A CLYDEBANK-based energy supplier has seen losses spiral to nearly £7 million as its boss vowed it was now on the road to profitability – despite challenging market conditions.

Together Energy, set up by former British Gas executive Paul Richards in 2016, booked a loss of £6.9m for the year ended August 31, which followed a £922,546 reverse the year before. Turnover leapt to nearly £36m from £1.7m, accounts newly filed at Companies House show.

Losses widened during a year which saw the company report a huge increase in customer numbers. As many as 33,000 came on board after Together was appointed as the supplier of last resort by Ofgem for customers of OneSelect, the failed Reading-based energy company. It took customer numbers at Together, which employs around 110 staff, to more than 55,000.

The auditors for Together note in the accounts that the firm’s ability to continue as a going concern depends on obtaining additional funding, meeting cashflow projections, and the continuing support of its wholesale trading partner. Mr Richards, who holds a 74.6 per cent stake in the company, said he has a “high degree of confidence” that talks with investors to raise around £15m will have a successful outcome.

Asked to comment on the increase in losses, Mr Richards said the results had been factored into the business plan set out when the company began trading in 2016, noting that gross margins were ahead of where he expected to be at this stage. He said: “To grow the book in the first instance we did what most people do, we put out a loss-making tariff. But in our 33, 34 months of trading we have only ever put two loss-making tariffs out. That’s playing a big piece.”

The losses also reflected a decision to amortise the cost of acquiring customers over two years, said Mr Richards, noting 80 per cent of customers have signed up to three-year fixed term deals.

“We are actually very happy with where we have got to,” he said. “We have reached peak losses, and we are out the other side now, looking profitable.”

However, Mr Richards conceded conditions remain “extremely challenging” in the energy supply sector. He admitted the failure of 11 smaller companies in recent months had led to many customers losing faith in the deals offered by the minnows, with many turning back to the Big Six suppliers.

But he noted that Ofgem had signalled its faith in Together by awarding it the right to serve the former OneSelect customers.

Mr Richards said being appointed supplier of last resort for OneSelect meant Together had to pay out £4m in customer credits.

But he said the cost of acquiring the customers was “negligible”.

He declared that the firm’s level of operating expenditure remained one of the lowest in the industry, adding that it will benefit over the long run from the investment it has made in its own billing system.

An initial £1.8m was spent on the system, with a further outlay of a similar amount still to be made in the technology. Now, as we grow, our cost to serve reduces,” Mr Richards said.

Asked how he would assess Together’s standard of customer service, he said its record currently looks poor on Trustpilot because it has had to deal with around 10,000 customers who did not come on board from OneSelect. That has involved settling final bills and credit refunds. However, he said it has been faring better on scores by Citizens Advice.

While big suppliers have lamented the impact of the UK Government’s price cap on variable tariffs, Together has won customers each time the cap has risen.

Together boosted its team in December by drafting in former Lloyds and Rangers director Donald McIntyre as commercial director.