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Ovo has announced it made a loss of £141 million in 2020 due to the integration of SSE’s energy retail arm.
In its financial results for the year to the end of December, Ovo said the pandemic had forced it to accelerate its integration plans, bringing forward some of the associated costs.
The announcement comes following reports in The Telegraph and Sky News that the company is eyeing a takeover of rival Bulb, with an offer expected to be tabled this week.
Ovo reported a more than tripling of revenues from £1.4 billion in 2019 to £4.5 billion in 2020 and a significant improvement to its underlying operating profit, going from a loss of £103 million to a loss of £7 million. Loss before tax stood at £176 million, with an income tax credit of £35 million taking the figure to £141 million.
Meanwhile, adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose to £97 million, up from a £77 million loss in 2019.
Ovo, which now holds a 13 per cent share of the domestic retail market with 4.5 million customers, explained that its integration plans, originally anticipated to be phased over a number of years, were accelerated due to the impact of the coronavirus pandemic.
As such, the majority of its £110 million exceptional integration costs were brought forward to 2020, contributing to a pre-tax loss of £176 million compared to a loss of £66 million in 2019.
These include £55 million of restructuring costs following the announcement of 2,600 redundancies last May.
Exceptional costs:
| Item | Cost | Description |
| Restructuring costs | £55m | Voluntary redundancy costs announced in May 2020 |
| Acquisition costs | £22m | M&A and legal costs associated with the acquisition |
| Consolidation costs | £15m | Cost of integrating the two businesses onto shared systems and platforms |
| Right-of-use-asset impairment and onerous lease costs | £18m | Accelerated closure of offices and brought forward property costs |
| Total | £110m |
The company said that it is in a “strong financial position” and “well hedged” to manage the rise in wholesale energy costs for the coming months.
Founder Stephen Fitzpatrick added the faster integration of SSE is benefiting the company and that it is projecting to return to profit in 2021.
He said: “This is an unprecedented time in the energy sector with rising energy prices creating an extremely challenging environment for many households this winter.
“As an industry we need to show leadership in times like these. 2020 saw Ovo embarking on the largest industry consolidation deal to date and was a crucial milestone on our mission to decarbonise Britain’s homes.
“Our progress in 2021 bears the fruits of this commitment and we are now well advanced in building a technology-led, low-cost platform serving 1 in 7 households in the UK.
“Our efforts were intensified when the coronavirus hit as we recognised that we needed to move faster than we had originally planned. We now benefit from that faster integration and investment with the business projecting a return to operating profit in 2021.”
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