Juliet Davenport Chief Executive Officer ANNUAL REPORT & ACCOUNTS 2017
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Good Energy’s vision is to become an expert integrator of green energy services in homes and businesses. Juliet Davenport Chief Executive Officer ANNUAL REPORT & ACCOUNTS 2017 Contents 4 Strategic Report 68 Financial Statements 5 Chairman’s Statement 69 Consolidated Statement of Comprehensive Income 7 Chief Executive’s Review 70 Consolidated Statement of Financial Position 10 Strategic Review 71 Parent Company Statement of Financial Position 15 Corporate Responsibility 72 Consolidated Statement of Changes in Equity 18 Chief Financial Officer’s Review 73 Parent Company Statement of Changes in Equity 21 Operating Review 74 Consolidated Statement of Cash Flows 24 Key Performance Indicators 75 Parent Company Statement of Cash Flows 26 Key Risks 76 Notes to the Financial Statements 29 Governance Report 30 Board of Directors 32 Governance & Directors’ Report 50 Remuneration & Nomination Report 58 Independent Auditors’ Report 2 2017 Highlights Report Strategic Governance Report Governance Financial Statements Revenue, Gross Profit, EBITDA, PBT, and EPS reflect 2017 continuing operations and 2016 continuing operations restated to reflect the discontinuation of the Generation Development business in 2017, 2013 to 2015 figures are as reported. 1. Total installed customer meters and FIT installations as at 31 December 2. Full year dividend per share for 2017 is based on the interim dividend of 1p (2016: 1p) plus the proposed final dividend of 2.3p (2016: 2.3p) 3. Volume supplied to half-hourly (business) and SME electricity customers 4. Generation output from owned and operated assets 3 STRATEGIC REPORT 5 Chairman’s Statement 7 Chief Executive’s Review 10 Strategic Review 15 Corporate Responsibility 18 Chief Financial Officer’s Review 21 Operating Review 24 Key Performance Indicators 26 Key Risks 4 Chairman’s Statement Report Strategic Good Energy has delivered another year of robust growth, while focussing on improving operational Good Energy has delivered efficiency. These results demonstrate the underlying strength of our business model given the tough conditions in the UK energy supply market. another year of robust growth, During the year Good Energy has made good while focussing on improving progress on its strategic evolution within an energy market that is in transition. operational efficiency STRATEGIC Our Market: Opportunities & Challenges In 2017, increased competition and wholesale market volatility led to difficult market conditions As Good Energy continues its strategic evolution, for UK consumer energy supply businesses. While I would like to thank our people, our customers we expect these conditions to continue in 2018 and shareholders for their ongoing support and in the consumer market, the business customer commitment to the company and our objectives. market is less challenged by these factors We are proud that a significant number of our and is one where Good Energy is successfully customers also choose to invest in Good Energy as strengthening its position. shareholders, or as bond holders, or in many cases as both. Addressing climate change remains a priority Report Governance for the developed and developing world. In 2017, Board update REPORT the UK government published its Clean Growth Strategy, setting out a blueprint for Britain’s low Tim Jones joined the Board in December, replacing carbon future and increasing the market for Good Francesca Ecsery who stepped down as planned Energy and our zero-carbon focus. following Tim’s appointment. Tim has over 20 years’ experience in leading digital innovation, The UK energy market is changing. Good Energy execution and operation at Moneysupermarket.com is focussed on its strategic evolution within this Group PLC and Trader Media Group (now known changing landscape, and believes that the future as Autotrader plc). His experience of delivering value lies in the provision of integrated green business transformation through digital innovation energy services within an increasingly compliments Good Energy’s strategic focus. decentralised market. On behalf of the Board I would like to thank Strategic Development Francesca for her valued support to Good Energy during her time with the company, and welcome Tim. A key focus of management and the Board is overseeing a strategy for growth and evolution Denise Cockrem who has been Chief Financial that will maximise the long term value we can Officer and an Executive Director of the Board since deliver to stakeholders and keep step with 2014, will step down from these positions at the end changes in the market. of March 2018. Rupert Sanderson, Good Energy’s Finance Director will take over Denise’s leadership Our strategy centres on building on our success, of our financial functions from April in a smooth developing the long term profitability of Good transition, and will report to the Board on financial Financial Statements Energy, and investing in the future as an integrated matters. Stephen Rosser will take over responsibility green energy services company. for Risk Management. In recent years the economics of generation I would like to thank Denise for her valuable development have shifted in favour of large-scale contributions to Good Energy’s development over players. Our previously announced move away recent years. from generation development frees up capital and management time to allow the company to expand into growing areas of demand that are consistent with our purpose. Our pilot in battery storage and electric vehicle charging activities at the end of 2017 are examples of this. Strategic Report Chairman’s Statement 5 2017 Ecotricity General Meeting proposal Dividend In July the Company received a requisition on Good Energy aims to deliver a progressive ‘green’ behalf of Ecotricity Group Limited for a general dividend policy. The policy has the objective of meeting of the Company’s members to consider increasing the dividend over time as profitability the appointment of two Ecotricity executives as grows to provide an appropriate return to directors of the Company. Ecotricity withdrew shareholders while also maintaining and balancing the its requisition after the general meeting had ability to invest in long term growth opportunities. been convened but before the general meeting took place. The Board has recommended a final dividend for 2017 of 2.3p per ordinary share. As communicated to shareholders in August 2017, the Board unanimously recommended that Looking ahead Shareholders vote against the proposal due to the inherent conflict of interest and commercial In 2018 we expect to deliver a full year performance and strategic risks to Good Energy. We recognise in line with current market expectations, as we see and thank customers, shareholders and other the benefits of management actions to evolve the stakeholders for the support we received business and continue our strategic evolution as an regarding the matter. integrated green energy supplier. Governance Good Energy has rigorous corporate governance, exceeding the requirements for AIM listed companies, and wherever appropriate aligning with best practice of the UK Corporate Governance Code. John Maltby The Board has a strong mix of skills and experience Chairman at a Non-Executive level to continue to provide 11 April 2018 strong corporate governance and challenge to management. 6 Chief Executive’s Review Report Strategic Good Energy has delivered robust revenue growth In 2017, through the roll-out of our new billing system in a challenging year for our sector while delivering we have established a platform on which we can annualised cost savings of £1m through phase one of build a truly digital customer experience and add our Fit for Growth (F4G) programme. new propositions over time. I would like to thank our customers for their support during the year as we Building for the Future have transitioned onto the new system and for their patience with us as we resolved issues arising during In 2017 Good Energy has been responding to an that transition. Despite this, our customer care team energy market in transition. In the competitive UK has continued to deliver consistently strong service. supply market many newer entrants are competing in a price war race to the bottom, which we do not We have significantly developed our offering to see as sustainable. We believe that the market is business customers in 2017, creating a new sales team undergoing fundamental change, where the and online tools for customers. We believe we are future value will be in energy services in a uniquely positioned to help businesses achieve their decentralised market. sustainability goals and their carbon reduction goals. We are working on shifting our relationship with our Our Strategy customers from that of a conventional supplier to that of an integrator to support their wider range Our strategy is to build on our successes and of green energy needs into the future. We have growing our core business through retaining existing successfully proven this model as a decentralised domestic customers, continuing to grow our business green energy integrator in our Feed In Tariff (FIT) customers and enhancing services to FIT customers. Report Governance business, where we have an 18% market share. We continue to roll out our F4G programme ensuring Our focus is on evolving our offering to capture that we have a lean operating model to improve where the future needs of this market are heading. margins, whilst increasing our technical capability within operations to leverage the investment in our Our Customers systems, reduce our costs and improve service. And, we are focussed on generating future business With the development of digital networks and opportunities by investing in new services, in our innovations in low-carbon technologies, based on digital platform and in research to drive new services our insight we know that our customers want a more into our pipeline. enhanced and personalised service and to be able to manage their green energy in a more intuitive way. The development of our billing system in 2017 We know that our customers increasingly see us as provides a platform to enhance customer experience, a partner that can support their wider needs.