TIDMGOOD
RNS Number : 3979I
Good Energy Group PLC
21 March 2018
Good Energy Group PLC
Un-audited Preliminary Results for the 12 months ended 31
December 2017
Resilient performance in a challenging market
The continuing business delivered a profit before tax of
GBP0.7m
Good Energy Group PLC ("Good Energy" or "the Company"), an
established renewable energy company supplying 100% renewable
electricity and green gas to homes and businesses, and providing
FIT services for renewable generators, today announces its
preliminary results for the twelve months ended 31 December
2017.
Year ended 31 December 2017 2017 2017 2016 % Change
GBPm Continued Discontinued Reported Continued Continued
operations operations operations operations
------------------------ ------------ -------------- ----------- ------------ ------------
Revenue GBP104.5m GBP0.01m GBP104.5m GBP89.7m +16.6%
------------------------ ------------ -------------- ----------- ------------ ------------
Gross Profit GBP29.3m GBP(3.7)m GBP25.6m GBP27.1m +8.2%
------------------------ ------------ -------------- ----------- ------------ ------------
Administration costs GBP(23.7)m GBP(0.3)m GBP(24.1)m GBP(20.9)m +13.5%
------------------------ ------------ -------------- ----------- ------------ ------------
Operating profit GBP5.6m GBP(4.0)m GBP1.6m GBP6.2m -9.8%
------------------------ ------------ -------------- ----------- ------------ ------------
Profit before tax GBP0.7m GBP(4.0)m GBP(3.3)m GBP2.0m -63.7%
------------------------ ------------ -------------- ----------- ------------ ------------
Net Debt GBP53.1m - GBP53.1m GBP52.1m +1.9%
------------------------ ------------ -------------- ----------- ------------ ------------
Cash balance GBP13.7m - GBP13.7m GBP6.3m 118.2%
------------------------ ------------ -------------- ----------- ------------ ------------
Basic earnings per
share (p) 8.1p - (17.1)p 12.9p -37.2%
------------------------ ------------ -------------- ----------- ------------ ------------
Full year dividend
per share (p) 3.3p - 3.3p 3.3p 0.0%
------------------------ ------------ -------------- ----------- ------------ ------------
Juliet Davenport, Founder and Chief Executive Officer, said:
Good Energy has delivered another year of robust growth in line
with expectations. During 2017, we built and focussed on optimising
our future operations in an energy market that is in
transition.
These are solid results given the tough market conditions in the
retail supply market. We have also delivered good growth in the
business supply market with some new key accounts.
During 2017, through our Fit for Growth programme we have
invested in new systems and technology to enhance customer
experience, reduced our costs to serve and created a platform for
future growth and greater profitability. We have seen growth in our
FIT services business and commenced pilot projects to launch our
first storage and electrical vehicle charging solutions.
Good Energy's purpose is to power the choice of a greener,
cleaner future together, with our people, our customers and our
investors. We believe that the energy market is undergoing
fundamental change, where the future value will be in energy
services in a decentralised market.
As regulation and policy to support the transition of the UK to
a low-carbon economy continues to expand, new technologies and
innovation are broadening the market for energy services.
Good Energy's position as an established player in the
decentralised energy market leaves us well placed to benefit from
these industry shifts. Our vision is to become an expert integrator
of green energy services in homes and businesses.
This is an exciting position for Good Energy. Looking ahead, we
expect to perform in line with market expectations in 2018 and that
our strategic developments will deliver growth in profitability and
in value, plus deliver a green dividend yield over the longer
term."
Financial highlights
Continuing operations
-- Revenue of GBP104.5m up 16.6% driven by business supply volume
-- Gross profit of GBP29.3m increased 8.2% with gross profit
margin of 28.1% (2016: 30.2%). Despite the shift in margin mix from
B2C to B2B in the supply business, reflecting the careful attention
to the quality of business given the ongoing price war in the
retail supply market
-- Profit before tax of GBP0.7m decreased 63.7% including
GBP1.1m of one-off and restructuring costs
-- A solid and improving cash position which increased 118.2% to
GBP13.7m, despite previous billing issues, which we expect to
normalise in 2018.
-- Successfully raised GBP16.8m from our second corporate bond in June 2017
-- Basic Earnings Per Share (EPS) was down 37.2% to 8.1p (2016: 12.9p)
-- Recommended full year dividend of 3.3p
Discontinued operations
-- In September 2017 we announced that our development business had been discontinued.
-- The discontinued generation business reported an operating
loss of GBP4.0m up from GBP0.2m in 2016.
-- As a matter of prudence, reflecting the changing conditions
for on-shore renewable developments in England, the combined
carrying value of these assets of GBP5.8m has been reduced by
GBP3.6m to GBP2.2m, including GBP1.3m classified as held for
sale.
-- Good Energy is continuing to explore options for the further
sale of remaining sites-under-development, to realise value from
the existing portfolio, through partnerships or sales to external
parties who will continue to develop the sites, including two wind
farms and two solar parks.
Operational highlights
2017 has been a year of transition, however we have continued to
perform strongly across our business segments and have seen
progress implementing our strategic priorities
-- Supply - FIT services
o Increase in market share of 1% in 2017 and now represents 18%
of the addressable market
o Over 99,000 B2B new sites now live with strong NPS business
score driving new business
o Continued automation of processes while upgrading B2B and B2C
systems for customers
-- Supply - Business Customers
o Strong volume growth of 46% driving increased performance
o New fixed tariffs, dedicated SME sales team and digital
upgrades enhancing customer experience
o Fit for Growth restructure is delivering cost to serve
improvements
-- Supply -Retail customers
o Customer electricity volumes and meters broadly stable on
prior year, despite increasingly price competitive market with
clear focus on profitable growth
o New scalable customer system implemented driving customer
insight
o Fir for Growth restructuring expected to deliver further cost
to serve improvements
Business review
Strategic overview
In 2017 Good Energy has been responding to an energy market in
transition as we continue to update our strategy in order to adapt
and exploit the changing conditions within this market.
We have gradually begun to shift our focus away from the retail
supply market, which is becoming characterised by an increasing
number of new entrants driving aggressive pricing and creating a
price war, with the majority of smaller suppliers remaining
unprofitable.
While we will continue to consolidate our position within this
market and deliver value for our retail supply customers, our core
business focus has been shifting towards FIT services, where we can
leverage our existing 18% market share, and to the business supply
market where we have seen strong customer growth already, evidenced
by a 46% increase in business volumes in 2017
We will continue to enhance our Fit for Growth operating model
to increase our capabilities, drive further efficiencies and
support future profitability.
As we continue to evolve, we believe the future of our core
business will move out of energy supply and into energy services
covering the FIT, business and domestic markets. This reflects our
vision to become an expert integrator of green energy and value
added technical services in the home and in businesses.
Our aim is to enhance our business model to focus on delivering
energy services in a decentralised market. We believe this market
has significant potential and where we are already an established
player. We believe we can achieve this goal by focusing on three
key actions;
o Build - build on our successes and growing our core business
through retaining existing domestic customers, continuing to grow
our business customers and enhancing services to FIT customers
o Economise - continue to roll out our Fit for Growth programme
ensuring we have a lean operating model to improve margins, whilst
increasing our technical capability within operations to leverage
the investment in our systems, reduce our costs and improve
service
o Invest - generate future business opportunities by investing
in new service development, an improved digital platform and
research to drive new services into the pipeline
Our future vision for the customer remains clear. We will allow
our customers to reduce their environmental impact, improve their
energy security and lower their costs. In addition, our vision
allows for increased participation through continued investment
into energy balancing and renewable generation for homes and
businesses, standalone battery storage solutions and increased
accessibility.
In order to ensure the business is well positioned to maximise
this future growth potential, we will continue to invest in data
and digital capabilities improving the customer experience which
underpins our offering and the strength of the Good Energy
brand.
Strategic initiatives
We believe that coupling of continued innovation with our unique
customer base of early adopters is setting our strategy up for
success. We are already undertaking a number of strategic
initiatives and projects with partners, as pilot projects and new
services development;
o Launched pilot project in Q4 2017 with New Motion for electric
vehicle charging stations
o Partnered with the Eden project for our first bespoke battery
storage solution in Q4 2017
o Behind the meter storage, solar and thermostatic propositions
for business and domestic customers
o Energy management digital app for customers pre and post
SMART
Summary
The business remains well positioned for future growth and has
performed resiliently in a challenging market in 2017. The core
business continues to grow profitability providing a stable
platform for a sustainable green yield for our stakeholders, while
2017 was the first year in our transformation programme for the
Group as we continue to evolve towards the business to focus on
energy services, which we will deliver by building on successes,
economising and investing in the business to maximise our future
potential.
While our core business growth continues to drive performance,
we believe that our future value will be enhanced by investment in
new energy services. Our Strategic initiatives continue to progress
at pace with a number of exciting collaborations, pilot projects
and new product development creating the platform for the business
to become an expert integrator of green and value add technical
services in the home and in businesses.
Financial performance
Good Energy made good financial progress in 2017 with 16.6%
growth in revenue from ongoing activities, gross profit up 8.2%,
and asset sales completed during the year supporting an increase in
cash position of 118% to GBP13.2m.
Revenue
In 2017, revenue grew by 16.6% to GBP104.5m (2016: GBP89.7m)
driven by growth in the Supply segment with an increase in business
volumes and a return to growth in the second half from domestic
customers.
Business customer volume growth was due to our increased sales
and marketing focus on this segment during the year, with the
addition of new business half hourly and small business customers.
Performance was also supported by FIT revenue from new business
sites, (FIT B2B) driven by our strong customer service.
Profitability
Gross profit increased by 8.2% to GBP29.3m in 2017 (2016:
GBP27.1m). EBITDA decreased by 4.3% to GBP9.9m (2016: GBP10.1m),
operating profit decreased by 9.8% to GBP5.6m (2016: GBP6.2m). This
was due to lower profit in the Supply segment, which included
GBP1.1m of restructuring and one-off costs.
The Supply business also saw a reduction in gross margins as a
result of increased wholesale power costs; the changing revenue mix
and faster growth with lower-margin business customers and our
decision to delay our customer price rise within the first quarter.
The impact of the restructuring and investment costs and lower
gross margin, together with increased marketing and customer
acquisition costs in the competitive Supply market, meant that
operating profit in Supply was below 2016.
Gross profit margin was 28.1% (2016: 30.2%), and operating
margin 5.4% (2016: 6.9%).
Cost of sales increased 20.2% to GBP75.2m (2016: GBP62.5m). This
was driven by market-wide increased wholesale power costs in 2017.
Administration costs increased 13.3% to GBP23.7m, (2016: GBP20.9m)
and included the GBP1.1m of restructuring and one off costs.
Our Finance costs increased 16.3% in 2017, due to temporary
phasing between the completion and repayment of Good Energy Bonds I
in March 2018 and the commencement of Bond II in June 2017 which
has successfully raised GBP16.8m. In 2018, following the repayment
of Good Energy Bonds I, finance costs will reduce with lower
on-going
funding costs. As a result, profit before tax was 63.7% lower at GBP0.7m (2016: GBP2.0m).
Fit for Growth: Restructuring and Investing for the Future
Enhancing the efficiency and economics of our operations and
optimising the business for growth is a key priority for the group.
In 2017 we completed the first phase of our Fit for Growth
programme as we transition to more efficient operations. These
activities included restructuring our business to reduce our long
term cost base, and reviewing our asset base and investments to
ensure that we are optimising our allocation of capital.
We have also simplified our operating model and upgraded systems
and processes that will improve our cost base, leverage the
investment in our systems and support profitable growth over the
long term. The annualised cost savings of our Fit for Growth
programme delivered in 2017 were GBP1m.
Generation Assets, Discontinued Operations and Work in
Progress
In 2017 we ceased all new generation development activities, in
response to changes in the UK government subsidy schemes and our
long term capital allocation objectives. During the year, our 5MW
Oaklands solar site was sold for GBP5.8m cash consideration and our
5MW solar farm at Newton Downs in Devon, sold for a cash
consideration of GBP5.8m. We have also agreed terms for the sale of
our 5MW solar park at Brynwhilach Farm near Swansea in December,
and expect the transaction to complete later in 2018 for a cash
consideration of GBP5.6m.
We are pleased that the Newton Downs and Brynwhilach sites have
been sold into community hands to realise the benefits of renewable
generation. The proceeds from these sales have supported the
repayment of Good Energy Bonds I and will be reinvested in our
other initiatives to deliver shareholder value as outlined in this
annual report.
Good Energy is exploring a number of options to realise value
from its portfolio of generation assets that are still at
development stage ('WIP assets'). This includes several development
sites which have not yet obtained planning permission and are at
different stages in the process.
The carrying value and treatment of these WIP assets is reviewed
against the likelihood of sale or planning outcomes, which by their
nature have uncertainty on the timing and outcome of such
activities. A provision is made for any change in value in
accordance with the policy set out in note 4 to the Financial
Statements. As a matter of prudence, reflecting the changing
conditions in the market regimes for on-shore renewable
developments in England, the combined carrying value of these
assets of GBP5.8m has been reduced by GBP3.6m to GBP2.2m, with
GBP1.3m shown as held for sale.
As a result, the discontinued generation business reported an
operating loss of GBP4.0m up from GBP0.2m in 2016, driven by this
increased provision against the work in progress.
Cash Flow and Cash Generation
Good Energy has a cash generative business model with an
increase in cash position of 118%. 2017 operational cash outflow
was GBP0.02m (2016: operational cash inflow of GBP10.7m) which was
impacted by delays in the implementation of the new customer
information system (CIS), resulting in customer billing delays.
Accrued income peaked during the year in June at around GBP10m
higher at the same time in the prior year, with around 60% of
customers billed. By year end, accrued income was only GBP3m higher
as customer billing reached 95% and has now moved into debt to be
collected. The remaining accrued income gap will largely be
eliminated in the first half of 2018, with billing on track to hit
99% and payment collections normalising.
We recognise anticipated future bad debts as well as those debts
which we know are either in dispute or unrecoverable. We have
therefore looked at the provision for bad debts in this context. We
have considered the impact that the delay in billing has had on our
likely future debt recovery. In some cases customer repayments of
their delayed bills are being received over 12 months and we expect
cash flow and cash collection to further improve in 2018 as the
remaining delayed bill repayments are received. We have continued
to take a prudent approach by providing for bad debts at around 2%
of electricity and gas revenue. We have reviewed the adequacy of
the provision and concluded that a further GBP0.4m needs to be
provided in 2017.
Financial Position and Capital Management
The Group continues to maintain a robust financial position. We
look to ensure we optimise our use of capital by continually
reviewing the returns on our assets, balancing operating
requirements, investment for growth, and payment of dividends back
to shareholders.
Funding and Debt
Good Energy has good access to a range of funding on good terms
to support our growth.
Good Energy is proud of its history of inviting customers to
invest in the business through our corporate bond programme. In
2013 we issued our first corporate bond, Good Energy Bond I. These
reached initial maturity in November 2017 and will be repaid in
March 2018, with the option for existing bondholders to extend them
until November 2019 at a coupon rate of 4.25% (effective 4.50% for
Good Energy customers). We launched Good Energy Bonds II in
November allowing existing bondholders to extend or rollover their
bonds, and to allow new investors to partake in this offering. The
bond has a coupon rate of 4.75% (effective 5.00% for Good Energy
customers) and a four year term.
Together these bonds have raised over GBP25m. Following the
repayment of Bond I, the reduced interest cost on Bond II will be
around GBP0.3m lower on a comparable annualised basis and is a
positive step towards lowering the Company's ongoing financing
costs and reducing the gearing ratio over the medium term.
Due to the phasing between the two bonds, Net Debt increased by
1.9% to GBP53.1m (2016: GBP52.1m). In December we reduced some of
our working capital overdraft facility with Lloyds Bank with
proceeds from the wind farm sale. The amount of the facility is now
GBP10m, which was undrawn as at 31 December 2017.
Assets
Total Assets increased 17.4% to GBP120.8m (2016: GBP102.9m) due
to increased trade receivables which reflects a temporary increase
in debtors and accrued income due to the delays in billing
following the implementation of the new CIS and an increased cash
position.
Earnings & Dividend
In 2017, Basic Earnings Per Share (EPS) was down 37.2% to 8.1p
(2016: 12.9p), due to the lower profit in the Supply segment
including restructuring and investment costs and increased Finance
costs as set out previously. The Board has recommended a final
dividend of 2.3p per ordinary share which is in line with 2016.
Finance Director
On 1 March 2018, we announced the Denise Cockrem would step down
as Chief Financial Officer from 31 March 2018. We are proud of the
financial and corporate development of the Company over the last
four years, including the significant progress we have made in
adapting our business model to address our stakeholder needs in a
highly competitive and dynamic energy market. Rupert Sanderson
joined Good Energy in January 2017 and will lead the company's
financial direction in its next stage of development as Finance
Director from April. It has been a pleasure to work with Rupert
Sanderson in ensuring a smooth transition.
Financial Outlook
In 2018 we expect to perform in line with market expectations
through growth momentum in our business and FIT services segments
and continued progress of our Fit for Growth programme. We will
also see a reduction in our funding costs, following the repayment
of Good Energy Bonds I and the lower coupon on Good Energy Bonds
II.
In the medium term, we expect to deliver improved profitability
from our Fit for Growth operating model and strategic initiatives
and as we transition to a more cost-efficient operating model.
With a robust financial position, our continued investment in
growth and the transformation of our cost base and efficiency
underway, Good Energy is well positioned to deliver sustainable
growth in our chosen segments and enhanced profitability in the
long term.
Notes:
To present the performance of the company in a clear and
consistent format, unless otherwise stated, all references to
revenue, profit, costs, tax and EPS refer to the continuing
operations.
Operating Review by Segment
Supply
What we do
Good Energy is an established energy supplier, with the core of
the business being rooted in the decentralised energy market. Since
2004 we have been a key player in the decentralised energy market,
working with a significant numbers of smaller, renewable
generators, delivering a market that would otherwise not exist. We
are currently the third largest provider of Feed in Tariff (FIT)
services to this market with over 18% of the market with potential
to grow.
Our energy supply business, supplying electricity and gas to
business and domestic householders is a relatively focused
business, supplying 0.2% of the domestic market and 0.1% of the
business (half hourly) market with 100% renewable electricity and
green gas, backed with a combination of green gas and offset
certificates.
The company has traditionally been well known for our focus on
good customer services historically being ranked well in
independent surveys like Which? and money saving expert Martin
Lewis. In 2017, we implemented a new billing system, which impacted
on our ability to deliver great customer services, and we are only
now beginning to see that recover in 2018.
The proposition we promise to our customers is 100% renewable
electricity, with customers being on average no further than four
miles from one of our local, renewable generators.
Market conditions 2017
The UK retail supply market is fiercely competitive with a
significant number of new entrants chasing low or negative margin,
less sticky segment of the market. 2017 saw record household
customer switching rates across the marketplace and the maturing of
many collective switching deals, with overall switching at around
28% of customers.
Comparatively the business market has been stable, with little
change in competition, and a relatively buoyant market for green
supply, as businesses consider closely their corporate social
responsibility targets and any commitments they have made to the UN
Sustainable Development goals.
The FIT market has continued to grow, albeit relatively slowly
in comparison to earlier years. It has still seen an overall growth
in this market of around 3%. We expect this to continue and perhaps
accelerate in 2018 until the close of the scheme to new sites in
April 2019.
Performance in 2017
Supply revenue grew strongly by 16.7% to GBP99.3m (2016:
GBP85.1m) driven by strong growth in business customer volumes.
Electricity revenue grew by 24.4%, Gas revenue by 6.8%, while FIT
revenue was 15.2% lower due to lower.
Supply operating profit of GBP3.5m (2016: GBP4.9m) was 27.7%
below the prior year, due the changing business mix as we saw
faster growth with lower-margin, higher-volume business customers.
In addition, the challenging market conditions in the retail
business, led us to increase investment in marketing and customer
support whilst maintaining fair pricing. The anticipated decline in
FIT profit was due to lower new customer revenue which generates a
greater administration fee receivable in the first year of sign
up.
In 2017, the total volume of all energy delivered to customers
grew by 5.4% to 1.06m MWh (2016:1.01m MWh). We achieved significant
growth in business electricity supply volumes of over 46%. Total
Supply customer meter numbers were stable at just over 115,755
(2016: 115,593). The competitive environment and high switching
rates across the market led to broadly flat growth in the retail
business by volume and by meters. Our strong customer service and
reputation in the FIT market enabled us to grow FIT customer
installations by 8.0%, adding 10,595 new FIT installations to
143,607 in total.
Due to the implementation of our Customer Information System
(CIS) in 2017 we experienced delays and disruption to billing
through the systems change, and restructured our customer support
team in the second half of 2017 to address these issues. We are now
back to 99% customer billed and front line service levels are
improving.
Highlights in 2017
-- Our FIT market share increased from 16.8% in 2016 to 17.6% in
2017 adding 10,595 new installations in the year and achieving a
strong NPS score with FIT business customers. We have also
increased our customer and sales support to FIT during the
year.
-- Began our Smart and Digital rollout, with our new CIS in 2017
and we began preparations to roll-out SMART meters from 2018.
-- Expanded our SME and business offering: During the year we
have set up a dedicated business sales team, launched a new online
quoting tool, new fixed tariffs and our new CIS system is
delivering greater customer insights.
-- Restructured our Executive team and the Senior Leadership
team to realign with our strategic objectives of Build, Economise
and Invest, with further improvements in efficiency expected in
2018.
-- Signed up leading brands as customers and partners including
Neal's Yard Remedies, BAFTA, Hay Festival and Innocent Drinks
-- Introduced offshore wind into our fuel mix for the first time
in 2017, through an agreement with DONG, now Orsted, to buy power
from their Westermost Rough Wind Farm in the North Sea.
2018 Outlook
We will continue to focus on the three key areas for the core
business and building on our success by:
-- Retaining retail customers, through better proposition,
customer service and improved content and communications
-- Grow business sales in the SME and medium business sector,
with an upskilled team, better systems and data and improvements in
customer experience. This year the marketing team will focus on
lead generation for the business sector and away from the retail
sector
-- Grow our FIT services business through organic growth for
retail customers, and portfolio switching for business customers
and portfolios.
Underpinning all of this is the need for Good Energy to have a
bigger focus on digital platforms and data strategy. The
development of our Smart metering business has given us the
opportunity to invest, particularly in digital, and develop that
capability in-house. This will form the foundation for further
investment in a suite of digital services across our customer
bases.
We have already undertaken a significant transformation of the
business, from a more traditional sales and operations model,
towards an agile development team and a tech-savvy operations team.
Ongoing, our plans are to develop a new product delivery team,
dedicated to bring new propositions for energy services to market,
and enhance the brand and customer experience capability in the
company.
Our future proposition to our customers is simple. By investment
in technology a home or business will have a lower environmental
impact, have better energy security and save money. For Good
Energy, the value is through providing services with a charging
model similar to the current model for FIT administration.
Energy supply underpins this offering and gives us the
permission to provide these services. Using the concept of the
virtual power station, Good Energy plans to use its access to the
market and expertise in the decentralised energy market to bring
value to investments made in behind the meter technology as a route
to market, an integrating platform.
In Summary, Good Energy is pivoting its business to focus more
on energy services such as FIT. It will continue to operate in the
supply market focusing on digital customer experience and improved
value for supply customers, with growth expected to be significant
in the SME and business sectors. We expect to begin to see the
benefits of this transition by the end of 2018, but do not expect
to see significant market penetration of energy services until
later in 2019 and 2020.
This is an exciting position for Good Energy, aligned with our
purpose of delivering a cleaner, greener world, as we work closely
with our customers, our people and our shareholders to achieve
this.
Generation
What we do
Good Energy owns and operates nine renewable energy facilities
across the UK that deliver 100% renewable electricity to the UK
electricity grid. There are seven solar sites and two wind farms,
with a total of 52.5MW of installed capacity in our continuing
generation portfolio. We use the renewable energy that we generate
to supply our customers with 100% renewable energy. Until 2017 Good
Energy also developed new generation assets, which it either held
as a generation asset or sold these back into the market, where
possible into community hands.
Market conditions 2017
As previously announced, Government policy changes over the last
two years have led Good Energy to stop new generation development
activities in 2017 and the development business is now reported as
a discontinued business. While we have been successful in creating,
utilising and monetising energy generation assets, the market has
moved in favour of large scale developers with better purchasing
power for renewable assets and access to low-cost finance. The
removal of government subsidies for many renewable energy
technologies however does not affect the financial performance of
Good Energy's continuing generation sites.
Performance in 2017
In 2017, revenue from continuing Generation operations increased
by 13.1% to GBP8.9m (2016: GBP7.8m).
Operating Profit in Generation increased by 14.6% to GBP3.7m
(2016: GBP3.2m).
In 2017, the total output from our generation portfolio
increased by 8.7% to 87.6 GWh (2016: 80.6 GWh). Solar output
increased by 11.4% to 38.6 GWh (2016: 34.7 GWh) with output
increase from the two new sites being offset by the sale of
Oaklands. Wind output was 6.6% higher to 49.0 GWh (2016: 45.9
GWh).
Highlights in 2017
In 2017 we completed our development of two new 5MW solar sites,
"Newton Downs" in Devon and "Brynwhilach" near Swansea. This was an
important step towards maximising the value of our development
activities over the past five years for our stakeholders.
In 2017, we reached agreements to sell three generation sites
for GBP17.2m combined. Our 5MW Oaklands solar site was sold for
GBP5.8m, and was our first sale of a site fully constructed and
developed by Good Energy. Importantly Good Energy retains an option
to purchase up to 50% of the site's power and continue to provide
management services. In the second half of 2017, we sold Newton
Downs for GBP5.8m, and reached an agreement to sell Brynwhilach for
GBP5.6m which is expected to complete in 2018 and returning these
back into community hands. We have the option to buy 100% of the
power from both of these sites.
2018 Outlook
Our continuing generation assets and 52.5 MGW capacity forms an
important part of our operating portfolio, allowing us to match
demand from our Supply business from our own generation. We expect
continuing good energy production from our continuing generation
assets in 2018, in keeping with local weather conditions
Discontinued Business - Development
In 2017 we announced that our development business was
discontinued and restructured our development team
This discontinued Development Business reported a loss before
tax of GBP4.0m, (2016 loss of GBP0.2m). The main driver for this
was a provision against the work in progress portfolio of GBP3.6m,
which is part of the normal treatment of such assets at this stage
in their development.
Good Energy is exploring options for the further sale of
remaining sites-under-development, to realise value from the
portfolio, through partnerships or sales to external parties who
will continue to develop the sites, including two wind farms and
two solar parks.
Further detail on this provision is set out in the Financial
performance section above.
Consolidated Statement of Comprehensive Income (Unaudited)
For the year ended 31 December 2017
2017 2016
GBP000's GBP000's
Unaudited Audited
REVENUE 104,509 89,651
Cost of Sales (75,178) (62,538)
GROSS PROFIT 29,331 27,113
Administrative Expenses (23,739) (20,914)
OPERATING PROFIT 5,592 6,199
Finance Income 2 18
Finance Costs (4,860) (4,195)
PROFIT BEFORE TAX 734 2,022
Taxation 566 (51)
PROFIT FOR THE YEAR FROM CONTINUING
OPERATIONS 1,300 1,971
DISCONTINUED OPERATIONS
Loss from discontinued operations,
after tax (4,033) (588)
(LOSS)/PROFIT FOR THE PERIOD (2,733) 1,383
OTHER COMPREHENSIVE INCOME:
Items that may subsequently be reclassified
to profit or loss
Loss on cash flow hedge - -
Other comprehensive loss for the year, - -
net of tax
TOTAL COMPREHENSIVE (LOSS)/INCOME
FOR THE YEAR
ATTRIBUTABLE TO OWNERS OF THE PARENT
COMPANY (2,733) 1,383
Earnings per share from loss for the
year - Basic (17.1p) 9.1p
- Diluted (17.1p) 8.8p
Earnings per share from profit for
the year - Basic 8.1p 12.9p
(continuing operations) - Diluted 7.7p 12.5p
Consolidated Statement of Financial Position (Unaudited)
As at 31 December 2017
2017 2016
GBP000's GBP000's
Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 51,723 58,247
Intangible assets 3,544 3,801
Long term security deposits 3,220 2,831
Investments 500 500
---------- ---------
Total non-current assets 58,987 65,379
Current assets
Inventories 9,881 9,799
Trade and other receivables 32,698 16,204
Current tax receivable - 167
Cash and cash equivalents 13,720 6,289
Current assets held for sale 5,553 5,095
---------- ---------
Total current assets 61,852 37,554
---------- ---------
TOTAL ASSETS 120,839 102,933
---------- ---------
EQUITY AND LIABILITIES
Capital and reserves
Called up share capital 826 825
Share premium account 12,652 12,546
EBT shares (946) (1,015)
Retained earnings 5,553 8,689
---------- ---------
Total equity attributable to members
of the parent company 18,085 21,045
Non-current liabilities
Deferred taxation 145 684
Borrowings 56,044 40,277
---------- ---------
Total non-current liabilities 56,189 40,961
Current liabilities
Borrowings 13,894 20,981
Trade and other payables 32,671 19,936
Current liabilities held for sale - 10
Total current liabilities 46,565 40,927
---------- ---------
Total liabilities 102,754 81,888
---------- ---------
TOTAL EQUITY AND LIABILITIES 120,839 102,933
---------- ---------
Consolidated Statement of Changes in Equity (Unaudited)
For the year ended 31 December 2017
Share Share EBT Retained Total
Capital Premium Shares Earnings
GBP000's GBP000's GBP000's GBP000's GBP000's
--------- --------- --------- ---------- ---------
At 1 January 2016 748 9,786 (1,074) 7,483 16,943
--------- --------- --------- ---------- ---------
Profit for the year - - - 1,383 1,383
Other comprehensive - - - - -
income for the year
--------- --------- --------- ---------- ---------
Total comprehensive
income for the year - - - 1,383 1,383
Share based payments - - - 230 230
Tax charge relating
to share option scheme - - - 98 98
Issue of ordinary
shares 77 2,760 - - 2,837
Sale of shares by
EBT - - 59 (14) 45
Dividend paid - - - (491) (491)
Total contributions
by and distributions
to owners of the
parent, recognised
directly in equity 77 2,760 59 (177) 2,719
--------- --------- --------- ---------- ---------
At 31 December 2016 825 12,546 (1,015) 8,689 21,045
--------- --------- --------- ---------- ---------
At 1 January 2017 825 12,546 (1,015) 8,689 21,045
--------- --------- --------- ---------- ---------
Loss for the year - - - (2,733) (2,733)
Other comprehensive - - - - -
income for the year
--------- --------- --------- ---------- ---------
Total comprehensive
income for the year - - - (2,733) (2,733)
Share based payments - - - 263 263
Tax credit relating
to share option scheme - - - (106) (106)
Issue of ordinary
shares 1 106 - - 107
Sale of shares by
EBT - - 69 (31) 38
Dividend paid - - - (529) (529)
--------- --------- --------- ---------- ---------
Total contributions
by and distributions
to owners of the
parent, recognised
directly in equity 1 106 69 (403) (227)
--------- --------- --------- ---------- ---------
At 31 December 2017 826 12,652 (946) 5,553 18,085
--------- --------- --------- ---------- ---------
Consolidated Statement of Cash Flows (Unaudited)
For the year ended 31 December 2017
2017 2016
GBP000's GBP000's
Unaudited Audited
Cash flows from operating activities
Cash generated from operations 27 10,656
Finance income 2 18
Finance cost (5,016) (4,208)
Income tax received 68 133
---------- ---------
Net cash flows from operating activities (4,919) 6,599
Cash flows from investing activities
Purchase of property, plant and
equipment (4,828) (4,958)
Purchase of intangible fixed assets (752) (1,851)
Disposal of assets 9,868 -
Long term security deposits (389) (29)
Net cash flows used in investing
activities 3,899 (6,838)
Cash flows from financing activities
Payments of dividends (422) (491)
Proceeds from borrowings 13,086 387
Repayment of borrowings (4,126) (951)
Capital repayments of finance lease (125) (50)
Proceeds from issue of shares net
of share issue costs - 2,837
Sale of own shares 38 45
---------- ---------
Net cash flows from financing activities 8,451 1,777
Net increase in cash and cash equivalents 7,431 1,538
Cash and cash equivalents at beginning
of year 6,289 4,751
Cash and cash equivalents at end
of year 13,720 6,289
Notes to the Financial Information
1. Basis of Preparation
Good Energy Group plc is an AIM listed company incorporated and
domiciled in the United Kingdom under the Companies Act 2006.
The principal activity of Good Energy Group plc is that of a
holding and management company to the Group. Fuller information on
the Group's activities is set out in the Chairman's statement,
Chief Executive's review and the Chief Financial Officer's
review.
The unaudited Preliminary Report has been prepared under the
historical cost convention and in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union and interpretations in issue at 31 December 2017.
The Preliminary Report was approved by the Approvals Committee
and the Audit Committee and adopted by the Board of Directors. The
Preliminary Report does not constitute statutory financial
statements within the meaning of section 434 of the Companies Act
2006 and has not been audited.
Statutory accounts for the year to 31 December 2016 have been
delivered to the Registrar of Companies. The audit report for those
accounts was unqualified and did not contain statements under 498
(2) or (3) of the Companies Act 2006 and did not contain any
emphasis of matter.
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 31 December 2016, as
described in those financial statements. New standards or
interpretations which came into effect for the current reporting
period did not have a material impact on the net assets or results
of the Group.
The Preliminary Report is presented in pounds sterling because
that is the currency of the primary economic environment in which
the Group operates.
The Preliminary Report will be announced to all shareholders on
the London Stock Exchange and published on the Group's website on
21 March 2018. Copies will be available to members of the public
upon application to the Company Secretary at Monkton Reach, Monkton
Hill, Chippenham, Wiltshire, SN15 1EE.
2. Segmental Analysis
The chief operating decision-maker has been identified as the
Board of Directors (the 'Board'). The Board reviews the Group's
internal reporting in order to assess performance and allocate
resources. Management has determined the operating segments based
on these reports. The Board considers the business from a business
class perspective, with each of the main trading subsidiaries
accounting for each of the business classes. The main segments
are:
-- Supply Companies (including electricity supply, FIT administration and gas supply);
-- Electricity Generation Companies (including wind and solar generation companies);
-- Generation Development (including early stage development companies);
-- Holding companies, being the activity of Good Energy Group PLC
The Board assesses the performance of the operating segments
based primarily on summary financial information, extracts of which
are reproduced below. An analysis of profit and loss, assets and
liabilities and additions to non-current asset, by class of
business, with a reconciliation of segmental analysis to reported
results follows:
Segmental Analysis: 31 December 2017
Electricity FIT Gas Total Electricity Holding Total Generation Total
Supply Administration Supply Supply Generation Companies/Consolidation - Development
Companies Adjustments Continuing (Discontinued)
Operations
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Revenue
Revenue
from
external
customers 68,801 5,006 25,517 99,324 5,185 - 104,509 17 104,526
Inter-segment
revenue - - - - 3,688 (3,688) - - -
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Total
revenue 68,801 5,006 25,517 99,324 8,873 (3,688) 104,509 17 104,526
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Expenditure
Cost
of sales (52,139) (505) (17,710) (70,354) (4,824) - (75,178) (3,700) (78,878)
Inter-segment
cost
of sales (3,688) - - (3,688) - 3,688 - - -
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Gross
Profit 12,974 4,501 7,807 25,282 4,049 - 29,331 (3,683) 25,648
Administrative
expenses (20,529) (391) (1,436) (22,356) (328) (22,684)
Depreciation
& amortisation (1,229) - (154) (1,383) (1) (1,384)
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Operating
profit/(loss) 3,524 3,658 (1,590) 5,592 (4,012) 1,580
Net
finance
income/(costs) (32) (4,947) 121 (4,858) - (4,858)
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Profit/(loss)
before
tax 3,492 (1,289) (1,469) 734 (4,012) (3,278)
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Segments
assets
& liabilities
Segment
assets 58,466 104,945 (56,315) 107,096 8,453 115,549
Segment
liabilities 51,057 110,697 (72,741) 89,013 12,451 101,464
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Net
asset/(liabilities 7,409 (5,752) 16,426 18,083 (3,998) 14,085
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Additions
to non-current
assets 817 5,677 159 6,653 - 6,653
Segmental Analysis: 31 December 2016
Electricity FIT Gas Total Electricity Holding Total Generation Total
Supply Administration Supply Supply Generation Companies/Consolidation - Development
Companies Adjustments Continuing (Discontinued)
Operations
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Revenue
Revenue
from
external
customers 55,324 5,904 23,903 85,131 4,520 - 89,651 786 90,437
Inter-segment
revenue - - - - 3,324 (3,324) - - -
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Total
revenue 55,324 5,904 23,903 85,131 7,844 (3.324) 89,651 786 90,437
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Expenditure
Cost
of sales (40,559) (1,415) (16,269) (58,243) (4,295) - (62,538) (367) (62,905)
Inter-segment
cost
of sales (3,324) - - (3,324) - 3,324 - - -
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Gross
Profit 11,441 4,489 7,634 23,564 3,549 - 27,113 419 27,532
Administrative
expenses (17,080) (357) (1,868) (19,305) (666) (19,971)
Depreciation
& amortisation (1,609) - - (1,609) (2) (1,611)
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Operating
profit/(loss) 4,875 3,192 (1,868) 6,199 (249) 5,950
Net finance
income/(costs) 140 (5,352) 1,035 (4,177) (339) (4,516)
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Profit/(loss)
before
tax 5,015 (2,160) (833) 2,022 (588) 1,434
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Segments
assets
& liabilities
Segment
assets 45,704 116,337 (70,270) 91,771 11,162 102,933
Segment
liabilities 38,008 116,948 (90,273) 64,683 17,205 81,888
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Net
asset/(liabilities 7,696 (611) 20,003 27,088 (6,043) 21,045
------------ --------------- --------- ---------- ------------ ------------------------ ----------- --------------- ---------
Additions
to non-current
assets 2,264 1,120 387 3,771 3,725 7,496
All turnover arose within the United Kingdom.
Consolidation adjustments relate to intercompany sales of
generated electricity and the elimination of intercompany
balances.
3. Finance Income & Cost
Finance Income: 2017 2016
GBP000's GBP000's
Bank and other interest receivables 2 18
Finance Cost: 2017 2016
GBP000's GBP000's
On bank loans and overdrafts 2,917 3,072
On corporate bond 1,345 1,113
Other interest payable 203 13
Amortisation of debt issue cost 395 336
Total finance costs 4,860 4,534
Less: amounts capitalised on qualifying - -
assets
--------- ---------
Total 4,860 4,534
--------- ---------
4. Taxation
2017 2016
GBP000's GBP000's
Analysis of Tax Charge in Year
Current tax (see note below) - -
Adjustments in respect of prior years - (164)
--------- ---------
Total current tax - (164)
Deferred Tax
Origination and reversal of temporary
differences (732) 217
Adjustments in respect of prior years 187 (2)
--------- ---------
Total deferred tax (545) 215
--------- ---------
Tax on profit on ordinary activities (545) 51
--------- ---------
Factors affecting the tax charge for the year
The tax assessed for the year is lower (2016: lower) than the
standard weighted average rate of Corporation Tax in the UK of
19.25% (2016: 20.00%). The differences are explained as
follows:
2017 2016
GBP000's GBP000's
(Loss)/Profit before tax (3,278) 1,434
--------- ---------
Profit before tax multiplied by the
weighted average rate of Corporation
Tax in the UK of 19.25% (2016: 20.00%) (631) 287
Tax effects of:
Expenses not deductible for tax purposes 48 42
Non-taxable gain on sale of investment (298) (73)
Effects of changes in tax rate 97 (39)
Restricted interest costs deduction 52 -
Prior year adjustment - current tax - (164)
Prior year adjustment - deferred tax 187 (2)
Total tax charge for year (545) 51
--------- ---------
5. Earnings per Ordinary Share
Basic
Basic earnings per share is calculated by dividing the profit
attributable to owners of the Company by the weighted average
number of ordinary shares during the year after excluding 463,239
(2016: 495,739) shares held by Clarke Willmott Trust Corporation
Limited in trust for the Good Energy Group Employee Benefit
Trust.
2017 2016
Profit attributable to owners of
the Company (GBP000's) (2,733) 1,383
Basic weighted average number of
ordinary shares (000's) 16,006 15,239
-------- -------
Basic earnings per share (17.1p) 9.1p
Continuing operations 2017 2016
Profit attributable to owners of
the Company (GBP000's) 1,300 1,971
Basic weighted average number of
ordinary shares (000's) 16,006 15,239
------- -------
Basic earnings per share 8.1p 12.9p
Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares to assume conversion of
all potentially dilutive ordinary shares. Potentially dilutive
ordinary shares arise from awards made under the Group's
share-based incentive plans. Where the vesting of these awards is
contingent on satisfying a service or performance condition, the
number of potentially dilutive ordinary shares is calculated based
on the status of the condition at the end of the period.
Potentially dilutive ordinary shares are actually dilutive only
when the average market price of the Company's ordinary shares
during the period exceeds their exercise price (options) or issue
price (other awards). The greater any such excess, the greater the
dilutive effect. In accordance with IAS 33 'Earnings per share',
for the purposes of calculating diluted loss per share, the effect
of potentially dilutive ordinary shares has not been taken into
account for the year ended 31 December 2017 due to there being a
loss for the year. The average market price of the Company's
ordinary shares during the year was 230p (2016: 223p). The dilutive
effect of share-based incentives was nil shares (2016: 563,595
shares). The dilutive effect of share-based incentives for
continuing operations was 918,989 shares (2016: 563,595
shares).
2017 2016
Profit attributable to owners of the
Company (GBP000's) (2,733) 1,383
Weighted average number of diluted ordinary
shares (000's) 16,006 15,802
-------- -------
Diluted earnings per share (17.1p) 8.8p
Continuing operations 2017 2016
Profit attributable to owners of the
Company (GBP000's) 1,300 1,971
Weighted average number of diluted ordinary
shares (000's) 16,925 15,802
------- -------
Diluted earnings per share 7.7p 12.5p
6. Assets and Liabilities Classified as Held for Sale
2017 2016
GBP000's GBP000's
Property, plant and equipment 4,288 5,095
Work in progress 1,265 -
--------- ---------
Total assets 5,553 5,095
--------- ---------
Deferred taxation - (10)
--------- ---------
Total liabilities - (10)
--------- ---------
Carrying value 5,553 5,085
--------- ---------
The property, plant and equipment assets held for sale at 31
December 2017 relate to Good Energy Brynwhilach Solar Park Limited,
sale contracts were exchanged before the balance sheet date.
Held for sale work in progress costs relate to a wind
development project held within Good Energy Development (No.7)
Limited. This entity was actively marketed for sale in the year
ended 31 December 2017 and various offers are under
consideration.
7. Borrowings
2017 2016
GBP000's GBP000's
Current:
Bank and other borrowings 5,606 5,891
Bond 8,288 15,090
Total 13,894 20,981
2017 2016
GBP000's GBP000's
Non-Current
Bank and other borrowings 39,378 40,277
Bond 16,666 -
Total 56,044 40,277
The Group has undrawn bank overdraft facilities of GBP10,000,000
(2016: GBP6,757,144) as at 31 December 2017 and undrawn revolving
credit facilities of GBP822,140 (2016: GBP822,140).
At 31 December 2017, GBP6,834,591 (2016: GBP7,279,171) of the
bank loans relate to the Company's subsidiary, Good Energy Delabole
Wind Farm Limited and is secured by a mortgage debenture on that
Company.
At 31 December 2017, GBP35,704,211 inclusive of GBPnil of
accrued interest (2016: 37,399,386 inclusive of GBP627,985 of
accrued interest) of the bank loans relate to the Company's
subsidiary, Good Energy Generation Assets No. 1 Limited. Repayments
of capital and interest are scheduled quarterly over a period of 18
years. Interest is payable at 6.85% and the outstanding principal
balance is partially exposed to annual RPI inflation over 3%. Costs
incurred in raising finance were GBP2,754,299 (2016: GBP2,754,299)
and are being amortised over the life of the loan in accordance
with IAS39.
On 2 October 2013 Good Energy Group launched a corporate bond
which closed on 24 October 2013 with subscriptions having reached
the maximum target of GBP15,000,000. The bond was issued to
bondholders on 22 November 2013 with interest scheduled
bi-annually. The coupon rate is 7.25% or 7.50% for bondholders that
are customers of the Group. Capital repayment of the bond is
payable following notice being received from the bond holder no
earlier than 4 years from inception. The total costs of issue were
GBP770,879 which are being amortised over the life of the bond. As
at 31 December 2017 the amortisation recognised in 'finance costs'
totalled GBP199,563 (2016: 191,248).
On 10 May 2017 Good Energy Group launched a second corporate
bond with online applications closing on 5 June 2017 and paper
applications closing on 12 June 2017. Total valid applications
reached GBP16.8 million (the maximum target was GBP20 million). The
bond was issued to bondholders on 30 June 2017 with interest
scheduled bi-annually. The interest rate is 4.75% or 5.00% for
bondholders that are customers of the Group. Capital repayment of
the bond is payable following notice being received from the bond
holder no earlier than 4 years from inception.
Good Energy Bonds I holders were able to roll over their first
bond and this amounted to GBP6,509,750 of the total amount.
On 13 February 2018 we announced the repayment of Good Energy
Bonds I offering bondholders the option to continue their
investment at a revised interest rate of 4.25% or 4.50% for
customers of the Group. GBP3.6m of valid continuation forms were
received at the deadline date. On 29 March 2019, GBP4.2m will be
repaid to Good Energy Bonds I bondholders.
8. Cash flows
2017 2016
GBP000's GBP000's
Profit before income tax (3,278) 1,434
Adjustment for:
Depreciation 3,329 2,808
Amortisation 1,008 1,368
Gain on asset disposals (1,048) -
Write down of generation development work
in progress 3,651 -
Share based payments 263 230
Finance costs - net 4,858 4,516
Changes in working capital (excluding the
effects of acquisition and exchange differences
on consolidation)
Inventories (4,998) (517)
Trade and other receivables (16,494) (4,605)
Trade and other payables 12,736 5,422
--------- ---------
Cash generated from operations 27 10,656
The company news service from the London Stock Exchange
END
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March 21, 2018 03:01 ET (07:01 GMT)
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