Good looking interim results to 31st January 2016 from Utilitywise (UTW) the independent utility cost management consultancy today. These showed revenues up 36%, diluted earnings up by 21% and the dividend by 29% which is ahead of the 21% or so growth that is currently forecast by the consensus. They have swung from cash to around £10m of debt, but separately they did announce another positive renegotiation of terms with an existing supplier which they say will give rise to a cash inflow of £2.25m by the year end, which may help to bring the debt back down again somewhat. This will be important to watch as some have questioned the cash flow on this one in the past and this together with other similar agreements with suppliers should help to address these concerns. Plus they highlighted the acquisition of t-mac technologies which occurred in the second half of 2015 and the cash of £6.4m was spent on this. Eliminating this from the movement between the two periods isolates the trading flows which overall equated to a £5.4m outflow of cash. The cash was apparently in line with their expectations and the second half is they say supposed to be a stronger cash period for them.
They also highlighted future secured revenues being up by 5% to £24.7m at the period end and up to £26.6m at the 31st March 2017. Total customer numbers were also up by 33% to just over 29,000. They also continued to expand their headcount to fill their new offices with Energy consultants increased by 39% to 625 (H1 2015: 449) and 630 since the period end. This large increase in the headcount might help to explain some of the big increase in turnover.
Aside from the numbers they also announced a board shake up with the existing CEO (and founder I think) stepping up to be Executive Chairman with a planned recruitment of a new CEO. They also added some other operational director appointments.
It all reads quite well and they finished by saying "We are confident about the future prospects of the business. The productivity measures in our Enterprise division, with a lower attrition rate in the second half, will see an improved second half performance against the first half. Overall we remain on track to deliver revenue and EBITDA margins in line with market expectations." So the shares have responded well this morning being up by nearly 5% to around 190p at the time of writing. Assuming no changes to forecasts on the in line outlook this leaves them on a rating of 10x with a 3.2% yield for the year to July 2017, which may fall to around 8x with a 4% yield if they hit forecasts for next year too. This seems attractive given the growth they seem to be producing but the market has be distrustful of this one in the past and therefore may still be wary of re-rating it. This is especially so at they commented that the net accrued revenue balance increased from £18.7m to £34.9m.
Thus the shares seem to be at an interesting juncture as they approach strong resistance at around 200p (see chart at the end). This could well mean the shares continue to track sideways from here if the market remains sceptical. It may however be worth watching to see if the 200p level can be convincingly breached, in which case a breakout might presage a re-rating on the back of improving sentiment towards the Company and their continued delivery, despite the markets scepticism. As ever I guess time will tell on this one.