During the period, we successfully completed the move to new,
larger premises in Newcastle which we invited institutional
investors to visit in January. The increased capacity has enabled
the Company to grow its headcount and measures are in place to
ensure that the infrastructure of the Company is sufficiently
scalable to cope with its recruitment strategy.
Investment in our products and services has continued during the
period. Our Intellectual Property is an integral part of our
business proposition and we remain committed to the ongoing
development and innovation of our unique energy management
solutions portfolio.
People
We are committed to attracting the right talent and to
developing the skills of our people so that our customers benefit
from our knowledge and experience and the quality of service we
provide. Our training academy continues to ensure that all of our
people have the appropriate knowledge and skills to service our
clients with our full range of products and services.
Compliance and Quality Assurance Process
In order to maintain our status of trusted advisor to energy
suppliers and customers alike, we remain committed to ensuring that
our compliance and quality assurance processes are best in class.
We have a number of procedures in place to ensure that our sales
processes meet energy suppliers' compliance procedures, including
training, coaching and documentation of our compliance procedures,
as well as checks on all sales documentation, emails and checks on
call recordings. A percentage of our sales documentation, including
call recordings, is also quality checked by energy suppliers. We
also adhere to our own stringent set of internally formulated
quality assurance requirements.
Principal Risks and Uncertainties
The principle risks and uncertainties faced by the Group are as
follows:
Exposure to energy suppliers
A significant proportion of the Group's revenues are derived
from commissions paid by a small number of energy suppliers. Should
these energy suppliers decide in future not to engage with the
Group or with TPIs generally and, instead, engage directly with
customers, the Group would suffer a loss in revenues related to the
commission payable by such energy suppliers. The Group ensures that
it is in constant dialogue and has trading with all of the major
energy suppliers to help mitigate this risk.
Exposure to underlying customers
The Group's customers pay the energy supplier directly for the
energy consumed, with the Group receiving its commissions from the
energy supplier. The Group is, however, at risk should the customer
cease trading or fail to pay the energy supplier. Should this
occur, the Group would suffer a loss in future revenues related to
the commissions associated with the future energy consumption by
that customer. It should be noted, however, that the energy
supplier usually undertakes credit checks on customers prior to
entering into a contract to supply energy and there is limited
individual customer concentration in revenue terms.
Competition
The Group has a number of competitors. These competitors may
announce new services, or enhancements to existing services, that
better meet the needs of customers or changing industry standards.
Management continue to develop and offer a full range of energy
services products to help mitigate customer risk.
Legislation
Legislation may change in a manner that may require more strict
or additional standards of compliance than those currently in
effect thereby creating additional costs. In addition, the
Government may implement legislation requiring changes to current
fee structures for TPIs. Should such legislation be passed, there
may be a material adverse effect on its financial condition and
operating results of the Group.
Regulatory
Currently, energy procurement is an unregulated market. Should
regulation be introduced to cover the Group's activities, the
increased regulatory burden could impact on the profits of the
Group. However, it should be noted that the Board believe that the
Group operates in line with best market practice, including the
provisions of the OFGEM retail market review, and in their view any
such regulation would initially impact on the smaller energy
consultancy and brokering businesses.
Related Parties
During the period there have been no related party transactions
which have had a material impact on the financial position or
performance of the Group. There have been no significant changes to
related party transactions disclosed in the annual report for the
year ended 31 July 2014.
Outlook
Post period end, we are pleased to report further KPI progress
with Group headcount increasing to 1,011, the Company's secured
revenue pipeline at GBP26m and 23,109 Group customers as at 31
March 2015.
We are still at an early stage in terms of the growth potential
in this sector and, with the reputation and resources we have
built, firmly believe that Utilitywise is now ideally positioned to
capitalise on it.
We see exciting opportunities ahead of us as the market evolves
and related service opportunities emerge, for example in the water
market when it fully de-regulates in 2017. In the meantime, we
continue to build our Energy Services capability and recent
Government initiatives such as the Energy Savings Opportunity
Scheme (ESOS) have presented superb opportunities to engage with
many large corporate customers to assist them not only in their
regulatory compliance but also in their desire to reduce energy
consumption.
Our relationship with the UK Energy Supply companies remains
strong and as a result we have secured important new commercial
terms with a number of suppliers during the period. We continue to
work closely with them to provide innovative energy solutions for
the benefit of our customers.
Our end customers and our desire to engage with them on all
utility related matters is at the heart of what we do and we are
focused on ensuring that we continue to cement our position as
their trusted advisor in the second half of the year and
beyond.
We are confident about the future prospects of the business and
we have started the second half well, in particular in meeting our
targets to increase Consultant headcount and to acquire new
customers. Our second half performance will be predicated on the
continuation of this momentum.
Acquisition of T-mac Technologies Limited (T-mac)
We continue to be focused on providing a comprehensive utility
solution to all sizes of customer and are committed to developing
further capabilities that respond to our customers' needs.
In line with this strategy, we have announced this morning the
acquisition of T-mac. Further details are contained in a separate
announcement released earlier today.
Financial Review
Income Statement
During the six month period ended 31 January 2015 revenue
increased by 42% over the corresponding period last year to GBP29.9
million. A key driver of growth has been the addition of revenue
generating Energy Consultants. At the end of January the headcount
had increased to 449 up from 347 at the end of January 2014, 15% of
which were recruited following the office move in November. The
additional heads came in at the end of the six month period
following the move to new offices to allow for further expansion
and as such the average revenue generating headcount was
approximately flat when comparing the two periods.
Despite this, revenue grew significantly which can be attributed
in part to a commercially attractive opportunity to extend
contracts with existing end consumers for longer terms. This has
coincided with a period of low energy prices thus enabling the end
consumer to lock in to these lower prices.
The secured pipeline (gross secured future revenue) was GBP23.5
million compared to GBP23.8 million at January 2014. The static
headcount that contributed to the revenue and the fact that an
extension will be recognised in revenue immediately means that the
gross secured future revenue held at cGBP24m. As at 31 March 2015,
the secured pipeline has increased to GBP26m as we refocused on new
customer acquisition.
Overall Gross Margins are 45%, up on the prior period of
43%.
Adjusted EBITDA, defined as EBITDA adjusted for share based
payments for the period was GBP7.7 million, an increase of GBP2.3
million (42%) on the period to 31 January 2014.
At the divisional results level we are pleased to see both
divisions progress from the prior period. Of the EBITDA increase of
GBP2.3m, GBP1.6m (68%) was attributable to the growth in the
Enterprise division, with the remainder reflecting strong growth in
the Corporate segment. The two segments have differing growth
prospects with the Enterprise growth being fuelled by the addition
of headcount as we acquire new customers in a market that remains
extremely large compared to our current customer count. The
Corporate Division operates in a much more mature market as far as
procurement is concerned and some of the growth initially is driven
by our desire to transfer some of the larger Enterprise customers
in to the Corporate account managed customer function as their
contracts come up for renewal. This together with some exciting
opportunities to engage more fully with this customer base provides
exciting growth prospects for the division as we continue to
strengthen the non-procurement offering with our wide range of
energy services.
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