Energy firm that inspires business with buying power
The column that makes most of your money
MILLIONS of people face the prospect of soaring gas and electricity bills over the next few weeks. Npower is raising its standard tariffs by almost 10 per cent, EDF is hiking prices by more than 8 per cent and Scottish Power is lifting dual-fuel prices by 7.8 per cent.
Blamed on wholesale energy prices, which have soared by more than 30 per cent over the past year, the news is expected to add around £100 to the average annual household bill. However, some companies face price hikes running into millions of pounds.
Inspired Energy helps firms cut their power bills. Based in Kirkham, Lancashire, its shares are 12¾p and should move considerably higher over the next few years.
The company was founded by Janet Thornton in 2000 after she had worked in the energy consulting industry for almost a decade. She believed companies’ energy needs were not being properly addressed and Inspired’s growth suggests she had a point.
Today it has more than 1,600 corporate clients, whose energy bills range from £5million to £80million a year. Customers include many of the UK’s top food makers and industrial groups, such as car repairer Kwik-Fit, surfaces specialist Formica and Muller Milk and Ingredients, the UK’s largest milk group.
In each case, these businesses want help and advice on how to cut their energy bills. Inspired offers two services – it buys gas and electricity for clients and advises them on how best to manage their energy needs. The group has developed close relationships with 17 energy groups in the UK, including all of the Big Six – British Gas, EDF, Npower, Eon, Scottish Power and SSE. Thornton and her team liaise with them to make sure they obtain the best contracts for clients.
Customers benefit because Inspired has substantial buying power. It has also developed considerable technical expertise, so its market knowledge is second to none. And contracts are often fixed for a couple of years or more, so firms can be clear about energy costs over the medium term.
On the advisory front, Inspired helps companies work out how to become energy-efficient, through better use of particular factories or sites, improved insulation and upgrading equipment, such as fridges or printing presses. The firm explains how to take advantage of energy storage, too, and whether businesses can bring down costs by using renewable energy or recycling biomass.
Inspired originally worked only with large companies, but many began to ask if it could help their smaller subsidiaries and their suppliers. In 2013, the group set up a division focused on small firms, which now has 11,000 customers. These companies have smaller bills and simpler needs than Inspired’s larger clients, but the division is growing fast and now accounts for about 25 per cent of group sales.
Inspired joined AIM just over five years ago, since when Thornton has made seven acquisitions, delivered strong profits growth and seen the company’s stock market valuation rise from £12million to more than £60million. Prospects for growth are promising too.
Profits for 2016 are expected to soar 40 per cent to £6.3 million, rising to at least £7.9 million in the current year. The group pays a decent dividend, forecast at 0.45p for 2016, rising to 0.5p for 2017.
Around 90 per cent of Inspired’s large customers stick with the business and contracts tend to run for several years, so a significant percentage of the company’s future revenues are already known. Thornton has a strong track record of finding new customers too, and tends to do particularly well when energy prices are rising and the economic outlook is uncertain.
Midas verdict: Inspired Energy has done well in recent years, profit growth has been strong and dividends have risen consistently. Yet the shares have barely moved in a year and are seriously undervalued. Buy now and watch them rise.