Energy Action reports mixed financial results in volatile market conditions

Energy Action ASX EAX financial results revenue NPAT EBITDA
Energy Action reported a statutory NPAT of $2.59m in FY18, up 46% from the previous year.

Energy management consultancy Energy Action (ASX: EAX) has delivered increased statutory net profit after tax (NPAT) and decreased group revenue results for the financial year ending 30 June 2018.

The company’s statutory NPAT of A$2.59 million was up 46% on the previous corresponding period’s reported $1.77m NPAT, while operating NPAT grew 3% as a greater focus on core margin improvement and strong cost management resulted in improved earnings before interest, tax, depreciation and amortisation (EBITDA) margins to 18.3%.

The higher operating NPAT result was also underpinned by a 2% decrease in operating expenditure compared to the 2017 financial year and lower cost of goods sold for the period.

Decreased group revenue

Group revenue for the period decreased by 5%, with a 15% growth in Procurement to A$9.27m offset by a 9% decline in the Contract Management & Environmental Reporting business and a 15% decline in the Projects & Advisory Services business.

Projects & Advisory Services revenues declined following a decision to de-emphasise low margin supply, install head contracts and retain a focus on higher-margin, core consulting work.

Energy Action said it is progressing strategies to halt further declines in the Contracts Management & Environmental Reporting area, such as introducing competitive pricing and launching an ‘Energy Metrics Insight’ service offering an automated, simplified and lower cost solution to clients.

The good news

Financial results were more positive for the company’s Structure Products segment, which reported a revenue increase underpinned by the addition of eight new clients during the period.

Growth was also recorded in the Tariff and Electricity Tenders business, offset by a decline in gas tenders due to the lack of affordable gas in the marketplace.

Revenues generated by the company’s Embedded Networks business grew by over 100% to $428,000, attributed to an 83% increase in tenancies under management.

Energy Action’s cash generation was reflected by a 92% increase in operating cash flow, increasing to $6.9m from $3.6m in the previous period, with the conversion of operating EBITDA into cash of 121%.

The company said the result was driven by an ongoing focus on working capital management, particularly receivables collection, and enabled the repayment of $4.1m of gross debt ($3.1m net of cash on hand) during the year.

Volatile market conditions

Energy Action chief executive officer Ivan Slavich said the company remains well placed to continue capitalising on volatile market conditions.

“With a higher energy price environment and ongoing market uncertainty, business energy users will remain focused on seeking solutions to help manage their consumption, optimise pricing and reduce costs,” he said.

“We have a number of planned initiatives [to meet those needs], including an ongoing investment in core system development, streamlining our business through digitalisation and developing products and services to grow the business.”

Mr Slavich said the increase in statutory profit and strong cashflow position enabled the company to declare a fully franked dividend of 4.0 cents per share, payable to shareholders in September.

At midday, shares in Energy Action were trading 29.41% higher at $0.880.

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