eEnergy Group (EAAS ) has acquired the entire issued and to be issued share capital of UtilityTeam TopCo Limited and 5% of the issued share capital of UtilityTeam Trading Limited, UtilityTeam TopCo doesn’t already own, for a total consideration up to £21m on a cash/debt free basis. 

UtilityTeam is a top 20 UK energy management business providing comprehensive management, consultancy and procurement services to industrial and commercial clients with a particular focus on large, complex, multi-site portfolios. 

Headquartered in Coventry, UK, UtilityTeam has 37 employees and is already profitable with Adjusted EBITDA of £1.5m and £2.2m for FY19 and FY20 respectively. 

UtilityTeam’s average contract length is 2.8 years with a total forward order book of £10.3m across more than 800 contracted customers. 

With a contract renewal rate of over 80%, current customer contracts are already forecast to deliver over 68% of forecast revenues for FY22.  

In addition to the high quality, recurring revenue, UtilityTeam also has a highly accomplished digital sales and marketing capability delivering strong new business wins, with 2021 on track to outperform 2020’s new business volumes. 

Harvey Sinclair, CEO of eEnergy, commented: “The acquisition of UtilityTeam, when combined with our existing businesses, gives eEnergy the ability to offer customers a broad range of services and expertise in energy management, energy efficiency and intelligent measurement & analysis. It is in line with our strategy to “buy and build” a portfolio of complementary operations that can take full advantage of market demand for zero carbon energy and energy data. 

Consideration 

The total consideration comprises of £15.8m initial consideration, of which £9.5m will be satisfied in cash on completion with a further £2m to be paid before 31 December 2021, in addition to the issue of £4.3m (18m shares to be issued at 24p per share) new ordinary shares. 

The earnout consideration of up to £5.1m will be satisfied by up to £1.5m in cash with the remainder to be issued in ordinary shares at or above 24p, based on a multiple EBUTDA basis for UtilityTeam to December 2021. 

In order to satisfy the above consideration, eEnergy is proposing to raise approximately £12m via an equity placing by way of an accelerated bookbuild at 15p per ordinary share. Proceeds from this placing will be used to part fund the acquisition and for general working capital requirements for the enlarged business. 

Harvey added; “For investors, [the Acquisition] will provide exposure to the links in the value chain of energy conservation, management and transition in areas that we expect to grow significantly in the years ahead.  This is an important milestone in our development and one which the Board believes will benefit all of our stakeholders, customers, staff and shareholders.”  

View From Vox 

Since IPO, eEnergy has demonstrated strong and repeated organic revenue growth across its business segments, successfully transitioning from a pure-play LaaS business to an integrated end-to-end energy services business.  

Whilst it’s been some time since the Company has completed a significant acquisition, the Group’s acquisitions to date have been successfully integrated adding both scale and margin, supported by the launch of the MyZeERO platform, which provides us confidence this acquisition can also be successfully completed and deliver forecast returns for shareholders. 

The initial consideration represents an acquisition multiple of 7.1x of UtilityTeam’s adjusted EBITDA for the year ended 31 December 2020, appears undemanding given the high quality earnings, CAGR of 26% between FY14 and FY20 and high level of retained earnings. 

UtilityTeam has long-term, strategic relationships with its mid-market customer base, which should also provide the Group with a strong cross-sell opportunity, which can play to the Beond platforms strength. 

Given the acquisition is expected to be significantly earnings enhancing to FY22 with existing customer contracts expected to deliver over 68% of forecast revenues for FY22,  we have both reliable forecasts and exciting growth to drive the shares higher from here. 

Reasons to  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.    

Rapidly Expanding 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.     

Strong 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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