is an Alternative Performance Measure and is a non-IFRS measure.



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

Note

31 Jul 2022
£'000

31 Jul 2021
£'000

31 Jan 2022
£'000

Non-current assets





Intangible assets


8,505

6,736

7,218

Property, plant and equipment


2,868

3,061

3,095

Right-of-use assets


207

330

243

Deferred tax asset


-

44

-

Total non-current assets


11,580

10,172

10,556

Current assets





Inventory


1,236

921

1,186

Trade and other receivables


13,148

3,856

12,389

Cash and cash equivalents


6,521

4,459

4,070

Total current assets


20.905

9,236

17,645

TOTAL ASSETS


32,485

19,408

28,201

Equity attributable to owners of the parent





Called up share capital


344

3

344

Share premium account


10,113

457

10,113

Merger reserve


(5,490)

-

(5,490)

Other reserves


(624)

(10)

(294)

Retained earnings


13,963

4,671

11,769

Total equity


18,306

5,120

16,442

Current liabilities





  Borrowings

7

2,310

812

-

  Trade and other payables


7,248

9,507

11,426

  Lease liabilities


118

119

82

Total current liabilities


9,676

10,438

11,508

Non-current liabilities





Borrowings

7

4,404

3,612

-

Lease liabilities


32

238

109

Deferred tax liability


67

-

142

Total non-current liabilities


4,503

3,850

251

Total liabilities


14,179

14,288

11,759

TOTAL EQUITY AND LIABILITIES


32,485

19,408

28,201

 

The accompanying notes form part of the condensed interim consolidated financial statements

 



CONSOLIDATED STATEMENT OF CASHFLOWS

For the six months ended 31 July

GROUP

Six months to 31 Jul 2022
£'000

Six months to 31 Jul 2021
£'000

Twelve months to 31 Jan 2022

£'000

Cash flow from operating activities




  Profit for the financial period

2,194

2,910

4,059

Adjustments for:




Amortisation of intangible assets

191

82

381

Depreciation of property, plant and equipment

666

30

618

Depreciation on right-of-use assets

14

44

113

Interest payable

100

1

330

Lease liability finance charge

19

13

36

Taxation charge / (credit)

756

(159)

8

Corporation tax received / (paid)

-

380

380

Foreign exchange

-

33

(38)

Share based payment charge

58

-

333

Changes in working capital:




Increase in inventory

(50)

(30)

(295)

Increase in trade and other receivables

(759)

(949)

(9,540)

(Decrease) / increase in trade and other payables

(5,386)

570

7,278

Net (outflow) / increase from operating activities

(2,197)

2,927

3,663

Cash flow from investing activities




Purchase of intangible assets

(285)

(354)

(549)

Purchase of property, plant and equipment

(113)

(350)

(2,722)

Acquisition of businesses - net of cash acquired

(1,319)

(1,665)

(5,111)

Interest received

-

-

-

Net cash outflow from investing activities

(1,717)

(2,369)

(8,382)

Cash flows from financing activities




Proceeds from borrowings

7,340

-

9,998

Repayment of borrowings

(786)

(383)

(4,972)

Interest paid

(100)

-

(330)

Repayment of lease liabilities

(89)

-

(191)

Net cash inflow from financing activities

6,365

(383)

4,505

Net increase / (decrease) in cash and cash equivalents

2,451

175

(214)

Cash and cash equivalents at beginning of period

4,070

4,284

4,284

Cash and cash equivalents at the end of the period

6,521

4,459

4,070

 

 

The accompanying notes form part of the condensed interim consolidated financial statements

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 July

 

Share Capital

Share Premium

Merger Reserve

Other Reserves

Retained Earnings

 

Total   Equity


£000

£000

£000

£000

£000

 

£000

At 1 February 2021

3

456

-

56

1,761


2,276

Profit for the period

-

-

-

-

2,910


2,910

Other comprehensive income

-

-

-

(66)

-


(66)

Total comprehensive income for the period

-

-

-

(66)

2,910


2,844

Balance at 31 Jul 2021

3

456

-

(10)

4,671


5,120

 


 

 

 

 

 

 

At 1 Aug 2021

3

456

-

(10)

4,671

 

5,120

Profit for the period

-

-

-

-

1,149


1,149

Other comprehensive income

-

-

-

66

-


66

Total comprehensive income for the period

-

-

-

66

1,149


1,215

Merger reserve

(3)

(456)

(5,490)

-

5,949


-

Issue of shares

344

11,996

-

-

-


12,340

Share issue costs

-

(1,883)

-

-

-


(1,883)

Other, including share based payments and foreign exchange reserves

-

-

-

(350)



(350)

Total transaction with owners

341

9,657

(5,490)

(350)

5,949


10,107

Balance at 31 Jan 2022

344

10,113

(5,490)

(294)

11,769


16,442

 

 

 

 

 

 

 

 

 

At 1 February 2022

344

10,113

(5,490)

(294)

11,769

 

16,442

Profit for the period

-

-

-

-

2,194


2,194

Other comprehensive income

-

-

-

-

-


-

Total comprehensive profit for the period

-

-

-

-

2,194


2,194

Other, including share based payments and foreign currency reserves

-

-

-

(330)

-


(330)

Total transaction with owners

-

-

-

(330)

2,194


1,864

Balance at 31 July 2022

344

10,113

(5,490)

(624)

13,963

 

 

The accompanying notes form part of the condensed interim consolidated financial statements

                                                   

 

Notes to the financial information

1.            BASIS OF PREPARATION

The figures for the six months ended 31 July 2022 and 31 July 2021 are unaudited and do not constitute statutory accounts.

As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing this Interim Financial Information.  The accounting policies adopted are consistent with those applied by the Group in the preparation of the annual consolidated financial statements for the year ended 31 January 2022.

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2022, but these do not have a material impact on the interim condensed consolidated financial statements of the Group. The financial information for the year ended 31 January 2022 set out in this interim report does not comprise the Group's statutory accounts as defined in section 434 of the Companies Act 2006.

The statutory accounts for the year ended 31 January 2022, which were prepared under international accounting standards in conformity with the requirements of the Companies Act 2006, have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

1.1          Critical accounting judgements and key sources of estimation uncertainty

The preparation of condensed Interim Financial Information requires the Directors to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. There are no changes to critical accounting judgements and key sources of estimation uncertainty from those disclosed in the annual accounts for the year ended 31 January 2022.

 

2.            SEGMENT REPORTING

The following information is given about the Group's reportable segments:

The Chief Operating Decision Maker is the executive Board of Directors. The Board reviews the Group's internal reporting in order to assess performance of the Group. Management has determined the operating segment based on the reports reviewed by the Board.

The Board considers that during the period ended 31 July 2022 the Group operated in the three business segments according to the geographical location of its operations and those being:

-     United Kingdom

-     Europe; and

-     India

 

Six months to 31 July 2022

 

 

United Kingdom

Europe

India

 

2022

 

 

£'000

£'000

£'000

 

£'000

Revenue


24,087

66

93


24,246

Cost of sales


(14,231)

(80)

(16)


(14,327)

Gross Profit


9,856

(14)

77


9,919

Administrative expenses


(5,976)

(801)

(91)


(6,868)

Included within administrative expenses are:







-     Exceptional costs


-

-

-


-

-     Share based payments


(58)

-

-


(58)

-     Depreciation of property, plant and equipment


(348)

(306)

(12)


(666)

-     Depreciation of right-of-use assets


(14)

-

-


(14)

-     Amortisation of intangible  assets


(191)

-

-


(191)

Adjusted administrative expenses


(5,365)

(495)

(79)


(5,939)

Adjusted EBITDA1


4,491

(509)

(2)


3,980

Operating profit/(loss)


3,880

(815)

(14)


3,051

Interest receivable and similar income


-

-

-


-

Interest payable and similar expenses


(83)

(17)

-


(100)

Profit/(Loss) before tax


3,797

(832)

(14)


2,951

Taxation


(756)

-

(1)


(757)

Profit/(Loss) after tax


3,041

(832)

(15)


2,194








Net Assets as at 31 July 2022







Assets:


27,679

3,748

242


31,669

Liabilities


(11,998)

(1,348)

(17)


(13,363)

Net assets / (liabilities)


15,681

2,400

225


18,306

 

 

Six months to 31 July 2021

 

 

United Kingdom

Europe

India

 

2021

 

 

£'000

£'000

£'000

 

£'000

Revenue


12,624

-

9


12,633

Cost of sales


(6,523)

(50)

(3)


(6,576)

Gross Profit


6,102

(50)

6


6,058

Administrative expenses


(2,989)

(211)

(7)


(3,206)

Other operating income


-

-

-


-

Operating profit


3,113

(261)

(1)


2,851

Interest receivable and similar income


-

-

-


-

Interest payable and similar expenses


(94)

(6)

-


(100)

Profit before tax


3,019

(267)

(1)


2,751

Taxation


159

-

-


159

Profit after tax


3,178

(267)

(1)


2,910








Net Assets as at 31 July 2021







Assets:


9,512

9,848

48


19,408

Liabilities


(10,240)

(4,031)

(17)


(14,288)

Net assets / (liabilities)


(728)

5,817

31


5,120

 

Twelve months to 31 January 2022

 

 

United Kingdom

Europe

India

 

2022

 

 

£'000

£'000

£'000

 

£'000

Revenue


35,918

216

42


36,176

Cost of sales


(21,350)

(187)

(35)


(21,572)

Gross profit


14,568

29

7


14,604

Administrative expenses


(8,974)

(1,079)

(118)


(10,171)

Included within administrative expenses are:







-     Exceptional costs


(1,178)

-

-


(1,178)

-     Depreciation of property, plant and equipment


(132)

(485)

(1)


(618)

-     Depreciation of right-of-use assets


(113)

-

-


(113)

-     Amortisation of intangible  assets


(339)

(42)

-


(381)

Adjusted administrative expenses


(7,212)

(552)

(117)


(7,881)

Adjusted EBITDA1


7,356

(523)

(110)


6,723

Operating profit/(loss)


5,594

(1,050)

(111)


4,433

Interest receivable and similar income


-

-

-


-

Interest payable and similar expenses


(366)

-

-


(366)

Profit/(Loss) before tax


5,228

(1,050)

(111)


4,067

Taxation


(7)

(1)

-


(8)

Profit/(Loss) after tax


5,221

(1,051)

(111)


4,059








Net Assets







Assets:


24,847

3,245

109


28,201

Liabilities


(9,208)

(2,538)

(13)


(11,759)

Net assets


15,639

707

96


16,442








 

 

3.            REVENUE


 

 

Six months to 31 Jul 2022

£'000   

 

Six months to 31 Jul 2021

£'000

Twelve months to 31 Jan 2022

£'000

United Kingdom


24,087

12,624

35,918

Europe


66

-

216

Rest of the World


93

9

42



24,246

12,633

36,176

 

4.            EXCEPTIONAL COSTS

Exceptional costs of £nil (six months to 31 July 2021: £224,900; twelve months to 31 January 2022: £1,178,000) relate to non-incremental costs associated with the initial public offering of the Group.

 

5.            OPERATING PROFIT

Operating profit from continued operations is stated after charging / (crediting):


 

 

Six months to 31 Jul 2022

£'000   

 

 

Six months to 31 Jul 2021

£'000

 

Twelve months to 31 Jan 2022

£'000






Depreciation of property, plant and equipment


666

30

618

Depreciation of right-of-use assets


14

44

113

Amortisation of fixed assets


191

82

381

Inventories recognised as an expense


-

-

1

Research and development costs


67

-

-

Share based payments


58

-

17

Exchange differences


75

33

(20)

 

Research and development costs in H1 FYJan2023 relate to the development of new applications for HL2024 products.  These were incurred in the United Kingdom and were written off to the statement of comprehensive income.

 

6.            EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is calculated by dividing the profit for the period by the weighted average number of ordinary shares in issue during the period.


 

Six months to 31 Jul 2022  

Six months to 31 Jul 2021

Twelve months to 31 Jan 2022

Profit for the period from continuing operations - £'000


2,194

2,910

4,059

Weighted number of ordinary shares in issue 


33,558,207

253,774

22,204,677

Weighted number of fully diluted ordinary shares in issue


33,890,880

-

147,183

Basic earnings per share from continuing operations - pence


6.54

1,146.69

18.28

Diluted earnings per share from continuing operations - pence


6.48

1,146.69

18.16

 

Prior to the IPO, the number of shares is based on Cenergist Limited. From the date of the IPO, the number of shares is based on the Company.



 

7.            BORROWINGS

 

 

 

31 Jul 2022
£'000

31 Jul 2021

£'000

31 Jan 2022
£'000

Current


2,310

812

-

Non-current


4,404

3,612

-



6,714

4,424

-

Analysis of maturity of loans is given below:


 

 

31 Jul 2022
£'000

 

31 Jul 2021

£'000

 

31 Jan 2022
£'000

Amounts falling due within one year





Other loans


2,310

812

-

Amounts falling due 1-2 years





Other loans


1,612

899

-

Amounts falling due 2-5 years





Other loans


2,792

2,713

-



6,714

4,424

-

 

Other loans relate to a £6,000,000 facility provided by HSBC to Cenergist Limited and a €1,500,000 facility provided to Cenergist Spain SL by CLM, and are secured by fixed and floating charges over the assets of the Company and by cross guarantees from the Company's subsidiary undertakings.

Interest on the HSBC facility is at a rate of 3.450% over the Bank of England Base Rate with the repayment period being 48 months from date of individual tranche drawdown.

Interest on the CLM facility is at a rate of 3.50% with the repayment period being 84 months from date of individual tranche drawdown.

 

8.            BUSINESS COMBINATION

On 29 July 2022 Cenergist Limited acquired all of the share capital of Mathewson Holdings Limited  ("Mathewson"). Mathewson provides a complete service in underfloor heating solutions from original specification, planning and drawings through to final surface finish.

Background and Rationale

Mathewson and its subsidiary, Mathewson Limited are an established provider of underfloor heating solutions in the health and commercial sectors.

The acquisition extends the Group's low carbon offering into the healthcare sector and strengthens its offering in other commercial sectors where Mathewson provides underfloor heating solutions.

For the 10 months ended 30 June 2022, Mathewson recorded revenues of £813,000 with a net profit before tax of £205,000.

Consideration

The total consideration for the acquisition, assuming all earn-out payments are made, will be £1.7 million. The consideration, is structured as follows:

Initial consideration, payable in cash on completion of £1.3 million; and

Contingent consideration of £0.4m, payable over the course of 24 months, in 3-monthly instalments. The first instalment is payable on 30 September 2022.

The initial estimates of the fair value of the assets acquired and liabilities assumed of Mathewson Limited at the date of acquisition are as follows:

 


 

£'000

Cash at bank


313

Inventory


60

Other receivables


676

Trade and other payables


(132)

Total identifiable net assets / (liabilities) acquired


917

Goodwill


817

 


1,734

Consideration



Initial consideration


1,320

Deferred consideration


414

Total consideration


1,734




Note that the above assessment is not yet finalised.

Goodwill relates to the accumulated "know how" and expertise of the business and its staff. None of the goodwill is expected to be deducted for income tax purposes.

 

9.            EVENTS SUBSEQUENT TO PERIOD END

The Group has not identified any subsequent event to be reported.

 

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