Announcement PDF RNS Number : 6486O Earnz PLC 27 June 2025 27 June 2025 EARNZ plc ("EARNZ", the "Company" or the "Group") Final Results and Notice of AGM EARNZ plc ("EARNZ" or the "Company") (AIM:EARN), an energy services company whose objective is to capitalise on the drive for global decarbonisation,announces its audited final results for the year ended 31 December 2024 (the "Full Year"). The Group has made a successful start to its journey to build a significant group in the energy services sector focusing on the decarbonisation of public and private sector building fabric. The UK Government continues to provide investment in the Net Zero transition and UK clean energy industries. The results herein include two months of the legacy Verditek business; a clean cash shell for a six-month period during which we negotiated the acquisitions of two businesses in order to enact our strategy, followed then by four months of trading of the two acquired businesses. They therefore do not truly reflect the underlying business that has been built and the future aspirations and opportunities. We have an active list of potential acquisition targets across the decarbonisation agenda. Due to the difficulties of the capital restrictions to date, our acquisition strategy has been highly selective as we work within our financial constraints. As we have established a profitable platform for growth, the Board is looking at more significant opportunities for acquired growth which will enhance service offerings and provide a more stable base. The Report & Accounts for the Full Year, the contents of which are set out below, together with the Notice of Annual General Meeting ("AGM"), will be posted to shareholders and will be available later today on the Company's website atwww.earnzplc.com. The AGM will be held at 10:00 a.m. on 28 July 2024 at Shore Capital's offices, Cassini House, 57 St James' Street, London SW1A 1LD. Bob Holt, Executive Chairman of EARNZ, said: "I am delighted with the progress to date in what has been an extremely difficult period for all companies listed on the Alternative Investment Market of the London Stock Exchange. Raising capital and liquidity are at record low levels in the 30 years since that market was created. Despite those stock market conditions, the Group is performing well with business tradingahead of target." For further information, please contact: EARNZ plc Bob Holt OBE - Executive Chair Elizabeth Lake - Chief Financial Officer +44 (0) 7778 798 816 John Charlton - Executive Director & Company Secretary Shore Capital(Nominated Adviser and Joint Broker) Tom Griffiths / Tom Knibbs / Lucy Bowden +44 (0) 20 7408 4090 Zeus Capital (Joint Broker) Antonio Bossi/ Andrew de Andrade +44 (0) 203 829 5000 This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. EXECUTIVE CHAIR'SREVIEW I am pleased to report a successful period at the start of our journey to build a significant group in the energy services sector focusing on the decarbonisation of public and private sector building fabric. The UK Government continues to provide investment in the Net Zero transition and UK clean energy industries. The results herein include two months of the legacy Verditek business; a clean cash shell for a six-month period during which we negotiated the acquisitions of two businesses in order to enact our strategy, followed then by four months of trading of the acquired businesses. Therefore, I feel that these results do not truly reflect our future aspirations and opportunities. I was most conscious of putting in place a Board of Directors which had the correct mix of skills to ensure that we build on a solid foundation. I am pleased to welcome Peter Smith as CEO following completion of our recent acquisition of A&D Carbon Solutions LTD ("A&D"). At the same time, I will become Non-Executive Chair and John Charlton will resign as a director of the Company but remain as Company Secretary. I am delighted with the progress to date in what has been an extremely difficult period for all companies listed on the Alternative Investment Market of the London Stock Exchange. Raising capital and liquidity are at record low levels in the 30 years since that market was created. Despite those stock market conditions the Group is performing well with all businesses trading ahead of target. We have an active list of potential acquisition targets across the decarbonisation agenda. Due to the difficulties of the capital restrictions to date, our acquisition strategy has been highly selective as we work within our financial constraints. As we have established a profitable platform for growth, the Board is looking at more significant opportunities for acquired growth which will enhance service offerings and provide a more stable base. I would like to congratulate all employees and partners in the Group and look forward to bringing news of further growth in earnings in the coming months. Bob Holt OBE, Executive Chair 26 June 2025 STRATEGIC REPORT The Directors present their strategic report on the Group for the year ended 31 December 2024. EARNZ plc disposed of its interests in its Solar Business on 29 February 2024. The Company's principal business is targeting acquisitions in the energy services sector. Going forward the Company willbuild a leading business in the energy services sector focusing on decarbonisation of public and private sector building fabric, leveraging UK Government investment in Net Zero transition and UK clean energy industries. The sector is hugely fragmented, providing significant growth opportunities, by acquisition and organically. The Group's buy and build strategy is designed to create shareholder value through bringing together businesses in the energy services sector, providing consolidation in a fragmented sector, and extensive industry experience gained over many years. This creates improved service experience for customers and a virtuous circle of value creation. The foundations have been set through the addition of three businesses to the Group and the opportunity for organic growth and further acquisitions set. Principal risks and uncertainties facing the business A full review of principal risks and uncertainties facing the business during the year and going forward is in this report. S172 Statement As required by Section 172 of the Companies Act, a director of a company must act in the way he or she considers, in good faith, would likely promote the success of the company for the benefit of the shareholders. In doing so, the director must have regard, amongst other matters, to the following issues: • the likely consequences of any decisions in the long term (see Corporate Governance Report); • the interests of the company's employees (see Corporate Social Responsibility report) • the need to foster the company's business relationships with suppliers/customers and others (see Corporate Governance Report); • the impact of the company's operations on the community and environment (see Corporate Social Responsibility report); • the company's reputation for high standards of business conduct (see Corporate Governance Report); and • the need to act fairly between members of the company (see Corporate Governance Report On behalf of the Board John Charlton Executive Director 26 June 2025 FINANCIAL REVIEW The continuing activities of EARNZ plc started when the Company disposed of the Solar Business and became an AIM Rule 15 cash shell on 1 March 2024, having ceased to own, control or conduct all, or substantially all of its existing trading business, activities or assets. The disposal of the legacy solar business and all related business assets of Verditek Plc (the "Solar Business") was approved on 28 February 2024 in return for the satisfaction of the outstanding bonds and accrued interest. The Solar Business was disposed of on 29 February 2024 and completed on 1 March 2024. The disposal was required in order to satisfy the outstanding creditor obligations of Verditek Plc, and avoid having to put the Company into administration. Under the AIM Rules the Company was required to make an acquisition or acquisitions which constitute a reverse takeover within 6 months to avoid the suspension of trading in the Company's shares on AIM. The Company raised £0.3m gross on 5 March 2024 at 0.075 pence per share to provide initial funding for EARNZ plc. Following a share consolidation on 4 April 2024 whereby 100 existing shares were exchanged for 1 new share, changing the nominal value of the Company's ordinary shares to 4 pence per share, a further £3.7m gross was raised through a placing of new shares on 8 April 2024 at 7.5 pence per share to embark on the Group's buy and build strategy. To enable the acquisition of two businesses, South West Heating Services Limited ("SWH") on 28 August 2024 and Cosgrove & Drew Limited ("C&D") on 29 August 2024 a further fund raise of £2.05m gross was completed on 29 August 2024 through the placing of new shares at 7.5 pence per share. On 12 June 2025, the Company announced that it had entered into an agreement with the shareholders of A&D Carbon Solutions LTD ("A&D") to acquire the entire issued share capital for a maximum consideration of £2.8m. On the same day the Company raised £1.02m through a share placing, to fund the acquisition and provide additional working capital for the Group. The sale is expected to complete on 1 July 2025 subject to obtaining shareholder approval to authorise the directors to issue the consideration shares. Further details are set out in the post balance sheet event section of the Directors' report. For the period between 1 March 2024 and 29 August 2024, the business remained a cash shell, generating no income and incurring costs of a listed plc and professional fees incurred in completing the acquisitions of C&D and SWH. From 1 September 2024, the results of C&D and SWH have been incorporated into the Group's results. Income statement Revenue In the year ended 31 December 2024, the Group's loss after taxation was £2,819k (2023: £2,089k), the loss after taxation from continuing operations was £2,684k (2023: £1,344k). In the four months from 1 September 2024 to 31 December 2024, Group revenue from continuing operations was £2,637k. Of this, revenue from C&D for the four months from 1 September 2024 to 31 December 2024 was £2,169k. C&D focuses on the provision of mechanical and engineering services across the commercial and industrial sectors. Revenue from SWH for the four months from 1 September 2024 to 31 December 2024 was £468k. SWH focuses on the provision of domestic maintenance services and heating installations. Profits £'000 Gross Profit Administration expenses - continuing 31 December 2024 31 December 2023 348 - (1,532) (743) Acquisition costs (1,622) - Operating Loss (2,806) (743) Net finance cost (74) (44) Other income/(losses) 1 (557) Loss before tax (2,879) (1,344) Gross profit margin 13.2% - Gross profit in the four months from 1 September 2024 to 31 December 2024 was £348k, which was lower than expected due to unexpected costs in C&D. The margin achieved in C&D was 9% as a result of significant unexpected costs. Since its acquisition, a significant amount of work has been undertaken to rebase the cost base, and the ongoing business is currently achieving margins at the expected rate of c.25-30% in 2025. The margin achieved in SWH was 32% in line with expectations. The administrative expenses incurred for the year ended 31 December 2024 were £1,532k (2023: £743k). The majority of the costs incurred being £940k relating to Group overheads from 1 March 2024 to 31 December 2024. The monthly run rate for Group overheads is c.£100k, which covers staff costs, and the costs associated with being quoted on AIM. The remaining administrative fees sit within the subsidiaries, C&D and SWH, approximately half of which relate to employee-related overheads. The acquisition costs include fees associated with the reverse takeover of C&D and SWH ("RTO") of £1,460k and aborted fees of £162k from another transaction that did not complete. Taxation Loss after tax from continuing operations was £2,684k (2023: £1,344k) Loss per share The basic and diluted loss per share was 0.046p (2023: 0.436p). Adjusted Profits The Group uses a number of Alternative Performance Measures ("APMs") in addition to those measures reported in accordance with IFRS. Such APMs are not defined terms under IFRS and are not intended to be a substitute for any IFRS measure. The Directors believe that APMs are important when assessing the underlying financial and operating performance of the Group. The exceptional items identified as non-recurring in nature are set out below and were considered in calculating the adjusted profits. Adjusted EBITDA from continuing operations £'000 Operating Loss Year ended 31 December 2024 (2,806) Depreciation & amortization 73 Share based payment 23 Exceptional items: Acquisition costs Non-recurring audit fee 1,622 68 Total exceptional items added back 1,690 Adjusted EBITDA (1,020) Financial Position £'000 Year ended 31 December 2024 Year ended 31 December 2023 Goodwill 3,577 - Intangible assets 1,003 Property, plant & equipment 310 98 Right of use assets 220 306 Deferred tax asset 130 - Non-current assets 5,240 404 Current assets excluding cash 1,733 589 Liabilities excluding borrowings (3,591) (622) Cash and cash equivalents 1,965 54 Borrowings (1,371) (523) 594 (469) 3,976 (98) Net cash/(debt) Net assets/(liabilities) As at 31 December 2024, the Group's net assets were £3,976k (2023: net liabilities of £98k). Non-current assets Goodwill of £3,577k has arisen on the acquisitions of C&D and SWH and has been recognised at cost, representing the excess of the consideration paid over the net assets acquired. The details relating to the acquisitions are set out in Note 12. As required by IAS 36, an impairment review has been carried out and concluded that no impairment was necessary. The intangible assets are the value of the customer relationships acquired, and these are amortised each year. Current assets excluding cash Current assets excluding cash comprise trade and other receivables of £1,125k (2023: £30k), contract assets of £266k (2023: nil), stock balances of £145k (2023: £419k), and other current assets of £197k (2023: £140k). See Note 16 for further details. Liabilities excluding borrowings The largest balance is trade and other payables at £1,947k (2023: £284k). Also included is the contingent deferred consideration arising from the acquisitions of C&D and SWH. The total balance of contingent consideration is £1,335k of which £180k is due within 12 months of the FY24 year end. Lease liabilities amount to £245k (2023: £308k). See Note 16 for further details. Liquidity The Group cash balance as at 31 December 2024 was £1,965k (2023: £54k). Details of borrowings are shown in Note 16(vii) Cashflow £'000 Net cash (used in)/generated from operating activities Year ended 31 December 2024 Year ended 31 December 2023 (3,083) (1,256) Payment for acquisitions, net of cash acquired (747) - Purchase of property, plant & equipment (64) (2) Other 36 4 Net cash (used in)/from investing activities (775) 2 Net proceeds from issue of shares 5,663 465 Proceeds from borrowing Proceeds from related parties 500 339 Net proceeds from factoring of trade receivables 100 Repayment of borrowing, HP and lease liabilities (162) Other Net cash generated from financing activities (503) (8) 5,932 Net cash outflow from discontinued operations (162) Net increase/(decrease) in cash during the year 1,912 462 (792) Net cash used in operations includes £1,690k of exceptional costs relating to the RTO and the acquisitions of C&D and SWH. Issue of New Shares On 5 March 2024, 400,000,000 new shares were issued at 0.075 pence per share with a total value net of fees of £278k. A further 83 ordinary shares were allotted on 4 April 2024 solely to facilitate the share consolidation on a 1-for-10 basis and then subsequently there was a share consolidation of every 100 ordinary shares of 0.04 pence each into one new ordinary share of 4 pence each. On 8 April 2024, 4,000,000 shares were issued at 7.5 pence per share on conversion of a £300k loan, made to the Company by Bob Holt, prior to his appointment as a director of the Company. On the same day there was a placing of 39,554,644 new ordinary shares at a price of 7.5 pence per share raising £2,749k net of costs. On 8 April 2024, 9,778,666 shares were issued at 7.5 pence per share with a total value net of fees of £712k. On 28 August 2024, 20,798,491 shares were issued at 7.5 pence per share on a VCT placing with a total value net of fees of £1,457k. On 29 August 2024, 6,552,959 shares were issued at 7.5 pence per share with a total value net of fees of £467k. On 29 August 2024, 3,000,000 shares were issued at 7.5 pence per share on conversion of a £225k loan originally made to C&D by Bob Holt. A further 8,975,119 consideration shares were issued on the acquisition of C&D and SWH. Dividends No dividend is recommended (2023: £nil). Events after the reporting period On 12 June 2025, the Group signed a sale and purchase agreement to acquire all the share capital of A&D at a cost of £2.8m with initial consideration of £1.3m, £1.04m in cash, to be adjusted for net debt and normalised working capital and £0.2m of which is contingent on meeting targets by 31 December 2025. The remaining initial consideration of £260k is payable in new ordinary shares in EARNZ plc. The remaining consideration is deferred and contingent upon reaching EBITDA targets for up to 3 years post completion and is payable 60% in cash and 40% in new ordinary shares in EARNZ plc. On 12 June 2025 the Company raised £1.02m through a share placing, to fund the acquisition and provide additional working capital for the Group. The sale is expected to complete on 1 July 2025 conditional on shareholders' approval at a general meeting to authorise the directors to issue the consideration shares. Events after the reporting period are described in Note25to the financial statements. Elizabeth Lake Chief Financial Officer 26 June 2025 RISK REPORT Risk Management Framework The Group has a risk register which includes all principal risks critical to the business. The Board retains responsibility and accountability for the effectiveness of the risk management framework and internal control systems. As the business grows the risks will continue to evolve and grow in complexity and so will the risk management processes. This will ensure continuous improvement in the organisation's risk maturity. Approach to Risk Management The Audit Committee, under delegated authority from the Board, is accountable for overseeing the effectiveness of the risk management process, including identification of the principal and emerging risks facing the Group. The Audit Committee has particular focus on those risks that affect accounting in general and safeguarding the Group's assets. Principal Risks and Uncertainties The current Board has identified the Group risks. DETAIL OF RISK MITIGATION and MANAGEMENT ASSESSMENT Insufficient working capital to fund growth opportunities in delivery of the Group's buy and build strategy. The Board has reviewed medium-to-long-term cashflow forecasts (including sales forecast), and aims to ensure sufficient funding is in place to meet requirements. The Board is continually engaged with its investors and potential investors. Full legal and financial due diligence was completed on each target business, including historical financial information. External advisors and Reporting Accountants were appointed for this work during the reporting period. Focusing on the decarbonisation agenda which is funded by government and a key policy area. Maintain good trading relationship with all key customers and continue to monitor. Build in contingencies in budgets and forecasts. Strong management teams are in place within the target businesses. The Group is directly responsible for installing and auditing an HSE culture. Documented operating procedures are in place in the operating businesses. Health & Safety is reviewed at each Board meeting The Group uses external IT support to carry out regular penetration testing and auditing security and processes. Robust insurance policy in place in case the event of ransom, including obtaining cyber essentials and training. Founders are incentivised with earn outs and bonuses. Executives have an LTIP in place, and senior management have bonus schemes. The Group is committed to improving working conditions, work life balance, progression, and training. High risk The executive benchmarked its corporate governance, policies and procedures against published QCA guidelines to ensure compliance. The Company has regular discussions with its nominated adviser and external counsel. Low risk Underperformance of target businesses HSE violations in Group operating companies. Failure of business systems or loss of data, potentially causing issues such as delay in sales, reduced financial performance, reputational damage. Attracting and retaining key employees. There is a general shortage of labour across the construction industry. Each operating company has a key management team, including the founders. The loss of any of these staff would have a detrimental impact on the growth of the business. Failure to meet AIM corporate governance requirements. GOVERNANCE BOARD OF DIRECTORS Medium risk Medium risk Medium risk Medium risk The Directors of EARNZ plc as at the date of signing the report and accounts comprised: Bob Holt OBE (Executive Chair)(1) - appointed 29 February 2024 Bob Holt is a highly accomplished executive with over 35 years' experience in senior leadership roles across various sectors, most recently serving as CEO of Revolution Beauty Plc after joining its board as interim COO. Prior to that, he successfully led Sureserve Group Plc as Chair, overseeing its successful turnaround that resulted in over a fivefold increase in the company's share price. He is perhaps most widely known for his role in the rise of Mears Group PLC. Since being appointed as Chair in 1996, he guided the company through its successful IPO on AIM and played a pivotal role in building its order book value to £3 billion, establishing Mears as a market leader in its sector. Bob has been awarded the OBE for his services to philanthropic causes. (1) On completion of the acquisition of A&D Bob Holt will be appointed as Non-Executive Chair for the Company John Charlton (Executive Director and Company Secretary)(2) - appointed 29 February 2024 John Charlton spent 28 years in various senior corporate banking and risk management roles within Barclays plc, specialising latterly in listed business service companies. He joined Sureserve Group plc as Group Company Secretary in 2017 and assisted with the successful turnaround of that business. In addition, John is Trustee and Chair of The Sureserve Foundation. (2) On completion of the acquisition of C&D John Charlton will resign as director of the Company and will remain as Company Secretary Elizabeth Lake FCA (Chief Financial Officer) - appointed 3 June 2024 (appointed non-executive director from 13 March 2024 - 3 June 2024) Elizabeth is an accomplished executive with more than 25 years' finance and commercial experience. Previously, Elizabeth joined the board of Revolution Beauty Group as CFO in May 2022 and was instrumental in turning around the business following the suspension of its shares from trading on AIM. Prior to Revolution Beauty, she was CFO of AIM quoted, Everyman Media Group. During her time at Everyman, Elizabeth successfully led the company through the challenges presented by the Covid 19 pandemic, demonstrating her ability to navigate uncertainty with strong financial and operational acumen. Prior to Everyman, Elizabeth was Chief Financial Officer at AIM quoted, Science in Sport, and before that finance director at Hugo Boss UK and Ireland. She brings extensive UK plc experience to EARNZ having also worked in finance roles at Marks & Spencer, Pearson and Thomson Reuters. Elizabeth is ACA qualified, having trained at Coopers and Lybrand (now PwC). Linda Main (Senior Independent Director) - appointed 1 May 2024 Linda is a chartered accountant who retired from KPMG LLP in September 2023 after a long career leading its Capital Markets Advisory Group. Linda has advised on well over 100 IPOs and significant transactions by listed companies of all sizes ranging from start-ups to members of the FTSE 100. She was also a member of the UK board of KPMG where she chaired the Risk Committee and sat on the Audit Committee. Until December 2023, Linda was a member of the London Stock Exchange's AIM Advisory Group and earlier in her career sat on a number of the Quoted Companies Alliance ("QCA")'s technical committees. She also sits on the QCA board. Linda is a Trustee of Carers Trust, a leading charity working to transform the lives of unpaid carers. Linda chairs the Company's Audit and Remuneration committees. Sandra Skeete (Independent Non-Executive Director) - appointed 3 June 2024 Sandra has over 25 years' experience working in social housing, holding senior roles in organisations such as the Peabody Trust and Refugee Housing Association Limited, and was previously a director of One Housing Group and the Duke of Lancaster Housing Trust. She was the Chief Executive of Octavia Housing Association Group, a not-for-profit organisation offering social housing and care services for vulnerable members of the community in central and west London. She was previously a non-executive board associate of Principality Building Society. Sandra sits on the Company's Audit and Remuneration committees. Directors in post during the year included: Rob Richards (Chief Executive Officer) - resigned 29 February 2024 The Rt Hon. Lord David Willetts FRS (Non-Executive Chair) - resigned 29 February 2024 George Katzaros (Non-Executive Director) - resigned 29 February 2024 Gavin Mayhew (Non-Executive Director) - resigned 2 January 2024 The Board and responsibilities The Board holds monthly meetings to review, formulate and approve the Group's strategy, budgets, corporate actions and oversee the Group's progress towards its goals. There is an Audit Committee and a Remuneration Committee in place with formally delegated duties and responsibilities and with specific terms of reference. From time-to-time separate committees may be set up by the Board to consider specific issues when the need arises. Due to the size of the Group, the Directors have decided that issues concerning the nomination of directors will be dealt with by the Board rather than by a committee but will regularly reconsider whether a nominations committee is required. Details of board meetings held in the reporting period, and attendance of Board directors is shown below: Board Members Eligible to attend Attended 2 2 2 2 17 2 2 16 16 17 16 17 14 12 14 8 Executive Directors Lord David Willetts (resigned 29 February 2024) Rob Richards (resigned 29 February 2024) George Katzros (resigned 29 February 2024 Bob Holt OBE (appointed 29 February 2024) Elizabeth Lake FCA (appointed Non-Executive Director 13 March 2024 and as Chief Financial Director 3 June 2024) John Charlton (appointed 29 February 2024) Non-Executive Directors Linda Main(appointed 3 June 2024) Sandra Skeete (appointed 1 May 2024) The Audit Committee The Audit Committee comprises Linda Main (appointed 1 May 2024) as Chair and Sandra Skeete (appointed 3 June 2024). At the beginning of the year, the Audit Committee comprised TheRt Hon. Lord David Willetts FRS (resigned 29 February 2024)as Chair and Gavin Mayhew (resigned 2 January 2024). Elizabeth Lake (appointed 13 March 2024) joined the Audit Committee temporarily on 1 May 2024 whilst she was a non-executive director, and was replaced by Sandra Skeete on 3 June 2024. The Audit Committee determines the terms of engagement of the Group's auditors and will determine, in consultation with the auditors, the scope of the audit. The Audit Committee receives, and reviews reports from management and the Group's auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Group. The Audit Committee has unrestricted access to the Group's auditors. The Audit Committee Report is presented in this report. The Remuneration Committee The Remuneration Committee comprises Linda Main (appointed 1 May 2024) as Chair and Sandra Skeete (appointed 3 June 2024). At the beginning of 2024,the Remuneration Committee comprised George Katzaros (resigned 29 February 2024) as Chair and Gavin Mayhew (resigned 2 January 2024). The Remuneration Committee reviews the scale and structure of the executive Directors' and senior employees' remuneration and the terms of their service or employment contracts, including share option schemes and other bonus arrangements. The remuneration and terms and conditions of the non-executive Directors are set by the entire Board. The Directors' Remuneration Report is presented in this report. Investor relations The Annual General Meeting is the principal forum for dialogue with shareholders. Updates on the progress of the business are regularly published on the Group's website. On behalf of the Board Bob Holt OBE Executive Chair 26 June 2025 CORPORATE GOVERNANCE REPORT The Chair