Utilitywise has posted heavy losses for the year to July 2017 after changing its accounting methodology and recalculating the value of its contracts.
The firm’s shares, which had been suspended from the AIM due to repeated delays to its financial results, fell further when trading resumed, though had partially recovered by midday.
The company had previously announced that customers were significantly under-consuming energy versus the contracts brokered by Utilitywise and energy suppliers. As TPIs make a margin on kilowatts consumed, if underconsumption is significant it has a material bearing on profit.
If energy suppliers have paid the TPI upfront based on inflated estimates, they might then ask for money back if they have ended up selling customers less energy than anticipated.
As such, Utilitwise has spent many months and a lot of money analysing thousands of contracts. The company said it now takes a much more conservative approach to their value.
Utilitywise is effectively taking the hit this year. For its contracts valued at less than £50,000, i.e most of its contracts, the company is using a weighted average of 26.4% under consumption, versus an actual weighted average rate of under consumption observed over the two years to July 2017 of 17.7%.
Should contracts mature at that observed lower rate of under consumption, group equity would increase significantly.
Meanwhile, through it breached covenants with its banks last year, the company said it has since moved away from a covenant based on profit with its provider and towards one based on cash flow and liquidity. Utilitywise, with £15.6m net liabilities as of 31 July 2017, said it expected to be able to refinance its borrowing facility before the current arrangement expires in April 2019.
While sales remained flat at £67.8m, the company said it had added around 4,000 accounts this year and had set ambitious growth targets out to 2021. These include increasing its SME and micro business market share in energy procurement from 2% to 7%, increasing UK SME customers to 130,000 and developing a 5% share in the £1.5bn UK corporate energy controls market.
The firm also “intends to expand across certain international markets”, according to CEO Brendan Flattery.
See the full financial report here.