TIDMINSE
RNS Number : 6517H
Inspired Energy PLC
02 August 2019
2 August 2019
Inspired Energy plc
("Inspired" or the "Group")
Acquisition of 40% interest in Ignite Energy LTD and exclusive
call option to acquire the balancing 60% in the company
Inspired (AIM: INSE), a leading energy consultant to UK and
Irish corporates, is delighted to announce that it has today
completed the acquisition of an initial 40 per cent of the issued
share capital of Ignite Energy LTD ("Ignite") (the "Strategic
Investment"). Inspired has paid net GBP5.0 million, calculated on a
cash free debt free basis, for the Strategic Investment. Inspired
also has an exclusive option, until 31 July 2021, to acquire the
balancing interest of 60 per cent under the terms of an option
agreement ("Option Agreement"). The Board believes the strategic
investment accelerates the Group's ability to deliver on the stated
strategy to grow its market share within the third-party
intermediary optimisation services market.
INFORMATION ON IGNITE
-- Ignite offers a full spectrum of energy management services,
with a strong focus on delivering energy efficiency projects and
optimisation services to large, multi-site estate intensive,
commercial energy customers, including Halford's, SSP, Network Rail
and WH Smith.
-- Ignite's optimisation services support clients through
increasing the effectiveness of their energy consumption by
implementing large scale energy demand reduction projects.
-- Ignite's specialism in efficiency projects and optimisation
services is highly complementary to Inspired's customer base, with
a particular relevance to the Group's estate and energy intensive
customer segments.
-- Ignite also provides consultancy services such as energy
procurement and energy accounting services to UK corporates,
aligned to Inspired's core Corporate offering.
KEY TERMS
-- Initial consideration of GBP5.0 million ("Initial
Consideration") to acquire 40 per cent of issued share capital of
Ignite on a debt free, cash free, normalised working capital
basis.
-- Further contingent consideration of up to GBP3.0 million may
become payable in cash, subject to the achievement of certain
financial performance targets for the year ending 31 December
2019.
-- The profits available for distribution of Ignite, will be
paid by dividend to its shareholders on a bi-annual basis on 1
January and 1 July each year, pro rata to its shareholdings.
-- The Initial Consideration has been financed from the Group's
existing resources, with funding provided by a drawdown of the
Group's existing GBP12.5 million acquisition facility with
Santander.
-- Mark Dickinson and Paul Connor will join the board of Ignite,
which will consist of five people.
OPTION AGREEMENT
-- Under the Option Agreement, from completion until 31 July
2021, Inspired has an exclusive one-way call option to acquire the
outstanding balance of 60 per cent of the issued share capital of
Ignite ("Remaining Ignite Shares").
-- Under the terms of the Option Agreement, Inspired will pay
consideration for the Remaining Ignite Shares which equates to an
enterprise value of 6.0x earnings before interest, tax,
depreciation and amortisation ("EBITDA") ("Option
Consideration").
-- The Option Consideration shall be based off a minimum EBITDA
of GBP3.0 million, and at the time of exercising the Option
Agreement, an amount of GBP10.8 million will become payable by
Inspired.
-- Should the EBITDA be greater than GBP3.0 million in either of
the scenarios shown below, then additional consideration will
become payable by Inspired, being the higher of:
- 6.0x Ignite's EBITDA for the last 12 months ending on the date
of the exercise of the option under the Option Agreement, or;
- 6.0x Ignite's EBITDA for the financial year ending the year in
which the option is exercised under the Option Agreement;
- Less the GBP10.8 million already paid on exercise of the
option, subject to a maximum EBITDA of GBP7.0 million.
-- Any additional consideration due will be payable within 90
days following the end of the financial year in which the option
agreement is exercised, Ignite's financial year end is 31
December.
Commenting on the transaction, Mark Dickinson, CEO of Inspired
said: "We are delighted to conclude our strategic investment in
Ignite, a business which is highly complementary to Inspired's core
Corporate Division. The Strategic Investment significantly broadens
and accelerates our optimisation service offering. Ignite has
proven itself, over many years, to be capable of achieving material
improvements to the energy efficiency of its clients. Inspired
currently has over 500 clients within the estate and energy
intensive segments who meet the Ignite customer profile, and could
benefit from the services that Ignite provides.
"We look forward to working closely with the highly experienced
and knowledgeable team of Ignite and welcoming them into the Group
as we continue to extend our position as a market leader."
Commenting on the strategic investment, David Higgins, Director
of Ignite said: "When contemplating strategic options for the
development of Ignite, we were looking for a partner who we could
work alongside to both bring benefits to our customers and provide
a platform to develop and scale the business. We believe Inspired
to be the perfect partner for Ignite and are looking forward to
working with the Inspired team to further improve the services we
offer to the Inspired and Ignite clients. We believe that by
working together, we will benefit from significant new
opportunities both in terms of winning new clients but also in
bringing benefits and savings to our existing portfolios."
Rationale for the Strategic Investment
As part of its stated strategy, the Board believes that
optimisation services represents a very significant future
opportunity for the Group, leveraging its established market
leading position in energy consultancy. The UK optimisation
services market remains relatively immature and service delivery
models in this area, which are typically project based rather than
recurring, will evolve over time as both customer understanding and
technology develops. Against this backdrop, the Board believes that
it is important to remain flexible and able to adapt its offering
in this area in line with market developments, which complements
its growing optimisation services capabilities.
The Strategic Investment is structured to enable Inspired to
accelerate its own optimisation service offering to the Inspired
customer base through the skills and experience of the Ignite team,
whilst enabling Ignite to scale and dilute their existing customer
concentration through access to and servicing of the Inspired
customer base. The strategic investment aligns the interests of
Ignite's management with those of the Group, as the Option
Consideration captures the benefits should they be able to
accelerate growth over the next two years. From the Group's
perspective, the Option Agreement enables Inspired to secure
ownership of Ignite at an attractive valuation, whilst retaining
operational and capital flexibility in the short term.
The Board believes that the strategic investment will further
enhance Inspired's core Corporate Division, complementing the
Group's existing offering and accelerating its optimisation service
offering.
Information on Ignite
Ignite began trading in 2009 and is led by David and Ben
Higgins. Ignite employs 51 people based across 3 locations in the
UK, aiming to provide a comprehensive range of energy management
solutions to large multi-site commercial energy users.
Ignite's service offering includes energy optimisation services,
energy procurement including risk managed solutions, energy
accounting and data management including validation, budgeting
support and data analysis.
Ignite provide large scale energy demand reduction projects,
ranging from building management system installation, local space
control systems, plant efficiency measures and lighting upgrades.
These projects are often long term, multi-phase projects with a
duration between one and five years.
The business has a highly respected and knowledgeable team who
generate revenues from a small portfolio of customers including
multi-site private and public sector estate intensive energy
consumers to reduce the supply and demand cost of energy.
For the financial year ended 31 December 2018, Ignite delivered
revenues of GBP12.41 million and profit before tax of GBP3.08
million, as well as generating operating cash of GBP1.50 million.
Net assets as at 31 December 2018 stood at GBP4.08 million.
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) ("MAR") prior to its release as part
of this announcement and is disclosed in accordance with the
Company's obligations under Article 17 of those Regulations.
Enquiries:
Inspired Energy plc
Mark Dickinson, Chief Executive +44 (0) 1772 689250
Paul Connor, Finance Director www.inspiredenergy.co.uk
Shore Capital (Nomad Adviser and Joint
Broker)
Dru Danford
Edward Mansfield
James Thomas +44 (0) 20 7408 4090
Peel Hunt LLP (Joint Broker)
Mike Bell
Ed Allsopp +44 (0) 20 7886 2500
Gable Communications +44 (0) 20 7193 7463
Justine James +44 (0) 7525 324431
John Bick inspired@gablecommunications.com
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END
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