TIDMETP
RNS Number : 8686K
Eneraqua Technologies PLC
31 August 2023
31 August 2023
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain.
Eneraqua Technologies plc
("Eneraqua", the "Company" or the "Group")
Impact of Recent Government Announcement on Net Nutrient
Neutrality
Half-Year Trading Update
and Notice of Results
Eneraqua Technologies plc, a provider of specialist energy and
water efficiency solutions, provides an update on trading for the
six months ended 31 July 2023 (H1 FY24) and on the full year
outlook following the planned reforms and changes to the net
nutrient rules recently announced by the UK Government.
Proposed changes to net nutrient neutrality rules announced by
the UK Government
On 29 August 2023, the UK Government ("Government") announced
its intention to change the legislation that governs development in
nitrate-sensitive areas. The Government announcement was unexpected
with no prior consultation and Government is yet to announce
further details enabling the Board to understand the full
implications of the proposals.
Since 2017, developers have been required to ensure new
developments do not cause increased nitrate emissions into the
local environment. Eneraqua, as part of its broader water product
offering, provides a service to developers and planning bodies
whereby using our Control Flow HL2024 technologies, can offset the
nutrient and water emissions from a planned development.
Through the Levelling Up and Regeneration Bill, the Government
is proposing to remove this obligation on developers. In its place
it is expected that there will be an enlarged mitigation programme
through the Natural England Nutrient Mitigation Scheme ("Scheme").
The Scheme is currently based on the generation of nutrient
neutrality credits that are created by projects and then purchased
by developers to offset the emissions from the new
construction.
As the Group currently understands the Scheme, if the present
approach of generating and supplying credits through the Scheme is
maintained, there may be enhanced opportunities for Control Flow
HL2024 technologies given that they represent the lowest-cost
offset solution. However, the Group has no clarity at this point
and will be engaging with Government in the coming weeks to
understand the exact nature of the Scheme. Notwithstanding, the
Group currently expects there to be an impact on the Group's
trading expectations for the current year, as set out below.
Trading for H1 2024 - Return to net cash positive position
The first half of the year has seen the Group continue to make
solid progress both in terms of continuing contracts and new
opportunities which are being pursued. H1 revenue is expected to be
at least GBP26.0m (H123: GBP24.3m) and profitable on an EBITDA
basis, in line with management expectations. In light of the
previously notified lower gross margins expected from the Group's
energy contracts, management has focussed on cost control and
working capital management. As a result of these efforts, the Group
generated cash flow from operations of c.GBP4.9m and returned to a
net cash position of GBP0.5m (gross cash of GBP5.9m), as the
working capital investment made towards the end of FY23
unwound.
The Group's order book(1) across Energy and Water stands at
GBP146.3m of which 48% is currently anticipated to be delivered in
the remainder of FY24. While we are mindful of continued caution
from the public sector and local authorities on their capital
budgets, we are encouraged that the inflation impact from last year
is unwinding. We continue to engage closely with all our clients to
ensure projects are delivered as planned and remain focused on
building a strong pipeline for FY25.
In Energy, notable major contracts in H1 include:
-- the Group's first NHS Trust award of an GBP11.3m
contract involving replacement of an end of life
combined heat & power (CHP) and steam boilers with
a low carbon heat pump solution;
-- a GBP12.7m contract for the replacement of an end
of life gas-fired district heating system with a
low-carbon heat-pump based system in West London;
and
-- a GBP7.2m contract for a world-class museum and
art gallery, and leisure centre complex for the
replacement of old gas-fired system again with a
new low-carbon heat pump solution.
These contracts will commence in H2 FY24 with the majority of
revenue recognised in FY25.
Our international businesses in India, Spain and Holland are
performing as per our expectations, with pilot projects underway to
replicate the benefits of Control Flow HL2024 seen in the UK. The
integration of the recent Vriend acquisition into the Group is
progressing well.
Outlook
In light of the prevailing uncertainty, until the details and
mechanics of the Scheme are finalised, the Group expects clients
will delay projects until there is greater clarity. The Group had
budgeted that work relating to the prevailing net nutrient
neutrality rules would generate up to GBP2m of EBITDA in FY24. It
now expects clients to delay all or a large majority of this work
until there is clarity on the Government's proposals which will
materially impact the Group's ability to deliver against its
original budget. As a result of this hiatus the Board now expects
that the outturn EBITDA for FY24 will be materially below current
market expectations.(2)
Notwithstanding the immediate impact of the announcement by the
UK Government, the Board believes that the prospects of the Group
remain strong, supported by a number of sector tailwinds. Absent of
the Government announcement, the Group was trading in line with
management expectations for the year. The actions of one government
are not expected to materially impact on these long-term prospects,
particularly as the Group diversifies products offering across
energy and water, as well as across global geographies, including
the UK, Continental Europe and India.
Confirmation of Dividend
As a sign of the Board's continued confidence in the Group's
strategy and prospects, the full year dividend of 1.2 pence per
share, previously announced on 23 May 2023, will be paid on 15
September 2023 to all shareholders that were on the register on 18
August 2023. The shares went ex-dividend on 17 August 2023.
Date of Results
Results for the H1 FY24 period are expected to be announced on
11 October 2023.
Mitesh Dhanak, CEO of Eneraqua Technologies commented : "The
first half of the financial year has been solid and in-line with
our expectations. We have continued to grow revenues and secure a
number of new contract wins. It is clear that the underlying
drivers of our end markets remain strong, with growth seen in both
Energy and Water in the UK and in our other regions of
operation.
"Looking ahead, the proposed changes to the nutrient-neutrality
rules were unexpected and outside the Group's control. In the short
term the uncertainty created is expected to have a negative impact
on EBITDA by up to GBP2m in the current financial year. However if
the market-based credits approach is retained then it may create
increased opportunities for our Control Flow HL2024 technologies as
they are the lowest-cost nutrient mitigation solution available. In
the meantime, we have proactively considered the impact of this
event in its entirety and are already focused on the mitigating
actions we can take and will continue to monitor the situation as
it evolves.
" We remain focused on the delivery of the Board's growth plans
for the current year as well as the strengthening of our ability to
deliver long term value for our shareholders."
Notes
1. Order book as at 29 August 2023
2. Group consensus EBITDA is GBP8.8m for FY24
For more information, please contact:
Eneraqua Technologies plc Via Alma PR
Mitesh Dhanak, CEO www.eneraquatechnologies.com
Iain Richardson, CFO
Liberum - Nominated adviser and Broker +44(0)203 100 2000
Edward Mansfield
Benjamin Cryer
Singer Capital Markets (Joint Broker) +44 (0)20 7496 3000
Sandy Fraser
Justin McKeegan
Asha Chotai
Alma PR - Financial PR and IR +44(0)20 3405 0205
Justine James eneraqua@almapr.co.uk
Sam Modlin
Will Ellis Hancock
Notes to editors
Eneraqua Technologies (AIM:ETP) is a specialist in energy and
water efficiency. The Group has two divisions energy and water.
Energy is the larger division, with the Company focused on clients
with end of life gas, oil or electric heating and hot water
systems. The Group provides turnkey retrofit district or communal
heating systems based either on high-efficiency gas or ground/air
source heat pump solutions that support Net Zero and
decarbonisation goals.
The water division is a growing service offering focused on
water efficiency upgrades for utilities and commercial clients
including hotels and care homes.
The activities in both divisions are underpinned by the
Company's wholly-owned intellectual property, the Control Flow
HL2024 family of products which reduce water wastage and improve
the performance of heating and hot water systems.
The Company's main country of operation is the United Kingdom.
The Company's head office is based in London with additional
offices in Leeds, Washington (Sunderland), India, Spain and the
Netherlands. The Company has 168 employees, with the majority
employed within the UK. Eneraqua Technologies has received the
London Stock Exchange's Green Economy Mark.
To find out more, please visit: www.eneraquatechnologies.com
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