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DJ Good Energy Group PLC Unaudited Results for 12 months ended 31 Dec 2019

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RNS Number : 3710G

Good Energy Group PLC

17 March 2020

Good Energy Group PLC

Un-audited Preliminary Results for the 12 months ended 31 December 2019

Continued delivery against our strategic goals and investment in technology

Good Energy Group PLC, the 100% renewable electricity supplier and innovative energy services provider ("Good Energy" or "the Company"), today announces its preliminary results for the twelve months ended 31 December 2019.

 
 Year ended 31 December          2019           2019           2019         2018        % Change 
  GBPm*                        Continued     Discontinued    Reported     Continued     Continued 
                               operations     operations                  operations    operations 
 Revenue                       GBP124.3m       GBP0.1m      GBP124.3m     GBP116.9m       6.3% 
                             ------------  --------------  -----------  ------------  ------------ 
 Gross Profit                  GBP31.7m       GBP(1.2)m      GBP30.5m     GBP33.4m       (5.4)% 
                             ------------  --------------  -----------  ------------  ------------ 
 Administration costs         GBP(25.2)m       GBP0.2m      GBP(25.0)m   GBP(26.8)m      (5.9)% 
                             ------------  --------------  -----------  ------------  ------------ 
 Operating profit               GBP6.4m       GBP(0.9)m      GBP5.5m       GBP6.6m       (3.2)% 
                             ------------  --------------  -----------  ------------  ------------ 
 Underlying profit 
  before tax                    GBP2.1m       GBP(0.9)m      GBP1.2m       GBP2.3m       (7.9)% 
                             ------------  --------------  -----------  ------------  ------------ 
 Non - underlying              GBP(0.9)m          -         GBP(0.9)m         -             - 
  costs 
                             ------------  --------------  -----------  ------------  ------------ 
 Profit before tax              GBP1.3m       GBP(0.9)m      GBP0.3m       GBP2.3m       (45.4)% 
                             ------------  --------------  -----------  ------------  ------------ 
 Cash and cash equivalents     GBP13.7m                      GBP13.7m     GBP15.7m       (12.7%) 
                             ------------  --------------  -----------  ------------  ------------ 
 Basic earnings per 
  share (p)                      7.5p                          1.6p         10.2p        (26.5%) 
                             ------------  --------------  -----------  ------------  ------------ 
 Full year dividend 
  per share (p)                  3.7p                                       3.5p          5.7% 
                             ------------  --------------  -----------  ------------  ------------ 
 

* Due to rounding, figures in the table above may not cast. Figures are rounded to the nearest GBP0.1m.

Juliet Davenport, Founder and Chief Executive Officer of Good Energy, said:

"In 2019 Good Energy made great strides to stay ahead of the market in its transition towards innovative technology based clean energy services. We are operationally resilient, despite a challenging retail market, underpinned by a good cash position and a cash generative business model.

"We are building the infrastructure and systems to underpin future growth. Our investment in the Kraken customer technology platform gives us the scalability and flexibility to serve more customers with more services, whilst reducing the cost of adding new customers. Our investment in Zap-Map and launch of business electric vehicle charging sets out a road towards clean transport - a crucial pillar of a zero carbon UK, alongside electricity and heat.

"We are witnessing a sea change in the relationship the UK has with energy - a shift from supplying to sharing. We have helped drive this for 20 years and today, as decentralisation, digitalisation and decarbonization become the new norms, are anticipating a gearshift that will lead to significant growth opportunities. We will continue to focus on innovative solutions that hasten a cleaner, greener future. With our strong market presence this is an exciting time for Good Energy's growth strategy."

* Due to rounding, figures in the table above may not cast. Figures are correct to the nearest GBP0.1m

Enquiries:

 
 Good Energy Group PLC                Via Walbrook PR 
  Juliet Davenport, Chief Executive 
  Charles Parry, Investor Relations 
 Investec Bank plc (Nominated         Tel: +44 (0) 20 7597 5970 
  Adviser) 
  Jeremy Ellis 
  Sara Hale 
 Walbrook (Financial PR)              goodenergy@walbrookpr.com 
  Nick Rome                            Tel: +44 (0) 20 7933 8783 
  Tom Cooper 
 

Analyst Briefing:

A briefing for Analysts will be held at 9:30 AM today via web conference. Analysts wishing to join should contact goodenergy@walbrookpr.com.

Notes to editors:

About Good Energy www.goodenergy.co.uk

Good Energy is a generator and supplier of 100% renewable power and an innovator in energy services. It currently owns two wind farms, six solar farms and sources electricity from a community of 1,500 independent UK generators.

Since it was founded 20 years ago, the company has been at the forefront of the charge towards a cleaner, distributed energy system. Its mission is to support UK households and businesses generate, store and share clean power.

Financial highlights - continuing operations

-- Revenue increased by 6.3% to GBP124.3m, driven by growth in business supply customers and domestic price rise in January 2019

-- Gross profit of GBP31.7m decreased 5.4% with a gross profit margin of 25.5% (2018: 28.6%) due to the planned shift to lower gross margin business growth, impact of rising commodity costs and one off impact of the 2018 'Beast from the East', consistent with our communication in H1 2019

-- Underlying profit before tax of GBP2.1m decreased 7.9%, as lower gross profit flowed down the P&L. After the GBP865k non-underlying costs associated to the Kraken customer services investment, profit before tax from continuing operations was GBP1.3m (2018: GBP2.3m)

-- Strong operating cashflow of GBP8.1m leading to a cash balance of GBP13.7m at year end (2018: GBP15.7m), funding investment across the business and a continued paydown of debt

   --     Basic earnings per share decreased to 7.5p (2018: 10.2p) 
   --     Recommended final dividend of 2.6p, leading to a full year dividend of 3.7p (2018: 3.5p) 

Operational highlights

-- Business supply customers saw significant growth of 33%, largely driven by SME growth following increased investment across the sales team. Total business customers grew by 4.9%

-- Domestic FiT customers grew strongly by 32.5%, following a surge in registrations before the scheme closure in Q1 2019

-- Overall customer numbers increased by 2.5% to 266.5k, as we continue to transition to higher volume business supply customers

-- Investment in Kraken customer services technology platform. The system implementation and associated operating model transformation, a market leading service technology, is expected to drive material operating cost savings, while delivering significant customer experience benefits and driving future growth

-- Kraken implementation and rollout progressing on track. Existing customers will be onboarded in waves throughout H1 2020

-- Strategic investment in ZapMap, a platform for the energy sharing economy and at the forefront of electric vehicle market growth. The transaction was structured so that the initial 12.9% minority equity investment will increase to 50.1%. Able to convert GBP 800k convertible loan to equity from April 2020. Total investment of GBP 1.07m, with GBP 0.87m invested to date and final GBP 0.2m due in March 2020.

-- We have seen no significant financial impact from the coronavirus (COVID-19) outbreak to date, however we are monitoring the situation closely while planning for a range of scenarios including changes to current government guidance or policy

Chairman's statement

In 2019, we had another year of good performance as we continued to deliver against our stated strategic shift to the energy services world of the future. We continue to demonstrate our resilience to changing and difficult markets and remain well positioned both financially and operationally. We made tangible investments in our future strategy, progressing in our transition towards technology enabled energy services for the generation, supply and sharing of 100% renewable clean power for all.

Our market: Opportunities and challenges

Looking back, we saw a significant amount of uncertainty: Brexit negotiations, parliamentary inertia and a sense of constant macroeconomic volatility dominated the landscape. The UK economy remains buoyant but highly sensitive. Recent events have only served to heighten this. Following genuine signs of an economic resurgence in 2020, the ongoing impact of Coronavirus (COVID - 19) has become a global issue.

We are witnessing unprecedented actions from both Governments and businesses: The Bank of England slashing interest rates, mass cancellations of sporting events and tangible impacts on global supply chains. As a business, we believe that our financial and operational resilience will allow us to react to these market challenges. We remain cash generative and have a good cash balance. Operationally, our UK focused business is well placed to respond. The implementation of our new customer technology platform is progressing as planned, which provides us with further flexibility to operate and deliver all our products and services to customers.

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We have seen no significant financial impact from the coronavirus (COVID-19) outbreak to date, however we are monitoring the situation closely while planning for a range of scenarios including changes to current government guidance or policy. As a business, the health and wellbeing of our employees remains of critical importance. We have a strong business continuity process in place to ensure we can safeguard against future developments. Whilst the potential impact of the virus remains unknown, we remain confident in our capabilities as a business to protect our employees and continue to deliver products and services for our customers.

I believe that as a business our financial and operational resilience provides us with the flexibility to handle significant market volatility. We have a good cash position, a high proportion of our customers on direct debit and an operating model which can handle remote working.

Strategic developments

As a Board, a key area of focus is to create and deliver a strategy to navigate the many challenges and opportunities the business faces. We must ensure that the business is well positioned to capitalise on these growth opportunities, both now and in a way that is sustainable for the long term.

As the energy market evolves, so do we. We have been actively updating our business model to position ourselves to prosper in these new markets. Decentralisation, digital products and data analytics will help us thrive and deliver energy as a service to our customers. We continue to invest across the business to make this transition a reality. We remain focused on technology, strategic partnerships and our people. Our investments in both Kraken and Zap Map continue to progress at pace and allow us to have the technological capabilities to play in the right markets and deliver our vision of a zero-carbon future. We will ensure that these decisions are taken in the context of the evolving situation regarding COVID-19.

Board update

In February 2019 Nemone Wynn-Evans joined the Board as a Non-Executive and has taken on the role of Chair of Audit and Risk. Nemone has extensive experience across the financial services sectors and has listed plc and PRA, FCA/FSA regulated experience, having acted as finance director on the main board of a stock exchange. Nemone is also a Fellow of the Chartered Institute of Securities and Investments. Nemone's experience continues to be an asset to the group as we continue to reshape the company, leading the shift from supplying to sharing energy.

In January 2020, Rupert Sanderson was appointed Chief Financial Officer. Rupert joined Good Energy in February 2017 and was appointed Finance Director in January 2018 and is responsible for finance, trading, legal and investor relations. His previous roles include senior financial and commercial positions at Centrica, British Gas, Serco and Avis Europe. Rupert began his career as an accountant for PwC and is a Fellow of the Institute of Chartered Accountants in England and Wales.

We are proud that we continue to live our values as a company and our board composition has an equal representation of men and women. Diversity and inclusivity are principles which we are passionate about and continue to promote throughout the company. We now have a Board in place to guide and oversee the company to meet its strategic objective and goals.

Dividend

Alongside our ongoing investments, we aim to deliver a progressive dividend policy. The policy has the objective of increasing the dividend over time as profitability grows to provide an appropriate return to shareholders. We remain mindful of maintaining and balancing the ability to invest in long term growth opportunities.

Following a good performance in 2019 and reflecting our confidence in the ongoing business, the Board has recommended an increased final dividend for 2019 of 2.6p per ordinary share, taking our full year dividend to 3.7p. The Board is pleased to confirm the continued operation of the Good Energy's scrip dividend scheme and will confirm the timetable for payment of the final dividend alongside circulating notice of Good Energy's annual general meeting in the coming weeks.

Will Whitehorn,

Chairman

Chief Executive Officer's review

Business update

In 2019, we delivered another year of good performance, as we continue to support our customers on their journey to have a zero-carbon footprint.

We witnessed a radical change in the attitudes towards addressing the climate crisis. We have always been, and always will be, a 100% renewable energy business. This secular shift in attitudes represents a growing opportunity to help both consumers and businesses have an impact in the fight against climate change.

We remain committed to focusing on our goals to drive growth. Lowering customer acquisition cost, improving customer retention and increasing overall customer lifetime value. We believe that the benefits to our customers will be more compelling propositions at a competitive price that will simplify their lives, meet their needs and cut carbon. This is true across all our markets.

Strong growth in the business sector underpinned our performance in 2019. This was driven by a 4.9% increase in our total business customers. This planned shift towards business provides us with greater stability, longer term contracts and more certain revenues. Whilst we saw gross margins fall as a result of this shift, operating margins have the potential to increase over time due to the lower cost per acquisition and cost to serve these customers. We continue to partner with a growing number of like-minded businesses, ranging from small, owner managed businesses to large corporates. We are confident about the opportunity in this market.

In the domestic supply market, we continue to avoid the price war that a growing number of companies remain engaged in. We do not see the race to bottom in price a viable long-term business model. Whilst we know that a significant number of customers remain highly price sensitive, there are an expanding number who want a truly green energy provider. The recognition from both OFGEM and Which? as a 100% green supplier, is evidence of our credentials in this space. Whilst we saw domestic customer numbers decrease by over 8% in 2019, we remained focused on reducing churn and improving the cost to acquire new customers. Our domestic customer churn levels, at 16%, remain significantly lower than industry levels. We have seen positive trends in reducing domestic churn.

Despite the feed in tariff (FIT) scheme closing to new entrants in March 2019, we continue to administer the scheme for both our domestic and business customers. We saw domestic customer numbers increase 32.5% and business customers increase 3.8%. We continue to have one of the largest market shares in this industry and it remains an important aspect of our business, as it is the foundation of energy as a service in our business model.

Technology and digitalisation will underpin all our future growth plans. In 2019, we made tangible steps to invest across the business in order to make this a reality. A new market leading customer services technology platform will enable us to deliver new products and services more effectively to all our customers and our investment in Zap - Map (Zap), the UK's leading electric vehicle (EV) mapping platform accelerates our shift into the EV market.

The implementation of our new customer services technology platform, Kraken, is a significant step on our journey. We have already begun the implementation phase, with a growing number of customers already live on the platform. The implementation is progressing well. This will be rolled out to our customers in several waves throughout the first half of 2020.

Zap continue to represent a market leading position, with both the large majority of EV drivers and network operators on their platform. In 2020, they will continue to provide real time data analytics and insights, whilst delivering several innovative products and services for EV drivers.

We continue to operate a cash generative business model, as a result of our good operating performance, ongoing focus on cost control and prudent financial management. As a result, we have a strong cash balance and believe that this financial resilience leaves us well positioned to deal with the myriad uncertainties in both the energy and wider UK economy.

Our market and positioning

Our addressable markets in both the domestic and business markets continue to grow. We have seen a secular shift in customer demand following a growing societal awareness. This focus has not been limited to customers. But businesses and financial institutions as well. BlackRock, Goldman Sachs and Microsoft have all recently released bold visions for the future focused on combatting the climate emergency. Businesses recognise that they need to provide solutions for their own customers and staff. Demand for green propositions is now firmly part of the mainstream conversation.

In 2018 and 2019 we have successfully put Good Energy on a new trajectory. Embracing the potential in the business sector, focusing on generating and managing power behind the meter and sharing power rather than supplying. We believe we have found a niche that we can utilize the expertise in the business effectively and compete in this ever-changing market.

Twenty years ago, we launched net zero electricity to support 100% renewable Britain. Over the next twenty, we will continue to support the transformation of the electricity market to zero carbon, and work to transform the heat and transport markets too.

Our objective

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Overall, our aim is to support the wider transition to a zero-carbon Britain, whilst delivering value for all our stakeholders. Our long-term goal is to support Good Energy customers on their journey to having a zero-carbon footprint in electricity, heat and transport. In 2020, our focus is on building the platform to allow customers to start their journey towards a zero-carbon future. We will deliver this through genuinely SMART tariffs and products, electric vehicle (EV) propositions and continued supply backed by 100% green power.

Our opportunity in a decentralising market

The Group was founded twenty years ago, at a time when 98% of the UK's power was from non-renewables and customers had less choice than they do today about where their energy came from. Over 40% of the UK energy mix is now from renewable energy sources. Today, we supply 100% renewable electricity from over 1,500 different locations across the UK, are one of the largest Feed-In Tariff providers and have a top ranking from Which? for green tariffs. OFGEMs decision to award a derogation from the standard variable tariff price cap in August 2019, recognised the need for a genuine green choice to be available, and that our model genuinely supports renewable generation in the UK.

Our purpose remains to power the choice of a cleaner, greener future together by helping people to be part of the solution to the climate crisis; it is at the core of who we are. It remains central to our strategy today and into the future.

It is our belief that the clean energy grid of the future will no longer be dominated by a few large fossil fuel and nuclear based gigawatt generators, but will instead be comprised of millions of households and businesses generating, using and sharing their own renewable and clean energy. These new generators will need energy services to support this investment and this shift represents a major opportunity for us. We estimate that today there are approximately one million renewable energy generators powering the grid. We are a UK energy company with more home generation customers than supply customers. Our vision of the energy sharing future is one in which we will no longer simply be selling energy but selling the services that enable energy sharing. We see a significant opportunity to build upon the foothold we have already established in this future in establishing ourselves as a leading 100% renewable brand. The key will be to make being a low carbon household or business of the future simple.

Energy as a service - the business model

Delivering this opportunity will require an evolution of our business model. Energy as a service reflects the transition to a sharing economy. A shift from passive energy supply. Engaging with customers and providing products and services to increase their ability towards zero carbon. In our vision of the energy sharing future, we will no longer simply be selling energy, we will be selling the services that enable energy sharing. Our business already has a foothold in this future, proven by our Feed in Tariff business. This manifests in four key themes. Decentralisation, digitalisation, data analytics and decarbonisation.

The future of Good

Our business model allows us to directly interact with customers throughout the entire value chain. From energy generation, consuming clean energy and all the way through to how customers utilise, interact and enhance their individual energy consumption. This is driven by the provision, understanding and analysis of the data that sits alongside this. We are at the heart of this change.

We see our medium-term growth focused on two key areas: (i) the home and (ii) businesses. This is underpinned by both the utilisation of 47.5MW of installed renewable capacity, and our access to power purchase agreements (PPAs) and export from generators in the future.

In both home and business, we intend to build a platform for future growth through system investments, which will enable us to benefit from scale and drive efficiencies. In the home, this will be realised through the investment in the Kraken customer technology platform while business will enhance its existing customer services capabilities.

This platform will allow us to expand the customer proposition through a suite of new products and services. We have a clear roadmap for future energy services, ranging from expanding the number of business customers the Group supplies gas to and electric vehicle (EV) opportunities including leveraging our investment in Zap-Map. We will invest in the right systems, technology and customer service levels to benefit all our customers and drive growth and sustainable stakeholder value.

Strategic goals to drive growth

Our business plan is fundamentally built upon three underlying strategic pillars. Successful delivery will drive long term, sustainable growth through:

   1.    Lower customer acquisition cost 

o Implementing the systems and scale to acquire customers more effectively.

   2.    Improve customer retention 

o Complementary new products and services for them to stay with the Group for longer.

   3.    Increase customer lifetime value 

o Drive greater value from the Group's customers through selling more products and services and improved efficiencies.

Our ability to deliver these goals successfully will provide clear benefits for our customers. Our aim is to create more compelling customer-led propositions to help cut their carbon. These propositions will simplify customers' lives and meet their needs.

Investing for growth

Our Strengths

Our 100% renewable status, over the past twenty years, gives us credibility with customers and the experience and knowledge to attract leading partners in the energy sector. We have developed a proven expertise and an understanding of the renewable energy and clean technology markets underpinned by partnerships with like-minded companies.

Our people are experts in their field and have high levels of engagement. This has been fundamental to help us build a strong reputation over time. Leveraging this expertise, working in partnerships and focusing on innovative technology is at the heart of what we have always done as a business. We continue to develop research into clean energy technologies, and work in close partnerships to deliver these innovative products and services. Recent projects with Octopus Energy, Orsted and Zap-Map are evidence of our continued progress in our markets.

Accelerating the rollout of products and services

In order to achieve the Group's strategic goals, there are several key strands we will be accelerating our investment in. Covering both our domestic and business customers, as well as having the appropriate capital structures to achieve scalable growth.

Investing in transformation technology - Kraken platform investment

Last year's announcement of our investment in a new customer services technology platform with Kraken Technologies Ltd, part of Octopus Group, is evidence of our commitment to invest in our future. We identified this investment, in a proven platform and operating model, as a required first step to facilitate expansion plans and that a step change in performance was needed: leveraging automation, case management and technology that supports the business processes. The new platform provides us with this transformational step change. Its technological capabilities will allow us to better serve our customers.

This investment is in line with our strategic goal of lowering customer acquisition cost, improving customer retention and increasing overall customer lifetime value through an improved offering of products and services. This platform will enable significant future growth potential in our domestic business.

Total forecast investment of GBP4m will be split approximately equally between cash and non-cash elements. Operating cost savings will be realised through a significant reduction in headcount and operating cost efficiencies. They are expected to achieve payback of the forecast investment within 18 months of the April 2020 full implementation. The write down of previous systems and the cash investment into implementation and transition will be taken across 2019 and H1 2020. Transformation costs of GBP865k were incurred in 2019.

Expected efficiency savings will be reinvested in both price and further proposition development and roll-out. This will enhance existing products, services and competitiveness. The new platform will provide significant scalability and flexibility. It will enable digital and clean technology innovation of significant benefit to customers.

Home

Our addressable market size in the domestic supply business continues to grow in line with the increasing societal shift towards action against climate change. Around half of the twenty-five million households in the UK feel climate change issues are important and are actively involved in decision-making in relation to energy management. These households with 'good intentions' account for roughly 25% of this addressable market, providing a significant growth opportunity.

However, the domestic market remains highly price competitive reflecting the ongoing energy price sensitivity across the wider economy. We have seen substantial market volatility and since the start of 2018, at least 18 companies have exited the market and there has been a fundamental shift in politics, policies and society as the climate crisis begins to play a larger role in people's everyday decision making.

The investment in our new Kraken customer services technology platform, will allow us to deliver improved customer service, to deliver decreased customer acquisition costs through increased ability to take on customers at scale and to realise expected operating efficiencies through a lower cost to serve. These savings will allow the Group to reinvest in the customer proposition to help make its tariffs more competitive and improve customer retention over the medium term.

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In order to sustainably improve customer retention, we are also planning to accelerate the roll out of a suite of low carbon home services to help our customers be part of the energy services future. The market for carbon reduction home products is anticipated to grow significantly to over GBP5 billion by 2023. This market is split between smart appliances, control and connectivity, security, home entertainment, energy management and comfort and lighting. The Group's propositions will focus on energy management, control, and connectivity in line with its addressable market and customer demand. These will include the continued roll out of SMART metering services (SMETS II) with the latest technology, in home devices, connected sensors and home hub and SMART thermostats. We are already rolling these out to a small number of our customers and will begin a larger scale rollout throughout 2020.

Our strategy is clear: we will reduce our cost to serve through our plans for improved customer service systems. We are developing new propositions with existing customers and will acquire new customers with a lower cost to serve and acquisition cost, through an improved bundle of propositions.

Business

We see a significant opportunity to expand our offering in the mid-market industrial and commercials. There is an increasing awareness from corporations as they demand greater energy sustainability or 100% renewable energy. This continues to grow our overall addressable market, expanding the number of larger electricity supply customers and extending into gas. We will continue to target consumer facing brands in the leisure, tourism, arts, property and services sectors.

In 2019, business supply volumes outstripped domestic supply for the first time ever. There is a growing opportunity to continue to build our business proposition, while maintaining healthy margins with a substantially lower cost to acquire than and better rates of retention than within the domestic supply base.

We have a strong pipeline of planned propositions to further enhance relationships with our business customers ranging from supply to carbon reduction services, to help businesses both understand their energy usage and provide benefits for their employees and customers

For example, we recently launched an electric vehicle (EV) charging solution for businesses, One Point, which was developed following detailed market positioning work and insights with existing customers. Pilot sites and propositions were refined, ahead of soft launches with existing customers before a full roll-out available for all our existing and potential customers. This solution provides organisations with the infrastructure and capabilities to deliver EV charging for their customers and employees and act as a dedicated EV destination for both new and existing customers. We are working closely with Zap - Map to leverage an increasing number of propositions and services for both our existing and potential customers.

Alongside further propositions, we continue to invest in systems and people within our business sectors. The intention is to have the right systems and people in place to provide the foundations for future growth. These investments will allow us to reduce customer acquisition cost and build relationships that both grow our existing customer base and improve retention.

Zap - Map: leveraging the UK's leading EV platform

In Zap-Map (Zap), we have invested in the UK's leading electric vehicle data platform, creating huge opportunities for rolling out several products and services in the crucial area of zero-emission transport and a catalyst for the sharing economy. These products are for both EV drivers and businesses. Covering mapping, payment, data and insights.

Zap is the go-to app for the UK's fast growing 280,000 EV drivers - planning routes, identifying charge points, checking their availability and sharing power. With close to 250,000 app downloads and more than 90,000 registered users, Zap is used by the vast majority of the fully electric EV market. Both the number of EV drivers in the Zap community and the number of charge points in its network have been increasing rapidly, which enhances the breadth and quality of the available data. By actively logging the status and availability of the public charging network, Zap provides crucial insights on individual users charging experience and requirements.

The growth potential for the UK EV market is compelling. The recent government announcement to ban the sale of new petrol, diesel and hybrid vehicles by 2035 (currently under consultation), will bring forward the original date by five years. The UK EV market is forecast to grow at an accelerated rate within that timeframe with more than 1 million EVs on UK roads forecast by 2025. Government subsidies & exemptions for EV purchases, home & workplace charging, and annual road tax exemptions are encouraging rapid adoption of EVs - including the introduction of the new 0% Benefit in Kind tax rate for company cars. With over 30 new EV models expected to enter the market in the next twelve months alone, the market is set to expand at a rapid rate. In May 2019 the number of EV charging locations in the UK overtook the number of petrol stations in the UK; a key milestone in diminishing the perceived range anxiety for current and future EV drivers. We are at the birth of a growing market, on the route to zero emission motoring. We invested in this market to be part of this future.

Zap offers several services for both EV drivers and businesses.

EV users - smoothing the transition to EV

Zap provides the right tools and products to help existing and potential customers with the transition to EV driving. Zap is the foundation, allowing customers to plan, check and communicate with their desired charging route. Zap-Pay, soon to be launched, will provide the solution to interoperability by allowing users to access and pay across multiple networks through one single app, reducing one of the key barriers for mass EV adoption.

Alongside mapping functionality, users can now plan and save driving routes. With real world driving distances linked to journey planning, users can effectively plan electric journeys to best suit their needs. Range anxiety persists as a genuine concern for many potential EV drivers. However, route planning, real world driving distance and availability of various charging infrastructure provides users with the information to overcome this perceived difficulty.

EV for businesses - delivering value

As the adoption of EVs continues to grow, businesses will play an ever-increasing role. Zap is well placed to provide data products and services to match the range of requirements, capitalising on market growth.

As businesses look to evolve their own EV propositions, understanding the data will be key. Zap are building a platform, with the data they possess, to allow businesses to understand and self-serve. This customisable data provides businesses with the answers to their most pressing questions. Additionally, Zap provides regular market insights and reports. Through their independent stance on data, they can provide businesses with genuine insight on the state of the market and their next steps.

Strategy in action - recent, ongoing and future initiatives

In 2019, we have been focused on laying the right foundations for growth. This has consisted of systems, people and proposition investment. We have already begun to implement the Kraken customer technology platform, have invested in our leadership team and have a clear proposition roadmap in place for 2020 and beyond.

We continue to refine our proposition pipeline, with several products in development.

One Point - Innovative solutions for a growing and fragmented market

The EV market is currently fragmented and complex, but it will soon be essential for UK businesses to offer EV charging facilities and services. We have launched a new solution to make it easier for businesses to install chargers and to secure available network capacity. 2019 saw the launch of One Point - our simple, easy-to-use service which supports businesses wanting to offer EV charging to their staff, customers and visitors, powered by 100% renewable energy. A pilot scheme was put in place at the Watergate Bay Hotel in Cornwall, managing the installation of four charging points on the premises, with two more planned. Further pilot projects will be launched soon with our partners. Lessons from the pilot schemes will help us expand One Point to companies up and down the country; including the potential integration of Zap-Pay to enable open and simple access to all One Point charging locations.

Investing in innovation

The clean energy sector is constantly evolving, and we want our customers to be a part of it.

That's why we're working on new products and services to help customers support a clean energy future, along with investing in new technologies and research. Aside from our investments with Zap, Smart meters and One Point, we continue to innovate in a number of ways. Recent research projects with both Honda and BestRes as examples.

HAVEN: using EVs for home energy storage

We recently completed an innovative research project with Honda, Upside Energy and Salford University. The study was designed to examine the value of 'vehicle-to-grid' (V2G) technology, where an electric vehicle is used alongside a special charger and other home systems: battery storage, solar panels, a smart hot water tank, and heat pumps. The technology is designed to maximise efficient energy usage, save money, and cut carbon emissions.

BestRes

Our Home Innovation Trial is part of the European-wide BestRes project, which is researching how to better integrate renewable generation into energy grids. We provided each household that signed up to the trial with a smart hub and linked app, which measured energy usage by different types of appliance. The aim is to explore and better understand energy usage and management in the home.

Operating review

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2019 performance - continued delivery against our strategy

In 2019 we continued to deliver against our strategic objectives and progress on our journey from energy generation and supply to energy services as a business model for the future. We have made tangible steps on the road to achieving this goal by further developing our capabilities across SMART metering and investing in technology enabled services to support the rapidly growing electric vehicle (EV) market. Our shift towards business supply was in line with our plans to expand our products into the fast-growing business markets.

Supply - a continued shift to business

Total customer numbers increased by 2.5% to 266.5k. Within that, we saw a continued shift in customer mix in line with our ambitions to focus on the business sector. Total business customer numbers increased 4.9% to 127.8k, whilst total domestic customer numbers increased marginally by 0.6% to 138.6k. Customer number growth was driven by an overall increase in FiT customers of 10% to 167k customers. The Business supply growth aligns to the longer-term strategy of a more balanced earning supply portfolio and is the third year in a row of consistent growth in this segment. Domestic supply meters fell by 8.4% in 2019. In line with our stated plans, the ongoing price sensitive nature of the domestic supply market remains challenging. However, OFGEM's decision to award a derogation from the standard variable price cap on a permanent basis, provides external validation of our green credentials.

The Kraken system implementation and associated operating model transformation is expected to drive operating cost savings, customer experience benefits and future growth. This will enable more customers to access competitively positioned clean energy and technology services. This agreement is in line with the Company's strategic goals of lowering customer acquisition cost, improving customer retention and increasing overall customer lifetime value through an improved offering of products and services.

Electricity supply volumes grew by 5.5% in 2019 to 542GWh, with business supply slightly exceeding domestic for the first time. Gas volumes fell by 8% to 532 GWh, driven by a reduction in domestic supply meters and the non-repeat of the extreme cold weather seen in Q1 2018. Gas volumes in Q1 2019 were 42GWhs lower than the same period in 2019.

Our overall customer mix was split 52% domestic customers and 48% business customers based. This has shifted from a 53% domestic to 47% business split in 2018. We anticipate this shifting focus from domestic to business customers will result in our overall volumes increasing, assuming seasonal weather conditions follow a normal pattern.

Importantly, the business market is driven through quality renewable products and our ability to deliver a more sophisticated solution for businesses than the consumer market. This creates a wide range of potential customers to engage with, particularly in the SME segment of the business supply market. We have a clear policy focused on delivering profitable growth, built around a fair price and better service.

Feed in Tariff (FIT)

The FiT scheme closed to new entrants on 31 March 2019, however, FiT payments will continue for existing customers for up to 20 years. We continue to administer the scheme for both our domestic and business FiT customers. The FiT proposition, in which we have one of the largest market positions, remains an important aspect of our business as it is the foundation of energy as a service in our business model.

Business FiT customers increased 3.8% to 120.0k in the period. Domestic FiT customer growth increased by 32.5% to 46.7k customers, driven by an uptake in registrations ahead of the scheme closure in Q1 2019.

Generation

Our 47.5MW generation portfolio now consists of 6 solar and 2 wind sites, following the successful sale of Brynwhilach solar site during the year. The sale of the Brynwhilach solar site complete in May 2019, with the site planned to end up in community ownership longer term. The focus has shifted to delivering value from our existing sites, where generation levels performed well in the period. We are committed to working on our existing sites and delivering value to stakeholders.

We continue to take a prudent approach to the value of the generation business, reflecting the underlying economics of each asset. We are monitoring both the performance and outlook of all the sites and plan to undertake a review in 2020 to ensure that our valuation is reflective of current market conditions.

Financial performance

Profit and loss

Revenue increased by 6.3% in the period to GBP124.3m (2018: GBP116.9m) driven by strong business supply growth particularly in the second half of the year, offset by lower domestic supply customers.

Cost of sales increased by 10.9% to GBP92.6m (2018: GBP83.5m). This was predominantly driven by a market wide increase in commodity prices during 2018, which flowed into the cost base at the beginning of the year. There was also a rise in compliance costs, with significantly increased costs for ROC, CFD and capacity market contributions in 2019.

Gross profit decreased by 5.4% to GBP31.7m (2018: GBP33.4m) driven by the increase in commodity prices, lower domestic gas volumes and planned shift to lower margin but more stable business supply customers. Gross profit margin decreased to 25.5% (2018: 28.6%).

Administration costs decreased 5.9% to GBP25.2m (2018: GBP26.8m), excluding the one-off GBP0.9m impact of the Kraken platform investment incurred in 2019, costs decreased 2.7%. To help offset the increased compliance and commodity costs the business kept close control over costs in 2019. Through this we were able to deliver a GBP1.6m reduction in like for like costs versus 2018. In 2019 we commenced the Customer Services 2020 project (CS2020).

Total forecast investment in Kraken of GBP4m will be split approximately equally between cash and non-cash elements. Operating cost savings are expected to achieve payback of the forecast investment within 18 months of the full implementation by Q2 2020. It is anticipated that the write down of existing systems and the cash investment into implementation and transition will be taken across 2019 and H1 2020.

Operating margin decreased to 4.5% (2018 5.7%). Excluding the impact of GBP0.9m investment costs above, operating margin was 5.2%.

Finance costs decreased by 1.7% to GBP4.3m, as overall debt paydown was offset by an increase in reported finance costs following the implementation of IFRS16.

Underlying profit before tax decreased by 7.9% to GBP2.1m (2018: GBP2.3m). Continuing profit before tax, after the impact of the one-off Kraken platform investment decreased 45.4% to GBP1.3m.

The tax charge includes the effects of the increase in the Annual Investment Allowance effective 1(st) January 2019 and Substantial Shareholder Exemption on the sale of Good Energy Brynwhilach Solar Park Ltd.

Cash Flow and Cash Generation

Our business model is cash generative with GBP8.1m cash generated from operations (2018: GBP18.1m), with GBP10.0m generated before movements in working capital (2018: GBP10.6m). The performance in 2018 included the recovery from delayed billing and cash collection during 2017.

There was a cash inflow of GBP1.4m from investing activities (2018: outflow GBP2.6m) following the sale of Brynwhilach solar site in May 2019. This was offset by a net outflow of GBP7.5m (2018: GBP9.5m) from financing activities following the repayment in full of Good Energy Bond I June 2019 and continued debt paydown.

Funding and Debt

The remaining GBP3.6m of Good Energy Bond I was repaid in full in June 2019. Following the repayment of Bond I, Group finance costs will be significantly lower and this represents a positive step towards lowering the Company's ongoing financing costs and reducing the gearing ratio over the medium term.

Net debt increased 1.7% to GBP41.6m (2018: GBP40.9m). Excluding the impact of IFRS 16, net debt decreased 11.5% to GBP36.2m following the bond repayment. Gearing ratio increased to 68.9% from 68.5%. Excluding the impact of IFRS16, the gearing ratio was 65.8%.

The Group continues to maintain a robust financial position. We look to ensure we optimise our use of capital by continually reviewing the returns on our assets, balancing operating requirements, investment for growth, and payment of dividends back to shareholders.

The Group is currently evolving its strategy towards energy services and remains mindful of the need to capitalise on strategic business development and investment opportunities. Prudent balance sheet management remains a key priority.

Earnings and dividend

Basic Earnings per share (continuing) decreased to 7.5p from 10.2p as a result of the underlying performance and decreased profitability. The Group has maintained a progressive dividend policy, and a final dividend of 2.6p has been declared, taking our full year dividend to 3.7p, up from 3.5p in 2018 and reflecting the Board's confidence in the Group's prospects.

Investment valuations

As part of our overall financial review, we continue to monitor the fair value of all our investments thorough both an understanding of the wider environment in addition to the underlying economics of all assets across the business. As a result of this process, the Board has decided to fully write down the value of our investment in its remaining un-developed wind farm site.

The investment had a carrying value as at 31 December 2018 of GBP1.3m and is reported under Discontinued Operations.

Non underlying costs

An amount of GBP865k has been incurred as non-underlying costs within the period. These relate to the one-off expenditure relating to the implementation of the Kraken technology platform and associated restructuring costs.

IFRS16

The business implemented IFRS16 as a new accounting standard in the period. Further details can be found in the notes to the accounts.

Investment in associate

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DJ Good Energy Group PLC Unaudited Results for 12 -6-

The share in loss of associate of GBP42k in the period, relates to the equity stake investment in Next Green Car Ltd. Further details can be found in the notes to the accounts.

Outlook

The business continues to perform in line with management expectations. We have seen no significant financial impact from the coronavirus (COVID-19) outbreak to date, however we are monitoring the situation closely while planning for a range of scenarios including changes to current Government guidance or policy.

In 2020, underlying profit growth is expected from both core business growth and finance cost savings. Following increased investment throughout 2019, we are focused on execution in 2020. We will monitor our execution to deliver system improvements, digital and online capabilities in order to drive future growth and the longer-term strategy. These investments will provide us with a platform for future growth beyond 2021. The Group will maintain a progressive dividend policy.

Juliet Davenport,

Chief Executive

Notes: To present the performance of the Company in a clear and consistent format, unless otherwise stated, all references to revenue, profit, costs, tax and EPS refer to the continuing operations.

Consolidated Statement of Comprehensive Income (Unaudited)

For the year ended 31 December 2019

 
                                                                                                                          2019       2018 
                                                                                                                       GBP'000    GBP'000 
                                                                                                                     Unaudited    Audited 
 REVENUE                                                                                                               124,258    116,915 
 Cost of sales                                                                                                        (92,601)   (83,466) 
                                                                                                                    ----------  --------- 
 GROSS PROFIT                                                                                                           31,657     33,449 
 Administrative expenses                                                                                              (25,219)   (26,800) 
 
 OPERATING PROFIT                                                                                                        6,438      6,649 
 Finance income                                                                                                            166         16 
 Finance costs                                                                                                         (4,439)    (4,361) 
 Share of loss of associate                                                                                               (42)          - 
                                                                                                                    ----------  --------- 
 UNDERLYING PROFIT                                                                                                       2,123      2,304 
 Non-underlying costs                                                                                                    (865)          - 
                                                                                                                    ----------  --------- 
 PROFIT BEFORE TAX                                                                                                       1,258      2,304 
 
 Taxation                                                                                                                 (42)      (660) 
                                                                                                                    ----------  --------- 
 PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS                                                                          1,216      1,644 
 
 DISCONTINUED OPERATIONS 
 Loss from discontinued operations, after tax                                                                            (962)      (743) 
                                                                                                                    ----------  --------- 
 PROFIT FOR THE PERIOD                                                                                                     254        901 
                                                                                                                    ==========  ========= 
 
 
 OTHER COMPREHENSIVE INCOME: 
 Other comprehensive income for the year, net of                                                                             -          - 
  tax 
 
 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 
  ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY                                                                             254        901 
                                                                                                                    ==========  ========= 
 
 
 
 Earnings per share from profit for the year - 
  Basic                                                                                                                  1.6 p       5.6p 
                                                                                                          - 
                                                                                                           Diluted       1.5 p       5.5p 
 
 
 Earnings per share from profit for the year - 
  Basic                                           7.5 p   10.2p 
 (continuing operations) - Diluted                7.2 p   10.0p 
 

Consolidated Statement of Financial Position (Unaudited)

As at 31 December 2019

 
                                                            2019      2018 
                                                        GBP '000   GBP'000 
                                                       Unaudited   Audited 
 ASSETS 
 Non-current assets 
 Property, plant and equipment                            46,326    50,351 
 Intangible assets                                         4,454     3,586 
 Right of use assets                                       6,483         - 
 Long term security deposits                               4,548     4,166 
 Equity investment in associate                              426         - 
 Other investment in associate                               615         - 
                                                      ----------  -------- 
 Total non-current assets                                 62,852    58,103 
 
 Current assets 
 Inventories                                               9,941     8,580 
 Trade and other receivables                              29,430    29,796 
 Short term security deposits                                474         - 
 Cash and cash equivalents                                13,667    15,662 
 Current assets held for sale                                  -     6,649 
                                                      ----------  -------- 
 Total current assets                                     53,512    60,687 
                                                      ----------  -------- 
 TOTAL ASSETS                                            116,364   118,790 
                                                      ----------  -------- 
 
 EQUITY AND LIABILITIES 
 Capital and reserves 
 Called up share capital                                     832       829 
 Share premium account                                    12,790    12,719 
 Employee benefit trust shares                             (549)     (810) 
 Retained earnings                                         5,707     6,088 
                                                      ----------  -------- 
 Total equity attributable to members of the parent 
  company                                                 18,780    18,826 
 
 Non-current liabilities 
 Deferred taxation                                           903       927 
 Borrowings                                               56,744    54,464 
 Provisions for liabilities                                1,294     1,446 
 Long term financial Liabilities                              39         - 
                                                      ----------  -------- 
 Total non-current liabilities                            58,980    56,837 
 
 Current liabilities 
 Borrowings                                                3,057     6,263 
 Trade and other payables                                 35,487    36,864 
 Short term financial liabilities                             60         - 
 Total current liabilities                                38,604    43,127 
                                                      ----------  -------- 
 Total liabilities                                        97,584    99,964 
                                                      ----------  -------- 
 TOTAL EQUITY AND LIABILITIES                            116,364   118,790 
                                                      ----------  -------- 
 

Consolidated Statement of Changes in Equity (Unaudited)

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DJ Good Energy Group PLC Unaudited Results for 12 -7-

For the year ended 31 December 2019

 
                                 Share capital   Share premium        Employee    Retained      Total 
                                                                       benefit    earnings 
                                                                  trust shares 
                                       GBP'000         GBP'000         GBP'000    GBP '000   GBP '000 
                                --------------  --------------  --------------  ----------  --------- 
 At 1 January 2018                         826          12,652           (946)       5,553     18,085 
                                --------------  --------------  --------------  ----------  --------- 
 
 Profit for the year                         -               -               -         901        901 
 Other comprehensive income                  -               -               -           -          - 
  for the year 
                                --------------  --------------  --------------  ----------  --------- 
 Total comprehensive income 
  for the year                               -               -               -         901        901 
 
 Share based payments                        -               -               -         358        358 
 Tax charge relating to 
  share option scheme                        -               -               -      ( 65 )       (65) 
 Issue of ordinary shares                    3              67               -           -         70 
 Exercise of options                         -               -             136     ( 127 )          9 
 Dividend paid                               -               -               -     ( 532 )      (532) 
 Total contributions by 
  and distributions to owners 
  of the parent, recognised 
  directly in equity                         3              67             136     ( 366 )      (160) 
                                --------------  --------------  --------------  ----------  --------- 
 At 31 December 2018                       829          12,719           (810)       6,088     18,826 
                                ==============  ==============  ==============  ==========  ========= 
 
 At 1 January 2019                         829          12,719           (810)       6,088     18,826 
                                --------------  --------------  --------------  ----------  --------- 
 
 Profit for the year                         -               -               -         254        254 
 Other comprehensive income                  -               -               -           -          - 
  for the year 
                                --------------  --------------  --------------  ----------  --------- 
 Total comprehensive income 
  for the year                               -               -               -         254        254 
 
 Share based payments                        -               -               -          81         81 
 Exercise of options                         -               -             262       (133)        129 
 Dividend paid                               2              72               -       (584)      (510) 
 Total contributions by 
  and distributions to owners 
  of the parent, recognised 
  directly in equity                         2              72             262       (636)      (300) 
                                --------------  --------------  --------------  ----------  --------- 
 At 31 December 2019                       832          12,790           (549)       5,707     18,780 
                                ==============  ==============  ==============  ==========  ========= 
 

Consolidated Statement of Cash Flows (Unaudited)

For the year ended 31 December 2019

 
                                                            2019       2018 
                                                         GBP'000    GBP'000 
                                                       Unaudited    Audited 
 Cash flows from operating activities 
 Cash generated from operations                            8,146     18,069 
 Finance income                                               59         16 
 Finance cost                                            (4,090)    (4,156) 
 Income tax received/(paid)                                    -         66 
                                                      ----------  --------- 
 Net cash flows generated from operating activities        4,115     13,995 
                                                      ----------  --------- 
 
 Cash flows from investing activities 
 Purchase of property, plant and equipment                 (112)      (326) 
 Purchase of intangible fixed assets                     (1,834)   ( 1,287) 
 Disposal of assets                                        5,037          - 
 Transfers (to)/from security deposits                     (857)     ( 946) 
 Equity investment in associate                            (277)          - 
 Other investment in associate                             (600)          - 
 
 Net cash flows generated from investing activities        1,357    (2,559) 
                                                      ----------  --------- 
 
 Cash flows from financing activities 
 Payments of dividends                                     (510)     ( 462) 
 Proceeds from borrowings                                      -          - 
 Repayment of borrowings                                 (6,311)    (8,655) 
 Capital repayments of leases                              (769)     ( 447) 
 Proceeds from issue of shares net of share issue 
  costs                                                        -         70 
 Proceeds from sale of share options                         123          - 
                                                      ----------  --------- 
 Net cash flows used in financing activities             (7,467)    (9,494) 
                                                      ----------  --------- 
 
 Net decrease in cash and cash equivalents               (1,995)      1,942 
 Cash and cash equivalents at beginning of year           15,662     13,720 
                                                      ----------  --------- 
 Cash and cash equivalents at end of year                 13,667     15,662 
                                                      ==========  ========= 
 

Notes to the Financial Information (Unaudited)

For the year ended 31 December 2019

1. Basis of Preparation

Good Energy Group PLC is an AIM listed company, incorporated in England and Wales and domiciled in the United Kingdom, under the Companies Act 2006.

The principal activity of Good Energy Group PLC is that of a holding and management company to the Group. More detailed information on the Group's activities is set out in the Chairman's statement, the Chief Executive's review and the Finance Director's review.

The unaudited Preliminary Report has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and interpretations in issue at 31 December 2019 .

The Preliminary Report was approved by the Approvals Committee and the Audit Committee and adopted by the Board of Directors. The Preliminary Report does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006 and has not been audited.

Statutory accounts for the year to 31 December 2018 have been delivered to the Registrar of Companies. The audit report for those accounts was unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006 and did not contain any emphasis of matter.

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2018 , as described in those financial statements, except as noted below.

The Group applied IFRS 16 Leases for the first time. The nature and effect of the changes as a result of adoption of this new accounting standard are described below. Several other amendments and interpretations apply for the first time in 2019, but do not have an impact on the consolidated financial statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.

The Group adopted IFRS 16 using the modified retrospective approach, with the date of initial application of 1 January 2019. Under this approach, the standard is applied retrospectively, with any cumulative effect of initially adopting IFRS 16 being recognised within equity as an adjustment to the opening balance of retained earnings for the current period.

The effect of adoption of IFRS 16 as at 1 January 2019 is as follows:

-- Right-of-use assets with a net book value of GBP7,636,179 were recognised and presented separately in the Statement of Financial Position. This includes:

-- Lease assets recognised previously under finance leases with a net book value of GBP752,231, reclassified from property, plant and equipment, and

-- Decommissioning provisions related to the right-of-use assets with a net book value of GBP1,200,070 were also reclassified from property plant and equipment.

   --     Additional lease liabilities of GBP5,683,878 were recognised within borrowings. 

For the year ended 31 December 2019:

-- The depreciation expense increased due to the depreciation/amortisation of additional assets recognised (being the increase in right-of-use assets, net of the decrease in property, plant and equipment). This resulted in increases in cost of sales and administrative expenses of GBP202,032 and GBP387,935 respectively.

-- The rent expense included within administration expenses relating to previous operating leases decreased by GBP728,515.

-- Finance costs increased by GBP369,926, relating to the interest expense on additional lease liabilities recognised.

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DJ Good Energy Group PLC Unaudited Results for 12 -8-

-- Cash outflows from operating activities decreased by GBP358,588 relating to lease payments in respect of previous operating leases. Cash outflows from financing activities increased by the same amount as a result, relating to the principal element of lease payment related to these new finance leases recognised under IFRS 16 as at 1 January 2019.

The Preliminary Report is presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.

The Preliminary Report will be announced to all shareholders on the London Stock Exchange and published on the Group's website on 17 March 2020 . Copies will be available to members of the public upon application to the Company Secretary at Monkton Reach, Monkton Hill, Chippenham, Wiltshire, SN15 1EE.

2. Segmental Analysis

The chief operating decision-maker has been identified as the Board of Directors (the 'Board'). The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. The Board considers the business from a business class perspective, with each of the main trading subsidiaries accounting for each of the business classes. The main segments are:

   --     Supply companies (including electricity supply, FiT administration and gas supply); 
   --     Electricity generation companies (including wind and solar generation companies); 
   --     Generation development (including early stage development companies); 
   --     Holding companies, being the activity of Good Energy Group PLC. 

The Board assesses the performance of the operating segments based primarily on summary financial information, extracts of which are reproduced below. An analysis of profit and loss, assets and liabilities and additions to non-current assets, by class of business, with a reconciliation of segmental analysis to reported results follows:

Segmental analysis: 31 December 2019 (Unaudited)

 
                   Electricity               FIT        Gas        Total   Electricity                    Holding         Total        Generation      Total 
                        Supply   Adminis-tration     Supply       Supply   Gener-ation   Companies/Consoli-dation             -      Develop-ment 
                                                              Comp-anies                              Adjustments   Continu-ing   (Discon-tinued) 
                                                                                                                    Opera-tions 
                       GBP'000           GBP'000    GBP'000      GBP'000       GBP'000                    GBP'000       GBP'000           GBP'000    GBP'000 
 Revenue 
 Revenue 
  from external 
  customers             89,981             5,247     26,335      121,563         1,697                          -       123,260                91    123,351 
 FiT/ROC 
  subsidy 
  revenue                    -                 -          -            -           998                          -           998                 -        998 
 Inter-segment 
  revenue                    -                 -          -            -         6,084                    (6,084)             -                 -          - 
                  ------------  ----------------  ---------  -----------  ------------  -------------------------  ------------  ----------------  --------- 
 Total revenue          89,981             5,247     26,335      121,563         8,779                    (6,084)       124,258                91    124,349 
                  ------------  ----------------  ---------  -----------  ------------  -------------------------  ------------  ----------------  --------- 
 
 Expenditure 
 Cost of 
  sales               (69,382)             (462)   (18,835)     (88,679)       (3,922)                          -      (92,601)           (1,246)   (93,847) 
 Inter-segment 
  cost of 
  sales                (6,084)                 -          -      (6,084)             -                      6,084             -                 -          - 
                  ------------  ----------------  ---------  -----------  ------------  -------------------------  ------------  ----------------  --------- 
 Gross Profit           14,515             4,785      7,500       26,800         4,857                          -        31,657           (1,155)     30,502 
 Administrative 
  expenses                                                      (20,724)         (426)                    (2,780)      (23,930)               225   (23,705) 
 Depreciation 
  & amortisation                                                 (1,091)             -                      (198)       (1,289)                 -    (1,289) 
                  ------------  ----------------  ---------  -----------  ------------  -------------------------  ------------  ----------------  --------- 
 Operating 
  profit/(loss)                                                    4,985         4,431                    (2,978)         6,438             (930)      5,508 
 Net finance 
  income/(costs)                                                      27       (3,377)                      (923)       (4,273)                 -    (4,273) 
 Share of 
  loss of 
  associate                                                            -             -                       (42)          (42)                 -       (42) 
                  ------------  ----------------  ---------  -----------  ------------  -------------------------  ------------  ----------------  --------- 
 Underlying 
  Profit                                                           5,012         1,054                    (3,943)         2,123             (930)      1,193 
 Non-underlying 
  items                                                            (865)             -                          -         (865)                 -      (865) 
                  ------------  ----------------  ---------  -----------  ------------  -------------------------  ------------  ----------------  --------- 
 Profit/(loss) 
  before 
  tax                                                              4,147         1,054                    (3,943)         1,258             (930)        328 
 Segments 
  assets 
  & liabilities 
 Segment 
  assets                                                          54,410        63,633                    (2,184)       115,859               505    116,364 
 Segment 
  liabilities                                                     43,981        65,176                   (23,808)        85,349            12,235     97,584 
----------------  ------------  ----------------  ---------  -----------  ------------  -------------------------  ------------  ----------------  --------- 
 Net asset/ 
  (liabilities)                                                   10,429       (1,543)                     21,624        30,510          (11,730)     18,780 
----------------  ------------  ----------------  ---------  -----------  ------------  -------------------------  ------------  ----------------  --------- 
 Additions 
  to non-current 
  assets                                                           2,923         5,090                      1,041         9,054                 -      9,054 
 

All turnover arose within the United Kingdom.

Consolidation adjustments relate to intercompany sales of generated electricity and the elimination of intercompany balances.

Segmental analysis: 31 December 2018 (Audited)

 
                   Electricity               FIT        Gas        Total   Electricity          Holding         Total        Generation      Total 
                        Supply   Adminis-tration     Supply       Supply   Gener-ation       Companies/             -      Develop-ment 
                                                              Comp-anies                 Consoli-dation   Continu-ing   (Discon-tinued) 
                                                                                            Adjustments   Opera-tions 
                       GBP'000           GBP'000    GBP'000      GBP'000       GBP'000          GBP'000       GBP'000           GBP'000    GBP'000 
 Revenue 
 Revenue 
  from contracts 
  with customers        80,121             4,856     27,998      112,975           195                -       113,170                 9    113,179 
 FiT/ROC 
  subsidy 
  revenue                    -                 -          -            -         3,745                -         3,745                 -      3,745 
 Inter-segment 
  revenue                    -                 -          -            -         4,369          (4,369)             -                 -          - 
                  ------------  ----------------  ---------  -----------  ------------  ---------------  ------------  ----------------  --------- 
 Total revenue          80,121             4,856     27,998      112,975         8,309          (4,369)       116,915                 9    116,924 
                  ------------  ----------------  ---------  -----------  ------------  ---------------  ------------  ----------------  --------- 
 
 Expenditure 
 Cost of 
  sales               (60,190)             (873)   (18,575)     (79,638)       (3,828)                -      (83,466)              (72)   (83,538) 
 Inter-segment 
  cost of 
  sales                (4,369)                 -          -      (4,369)             -            4,369             -                 -          - 
                  ------------  ----------------  ---------  -----------  ------------  ---------------  ------------  ----------------  --------- 
 Gross profit           15,562             3,983      9,423       28,968         4,481                -        33,449              (63)     33,386 
 Administrative 
  expenses                                                      (22,172)         (315)          (3,087)      (25,574)             (124)   (25,698) 
 Tidal Lagoon 

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DJ Good Energy Group PLC Unaudited Results for 12 -9-

  write off                                                            -             -              500           500             (500)          - 
 Depreciation 
  & amortisation                                                 (1,081)             -            (645)       (1,726)                 -    (1,726) 
                  ------------  ----------------  ---------  -----------  ------------  ---------------  ------------  ----------------  --------- 
 Operating 
  profit/(loss)                                                    5,715         4,166          (3,232)         6,649             (687)      5,962 
 Net finance 
  income/(costs)                                                      12       (3,574)            (783)       (4,345)                 -    (4,345) 
                  ------------  ----------------  ---------  -----------  ------------  ---------------  ------------  ----------------  --------- 
 Profit/(loss) 
  before 
  tax                                                              5,727           592          (4,015)         2,304             (687)      1,617 
                  ------------  ----------------  ---------  -----------  ------------  ---------------  ------------  ----------------  --------- 
 
 Segments 
  assets 
  & liabilities 
 Segment 
  assets                                                          63,898        99,253         (52,095)       111,056             7,734    118,790 
 Segment 
  liabilities                                                     51,116       104,897         (73,546)        82,467            17,497     99,964 
                  ------------  ----------------  ---------  -----------  ------------  ---------------  ------------  ----------------  --------- 
 Net assets/ 
  (liabilities)                                                   12,782       (5,644)           21,451        28,589           (9,763)     18,826 
                  ------------  ----------------  ---------  -----------  ------------  ---------------  ------------  ----------------  --------- 
 Additions 
  to non-current 
  assets                                                           1,577            34                6         1,617               (4)      1,613 
 

All turnover arose within the United Kingdom.

Consolidation adjustments relate to intercompany sales of generated electricity and the elimination of intercompany balances.

3. Finance Income and Finance Costs

 
 Finance income:                             2019      2018 
                                          GBP'000   GBP'000 
                                        Unaudited   Audited 
 Bank and other interest receivables           80        16 
 Gains on fair value adjustment                86         - 
                                       ----------  -------- 
                                              166        16 
                                       ==========  ======== 
 
 
 Finance costs:                          2019      2018 
                                       GBP000    GBP000 
                                    Unaudited   Audited 
 On bank loans and overdrafts           2,956     3,051 
 On corporate bond                        908     1,092 
 Other interest payable                     8        26 
 Lease interest payable                   374         - 
 Amortisation of debt issue cost          193       192 
                                   ----------  -------- 
                                        4,439     4,361 
                                   ==========  ======== 
 

4. Non-underlying costs

Non-underlying costs in the year relate to our investment in a new customer services technology platform with Kraken Technologies Ltd. These costs comprise of a restructuring provision of GBP351,401 as part of our operating model transformation and the costs of the Kraken system implementation of GBP513,690.

Capitalised expenditure on the Kraken system implementation in the year totaled GBP663,596, these are additions to intangible assets as assets under the course of development.

5. Earnings per Ordinary Share

Basic

Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares during the year, after excluding 293,270 (2018: 403,270) shares held by Clarke Willmott Trust Corporation Limited in trust for the Good Energy Group Employee Benefit Trust.

 
                                                                2019      2018 
                                                           Unaudited   Audited 
 Profit attributable to owners of the Company (GBP'000)          254       901 
 Basic weighted average number of ordinary shares 
  (000's)                                                     16,294    16,109 
                                                          ----------  -------- 
 Basic earnings per share                                      1.6 p      5.6p 
 
 
 Continuing operations                                          2019      2018 
                                                           Unaudited   Audited 
 
 Profit attributable to owners of the Company (GBP'000)        1,216     1,644 
 Basic weighted average number of ordinary shares 
  (000's)                                                     16,294    16,109 
                                                          ----------  -------- 
 Basic earnings per share                                      7.5 p     10.2p 
 

5. Earnings per Ordinary Share (continued)

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares to assume conversion of all potentially dilutive ordinary shares. Potentially dilutive ordinary shares arise from awards made under the Group's share-based incentive plans.

Where the vesting of these awards is contingent on satisfying a service or performance condition, the number of potentially dilutive ordinary shares is calculated based on the status of the condition at the end of the period.

Potentially dilutive ordinary shares are dilutive only when the average market price of the Company's ordinary shares during the period exceeds their exercise price (options) or issue price (other awards). The greater any such excess, the greater the dilutive effect.

The average market price of the Company's ordinary shares during the year was 138p (2018: 126p).

The dilutive effect of share-based incentives was 513,596 shares (2018: 289,262 shares). The dilutive effect of share-based incentives for continuing operations was 513,596 shares (2018: 289,262 shares).

 
                                                                2019      2018 
                                                           Unaudited   Audited 
 Profit attributable to owners of the Company (GBP'000)          254       901 
 Weighted average number of diluted ordinary shares 
  (000's)                                                     16,807    16,399 
                                                          ----------  -------- 
 Diluted earnings per share                                    1.5 p      5.5p 
 
 
 Continuing operations                                          2019      2018 
                                                           Unaudited   Audited 
 Profit attributable to owners of the Company (GBP'000)        1,216     1,664 
 Weighted average number of diluted ordinary shares 
  (000's)                                                     16,807    16,399 
                                                          ----------  -------- 
 Diluted earnings per share                                    7.2 p     10.0p 
 

6. Assets and Liabilities Classified as Held for Sale

 
                                        2019      2018 
                                     GBP'000   GBP'000 
                                   Unaudited   Audited 
 Property, plant and equipment             -     6,649 
 Total assets                              -     6,649 
                                 -----------  -------- 
 
 Deferred taxation                         -         - 
                                 -----------  -------- 
 Total liabilities                         -         - 
                                 -----------  -------- 
 
 Carrying value                            -     6,649 
                                 -----------  -------- 
 

6. Assets and Liabilities Classified as Held for Sale (continued)

The property, plant and equipment assets held for sale at 31 December 2018 related to Good Energy Brynwhilach Solar Park Limited. The sale agreement was completed, and this company sold in the year ending 31 December 2019.

The assets also related to a wind development project, residential property and a transformer. The residential property was also sold in the year ending 31 December 2019, however despite active marketing a buyer has not currently been found for the transformer nor wind development project. As such the value of these items have been written down to nil. The transformer continues to be actively marketed, and if a buyer is found the impairment recognised will be reversed as appropriate.

7. Borrowings

 
                                   2019      2018 
                                GBP'000   GBP'000 
                              Unaudited   Audited 
 Current 
 Bank and other borrowings        1,950     2,668 
 Bond                               395     3,595 
 Lease liabilities                  711         - 
 Total                            3,057     6,263 
 
 
                                   2019      2018 
                                GBP'000   GBP'000 
                              Unaudited   Audited 
 Non-current 
 Bank and other borrowings       35,313    37,297 
 Bond                            16,757    17,167 
 Lease liabilities                4,673 
 Total                           56,744    54,464 
 

The Group has undrawn bank overdraft facilities of GBP 10,000,000 (2018: GBP 10,000,00) as at 31 December 2019.

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DJ Good Energy Group PLC Unaudited Results for 12 -10-

At 31 December 2019, GBP5,449,283 (2018: GBP 6,193,641) of the bank loans relate to the Company's subsidiary, Good Energy Delabole Wind Farm Limited and is secured by a mortgage debenture on that company.

At 31 December 2019, GBP 33,882,698 inclusive of GBPnil of accrued interest (2018: GBP34,990,240 inclusive of GBPnil of accrued interest) of the bank loans relate to the Company's subsidiary, Good Energy Generation Assets No. 1 Limited. Repayments of capital and interest are scheduled quarterly over a remaining period of 14 years. Interest is payable at 6.85% and the outstanding principal balance is partially exposed to annual RPI inflation over 3%. Costs incurred in raising finance were GBP2,754,299 (2018: GBP2,754,299) and are being amortised over the life of the loan in accordance with IFRS 9.

Good Energy Bond I was fully redeemed in 2019, with GBP3.6m repaid in June 2019.

8. Cash Generated from Operations

For the year ended 31 December 2019

 
                                                           2019      2018 
                                                        GBP'000   GBP'000 
                                                      Unaudited   Audited 
 Profit before tax from continuing operations             1,258     2,304 
 Loss before tax from discontinued operations             (937)     (687) 
                                                     ----------  -------- 
 Profit before tax                                          321     1,617 
 
 Adjustments for: 
 Depreciation                                             3,467     2,948 
 Amortisation                                               487       858 
 (Gain)/Loss on asset disposals & writedowns              1,435         - 
 Tidal Lagoon impairment                                      -       500 
 Fair value adjustment of contingent consideration         (72)         - 
 Net gain on financial assets at FVTPL                     (15)         - 
 Share based payments                                        81       358 
 Share of loss of associates                                 42         - 
 Finance costs - net                                      4,244     4,345 
 
 Changes in working capital (excluding the 
  effects of acquisition and exchange differences 
  on consolidation): 
 Inventories                                            (1,012)       346 
 Trade and other receivables                                366     2,682 
 Trade and other payables                               (1,198)     4,415 
                                                     ----------  -------- 
 Cash generated from operations                           8,146    18,069 
                                                     ==========  ======== 
 

9. Interests in Equity Associates

In the year, the Group acquired a 12.9% interest in Next Green Cars Ltd ("NGCL"), which develops Zap-Map the UK's leading charging point platform allowing electric vehicle (EV) drivers to plan routes, identify charge points, checking their availability and share power. It also develops the nextgreencar platform, the UK's number one green car website.

NGCL is a private entity that is not listed on any public exchange.

9.1 Summary of interests in equity associates

 
                                         2019      2018 
                                      GBP'000   GBP'000 
                                    Unaudited   Audited 
 Non-current assets 
 Equity investment in associate           426         - 
 Other interests in associates            615         - 
 
 Non-current Liabilities 
 Long term Financial Liabilities           39         - 
 
 Current Liabilities 
 Short term Financial Liabilities          60         - 
 
 

9.2 Investment in associate

As part of the investment in NGCL, the Group appointed a director to the board. This grants 33% of the board's voting rights and constitutes significant influence to direct the relevant activities of NGCL. As such NGCL is accounted for as an associate using the equity method in the consolidated financial statements.

The associate had no contingent liabilities or capital commitments as at 31 December 2019 and 2018.

No dividends were paid by the associate in the period.

9.3 Other interests in associate

At 31 December 2019 the group held GBP600,000 of the authorised GBP800,000 secured convertible loan notes in NGCL. This consists of the first two drawn down tranches of the loan. After the final tranche of GBP200,000 has been drawn down in Q1 2020 the Group will have the option to convert the entirety of the secured loan notes into a total shareholding of 50.1% together with the already held shareholding. These secured convertible loan notes are convertible at the option of the Group until 31 December 2021.

If the convertible loan note is not exercised by Good Energy, it becomes repayable half yearly in arrears on 30 June and 31 December, by NGCL over the following five years until 31 December 2026, accruing interest annually at 8%.

9.4 Other financial liabilities

 
                                                                 2019      2018 
                                                              GBP'000   GBP'000 
                                                            Unaudited   Audited 
 Financial liabilities at fair value through profit 
  and loss 
 Contingent consideration                                          99         - 
 
 Total non-current                                                 39         - 
 Total current                                                     60         - 
 

The carrying amount of these liabilities is equivalent to the fair value.

As part of the purchase of share in NGCL a contingent consideration has been agreed. Contingent consideration is payable dependant on the satisfaction of product milestones in July 2020 and stretching financial milestone targets in December 2021. The maximum possible deferred consideration is GBP0.72m.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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