Eenergy Group (LSE:EAAS) — Full Year Trading Update

0:02 Good morning, ladies and gentlemen, and welcome to the EENERGY GROUP PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish those responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we would just like to submit the following poll. I would now like to hand you over to the executive management team from EENERGY GROUP PLC, Harvey. Good morning, sir. Good morning, and welcome to our end of the year trading update. So overall, I'm very pleased with the progress the company's made in the last twelve months.

0:49 It was frustrating to see that we had just over 4,000,000 delayed that we were expecting to recognize in FY '25. As I explained in the presentation today, the underlying value has not been eroded. And in fact, if we take a broader rolling ninety day look of the business, we can see that those contracts did close and did sign before the end of the year and has supported a $4 book that we're very proud of as we go into FY '26. So overall, a strong EBITDA performance, which was up a 183%, which demonstrates good solid organic growth. We have very strong visibility now over contract forward order book that's over double what it was this time last year and evidence of a investment grade pipeline of over 127,000,000, which has been originated and developed and heavily invested in over the course of the last year.

1:48 Underpinning all of this growth is evidence really of a strategy that is now firmly working that we stated just over two years ago, which was a move away from direct sales and into partner led, framework led, and diversification of routes to market. And you can see that through some very large awards being secured this year, not least the government contract with GB Energy, but also with the NHS NEEF awards and the local authority award, all of which were materially underpinning the growth strategy that we now feel are entrenched within our business. It's evidence that large institutions, government and private, are confident in EENERGY's ability to deliver large multisite projects, evidence that we have got a multi technology driven strategy that's giving confidence across energy efficiency, renewables in a number of different forms, and now increasingly a growing battery storage business with a wrap of EV on most projects.

2:59 So, you know, this is a a big stepping point for the business. We've got way more visibility. We've got three to six month visibility now in our pipeline. We're much less reliant on direct sales, which is a more unpredictable projects based revenue line. We have an underlying engine, but now we've got the support of multiple other revenue lines. Margins have been maintained at a strong level, as John will talk to you about. We've underpinned a very strong and organically growing multi service proposition in renewables, as I'll talk about in a minute. But also, we've built some recurring revenue lines with our solar life proposition. We've now got a total order book of over 2,000,000, which is delivering 200,000 of recurring revenue from this year. That's not in our order book.

3:51 So overall, a huge number of accomplishments, and I'll I'll go into some of those in a bit more detail in a minute. And finally, it was great to invite Nick Mills to join as a nonexec board director to replace John Hornby, who would like to thank for his support over the last three years. He's been a great nonexec, but Nick brings a huge amount of very relevant experience as we move into next chapter of our growth. I thought I would just frame how EENERGY has evolved, not from a product proposition perspective, but from a sort of structural operating platform. So we see our business as two very distinct parts. We have a commercial development platform, which is all around the origination and underwriting and structuring of energy performance contracts, whether that's energy efficiency, grandma and solar, solar carports, battery storage, or EV. It's all around our ability to originate deals through multiple channels, create investment grade funded proposals, which revolve around very accurate and trusted assessment of projects and and being able to essentially convert those at pace and at scale.

5:11 We've got a very, very efficient development engine now that runs runs across all parts of our business. And I think this is one of the underlying value propositions of our business model is that we can now scale. We've invested a huge amount in technology to help this process. So with third party integration with middleware systems Microsoft all the way through to proprietary apps that allow us to be fully integrated and move differently in this environment than our competitors as evidenced by the conversion rates. And we we generally see a 50 conversion rate from proposal to sale throughout the sales cycle. And then the second part of our business, which has evolved and matured a lot over the last twelve months, is our EPC delivery platform.

6:01 Originate originating originally from a energy efficiency background, we're now fully integrated with a very experienced delivery platform across the renewable space, which includes batteries and also EV. And our two chief operating officers are very skilled and have run very large teams in their previous roles before they joined EENERGY have been instrumental in building out our operating platforms for growth. And we've got a team now that has the capacity to to to have a sort of $7,080,000,000 of revenue between them. So we've we've built in in anticipation of the next two years' worth of scale and growth. Margins within the EPC delivery platform are very stable.

6:50 In the LED space, we're consistently hitting over 40% gross margin. And in the solar environment, we are constantly hitting 30% gross gross margin. So we think this is a a real testament to our operating model, and we think that's going to help create a really strong gearing effect in our EBITDA margin as we start scaling our revenue. As you'll see from this proposition, I guess, graph, you can see how battery storage is now a key part. This is a a really interesting growth area and I think underpins the next five years of our strategy. We've got over, you know, 1,300 customers under contract now, all of whom are a perfect hunting ground for integrated battery storage, and that's a very exciting growth strategy for us.

7:45 You'll also see here we've added a fourth pillar in terms of our target sectors. Education was our core, and we were effectively, five years ago, a direct sales organization targeting schools. That is now integrated into a fully multichannel education business across higher education universities and colleges, both in the private and public sector, and we're proud to be, you know, renowned as the number one player in the education market. And the addressable market in this space is huge. It's still over 55% addressable market. We've got large multi multi commerce site, government backed projects, which are a new revenue stream for us in addition to our traditional routes to market. Healthcare is probably our strongest growth new business area. In the last twelve months, we've underpinned a fantastic number of case studies.

8:38 We've got huge pipeline building. Again, a very large addressable market for energy efficiency, but some really interesting opportunities coming through the health care space. Recently signing the first of its kind off balance sheet energy performance contract with a number of GP surgeries using the new redaptive off balance sheet approved funding mechanism where we're able to guarantee savings for our customers. Again, a unique pivotal product with the only people in the market that can offer a true off balance sheet IFRS 16 contract, and we believe that the appetite in the in the NHS in particular for this product is extremely extremely large for us. Commercial industrial, landlord focused for solar is a big part of our market now. We're working a lot with the REITs and with the multi estate portfolio managers.

9:34 Huge landlords looking to increase the valuations of their portfolios by adding solar and batteries to their their estate, we're starting to get great case studies in that area. And then sports and leisure, over the last two years, we've built a great case study portfolio of everything from golf clubs to paddle courts to leisure centers to pools to, you know, indoor and outdoor kind of snow center environment. So we think this is a really interesting sort of super niche, we're starting to build a pipeline in here on the back of those case studies in some very fast growing markets. Just a few images I thought investors would like to see of some of our big twenty twenty five projects.

10:21 Brioche, very, very pivotal, so solar solution here, 1,500,000 contract value. Great stepping off point for other future carports, which we see as a big market for us. Complex outdoor snow center, green roof, very complex environment to put the solar onto, million pound contracts successfully delivered, opening up the door for future more complex projects. Big rollout achieved last year. It was a nine month rollout program. We started in 2024, completed last year. Very proud of the work we did. Complicated estate, complicated buildings, enabled us to win quite a few other complex jobs on the back of it and pivot into the health care environment.

11:13 So just to summarize some key achievements, I think the the switch from single direct sales sales channel route to market into a multisector, multichannel, multitech route to market has been pivotal for us. Frameworks and the success of getting on frameworks, which are both closed and open, have enabled us to build a very credible pipeline within new environments. The the renewable space has been big turning point for us as we move not just into roof man schemes, but also ground man and carport schemes where we've moved away from small projects. We're focused on very large multi site and large singular site projects from a 100 kilowatt all the way up to five megawatt projects now. Wrapping all of this has been the successful closing of the 100,000,000 facility with Adaptive, which supports the NatWest facility, offering a number of unique products, most important of which is our IFRS 16 approved energy performance contract, which allows us to guarantee savings, not at the risk of EENERGY's balance sheet.

12:21 This is a Redaptive risk profile. We're starting to see interesting deal flow coming from Redaptive, working closely on a weekly basis with their senior management team and building out a really interesting strategy for the next five years. The GB Energy DFE framework win was a fantastic, I guess, endorsement of our platform and the confidence we've got for delivering multi site projects. We're live on this project now. We've delivered over 70 construction grade specifications. We're live on sites. We've completed a number of projects, and we're moving in line with the program, and we expect to be completed in the next three months. So that will be a fantastic stepping off point for future multisite government projects, and we're busy negotiating more projects across both the NHS and the education sector.

13:20 An area we've talked about in the past is the development of our technology. For the last ten years, we've been building both manually and through annually and also through process origination that's culminated in an app now that's had several £100,000 invested in it by the company that has really streamlined our assessment through to investment grade proposal. It enables us to achieve 10 times return for single single engineers that work for us in the business that would have previously involved two or three other departments. It's a system in a box. It's driven by machine learning and AI based technology, extremely accurate, and allows us to provide customers with real time proposals without them having to wait. And I'll talk a little bit about that in a second.

14:16 And then finally, the bedding in of our senior c suite has enabled me to focus more on strategic growth and corporate development and partnerships, which is starting to pay returns now significantly, and that C suite now really run the day to day operations. I'm very pleased with the consistency we've seen in their leadership of their teams. A quick snapshot of our pipeline. We look at our pipeline in two parts. We have a big number, which is our total engagement pipeline of customers, the 127,000,000 that we referenced in the update earlier, which is about a third of our pipeline, is the investment grade part of the pipeline. That is projects that have gone through a full investment of specification design and delivery to decision makers that are in the closing phase.

15:09 The remainder of the pipeline is at either the origination engagement and or, if you like, relationship building phase. The moment we move into investment grade proposals, we've invested usually three to four months' worth of on-site structural design and delivery of quite significant data to the customer, And we see over 50% conversion of that pipeline depending on the size of the the length of the sales cycle. So we've got strong momentum into this year. The healthiest pipeline we've seen, a clean sales force, a new sales force that we've integrated from scratch following the sale of the engine management business two years ago, and now starting to be fully integrated with our finance platforms as well.

16:00 We've talked about frameworks, an incredibly important part. We're looking to build on it over the next six months. We've got two other frameworks we're hoping to onboard, and these are now transcending across, you know, multiple sectors but also for multiple technologies. And we think this is going to underpin a quite predictable growth as we go forward. Just a quick screenshot of how the app works in practice. As you can see, it captures both on-site data as well as historic meter data, allows you to navigate buildings, actually, in real real time data that can then be processed real time and then produce a investment proposal from customer, which is something unique in the market.

16:50 Essentially, as I've explained, it removes five steps from the process and removes an estimated manual process time due to three days, which we've done live in environments. So as you can see, it allows our individual layers who essentially manage, you know, a 100% increase in volume move much faster through our customer development. It's not important as we start to generate new big opportunities. I'll just hand over to John to talk to you some of the financial highlights, and then I'll come back and talk to you about. Good morning, everybody. So we closed the year with £23,000,000 worth of revenue. We had expected the the the revenue for 2025 to be around 4,000,000 higher. As Harvey's already mentioned, some of the sales opportunities didn't close as expected in December, and shifted into FY '26.

17:49 So they haven't gone away. They're still there for us to pursue. On December 15, when we put the trading update out, we we said that the forward order book was 10,500,000. As we sit here today, the forward order book is around 14,000,000. So it's also increased by 3,500,000 over the course of the last month or so. 14,000,000 represents a doubling of the order book that we entered 2025, which is only 7,000,000. So the it positions us very strongly for 2026. Adjusted EBITDA increased significantly, 0.6 for last year for prior year and naught 1,700,000 in 2025. We've really got a grip of our sort of PLC and nonoperating costs, which reduced from 2.5 down to 2,000,000, and sort of optimizing our cost structure and and trying to secure operating efficiencies across the business It's made a significant difference.

18:41 And as we grow in 2026, that operational leverage will really come through and improve profitability. It's interesting to see gross margin improve. We put a lot of work into, budgeting jobs properly to make sure that all costs are correctly captured. I sign off every single quote that goes out of the door and make sure that try to make sure that we've we've captured all the costs so there are no surprises later on. We've improved our ways of working with vendors. We've got some simple ways of working around sort of no PO, no go. So if you haven't got a purchase order from EENERGY, don't do the work. That's been been very helpful in limiting gross margin leakage where where vendors have taken on extra tasks that either haven't been budgeted or properly costed. So despite the fact that Mace was actually a slightly lower margin contract for us compared to our normal sort of run rate of profitability, we still managed to improve the margin up to 35.3% versus 34.7%.

19:37 So I'm really, really pleased with that performance. Net debt, including the IFRS 16 liabilities reduced to $1,600,000 down from 2.4% previously. We continue to pay down the SPVs, the special purpose vehicle funding, And that's what that that's what is driving that the net debt cash number downwards primarily. And it stated net debt is stated after we drew down £1,500,000 from Harwood Holdco Limited. This was to help fund networking capital on the Mace transaction, and Mace effectively had doubled in size when we originally took it on to, to where we are today. As I as we did in the first half of twenty twenty five, there are no other exceptionals reported as exceptional items other than the share based payment charge. Companies like to stick costs through the exceptionals line. We didn't do that last year. We we stopped doing that, and we haven't done it. We didn't do it in the first half of last year. We didn't do it in the full year results either. There are some minor restructuring costs of probably just under a £100,000 that are included within adjusted EBITDA. So effectively, the only add back to adjusted EBITDA is effectively the share based payment charge, which is a noncash charge for share options.

20:51 Cash at the end of the year had reduced. It was down to $900,000 compared to 2,300,000 previously, but that is expected to significantly increase in the first half of this year. The principal reason why cash had reduced was we've been working for three or four months on the MACE contract, and it's only now at the end of January are we seeing cash really sort of coming in from that contract. So we had a significant investment in short term working capital, which is which is now, unwinding and turning into cash, which is really good news. So as I mentioned before, we've got a record contracted and awarded forward order book. It was currently sitting on 14,000,000, and there's lots of other opportunities that we're close to closing, which will help, boost the revenue for h one. We're looking at a sort of, run rate of sort of £10,000,000 a quarter, which is where we want to get to.

21:42 The fund adaptive funding facility, just to make you clear, this isn't a facility that we draw on. This is a facility that our customers draw on. So Reductive have made a facility of a 100,000,000 available as we sit here today. Reductive have provided funding to our customers of around £13,000,000 covering a 175 projects across a 179 locations. It's a terrific off balance sheet, IFRS 16 compliant facility. It's unique. It's it's a really helpful funding facility for our customers, which allows them to avoid the upfront capital cost when they're installing, our technologies. We still retained the £40,000,000 NatWest facility, mainly for public sector contracts. It's still in place, but we haven't drawn on it as yet. We're we're still still sat there, and we could do so if we wish to do so.

22:32 In November 2025, we drew down 1,500,000 as an unsecured loan from from Howard, as I mentioned. This was to help fund the working capital on Mace. We started on on the Mace project back in September. So effectively, we've had three or four months of working on on the Mace project, and we're now already seeing that working capital turning into cash. So in a couple of months' time, our cash balance will be several million pounds higher than it currently is or currently was at the end of twenty twenty five. In the second half of last year, we replaced PKF, our previous auditors, with Cooper Parry. Cooper Parry based in London, very experienced. And after I signed off the accounts for 2025 with an unqualified audit opinion with a with a with a true and fair view, but unfortunately, didn't share the same view. And as a result, we decided to replace PKF with Cooper Parry.

23:26 Cooper Parry had already done an extensive amount of work on the, first eight months trading results for the year. So they've looked at the opening balance sheet for FY '25, and the accounts will be produced much, much more quickly this year, I'm sure, than last year. We're not waiting until the June 30 to try and put the accounts out. We will hopefully publish the accounts sometime in around in April time and and sooner if we can. The auditors are on-site on the February 2, so we're just about to start. And the work they've done already has validated the contract accounting work, which we which we've been doing, which is really good news. And I'm expecting that the FY 2025 result will be unqualified. So we'll be back to a normal sort of true and fair view of the financial performance of the group.

24:14 That concludes the finance section. Thank you. Thank you, John. Just a few operational highlights for the year. I think, as I've mentioned, the, I guess, the improvement and the stabilization of our c suite with two chief operating officers has really helped deliver a huge number of efficiency gains and scalability across both efficiency and also renewables. The ability for us now to tender for large multi site contracts really does complement our direct sales business so that we can run both in parallel. The portfolio of NEE funded NHS trusts, again, a new revenue line for us, mainly LED lighting at the moment, but with future solar and battery storage projects being added.

25:07 The o and m business that we've launched is starting to be a really interesting high gross margin opportunity, and we think that's going to be scaled this year. And over the next three years, we're hoping to triple that order book so we can start to see really meaningful annual recurring revenue streams coming through. Winning the laser framework was fantastic. It's a relationship we've been building on. They're one of the leaders, if not the leader in, engine management procurement and have over two and a half thousand customers. So we see that framework opportunity worth over 50,000,000 for the next four years. And a really big win for West Berkshire Council came in in December. So these big wins have really underpinned a huge number of growth opportunities for '26 and '27 because a lot of this work is now coming to light as a result of two years' worth of planning and strategic implementation.

26:05 So I'm very pleased with how the operations team and the development team have effectively managed these successes. I think, overall, what what we've seen in the last twelve months is evidence that our strategy is working. And despite the frustration of seeing £4,000,000 signed too late, it did sign. It came too late for us to recognize all of it. So, unfortunately, we did short of our revenue performance, which was something I was quite disappointed in. But I think the outlook for f y twenty six has never been stronger, which is the reason why we upgraded our guidance to 34,000,000 revenue, which is a 13% increase, and and adjusted EBITDA to 4.5. So the the fact we've upgraded our guidance demonstrates the confidence we have in our business this year. We've never seen more opportunity.

26:58 We've got a very stable team running data operations, and we've got strongest visibility we've ever had. As John has mentioned, we've got very high visibility on cash with a strong unwind from the net working capital from the MACE Building in the in the first quarter, and that's showing a really ongoing theme of strong financial controls and good cash conversion coming through from our projects. We've definitely got a differentiated EPC solution now. We've got a product that's unique in the market, and I'm very pleased about the way in which our renewables business has moved to be a multichannel renewables business, not just rooftop, but also Grand Man solar carport solutions, which are complex projects and allows us to bid and tender for projects that previously would not been able to do.

27:52 I think Nick joining the board has really strengthened our overall, I guess, team at the board level. I'm looking forward to working with him as he helps improve our governance and execution capacity. And that concludes our presentation today. I hope that's been useful for investors. Perfect. Harvey, John, if I may just jump back in there. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that have been submitted already, just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, can all be accessed via your investor dashboards. Guys, you can see that we have received a number of questions, and thank you to all of those for submitting their questions. But Katie, at this stage, if I may hand over to you to share the Q and A with the team. And if I pick up from you at the end, that would be great. Thank you. Thank you very much, Jake. There's been a couple of questions looking at the outlook at opportunity.

28:53 So firstly, where do you see the greatest opportunities in full year 2026? I think there's probably three big channels that we expect to scale this year. One is new multi opportunities coming through from tenders that we've already delivered specifications for. We've got a number of NHS projects that we think is going to significantly drive performance. And I would say the C and I service space for landlords. For for me, they are the three areas that I think are gonna drive the potential for exponential growth. As I've said and as John's mentioned, the ambition for this year is to do 10,000,000 a quarter. That's obviously significantly higher than our current guidance.

29:39 And yes, of course, some things never go quite according to plan, but we do believe that this business is well positioned to deliver 10,000,000 a quarter now, and that's really what our ambition is for the year. Thank you, Harvey. And then looking a bit further on, what do you or EENERGY kind of aspire for the next five years or so? I think as a five year strategy, one has to think about batches as being one of the core pillars of our revenue growth strategy. It's going to significantly change the landscape for renewables as people with daytime consumption looking to drive optimization of their solar solutions into the main consumption.

30:24 And I think that for us, the schools and for the NHS is going to be a really big growth driver. So I would say that change of storage is a five year plan, which we'll start to see evidence of already as what we could keep driving for a long time growth. Any other questions for us to address? Apologies. Your microphone is a little bit off, Harvey, if you want to mute and unmute. We've got one question which we did answer, which is about the releasing of the full year reports and accounts. And John, you highlighted that was in April, expected time, but a specific date will be published close to the time. And then final question we have is currently, how repeatable are large awards like the MACE contract? Should we think this is a one off or a step change or a new baseline for project sizes?

31:26 That's a very good question. So the government have a big strategic three year plan here. The, I guess, the delivery and the success of the current MACE project wins is a platform for us to prove ourselves. MACE effectively two point o for us is a rollout project that could be a three year revenue line. We are busy working with the various departments that are linked to the GB Energy program. We're hoping that we can deliver a successful program for the first promotion of their projects. We'll position ourselves well more for a three year program, and that could be significantly bigger annually than what we are currently seeing for this year and last.

32:24 Thank you, Harvey. We've just had one more come in as you are we've just had another one as well. But we'll start with the first one about how diversified is your NHS exposure across trusts and what concentrated risk remains? Are you seeing any changes in customer decision timelines, particularly the NHS and local authority sectors? So public sector decision making has changed. It's much more driven through frameworks, either direct or through tenders. I think what we have learned is to be more conservative in our forecasting time frames. I do think that the environment has changed generally for energy projects, and I think that our pipeline estimation for forecasting has also changed. So whilst whilst we are always conscious of the risk around decision making, I think we've now got way more coverage in our weighted pipeline to be able to deal with those delays.

33:26 So, yeah, I I do think I do think that the decision making for public sector in a way has got easier, but it has changed. And I think now that we are familiar with the steps on those processes, we're able to forecast more accurately. Thank you. A couple extra questions have come have come in. And one of them is, as you've slightly touched on or touched on a bit already about your optimism optimistic internal targets revenue for 2026, would $40,000,000 actually be in reach? 40,000,000 is absolutely in reach. We we are confident that we can deliver 20,000,000 in the first half. The development program that we've got running in q one will dictate our level of confidence on being able to match h two with with h one.

34:21 So one of the things we're seeing is less seasonality driven by less exposure to schools. We're seeing more predictability on a 90 period. So the first quarter of this year is critical in developing to a forecastable level what we think q three and q four will look like. So I'm hoping by April, we'll be in a position to have a little bit more granularity around what that forecast is looking like, but absolutely forty minutes in reach. Thank you. One final question around another one should come in as well, but they kind of link in. So can you comment around the main elements behind the projected increase in EBIT adjusted EBITDA?

35:10 And can you comment on the cash generation within the business? Thank you. So in 2025, we've we did $23,000,000 of revenue and market expectation is 34,000,000 for 2026. So that's an $11,000,000 increase. Dollars 11,000,000 increase at a 30 margin, being conservative, hopefully, is a $3,300,000 of additional profit On top of the 1,700,000 adjusted EBITDA, which we did in 2025 takes us to 5,000,000. Undoubtedly, there'd be some extra cost to service that that revenue, but that's how we get to 4,500,000. So it's primarily driven by operational gearing with the additional gross profit on the incremental revenue falling down to the bottom line. That's what we expect.

35:58 And from a cash perspective, if we were measuring this business and come the end of March, you know, there are some very substantial cash receipts coming in over the next couple of months. And the cash position will be markedly different at the by the end of March as as it compared to where it was and where we were at the end of December, And that's purely a short term timing networking capital issue. So that will that will resolve itself very, very quickly. Thank you very much, John. That's all the questions. So I'll hand back. Perfect, guys. That's great. And thank you very much indeed for addressing all of those questions that came in this morning. And of course, if there are any further questions that do come through, we'll make these available to you after the presentation. But Harvey, perhaps before really now, just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and to the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great.

36:53 Look, I think FY twenty twenty five was a period of both stabilization and derisking the operating model to the extent that we've got a way more predictable gross margin to cash business. We've derisked our business from being a direct sales education business. We've got a hedge on seasonality now. I think we're well positioned with our pipeline to deliver real cash generation and strong EBITDA growth as we look forward to FY '26. That's great. Harvey, John, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback? On behalf of the management team of EENERGY GROUP PLC, we would like to thank you for attending today's presentation.

37:40 That now concludes today's session. So good morning to you all.