Half-year Report

19 April 2016

Utilitywise plc

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

Interim Results

for the six months ended 31 January 2016

Utilitywise, a leading independent utility cost management consultancy, is pleased to announce its financial results for the six months ended 31 January 2016.

Financial Highlights

· Revenue increased 36% to £41.6m (H1 20151: £30.6m)

· Adjusted EBITDA2 increased 15% to £9.7m (H1 20151: £8.4m)

· Adjusted Pre-tax profit3increase of 17% to £9.1m (H1 20151: £7.8m)

· Adjusted fully diluted EPS4 increased 21% to 9.8p (H1 20151: 8.1p)

· Proposed interim dividend increased 29% to 2.2p (H1 2015: 1.7p)

· Net (debt) / cash of (£10.2m) (H1 2015: £1.6m)

Operational Highlights

· Enterprise revenue added to order book5 during the period increased by 50% to £40.0m (H1 2015: £26.6m)

· Future secured revenue increased 5% to £24.7m (H1 2015: £23.5m)

· Total customers increased by 33% to 29,288 (H1 2015: 22,048)

· Utility Management Plan and multi-channel offering are progressing well

· Customer advocacy remains high with strong positive Net Promoter Score

· Energy consultants increased 39% to 625 (H1 2015: 449)

· Strengthened management team

Post period

· Energy consultants increased to 630

· Future secured revenue as at 31 March 2016 at £26.6m

· Partnership agreement signed with Dell to advance Energy services offering

Geoff Thompson, Chief Executive of Utilitywise, commented:

"The Group has continued to drive growth across all of its KPIs including strong growth in revenue and EBITDA. Enterprise, inclusive of Europe, and the Corporate division have performed well in the first half and I am very pleased to see the positive momentum maintained. 

We have continued to strengthen the Group operationally with the continued roll out of our Utility Management Plan and further progress with the Group's multi-channel offering - both of which contribute to the Group's continued organic growth. Supporting this progress, we have bolstered our senior management team with the arrival of Brin Sheridan as Chief Operating Officer and Adrienne McFarland as People Operations Director.

The combination of our market-leading procurement business alongside our energy services offering is a compelling proposition. The market opportunity to assist customers to procure gas, power and water efficiency to comply with regulation and importantly enable them to manage their energy usage is significant and we look forward to building on our unrivalled position in the market to drive further growth."

1 As restated

2 Adjusted for share based payments of £286k (H1 2015: £366K) and exceptional items credit of £4,055k (H1 2015: £194k credit)

3 Adjusted for share based payments of £286k (H1 2015: £366K), amortisation of IFRS3 intangibles of £975k (H1 2015: £531K) and exceptional items credit of £4,055k (H1 2015: £194k credit)

4Adjusted for share based payments of £286k (H1 2015: £366k), amortisation of IFRS3 intangibles of £975k (H1 2015: £531k), the tax impact of those adjustments of £171k credit (H1 2015: £162k credit) and exceptional items credit of £4,055k (H1 2015: £194k credit)

5 where revenue added to order book is gross additions to future secured revenue

For further information:

About Utilitywise

Utilitywise is a leading independent utility cost management consultancy based in Newcastle upon Tyne. The Group has established trading relationships with a number of major UK energy suppliers and provides services to its customers designed to assist them in achieving better value out of their energy contracts, as well as enabling reduced energy consumption and lower carbon footprint.

Businesses large and small rely on Utilitywise for their energy management needs. Clients range in size from single site SME's to multinationals with thousands of sites and cover the whole of the UK. In total, Utilitywise has c.30,000 UK & I customers. The Group also has a European operation which is starting to build a presence in France, Germany, Belgium and Netherlands with a total customer base of c. 5,500.

Chief Executive's Statement

I am pleased to report on the continued strong performance of the Group delivering another period of revenue and profit growth.

Our focus on operational excellence has continued with our Trusted Advisor strategy being deployed, a strong positive Net Promoter Score which is independently managed and a continued focus on the customer journey with the deployment of the Utility Management Plan.

KPIs

*where future secured revenue is contracts which have been won but are not currently live and therefore have no contribution to these financial statements.

We also regard the main financial indicators such as revenue, EBITDA and cash as important measures and these are disclosed as such throughout.

Progress by division

During the period the Group operated from two principal divisions. The performance of both divisions is reported separately.

Enterprise division

Our Enterprise division is the foundation of the Utilitywise business, focusing on small, medium and multi-site organisations. We have well established trading relationships with a number of major UK energy suppliers and provide services to our customers designed to assist them in achieving better value from their energy contracts. Utilitywise negotiates rates with energy suppliers on behalf of business customers and provides an account care service where account managers help customers execute a Utility Management Plan to manage their energy contracts more efficiently, as well as reducing waste and lowering their carbon footprint.

Enterprise revenue added to order book increased by 50% to £40.0m (H1 2015: £26.6m) in the period, demonstrating the relevance of our proposition and the quality of our sales and marketing capability. Revenue in the division grew 31% to £32.6m (H1 2015: £24.9m) with gross profit increasing 13% to £12.7m (H1 2015: £11.2m). Overall gross margins reduced to 39% compared to 45% in the previous period and EBITDA increased 15% to £7.5m (H1 2015: £6.5m).

The movement in the gross margin is attributable to the additional costs incurred in employment of Energy Consultants and in support of various marketing initiatives and the continued investment in our multi-channel route to market. During the current financial year the people attrition rate has continued to be a challenge.

We have seen the 'go live' profile for the secured order book improve with more near term sales being transacted and as such we are seeing a quicker translation into revenue whilst still maintaining a significant secured pipeline. In addition, we have seen a consistent renewal rate of c. 80% by meter volume for our Enterprise customers.

During the period we continued to increase our contracted customers, increasing the total Enterprise customer base by 33% to 28,384 as at 31 January 2016 (H1 2015: 21,290). In the period 77% (H1 2015: 58%) of revenues came from new customers.

We have made significant operational progress in the period including:

§ The appointment of our new People Operations Director, Adrienne McFarland, with which we have focused on reducing the attrition rate which has increased throughout the year. I am pleased that this is now reducing with the focus on improving the quality of our hiring, building our recruitment strategy to match the multi-channel strategy and developing team manager skills/capabilities

§ A continued focus on delivering our multi-channel strategy and investment in the marketing to support its growth including the launch of new online switching platform, www.utilitywise.com/energy-quote

In the period we received £3.6m from a supplier who agreed to harmonise the payment terms on extension contracts with that of newly acquired customers. Our cash conversion from the Enterprise division will continue to improve as we negotiate with suppliers to change their terms on extension contracts and the absolute proportion of extensions contracted reduces as it has in the period to 23%, down from 42% in 2015.

European expansion continues to perform in line with expectations and we will continue to evolve our business model and expand our resources deployed on the French, German, Belgium and Netherlands markets in the coming year.

Corporate division

The Corporate division consists of a comprehensive portfolio of products and services, as defined within our Utility Management Plan, designed to assist companies with more complex energy needs in managing their energy consumption. Procurement is at the core of the offering but, due to the size and complexity of the energy needs of these larger customers, the other elements of our Utility Management Plan are even more critical. In delivering a complete Strategic Utility Management Plan to our Corporate customers, we continue to develop strong customer relationships and Utilitywise is seen as their trusted advisor.

The acquisition of t-mac technologies in April 2015 added cutting edge cloud-based energy monitoring and controls capabilities to our service portfolio and we have shown great progress integrating this business alongside our Corporate and our Enterprise customer base. The number of customers benefitting from the "smartdash" data analytics software we acquired with t-mac is currently 1,281, and a plan is in place to roll out the software to all customers, as we arrange installation of their AMR Smart Meter. This data-led service enables a wider and more comprehensive dialogue around energy management with customers and includes the deployment of our Edd:e monitoring hardware alongside the t-mac controls hardware as a key part of this.

During the period, the Corporate division incorporating t-mac, enjoyed strong revenue growth with revenue in the division increasing 61% to £9.0m (H1 2015: £5.6m) and gross profit increasing 34% to £3.9m (H1 2015: £2.9m). This growth was supported by significant customer wins in the medium-sized business space. EBITDA increased 16% to £2.2m (H1 2015: £1.9m). Of the revenue growth £2.2m was from t-mac which operates at lower gross margins than the core procurement business. We have also benefited from good revenue growth in the non-procurement business specifically related to the ESOS (Energy Savings Opportunity Scheme) which was also at lower gross margins than the procurement revenues.

Principal Risks and Uncertainties

The Group is affected by certain risks, not wholly within our control. The most significant of these, are as follows:

· Reliance on key suppliers

· Exposure to underlying customers

· Customer service and delivery

· Competition

· Recruitment and retention of the right people

· Security and resilience of our networks and IT systems

· Liquidity

· Legislation and regulatory

The principal risks and uncertainties facing the Group have therefore not changed from those as set out in the Strategic report on pages 8 to 9 of the 2015 Annual Report and Accounts. Further detail regarding the risk and mitigation can be found in the Annual Report.

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 2015.

Outlook

Of particular focus in the period ahead will be the continued implementation of the productivity initiatives and emphasis on our recruitment strategy within our Enterprise division. In addition we will continue to focus on the roll-out of our Utility Management Plan and the development of Corporate division's energy services offering alongside growth in the core procurement business.

We are confident about the future prospects of the business. The productivity measures in our Enterprise division, with a lower attrition rate in the second half, will see an improved second half performance against the first half. Overall we remain on track to deliver revenue and EBITDA margins in line with market expectations.

Financial Review

Income Statement

During the six month period ended 31 January 2016 revenue increased by 36% over the corresponding period last year to £41.6 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 625 up from 449 at the end of January 2015.

Total Enterprise revenue added to order book in the period totaled £40.0m (H1 2015: £26.6m), demonstrating the strength of our proposition and the quality of our sales and marketing.

The secured pipeline (gross secured future revenue) was £24.7 million compared to £23.5million at January 2015. As at 31 March 2016, the secured pipeline has increased to £26.6m.

Overall Gross Margins are 40%, down on the prior period of 46%, due to our continued investment in energy consultants and our numerous marketing and multi-channel initiatives.

Adjusted EBITDA, defined as EBITDA adjusted for share based payments and exceptional items for the period was £9.7 million, an increase of £1.3 million (15%) on the period to 31 January 2015.

At the divisional results level we are pleased to see both divisions progress from the prior period. Of the EBITDA increase of £1.3m, £1.0m (77%) was attributable to the growth in the Enterprise division, with the remainder reflecting strong growth in Corporate.

Within the accounts there is release of the deferred consideration we expected to pay to the vendors of t-mac technologies of £5.7m, net of discounting, offset by an impairment charge to the carrying value of the goodwill relating to t-mac of £1.3m. The business is performing satisfactorily and we are successfully integrating the t-mac smart dash software reporting solution across both Enterprise and Corporate customers. However, the revenue streams to be derived from the full integration into the wider Energy services offering are largely planned to fall outside the earn out period and the order book and business activity without these will not be sufficient currently to pay further sums to the vendors. The impairment charge reflects the timing changes to the revenue and profits arising from the business.

Cash and Borrowings

The Group ended the half year with a net debt balance of £10.2m compared to a net cash balance of £1.6m at 31 January 2015. The acquisition of t-mac technologies occurred in the second half of 2015 and cash of £6.4m was spent on this. Eliminating this from the movement between the two periods isolates the trading flows which overall equates to a £5.4m outflow of cash. The cash is in line with our expectations and the second half is a stronger cash period.

Balance Sheet

As at 31 January 2016 the Group had total net assets of £54.9m compared to £37.4m at the end of January 2015.

The net accrued revenue balance increased from £18.7m to £34.9m. This represents future cash flows which are contracted by a utility provider with our end user business customers and which are paid to the Group by the underlying utility provider. To a large extent the increase in net accrued revenue has arisen as a result of the contract extension business undertaken in our Enterprise division. The net accrued revenue balance has a maturity profile which has c34% due within one year and the balance of 66% extending in to the future. This compares to 43% due within one year as at the end of H1 2015 and 25% due within one year at the end of July 2015.

Dividend

The Board is proposing an interim dividend of 2.2p per share payable on 21 June 2016 to shareholders on the register at close of business on 20 May 2016, with an associated ex-dividend date of 19 May 2016.

INDEPENDENT REVIEW REPORT TO UTILITYWISE PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2016 which comprises the condensed consolidated statement of total comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2016 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

BDO LLP

Chartered Accountants and Registered Auditors

Location

United Kingdom

Date

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Condensed consolidated statement of total comprehensive income - Unaudited

Condensed consolidated statement of financial position - Unaudited

Condensed consolidated statement of changes in equity - Unaudited 

Condensed consolidated cash flow statement - Unaudited

Notes

1. Accounting policies

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 July 2015, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

The interim financial information for each of the six month periods ended 31 January 2016 and 31 January 2015 has not been audited and does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The information for the year ended 31 July 2015 does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006, but is based on the statutory financial statements for that year, on which the auditors have reported. Their audit report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498 (2) or (3) Companies Act 2006.

The principle accounting policies have been applied consistently to all years and are set out below.

2. Basis of preparation

Utilitywise Plc is incorporated and domiciled in the United Kingdom.

The accounts for the periods have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and the accounting policies are consistent with those of the annual financial statements for the year ended 31 July 2015 and those envisaged for the financial statements for the year ending 31 July 2016. The Group has not adopted any standards or interpretation in advance of the required implementation dates. It is not anticipated that the adoption in the future of the new or revised standards or interpretations that have been issued by the International Accounting Standards Board will have a material impact on the Group's earnings or shareholders' funds.

The financial statements have been prepared on a going concern and historical cost basis as stated in the accounting policies. There have been no changes in accounting policies. All policies are in line with the year ended 31 July 2015 and we do not anticipate any further changes for the year ended 31 July 2016.

3. Prior year adjustment

The financial statements have been adjusted to reflect the correction of an error made in the financial statements for the year ended 31 July 2013 and 2014, which has led to the restatements 2015 interim results. This arose following management's review of the revenue provision calculation. The conclusion of the review was that the rate used to calculate the estimated variability in value was too low and also the provision was held for 24 months and then released which did not reflect the lengthening of contract terms the Group was experiencing.

Details of the year end adjustment are included in the audited 31 July 2015 accounts.

The following financial statement extracts show the impact of the prior period adjustments to the Group's 2015 interim financial statements.

Consolidated statement of profit and loss and other comprehensive income

Consolidated statement of financial position

4. Segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the Chief Executive Officer and Chief Financial Officer. The Group reports to the Board under both UK GAAP and IFRS. Underlying accounting information is prepared under UK GAAP and the below adjustments to take results to IFRS are made for the purpose of reporting to the Board and external reporting.

During the current period the Group serviced both Corporate and Enterprise businesses. The Board considers that the services were offered form two distinct segments in the current period.

Operating segments are determined based on the internal reporting information and management structure within the Group. Information regarding the results of the reportable segment is included below. Performance is based on segment operating profit or loss before share-based payment charges, depreciation, amortisation and acquisition costs, as reported in the internal management reports that are reviewed by the CODM. The segment operating profit or loss is used to measure performance. Revenues disclosed below represent revenues to external customers.

The Enterprise Division derives its revenues from energy procurement by negotiating rates with energy suppliers for small and medium sized business customers throughout the UK, Republic of Ireland and certain European markets. The Corporate Division derives its revenues from energy procurement of larger industrial and commercial customers, providing an account care service and offering a variety of utility management products and services designed to assist customers manage their energy consumption.

Other information

5. Exceptional items

Exceptional items in the six months ending 31 January 2016 relate to £341k in relation to restructuring and reorganisation costs and £29k of onerous lease discounting.

Included in exceptional items is also a credit of £5,740k which has arisen from the release of deferred consideration, net of discounting, in relation to the acquisition of t-mac technologies Limited where earn-out criteria were not met and a related goodwill impairment charge of £1,315k.

Exceptional items in the year ended 31 July 2015 relate to the costs incurred in the acquisition of t-mac Technologies Limited, costs of £39k in relation to unforeseen late invoices connected to the prior year acquisition of Icon Communication Centres s.r.o. and other aborted acquisition costs. Also included are restructuring and re-organisation costs such as settlement payments of £83k and costs of £52k incurred in the set-up of a new head office.

In the year ended 2015 there is also a credit of £268k offsetting these costs which arose from the release of restructure and dilapidation provisions not utilised. Exceptional items are included in administrative expenses in the statement of profit and loss.

6. Dividends

In the period a final dividend in relation to the year ended 31 July 2015 of 3.3p was paid on 76,195,520 shares. The dividend was waived on 500,000 shares.

7. Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume the conversion of all potentially dilutive ordinary shares.

The Group has potentially dilutive ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period.

8. Property, plant and equipment

During the six months ended 31 January 2016 the group incurred property, plant and equipment additions of £199,308 (HY 2015: £2,120,852).

9. Share capital

Ordinary shares carry the right to one vote per share at general meetings of the Company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up.

During the period ending 31 January 2016 a further 1,123,978 were issued pursuant to the exercise of options over such shares, which resulted in additions to share capital of £1,123 and additions to share premium of £939,262.

10. Post balance sheet events

Since the end of financial period, the Directors are not aware of any other matter or circumstance that would need disclosing.