Utilitywise — Update 22 February 2017

Utilitywise — Update 22 February 2017

Utilitywise

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Utilitywise

On course for FY17

H1 trading update

Industrial support services

22 February 2017

Price

182.62p

Market cap

£143m

Net debt (£m) at 31 January 2017

4.1

Shares in issue

78.1m

Free float

83%

Code

UTW

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.7

6.4

11.5

Rel (local)

(1.0)

(1.0)

(8.3)

52-week high/low

202.00p

118.25p

Business description

Utilitywise is an independent cost management consultancy offering energy procurement and management products to the business market in the UK.

Next events

Capital markets day

2 March 2017

Interim results

4 April 2017

Analysts

Graeme Moyse

+44 (0)20 3077 5700

Roger Johnston

+44 (0)20 3077 5722

Utilitywise is a research client of Edison Investment Research Limited

Utilitywise’s (UTW) trading statement indicates that it continues to grow. Consultant headcount rose in H117 after a flat performance in FY16 and, despite the seasonal impact on cash flow, we expect UTW to be in a net cash position by year-end FY17. The rating of the shares remains modest for a company that continues to grow and offers an attractive yield.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

07/15

69.1

16.7

17.9

5.0

10.2

2.7

07/16

84.4

17.8

19.4

6.5

9.4

3.6

07/17e

97.1

19.1

20.0

7.5

9.1

4.1

07/18e

110.2

22.2

23.2

8.5

7.9

4.7

Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Strong revenue growth in H1

UTW’s trading statement for the six months to 31 January 2017 demonstrated encouraging progress in a number of key areas and was said to be “in line with management expectations”. Revenue growth in the six-month period was “double-digit” and compares to our FY17 expectation of c 15% growth. Net debt rose from £0.2m at the end of FY16, to £4.1m at 31 January 2017. Cash flow is traditionally stronger in the second half of the year (operating cash flow was £12m in H216 versus -£1.4m in H116) and we expect UTW to move into a net cash position by the end of the year (£3m), helped by a lower level of renewals and extension business and improved contractual terms with its suppliers compared to recent years.

Enterprise division continues to drive the business

Following a strong performance in H216, management states that the Enterprise division (>90% of group profits) is continuing to perform strongly, increasing revenue and profit versus H116. Gross order book additions were £50.2m (£40.4m in H116) and the revenue pipeline rose to £28m versus £25.6m at year end. Significantly, consultant headcount, which had been expected to grow strongly in FY16 but failed to do so due to staff attrition, rose from 625 at the end of FY16 to 661 on 31 January 2017. This is broadly in line with our projections, which assume UTW reaches a consultant headcount total of c 700 by year-end FY17. Due to delays in deployment of technology-based solutions and the absence of ESOS revenue in H117 versus H116, the Corporate division, which services UTW’s larger customers, saw a drop in revenue. This follows a period of heavy investment in energy services technology, which also depressed profitability in FY16. The board, however, is said to remain “confident” of the outlook for the Corporate division.

Valuation: Modest valuation given growth

Based on our forecasts, which remain unchanged following the trading update, UTW stands on a prospective P/E (CY17) of 8.5x versus 14.8x for the FTSE All-Share. The rating appears modest for a company that should continue to grow both profits and revenues and offers a prospective yield of over 4%.

Exhibit 1: Financial summary

 

 

2014

2015

2016

2017e

2018e

31 July

 

IFRS

IFRS

IFRS

IFRS

IFRS

 

 

£'000

£'000

£'000

£'000

£'000

PROFIT & LOSS

 

 

 

 

 

 

Revenue

 

48,947

69,106

84,428

97,061

110,217

Cost of Sales

 

(26,586)

(38,810)

(51,638)

(58,237)

(66,130)

Gross Profit

 

22,361

30,296

32,791

38,824

44,087

EBITDA

 

14,467

17,785

18,268

19,424

22,247

Operating Profit (before amort and except)

13,751

16,920

17,511

18,519

21,226

Intangible Amortisation

 

(946)

(1,297)

(1,940)

(1,963)

(1,611)

Exceptionals

 

(22)

(570)

3,192

0

0

Share Based Payments

 

(737)

(695)

(639)

(756)

(794)

Other

 

0

0

0

0

0

Operating Profit

 

12,046

14,357

18,124

15,800

18,821

Net Interest

 

(373)

(235)

289

628

947

Profit Before Tax (norm)

 

13,379

16,685

17,799

19,147

22,172

Profit Before Tax (FRS 3)

 

11,673

14,123

18,412

16,429

19,767

Tax

 

(2,170)

(2,927)

(2,592)

(3,286)

(3,756)

Profit After Tax (norm)

 

11,208

13,758

15,208

15,862

18,417

Profit After Tax (FRS 3)

 

9,503

11,196

15,821

13,143

16,012

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

72.5

75.3

77.4

78.1

78.1

EPS - normalised (p)

 

15.4

18.3

19.7

20.3

23.6

EPS - normalised fully diluted (p)

 

14.6

17.9

19.4

20.0

23.2

EPS - (IFRS) (p)

 

13.0

14.9

20.5

16.8

20.5

Dividend per share (p)

 

4.0

5.0

6.5

7.5

8.5

 

 

 

 

 

 

 

Gross Margin (%)

 

45.7

43.8

38.8

40.0

40.0

EBITDA Margin (%)

 

29.6

25.7

21.6

20.0

20.2

Operating Margin (before GW and except.) (%)

28.1

24.5

20.7

19.1

19.3

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

Fixed Assets

 

36,975

66,048

69,475

71,122

75,165

Intangible Assets

 

21,926

37,171

34,234

32,272

30,660

Tangible Assets

 

4,838

5,899

5,591

5,350

5,505

Investments & Other

 

10,211

22,978

29,650

33,500

39,000

Current Assets

 

30,436

23,075

33,200

40,362

44,201

Stocks

 

98

643

559

630

715

Debtors

 

13,958

15,939

19,657

23,500

26,685

Cash

 

15,823

6,492

12,985

16,232

16,800

Other

 

557

0

0

0

0

Current Liabilities

 

(18,315)

(18,420)

(23,495)

(23,110)

(25,750)

Creditors

 

(18,315)

(18,420)

(23,495)

(23,110)

(25,750)

Short term borrowings

 

0

0

0

0

0

Long Term Liabilities

 

(15,494)

(24,581)

(19,791)

(20,942)

(16,015)

Long term borrowings

 

(6,000)

(13,175)

(13,175)

(13,175)

(7,175)

Other long term liabilities

 

(9,494)

(11,406)

(6,616)

(7,767)

(8,840)

Net Assets

 

33,602

46,121

59,389

67,432

77,600

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

Operating Cash Flow

 

11,615

(2,537)

12,487

11,918

16,675

Net Interest

 

(373)

(250)

(434)

628

947

Tax

 

(1,910)

(2,208)

(1,814)

(3,286)

(3,756)

Capex

 

(631)

(1,897)

(786)

(665)

(1,175)

Acquisitions/disposals

 

(835)

(6,398)

0

0

0

Financing

 

101

149

1,258

0

0

Dividends

 

(2,158)

(3,365)

(4,218)

(5,349)

(6,122)

Net Cash Flow

 

5,810

(16,506)

6,492

3,247

6,569

Opening net debt/(cash)

 

(4,013)

(9,823)

6,683

190

(3,057)

HP finance leases initiated

 

0

0

0

0

0

Other

 

0

0

0

0

0

Closing net debt/(cash)

 

(9,823)

6,683

190

(3,057)

(9,625)

Source: Company accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Utilitywise and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney, NSW 2000

Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney, NSW 2000

Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Utilitywise and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney, NSW 2000

Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney, NSW 2000

Australia

Orexo — Update 21 February 2017

Orexo

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