Utilitywise shares bump around as board talks stability

Independent utility cost management consultancy Utilitywise updated the market on its trading for the year to 31 July on Thursday, confirming it had performed in line with the expectations announced at the end of July.

The AIM-traded company remained set to announce its full set of results on 17 October.

As it had previously announced, the group adopted IFRS 15 ‘Revenue from Contracts with Customers’ on 1 August.

Accordingly, the year ended 31 July was the final year that Utilitywise would report under the existing revenue accounting standard, IAS 18 ‘Revenue’.

The board said it expected to report group revenue for the year 3% higher than the prior year,, and adjusted profit before tax 40% lower than last year.

It said the fall in adjusted profit before tax was primarily because of an adjustment recognised in respect of projected under-consumption of contracts, as announced on 29 June, and the deferral of certain significant renewals contracts, announced on 31 July.

“Although the company endured some headwinds in the period which impacted our financial performance in the short term, there have been a number of underlying improvements in the business which augur well for the future,” said CEO Brendan Flattery.

Utilitywise’s enterprise division reportedly delivered a “strong” underlying operating performance during the year, despite the issues previously announced.

The board said the unit served the SME market and as such represented the “vast majority” of the group's expected adjusted profit before tax for the year.

Additions to the gross order book totalled £99.2m, an increase of 17.3% compared to £84.5m in the prior year.

That was the result of a number of planned productivity improvement initiatives, the board explained, which included enhanced operational management and a reduction in sales force headcount from 625 to 550 during the year.

Secured future revenue increased by 17.4% during the year on a like-for-like basis.

The order book value as at 1 August, stated after the adoption of IFRS 15, was £46.1m, of which the board said £26.3m was expected to be recognised as revenue during the financial year ended 31 July 2018, as a result of the adoption of IFRS 15.

The European operation was said to have performed “well”, with an increase in revenue and operating profit compared to the prior year.

“Productivity gains in our enterprise division, which represents the majority of our profits, have led to a significant increase in our order book,” Brendan Flattery explained.

The company’s corporate division, which services larger organisations and represented less than 10% of the group's expected adjusted profit before tax for the year ended 31 July, saw a reduction in revenue compared to the year ended 31 July.

Utilitywise said the profit of the division in the second half of the year was broadly in line with the first half profit, as the business continued to build a pipeline of future work.

The corporate division continued to form a “key part” of the group's strategy for growth, the board added, and it remained “confident” in the medium-term prospects for division.

Looking at the books, the board said it expected to report net debt as at 31 July of. £19.0m, compared to £5.5m a year earlier.

The primary reason for the increase was reportedly the decision to discontinue the acceptance of advance cash receipts from certain energy suppliers, in respect of new business not yet written, as announced in the group's interim results in April.

It said year-end net debt was lower than management expectations, primarily due to £1.0m of legacy supplier cash advances previously expected to have been repaid before the year-end, remaining outstanding at 31 July.

It was now anticipated that it would be repaid during the current financial year.

“Looking forward, our revenues and profits will now be more closely aligned to our cash generation, and the secured future revenue balance of £46.1m at 1 August gives us increased visibility of future performance,” Flattery added.

“With our portfolio of energy services and strong customer service, Utilitywise has a solid platform for future growth.

“I look forward to providing further details in our year end results statement in October."