For immediate release 7 June 2016 Energy Assets Group plc ( Energy Assets, the Company or the Group ) Preliminary Results for the year ended 31 March 2016 Energy Assets Group plc (LSE: EAS.L), the largest independent provider of industrial and commercial (I&C) gas metering services in the UK 1 and a major provider of multi-utility network, metering and data services, is pleased to announce its preliminary results for the year ended 31 March 2016. Financial highlights Total revenue increased by 25% to 45.3m (2015: 36.2m); Recurring revenue, generated from the Group s meter and data asset portfolio, increased by 12% to 26.1m (2015: 23.3m) representing 58% of total revenue; Revenue from Siteworks activity increased by 49% to 19.2m (2015: 12.9m); EBITDA before exceptional items increased by 16% to 22.5m from 19.4m; Operating profit before exceptional items increased by 20% to 15.2m from 12.7m; Profit before tax and exceptional items increased by 20% to 10.7m (2015: 8.9m). Profit before tax was 10.5m (2015: 9.3m); Basic earnings per share increased by 11% to 30.36p (2015: 27.30p); Cash generated from operations increased by 8% to 21.1m (2015: 19.5m); In November 2015, the Group announced a 10m increase to its current facility with Lombard, the asset finance division of The Royal Bank of Scotland Group, taking total facilities from the Group s three main funding partners to 110m. Additionally, a two year extension of the Group s 35m Bank of Scotland facility was also agreed in November 2015; Available facilities at 31 March 2016 were 29.5m and cash at bank was 6.7m. Operational highlights The Group s owned and managed meter and data asset portfolio has increased by 23% in the year to circa 450,000 assets (2015: circa 365,000) with all existing major contracts across gas and electricity contributing to this growth; The Company acquired Blyth Utilities Limited (Blyth), a Multi-Utility Infrastructure Provider, on 9 December 2015. Integration is progressing well; Since acquisition, Blyth has successfully secured a new 6m contract with East Lothian Developments Ltd (ELDL) to provide utility networks for a new development in East Lothian. This is testimony to the expertise and uniquely differentiated offering within our expanded business; 1 By number of meters owned and managed 1
The three new businesses acquired in the previous financial year, Bglobal Metering, Origin and SA Gas, are now fully integrated into the Group and are performing well under Energy Assets management. Performance in the 2015/16 financial year was as expected and the Board is pleased with the progress of each of these businesses; Energy Assets was appointed as a preferred supplier to Crown Gas and Power (Crown), the gas supply division of Crown Oil Ltd, in December 2015. The appointment, for the provision of advanced gas metering technology and data services solutions, was made due to Energy Assets reputation for delivering a high quality service offering. Corporate developments On 18 April 2016, the Boards of Energy Assets and Euston BidCo Ltd (BidCo) announced that they had reached agreement on the terms of a recommended cash acquisition by BidCo, a newly established company indirectly wholly owned by the Alinda Funds, which are controlled and managed by Alinda, of the entire issued and to be issued share capital of Energy Assets. As previously advised by the Board of Energy Assets on 19 May 2016, the Court Meeting and the General Meeting were adjourned, in each case to a date, time and place to be determined by the directors. We would expect to be in a position to further update shareholders in relation to this in the next few days. Further information on the proposed acquisition, which has been unanimously recommended by the Energy Assets Board, and its current status can be found on the Energy Assets website. Chief Executive s comment Commenting on today s announcement, Chief Executive Phil Bellamy-Lee said: The financial year to 31 March 2016 has been very successful for Energy Assets incorporating good organic growth across our asset portfolio and Siteworks business from strong trading activity and new contract wins. We were delighted to welcome Blyth into the Energy Assets Group in December 2015. This acquisition represents another step in our continuing growth strategy and has allowed us to expand our services to become a fully accredited multi-utility infrastructure provider in the commercial area. The acquisition has also enabled us to extend our utility networks offering to businesses within the UK house building sector at a very exciting time following recent government announcements that investment in the housing sector is set to double to support home ownership. The addition of Crown to our customer portfolio and the confidence they have shown in the capabilities and technology that the Energy Assets Group can offer is testament to the hard work and focus of our operational team. The relationship is progressing well as we continue to deliver a level of service which matches their expectations. We continue to enjoy good relationships with all of our banking partners who have expressed a keen interest to continue working with the Group. We are confident that these relationships will provide sufficient funding to facilitate our future growth plans as we work towards being the supplier of choice for customers within the UK I&C utilities sector and the largest independent provider of I&C energy metering services in the UK. The new financial year has started well, all segments continue to grow and we are on track to deliver another year of strong operating and financial performance. 2
Enquiries For further information visit www.energyassets.co.uk or contact: Energy Assets Group plc Phil Bellamy-Lee / John McMorrow Tel: +44 (0)1506 405 405 Buchanan Richard Darby / Patrick Hanrahan Tel: +44 (0)20 7466 5000 Numis Securities Limited Charlie Farquhar / Stuart Skinner Tel: +44 (0)20 7260 1000 About Energy Assets: Energy Assets provides metering and related services in the I&C segment of the UK utility market and is the largest independent provider of I&C gas metering services in the UK, by number of assets owned and managed. The Group offers utility suppliers, end-user energy consumers and commercial and residential developers a broad spectrum of expert metering related services from the design, project management and building of utility networks to management of new and replacement meters and the collection and provision of energy consumption data. Energy Assets (EAS) is listed on the Main Market of the London Stock Exchange. 3
Chairman s statement I am delighted to report continued strong trading in what has been another successful year for Energy Assets encompassing good organic growth, major new contract wins and the acquisition and successful integration of Blyth into the Group. Energy Assets continues to achieve its core objectives providing metering and related services in a reliable and sustainable way and, throughout the 2015/16 financial year, the Group has continued to deliver a high quality service and strong growth which is significantly ahead of the prior year. Profit before tax and exceptional items is up 20% to 10.7m and our owned and managed asset portfolio has increased by 23% to circa 450,000 assets. Our Siteworks business has generated revenues of 19.2m, representing an increase of 49% (2015: 12.9m). The strength of this performance is testament to the continuing and growing demand for our services and the strength and scalability of our operating systems and procedures. The success we have achieved to date and our continued growth is pivotal as we strive towards our goal of being able to provide a full end to end multi-utility service offering across gas, electricity and water. Strategy The Group operates within a clearly defined, long-term strategic framework which is built around the efficient operation of and strategic investment in a balanced range of businesses across the UK I&C multi-utility metering and network markets and provides effective scope for continued expansion. We remain well positioned to achieve our primary objectives which are: To further consolidate our position as the largest independent metering and data service provider to the UK I&C gas sector; To grow our position across the utility sector as a whole; and To grow our successful Siteworks business and expand the range and complexity of the services provided. Following the year end, the Group made a strategic decision to optimise the combined expertise of Blyth and the Energy Assets Siteworks gas design and project management service to create a new force in gas, electricity and water utility network provision for housebuilders and I&C markets, Energy Assets Utilities. Going forward, Energy Assets Utilities will deliver all utility network services and activities as an integral part of the wider Group activities. Acquisitions The Energy Assets strategy focuses primarily on continuing to achieve growth both organically and through making targeted acquisitions which can add value. The Blyth acquisition in December 2015 has now been successfully integrated into the Group. This acquisition represented another positive growth milestone for Energy Assets and has enabled us to progress further towards meeting our primary objectives as we continue to extend our product ranges and service offering to the wider multi-utility market sector, encompassing gas, electricity and water. 4
Funding In November 2015 we announced a 10m increase to our current facility with Lombard, the asset finance division of The Royal Bank of Scotland Group, taking total facilities from the Group s three main funding partners to 110m. The expansion of the Group s relationship with Lombard increased the facility to 70m, on the same terms as previously agreed. Additionally, an extension was also agreed in November 2015 on the Group s 35m Bank of Scotland facility which is now available for a further two years. Dividend At the time of the Company s IPO it was stated that it was the Directors intention to prioritise investment to grow the Company s installed asset base. This remains the case and, in the financial year to 31 March 2016, a total of 22.9m (2015: 22.5m) was invested in assets that generate long term recurring revenue for the business. Additionally, Group return on capital employed at 31 March 2016 was 13.2%. The Board is, therefore, not recommending a dividend for the financial year ended 31 March 2016 but is continuing to keep the dividend policy under review as the scope and nature of the Group s activities continue to expand. People We now have over 300 employees across the Group and each of these individuals has a key role to play in the successful operation of our business. In particular, we have a dedicated and talented management team who have steered the business through a period of significant growth with great success. On behalf of the Board, I would like to thank all of our people for their hard work during this financial year and for their continued commitment to Energy Assets. Outlook The new financial year has started well across the business and we are on track to deliver another year of sound operating and financial performance in 2016/17 as we continue to look to the future with confidence. Dr Christopher Masters Chairman 7 June 2016 5
Business and financial review Energy Assets is the largest independent provider of I&C gas metering services in the UK (by number of assets owned and managed) and a major provider of multi-utility network, metering and data services. Our strategy The Group s primary objectives are: To further consolidate our position as the largest independent metering and data service provider to the UK I&C gas sector; To grow our position across the utility sector as a whole; and To grow our successful Siteworks business and expand the range and complexity of the services provided. This strategy focuses primarily on growing the business organically while making targeted acquisitions which can add value to our core business. In implementing this strategy we expect to: Continue to grow our asset base, focussing on the I&C segment of the metering market; Grow and diversify the primary energy supplier client base; Increase direct engagement with end-user consumers; Offer services across a multi-utility platform; and Increase operational flexibility. The Group s achievement of these key strategic priorities to date can be linked to key performance indicators as follows: Strategic priority Our progress in 2015/16 Continued focus for 2016/17 Continue to grow our asset base, focussing on the I&C segment of the metering market Total owned and managed asset portfolio increased by 23% to circa 450,000 assets; Recurring revenue accounts for 58% of total revenue being 26.1m compared to 23.3m in the previous year, an increase of 12%; Total future contracted revenue from I&C gas meters was 281.8m at 31 March 2016 (2015: 255.3m). Increase meter installations in the I&C gas market through servicing of contracts with existing customers; Continue to increase our presence in the electricity market installing additional meters and contracting MOP and DC/DA services; Increase recurring revenue through further organic growth and strategic acquisitions. 6
Strategic priority Our progress in 2015/16 Continued focus for 2016/17 Grow and diversify the primary energy supplier client base Increase direct engagement with enduser consumers Offer services across a multi-utility platform Energy Assets was appointed as a preferred supplier to Crown in December 2015. The appointment, for the provision of advanced gas metering technology and data services solutions, was made due to Energy Assets reputation for delivering a high quality service offering. The Energy Assets service is now being provided to over 1,500 end-users across data services and Siteworks; Siteworks revenue increased by 49% to 19.2m in the year to 31 March 2016; The acquisition of Blyth in December 2015, further increased the Group s direct customer base; Immediately following the year end, the Group announced that it has secured a new contract with ELDL to provide utility networks for a new development at St Clements Well, Wallyford, East Lothian. The new contract has a contract value of 6m over the complete project term and is the largest Utility Networks contract to ever be secured by Energy Assets. The acquisition of Blyth, a Multi-Utility Infrastructure Provider, in December 2015 enables Energy Assets to provide a complete multiutility network offering to the commercial and residential property development sector. Continue to grow relationships with existing gas and electricity suppliers and seek to gain new relationships by actively marketing and continually improving our service offering. Continue to grow relationships, revenues and profits with existing enduser consumers and seek to cement new relationships by offering increasingly sophisticated and integrated services. Continue to grow relationships with existing multi-utility suppliers and end users and actively seek to cement new relationships; Continue to develop internal technology which will enable the Group to provide services across all utilities. 7
Strategic priority Our progress in 2015/16 Continued focus for 2016/17 Increase flexibility operational Continued growth of the Group s internal resource team enabling further control over operational activities; The internal direct labour organisation (DLO) installed over 30% of total meters (2015: 24%) reducing reliance on subcontracted labour to install assets; Acquisition of Blyth during the year increased internal operational capability; No significant nonconformities reported across all of the Group s accreditations. Continue to utilise internal resources to install meters, further improving operational flexibility; Successfully integrate Blyth to enable the Group to obtain maximum benefit from the acquisition. Our progress in relation to our strategy can be further highlighted through the trends in our asset base and revenue over the past few years as follows: 2011 2012 2013 2014 2015 2016 Gas meter portfolio 47,000 63,000 81,000 101,000 123,000 147,000 Gas data collection points 15,000 21,000 52,500 62,500 75,000 87,000 Electricity meter portfolio - - - - 68,000 93,000 Electricity data collection points - - - - 99,000 123,000 Recurring revenue 5.3m 8.3m 12.3m 16.9m 23.3m 26.1m Siteworks revenue 4.3m 4.4m 5.7m 7.3m 12.9m 19.2m Business model Energy Assets provides metering and related services in the I&C segment of the UK utility market and is the largest independent provider of I&C gas metering services in the UK, by number of assets owned and managed. The Group offers utility suppliers, end-user energy consumers and commercial and residential developers a broad spectrum of expert metering related services from the design, project management and building of utility networks to management of new and replacement meters and the collection and provision of energy consumption data. 8
Meter Asset Management and Data Services The Group s main area of recurring revenue activity is the provision, management and maintenance of I&C gas and electricity meters and the collection and provision of consumption data and, during the year, the meter and data asset portfolio has increased by circa 85,000 assets bringing the owned and managed meter and data asset portfolio to circa 450,000 assets. Recurring revenue, which is generated through recurring meter rental payments and payments for the provision of consumption data from utility suppliers and end user consumers, increased by 12% to 26.1m in the current period (2015: 23.3m) representing 58% of total revenue. The Group has relationships with some of the largest UK utility suppliers and also some of the most respected niche suppliers, operating across both gas and electricity. In December 2015, Energy Assets announced that it has been appointed as a preferred supplier to Crown, the gas supply division of Crown Oil Ltd. The appointment is for the provision of advanced gas metering technology and data services solutions. The Energy Assets offering encompasses a suite of innovative options and solutions to help customers manage their energy use and meet the industry s obligations on carbon reduction. The Group has a reputation for delivering high quality solutions to customers and Energy Assets will partner with Crown, and all of its existing customers, to deliver metering and data services of the highest calibre, delivering a service which merits the confidence our customers have shown in the capabilities and technology that the Energy Assets Group can offer. Going forward the I&C asset base is expected to continue to grow as a result of existing contracts and future demand for the installation of advanced and smart gas meters being driven by Government policy which currently requires every metering point in the UK to have advanced or smart-enabled energy meters by 2020. Siteworks Through its Siteworks division the Group provides customers with an expert engineering, consultancy, system design and project management service of the highest standard for multi-utility networks and metering installations. The business is rapidly establishing a reputation as a technical leader in the design, project management and building of utility networks and metering installations enabling continued growth and revenue from Siteworks activity has increased by 49% during the year to 19.2m (2015: 12.9m). The acquisition of Blyth, a Multi-Utility Infrastructure Provider involved in the design and construction of utility networks direct to commercial and residential developers throughout Scotland and the North of England on 9 December 2015, now enables Energy Assets to provide a complete multi-utility product offering across gas, electricity and water, in accordance with the Group s strategy. The acquisition also creates growth opportunities through targeting businesses within the UK house building sector and will enable the Group to increase the market share of its existing Siteworks division and provide a broader service offering to customers. Following the year end, the Group made a strategic decision to optimise the combined expertise of Blyth and the Energy Assets Siteworks gas design and project management service to create a new force in gas, electricity and water utility network provision for housebuilders and I&C markets, Energy Assets Utilities. Going forward, Energy Assets Utilities will deliver all utility network services and activities as an integral part of the wider Group activities. 9
Financial results and Key Performance Indicators The Group monitors a number of financial and key performance indicators as follows: March 2016 March 2015 Growth Revenue 45.3m 36.2m 25% Recurring revenue 26.1m 23.3m 12% Siteworks revenue 19.2m 12.9m 49% EBITDA (before exceptional items) 22.5m 19.4m 16% Operating profit (before exceptional items) 15.2m 12.7m 20% Profit before tax 10.5m 9.3m 13% Profit before tax and exceptional items 10.7m 8.9m 20% Cash generated from operations 21.1m 19.5m 8% Total future contracted revenue from I&C gas meters 281.8m 255.3m 10% Net Debt/EBITDA 3.4 3.4 Return on capital employed 13.2% 13.2% Basic earnings per share 30.36p 27.30p Share price 475.30p 458.80p 4% Asset portfolio Gas meter portfolio 147,000 123,000 20% Gas data collection points 87,000 75,000 16% Electricity meter portfolio 93,000 68,000 37% Electricity data collection points 123,000 99,000 24% Total asset portfolio (owned and managed) 450,000 365,000 23% The Group has continued to grow revenue and profits through strong performances across each of its business segments. For the year ended 31 March 2016, revenue was 45.3m, showing an increase of 9.1m (25%) compared with the previous financial year. This increase is predominantly due to the expanding asset portfolio owned and managed by the Group and the strong organic growth of the Siteworks offering. At 31 March 2016 recurring revenue accounted for 58% of total revenue being 26.1m compared to 23.3m in the previous year, an increase of 12%. These recurring revenues are as a result of the long term nature of the Group s metering and data contracts. Gross profit margins have been maintained against the prior year. During the year the Group incurred non-recurring transaction costs relating to the acquisition of Blyth amounting to 0.1m. In the prior year similar costs of 0.1m were incurred in relation to the acquisitions of Origin and SA Gas. The Group also incurred non-recurring transaction costs of 0.1m in the current year relating to the proposed acquisition by Euston BidCo Limited. Upon acquisition of Bglobal Metering in the prior year, the fair value of the net assets of this company was greater than the fair value of the consideration paid resulting in a gain on the acquisition of 0.8m in the prior year. The Group implemented a number of share based payment schemes as part of the IPO on 22 March 2012. The expense for the prior year in relation to these schemes amounted to 0.2m. No further expense will be incurred in the future in relation to these schemes. Operating profit before exceptional items increased from 12.7m to 15.2m, a rise of 20% and EBITDA before exceptional items increased by 16% from 19.4m to 22.5m. 10
Profit before tax and exceptional items increased by 20% to 10.7m (2015: 8.9m). Profit before tax was 10.5m (2015: 9.3m) after deducting exceptional acquisition costs. At a divisional level, the Group has installed circa 24,000 gas meter assets during the year, increasing its total portfolio by 20% to circa 147,000 meters. Given that the design life of meters is in excess of 20 years it is expected that these assets will continue to provide a solid source of long term recurring revenue over the life of the asset which is currently forecast at 281.8m (2015: 255.3m). Current year revenue increased to 16.6m (2015: 14.1m). In addition, the managed electricity meter asset portfolio acquired with Bglobal Metering has increased to circa 93,000 assets by the year end, up 37% compared to the prior year end. Revenue from our data services business has increased to 9.5m (2015: 9.2m) and the number of meter points from which data is collected has increased to circa 210,000 across gas and electricity (2015: circa 174,000). This represents one of the largest portfolios within the UK I&C sector. The Siteworks division continues to develop with significant annual growth during the current financial year. Overall revenues improved by 49% to 19.2m as a result of significant organic growth across gas and electricity and the acquisition of Blyth in December 2015. Blyth Utilities Limited (Blyth) On 9 December 2015, Energy Assets acquired the entire issued share capital of Blyth, a Multi-Utility Infrastructure Provider involved in the design and construction of utility networks direct to commercial and residential developers throughout Scotland and the North of England. The transaction consideration comprises an initial cash payment of 1.5m, 200,784 shares in Energy Assets Group plc with a market value of 1m at the time of issue, which are subject to the sellers of Blyth remaining with the Group during a restrictive period of two years, and a three year earnout consideration of up to 2.5m contingent on the future performance of Blyth. Since incorporation in 2003, and now with a team of circa 80 highly qualified and professional employees, Blyth has built a proven track record and has a strong reputation, based on quality, expertise and delivery, as a key multi-utility network provider in the commercial and residential construction sectors within Scotland and the North of England. This acquisition therefore enables Energy Assets to provide a complete multi-utility product offering across gas, electricity and water network design, project management and build, in accordance with the Group s strategy, whilst also creating growth opportunities to businesses within the UK house building sector. Energy Assets recognises the importance of high quality, responsive and competitive provision of utility networks and, as such, we are excited to be able to offer Blyth the support of the wider Group to realise the potential for growth within both businesses as a result of this acquisition. Going forward, the Group will also examine the opportunity arising from this acquisition to grow a pipeline asset portfolio, utilising Blyth s existing Independent Gas Transporter (IGT) licence, and it is intended that the Blyth business model will be expanded across the UK using the existing Energy Assets footprint. The acquisition is in line with Energy Assets established strategy of making selective acquisitions which add value to the Group and the Energy Assets directors are confident that the Blyth business will provide enhanced earnings from the financial year 2016/17. 11
New contracts Crown Gas and Power (Crown) In December 2015, Energy Assets announced that it has been appointed as a preferred supplier to Crown, the gas supply division of Crown Oil Ltd. The appointment is for the provision of advanced gas metering technology and data services solutions. As the leading independent provider of I&C gas metering services in the UK, the Energy Assets offering encompasses a suite of innovative options and solutions to help customers manage their energy use and meet the industry s obligations on carbon reduction. The Group has a reputation for delivering high quality solutions to customers and Energy Assets will partner with Crown to deliver Meter Asset Management and AMR services of the highest calibre, delivering a service which merits the confidence Crown has shown in the capabilities and technology that the Energy Assets Group can offer. East Lothian Developments Ltd (ELDL) Immediately following the year end, the Group announced that it has secured a new contract with ELDL to provide utility networks for a new development at St Clements Well, Wallyford, East Lothian. The new contract, which was signed by recently acquired subsidiary Blyth, encompasses the provision of gas, water and electricity networks for the development which will include approximately 1,450 mixed residential units along with offices, retail and supermarket units and a primary school. With a contract value of 6m over the complete project term, this is the largest Utility Networks contract to ever be secured by Energy Assets and reaffirms the Group s strategy to provide a complete multi-utility infrastructure offering across gas, electricity and water. The award of this contract underpins the growth aspirations the Group has for Blyth as part of the Energy Assets Group and is testimony to the expertise and uniquely differentiated offering within the expanded business. New branding Following the acquisition of Blyth in December 2015, the Group made a strategic decision to optimise the combined expertise of Blyth and the Energy Assets Siteworks gas design and project management service to create a new force in gas, electricity and water utility network provision for housebuilders and I&C markets. The new Energy Assets Utilities brand was launched immediately following the year end and, going forward, will deliver all utility network services and activities as an integral part of the wider Group activities. 12
Funding and financial position In November 2015 we announced a 10m increase to our current facility with Lombard, the asset finance division of The Royal Bank of Scotland Group, taking total facilities from the Group s three main funding partners to 110m. The expansion of the Group s relationship with Lombard increased the facility to 70m, on the same terms as previously agreed. Additionally, an extension was agreed on the Group s 35m Bank of Scotland facility which is now available for a further two years. We continue to enjoy good relationships with all of our banking partners, who have expressed a keen interest to continue working with the Group, and we are confident that these relationships will provide sufficient funding to facilitate our future growth plans as we work towards being the supplier of choice for customers within the UK I&C utility sector and the largest independent provider of I&C energy metering services in the UK. Net debt at 31 March 2016 of 75.9m was 10.8m higher than the previous year mainly as a result of the increase in capital expenditure to service the growing meter portfolio. Capital investment in meters amounted to 21.7m in the year and, at 31 March 2016, Energy Assets had a gas meter portfolio of circa 147,000 meters with a net book value of 101.5m (2015: circa 123,000 gas meters with a net book value of 85.4m). Available facilities at the financial year end amounted to 29.5m (2015: 28.7m) and the cash at bank balance at 31 March 2016 was 6.7m (2015: 7.8m). Principal business risks and uncertainties With 58% of our revenue being long term recurring revenue, over a period of up to 20 years, much of our business is considered to be predictable and relatively low risk. Nonetheless, potential risks to the business are continuously reviewed as part of our Operational Risk Self Assessment process and actions to mitigate these risks are identified. The key risks identified and managed are set out in the Strategic Report within the 2016 Annual Report and Accounts and are summarised below: Key risk Mitigation Interruption or failure of IT systems which could impair Robust systems with appropriate back-up procedures in place both on and off-site; the Group s ability to provide Experienced internal IT software development resource; services and invoice assets Stringent test regime in respect of operating platforms; effectively Disaster recovery and business interruption processes regularly tested. Debt funding availability Ongoing dialogue with potential funders; Relationships with new funding partners who are keen to work with Energy Assets; Current funding which, based on current plans, covers a period of at least 18 months. Reliance on the performance of subcontractors Changes in government policy for all meters to be smart or advanced by 2020 Careful monitoring of the quality of work undertaken by subcontractors and the accreditations accorded to them; Development and expansion of the Group s existing internal resource team. Active engagement with industry bodies and working groups; Contribution to sector consultation; Well respected internal resource influencing industry standards and DECC policy. 13
Key risk Mitigation Economic conditions impacting demand for Group services Broad customer mix of retail organisations, local governments and purchasing clubs minimising the effect of economic conditions and short-term decisions. Pricing pressures Pricing pressures are regularly monitored and the Group maintains strong relationships and communication with all customers; The Group constantly reviews its prices and costs to ensure these remain competitive whilst continuing to ensure adequate levels of shareholder return. Dependency on a limited number of gas suppliers. Change of gas supplier by end-user consumer which may lead to the return of meters to the Group and a corresponding loss of rental income The Group maintains strong relationships with all customers; Customer service is paramount and the level of service provided to Energy Assets customers is second to none; Strict service levels are monitored throughout the business to ensure the Group meets and exceeds customer expectations; Continued diversification of products and services to new and existing clients dilutes such dependencies. The Group strives to maintain continued dialogue with a number of gas suppliers and those in need of our services as a fully integrated metering solution; Energy Assets now serves gas suppliers who represent over 80% of the I&C gas market by volume of gas supplied and the Group seeks to build and maintain strong relationships with all of these gas suppliers ensuring the risk of churn is minimised. Loss of required accreditations The Group takes its commitment to retaining accreditations seriously and the internal compliance manager is responsible for ensuring all requirements are met and all staff members are fully trained; The Group has no significant non-conformities in respect of the accreditations it holds. By order of the Board Philip Bellamy-Lee John McMorrow Chief Executive Officer Chief Financial Officer 7 June 2016 7 June 2016 14
Consolidated statement of comprehensive income For year ended 31 March 2016 Note 2016 2015 000 000 Revenue 4 45,270 36,208 Cost of sales 4 (20,064) (16,098) Gross profit 25,206 20,110 Administrative expenses 4 (10,214) (6,991) Operating profit 14,992 13,119 Attributable to: Operating profit before exceptional items 15,228 12,721 Exceptional acquisition costs 5 (236) (129) Exceptional gain on acquisition 5-760 Exceptional IPO share based payment expense 5 - (233) Operating profit 14,992 13,119 Finance income 16 10 Finance costs (4,504) (3,811) Profit before tax 10,504 9,318 Taxation 6 (2,051) (1,852) Profit for the year 8,453 7,466 Other comprehensive income Items that may subsequently be reclassified to profit or loss Cash flow hedge movement, net of tax 3 (891) Total comprehensive income for the year 8,456 6,575 Basic earnings per share (pence) 7 30.36 27.30 Diluted earnings per share (pence) 7 29.37 26.61 15
Consolidated Balance Sheet As at 31 March 2016 ASSETS Note 2016 2015 000 000 Non-current assets Intangible assets 22,535 17,658 Property, plant and equipment 8 107,199 90,586 Deferred tax asset 3,782 4,363 133,516 112,607 Current assets Inventories 2,357 1,717 Trade and other receivables 13,051 7,785 Cash and cash equivalents 6,748 7,835 22,156 17,337 TOTAL ASSETS 155,672 129,944 EQUITY AND LIABILITIES Liabilities Current liabilities Trade and other payables 19,223 14,240 Current tax liabilities 129 184 Borrowings 9,891 8,207 29,243 22,631 Non-current liabilities Borrowings 72,746 64,707 Derivative financial instruments 2,062 2,117 Deferred tax liabilities 5,323 3,995 80,131 70,819 Total liabilities 109,374 93,450 NET ASSETS 46,298 36,494 Equity attributable to owners of the parent Share capital 280 278 Share premium 16,270 15,272 Share based payment reserve 1,351 1,050 Other reserves (33,876) (33,879) Retained earnings 62,273 53,773 46,298 36,494 TOTAL EQUITY AND LIABILITIES 155,672 129,944 16
Consolidated Statement of Changes in Equity For year ended 31 March 2016 Attributable to the owners of the Parent Company: Share capital Share premium Share based payment reserve Other reserves Retained earnings TOTAL 000 000 000 000 000 000 At 1 April 2014 272 14,274 1,171 (32,988) 45,672 28,401 Profit for the year - - - - 7,466 7,466 Cash flow hedge movement, net of tax - - - (891) - (891) Total comprehensive (expense)/ income for the year - - - (891) 7,466 6,575 Issue of shares 6 998 - - - 1,004 Value of employee services - - 290 - - 290 Equity element of deferred tax on share based payments - - 269 - - 269 Transfer to retained earnings upon exercise of share options - - (680) - 635 (45) Transactions with owners of the Parent Company 6 998 (121) - 635 1,518 At 31 March 2015 278 15,272 1,050 (33,879) 53,773 36,494 17
Consolidated Statement of Changes in Equity For year ended 31 March 2016 Attributable to the owners of the Parent Company: Share capital Share premium Share based payment reserve Other reserves Retained earnings TOTAL 000 000 000 000 000 000 At 1 April 2015 278 15,272 1,050 (33,879) 53,773 36,494 Profit for the year - - - - 8,453 8,453 Cash flow hedge movement, net of tax - - - 3-3 Total comprehensive income for the year - - - 3 8,453 8,456 Issue of shares 2 998 - - - 1,000 Value of employee services - - 599 - - 599 Equity element of deferred tax on share based payments - - (212) - - (212) Transfer to retained earnings upon exercise of share options - - (86) - 47 (39) Transactions with owners of the Parent Company 2 998 301-47 1,348 At 31 March 2016 280 16,270 1,351 (33,876) 62,273 46,298 18
Consolidated statement of cash flows For year ended 31 March 2016 2016 2015 000 000 Cash flows from operating activities Profit before taxation 10,504 9,318 Finance income (16) (10) Finance costs 4,504 3,811 Exceptional gain on acquisition - (760) Depreciation 6,592 6,160 Intangibles amortisation 678 545 Net foreign exchange gains - (4) Share based payment expense 599 290 Increase in inventories (440) (253) Increase in trade and other receivables (2,318) (1,353) Increase in trade and other payables 962 1,794 Cash generated from operations 21,065 19,538 Income tax (225) - Net cash from operating activities 20,840 19,538 Cash flows for investing activities Payments to acquire property, plant and equipment (23,589) (22,866) Payments to acquire intangible assets (823) (339) Purchase of subsidiaries, net of cash acquired (2,750) (6,541) Finance income 16 10 Net cash used in investing activities (27,146) (29,736) Cash flows from financing activities Proceeds from new borrowings 18,878 20,922 Repayments of borrowings (9,155) (6,931) Finance costs (4,504) (3,811) Net cash from financing activities 5,219 10,180 Net decrease in cash and cash equivalents (1,087) (18) Cash and cash equivalents at the beginning of the year 7,835 7,853 Cash and cash equivalents at the end of the year 6,748 7,835 19
Notes to the consolidated financial statements For the year ended 31 March 2016 1) Financial information This announcement does not constitute full accounts within the meaning of section 434 of the Companies Act 2006 but is derived from the audited accounts for the year ended 31 March 2016 for which an unqualified audit report has been received. The statutory accounts for the year ended 31 March 2016 will be delivered to the Registrar of Companies. The Annual General Meeting (AGM) of Energy Assets Group plc is intended to take place in London on 7 September 2016. Notice of the AGM and related papers, including the statutory accounts, will be sent to shareholders at least 21 clear days before the meeting. While the information included within this announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), it does not in itself contain sufficient information to comply with IFRS. This information has been approved for issue by the Board of Directors of Energy Assets Group plc on 7 June 2016. Energy Assets Group plc was incorporated in the United Kingdom on 1 February 2012 which is where it is domiciled. 2) Basis of preparation The consolidated financial statements of Energy Assets Group plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), the Companies Act 2006 applicable to companies reporting under IFRS and the Listing Rules. The consolidated financial statements have been prepared under the historical cost convention, as modified by financial assets and liabilities (including derivative instruments) at fair value through profit or loss. 3) Going concern The Group s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report within the 2016 Annual Report and Accounts. The Directors have considered these factors, the likely performance of the business and possible alternative outcomes, the financing facilities available to the Group, compliance with financial covenants and the possible actions able to be taken should new facilities not be available in the future. Having taken all of these factors into consideration, the Directors confirm that forecasts and projections indicate that the Group and its Parent Company have adequate resources for the foreseeable future and at least for the period of 12 months from the date of this report. Accordingly the financial statements have been prepared on the going concern basis. 20
4) Segment information Operating segments are reported in a manner consistent with the reports made to the chief operating decision maker. It is considered that the role of chief operating decision maker is performed by the Board of Directors. The Group currently only operates in the UK and for management purposes is organised into three core divisions: Meter asset management; Data services; and Siteworks This currently forms the basis of the Group s reportable operating segments. However, in the future as the business develops and moves towards a multi utility offering in accordance with its primary strategy, meter asset management and data services are likely to converge into a single division as customer demand increases for a combined service offering meaning it may become less relevant to split out revenue and costs associated with these divisions. The measure of profit principally used to allocate resources is gross profit. However, as interest costs arise on borrowings which are wholly attributable to the meter asset management and data services segments, finance costs are also allocated to these segments. EBITDA is monitored on a Group level but not at segment level and therefore this has not been presented within this note. Certain central costs, assets and liabilities are not allocated to segments as they are managed on a Group basis. These comprise primarily central and management overhead costs, cash, accounts receivable and accounts payable. Year ended 31 March 2016 Meter asset management Data services Siteworks Total operations 000 000 000 000 Revenue from external customers 16,653 9,476 19,141 45,270 Cost of sales depreciation (5,501) (621) - (6,122) Cost of sales - amortisation (331) - - (331) Cost of sales other - (4,326) (9,285) (13,611) Group gross profit 10,821 4,529 9,856 25,206 Items not reported by segment: Other operating costs (9,161) Depreciation (470) Amortisation (347) Exceptional costs (236) Group operating profit 14,992 Net finance costs (4,169) (127) (4,488) Profit before tax 6,652 4,402 10,504 Tax (2,051) Profit for the year 8,453 21
During the year, sales to related parties amounted to 9.5m (2015: 9.0m) being sales made on an arm s length basis to a company controlled by one of the Group's significant shareholders. In addition, revenue of 5.3m (2015: 4.5m) was received from another single external customer in relation to data and metering services. At 31 March 2016 Meter asset Data Total management services Siteworks operations 000 000 000 000 Intangible assets 5,116 - - 5,116 Property, plant and equipment 101,527 4,841-106,368 Assets not reported by segment 44,188 Total assets 155,672 Bank borrowings (74,410) (1,552) - (75,962) Liabilities not reported by segment (33,412) Total liabilities (109,374) Year ended 31 March 2015 Meter asset management Data services Siteworks Total operations 000 000 000 000 Revenue from external customers 14,089 9,229 12,890 36,208 Cost of sales depreciation (4,418) (1,386) - (5,804) Cost of sales - amortisation (331) - - (331) Cost of sales other - (3,561) (6,402) (9,963) Group gross profit 9,340 4,282 6,488 20,110 Items not reported by segment: Other operating costs (6,819) Depreciation (356) Amortisation (214) Net exceptional gain 398 Group operating profit 13,119 Net finance costs (3,632) (169) (3,801) Profit before tax 5,708 4,113 9,318 Tax (1,852) Profit for the year 7,466 At 31 March 2015 Meter asset Data Total management services Siteworks operations 000 000 000 000 Intangible assets 5,447 - - 5,447 Property, plant and equipment 85,412 4,240-89,652 Assets not reported by segment 34,845 Total assets 129,944 Bank borrowings (65,510) (2,462) - (67,972) Liabilities not reported by segment (25,478) Total liabilities (93,450) 22
5) Exceptional items Items that are material because of their size or nature, non-recurring and whose significance is sufficient to warrant separate disclosure and identification within the consolidated financial information are referred to as exceptional items. The separate reporting of exceptional items helps to provide an understanding of the Group s underlying performance. 2016 2015 000 000 Exceptional acquisition costs 236 129 Exceptional gain on acquisition - (760) Exceptional IPO share based payment expense - 233 236 (398) During the year the Group incurred non-recurring transaction costs relating to the acquisition of Blyth amounting to 0.1m. In the prior year similar costs of 0.1m were incurred in relation to the acquisitions of Origin and SA Gas. The Group also incurred non-recurring transaction costs of 0.1m in the current year relating to the proposed acquisition by Euston BidCo Ltd. Upon acquisition of Bglobal Metering, the fair value of the net assets of this company were greater than the fair value of the consideration paid resulting in a gain on the acquisition of 0.8m in the prior year. The Group implemented a number of share based payment schemes as part of the IPO on 22 March 2012. The expense for the prior year in relation to these schemes amounted to 0.2m. No further expense will be incurred in the future in relation to these schemes. 6) Taxation Analysis of charge in the year 2016 2015 000 000 Current tax: Adjustments in respect of previous periods 17 - Deferred tax: Origination and reversal of temporary differences (2,212) (1,852) Effect of changes in tax rate on opening liability 144 - Total deferred tax (2,068) (1,852) Tax charge (2,051) (1,852) 23
The tax on the Group s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows: 2016 2015 000 000 Profit before tax 10,504 9,318 Tax calculated at domestic tax rate applicable to profits (2016: 20%, 2015: 21%) (2,101) (1,957) Effects of: Effect of items not deductible/taxable for tax purposes (103) 137 Adjustments in respect of previous periods 9 (32) Effect of changes in tax rate 144 - Tax charge (2,051) (1,852) A number of changes to the UK Corporation tax system were announced in the March 2015 Budget Statement with the main rate of corporation tax reduced from 20% to 19% from 1 April 2017 and from 19% to 18% from 1 April 2020. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements. 7) Earnings per share Basic earnings per share is calculated by dividing the profit attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares in issue during the year. 2016 2015 Net profit attributable to equity holders of the Group ( 000) 8,453 7,466 Weighted average number of shares in issue (thousands) 27,846 27,346 Basic earnings per share from continuing operations (pence) 30.36 27.30 Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. This is done by calculating the number of shares that could have been acquired at fair value (determined as the average market share price of the Company s shares in the year) based on the monetary value of the exercise price attached to outstanding share options. The number of shares calculated above is compared with the number of shares that will be issued assuming the exercise of the share options. Therefore, the earnings per share calculation is required to be adjusted in relation to the share options that are in issue under the LTIP, Deferred Bonus Plan and the IPO Award Plan as follows. None of the shares under the SIP or the Employee Retention Award Plan are potentially dilutive as these are to be settled with shares purchased on the open market. 2016 2015 Net profit attributable to equity holders of the Group ( 000) 8,453 7,466 Weighted average number of shares in issue (thousands) 28,786 28,062 Diluted earnings per share from continuing operations (pence) 29.37 26.61 24
8) Property, plant and equipment At 31 March 2016 Gas meters Data loggers Furniture, fittings & office equipment Plant and machinery Motor vehicles TOTAL 000 000 000 000 000 000 Cost At 1 April 2015 99,304 7,952 1,736 78 64 109,134 Additions 21,708 1,222 293 80-23,303 From acquisitions - - 45-15 60 FV balance sheet (92) - (18) (20) (27) (157) Disposals - - - - (1) (1) At 31 March 2016 120,920 9,174 2,056 138 51 132,339 Accumulated depreciation At 1 April 2015 13,892 3,712 921 13 10 18,548 Charge for the year 5,501 621 398 46 26 6,592 At 31 March 2016 19,393 4,333 1,319 59 36 25,140 NBV At 31 March 2016 101,527 4,841 737 79 15 107,199 At 31 March 2015 85,412 4,240 815 65 54 90,586 Gas Meter additions include directly attributable costs of 5.3m (2015: 4.1m). Borrowings are secured by a fixed and floating charge over the metering assets to which they relate. At 31 March 2015 Gas meters Data loggers Furniture, fittings & office equipment Plant and machinery Motor vehicles TOTAL 000 000 000 000 000 000 Cost At 1 April 2014 77,988 6,352 1,162-9 85,511 Additions 20,890 1,600 359 17-22,866 From acquisitions 426-215 61 67 769 Disposals - - - - (12) (12) At 31 March 2015 99,304 7,952 1,736 78 64 109,134 Accumulated depreciation At 1 April 2014 9,474 2,326 579-9 12,388 Charge for the year 4,418 1,386 342 13 1 6,160 At 31 March 2015 13,892 3,712 921 13 10 18,548 NBV At 31 March 2015 85,412 4,240 815 65 54 90,586 At 31 March 2014 68,514 4,026 583 - - 73,123 25
9) Net debt/ebitda The Group monitors capital on the basis of net debt divided by EBITDA. Net debt is calculated as total borrowings less cash and EBITDA is calculated as operating profit before any exceptional items, interest, tax, depreciation and amortisation as follows: 2016 2015 000 000 Profit before tax 10,504 9,318 Add: finance costs 4,504 3,811 Less: finance income (16) (10) Add: depreciation 6,592 6,160 Add: amortisation 678 545 Add/(less): exceptional items 236 (398) EBITDA 22,498 19,426 2016 2015 000 000 Total borrowings 82,637 72,914 Less: cash and cash equivalents (6,748) (7,835) Net debt 75,889 65,079 EBITDA 22,498 19,426 Net debt/ebitda 3.4 3.4 10) Leased assets The Group, as part of its core business, is a lessor of gas metering assets. These are leased to customers under operating leases. The minimum lease rentals receivable at current prices assuming the lease remains in place for its expected term are as follows: 2016 2015 000 000 Within one year 16,992 14,870 Between one to two years 16,992 14,870 Between three to five years 50,976 44,610 More than five years 196,844 180,985 281,804 255,335 These lease payments are subject to annual reviews and are cancellable by the customer. 11) Acquisitions Blyth On 9 December 2015, Energy Assets acquired the entire issued share capital of Blyth, a Multi-Utility Infrastructure Provider involved in the design and construction of utility networks direct to commercial and residential developers throughout Scotland and the North of England. The following table summarises the consideration paid for Blyth and the fair value of the amounts recognised at the acquisition date for each major class of assets acquired and liabilities assumed, as provisionally determined. The fair value of assets acquired and liabilities assumed may be revised within the 12 month period post acquisition: 26
000 Consideration Cash 1,500 Shares 1,000 Deferred consideration 2,500 5,000 Less: cash acquired through the subsidiary - Net cash to acquire subsidiary 5,000 Net assets acquired: Property, plant and equipment 60 Inventories 200 Trade and other receivables 2,948 Cash and cash equivalents - Trade and other payables (2,597) 611 Goodwill 4,389 Total purchase price 5,000 Goodwill has been reflected within intangible assets on the Group balance sheet. Goodwill recognised is attributable to a variety of intangible benefits including economies of scale from bringing the Blyth business in-house, the ability to provide a broader service offering to customers and access to the company s highly qualified team of specialist engineers and technicians. The fair value of trade and other receivables is 2.9m and 2.3m is attributed to trade receivables. This is the gross contractual amount of which all is expected to be collectible. In the year to 31 March 2016, revenue of 3.4m and a profit of 0.26m was included in the income statement relating to Blyth for the period from the date of acquisition. If the acquisition had taken place at the start of the year revenue of 10.4m and a profit of 0.5m would have been included. Acquisition costs relating to the transaction amounted to 0.1m and have been charged to exceptional administrative expenses in the income statement in the year ended 31 March 2016. Further details of the above business combinations and the benefits that these will bring to the Group are included within the Strategic Report. 27