Management at Inspired Energy (INSE:AIM) says sector peer Utilitywise’s (UTW:AIM) accounting on contract extensions is unnecessarily aggressive.
Utilitywise, a rival of Inspired, is under the microscope after its accounting policies were questioned by Panmure Gordon analyst Michael Donnelly and former finance director Andrew Richardson unexpectedly quit.
Today, Inspired Energy chief executive Janet Thornton piled even more pressure on the under fire Newcastle-headquartered firm, saying the same accounting policies were rejected at Inspired.
Asked whether there was ambiguity in the accounting treatment of such transactions, Thornton said: ‘We do not think we should book the revenue.’
‘We can see why Utilitywise is doing it but it is too aggressive. It’s very risky particularly in a market where an SME company may not stay in business for the duration of the contract or remain in the same premises in the future.
‘You are booking it now for revenue in three years’ time and we think that’s aggressive and unnecessary.
‘We can see why you would do it but it’s not something we’d do in our business.’
Speaking after Inspired’s half year results which showed adjusted earnings per share gained 29% to 0.45p, Thornton outlined a cautious view of SME energy broking.
‘SME plays havoc with our cash flow and it is very much a bolt-on division,’ Thornton says.
‘Our core business remains the corporate division and we’re delighted with the way it’s performing.’
An Inspired investor presentation shows cash conversion in its corporate energy services unit was 99% versus 67% in its smaller SME unit.
Shares in Inspired trade 1% higher at 12p.