On September 12, Good Energy Group PLC ,(market cap £34.42 million) announced its results for the six months ended June 30, 2017. The figures were in line with the measured expectations of analysts, but the market reacted somewhat negatively. The share price, which was already trading at a 52-week low, fell a little further to 208.50 pence.
The good news was that gross revenue, at £52.0 million (H1 2016: £44.8m) was up by 16 per cent. This continues a trend of steady increase in revenue, for the figures for the whole year for 2015 and 2014 were £64.3m and £57.6m respectively. The increase reflects .steady business volume consumption growth, though business customers come with lower gross margins. (gross profit margin was 28 per cent, down from the 33 per cent in H1 2016).
The market seems to have been more influenced by the negative percentage changes in most of the other key indicators. While gross profit was down only 3 per cent, from £14.8m (H1 2016) to £14.4m, other figures were significantly down in percentage terms, ranging from the 11 per cent decrease in operating profit from £3.4m? (H1 2016) to £3.0m (H1 2017) to the 62 per cent decline in diluted earnings per share, down from 7.6p to 2.9p (a more detailed list of these figures are at the end of this piece.)
These seem to suggest that future prospects rely on increasing efforts by the company to improve its efficiency in a market which is likely to be more uncertain, if not tougher as well. Good Energy is now a mature company: the days of vertiginous growth in individual customers are over. (From 2014 to 2015, the number of individual consumers rose from 152,500 to 219,400). The low fruits seem to have already been plucked. Or to put it another way, any individual who wanted to switch to Good Energy because it provided renewable energy has probably already done so. Further increases will rely on the somewhat slower actions of businesses.
Good Energy is far from complacent in the face of the challenges it faces. A successful corporate bond issue has reduced ongoing financing cost and left net debt at £60.4m as at 30 June 2017 (H1 2016: £50.7m). The company has launched a Fit for Growth programme to make the necessary changes to their business model. It was originally founded in 1999 to empower households and business to address climate changes through their choice of energy supplier.
It still owns Delabole Wind Farm, the UK’s first commercial onshore wind farm and owns and operates Hampole Wind Farm, near Doncaster. But renewable generation is a tricky game. The company now needs to adapt to a highly competitive and dynamic energy market.
|Six months ended 30 June||H1 2017||H1 2016||Change|
|£ million (unless otherwise stated)|
|Gross profit margin (%)||27.7||33.1||-16%|
|Profit before tax||0.7||1.2||-37%|
|Profit – continuing operations||0.8||0.9||-20%|
|Basic earnings per share – continuing operations (pence)||4.7||6.5||-28%|
|Diluted earnings per share – continuing operations (pence)||4.5||6.3||-29%|
|Basic earnings per share (pence)||3.1||7.9||-61%|
|Diluted earnings per share (pence)||2.9||7.6||-62%|
|Interim dividend per share (pence)||1||1||–|
|Electricity total customers (number)||71,150||72,250||-2%|
|Gas total customers (number)||42,750||43,000||-1%|
|Feed-in-Tariff customers (number)||137,900||124,500||+ 11%|