REG - Inspired PLC - Half year trading update

InspiredAnnouncement

16/08/2024 07:00

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RNS Number : 6729A  Inspired PLC  16 August 2024

16 August 2024

 

Inspired PLC

("Inspired" or the "Group")

 

Half Year Trading Update

Termination of Deed of Variation

Notice of Results and Investor Presentation

 

Inspired (AIM: INSE), a leading technology-enabled service provider delivering
solutions to enable businesses to transition to net-zero and manage their
response to climate change, provides an update on trading for the six-month
period ended 30 June 2024.

 

The Group made good progress in the first half of the financial year. The
Board expects to report results in line with management expectations for the
period ended 30 June 2024 and remains confident in delivering full year
results in line with market consensus. This is dependent on delivering a small
number of significant optimisation services projects, which are expected to be
contracted and commence on-site in Q4 2024. The Group's strategy, which is
centred on new client wins and expanding the number of services provided to
existing customers, continues to drive growth in opportunities for 2024/25.

 

Divisional highlights

 

Robust performance across all four divisions, supported by long-term
structural growth drivers:

 

·      Assurance Services: highly encouraging momentum in new business
generation, with churn rates continuing to improve to deliver revenue growth
and margins stabilising as expected.

·     Optimisation Services: increasing levels of repeatable demand from
existing clients, alongside cross selling opportunities from the Assurance
Division, with clients focussing on the beneficial impacts of energy reduction
and delivering net-zero. Consistent with FY 2023, and as indicated in the FY
2023 results, the Group expects Optimisation Services to deliver c.60% of its
gross profit contribution in H2 2024, when a small number of significant
optimisation projects for large corporate customers are expected to contract
and commence on site. Notably, margins remain robust, with working capital
cycles improving in line with management's focus on invoicing and improved
payment terms.

·    ESG Services: delivered good growth, increasing the lifetime value
of existing clients and adding new clients to the Group.

·   Software Services: delivered consistent growth with new client wins,
and continues to underpin the Group's broader service delivery.

 

Ignite Energy LTD - Termination of the Deed of Variation

 

Inspired has accelerated the integration of Ignite and terminated its Deed of
Variation (the 'Deed') in relation to Ignite Energy LTD ('Ignite') and as a
result has no outstanding contingent consideration payment obligations in
relation to the Ignite transaction. The maximum contingent consideration
remaining available under the Deed was £9.2m, of which £5.4m was provided
for in the Group balance sheet as at 31 December 2023; this provision will now
be released in full to the Income Statement in 2024.

By way of background, Inspired acquired a 40% interest in Ignite in August
2019, with the remaining balance of its share capital acquired in July
2020. In the period that followed, operational integration of the Ignite
business was hindered as a result of COVID.

As announced on 22 May 2023, the Group entered into the Deed to the share
purchase agreement dated 9 July 2020 (the 'SPA'), to refresh the unearned
contingent consideration from the SPA, realign incentives and reset a three
year timeframe to facilitate a full transition of leadership and integration,
whilst also retaining the services of the Ignite vendors to execute on a
substantial growth opportunity for the Group.

The Group has made significant progress in converting the opportunity and
growing Optimisation Services to become the largest contributor to the Group's
financial performance, whilst completing the integration of Ignite and
executing on the transition of leadership. The Group now anticipates a full
transition of senior leadership will be completed by 31 May 2025 ('the
Restructuring Period'), two years earlier than set out in the Deed.

As a result of this accelerated transition, the Ignite vendors, being Benjamin
Higgins, David Higgins, Vanessa Higgins and Ethan Higgins, parties to the SPA
and Deed (the 'Ignite Vendors') have entered into an agreement terminating the
Deed (the 'Deed of Termination') and the Group now has no outstanding
contingent consideration payment obligations related to the Deed.

The Group has also entered into consultancy agreements with David Higgins and
Benjamin Higgins (the 'Consultants') for the Restructuring Period (the
'Consultancy Agreement'). The Consultancy Agreement contains a monthly fee
payable to each Consultant which is equivalent to their previous employment
contract and also includes a performance fee based on gross margin targets for
Ignite during the Restructuring Period (the 'Performance Fee'). Based on
Management's current expectations for the Ignite business, the total "on
target" Performance Fee would be £2.3m, payable in two instalments over H1
2025 and satisfied from existing cash resources.

Net debt and cash generation

 

The Group's focus on cash generation delivered improved cash conversion of
c.80% in H1 2024 (FY 2023: 75%), with cash conversion for the 12 months to 30
June 2024 in excess of 90%.

 

Following the cash payment in H1 2024 of £8.4m of the £10.6m contingent
consideration payable in FY 2024, related to acquisitions made in 2020 and
2021, the Group's net debt was £57.0m at 30 June 2024, (31 December 2023:
£48.7m), which is broadly in line with management's expectations.

 

Following the execution of the Deed of Termination, and the final contingent
consideration payment relating to the Businesswise Solutions LTD transaction
of £2.2m in H2 2024, the Group will have no further contingent consideration
payments to fund. Accordingly, cash generated from operations will now
primarily be allocated towards reducing the Group's net debt position and the
pursuit of organic growth opportunities, particularly those in the
Optimisation Services division.

 

Mark Dickinson, CEO of Inspired, commented: "The Group has delivered a robust
H1 performance and is better placed than ever as a full-service provider of
sustainability solutions for businesses. Managing energy costs and ESG are now
firmly embedded as operationally and commercially critical for most
businesses, creating sustained and increasing demand for Inspired's
differentiated products and services.

"The Optimisation Division has delivered significant growth since the
acquisition of Ignite. Ignite has been a key catalyst in the Group's
transformation from an energy procurement adviser to a full suite
sustainability services provider supporting businesses with the delivery of
their net zero transformation.

"It is clear that the strategy we have in place, which is focused on ensuring
customers have access to, and make use of, our full suite of sustainability
services, is driving a step change in the business. We look forward to
reporting further progress in cross selling across the Group's divisions for
H1 2024 when we publish our half year results."

Notice of Results

 

Inspired will announce its unaudited half year results for the six months to
30 June 2024 on 12 September 2024.

Analyst Presentation

An analyst briefing call will be held at 9.00 a.m. on the morning of the
results and those analysts wishing to join the presentation can register for
details via inspired@almastrategic.com (mailto:inspired@almapr.co.uk)

 

Retail Investor Presentation

A presentation to retail investors will be hosted on Thursday 12 September
2024 at 4.30 p.m. via the Investor Meet Company platform. The presentation is
open to all existing and potential shareholders. Questions can be submitted
pre-event via the Investor Meet Company dashboard up until 9.00 a.m. the day
before the meeting or at any time during the live presentation.

 

Investors can sign up to Investor Meet Company for free and add to
meet Inspired plc via:

https://www.investormeetcompany.com/inspired-plc/register-investor
(https://url.avanan.click/v2/___https:/www.investormeetcompany.com/inspired-plc/register-investor___.YXAxZTpzaG9yZWNhcDphOm86ZTViYTMxN2Q4OTJjOWI3M2E2NWRhNTkyY2I0MTJkMWI6NjozMjk3OjYzNDdhODRjYTkwMmI0NzIzNjRkYThiM2YzNzc4ZDAyZmZiOTA0MWM3NTU4MjIxNDVkOGE5YWE4YTYwOTlkMzM6cDpU)

Related Party Transaction

The Consultants are directors of Ignite which is a wholly owned subsidiary of
the Company and therefore are deemed to be related parties of the Company
under the AIM Rules for Companies ("AIM Rules"). Accordingly, the entering
into the Deed of Termination and the Consultancy Agreements by the Company
with the Ignite Vendors and Consultants respectively constitutes a related
party transaction under the AIM Rules (the "Related Party Transaction"). The
directors of the Company consider, having consulted with Shore Capital and
Corporate Limited ("Shore Capital"), the Company's nominated adviser, that the
terms of the Related Party Transaction are fair and reasonable insofar as
shareholders of the Company are concerned.

(*) The Company considers that the consensus forecasts for the year ended 31
December 2024 are revenue of £115.5m and Adjusted EBITDA of £27.4m.

Enquiries please contact:

 Inspired PLC                                        www.inspiredplc.co.uk

                                                   (https://url.avanan.click/v2/___http:/www.inspiredplc.co.uk___.YXAxZTpzaG9yZWNhcDphOm86ZTViYTMxN2Q4OTJjOWI3M2E2NWRhNTkyY2I0MTJkMWI6NjplNDhmOmIzYzU1YzJiMTU4NGU5ODExMDliZWQxYjYwNGI5NTQzMzUxYzY3NDE5NDc0YTFjZTUxYWEwMDBkZGIzZjhjMDM6cDpU)
 Mark Dickinson (Chief Executive Officer)

                                                   +44 (0) 1772 689250
 Paul Connor (Chief Financial Officer)

 David Cockshott (Chief Commercial Officer)

 Shore Capital (Nominated Adviser and Joint Broker)   +44 (0) 20 7408 4090

 Patrick Castle

 James Thomas

 Rachel Goldstein

 Liberum (Joint Broker)                              +44 (0) 20 3100 2000

 Edward Mansfield

 Satbir Kler

 Alma Strategic Communications                       +44 (0) 20 3405 0205

 Justine James                                       +44 (0) 7525 324431

 Hannah Campbell                                     inspired@almastrategic.com

 Will Ellis Hancock

 

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