eEnergy: Equity Development

eEnergy’s FY23 results are in line with expectations, having been well flagged in the March update. Recent months have seen the balance sheet transformed by the disposal of Energy Management and growth capacity materially enhanced by a £40m project funding facility with NatWest. H1’24 results are likely to be softer than expected but last week’s c. £5.2m contract win with Spire Healthcare – one of the Group’s largest to date – gives us confidence in pipeline conversion and a meaningful step-up in revenue and profitability from H2. eEnergy is now well capitalised, with an excellent track record of growth (three-year CAGR of 58% within Energy Services). We expect this to continue, driven by an ambitious management team with a focused strategy to capitalise on a highly attractive market with significant scale. 

FY’23 results in line with recent trading update 

Group revenue for the 18-month period was £45.6m (in line with our £46.0m forecast) and EBITDA was £5.1m (ED forecast £5.1m). Annualised revenues were £30.4m, +38% versus FY22 on a likefor-like basis. Net debt was slightly better than forecast at £8.0m (ED forecast £8.4m) and this predated the £25m initial cash receipt from the Energy Management disposal. 

H1’24 performance constrained but pipeline points to much stronger H2 

Balance sheet constraints and the distraction of the Energy Management (EM) disposal held back the Group’s performance in the final six months of FY’23 and the early months of FY’24. This was exacerbated by market factors, as a result of falling energy prices and the increased cost of funding. As a result, H1’24 results are likely to be weaker than expected but management is confident in a strong step-up in performance from H2’24. The medium-term outlook remains very positive but we have prudently trimmed FY25, whilst leaving FY26 unchanged (see p.5). Our new Energy Services EBITDA forecasts are £2.7m, £4.7m and £6.0m for FY24 to FY26 (from £3.8m, £5.1m and £6.0m). 

Well positioned to capitalise on significant market opportunities

 eEnergy now has the balance sheet strength to tender for much larger contracts, which we expect to support a significant uplift in revenue and EBITDA from H2’24. The benefits are already being seen with the recent £40m funding facility agreement with NatWest and last week’s (22nd April) major contract with Spire Healthcare. Our Fair Value estimate of 13p per share represents an EV/EBITDA rating of c.8.5x our FY26 forecast. This is in line with the current FY1 EV/EBITDA rating of the peer group. Note that our forecasts do not include the potential benefit of deferred consideration from the EM disposal, which management estimates at between £8m and £10m over the next two years.

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