Financial Report 2024

For personal use only

30 September 2024

Letter to Shareholders

Dear Shareholder,

Energy Action has made significant progress this year, showing that our strategy is working. By focusing on what we do best - delivering energy and emissions procurement and management services to Australian businesses - we've returned to profit and generated positive cash flows. These are important steps towards long-term financial stability and growth.

Delivering Exceptional Customer Service

Our recent success is because of a common-sense focus on strengthening customer relationships, reaching new customers, and delivering exceptional service. We continue to help more businesses secure better energy prices, reinforcing our market position. This year, we revitalised our brand and sharpened our sales processes, ensuring our value proposition is clear and compelling.

Delivering exceptional service is the key to winning in a competitive market. Utilibox, our AI-driven,cloud-based platform for energy and emissions management, gives us a competitive edge by providing the insights and control that businesses need to confidently manage their energy and emissions. By automating routine tasks, we've freed up resources to focus on delivering higher-value services.

Technology as a Key for Growth

We use technology as a key growth driver, developing customer-centric solutions that can scale. This year, we introduced a solution designed to address Australia's mandatory climate-related financial disclosures, simplifying compliance for our clients. Early feedback has been positive, and we expect this will drive increased adoption of our reporting services. This represents a strategic shift in customer demand, allowing us to go beyond cost-saving and address customer compliance needs essential to their businesses.

Small Team, Big Impact

I'd like to acknowledge Energy Action's management team. They've rolled up their sleeves and done the hard work to achieve our turnaround. Like me, they look for cost savings at every opportunity and work hard to make our business simpler. Our FY24 financial results are a testament to the impact this team has had. Through their efforts, we've seen significant improvements, proving that the right people, with the right mindset, can lead to extraordinary outcomes.

Delivering Sustainable Financial Results

Energy Action returned to profitability in FY24, marked by a positive net profit and cash flow. This result reflects our disciplined approach to cost management and positions us to take advantage of near-term opportunities to grow both revenue and our customer base. Our financial results included an impairment expense on software assets providing a transparent view of financial performance.

Thanks to the support of our shareholders, we've been able to pay down more of our debt. Combined with the improvements we've made in how we run the business, these steps have put us on even stronger financial footing.

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Investing in growth. Maintaining our strategy

At Energy Action, we are focused on creating long-term value for customers and shareholders. This year's financial results highlight our strong execution, disciplined cost control, and strategic investment. With a solid foundation in place, we are well-positioned for growth. Our Board and management are committed to maintaining this momentum, with the aim of delivering sustained profitability while keeping customer service at the centre of what we do.

We are fortunate to have customers who trust us, a team that delivers, and shareholders who support us.

Thank you for your ongoing support.

Bruce Macfarlane

Interim CEO and Director

Energy Action Limited Corporate directory 30 June 2024

Directors

Murray Bleach - Non-Executive Chairman

Paul Meehan - Non-Executive Director

Bruce Macfarlane - Executive Director and Interim CEO

Derek Myers - Non-Executive Director

Caroline Wykamp - Non-Executive Director

Kimberly Sue

Level 5, 56 Station Street

Parramatta NSW 2150

Link Market Services Limited

Level 12

680 George Street

Sydney NSW 2000

RSM Australia Partners

Level 13, 60 Castlereagh Street

Sydney NSW 2000

DLA Piper

No 1 Martin Place

Sydney NSW 2000

Commonwealth Bank of Australia

Level 3, 101 George Street

Parramatta NSW 2150

Energy Action Limited shares are listed on the Australian Securities Exchange (ASX code: EAX)

https://energyaction.com.au/about/corporate-governance/

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The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Energy Action Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2024.

Directors

The following persons were directors of Energy Action Limited during the whole of the financial year and up to the date of this report, unless otherwise stated:

Murray Bleach - Non-Executive Director and Chairman

Paul Meehan - Non-Executive Director

Bruce Macfarlane - Executive Director and Interim CEO

Derek Myers - Non-Executive Director

Caroline Wykamp - Non-Executive Director (appointed 1 September 2023)

Principal activities

Energy Action offers Australian business customers energy and carbon emissions procurement and management services. Our three core revenue streams are energy procurement, energy management, and solar PV.

• Energy Procurement - Broking or consulting using a range of procurement methodologies including auctions, tenders, progressive and structured purchasing, corporate power purchase agreements.
• Energy Management - Managed client energy contracts and environmental reporting, including account management, liaison with their retailer, validating their bill, ensuring the right tariff, and helping them to understand how they are using energy and their emissions profile.
• Solar PV - Sourcing and contracting of solar project suppliers for business customers looking to implement solar solutions.

The services are supported by the Company's proprietary software solution, Utilibox, an energy and emissions management platform designed to transform energy data.

Dividends

There were no dividends paid, recommended or declared during the current or previous financial year.

Review of operations

The profit for the consolidated entity after providing for income tax amounted to $584,407 (30 June 2023: loss of $298,475).

Operating profit for the consolidated entity after tax amounted to $584,407 (30 June 2023: loss of $208,366) and EBITDA

for the consolidated entity after providing for income tax amounted to $1,795,869 (30 June 2023: $902,539).

A reconciliation of the consolidated entity's Statutory profit/(loss) to Operating profit/(loss) after tax and EBITDA is shown in the table below:

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• Operating profit/(loss) after tax is defined as Statutory profit/(loss) excluding significant items and is reported to give information to shareholders that provide a greater understanding of operating performance by removing significant items and facilitating a more representative comparison of performance between financial periods.

Revenues

Total revenue saw a reduction of $66,249 compared to previous period. Energy Buying revenue declined 1% with an increase to Total auction bid value increased 6% to $172 million. Energy Management revenue declined 5%, although we saw an increase of 1,317 in sites under management to 6,706, the average contract duration decreased by 4 months. Embedded Networks activities were sold in April 2022 and the full assignment of embedded networks customers was completed in February 2023.

Operating Expenditure

Expenditure totalled $10.8M, compared to $11.8M in FY23, a reduction of $1.0M (8.4%). The most significant reduction was in employment benefits expense reducing by $0.59M.

Discretionary spend is monitored and managed accordingly in order to satisfy the groups Capital Risk Management Policy and address its Financial Risk Management Objectives around Liquidity Risk.

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Energy Action Limited Directors' report

30 June 2024

Other

A Nil dividend was declared in FY24 with a priority of managing net debt, investing in value added technology, service and delivery, expand customer value and continue to see growth in customer sales and revenue.

1. Electricity component of contract only, i.e. excluding network and other charges
2. Does not include contracts which are signed, but yet to commence service delivery

Forward contracted revenue

The forward contract revenue balance for FY24 was $8.9M which was a decrease on prior periods.

The Company continues to focus on improving acquisitions, retentions, customer service and enhancing the Energy Management offering with a key strategy to see growth in future contract revenue for annuity based revenue streams.

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Contract Assets

Revenue from Auction, Commission based tenders and Tariff revenues are recognised upfront once the Auction is complete and the contract signed between the retailer and customer. The payments are received over the life of the contract. A contract asset called "Revenue not Invoiced" holds the net balance after provisions of $6.27 million to be received as cash in the future for revenue recognised in current and previous fiscal periods.

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Energy Action Limited Directors' report

30 June 2024

Significant changes in the state of affairs

On 13 May 2024, 5,018,933 ordinary shares were issued under a 1 for 6 non-renounceablepro-rata entitlement offer to raise $1,003,786 (refer note 21).

On 27 June 2024, 3,336,428 and 512,480 ordinary shares were issued to the Directors Bruce Macfarlane and Derek Myers respectively, to settle loans from Directors totalling $769,782 (refer note 18).

During the year, the consolidated entity revised its Facility Agreement with Commonwealth Bank of Australia (CBA) resulting in several key changes to its debt structure as part of ongoing financial management efforts, as follows:

1. The facility final repayment date was extended from 31 December 2024 to 31 March 2026.
2. The repayment of $1.5 million due on 31 August 2023 was removed.
3. The consolidated entity agreed to increase quarterly repayment obligations from $250,000 to $300,000 with these repayments backdated to start from 30 September 2023. Subsequent to the March 2024 repayment, the timing of quarterly repayments have been changed to the last weeks of November, February, April & August each year commencing November 2024.
4. The consolidated entity successfully negotiated a lower minimum cash balance requirement from $1 million to $500,000, enhancing cash flow flexibility.
5. Removal of requirement to repay excess where cash balances held exceed $1.5 million in a quarter.
6. Updated gearing ratios and interest cover ratios.
7. Included requirement that EBITDA in respect of each 12 month period up to the calculation date is at least equal to or greater than $1 million. The calculation date is at the end of each quarter.
8. Included requirement to ensure that Operating Expenditure does not exceed 90% of the total Revenue of the group for the financial year.

There were no other significant changes in the state of affairs of the consolidated entity during the financial year.

Matters subsequent to the end of the financial year

Subsequent to the year-end, Derek Myers was appointed as Chief Executive Officer (CEO), commencing on 1 October 2024. Derek Myers will receive a base salary of $300,000 per annum, plus superannuation. His total remuneration package includes compensation for both his role as CEO and as a Non-Executive Director.

No other matter or circumstance has arisen since 30 June 2024 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.

Likely developments and expected results of operations

Information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the consolidated entity.

Material business risks

Energy Action identifies major risks using an enterprise-wide risk program. Energy Action faces a wide variety of risks due to the nature of the industry in which it operates. Energy Action has processes in place to reduce the possibility of the risk occurring and/or, to the greatest extent possible, the adverse consequences of the risk occurring. Many of the risks are influenced by factors external to, and beyond the control of Energy Action. Details of Energy Action's main risks and the related mitigations are set out below:

Energy Action Limited Directors' report

30 June 2024

Risk

Strategic Risk

Energy Action faces the risk of failing to achieve its long-term strategic objectives to grow its market share of the market for business energy procurement and emissions reporting, by using technology to deliver services at low cost, which could impact its growth potential.

Energy Action is exposed to fluctuations in market conditions, including changes in customer demand, competition, and economic downturns, which could adversely affect its business operations and revenue streams.

The risk of insufficient earnings and cash flow to support business operations and growth, potentially leading to an inability to meet financial obligations and deliver shareholder value.

The risk of non-compliance with legal and regulatory requirements, including those related to the Competition and Consumer Act and the Australian Financial Services Licence (AFSL), which could result in legal action and reputational damage.

Energy Action has three strategies to maintain and grow market share: acquisition, retention, and cross-sell. Each are invested in and continuously improved. The business service focus is on delivering technology-driven solutions, particularly in the net-zero space, to support long-term relevance and competitiveness.

Diversified service offering including energy procurement, carbon emissions reporting, and solar PV procurement. Close monitoring of market conditions with adjustments to sales and marketing strategies. Use of technology to remain adaptable and responsive, ensuring a strong value proposition for customers.

Implementation of a "back to basics" strategy focusing on core revenue-generating activities. Establishment of a financial buffer between operating expenses and baseline revenue. Long term debt reduction.

Rigorous compliance training for all outward-facing staff. Comprehensive AFSL compliance system with regular monitoring and reporting of potential breaches. Use of external audits and legal consultations to ensure ongoing compliance and proactively address risks.

meet its contractual obligations and internal operations and customer services, ensuring that any