Eenergy Group (LSE:EAAS) — Trading Update

0:02 Good morning, ladies and gentlemen, and welcome to the EENERGY GROUP PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab It's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it is appropriate to do so.

0:29 Before we begin, as usual, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from EENERGY GROUP PLC. Harvey, good morning, sir. Good morning, and welcome, everybody. So we've got a trading update this morning, which reflects a very transformational year for the business. As you know, we disposed of our integrated energy management business last year. And as a result of that, we've been focused very much on transforming the energy services business into a scalable and very cash generative business. And I'm pleased to say that we've seen huge revenue growth in the second half of the year. As you can see, we've hit 27,000,000, in the full year, partly reflected by the hugely growing business in second half. So over 20,000,000 of revenues in the second half, delivering an EBITDA of 2,400,000, which is a 12% margin.

1:27 So very proud of the transition that we've seen moving away from an integrated business and seeing that revenue growth coming through, not just from lighting, but also from solar. So as we sit here today, we've got a very strong pipeline as a result of the momentum that we've been generating in the second half of the year. And we have a contracted all order book in q one into the the first half of the year of over 7,000,000. Bearing in mind that this time last year, we did 6,000,000 in the first half. We're now contracted with over 7,000,000 already. So we're expecting a very strong first quarter to follow on from what has been two very strong preceding quarters in q three and q four. Some of the key investments we've made, John talked through later in the presentation, are around building new systems and platforms for a standalone energy services business. Obviously, as we were an integrated business, there was quite a lot of disruption, quite a lot of systems and architecture that had to be unwound that went with the energy management business.

2:33 And we had to reinvest quite heavily into both technology platforms, but also systems and processes so that we were set up for, you know, a scalable business model going forward for energy services across both lighting, solar, and EV. We reduced our cost base in the second half of last year, which John will talk through, and we've got a much more focus around cash generation now. So I'm really pleased with the progress we've made. We've seen a record pipeline being developed. And as you know, we have a six month sales cycle. So we're starting q one with an extremely strong pipeline as a result of the work we put in from June onwards. I think we've seen some really pivotal frameworks being initiated in the business, and we'll talk about that shortly.

3:20 But notable wins are the NHS commercial solution sustainable framework and a nearly £1,000,000 award for University College Group. Macro tailwinds with us now with the new government investing very heavily into the public sector, which is driving quite a lot of additional channel revenue into EENERGY. So, yeah, very pleased with the momentum in the business. It's all organic growth, and we're starting to see that investment we've made in the pipeline start to bring real profitability to the business. From a market perspective, as you know, we were very much an education business in energy services. And whilst that's an exciting sector, still a £2,000,000,000 market, where 65% of the schools that are in The UK market across all the various subsectors of education remain untapped.

4:15 We've pivoted and started to think about further education as a really a really key addressable market. So universities and colleges are now a a very big part of our strategy, and we're starting to see million pound plus accounts starting to be developed within our pipeline that are having quite a big meaningful impact on our p and l because previous deal values were around a £150,000 mark, where we're starting to see million pound accounts being won in the further education sector. It has a real big gearing effect on our p and l. So education is still a very big market for us, but further education is enhancing that and giving us a a longer tail of opportunity.

5:01 We did quite a lot of market research last year independently to assess the addressable market. And so these figures are the result of looking at those markets very deeply. And 65 addressable market gives us a good five to ten years worth of available work in in LED and ten years and beyond in solar. So a lot of investors have mentioned over the years, have we got a limited time frame for the education market based on essentially a niche market and us being so successful? We are successful in this space, but we've got less than two or 3% market penetration at the moment. We wanna get 10% market penetration, and we believe now we've got long enough tail to do that.

5:49 The other key market opportunity for us is in the NHS where we've seen a 50% addressable market available within lighting, and we think this is a £5,000,000,000 market across the net zero initiatives that we operate in. So frameworks are a key part of this for us. We see this as being a big part of 2025, and we've got some exciting projects in the pipeline that we're developing. We I think we're gonna start seeing those come to fruition in q two and q three. I mentioned the government. The government's new initiatives in public sector are helping us enormously. There's a there's a real rush to demonstrate, I think, to the The UK public that we are in an environment where the government is taking it very seriously. We're starting to see much more investment coming through for frameworks in this education and NHS space. So that's helping us.

6:45 And we also think that the the ten year tenure that we've now got within energy services is giving us a real competitive advantage and creating a high barrier to entry. So we've seen a lot of small players disappear from the market, a slight consolidation around the key players. And as we start to go up the deal value chain north of the million pound mark, obviously, there is a much more credentials led tender process, and EENERGY is now capable of tendering against some of the big infrastructure players that are in the market. Without question, our differentiated funding model is creating a point of deflation generally in the market for us.

7:31 Budgets are tight. Public sector budgets have been limited outside of some of the government grants. We still see huge, huge pressure in education and HS and universities as a result of everything from national insurance increases and all of the various pressures that these businesses like, you know, universities are facing at the moment. And and the ESG agenda remains very, very priority. So for us, being able to offer a zero capital solution is becoming more and more important for these customers. Solar is surging in demand, which is as expected. We're starting to see the size of our solar projects increase in size and scope, which is also driving a huge amount of, you know, momentum within our business.

8:27 When we look at the drivers for f y twenty five, we've picked out a selection here. Obviously, there are a lot more than this. These are the main ones that we're, you know, most focused in on. We talked about government backing the investment environment around grants for certain LED projects in schools. That's helping us, and that's sort of a previously unbudgeted revenue channel for us. Capital free solutions, well, that question is driving a huge amount of conversion in our pipeline. The ability to assess data in the process sets us apart from our competitors. We have a very data driven surveying and assessment process as part of our sales cycle, and that's really, really key as part of providing a fast track process from an opportunity opening up and closing that opportunity, and then providing optimization of that data once we've delivered the project.

9:29 Customers now insist on a turnkey solution. They don't want to have to manage the project. They don't wanna have to manage procurement. So a turnkey solution for us is, again, a very very big differentiator. The adoption of solar, it's trading at 50% discount to grid energy. So anyone with daytime consumption and with roof space or available space for Grandman, it's not a question of are they going to be doing so. It's a case of when our job is to convince our customers that time is the biggest value driver in any project. So that's a real driver for us this year. And then the expansion into universities and NHS trusts, again, as I mentioned, a massive value driver. The £1,000,000 projects that we're now seeing come through and some multimillion pound projects have a strong inflection point on our p and l given the gearing effect.

10:23 Routes to market. We've been talking a lot about bits and frameworks. That's not to dilute the impact of our direct sales strategy. We've doubled the size of our sales team. We've adopted regional approach to bring a more focused, I guess, account management strategy around the way we manage education in universities and health care. This is proving to be extremely extremely successful and efficient, and we're starting to see that come into its own momentum now. Bids and frameworks, we're on five public sector frameworks now. That's up from one this time last year. We're expecting to be on one or two more in the next quarter as we've as we've been planning. Those are critical for our success on multisite million pound plus projects.

11:11 And then in solar, what we're doing is we're launching and leveraging a partner network where we're working with partners who have influence over multisite commercial industrial, whether that's landlords, whether that's industrial developers, and or portfolio managers of larger states. So the three key target areas for us, very focused education, health care, and CNI for solar are the routes to market for FY '25.

11:42 I see this business as being in two parts. We're we're in part of developer and a development platform, and we're an EPC solutions business. The pipeline is essentially the the heartbeat of our business. As you can see, we've increased our pipeline from 258,000,000 to 375,000,000 over the last six months. That demonstrates that huge momentum that we've seen within the period June to December. So 45% year on year increase. 26% of that pipeline is an investment grade proposal. That means that we've gone through the investment of assessing and delivering to key decision makers within our, if you like, key stakeholders of our prospects.

12:31 That is a significant improvement on this time last year. Again, nearly a 100% above where we were for lighting and more than that for solar. We have a historic 55% conversion rate of investment grade proposals. Now whilst our budget is not to convert 50% of that that 98,000,000 this year, That partly that partly results in a longer tail of, I guess, sales cycle, particularly for solar. But what it's giving you is an indication of the long tail of value that we're building, not just in 2025, but also in 2026. So that's for multi site customers where we've done perhaps lighting, and then we'll do solar six to nine months afterwards or where we're going through a detailed and comprehensive appraisal of the solar development cycle.

13:23 33 of our customer contracts last year were from existing customers. That's testament to delivering good quality service and, effectively, the opportunity with our customers that is changing in their profile that gives us a longer tail of revenue.

13:39 So as we think about q one, we've got a pipeline of weighted forecast that's delivering confidence in our first half, 7,000,000 of which is contracted. This time last year, we were expecting to deliver, you know, three million first quarter. We're looking to double that this year, and I think we'll do better than that in the second quarter. So you can start to see the momentum we're getting with our pipeline, but also the predictability and ability to more accurately forecast as well, which is helping us manage the business better. So I'll hand over to John to talk about the accounting and the work he's been doing, and I'll pick up to talk about some of outlook. Good morning, everybody. So I just wanna talk about the accounting adjustments first before we talk about FY '24.

14:28 So, obviously, with a new CFO in place, I joined in October 2024. It was it's right. I did a detailed balance sheet review. And, effectively, the accounting adjustments of are designed to shift the revenue and cost into the right period. So we ended in December 2023 with a significant accrued revenue balance of about £7,600,000. And having looked at that balance in detail and looking at the and looked at the gross margin on the business that we've we've done in the first half, it was clear to me that that the revenue recognition policy needed a little bit of tightening up, which is effectively what we've done in 2024, and then we've gone back and restated 2023. So effectively, there's 2,800,000 of revenue and a circa 1,400,000 of gross profit, which comes out of '23 into 2024, and that's where the revenue and those costs should sit.

15:18 We've also taken opportunity to to to review the balance sheet in detail, and there's a further £2,000,000 noncash adjustment. These are all noncash adjustments. So further 2,000,000 reclassification to remove the historic project accounting balances from the December 2023 balance sheet. So in total, that's 4,800,000 of revenue adjustment into 2023, and the gross profit is reduced by 3,400,000. And for 2024, effectively, as I said, 2,800,000 of the revenue from '23 moves into 2024, which is where it should sit, and 1,400,000 of the gross profit moves from '23 to 2024 as well. We've also taken the opportunity to to write off legacy debtors related to the energy management business. As we know, the energy management business was sold in in February 2024. Some of the legacy debtors that were sat within that business are unrecoverable, and I think it's appropriate that we make an adjustment back in 2023 and write those debtors off as an exceptional charge effectively below the EBITDA line.

16:19 Overall, I've introduced a much more disciplined approach around revenue recognition and project accounting, and I'll talk about that a little bit more in a second. And, of course, all the accounting adjustments are subject to audit. So let's move on to the 2024 results. Results were in line with with market expectations, both within the 10% threshold. Revenue increased by 14,400,000 to 27,100,000, and adjusted EBITDA increased by 4,000,000 to 400,000, so both in line with market. H two twenty twenty four was particularly strong. This is all organic growth. There is no m and a in these numbers. It's all organic growth. Revenue was up over 100% to $21,100,000 in the second half with adjusted EBITDA in H2 of $2,400,000 giving us an EBITDA margin of circa 12%.

17:04 That's moving in the right direction towards our target of sort of 15% to 20% EBITDA margin, which we think is achievable. So in total, there were 4,200,000 of exceptional charges in FY 2024. The cash cost of those exceptionals is circa 3.6. And actually, if you if we look back over the course of 2024, extracting ourselves from the energy management business, which was highly integrated with energy services, took significant longer and cost more than we initially expected. We also had significant deal costs around the disposal of the business and and also the subsequent restructuring where we've invested money into developing our own technology. And, obviously, in the second half of the year, we made the decision to close Ireland, which resulted in some exceptional costs coming through.

17:51 So I guess the key message for investors for 2025 is we're not expecting exceptional charges in 2025. That's the key message. So we closed the end of the year with £2,300,000 of net cash. Prior year comparative was £7,300,000 of net debt. And effectively post June 2024 this year, we've invested £1,100,000 in NatWest funded deals. That money will then turn into additional cash for us over the next seven to ten years of circa 1,700,000. We've also invested around 400,000 in e energy platforms and system improvements around Salesforce, NetSuite, and some of our an an in house app which we've developed around helping our LED business. And we've also, towards the latter part of h two, made some significant fixed cost reductions such that we expect to be cash positive in the first half of twenty twenty five, which is typically the weaker half of our of our two trading periods.

18:49 So one of the things that I focused on since joining EENERGY is to really take a really close look at the operations and controls in the business and to try and get the finance team working much more closely with the LED and the solar solar businesses. And effectively, we've made significant investments in NetSuite to help enhance our our accounting information around gross margin, around net cash, around net working capital all by project and to try and join up finance with the operational teams to make sure that we're we're maximizing all of the opportunities across the business. So there's a big focus now, much, much more focused, I would say, on on cash flow and gross margin, which we're looking at looking at sort of week to week in regular meetings and dialogues, using the accounting information to try and drive and make meaningful decisions, data driven decisions, which will enhance the operational performance of the business.

19:43 We're also looking at all the vendor contractual terms. Obviously, as our business scales, we need we need support from vendors around being able to to meet our our needs as we go forward. And we're looking at credit terms and also pricing very carefully to make sure we're getting the best value for money and make maximizing any cost efficiencies there for us. I think our overall objective for for me and my team this year is

20:06 very much focused on improving our profitability and cash flow. That's absolutely where, we'd where we need to be focused, and we've already made great inroads with that already. And I look forward to reporting on that at the half year. Thank you. Thank you. Thank you, John. So when we think about the outlook, we've got huge confidence in our pipeline. We've got a record contract to order forward forward order book in q one that demonstrates the work we've done in h two, but also underpins the strong market demand. Positive EBITDA for h one. And although the first half is usually slower than the second half, we think we can start to smooth out those those two periods, in particular driven by the sort of less less seasonal impact of solar.

20:56 Strategic focus on the broader higher education health care markets, partly driven by frameworks. This is going to drive significant value opportunities for us. The efficiencies that John's talked about around our operating model, very much gross margin focused, cash generative focus on all projects, thinking about the way in which we work with our various supply chain partners so that we can scale the business without effectively sucking up what networking capital is a real big part of the strategy going forward, which we are confident we can do. I think the profitability of the business, the EBITDA margin enhancement is something we've got our key objectives focused in around. The same team are very much focused on how can we drive EBITDA efficiencies in the business.

21:46 And, you know, we've got a debt free balance sheet. So we've got a strong financial business, and we've got a strong pipeline to drive profitability in f y twenty five. So in summary, record h two. I think the the EBITDA that's coming out of q three and q four shows what's possible in this business. We see that maintaining momentum. The market generally is finally getting its act together with regard to a net zero focus as we raise towards 2030. The new government's helping that. And I think also, aging infrastructure is also helping in a big way. This start to be a significant focus. We're the leader in our sector. So for education, without doubt, we are known as the leading brand that's starting to infiltrate into college and universities.

22:41 To put that into context, we've got one university we're working with that has over 200 buildings. The total opportunity for that is a three year opportunity in excess of 8 figures. So if we can really drive momentum in the further further education market with the universities, I think there's an opportunity for us to really drive profitability in a big way with these large projects. Strong start to '25. Quicker out of the month this year. Usually, the first week of January is very slow. This year, we felt a lot of momentum very quickly. The off sheet off balance sheet funding, again, is a massive, massive advantage to our business. We're starting to think about new partners. We're starting to think about how we can expand on our NetWest facility with other strategic funding partners that can help us, in particular, with the commercial.

23:35 As you know, NetWest is a public sector facility. We're working with our, new partners around, c and I funding for larger, multisite projects, that are not in the public sector, and our investment in the operating platform is starting to bring efficiencies. So what that means is we can scale the business without increasing materially our headcount cost. So I think what q three and q four showed was that we have got a run rate business of 40,000,000, given that we did over 20,000,000 in h two. That run rate business was able to deliver, you know, over 2,400,000 of EBITDA in that period. It does suggest that that cost base is quite capable of delivering a 40,000,000 man act term without any further increase in cost, and that we've got a, you know, a 5,000,000 plus EBITDA business run rate. So the potential there for scale is huge, and the potential for gearing in our p and l is really quite exciting.

24:32 And that concludes, our presentation today. So, yes, happy to open up to questions. Thanks for your time. Perfect. Harvey, do you if I may just jump back in there? Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A can all be accessed via your investor dashboard. Harvey, John, as you can see there, we have received a number of questions from investors. And thank you to all of those on the call for taking the time to submit their questions. But Katie, at this point, if I may just hand over to you to chair the Q and A with the team. And if I pick up from you at the end, that would be great. Thank Thank you very much, Jake.

25:21 To start with, we've had several questions around the contingency payments for the sale of Energy Management business. Are you able to give any indication on both the initial and second potential installments?

25:32 Or due to it not being mentioned in the trading update, is your view that nothing will be received? Certainly answer that one. We don't know at this stage how much the deferred consideration will be. We had initially envisaged it would be circa 8 to 10,000,000. However, we we have assumed it will be circa 5,500,000 is our current thinking, but we won't know the final answer until January 2026 when the final measurement period has been completed. Thank you, John. We've had a few questions around the frameworks. The first one is how much revenue is expected from the frameworks?

26:12 Okay. So it's hard to predict. In our budget for this year, we've we've only budgeted for a couple of million to come from frameworks. I think we can already see that being deliverable from the pipeline we've got. The upside potential is huge. Many of our frameworks are closed, and therefore, we see bids and tenders coming through them to a select number of framework participants. So, we expect those frameworks to get busy in the year. They come to the table with with projects that are ready to go. So so long as we are seeing the ability to bid for those frameworks within the first six to nine months of this year, we've got the potential to deliver and recognize that revenue.

27:00 So, potentially, a huge number, but budgeted 2,000,000 for this year. Thank you. Someone's asked why you're being so successful with the frameworks. And in terms of the frameworks, typically, how long between the bid and acceptance of the bids? Do you expect to start to get some bids accepted? And will you inform the market of each successful bid? So, clearly, material project wins get captured either in a in a reach or an RNS. So yes. I think the the cycle for solar deals is quite different to the cycle of LED deals. So with an LED LED deal, multisite million pound plus project, we can be at assessment phase and fully recognizing your revenue within sixty to ninety days.

27:47 So we could quite easily see, you know, ninety day turnaround of revenue outside of our budget even in October. So we've got nine, ten months worth of opportunity, coming through the business with solar. The, sales cycle and the development cycle are longer, so we would need to see opportunities coming through to us by June in order to be able to feel confident we could recognize that revenue through the into the into the December year end. I think the the success formula for frameworks, getting on them and winning them is, again, different according to the sector. So in education, it's credibility. It is supply chain pricing.

28:33 So I think one of the reasons we're being extremely successful is because we've got ten years of experience over three quarters of a million luminaires installed across 1,200 sites gives us quite head start on our competitors. I think our price point in our supply chain means we're extremely competitive, And we've invested quite heavily in the accreditations and compliance around the various scoring mechanisms that make winning a framework successful. Thank you, Harvey. Next, a couple questions around the funding. And first on NatWest, what sort of IRR do you expect on the 1.1 of NatWest funded deals, and what rate do you pay for the funding? So I'm not gonna disclose the rate we pay because it's sensitive in the market. What I can say is that we retain 20% of our revenue into our projects. So we are leaving behind a retained interest in the project alongside NatWest.

29:33 So instead of cashing out our margin in cash on day one, we leave behind 20% of our revenue, and that revenue then obviously accrues value over the course of the term of the contract. So as John indicated, you know, 1.1 investment will will will end up yielding a 1.7 to 1,800,000 return to investors over the term of the contract, which we collect quarterly. So it's a small, but nonetheless important reoccurring or recurring revenue stream that we're building. And so, hopefully, that answers the question. Thank you, Harvey. The other one was about providing a bit more detail on the funding available to clients. So, obviously, aware of the NatWest facility, But they noted in a previous presentation about Seismans as another source of finance, and if you could expand on that at all.

30:22 Yeah. So as we've stated, NatWest is a public sector facility. It's designed to be very much focused around three technologies in health care, public sector, and also local government as well as NHS. So outside of that, obviously, we have independent schools. We have universities, and we also have all of the c and I projects for solar. So what we have is a panel currently of two or three retained

30:53 funders that have underwritten our contract form over the last seven years. So Siemens is one of them. There are others, which I won't mention because of the competitive nature of what we do. However, we are in talks with a strategic partner that we think could bring a lot more than just funding to our business, and we hope that we will be able to pull together a broader project funding offer that covers more than just public sector as we start to really scale our solar business. Thanks, Harvey. On the note of strategic partners, there's been a question around what the thinking behind appointing John Hornby, the CEO of Loseko, to the board and just about Loseko's competitiveness with EENERGY.

31:39 Yeah. Look. It's a it's a good question, and it's an easy one to answer. Laseko are a incredibly well respected and large supply chain partner in the technology space and energy services, in particular around LED, but also around other component parts, but also EV. That relationship is getting stronger by the quarter. We're getting improvement in our pricing points regularly. It is a strategic partnership where we are obviously both mutually bound by our confidentiality around pipeline. So we we don't ever have a worry that our pipeline of projects could be in any way circumvented by. That's just simply not in the spirit or contractual nature of our deal.

32:24 John's a fantastic exec. He's been he's been with us now for nearly a year and has been a huge contributor in board meetings, and he he runs a public company himself. He provides good governance. And whilst there is, obviously, you know, an interest in progressing mutual mutual sides of our our partnership, he also brings a sense of independence as well. So I think it's it's a great partnership, one that I'm investing in and one that's yielding strong results.

32:54 Thank you, Harvey. Looking towards the cash aspect, can you provide more detail around the cash balance, where the funds from the EEN sale have been deployed, and is the business now cash generative?

33:06 So let me answer that one. So at the time of of sale, the energy management's business back in February, all of the group's external debt was repaid, all of it. And in the second half of this year, cash has gone backwards slightly as we've invested, as I said, in some of the systems, and we've continued with some of the exceptional items, which obviously we won't be carrying on in 2025. Cash at the end of the year stood at 2,300,000. There is no debt in that in the business as we sit here today, and that's and that's excluding sort of a relatively small sort of right of use asset, IFRS 16 liability. So, yeah, positive net cash, and we're expecting to be cash positive in the first half of twenty twenty five. Yes. Thank you.

33:53 Just about the exceptional items as well that you mentioned and if there's any further details that can be provided around them? So we'll provide a more detailed breakdown in the annual report of exactly what we spent on each of the items. But obviously there was a significant amount of restructuring over the course of the year to extract the energy management business from the energy services business. Now I think it was it's fair to say that the businesses were much more sort of closely aligned to some of the legal entities and therefore extracting the assets and liabilities in relation to the business that's been sold and also dealing with all the sort of legacy issues around trying to rebuild Salesforce data, rebuild NetSuite data, etcetera, etcetera. There were some considerable costs associated with the sale of that business. Yeah. So more detail to be provided in the annual report.

34:41 Thank you. And for the accounting adjustments to debtors relating to the Sold Energy division, do those debtor balances belong to EENERGY and not the purchaser? Irrespective, does the performance of those debtors impact the calculations and economics of the deferred consideration to be received? No. It doesn't impact the calculation of the deferred consideration. I think one of the problems that the the business had had is that a lot of the customers were common to both businesses, energy services and energy management.

35:13 And, historically, we'd not strictly spit out exactly which debt is related to which business, but that was part of the the work which was done in extracting the energy management business from the rest of the group. So there isn't an impact on the deferred consideration, And effectively, those debtors weren't sold as part of the sale of Energy Management. And effectively, there's a noncash write off to clean up the balance sheet at the end of December twenty three for that disposal. Thank you, John. Looking at to cost cutting, someone's wondering if you have any exact figures. Where have you cut cost, apologies, and by how much? So we've probably taken around £500,000 of cost out of the run rate of the business, primarily in in a couple of areas where we've harmonized roles and shared the workload across other existing other existing members of the management team.

36:08 It puts us in a position to make sure that we can be cash generative in the first half of twenty twenty five, which is obviously critical for our business given the the the financial performance over the last twelve months. One of the other areas that I think is important to know, our investment in investment in systems and tech has enabled us to be more efficient at the assessment stage in our development cycle. So we were incurring nearly 200,000, £250,000 a year in assessment of LED projects. The app, which is now 80% in its development cycle, has already seen a 35 to 40% efficiency gain in the way in which we are able to automate the assessment of lighting projects.

36:54 That's enabled us to remove the external parties that we're working with and also some of the fixed costs we had in that compartment. So that's been a real efficiency gain. We're doing the same thing with solar. And I think as our thoughts around technology and our development cycle improve in terms of how we optimize, we're gonna start to see the business scale but with a smaller cost base. Thank you both. A question on account receivables and ability to pay people. Know account receivables have increased by £5,000,000 in h one. And noting that they thought this was already relatively high. What are you doing to bring this down? Okay. So first of let me just state we don't have an issue collecting debtors. Occasionally, debtors may take one or two extra weeks to pay us, but that is not the norm. You'll see in the annual report that we'll set out in more granularity exactly what the trade debtors are. So we're not putting into the same category trade debtors, accrued revenue, other debtors, we'll carefully split out and analyze with commentary exactly what those debtors are.

38:01 So I just can reassure investors that the debtors are are tightly controlled, tightly managed, and, we don't have a debt collectability issue. So that number that's being quoted in the notes there in the questions is actually higher than the actual real trade debtors. There are other totals in there, which we need to separately analyze to allow investors to understand really what the net working capital position is on the debtor side of our business, and we'll certainly do that in the annual report. Thank you, John. A slightly different one. Someone's asked about Trump tariffs. Trades were obviously terrible for business is what the comment says. Do you see any impact on EENERGY going forward? Crikey. That's a big macro question. What I would say is that, look, we don't have an American market.

38:49 That said, we have got a couple of interesting projects that have come to us that we may decide to fulfill in America that came out of one of our events we did last year. We don't we don't have a supply chain from America. And I think maybe the question is, is there a macroeconomic influence happening that's gonna drive an impact to our business? I don't think so. Public sector is driven by government policy on our side and get driven by subsidies and driven by compliance and ESG targets that are being set. So if anything, I think it harnesses The UK's approach to ESG and makes us look like a a potential beacon of hope around what we can do with ESG. And I think that the public sector is very focused around showing the public that they can get to net zero by 2030, and that's really got nothing to do with the Trump trade wars.

39:50 Thank you, Harvey. Looking at EBITDA margin, someone's questioned of the 12% and questioned whether it should be expected to be nearer 20%. Are there any comments on that? Yes. I'm I'm sure I'll answer that one. So it was 12% in the second half of twenty twenty four. But, obviously, we've taken some cost out of the business. We're much, much more margin focused now. We can see that the projects which we're winning work on for LED and solar are better margins than we've historically enjoyed. And I think 20% is is a realistic 15% to 20% is a sort of realistic EBITDA margin on a sort of adjusted EBITDA of a revenue as a ratio. So I'd expect a significant improvement in that ratio over the course of 2025.

40:36 I'd like to jump in as well. Think, look, it's a very good question. And if we stripped out the LED business without incurring the cost of developing organically an equally sized solar business from scratch. And bear in mind that from scratch, we've built a, you know, $1,314,000,000 turnover solar business within two years. It's partly where a lot of our investments gone. So when we think about where's the cash gone, it's also gone into hiring a solar team from scratch that we would otherwise not have needed if we were just an an AD business. If we were a 15,000,000, LED business and we were private company, we would probably be on 25 to 30% EBITDA. Right? And we can see that as John and I go through our divisional analysis, we can see that we've got an incredibly exciting LED business that is growing and building scale again, and the solar business is just catching up.

41:31 So I think we've got a little bit of a drag on our exciting rich margins coming out of NED, but we've got a much bigger market in solar, which has got potential for a lot bigger scale. So I think 20% is a target that we aspire to have. I think it is the right number eventually. And also bear in mind that the investment in our fixed cost base gears quite quickly once we get tipping points in revenue. So for every million of revenue you go past, let's say, a 30,000,000, you get a much richer drop through to the bottom line. And so our real goal is, can we scale this business to $3,540,000,000 quite quickly, And can we start to see 20% plus margins coming through? Yes. We can. We just need to start winning bigger multimillion pound deals with the same team that is more than capable of doing that.

42:20 Thank you both. Just a few more questions. Why is the first half of the full year traditionally much less profitable than the second half? It comes historically from the lighting sector. Lighting sector as a as a as a an overall trend has a very strong second half. Know it sounds strange, but it's partly as a result of the the the light in the evenings getting darker past September has traditionally been a strong q three, strong q four for lighting. The education sector amplifies that in the sense that the capital refurbishment cycle mindset of education was always to deliver all its projects in July and August, which do sit in h two. So there's there's there's a natural AD shift if if you look across the sector to a stronger h two and an education bias towards allocation of resource within our client mindsets to have second half installations.

43:20 We we do expect it to smooth out a little bit more this year. Last year was particularly worse because we were impacted internally at a micro level as a result of the restructure and as part of disposal that sort of blew up our operations. In pipeline development, in the first and second half of h one. And so for 2023, our development pipeline was imploded because of the distraction on doing the the sale process. And then the integration of the sale process and disposal then causes a headache in the first half of the year. So we had sort of two hits. Thank you, Harvey. Second to last question, how do you physically deliver the projects? Through subcontractors? Can you take them through that a little bit more, and how do you control that effectively?

44:08 Okay. So within the lighting operating model, we have a full end to end turnkey operating model where the only piece of the project that we don't physically, through our own fixed cost base, manage is the electrical install of the lights on-site. We we project manage them on-site. We we manage all of the supply chain elements, everything from health and safety to the project management to the access equipment to the disposal of product. We we do all of that, but we don't physically do the electrical install ourselves. Although we have on-site project managers supervising on the whole journey of a customer's experience.

44:53 We're moving to a almost replica model with with solar. So we don't have we don't have the balance sheet risk of labor on on our on our business model, which is a hybrid and, I think, attractive model, investment like model for our investors. But we have a very close handholding project management service that we deliver to our customers. Thank you, Harvey. And just the final question. Is there an opportunity for operational and maintenance contracts after for solar projects? And if so, the annual sales value? So there is. We've we've kept it off our, I guess, budget for now because it's a small but growing part of our strategy.

45:43 We have an emerging offer to our customers where we do the full o and m over the life cycle of our developed projects, whether that's being funded or not. And we believe this is going to be quite a profitable business model for us. So as the year unfolds, we've got proof of concept. We think this is an attractively high margin business offer for the business, for shareholders, but also extremely, you know, added value benefit to our customers as well and to our funding partners. So we will be doing more updates around o and m for solar, not for lighting because we don't have an an o and m requirement for our lighting businesses. It's all covered as part of our contract. And for solar, it's an it's quite an exciting part of our strategy.

46:33 Katie, Harvey, John, if I may just jump back in there. Thank you very much indeed for being so generous of your time then addressing all of those questions that came in for investors this morning. But, Harvey, perhaps before really just looking to redirect those on the call to provide you with their feedback, I which know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that'd be great. Sure. So we recognize that it's been a a quite a long trading update this morning with quite a lot of moving parts around last year. Hopefully, today's presentation clarifies a lot of the questions. We think we're in an amazing space now. We've got a market leading position where there are a number of tailwinds. And with the brand the brand credibility that we have, we think we are in a market leading position to scale this business now and really achieve some huge profitability over the next twelve, twenty four, thirty six months.

47:26 Perfect, Harvey. That's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of EENERGY GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.