Inspired Energy completes disposal of SME division

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Inspired Energy PLC (LON:INSE) said it has completed the disposal of its SME division to its management team by way of a buyout for a total consideration of up to £10.5mln.

The energy procurement consultant said the sale will enable it to focus exclusively on its strategy of providing expert assurance and utility cost optimisation services to corporate energy consumers.

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Inspired said it considered the SME division to be a “non-core activity”, contributing 7% of total revenues during the first half of 2020, and that the division’s performance had also been impacted by the coronavirus (COVID-19) pandemic.

The £10.5mln sum will be paid to Inspired on the collection and run off of the SME division’s accrued income balance, the majority of which is expected to be recovered within three years of completion.

The company also issued a trading update, saying that a recovery of the SME division following its interim results on September 9 has not materialised, and as a result, the business is expected to contribute underlying earnings (EBITDA) that are £1.2mln below current expectations for the firm’s 2020 financial year.

However, Inspired said in the continuing operations of its corporate division, its core corporate assurance service “remains robust and ahead of management expectations for the full year” despite disruptions in its fourth quarter

The firm also said the average reduction in energy consumption by customers for the April to December period is expected to be around 18%, well ahead of the 25% reduction modelled in its downside case for the COVID-19 pandemic.

Elsewhere, Inspired said its optimisation services businesses,  which are project based and typically require access to customer sites, had been disrupted from April to September as a result of pandemic restrictions and some project deferrals, and while the division had experienced a partial recovery in October, lockdowns in November had again restricted site access and shifted some projects into 2021.

As a result of the short term disruption of optimisation services, and despite the continued resilient performance in assurance services offsetting the decline, the company said it expects its continuing operations to report full-year underlying EBITDA that are around £1.2mln below current expectations. Inspired also reiterated its EBITDA guidance for its 2021 financial year.

“The disposal of the SME division represents an important milestone in the strategic direction of Inspired Energy.  Unlike the corporate division, where assurance services have performed better than our COVID sensitised model, and optimisation services where FY2020 performance is impacted by deferrals to project delivery, but is expected to recover in FY2021, the SME division has proved less resilient to the pandemic.  This transaction allows the group to focus solely on our core service offering to corporate energy consumers with a business that is more resilient to the COVID pandemic in FY2021”, Inspired chief executive Mark Dickinson said in a statement.

“Whilst the financial performance of the group for FY2020 is disappointing, it is a consequence of factors outside of the group’s control. The board is pleased with the continued outperformance of the group’s core corporate assurance service lines and believes that optimisation services will regain strong momentum once restrictions on movement are lifted. The board continues to believe there is a strong and growing demand for optimisation services as ESG becomes a higher priority for corporates”, the CEO added.

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