Good Energy’s profit before tax increased in 2023 as the renewable energy services company delivered on its strategy to become an end-to-end microgeneration specialist.

The 2023 full year marked a year of transformation for Good Energy, in which it transitioned to operating as an end-to-end renewable energy services business providing a one-stop shop for climate-conscientious households.

During the period, Good Energy completed the acquisition of Wessex EcoEnergy enabling them to enhance their solar installation service. The deal adds to similar acquisitions that bolster heat pump installations.

Customers can use Good Energy for energy supply, installation of heat pumps and solar panels, smart metering, and the capability to sell their energy back to the network.

The company has now installed 47,000 smart meters, meaning that around 58% of the company’s domestic customers now have them installed. 

Despite a volatile year for energy prices, Good Energy produced a 2.4% increase in revenue and increased gross margin to 17.4% helped by power purchase agreements. 

“Against a backdrop of continued volatility in the energy market, 2023 saw Good Energy undergo a transformation from pure renewable supply and Feed-in-Tariff administration to a fully-fledged clean energy services business,” said Nigel Pocklington, CEO, Good Energy Group.

“Following multiple acquisitions in the heat and solar space we can now offer customers premium services across supply, export, heat pumps, solar PV, storage and EV charging.

“Alongside this, we are now a leader in smart export for small scale solar and have trialled innovative flexibility services for businesses and consumers to shift their demand to cut their carbon further. Good Energy is establishing itself as the microgeneration specialist for the premium end of a rapidly growing market, offering everything a home or business needs to go greener, from a trusted brand with unparalleled expertise.”

The 2.4% increase in revenue reflected substantially lower wholesale prices at the start of 2023 compared to the end. Good Energy sees energy prices trending lower through 2024 leading to both lower revenue and cost of sales.

Reported profit before tax of £5.7m in 2023 compared with an underlying profit before tax of £1.4m in 2022. Good Energy recorded a one-off gain in 2022, meaning the reported profit before tax was £9.2m.

Good Energy’s balance sheet is exceptionally strong. Cash and equivalents grew to £41m in the period and total liabilities fell to £69m. Trade and other receivables also fell to culminate in £42m total equity at the end of the period.

In terms of the EV/EBITDA ratio used to assess the true value of the business, Good Energy trades at a material discount to peers.

After a substantial rally in Good Energy shares in the runup to results, investors booked profits on Tuesday sending shares lower in early trade.

Ocado Retail Ltd, the joint venture between Ocado Group plc and Marks & Spencer Group plc, has released its trading statement for the 13 weeks to 3rd March 2024.

The release was well received by investors and Ocado shares spiked higher on the open before falling back to trade 1.9% higher at the time of writing.

The company reported an 8.1% year-on-year growth in volumes, driving a 10.6% increase in Q1 Retail revenue to £645.3m.

“Sales were up and not just because of rising prices. The venture is actually seeing significant volume growth as it wins market share. This is partly because it saw less price inflation than the wider market,” said AJ Bell investment director Russ Mould.

“This positive trading comes after a long period of disappointing performance and you can understand Marks & Spencer’s frustration – when it agreed the tie-up with Ocado in 2019 it set targets which have subsequently not been met.”

Ocado Retail’s online market share, according to Nielsen, rose to 13.5% at the end of February, a 0.7% increase over the year.

The average number of orders per week grew by 8.4% compared to Q1 2023, reaching 414,000, reflecting a 6.4% increase in active customers to 1.02 million at the end of the quarter. W

While the average basket value increased by 2.1%, the basket size in terms of the number of items remained stable year-on-year.

As a premium retailer, Ocado Retail has set about tackling perceptions of value with a pricing strategy that resulted in a modest 2.2% growth in average selling price, significantly lower than the market.

“Ocado now needs to stay on this trajectory, keep narrowing their losses and winning more market share on their road to profit. With shares trading 85% lower than their 2021 record high and even 50% lower than just last July, many investors may well be putting some stock in their baskets looking at the potential upside,” said Adam Vettese analyst at investment platform eToro.

ZOO Digital shares surged on Tuesday after the media services to the global entertainment industry said orders has returned following the US writers’ trike.

Noting clarity on project timelines, Zoo said it is now receiving orders for work on feature films and TV shows completed after the industry strikes of 2023. January saw the highest invoicing month since April 2023 and Zoo sees acceleration in its pipeline.

Zoo Digital shares were 25% higher at the time of writing.

ZOO Digital anticipates surpassing revised market guidance for FY24, with projected revenues of at least $40 million. Consequently, the expected EBITDA loss will be mitigated. Net cash is forecasted to be at least $3 million, exceeding revised market expectations. While the Company currently holds no debt, it plans to renew its existing undrawn facilities upon expiration.

Enhanced Visibility

Investors will be pleased momentum is returning to Zoo Digital providing enhanced visibility of work, some of which will extend through September 2024. A considerable number of orders are in progress, with a growing pipeline of projects confirmed for the upcoming period. The order book for FY25 Q1 has seen a notable increase of 30% compared to FY24 Q4, underscoring expectations of a robust revenue recovery in FY25 H1.

Zoo Digital said market expectations for FY24 revenue is $37.6 million and EBITDA $14m.

Towards the end of February the £528m capitalised Greencore Group (LON:GNC) completed its second share buyback programme, taking out 15.4m shares at an average of 97.16p each over a four month period.

That takes the food group’s buyback spend up to £50m in total since late May 2022, in its effort to value return those funds to shareholders.

Now, I am not a fan of share buybacks because I believe that firms with efficient management should be able to make a far better use of such funds.

Others will, no doubt, argue that the reduction of equity inevitably helps to increase share prices, if earnings continue to accrete.

However, after some tough remedial work in the recent efficiency drive it looks as though far better times are ahead for this group, suggesting that its shares are too cheap.

The Business

The Dublin-based business is a real ‘biggie’ in the convenience food sector.

With some 13,600 employees, it has over 16 manufacturing and 18 distribution centres in the UK.

It is the world’s largest fresh pre-packaged sandwich maker, making over 779m sandwiches and other food to go items each year.

The company supplies a range of chilled, frozen and ambient foods to some of the retail and food service customers in the UK.

It also supplies convenience and travel retail outlets, discounters, coffee shops, foodservice and other retailers.

Its 645 vehicles make over 10,400 ‘direct to store’ deliveries each day as it supplies all of the supermarkets in the UK, with over 1,600 of its products spanning across 20 categories.

Its UK convenience food categories, including sandwiches, salads, sushi, chilled snacking, chilled ready meals, chilled soups and sauces, chilled quiche, ambient sauces and pickles and frozen Yorkshire Puddings, as well as an Irish ingredient trading business.

Each year it manufactures some 132m chilled prepared meals, 245m bottles of cooking sauces, pickles and condiments, 155m salads, 439m Yorkshire puddings, 28m quiche, and 45m of chilled soups and sauces.

Sales Per Business and Region

On a sales per business basis its ‘Food To Go’ side had a £1.25bn turnover in 2023, representing 65.5% of group revenues, while ‘Other Convenience’ made up £661m, 34.5%.

On a per region basis the UK represented £1.83bn of sales, 95.8%, while Ireland made up the balance £80m, 4.2%.

Q1 2024 Trading Update

Towards the end of January this year the group announced a Q1 Trading Update for the 13 weeks to 29^th December 2023.

Taking into account that the group has cut out a number of non-performing contracts, together with disposal activity, creating a 6% decrease impact, it actually showed a strong start for the current year to end September 2024.

CEO Dalton Philips stated that:

“I am extremely encouraged by the strong start to the year for our business.

Our manufactured like for like volume growth of 0.5% in the quarter, continued to outperform the market in the key categories in which we operate.

This performance has once again been supported by our outstanding operational service levels to ensure availability of products to our customers. 

Our focus as a team is to provide fresh and healthy foods to our customers and consumers each and every day.

Our progress as a business has been delivered through continued effective operational and commercial initiatives, as detailed in November, this has supported improved profit conversion and a strong profit outturn in the quarter.

We are committed to continuing to drive profitability through commercial discipline and are investing in several initiatives to develop a robust platform for future growth.

While we remain mindful of the seasonally important second half of the year, we are confident that the Group will deliver a full year outturn in line with current market expectations.”

The Shareholders

The group has some 468m shares in issue.

Major holders include Polaris Capital Management (13.39 %), Rubric Capital Management (5.85%), Brandes Investment Partners (5.42%), Fidelity Management & Research (4.92%), Black Creek Investment Management (3.38%), Utah Retirement Systems (3.30%), Gartmore Investment (1.37%), Cobas Asset Management (0.59%) and Dimensional Fund Advisors (0.43%).

Analyst Views

There are some eight analysts that closely follow this group.

Taking a consensus average of their views it appears that they are estimating current year sales to end September 2024 of £1.89bn (£1.91bn), with adjusted operating profits of £83.1m (£76.3m), generating 9.3p (9.3p) in earnings per share.

For the coming year they look for £1.94bn sales, £92.7m in profit and earnings of 11.0p per share.

There are currently estimates out for some 13.5p of earnings per share having been pencilled-in for September 2026.

My View – totally under-rated

What I find interesting, perhaps giving some caution on value, is the analyst’s consensus average Target Price on the shares is only 113.5p – I think that they are far too conservative.

We will have to wait until 21^st May to get the interims results for the six months to 29^th March and the next corporate update on current year trading, showing through the combination of the group’s recent efficiency drive and its new contracts.

As I see it, this group is a real generator of value, it has a commanding position in its sector and its shares at just 112.90p, are under-rated and offering a bargain for new investors.

The FTSE 100 fell on Monday as geopolitical risk aversion returned to equities after an attack on a Russian concert hall raised fears of an escalation in Russia’s aggression against Ukraine.

Although Russia has not yet made any suggestions it would retaliate, Russia’s comments that the attackers were heading towards Ukraine have raised fears Putin will use the Moscow attack as an excuse for escalation in the war, which is now in its third year with no sign of resolution. Ukraine denied any involvement.

Oil prices ticked higher, and European stocks declined. The FTSE 100 was down 0.1% at the time of writing in a broad selloff that sent most industry sectors lower.

“Heightened tensions between Ukraine and Russia have brought a halt to the rally in equity markets seen last week,” said Russ Mould, investment director at AJ Bell.

“Investors were nervously watching proceedings from the side lines, particularly as oil prices crept up once again, including a 0.5% rise in Brent Crude to $85.84 a barrel. The commodity price has been strengthening amid concerns about tighter global supplies and a falling US rig count which implies less exploration and production activity.

“Asian markets were mostly down on Monday, including a 1.2% drop in the Nikkei 225 amid notable weakness in the real estate and healthcare sectors.”

Kingfisher disappoints

Kingfisher was the FTSE 100’s top riser after the DIY retailer failed to construct a recovery in 2023/24, hampered by the ongoing cost of living crisis and weakness in Europe. The company started Monday deep in the red before staging a monumental turnaround as the sessions progressed.

Kingfisher shares were 2.4% higher at the time of writing.

“As is often the case, profit warnings have come in threes for B&Q-owner Kingfisher. The company is being held back by its overseas operations and investors can only hope the progress the group has recently made with its UK business can be replicated in France and Poland,” Russ Mould said.

“The company and the wider DIY sector did well during the pandemic as one of the few elements of physical retail able to continue trading. Pent-up demand for home improvements during lockdown, driven by people being stuck indoors and wanting to enhance their environment, was a strong driver of growth.”

As Russ Mould mentioned, profit warnings tend to come in threes, and investors may now be confident the worst is behind Kingfisher.

Ocado was the top faller as the risk-off sentiment hit the food technology company. Ocado shares were 4% lower at the time of writing.

Innovative Eyewear, a Tekcapital portfolio company, has announced record-breaking results for the year ended 31st December 2023.

The launch of the world’s first ChatGPT-enabled smart eyewear and the integration of several patented innovations helped propel the company’s revenues 75% higher to $1,152,479 for the year.

Notably, Q4 revenue was $615,754 – more than all three prior quarters combined.

Last year, Tekcapital said it saw multi-million pound revenue for all of its portfolio companies in 2024. Should the momentum demonstrated in today’s results continue into 2024, Innovative Eyewear will be set to achieve this milestone in the year ahead.

Supporting further sales growth in 2024, the jump in Q4 revenue was recorded before Innovative Eyewear launched its new lines Nautica Powered by Lucyd®, Eddie Bauer Powered by Lucyd®, Reebok Powered by Lucyd®, and the Lucyd Armor smart safety glasses line.

The Nautica line was launched in early 2024, and other lines are expected to be revealed in the coming year.

The company believes that the introduction of the new lines will create the most diverse range of smart eyewear in the United States.

After launching the world’s first AI-enabled smart eyewear in 2023, Innovative Eyewear is targeting another first with the launch of smart safety glasses aimed at the construction industry and other sectors demanding hands-free, safety-grade connectivity through smart eyewear.

Lucyd were delighted to showcase the latest innovations in smart eyewear and meet with the world’s ophthalmic professionals at Vision Expo pic.twitter.com/PT2oMgQ3gZ

— Tekcapital Plc (@tekcapital) March 22, 2024

Harrison Gross, CEO of Innovative Eyewear, said, “Our growth trajectory is a testament to our team’s hard work and the strategic decisions we’ve made over the past year. As we continue to innovate and expand our partnerships, we’re excited to lead the charge in smart eyewear and integrate GenAI technology that enhances our users’ daily lives. The industry’s investment in this space reaffirms our direction, and we believe we’re poised to potentially capture significant market share with our upcoming product releases and anticipated global expansion.”

Innovative Eyewear (NASDAQ:LUCY) was 7% higher in US trade.

Kingfisher shares staged a sharp turnaround on Monday after the DIY retailer said profits would be lower in the coming year as 2023/24FY sales and profits fell.

Having started the session deep in the red, Kingfisher shares were trading 2.4% higher at the time of writing.

The UK showed resilience but European performance was particularly poor. French retail profit sank 28.% while the UK’s retail profit dropped 8%.

“Kingfisher has published a concerning set of results this morning. The multinational DIY retailer has issued what is now a third profit warning in the last six months, with consumers shelving plans for DIY home improvements, chipping away at Kingfishers’ bottom line. French and Polish regions of the business were noticeable underperformers in what continues to be a challenging period for the retail sector,” said Mark Crouch, analyst at investment platform eToro.

When homeowners have little confidence improvements to their property will translate to great value, they hold back on DIY projects. This dynamic has hurt Kingfisher’s profitability.

Group like-for-like sales were down 3.1% and reported operating profits fell 20%. Adjusted profit before tax was £567m, slightly higher than the guidance of £560m which was revised lower in its Q3 trading update.

The company said it expected profit before tax would be c.£490m to £550m in 2024/25.

“B&Q owner Kingfisher is still very much in repair mode, with its performance damaged by cost-of-living headwinds and a struggling housing market. It’s issued the third warning in six months about the outlook for profits, as they fell 25% for the full year,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“There had been hopes that with interest rates eyed on the horizon, and UK house prices stabilising, that demand for DIY products and services would bounce back, but the company says due to the lag between house sales and renovation projects being green lit, recovery is further on the horizon.”

It wasn’t all doom and gloom; Kingfisher has expanded the Screwfix brand through an online-only model into six new countries: Poland, Spain, Belgium, the Netherlands, Sweden and Austria, utilising a fulfilment centre in France. Kingfisher sees this as a model that can be replicated to enter new European markets.

“The bright spot appears to be online sales, with the revamped marketplace platform, also offering third party products, helping boost e-commerce sales in the UK and Iberia beyond expectations. However, in France, subdued consumer confidence and a weak housing market continues to be a drag and it’s now trimming back floor space for the Castorama chain while restructuring and modernising the store network to compete with rivals like Leroy Merlin,’’ Streeter said.