Energy One [ASX:EOL] today pushed back at negative rumours and released profit guidance for the second half of the year, showing a strong performance by the energy trading company.
Today’s profit guidance showed that the company expects Annual Recurring Revenue (ARR) growth of 19% for FY23, equivalent to approximately $44 million.
Shares of the company continued its recent strong upswing, with shares up by 5.11% today, trading at 19 cents per share. The positive price action is a welcome change for the company, down by 23.15% in the past 12 months, while the rest of the market gained approximately 10%.
Looking at the bigger picture, EOL has still performed well. The wholesale energy market software supplier has seen impressive growth over the last five years, with an increase of 365.9% in its share price. EOL has successfully expanded its reach in the global wholesale energy trading industry and now sees approximately half of the Australian wholesale energy traded on its systems.
Source: TradingView
Energy One hits profit guidance
Energy One, a supplier of software and services for energy trading, has announced its unaudited financial results for the full FY23 year.
The company batted off rumours of poor performance and confirmed it is on track to meet its prior guidance, dispelling market speculation.
Energy One expects its total revenue for FY23 to reach approximately $44.5 million, while EBITDA is projected to be around $12.3 million, based on unaudited figures. These results indicate a strong performance for the company.
One of the highlights of Energy One’s performance is the impressive ARR growth. The company anticipates a 19% growth in ARR for FY23, equivalent to approximately $44 million, with organic growth driving this achievement.
The substantial growth in ARR has excited investors compared to the first half of the financial year, which experienced an anemic ~3% ARR growth. This began the rumours of an embattled company.
Energy One’s success extends beyond Australia, as the company has established a significant presence in the UK and European wholesale markets.
The 2021 acquisition of Egssis, a major Belgian energy software supplier, gave the company access to 17 European counties and broadened its reach. The deal, which cost approximately $6.8 million, has been an important driver for ongoing growth in that market.
Source: Energy One
In March this year, EOL also announced it had entered into a long-term agreement with Shell Australia to use its software for its growing portfolio of battery demand response, renewable and other generation assets.
Energy One CEO, Shaun Ankers, noted:
‘We are excited to be able to extend our relationship with Shell and assist with its renewable energy transition. Our global capability in both technology and services means we can support a leading renewables developer, like Shell, with cutting-edge solutions.’
What will today’s earnings update mean for the company moving forward?
Energy One outlook
Energy One’s ability to meet its guidance and achieve record ARR growth for FY23 reflects its strong market position and strategic approach to the energy sector.
With offices in Australia, the UK, and Europe, Energy One has positioned itself as a significant player in the global energy trading industry.
EOLs movement towards renewable energy trading, highlighted by its agreement with Shell, has also strongly focused on extending into the smaller renewable energy players.
Australia, since 2015 has seen 94% of new electricity generation come from renewables, a story similar to the European market.
Source: Clean Energy Council
The bet that smaller renewable energy projects are increasingly fragmented and not from the traditional utility giants has paid off for the company as it attracted start-ups, traders and consumers to its platforms.
According to the clean energy council, as of the end of 2022, 72 large-scale renewable projects are under construction or financially committed. This should also provide further scope for growth in medium-to-large-scale utility traders in the Australian market.
With a robust portfolio of software solutions and services, the company is well-positioned to capitalise on emerging renewable trends in the energy market and drive further growth in the coming years.
However, EOL’s high debt-to-equity ratio of 49.3% is something to watch.
Investors should focus on future earnings as it tries to stay on top of its high debts from past acquisitions.
Another note to temper enthusiastic investors may be the low dividend yield of 1.6%, a clear tradeoff for the growth seen in the past.
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Regards,
Charles Ormond,
For Money Morning