Preliminary Results

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Energy Assets Group plc

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

Maiden Preliminary Results for the year ended 31 March 2012

Energy Assets Group plc (LSE: EAS.L), the largest independent provider of industrial and commercial ("I&C") gas metering services in the UK (by number of meters owned and managed), is pleased to announce its maiden preliminary results for the year ended 31 March 2012 following the initial public offering and admission to trading on the Official List of the London Stock Exchange. Today, Energy Assets reports a profit before tax and exceptional items of £2.9m which is at the top end of the range indicated within the prospectus published in respect of the flotation. 

Financial highlights

·; Successful Main Market flotation on the London Stock Exchange as a premium listed company in March 2012 raising £15.0m (gross) of new equity funding

·; Cash generated from operations of £7.1m (2011: £5.0m) showing growth of 42%

·; Revenue increased by 32% to £12.7m (2011: £9.6m) with £8.3m (65%) recurring in nature (2011: £5.3m or 55%)

·; Operating profit before exceptional items increased from £3.5m to £5.6m, an increase of 60% with operating profit margin increasing to 44% (2011: 36%)

·; Adjusted EPS of 7.85p based on share capital at the date of listing being in issue for the full year (2011: 5.01p on an equivalent basis)

·; Profit before tax and exceptional items increased by 53% to £2.9m (2011: £1.9m). Profit before tax was £0.2m (2011: £2.4m) after incurring exceptional IPO costs

Operational highlights

·; Continued development of our position as the largest independent provider of gas metering services within the UK I&C sector (by volume of meters) with the metering portfolio owned and installed increasing by 34% to 63,000 (2011: 47,000) and over 80% coverage of the I&C gas market by volume of gas supplied serving 23 gas suppliers

·; Data logger portfolio increased by 40% to 21,000 (2011: 15,000) representing one of the largest independent portfolios within the I&C sector

Current trading and outlook

·; The 2012/13 financial year has started well with management's target to grow the meter and data logger portfolio being on track

·; Strong performance in Automated Meter Reading ("AMR") contract renewals are being experienced with a 98% success rate during Q1 based on the number of meter points as a percentage of AMR units

·; The Group continues its active discussions with gas suppliers requiring a fully integrated metering, AMR and Siteworks service provision

·; The business outlook for 2012/13 remains positive

Commenting on the strategy and outlook for 2013, Chief Executive Phil Bellamy-Lee said:

"Our primary strategy for the current year continues to be the expansion of our market share as a Meter Asset Manager ("MAM") within the UK I&C gas sector by further capitalising on identified market opportunities. Our successful positioning as the leading independent MAM (by volume of meters owned and managed), coupled with Government regulatory requirements to ensure meters in the UK are advanced or smart, puts us in a strong position. 

In line with our stated objectives during the IPO process, we have also strengthened our Siteworks business development and design team, placed further emphasis on sales and marketing activities within AMR and gained accreditation enabling direct metering installation works. All of these actions are enablers to maximise the opportunity available to our integrated solution.

The financial strength of the Group has been significantly increased by our listing in March and in conjunction with the extended funding resources from our lenders we now have a solid platform to take advantage of these favourable market opportunities and look forward to the future with added confidence."

Enquiries

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

Notes to Editors:

Energy Assets provides gas metering and related services in the I&C segment of the UK gas market and is the largest independent provider of I&C gas metering services in the UK (by number of meters under management). The Group offers gas suppliers and end-user consumers of gas a broad spectrum of metering services from the provision and management of new and replacement meters through its MAM Services division to the procurement and project management of related gas infrastructure works and the collection and provision of gas consumption data through the Group's Siteworks and AMR divisions.

Chairman's Statement

I am delighted to have joined the Board of Energy Assets at such a pivotal time in its development. The major corporate event of the year was our recent initial public offering and flotation in the premium segment of the Main Market of the London Stock Exchange which completed in March 2012 and raised net proceeds of £11.7m. I would like to take this opportunity to welcome our new shareholders as we present our maiden set of annual results as a publicly listed company and congratulate all involved on a successful transaction. We are delighted to have such high quality institutional investors on our shareholder register and we look forward to working with them over the coming years.

The Board

We have an excellent management team who have steered the business through a period of significant growth with great success. I have no doubt that they benefitted from the guidance of the Macquarie representative Non-executive Directors, Matthew Gray and Paul Plewman, over the period that Macquarie controlled the Group. However, in conjunction with the flotation, Matthew and Paul have stepped down to allow the governance of the Group to be more independent. We thank them both for all of their help, input and guidance over the years.

I am delighted to welcome our two new Non-executive Directors, David MacFarlane and Matthew Booth, and look forward to working with them and the Executive team in the years to come.

Dividend

Given the Company only listed on 22 March 2012 the Board is not recommending a dividend for the financial year ended 31 March 2012. Funds recently raised will be utilised for continued investment in the asset portfolio of the business in the medium term, continuing its expansion, as outlined in the prospectus.

Outlook

Energy Assets is now a well funded, publicly listed company with a track record of growth, a blue chip customer base, state of the art systems and a truly dedicated team committed to the growth of the Group. The business outlook for 2012/13 is positive and the financial year has started well with management's target to grow the meter and data logger portfolio being on track. The Group is continuing its dialogue with gas suppliers and those in need of our services as a fully integrated metering solution and we look forward to our future with excitement and confidence.

Dr Christopher Masters

Independent Non-Executive Chairman

21 June 2012

Business and Financial Review

We are delighted to present our maiden annual results following our listing for the year to 31 March 2012. 

We would like to thank our employees, who are crucial to our continued success, for their contribution during the course of this year. The Group is, at its heart, a service business and without the hard work and commitment of the team delivering that service we could not have continued to flourish in the way that we have. 

We are pleased to welcome the two new Non-executive Directors, David MacFarlane and Matthew Booth and our new Non-executive Chairman, Christopher Masters, to the Board. They all have impressive experience and a mix of skills that will be invaluable to us going forward. 

Business review

The Group has enjoyed another strong year of growth in our meter and AMR portfolios and there has also been a significant increase in the activity and efficiency of the Siteworks division. The financial strength of the business has been significantly increased by our listing in March which raised net proceeds of £11.7m and in conjunction with the extended funding resources granted by our lenders the business now has the flexibility to respond rapidly to future opportunities and further expand our asset portfolios. The flotation has reduced our net debt/EBITDA ratio to 2.4 (2011: 4.6). 

In summary, this has been a momentous and highly successful year for our business as outlined below:

Key Performance Indicators

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

Results for the year

For the year ended 31 March 2012, group revenue was £12.7m showing an increase of £3.1m (32%) compared with the previous financial year. This increase is mainly due to the increased recurring revenue as a result of the expanding meter and data logger portfolio owned and managed by the Group. At 31 March 2012 recurring revenue accounted for 65% (£8.3m) of total revenue compared to 55% (£5.3m) in the previous year. Additionally, the Group has increased its focus on the I&C market which typically generates higher rental incomes per meter than the domestic market further underpinning the revenue growth. Average rental income for I&C meters, of which we own 48,000, has increased in the current year to £135 per annum compared to £133 per annum in the year ended 31 March 2011.

EBITDA increased by 61% in the current year from £4.9m to £7.9m and gross profit increased by 49% from £5.1m (2011) to £7.6m (2012). All segments contributed to the improvement as well as helping to improve overall gross profit margins from 53% in 2011 to 60% this year.

On 22 March 2012 Energy Assets Group plc was admitted to trading on the Official List of the London Stock Exchange and significant non-recurring costs were incurred in relation to this of which £2.6m have been charged to the statement of comprehensive income.

Operating profit before exceptional IPO costs also increased from £3.5m to £5.6m in 2012 as a result of the growth in the business, this is a rise of 60%.

Finance costs increased from £1.6m to £2.8m due to increased borrowings supporting our growing investment in meter assets.

Profit before tax and exceptional items increased by 53% to £2.9m (2011: £1.9m). Profit before tax was £0.2m (2011: £2.4m) after incurring the exceptional IPO costs.

The results can be further analysed into the business divisions as follows:

Meter Asset Management

The Group's key area of activity is its meter asset management division which owns, provides, manages and maintains I&C gas meters as an OFGEM accredited Meter Asset Manager (MAM). Revenue is generated through long term rental payments from gas suppliers who supply gas through the Group's meters.

This division has made significant progress during the year installing circa 16,000 meters and increasing its total portfolio to circa 63,000 meters (up 34% from 2011). This represents over 80% coverage of the I&C gas market by volume of gas supplied and serving a total of 23 gas suppliers. Given that the design life of gas meters in the UK is in excess of 20 years it is expected that our assets will provide a solid source of long term recurring revenue. Meter asset management is, therefore, the core of our business and we are pleased to have continued to deliver on our strategy of developing an ever increasing base of long term recurring revenue which, for this division, is now at £5.7m and represents 45% of total Group revenue (2011: 35% and £3.4m). Gross profits for the meter asset management division increased to £3.8m (2011: £2.3m).

Siteworks

Through the Siteworks division the Group provides a comprehensive consultancy, system design and project management service for gas infrastructure works and meter point infrastructure.

In the 2012 financial year the Siteworks division has made some important steps forward. We made a strategic decision to bring more of the project management and design capability in-house rather than sourcing this externally. The result has been successful, improving overall gross profit by 35% to £2.7m (2011: £2.0m) and providing us with a strong platform to increase our market share in this segment and increase profitability further in 2013.

As part of our focus on customer service and operational cost efficiencies, Siteworks achieved Gas Industry Registration Scheme (GIRS) accreditation during the year. This gives us the ability to design Siteworks infrastructure in-house which further increases our service offering to the customer and is therefore a valuable selling tool.

Demand for our Siteworks service is driven by:

·; the requirement for new metering points, changes in the required size of a meter, infrastructure works that require the gas supply to be moved, removal of metering points from vacant properties or the removal of infrastructure from a building to be demolished;

·; the addition of key design, engineering and business development resource;

·; continued focus on high customer service levels.

These factors enable Energy Assets to be well placed for delivery of these services to both existing customers and the wider market.

Pulse 24 - Automated Meter Reading ("AMR")

The Group's AMR division (branded as Pulse 24) provides ASPCoP-approved AMR services, installing data loggers that collect and transmit consumption data from gas meters to a data centre for validation and formatting before provision to gas suppliers and end-user consumers.

Our Pulse 24 business has had a good trading year with a 30% increase in revenue to £2.6m (2011: £2.0m) and a 22% increase in gross profit to £1.1m (2011: £0.9m) as trading with commercial customers has gone from strength to strength as they seek better information across their property portfolios. The data logger portfolio increased by 40% to 21,000 (2011: 15,000) representing one of the largest independent portfolios within the I&C sector.

However, the effects of the difficult economic conditions has had more of an impact in Pulse 24 than in the other two divisions particularly as some local government funding restrictions have caused deferral of investment in the installation of data loggers. Despite this, we have benefitted from the broad spectrum of clients for whom we provide data with continued growth in revenue, profit and margin.

From April 2011 we changed our model from being outsourced through a full rental/data collection service to direct hardware purchase, installation and data delivery. In collaboration with Mercury Instruments, a division of the US company Honeywell, we redeveloped and simplified the onsite installation and data collection process introducing efficiencies and reducing operational risk.

In a further illustration of the progression of Pulse 24, the Group established a team of installation technicians during the year and as a result Energy Assets now installs in excess of 90% of its data loggers whereas in the past this function was outsourced to other service providers. This move to a direct labour installation process gives the business greater control of the installation process and consequently helps to meet customer requirements more flexibly and efficiently. 

To date in the current year a strong performance in AMR contract renewals is being experienced with a 98% success rate during Q1 based on the number of meter points as a percentage of AMR units. 

Financial Position and Listing

On 22 March 2012 Energy Assets Group plc was admitted to trading on the Main Market of the London Stock Exchange as a Premium Listed company. The IPO raised net primary proceeds of £11.7m through the issue of 14,395,705 new and existing ordinary shares and substantially increasing the cash balance to £16.4m at 31 March 2012. This will allow the funding of further investment in the asset portfolio in the current year alongside the existing debt finance from which the asset portfolio has previously been funded. The IPO proceeds give significant flexibility to respond to market opportunities as they arise without the need to arrange specific incremental funding. 

As at 31 March 2012, Energy Assets had £35.5m of debt outstanding against a meter portfolio of circa 63,000 meters with a net book value of £40.0m (2011: £27.3m of debt against circa 47,000 meters with a net book value of £27.9m).

Financial Risk Management

The Group operates conservative treasury policies. No investments other than short term cash deposits are held and loans are drawn down reflecting the level of meter installations in the previous month. 

The Group has limited exposure to cash flow or liquidity risk surrounding the repayment of debt since the loans drawn are repaid over a shorter period than the period over which the related meters are expected to generate revenue and furthermore Siteworks contracts are typically paid for in advance or strictly on 30 day end of month terms.

In addition, the business model results in a cash generative operating business where cash outflows (predominantly the cash cost of investing in the installation of new meter and data logger assets) can be controlled or stopped at short notice if necessary. The Group's customers are either large retail groups, local authorities or, in the case of the meter asset management division, well capitalised gas suppliers all of whom have demonstrated an excellent track record of payments. The Group is therefore not significantly exposed to credit risk. 

Energy Assets operates in a competitive industry and is, therefore, exposed to some price risk particularly in relation to future meter installations, however, pricing is kept under review and there is no reason to expect any material deterioration in meter pricing as there have been no instances of this in recent years. 

The Group hedges against interest rate risk on any variable rate loans by which it funds the business. The variable rate loans are provided by Macquarie and are long term, typically ten years in duration. These loans are priced at 4% over Libor but the Group has fixed this rate by entering into an interest swap which effectively sets Libor for this purpose at 3.055%. This swap is over a notional amount of up to £11.2m (depending on what has been drawn down) whereas the facility limit is £15.9m. As the hedge is therefore not perfect for the full facility the Group does retain some exposure to interest rate risk, however, as only £9.3m had been drawn as at 31 March 2012 there has been limited impact in the current year.

All other loans are fixed at point of drawdown meaning that the rate for each month's drawdown can be different to the rate in other months.

The Group purchases data loggers in US dollars. To avoid short term deteriorations in exchange rates, the Group purchases US dollars up to three months in advance but otherwise does not seek to hedge any foreign exchange.

Strategy and outlook

The primary strategy of the Group for the current year continues to be the expansion of our market share as a Meter Asset Manager within the UK I&C gas sector by further capitalising on identified market opportunities. Our successful positioning as the leading independent MAM (by volume of meters owned and managed), coupled with Government regulatory requirements to ensure meters in the UK are advanced or smart, puts us in a strong position. 

In line with our stated objectives during the IPO process, we have also strengthened our Siteworks business development and design team, placed further emphasis on sales and marketing activities within AMR and gained accreditation enabling direct metering installation works. All of these actions are enablers to maximise the opportunity available to our integrated solution.

The new financial year has started well and the business continues to perform in line with expectations. Since raising new funds at the IPO, the Group has continued its dialogue with gas suppliers and those in need of our services as a fully integrated metering solution. The Directors expect to see continuing growth across the Group with management's target to grow overall meter and data logger portfolio being on track in the current year to date. We look forward to the coming year with confidence.

Philip Bellamy-Lee John McMorrow

Chief Executive Officer Chief Financial Officer

21 June 2012

Consolidated Statement of Comprehensive Income

For year ended 31 March 2012

Consolidated Balance Sheet

As at 31 March 2012

Consolidated Statement of Changes in Equity

For year ended 31 March 2012

Consolidated Statement of Cash Flows

For year ended 31 March 2012

Notes

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 2012 for which an unqualified audit report has been received.

The statutory accounts for the year ended 31 March 2012 will be delivered to the Registrar of Companies following the Annual General Meeting (AGM) of Energy Assets Group plc which is intended to take place in London on 6 September 2012. It will be ensured that a Notice of the AGM and related papers, including the statutory accounts, will be sent to shareholders at least 21 working 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) this announcement 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, a company domiciled and incorporated in the United Kingdom on 1 February 2012. 

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) Initial public offering

On 22 March 2012 Energy Assets Group plc was admitted to trading on the Official List of the London Stock Exchange as a Premium Listed company. The IPO raised net primary proceeds of £11.7m through the issue of 14,395,705 new and existing ordinary shares substantially increasing the cash balance to £16.4m at 31 March 2012. This will allow the funding of further investment in the asset portfolio in the current year alongside the existing debt finance from which the asset portfolio has previously been funded. The IPO proceeds give significant flexibility to respond to opportunities as they arise without the need to arrange specific incremental funding. 

During the year, in connection with the listing of the Company on the London Stock Exchange, the Company was incorporated and introduced as the new holding company of the Group on 21 February 2012 as follows:

·; On 21 February 34,999,998 million £1 shares were issued to the shareholders of Energy Assets Holdings Limited (the previous holding company of the Group) in connection with its acquisition by the Company;

·; On 22 February the sole shareholder resolved to consolidate the Company's capital to 20,000,000 shares of £1.75;

·; On 23 February the sole shareholder resolved to reduce the nominal value of each share from £1.75 to 1p;

Notes (continued)

Note 3 - Initial public offering (continued)

·; On 22 March 2012 a further 7,142,857 new shares were issued in connection with the offering of 14,395,705 new and existing 1p shares at 210 pence per share bringing the total share capital to 27,142,857.

4) 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 and Financial Review on pages 4 to 8.

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.

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 financial statements. Accordingly the financial statements have been prepared on the going concern basis.

5) 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 only operates in the UK and for management purposes is organised into three core divisions:

·; Meter asset management

·; AMR data provision

·; Siteworks

This forms the basis of the Group's reportable operating segments.

The meter asset management segment combines the results of both the installation and management of gas meters as both have similar long term economic characteristics and similar nature of their products and services due to the customer base and regulatory environment under which they operate.

The measure of profit principally used to allocate resources is net contribution. However, as interest costs arise on borrowings which are wholly attributable to the meter asset management segment, finance costs are also allocated to this segment. Allocated operating costs represent management charges including payroll and related overheads. 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.

Notes (continued)

Note 5 - Segment information (continued)

Notes (continued)

Note 5 - Segment information (continued)

During the year, sales to related parties amounted to £6.7m (2011: £4.4m) being sales made on an arm's length basis to Corona Energy Limited, a Macquarie Group company.

Notes (continued)

6) 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.

On 22 March 2012 Energy Assets plc was admitted to trading on the Official List of the London Stock Exchange as a Premium Listed company. The IPO raised net proceeds of £11.7m through the issue of 14,395,705 new and existing ordinary shares. However, significant non-recurring costs were incurred in relation to the IPO and it is deemed necessary to separately identify these costs.

Additionally, exceptional IPO costs of £0.7m were offset against equity in the current year amounting to total IPO costs of £3.3m.

The Group also implemented a number of share based payment schemes as part of the IPO. The expense for the current year in relation to these schemes amounted to £0.02m.

The gain of £0.5m recognised in the year ended 31 March 2011 relates to the release of deferred consideration which was potentially payable in relation to the acquisition of Energy Assets Limited in January 2009 due to the profit trigger for this final instalment not being achieved. 

7) 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:

Notes (continued)

Note 7 - Taxation (continued)

Energy Assets Group plc has agreed with its significant shareholder and 100% parent until the Listing that the wider Macquarie Group will surrender tax losses under Part 5 of Corporation Tax Act 2010 to cover Energy Assets Group plc taxable profits in the years ended 31 March 2011 and 31 March 2012 for the period of ownership hence the tax credit for the year ended 31 March 2012.

It is anticipated that the Group will be subject to ordinary rates of corporation tax in the UK going forward.

A number of further changes to the UK corporation tax system were announced in the March 2012 UK Budget Statement. A resolution passed by Parliament on 26 March 2012 reduced the main rate of corporation tax to 24% from 1 April 2012. Legislation to reduce the main rate of corporation tax from 24% to 23% from 1 April 2013 is expected to be included in Finance Act 2012. A further reduction to the main rate is also proposed to reduce the rate to 22% from 1 April 2014. None of these rate reductions had been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements. Had these changes been substantively enacted at the balance sheet date there would have been no significant impact on the accounts. 

8) Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

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. 

Notes (continued)

Note 8 - Earnings per share (continued)

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 since Listing) 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 would have been 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 shares that are to be issued under the Share Incentive Plan and share options in issue under the remaining share based incentive schemes as follows:

Adjusted earnings per share

Given the large issue of shares as a result of the IPO on 22 March 2012 the Group now has 27,142,857 shares in issue compared to a weighted average of 3,462,433 in the current year. Going forward EPS will be calculated using these shares as a basis and therefore it is useful to review what the current year EPS would have been if these shares had been in issue for the entire year and compare this to what EPS would have been if these shares had been in issue in the prior year. 

Additionally, there has been a significant tax credit received in the current year due to group relief received from Macquarie, however, this will not be available going forward and therefore the profit figure has been adjusted to show profit after a notional tax charge at 26% in the current year and before exceptional items. A notional tax charge at a rate of 28% has also been used for the prior year given this has also previously been skewed by group relief.  

Notes (continued)

9) Property, plant and equipment

Notes (continued)

Note 9 - Property, plant and equipment (continued)

Gas Meter additions include directly attributable costs of £2,212k (2011: £2,313k).

Borrowings are secured by a cross company guarantee and fixed and floating charge over the Group's assets.

10) 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 significant non-recurring items, interest, tax, depreciation and amortisation as follows:

The decrease in the net debt:EBITDA ratio can be attributed to increased cash balances generated by the IPO and increased EBITDA due to increased meter and data logger rental revenue.

Notes (continued)

11) Leased assets

The Group, as part of its core business, is a lessor of 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:

These lease payments are subject to annual reviews and are cancellable by the customer.