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Inspired Energy builds market presence during pandemic

Snapshot

  • Inspired Energy is a consultancy that helps corporates with their energy buying and usage
  • Acquisitions have focused on optimisation services across utilities
  • Sector is very fragmented and open to consolidation
Inspired Energy plc -

Quick facts: Inspired Energy PLC

Price: 17 GBX

AIM:INSE
Market: AIM
Market Cap: £163.53 m
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What Inspired Energy does

Inspired Energy plc (LON:INSE) is an energy consultancy, which aims to take the headache out of energy procurement for big users, selecting the best deals, helping to cut consumption and digitising the whole process.

Also referred to as a Third Party Intermediary (TPI), it works mainly with commercial, industrial and public sector organisations to give advice on procurement, energy accounting, supply chain management, audit, optimisation and strategy.

Inspired has a ‘buy and build’ growth strategy, and keeps a keen eye on acquisition opportunities to help it expand its geographic spread, add technical capabilities and become more efficient within the growing market.

How it's doing

In March 2021, the group completed the acquisitions of Businesswise and General Energy Management (GEM).

For the financial year ended March 31, 2020, Businesswise delivered revenues of £3.79 mln, underlying earnings (EBITDA) of £1.3mln and profit before tax of £1.15mln. Businesswise’s net assets at the end of March 2020 stood at £1.92mln. GEM, meanwhile, made a profit before tax of £250,000 on revenues of £500,000 over the same period. At the end of March 2020, it had net assets of £400,000.

Inspired Energy is paying £6mln in cash upfront for Businesswise, with up to £23.5mln in cash payments to follow subject to the achievement of growth targets for the years 2021 – 2023 inclusive. For GEM, it is paying an initial cash consideration of £1.5mln, with a possible £250,000 to follow.

In September, Inspired Energy resumed dividend payments and said it was looking for more acquisitions following an uptick in corporate energy usage after the end of the first coronavirus (COVID-19) pandemic lockdown.

The consultant said acquisitions helped revenue in the half-year to June 30, 2020, rise by 25% to £20.9mln, but the impact of coronavirus restrictions meant corporate energy consumption fell 14% on average over the half-year, which affected margins, especially in the SME arm

Profits for the half-year dropped 41% to £1.42mln, though cash inflows increased 51% to £10.3mln as VAT and PAYE payments tax were deferred.

What the boss says: Mark Dickinson, chief executive

"Together, the funds raised in the July fundraising, and the benefits of the Ignite acquisition leave the Group in a strong financial position with the ability to make further progress in its organic and inorganic growth strategies.

“The pipeline of acquisition opportunities remains strong and the Board continues to review a number of potential transactions which could deliver strategic and financial benefits.”

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Inflexion points

  • The business has remained cash positive during lockdown period
  • Orders have continued to rise 
  • Acquisitions likely to boost market presence following recent fundraise

What the broker says; Shore Capital

Inspired’s house broker Shore Capital estimated the March 2021 acquisitions of Businesswise and GEM, based upon a 10-month contribution, will enhance Inspire’s adjusted profit before tax this year by about £1mln and increase earnings per share (EPS) by roughly 7%.

As a result, it has pencilled in 1.27p for its EPS forecast this year, up from 1.19p previously.

“As the economy recovers from the impact of the Covid pandemic, Inspired is trading on a revised FY2021F PER [price/earnings ratio] of 12.4x (EV [enterprise value]/EBITDA 9.0x), offering a progressive dividend yield of 2.3%. With recovery out of the pandemic set to emerge, Inspired is poised to benefit, in our view, delivering essential services in energy assurance and optimisation as well through its emerging ESG based compliance platforms,” Shore said.

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