The acquisition of Ignite - which provides energy management services to corporate clients like Halfords, Starbucks, and WH Smith - will accelerate the group's organic growth in optimisation services, the company said in a statement.
It will give the group full control of Ignite and allow it to leverage its platform to cross-sell, Inspired added. The move increases the company’s exposure to a bigger market. At 857mln the Optimisation Services market is believed to be about twice the size of the energy assurance services market.
Importantly, it means Inspired will benefit from 100% of Ignite’s cash flow and earnings. In 2019, the business earned £4.3mln on £15.9mln of revenues. The business has grown at a rate (organic CAGR) of 15% in 2016 to 2019.
"I am delighted we have reached agreement to acquire the outstanding 60% of Ignite, which represents an important milestone in our strategic focus of accelerating the growth of our optimisation services offering,” Mark Dickinson, Inspired Energy's chief executive said ina statement.
“We are pleased with the progress made to date in identifying cross-selling opportunities and look forward to maximising the commercial overlap between the optimisation and assurance services' markets,” he added.
The equity fundraise sees the company issue £30mln of shares via a placing, executed via an accelerated book-building process, and sell £5mln of shares via an open offer to existing qualifying shareholders.
New shares will be priced at 15p each, a discount of around 12.5%. Some 71.39mln shares will be sold in a firm placing, to raise £10.7mln, and a further 128.6mln shares will be sold in a conditional placing subject to approval by shareholders.
The placing is being run by brokers Shore Capital and Peel Hunt.
Inspired also highlighted its current financial position and trading. Amid the impact of the coronavirus (COVID-19) pandemic, it said group revenue decreased by 9% in the second quarter whilst adjusted earnings (EBITDA) fell 49%, as customer activity and energy usage reduced.
Boosted by a “very strong” first quarter, revenue for the first six months of 2020 actually increased by 19% and cash conversion for the half was described as “strong”.
The company said it is basing its business decisions on conservative predictions that client energy consumption will be down 40% through the third quarter. It noted that actual customer energy consumption reduced by 27% in April, 24% in May and 20% in June.
It had net debt of £34.7mln at the end of the half-year.
Inspired said its current intention is to reinstate dividends alongside its interim financial results, slated for September. It noted that the plan is to adopt a progressive dividend policy, with an initial dividend covered by at least 3x earnings.
Dickinson said: "This fundraising will secure the company's ability to respond quickly to, and execute, other acquisition opportunities which we believe are likely to emerge over the coming months and would add incremental capability to our growing platform.
“A key area of focus for Inspired continues to be its development of ESG solutions, where we provide assurance on buying strategies for customer and support them to reduce consumption and improve efficiency with the ultimate aim of delivering net zero carbon. Ignite, together with other M&A targets, will expand our service offering to customers."