eEnergy Group (EAAS ) delivered a strong first half outturn on both organic and total revenue growth metrics for 1H21 and continues to see “strong organic growth” as a result of increased demand in the market for energy efficiency solutions, particularly, for its EEaaS proposition.
Financial Highlights
The Group, which operates as an "Energy Efficiency-as-a-Service" (EEaaS) business in the UK and Ireland, reported total revenue and organic revenue growth for the six months to 31 December 2020 of 235% (c.£6.6m) and 125% respectively.
All Group entities reported positive operating EBITDA with net income (before exceptional items) of c. £0.1m, in-line with its previously announced break-even guidance.
Operating Highlights
eEnergy completed 111 projects, a 95% rise on the six-month period to December 2019 with the average contract value of each project was 50% higher compared to this 2019 period.
The Company told investors that growth has been driven by an increased demand in the market for energy efficiency solutions, particularly, for the Group's EEaaS proposition.
eEnergy provides its core "Light-as-a-Service" ("LaaS"), to educational and commercial & industrial customers through its eLight and RSL operations across the UK and Ireland. Specifically, the Group’s solutions help businesses and schools switch to LED lighting.
‘Customers can fund carbon reduction through the energy savings delivered, without investing capital upfront,’ it noted. It cited ‘strong growth’ within the UK’s Academy and state school sector, and through the entry into new markets, including Northern Ireland.
Over the reporting period, eEnergy said its business model was able to successfully navigate the impact of the ongoing COVID-19 pandemic through new contract wins, client properties largely remaining open and school closures which allowed for accelerated installations.
In July, the Group expanded its LaaS offering to Academy and state schools through the acquisition of Renewable Solutions Lighting ("RSL"). RSL has since been integrated into the eLight platform, which has reduced unit costs for RSL and improved pricing to its clients.
In addition, the Group said it is now benefiting from its exclusive OEM partnership with Venture Lighting Europe Limited ("Venture Lighting"), announced back in October 2020.
Venture Lighting’s integrated supply chain has increased operating efficiencies, the Group highlighted. Since the Company holds dedicated stock lines in the UK for eLight, this has resulted in eEnergy ‘avoiding any supply chain disruption caused by Brexit or COVID-19.’
Overall, it said more competitive technology pricing has improved eLight's gross margin for the period by more than 400 bps when compared to the equivalent period in the prior year.
In December 2020, the Group completed the acquisition of Beond Group, a top 20 UK-based renewable energy consulting and smart procurement business which the Group said is ‘progressing well, and to date the business has performed as expected.’ The acquisition is expected to be materially earnings-enhancing in the first full year of ownership.
Outlook
The Group said the current lockdown has resulted in some delayed customer decisions in contracting for new business which may result in an extension of some project timeframes.
However, the Board said it remains confident that, with the current and expected contracted forward order book and with active cross-sell engagement for customers, that Group revenue and gross profit remain in-line with its expectations for the FY21.
The Board also noted its recent move to strengthen its senior management team with the appointment of Rob Van Leeuwen, as Group COO. It has also invested in a number of operational and corporate development roles, reflected in Group overheads, to accelerate the integration of Beond and the execution of the Group's stated "buy and build" strategy.
The Board said it expects the Group to achieve a break-even net income for the FY21.
"We are confident about the future, as we look to add to the energy efficiency services we can offer to customers, driven through execution of our "buy and build" M&A strategy. We are currently evaluating a number of strategic opportunities in our pipeline to build an integrated energy management and energy efficiency platform,” said CEO, Harvey Sinclair.
Organic revenue and total revenue growth of 125% and 235% respectively provides clear indication on the progress the Company made during the period. Growth in the business appears underpinned by the number of projects completed during the period at almost double the pace set last year with the value of each project significantly.
The successful acquisitions of RSL and Beond during the period provides investors with confidence in the accelerated growth strategy through M&A and expect to see more through the 2H21. All investors can hope for during the remainder of the current financial year is more of the same. Shares in eEnergy have increased by over 150% in value since the beginning of June 2020 from a price of 5.25p. Shares ticked up 4.00% to 13.78p this morning following the news.
Reasons to Follow EAAS
eEnergy intends to develop into a broader energy services company and acquire other businesses in the energy management sector. It is currently focused on providing ‘Light-as-a-Service’ to commercial customers and helps businesses and schools switch to LED lighting, typically for a fixed monthly service fee, avoiding any upfront payments.
For businesses and schools, the energy savings are greater than the monthly service fee, allowing them to unlock free cash-flow from day one as well as to improve the quality of their lighting and reduce carbon emissions.
Market
The market in the EU for energy efficiency services was approximately €25 billion in 2017 and is expected to double by 2025.
In November 2020, eEnergy launched the ‘Green Energy Initiative’, a scheme focused on helping more UK schools, which are eligible for part but not full Government funding, to reduce carbon emissions and save money by switching to cheaper, efficient LED lighting.
The Initiative has been set up by eEnergy to work in conjunction with the Public Sector Decarbonisation Scheme ("PSDS"), a UK Governmental entity which provides grants for public sector bodies in order to fund energy efficiency and heat decarbonisation measures.
eEnergy believes only 20% of schools have upgraded to date and expects to be able to increase its addressable market as the ‘Initiative’ will either make up any shortfall or fully fund the switch, using just its Funding Partners.
Supply Chain
In November 2020, eEnergy signed an exclusive OEM partnership with Venture Lighting Europe Limited ("VLE") to provide eLight-branded LED technology.
Chosen after a tender process which included some of Europe's leading OEM manufacturers, with a 35-year heritage, VLE forms part of Advanced Lighting Technologies, a US-based group which has 600 employees and an annual revenue of over $130m.
eEnergy believes an integrated supply chain for eLight will maximise operating efficiencies and is a significant market differentiator. In particular, it will hold dedicated stock lines for eLight, ‘significantly’ reducing the time that it takes to complete installation projects.
ESG merger and acquisitions strategy
eEnergy has an active ‘Climate Action Initiative’ with energy efficiency marked as the #1 solution for many commercial buildings to reduce their energy consumption.
The Company has a declared M&A strategy in this space, which it expects to complement its core business and lead to an exciting ESG Investment Case for Investors.
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