eEnergy Group (LON: EAAS) has sold its energy management division for an initial £29.1m in cash and intercompany debt repayments, which is similar to the whole company’s market capitalisation. There is further contingent consideration payable over the next two years. AIM-quoted eEnergy Group was one of UK Investor Magazine’s Top 15 Stock Picks for 2024 (https://ukinvestormagazine.co.uk/top-15-stock-picks-for-2024/(opens in a new tab)).
Flogas, a subsidiary of DCC (LON: DCC), is acquiring the energy management business. Contingent consideration is dependent on free cash flow generation from the core energy management business, plus the number of installations of the MyZeERO smart metering platform. This could add £8m-£10m to the cash payment. The maximum additional payment is £20m. This will be payable in two instalments covering the periods to September 2024 and the 12 months to September 2025.
There is a cross-referral agreement between Flogas and eEnergy. There is a referral fee for successful referrals. This lasts for an initial two-year period.
There was £23.4m invested in the energy management business. The sale requires shareholder approval at a general meeting on or about 7 February.
The cash will be used to pay off debt and the rest reinvested in the core energy services business, which offers solar and LED lighting as a service. There should be £18m in cash available.
Energy services revenues grew by 87% in the 12 months to June 2023. The additional finance will enable growth to continue to be rapid, even if it does not maintain that level of increase.
Prior to the disposal, Canaccord Genuity was forecasting 2024 EBITDA of £4.5m from the energy services business. There were corporate overheads of £2.1m separate from this and it is unclear how this figure will change after the disposal.
Chief executive Harvey Sinclair has been awarded a bonus of £285,000 and finance director Crispin Goldsmith £200,000 relating to the disposal. New share incentives have been announced for four directors and other employees, including those two directors, with a minimum vesting threshold share price of 9.32p. Other tranches of shares have vesting thresholds of 13p, 15.8p and 18.4p. Just over 184 million shares could be issued if all vesting levels are reached. This was set when the share price was 5p.
Canaccord Genuity has a target share price of 12p. The current share price is 7.6p.
