Interim Results

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For immediate release 10 November 2015

Energy Assets Group plc

("Energy Assets", the "Company" or the "Group")

Interim Results for the six months ended 30 September 2015

Energy Assets Group plc (LSE: EAS.L), the largest independent provider of industrial and commercial (I&C) gas metering services in the UK1 and a major provider of utility infrastructure services and electricity metering anddata services is pleased to announce its Interim Results for the six months ended 30 September 2015 (H1 2015/16). 

Financial highlights

· Total revenue increased by 22% to £20.6m (H1 2014/15: £16.9m);

· Recurring revenue generated from the Group's meter and data asset portfolio increased by 15% to £12.7m (H1 2014/15: £11.0m), representing 62% of total revenue;

· The Siteworks business continues to make good progress with revenue increasing by 34% to £7.9m (H1 2014/15: £5.9m), through both organic growth and from the SA Gas acquisition in March 2015;

· EBITDA increased by 19% to £10.5m (H1 2014/15: £8.8m);

· Operating profit increased by 25% to £7.0m (H1 2014/15: £5.6m);

· Profit before tax increased by 26% to £4.8m (H1 2014/15: £3.8m);

· Basic earnings per share increased by 27% to 14p (H1 2014/15: 11p);

· Cash generated from operations increased by 21% to £9.7m (H1 2014/2015: £8.0m);

· Available facilities at 30 September 2015 of £24.8m and cash at bank of £7.1m.

Operational highlights

· The Group's owned and managed meter and data asset portfolio has increased by 11% since the last financial year end to circa 404,000 assets (31 March 2015: circa 365,000);

· The contract with British Gas Business, awarded in July 2014, is now generating increased installation rates compared to prior periods, in line with management expectations;

· Within the electricity sector, an agreement with npower, secured in October 2014, for the provision of data collection and aggregation services has been extended to 2019. Additionally, our relationship with major gas customer Corona Energy has been further strengthened through a new electricity metering contract signed during the period;

· Cumulative capital investment in meter and data assets increased by 10% since the start of the financial year to £118.3m which has driven the increase in recurring revenue in the current period;

· 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 to date in the current financial year is as expected and the Board is pleased with the progress of each of these businesses;

· An additional 'Community Metering' pilot project has been undertaken with a London council, further proving the technology and delivery concept of this initiative.

Current trading and outlook

The second half of the financial year has started well. The Group's major metering and data contracts continue to perform strongly and the Siteworks business continues to make good progress both in terms of revenue growth and the sophistication of the services provided.

Commenting on the half year results, Chief Executive Officer Phil Bellamy-Lee said:

"The results for the first half of the financial year show a continuation of the excellent growth and success Energy Assets has achieved in recent years following another period of strong trading activity.

Our strong supply chain relationships, engineering competence, experienced management team and focus on quality continue to differentiate us from our competitors as we strive towards being the supplier of choice for customers within the UK I&C sector, enabling achievement of our primary objective to be the largest independent provider of I&C energy metering services in the UK."

Enquiries

For further information visit www.energyassets.co.uk or contact:

Notes to Editors:

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 and end-user consumers of energy a broad spectrum of expert metering services from the provision and management of new and replacement meters through its Meter Asset Management division to the procurement and project management of related utility infrastructure works, including fully managed gas installations and live connections, gas pipework modifications and in-depth gas maintenance projects, through its Siteworks division. The Group also collects and provides energy consumption data through its Data Services division.

Energy Assets (EAS) is listed on the Main Market of the London Stock Exchange.

Interim Management Report

Throughout the current period the business has continued to grow strongly with further assets added to the Group's robust portfolio and a further rise in Siteworks revenue when compared to the comparative financial period. 

Key performance indicators

The Group monitors a number of key performance indicators as follows:

Results for the period

For the six months ended 30 September 2015, Group revenue was £20.6m showing an increase of £3.7m (22%) compared with the same period in the last financial year.

Recurring revenue of £12.7m accounted for 62% of total revenue, compared to £11.0m in the corresponding period in the previous year, an increase of 15%. These recurring revenues are as a result of the long term nature of the Group's metering and data contracts.

Gross profit increased by 29% to £11.7m (H1 2014/15: £9.1m) with all segments contributing to this improvement.

Operating profit increased from £5.7m to £7.0m, a rise of 23%, and EBITDA increased by 18% from £8.9m to £10.5m.

Finance costs have increased to £2.2m (H1 2014/15: £1.8m) due to the increase in borrowings supporting the Group's growing investment in meter assets. However, the return achieved by these borrowings continues to grow and net debt/EBITDA ratio has reduced in the current period to 3.3 times (H1 2015/15: 3.5).

Profit before tax was £4.8m (H1 2014/15: £3.8m) after incurring exceptional share based payment costs.

At a divisional level, the Group has installed circa 11,000 gas meter assets since the end of the last financial year increasing its portfolio by 9% to circa 134,000 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 £269.2m (H1 2014/15: £235.9m). 

In addition, the managed electricity meter asset portfolio acquired with Bglobal Metering has increased to circa 79,000 assets at 30 September 2015 (31 March 2015: 68,000).

Revenue from our data services business has increased to £4.7m (H1 2014/15: £4.3m) and the number of meter points from which data is collected has increased to circa 191,000 across gas and electricity (H1 2014/15: circa 162,500). This represents one of the largest portfolios within the UK I&C sector.

The Gas Industry Registration Scheme (GIRS) accredited Siteworks division continues to develop with significant growth during the first half of the current financial year. Overall revenues improved by 34% to £7.9m as a result of organic growth, the SA Gas acquisition and increased opportunity within the electricity sector following the acquisition of Bglobal Metering.

Acquisitions

Throughout the current financial year, the Group has continued to see benefits from the three acquisitions which took place in the year ended 31 March 2015. Bglobal Metering, Origin and SA Gas are performing well under Energy Assets management and are now fully integrated into the Group. Performance to date in the current financial year is in line with management expectations and the Board is pleased with the progress of each of these businesses.

The Group has continued to increase its presence in the electricity sector and has won a number of new contracts since taking ownership of Bglobal Metering in April 2014. An agreement with npower, which was secured in October 2014, for the provision of data collection and aggregation services has been extended to 2019 and a new Corona Energy electricity metering contract has also been signed during the period further strengthening this relationship across both gas and electricity.

Origin continues to provide the software interface and on-site mobile installation and audit platform which is an integral element of Energy Assets' unique project and supply chain management platform 'TEAMS'. The Group is also benefitting from the expertise of the acquired labour force who have made a major contribution to the continued development of the Group's web enabled service offering and industry leading IT systems, which provide an increasing service differentiation for our customers.

The Group's Siteworks business is also seeing the benefit of the integration of the SA Gas business since the year end. The acquisition has significantly extended the Group's operational capability as well as expanding the range of increasingly sophisticated services provided to link the gas network to the customer's usage point, enabling the Group to increase the market share of its existing Siteworks division and provide a broader service offering to customers.

Community metering

The CityWest Homes pilot project, which included the installation and maintenance of meters and new Half Hourly (HH) "Community Metering" technology developed by the Group, has now been completed with installation of "Community Metering" in 800 properties across eight social housing tower blocks in Central London. This technology is the first of its kind in the UK and will allow suppliers to provide beneficial tariffs to the landlord and therefore reduce energy charges to residents where fuel poverty is prevalent. 

An additional pilot project has been undertaken with a London council, further proving the technology and delivery concept of this initiative, which should present multiple opportunities for other projects of this kind within the social housing, local authority and heat with rent sectors, generating future revenue potential for the Group.

Funding and Financial position

The Group continues to enjoy good relationships with all its banking partners, who have expressed a keen interest to continue working with Energy Assets due to the Group's strong asset portfolio which generates attractive long-term recurring revenue streams. We are confident that these relationships will provide sufficient funding to help facilitate growth plans whether these are organic or through acquisition.

Available facilities at 30 September 2015 amounted to £24.8m (30 September 2014: £33.5m) and the cash at bank balance was £7.1m (H1 2014/15: £5.1m). 

Net debt at 30 September 2015 of £69.1m was £4.0m higher than at 31 March 2015 as a result of the increase in capital expenditure to service the growing meter portfolio. Capital investment in meters amounted to £10.3m in the year to date. At 30 September 2015, Energy Assets had a gas meter portfolio of circa 134,000 meters with a net book value of £93.0m (30 September 2014: circa 112,000 gas meters with a net book value of £77.1m). 

Principal risks and uncertainties

Details of the principal risks and uncertainties faced by the Group are included on pages 16 and 17 of the published annual report and financial statements for the year ended 31 March 2015. No material additional risks or uncertainties have been identified since the financial year end which could impact the business in the coming six months.

Current trading and outlook

The second half of the financial year has started well. The Group's major metering and data contracts continue to perform strongly and the Siteworks business continues to make good progress both in terms of revenue growth and the sophistication of the services provided. 

The respected Energy Assets brands and reputation continues to put the Company in a good position to develop relationships with other major utility suppliers and to seek future opportunities within the UK I&C utility market, thereby ensuring Energy Assets is well positioned to achieve its primary objective to be the largest independent provider of I&C energy metering services in the UK.

Responsibility statement 

We confirm that to the best of our knowledge:

a) The condensed consolidated interim financial information contained in this document has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union;

b) The interim management report includes a fair review of the information required by the Financial Conduct Authority's Disclosure and Transparency Rules (DTR) 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c) This document includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of and on behalf of the Board 

Philip Bellamy-Lee John McMorrow

Chief Executive Officer Chief Financial Officer

10 November 2015

Consolidated Statement of Comprehensive Income

For six months ended 30 September 2015

Consolidated Balance Sheet

As at 30 September 2015

The notes on pages 13 to 24 form an integral part of this interim consolidated financial information.

Consolidated Statement of Changes in Equity

For six months ended 30 September 2015

Consolidated Statement of Changes in Equity

For six months ended 30 September 2015

Consolidated Statement of Cash Flows

For six months ended 30 September 2015

Notes

1) Financial information

This announcement does not constitute full accounts within the meaning of the Companies Act 2006 and the condensed interim financial information included within has been reviewed but not audited. It does not therefore include all the information and disclosures required in the annual financial statements as at 31 March 2015 which were approved by the Directors on 9 June 2015 and delivered to the registrar of companies. The audit report received on those accounts was unqualified and did not contain any emphasis of matter paragraph nor any statement under section 498 of the Companies Act 2006.

This information has been approved for issue by the Board of Directors of Energy Assets Group plc, a public limited company domiciled and incorporated in the United Kingdom with shares listed on the London Stock Exchange. The registered office address is Ship Canal House, 98 King Street, Manchester, M2 4WU. 

2) Basis of preparation

The condensed consolidated interim financial information included within this announcement has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 "Interim Financial Reporting" as adopted by the European Union (EU) and should be read in conjunction with the annual financial statements for the year ended 31 March 2015, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

The consolidated interim financial information has been prepared under the historical cost convention, as modified by financial assets and liabilities (including derivative instruments) at fair value through profit or loss.

A financial review of the business is outlined on pages 4 and 5.

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 business review on pages 4 to 6. 

The Directors have considered these factors, the likely performance of the business and possible alternative outcomes, the financing facilities available to the Group and the possible actions able to be taken should new facilities not be available in the future. They have also prepared cashflow forecasts which show the Group expects to meet its liabilities as they fall due for a period in excess of 12 months from the date of the half year report. 

The Group maintains substantial headroom in its funding facilities, had cash at bank of £7.1m at 30 September 2015 and continued to be cash generative through trading operations.

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 the half year report. Accordingly the financial information has been prepared on the going concern basis. A longer term viability statement will be included in the Annual Report and Accounts for the year ended 31 March 2016.

4) Accounting policies

The accounting policies adopted in the preparation of the financial information for the six months ended 30 September 2015 are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRS') as adopted by the European Union and are consistent with those applied during the financial year ended 31 March 2015 as disclosed in the Annual Report and Accounts for that period. 

Exceptional items are disclosed and described separately in the interim financial information where it is necessary to do so to provide further understanding of the financial performance of the Group.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total earnings.

5) Estimates

The preparation of interim financial information requires management to make certain judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual amounts may differ from these estimates.

In preparing this condensed consolidated interim financial information the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 March 2015.

6) 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 head office and management overhead costs, cash, accounts receivable and accounts payable.

7) Exceptional items

Items that are both 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.

The Group implemented a number of share based payment schemes as part of the IPO on 22 March 2012. These awards have fully vested and the expense for the current period is in relation to additional employer's national insurance liability arising due to the increasing share price.

8) Taxation

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:

Changes to the UK Corporation tax rates were substantively enacted as part of the Finance Bill 2013 on 2 July 2013. These include reductions to the main rate to reduce the rate to 21% from 1 April 2014 and to 20% from 1 April 2015. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

9) 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 period.

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 during the period) based on the monetary value of the subscription rights 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 Company will be required to adjust the earnings per share calculation in relation to the share options that are in issue under the LTIP, IPO Award Plan and Deferred Bonus Plan share based incentive schemes as set out below. None of the shares under the Employee Retention Award Plan are potentially dilutive as these are to be settled with shares purchased on the open market.

Adjusted earnings per share

The earnings per share calculation in prior years has been impacted in relation to exceptional items. The profit figures have therefore been adjusted to show profit after a notional tax charge at 20% (2015: 21%) and before exceptional items.

10) Property, plant and equipment

Gas Meter additions in the period to 30 September 2015 include directly attributable costs of £2.4m (H1 2014/15: £1.9m).

Borrowings are secured by a cross company guarantee and fixed and floating charge over certain meter and data logger assets.

11) Financial risk management and financial instruments

The Board reviews and agrees policies for managing the risks associated with interest rate risk, foreign exchange risk, credit risk, liquidity risk and capital. The Group has in place a risk management policy that seeks to minimise any adverse effect on its financial performance by continually monitoring material financial risks.

These condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements and should therefore be read in conjunction with the Group's annual financial statements as at 31 March 2015. There have been no changes in the risk management department or in any risk management policies since the financial year end.

Fair value estimation

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

· Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities;

· Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly; and

· Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

The Group held the following financial instruments carried at fair value:

The above outlined financial instruments are not traded in an active market and relate to over-the-counter derivatives. The fair value is determined using forward interest rates extracted from observable yield curves.

For all other financial assets and liabilities there is no material difference between the fair value and the carrying value included in the financial statements.

12) Net debt/EBITDA

The Group monitors capital on the basis of net debt divided by EBITDA before exceptional items. Net debt is calculated as total borrowings less cash and EBITDA is calculated as operating profit before any significant non-recurring items, interest, tax, depreciation and amortisation as follows:

13) Related party transactions

Energy Assets Group plc is a listed company with 20% of the ordinary share capital held by Macquarie Investments 2 Limited. The remaining 80% of the shares are widely held.

During the period, sales to related parties amounted to £4.5m (H1 2014/15: £4.5m) being sales made on an arm's length basis to a company controlled by the Group's significant shareholder. In addition, revenue of £2.5m (H1 2014/15: £2.5m) was received from another single external customer in relation to data and metering services.

All transactions with related parties were made on an arm's length basis in line with terms that would be available to third parties.

14) Leased assets

The Group, as part of its core business, is a lessor of metering assets. These are leased to customers under operating leases which are subject to annual reviews and are cancellable by the customer. The minimum lease rentals receivable at current prices, assuming the lease remains in place for remaining useful life of the asset, are as follows: