TIDMYU.
RNS Number : 6784A
Yu Group PLC
28 March 2017
Yü Group PLC
(the "Group")
Preliminary results for the year ended 31 December 2016
Yü Group PLC, the independent supplier of gas and electricity to
the UK corporate sector, announces its preliminary results for the
year to 31 December 2016.
HIGHLIGHTS
Financial
-- Revenue increased to GBP16.3m (14 months to 31 December 2015: GBP3.9m);
-- Gross margin increased to 21.2 per cent (14 months to 31 December 2015: 19.3 per cent);
-- Adjusted operating profit (excluding IPO costs and share
based payments) of GBP205,000 (14 months to 31 December 2015: loss
of GBP1.0m);
-- Loss for the year of GBP1.4m (14 months to 31 December 2015: GBP0.8m); and
-- Proposed final dividend of 1.5p per share, making a full year
dividend pay-out of 2.25p per share.
Key Performance Indicators
31 December 31 December % increase
2016 2015 / (decrease)
Contracted revenue* GBP27.8m GBP8.4m 231%
Number of half hourly
meters 473 36 1,214%
Number of non-half hourly
meters 2,351 521 351%
Number of gas meters 1,497 550 172%
Total meter numbers 4,321 1,107 290%
Average monthly new bookings GBP3.7m GBP0.9m 311%
------------------------------ ------------ ------------ --------------
*Contracted revenue comprises the estimated value of revenue for
the subsequent 12 months under contract with customers. The actual
amount recognised might vary by up to 10% of this value, due to the
inherent estimation involved in the calculation.
Operational
-- Successful admission to AIM on 17 March 2016 raising GBP7.5m
gross, principally to support the Group's stated hedging
policy;
-- Exit from Controlled Market Entry for half-hourly meters
achieved during the period, enabling the Group to supply high-usage
electricity customers;
-- Increased investment in sales channels and staff to support
scaling of the business with headcount increasing to 72 staff (31
December 2015: 40) and further recruitment planned; and
-- Renewal rate continues to be in line with expectations, in excess of 80 per cent.
Bobby Kalar, the Group Chief Executive Officer, said: "2016 was
an excellent year for the Group from both an operational and
financial standpoint. We have followed our IPO in March with strong
growth in all our key performance indicators with exceptional
revenue growth and underlying profitability being delivered ahead
of management expectations. Our hedging and energy purchasing has
proved robust through what has been a turbulent market for energy
suppliers.
"With contracted revenue for 2017 standing at GBP27.8m at the
year end, supplemented by GBP8.0m in new sales booked this year as
at 24 March 2017 and a strong pipeline of new business we are
confident that we can continue to build our record of strong
profitable growth."
The information communicated in this announcement would have
constituted inside information for the purposes of Article 7 of
Regulation 596/2014.
For further information please contact:
Yu Group PLC +44 (0) 115 975 8258
Bobby Kalar
Nick Parker
Shore Capital +44 (0) 20 7408 4090
Bidhi Bhoma
Edward Mansfield
Anita Ghanekar
Alma PR +44 (0) 20 8004 4218
John Coles
Hilary Buchanan
Robyn McConnachie
Notes to Editors
Information on the Group
Yü Group is an independent supplier of gas and electricity
focused on servicing larger corporate and SME businesses throughout
the UK. It has no involvement in the domestic retail market. The
Group was founded by Bobby Kalar and is listed on the AIM market of
the London Stock Exchange following a successful IPO in March
2016.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the first annual results of Yü Group PLC
following the Company's successful admission to AIM on 17 March
2016. The Company raised net proceeds of GBP6.0m which have been
used to support our rapid growth.
Sales growth and cash generation
Little more than two years ago, the business posted annualised
sales of some GBP500,000 and now for the year to December 2016
revenues have risen to over GBP16m. The Board are confident that
the Group will continue to grow at a rapid rate with a concurrent
progression in the Group's profitability and cash generation.
With relatively low levels of capital expenditure and a
substantial potential marketplace of SMEs and larger corporates,
the Board are confident in the Group's ability to generate cash to
support the dividend policy which is a key element of our on-going
strategy for delivering healthy returns to investors.
Market conditions, risk management and margins
The market for energy suppliers has been somewhat turbulent
throughout the year under review with a high degree of volatility
being experienced by all participants. Against that background, our
policy of hedging our supply commitments has proved to be extremely
successful. Our ability to achieve this by participating within the
global commodities market with reliable counterparties would not
have been possible without the funds raised at the time of the
IPO.
Due to the close co-operation between our sales personnel and
our commercial team (who manage the hedging and pricing operations
of the business) we have been able to maintain steady margin, while
also delivering the very best customer service.
Customer service and support
In the last year we have won Service Provider of the Year awards
as well as accolades from industry bodies such as Cornwall
Insights, which stated that "service level is very good" and "Yü
Energy is a standout for smaller suppliers."
As the business grows, one of the challenges of which the Board
is very aware is the need to maintain the high level of customer
service and flexibility, while at the same time ensuring that fixed
costs, particularly in relation to bad debts, do not increase
disproportionately. This challenge will continue but our rapidly
growing revenues will fully support the requisite investment in
staff and systems.
Our people
Staff levels have grown rapidly in the last year with the
average number of employees increasing from 32 to 58 in the 12
months to December 2016. I would like to express the gratitude of
the Board to all these employees, both longer serving and more
recently joined, who have contributed so much to the success of the
business. Their dedication and hard work has been exemplary during
a period of rapid growth which has put considerable pressure on the
business as a whole. These demands are unlikely to lessen as we
continue to grow at a rapid rate but the Board is confident that
the Company will be able to recruit the additional staff that will
be needed to meet these challenges.
Dividend
The Group, on admission, adopted a progressive dividend policy
and paid its maiden dividend in early January 2017 in relation to
the first half of 2016. The Company intends to pay a final dividend
of 1.5p per ordinary share for the year to December 2016, subject
to shareholder approval at the AGM to be held on Thursday 25 May
2017.
The proposed final dividend will be payable on 12 September 2017
to shareholders on the register on 11 August 2017 and the shares
will go ex-dividend on 10 August 2017.
Ralph Cohen
Chairman
Chief Executive Officer's statement
Introduction
The year to 31 December 2016 was one of dramatic change within
the Group and I am therefore particularly pleased that the growth
plans developed during 2015 for the business have been delivered in
full. At the beginning of 2016 we planned for revenue to grow from
GBP3.9m in the 14 months to December 2015 to more than GBP14m by
the end of the year. The results we are now reporting show that
revenue of GBP16.3m exceeded our target by 16 per cent.
In addition, due to a robust margin and a tight control over
fixed costs, it has been possible to deliver adjusted operating
profit (before exceptional IPO costs and share based payment
charges) ahead of schedule. It is because of our confidence in the
future growth of the Group and the ability of the business to
generate cash that we were able to declare an interim dividend for
our shareholders, ahead of expectations. We remain positive
regarding the future growth opportunities of the Group.
The volatile market that the energy industry has experienced had
the potential to cause some difficulties, but the business model -
with a firm hedging policy at its core - has demonstrated that even
in difficult markets there is an opportunity for a customer focused
supplier to deliver the service and products the market requires at
a sensible margin.
Our strategic objectives
Risk-averse operations
At the time of the IPO in March 2016, the strategic priority was
to ensure that the Group had a strong enough balance sheet to be
able to support its hedging and energy purchasing strategy. By
utilising some of the funds raised in the IPO to lodge collateral
through letters of credit with trading counterparties in the
wholesale energy market, this objective was successfully
delivered.
Sales growth and sustainable margins
The next priority was to deliver on the rapid growth opportunity
that was apparent following achievement of supply accreditation
from the regulator and exit from Controlled Market Entry ("CME")
for both non-half-hourly and half-hourly meters. This was achieved
with annualised sale bookings (being the forecast annual sales
value of new contracts signed) averaging GBP3.7m per month during
2016 and customer numbers (as measured by meter points) seeing a
near fourfold increase over the period. A firm pricing policy
combined with effective hedging has meant that margins on these
sales are in line with market norms for a business in an
increasingly competitive industry. When combined with a renewal
rate in excess of 80 per cent, this gives us confidence that
profitable growth will continue.
Cost control and customer service
An on-going focus is to maintain tight control over costs, while
at the same time developing infrastructure and back office support
to ensure that customer service levels are sustained. On occasion
this balance has been challenging but, overall, during the year we
have been successful. We have kept a close watch over credit
control procedures and ensured timely payment of outstanding debts
by our customers.
Cash management and shareholder returns
Finally, a key objective is to optimise cash management to
support future growth as well as the Group's progressive dividend
policy. The Group has a strong balance sheet with healthy cash
reserves. Letters of credit were issued during the year for GBP3.4m
in total which are approximately 65 per cent utilised by our
trading counterparties. We also absorbed some cash resources into
working capital during the year as we moved from collecting cash
from our customers in advance to billing in arrears. This change in
our billing policy was necessary in order to access some of the
higher value customer accounts and has proven to be successful. It
has meant the utilisation of circa GBP2.7m of our cash generation
during the year.
Our market place
Yü Group PLC has no intention of becoming a supplier to the
domestic energy market. There are approximately 5.4m businesses in
the UK, of which, according to recent industry surveys, a
significant percentage have rarely, if ever, changed their energy
supplier. This provides a significant opportunity for SME and
larger corporates to make savings. Yü Energy, our trading name,
engages both directly with this target customer base as well as via
the energy broking community. Approximately two-thirds of the
Group's revenues are derived from direct engagement, thus providing
the best possible prices for the end user as well as more direct
client service levels. This approach helps to ensure that as a
supplier we understand a client's needs in terms of their corporate
structure, invoicing, and the provision of ancillary services. It
also helps ensure that renewal rates remain high.
In April 2017, the water industry within England and Wales will
be opened up for greater competition. While this sector has a
different regulatory structure and commercial drivers to the
Company's core activity of electricity and gas supply, it is our
intention to add water supply to our activities in order to expand
the range of bundled services that we are able to offer to our
customer base.
Outlook
The new financial year has started well, with contracted revenue
for 2017 already amounting to GBP27.8m. The rapid sales growth seen
in 2016 is expected to continue through 2017 with the annual value
of new sales booked so far to 24 March 2017 exceeding GBP8.0m. As
markets become increasingly competitive, the Directors are
conscious of the pitfall of chasing turnover where margins are
unsustainably low and the importance of conserving our capital base
for our hedging activities while at the same time ensuring strong
cash generation. The sales force has therefore focused and
continues to focus on ensuring margins remain stable and that the
customer service is such that the renewal rates remain high, thus
underpinning the predictable element of the revenue model. The
subscription model of signing customers up to a fixed term contract
enables the Group to have good visibility of future revenues. This
facet of the business coupled with the scalability of our model
provides the Board with considerable confidence and support for our
belief in future growth.
Bobby Kalar
Chief Executive
Finance Review
Introduction
2016 has been a year of substantial growth. The two key events
that have driven this growth were the admission of the Company's
shares to AIM on the London Stock Exchange in March 2016, and the
exit from all CME regulations in respect of half-hourly meters in
April 2016.
The IPO was extremely successful, raising GBP6.0m (net of
costs). These funds have allowed the Group to invest in its sales
and support functions, which, coupled with the lifting of the CME
regulations, has resulted in significant growth in the customer
base. Gas customer numbers have risen to 1,497 (2015: 550) and
electricity customers are up to 2,824 (2015: 557). The proceeds of
the IPO have also provided the Group with the necessary collateral
to support its hedging activities in the wholesale energy
market.
Current year results
Revenue in 2016 increased to GBP16.3m (14 months ended 31
December 2015: GBP3.9m) as a result of the factors mentioned above.
Gross margins have improved to 21.2 per cent (2015: 19.3 per cent).
Loss for the year before tax was GBP1.5m (2015: GBP1.0m). After
adjusting for interest, exceptional IPO costs, and share based
payments, the Group achieved an adjusted operating profit of
GBP205,000 (2015: Loss of GBP1.0m).
The Directors are of the opinion that by reporting the adjusted
operating profits before charging share based payments a more
representative figure for the relevant profitability of the company
can be derived. The investing community and other stake holders,
such as credit reference agencies, need to be able to calculate
this level of profitability in order to assess more accurately the
true value of the business and its credit worthiness. In the
opinion of the Directors, substantial non-cash charges, such as
share based payments, do not materially affect the credit
worthiness or short term enterprise value of the business and thus
adjustment is required so that sensible assessments can be made.
Furthermore, the adjusted operating profit is the measure by which
the Board assesses the performance of the business on a continuing
basis.
The Group changed its invoicing policy in the year from
invoicing in advance to invoicing in arrears to enable the Group to
access higher value customers. This change has had a substantial
impact on the Group balance sheet, creating a trade debtor balance
of GBP2.7m (2015: GBPnil).
The Group ended the year with a healthy cash balance of GBP5.2m,
of which GBP1.4m was held in short-term deposits and GBP3.4m is
being used to support letters of credit.
Overall the most significant cash cost for the business is the
wholesale cost of electricity, but due to our hedging policy the
margin achieved thereon has remained relatively stable despite the
volatility in the market. The second highest cost incurred is the
transportation of this electricity around the country to our
customers, followed by the cost of gas. While employee costs remain
an important cash outflow, the additional expenditure on various
government taxes such as Feed-In Tariffs, Renewable Obligation
Certificates and the Climate Change Levy are a significant part of
the customers' bills.
Dividend
It was stated in the Group's Admission Document that the Board
intended to adopt a progressive dividend policy. A maiden interim
dividend of 0.75p per share was paid to shareholders on 5 January
2017, and the board is now recommending the payment of a final
dividend of 1.5p per share, subject to shareholder approval at the
Company's AGM on 25 May 2017.
Contracted revenue
One of the key advantages of the Group's business model is the
predictability of revenue streams. Average contract length for our
customers is approximately 15 months and given that the selling
price is contractually fixed and the consumption of the customer
base can be reliably forecast, it means that forecast contracted
revenue, which assumes no new sales going forward, can be estimated
with reasonable certainty to the extent of a 10 per cent margin of
error.
At the start of the new-year the contracted revenue for 2017 was
in excess of GBP27m.
Annualised bookings
Each month a key management review point in order to assess the
growth of the sales pipeline is to monitor the annualised value of
contracts sold. The level of sales each month will fluctuate
dependent upon the time of the year and the number of sales staff,
as well as whether we manage the sales team to focus on margin or
revenue. The average monthly sales bookings has risen from
GBP900,000 per month in 2015 to GBP3.7m per month in 2016.
Letters of credit
At the year end the Group had issued GBP3.4m of letters of
credit, which were supported by way of cash on deposit with the
Group's bankers. The Group constantly assesses the level of this
collateral against its operations in the commodity market to ensure
that there is sufficient support for its hedging operations. Cash
and cash equivalents at the end of the year stood at GBP5.2m.
Nick Parker
Chief Financial Officer
Condensed consolidated statement of profit and loss and other
comprehensive income for the year ended 31 December 2016
31 December 2016 14 Months ended 31 December 2015
Exceptional
Items and
share based Exceptional
Adjusted payments Total Adjusted Items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 16,264 - 16,264 3,880 - 3,880
Cost of Sales (12,821) - (12,821) (3,132) - (3,132)
------------------ ----------------------- ------------- ------------- --------- ------------- ---------------
Gross Profit 3,443 - 3,443 748 - 748
------------------ ----------------------- ------------- ------------- --------- ------------- ---------------
Operating costs
before
exceptionals and
IFRS 2 (3,238) - (3,238) (1,735) - (1,735)
Operating costs -
exceptional IPO
costs - (379) (379) - (33) (33)
Operating costs -
IFRS 2 share
option charge - (1,344) (1,344) - - -
------------------ ----------------------- ------------- ------------- --------- ------------- ---------------
Total operating
costs (3,238) (1,723) (4,961) (1,735) (33) (1,768)
Profit/(Loss)
from operations 205 (1,723) (1,518) (987) (33) (1,020)
------------------ ----------------------- ------------- ------------- --------- ------------- ---------------
Finance Income 19 - 19 - - -
Finance Costs (29) - (29) - - -
Profit/(Loss)
before tax 195 (1,723) (1,528) (987) (33) (1,020)
------------------ ----------------------- ------------- ------------- --------- ------------- ---------------
Taxation (59) 228 169 204 - 204
Profit/(Loss) for
the Year 136 (1,495) (1,359) (783) (33) (816)
------------------ ----------------------- ------------- ------------- --------- ------------- ---------------
Other
comprehensive
income - - - - - -
Total
comprehensive
income/(expense)
for the year 136 (1,495) (1,359) (783) (33) (816)
------------------ ----------------------- ------------- ------------- --------- ------------- ---------------
Loss per share
Basic and diluted GBP0.10 GBP0.08
------------------ ----------------------- ------------- ------------- --------- ------------- ---------------
Condensed consolidated balance sheet
At 31 December 2016
31 December 2016 31 December 2015
GBP'000 GBP'000
ASSETS
Non-current assets
Property plant and equipment 209 155
Intangible assets 57 59
Deferred tax 467 204
----------------- -----------------
733 418
Current assets
Trade and other receivables 4,891 1,063
Cash and cash equivalents 5,197 47
----------------- -----------------
10,088 1,110
Total assets 10,821 1,528
----------------- -----------------
LIABILITIES
Current liabilities
Trade and other payables (5,340) (2,514)
Non-current liabilities (72) -
Total liabilities (5,412) (2,514)
----------------- -----------------
Net assets 5,409 (986)
----------------- -----------------
Equity
50
Share capital 70 -
Share premium - -
Merger reserve (50) (50)
Retained earnings 5,389 (986)
----------------- -----------------
5,409 (986)
----------------- -----------------
Condensed consolidated statement of changes in equity
For the year ended 31 December 2016
Share Capital Share Premium Merger Reserve Retained Earnings TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2016 50 - (50) (986) (986)
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Total comprehensive income for
the year
Loss for the year - - - (1,359) (1,359)
Other comprehensive income - - - - -
-------------------------------- ------------------ -------------- --------------- ------------------ --------
- - - (1,359) (1,359)
-------------------------------- ------------------ -------------- --------------- ------------------ --------
Transactions with owners of the
company
Contributions and distributions
Equity settled share based
payments - - - 1,272 1,272
Deferred tax on share based
payments - - - 69 69
Proceeds from IPO share issue 20 7,480 - - 7,500
Share issue costs - (1,087) - (1,087)
Capital restructuring - (6,393) - 6,393 -
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Total transactions with owners 20 - - 7,734 7,754
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Balance at 31 December 2016 70 - (50) 5,389 5,409
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Balance at 1 November 2014 50 - (50) (170) (170)
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Total Comprehensive Income for
the period
Loss for the period - - - (816) (816)
Other comprehensive income - - - - -
-------------------------------- ------------------ -------------- --------------- ------------------ --------
- - - (816) (816)
-------------------------------- ------------------ -------------- --------------- ------------------ --------
Transactions with owners of the
company
Contributions and distributions
Equity settled share based
payments - - - - -
Share issue costs - - - - -
-------------------------------- ------------------ -------------- --------------- ------------------ --------
Total transactions with owners - - - - -
Balance at 31 December 2015 50 - (50) (986) (986)
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Condensed consolidated statement of cash flows
For the year ended 31 December 2016
2016 2015
GBP'000 GBP'000
Cash flows from operating activities
Loss for the financial year (1,359) (816)
Adjustments for:
Depreciation of property plant and equipment 108 80
Amortisation of intangible assets 2 2
Finance income (19) -
Finance costs 29 -
Taxation (169) (204)
Share based payment charge 1,344 -
Increase in trade and other receivables (3,828) (920)
Increase in trade and other creditors 3,022 2,018
Net cash from operating activities (870) 160
----------- -----------
Cash flows from investing activities
Purchase of intangible assets - (20)
Purchase of property plant and equipment (162) (130)
Interest received 19 -
Net cash from investing activities (143) (150)
----------- -----------
Cash flows from financing activities
Net proceeds from issue of new shares 6,413 -
Proceeds from loan - 82
Repayment of borrowings (250) (79)
Net cash from financing activities 6,163 3
----------- -----------
Net increase in cash and cash equivalents 5,150 13
Cash and cash equivalents at the start of the year 47 34
Cash and cash equivalents at the end of the year 5,197 47
=========== ===========
Notes to the condensed consolidated financial report
1. Reporting entity
Yü Group PLC (the "Company") is a public limited company
incorporated and domiciled in the United Kingdom. The Company's
ordinary shares are traded on AIM. These condensed consolidated
financial statements ("Financial statements") as at and for the
year ended 31 December 2016 comprise the Company and its
subsidiaries (together referred to as the "Group"). The Group is
primarily involved in the supply of energy to SMEs and larger
corporates in the UK.
Basis of preparation
Whilst the financial information included in this preliminary
announcement has been prepared on the basis of the requirements of
International Financial Reporting Standards ("IFRSs") in issue, as
adopted by the European Union ("EU") and effective at 31 December
2016, this announcement does not itself contain sufficient
information to comply with IFRS.
The financial information set out in this preliminary
announcement does not constitute the company's statutory financial
statements for the years ended 31 December 2016 or 2015 but is
derived from those financial statements.
Statutory financial statements for 2015 have been delivered to
the registrar of companies and those for 2016 will be delivered in
due course. The auditors have reported on those financial
statements; their reports were (i) unqualified (ii) did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The condensed consolidated financial information is presented in
British pounds sterling (GBP) and all values are rounded to the
nearest thousand (GBP000) except where otherwise indicated.
Summary of impact of Group restructure and Initial Public O
ering
On 17 March 2016, the Company listed its shares on AIM. In
preparation for this Initial Public O ering ('IPO') the Group was
restructured. The restructure has impacted a number of the current
year and comparative primary nancial statements and notes.
For the consolidated nancial statements of the Group, prepared
under IFRS, the principles of reverse acquisition accounting under
IFRS 3'Business Combinations' have been applied. The steps to
restructure the Group had the e ect of Yü Group PLC being inserted
above KAL-Energy Limited as the holder of the KAL-Energy Limited
share capital.
By applying the principles of reverse acquisition accounting,
the Group is presented as if Yü Group plc has always owned
KAL-Energy Limited. The comparative Income Statement and Balance
Sheet are presented in line with the previously presented
KAL-Energy Limited position. The comparative and current year
consolidated reserves of the Group are adjusted to re ect the
statutory share capital and share premium of Yü Group PLC as if it
had always existed, adjusted for movements in the underlying
KAL-Energy Limited share capital and reserves until the share for
share exchange.
The steps taken to restructure the Group are explained in more
detail in the Group Reorganisation section below. The impact on the
primary consolidated nancial statements is as follows:
-- Equity re ects the capital structure of Yü Group PLC.
Following the restructure a merger reserve of GBP49,800 was
recognized being the difference between the nominal value of the
shares issued for consideration on the acquisition of KAL-Energy
and the share capital of the existing KAL-Energy Group
-- As part of the restructuring of the Group and the IPO, a
number of shares in Yü Group PLC were issued in exchange for cash.
The premium arising on the issue of shares was allocated to share
premium.
-- Costs relating directly to the new issue of shares have been
deducted from the share premium account. Attributable IPO Costs are
allocated between share premium and the income statement in
proportion to the number of shares traded on admission.
-- A resolution was passed by the Company at a general meeting
to cancel the share premium account as part of a capital reduction.
This became effective from 22 June 2016 following high court
approval.
Group reorganisation
Prior to IPO the Group undertook a reorganisation in preparation
for the transaction.
The e ect of this reorganisation was to insert a new ultimate
parent company, Yü Group PLC, into the Group. This company acquired
the entire issued share capital of KAL-Energy Limited, as
summarised below.
Yü Group PLC became the ultimate parent company of the Group by
acquiring KAL-Energy Limited in exchange for the issue of new
shares.
The key steps of the process were as follows:
-- On incorporation on 15 February 2016, 100 Ordinary shares of
GBP1.00 each were allotted and issued.
-- On 16 February 2016, the existing 100 ordinary shares of
GBP1.00 were subdivided into 20,000 shares of GBP0.005 each.
-- On 18 February 2016, the Company allotted 9,980,000 ordinary
shares of GBP0.005 each in connection with a share-for-share
exchange transaction pursuant to which the Company acquired
beneficial ownership of 100 per cent of the share capital of
KAL-Energy Limited.
-- The Company has recorded a GBPnil cost of investment and a
merger reserve of GBP50,000, in the Company only accounts (in line
with IAS 27 paragraph 13), as KAL-Energy Limited was in a negative
net asset position at that date.
-- As part of the Company's admission to AIM on 17 March 2016,
4,054,055 new ordinary shares of GBP0.005 each were issued. These
shares were placed at GBP1.85 per share, resulting in additional
share capital of GBP20,270 and share premium of GBP7,479,730.
Going concern
At 31 December 2016 the Group had net assets of GBP5.4m (2015:
net liabilities of GBP1.0m). Management prepare detailed budgets
and forecasts of financial performance and cash flow over the
coming 12 to 36 months. Based on the current projections the
Directors consider it appropriate to continue to prepare the
financial statements on a going concern basis.
Use of estimates and judgements
The preparation of financial information in conformity with
adopted IFRSs requires the use of estimates and assumptions.
Although these estimates are based on management's best knowledge,
actual results ultimately may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
Revenue recognition
The Group enters into contracts to supply gas and electricity to
its customers. Revenue represents the fair value of the
consideration received or receivable from the sale of actual and
estimated gas and electricity supplied during the year, net of
discounts, climate change levy and value added tax. For both
electricity and gas supplied, revenue is recognised on
consumption.
Revenue is recognised when the associated risks and rewards of
ownership have been transferred, to the extent that it is probable
that the economic benefits associated with the transaction will
flow to the Group and where the revenue can be measured
reliably.
Due to the inherent nature of the industry and its reliance upon
estimated meter readings, revenue includes the Directors' best
estimate of differences between estimated sales and billed sales.
The Group makes estimates of customer consumption, based on
available industry data, and also seasonal usage curves that have
been estimated through historic actual usage data.
2. Segmental analysis
Operating segments
The Directors consider there to be one operating segment, being
the supply of energy to SMEs and larger corporates.
Geographical segments
100 per cent of the Group revenue is generated from sales to
customers in the United Kingdom (2015: 100 per cent).
The Group has no individual customers representing over 10 per
cent of revenue (2015: none).
3. Exceptional items
The Group incurred legal and professional fees in the year ended
31 December 2016 of GBP379,000 (2015: GBP33,000) in relation to the
placing of ordinary shares and admission to AIM.
4. Earnings per share
Basic loss per share
Basic loss per share is based on the loss attributable to ordinary shareholders and the weighted
average number of
ordinary shares outstanding.
14 months ended
31 December
2016 2015
GBP'000 GBP'000
Loss attributable to ordinary shareholders (1,359) (816)
2016 2015
Weighted average number of ordinary shares
At the start of the year 10,000,000 10,000,000
Effect of shares issued in the year 3,212,229 -
Weighted average number of ordinary shares 13,212,229 10,000,000
--------------- ---------------------
2016 2015
GBP GBP
Basic loss per share (0.10) (0.08)
Adjusted earnings per share
Adjusted earnings per share is based on the result attributable to ordinary shareholders before
exceptional items and the cost of share based payments, and the weighted average number of
ordinary
shares outstanding:
2016 2015
GBP'000 GBP'000
Adjusted earnings per share
Loss for the year (1,359) (816)
Add back:
Exceptional items 379 -
Share based payment charge after tax 1,116 -
Adjusted basic earnings/(loss) for the year 136 (816)
--------------- ---------------------
2016 2015
GBP GBP
Adjusted earnings/(loss) per share 0.01 (0.08)
Diluted loss per share
Due to the Group having losses in each of the periods, the fully
diluted loss per share for disclosure purposes as shown in the
condensed consolidated statement of comprehensive income is the
same as the basic loss per share.
5. Dividends
The Group proposed and paid an interim dividend in relation to
2016 of 0.75p per share. The total interim dividend of GBP105,405
was paid to shareholders on 5 January 2017.
The proposed final dividend in relation to 2016, of 1.5p per
share, will be subject to approval at the AGM on 25 May 2017.
6. Taxation
14 months
ended
31 December
2016 2015
GBP'000 GBP'000
Current tax charge
Current
year (25) -
Adjustment in respect
of prior years - -
(25) -
Deferred tax credit
Current
year 219 204
Adjustment in respect
of prior years (25) -
194 204
Total tax
credit 169 204
---------------- ------------
Tax recognised directly
in equity
Current tax recognised
directly in equity - -
Deferred tax recognised
directly in equity 69 -
Total tax recognised directly
in equity 69 -
---------------- ------------
Reconciliation of effective
tax rate
Loss before
tax 1,528 1,020
Tax at UK Corporate tax
rate of 20% 306 204
Expenses not deductible
for tax purposes (73) (10)
Adjustment in respect of prior
periods - deferred tax (25) -
Deferred tax recognised on previous
losses - 33
Reduction in tax rate on deferred
tax balances (39) (23)
Taxation credit
for the year 169 204
---------------- ------------
7. Trade and other receivables
2016 2015
GBP'000 GBP'000
Trade receivables 2,663 -
Accrued income 1,904 1,005
Prepayments 83 35
Other receivables 241 -
Loans to connected
parties - 23
4,891 1,063
-------- -----------
8. Cash and cash equivalents
2016 2015
GBP'000 GBP'000
Cash at bank and
in hand 379 47
Short term deposits 4,818 -
5,197 47
----------- --------
9. Trade and other payables
2016 2015
GBP'000 GBP'000
Current
Trade payables 431 157
Loans from connected
parties - 250
Accrued expenses 3,602 647
Deferred income - 1,227
Corporation
tax 25 -
Other payables 1,282 233
5,340 2,514
-------- ----------
Non-current
Group share bonus liabilities 72 -
====================================================
10. Financial instruments and risk management
The Group's principal financial instruments are cash, trade
receivables and trade payables. The Group has exposure to the
following risks from its use of financial instruments:
Market risk
Market risk is the risk that changes in market prices, such as
commodity and energy prices, will affect the Group's income.
Commodity and energy prices
The Group uses commodity purchase contracts to manage its
exposures to fluctuations in gas and electricity commodity prices.
The Group's objective is to minimise risk from fluctuations in
energy prices by entering into back-to-back energy contracts with
its suppliers and customers. Commodity purchase contracts are
entered into as part of the Group's normal business activities, the
Group classifies them as "own use" contracts. This classification
as "own use" allows the Group not to recognise the commodity
purchase contracts on its balance sheet at the year end.
As far as possible the Group attempts to match up all new sales
orders with corresponding commodity purchase contracts. There is a
risk that at any point in time the Group is over or under hedged.
Holding an over or under hedged position opens the Group up to
market risk which may result in either a positive or negative
impact on the Group's margin and cash flow, depending on the
movement in commodity prices.
The Board has evaluated and continues to evaluate the use of
commodity purchase contracts and whether their classification as
"own use" is appropriate. On the basis that the key requirements
are as listed below, it has concluded that this classification is
appropriate:
-- Physical delivery takes place under all contracts;
-- The volumes purchased or sold under the contract correspond
to the Group's operating requirements;
-- The contracts are not considered to be written options as defined by IAS 39;
-- There are no circumstances where the Group would settle the
contracts net in cash, nor does the Group take delivery of the
commodities and sell them within a short period for trading
purposes.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's receivables from customers.
These trading exposures are monitored and managed at Group
level. All customers are UK based and turnover is made up of a
large amount of customers each owing relatively small amounts. Any
potential new customer has their credit checked using an external
credit reference agency prior to being accepted as a customer.
Credit risk is also managed through the Group's standard
business terms, which require all customers to make a monthly
payment by direct debit. At the year end there were no significant
concentrations of credit risk. The carrying amount of the financial
assets represents the maximum credit exposure at any point in
time.
The ageing of trade receivables at the balance sheet date
was:
2016 2015
GBP'000 GBP'000
Not past due 1,434 -
Past due (0-30 days) 523 -
Past due (31-120 days) 670 -
More than 120 days 36 -
2,663 -
-------- --------
At 31 December 2016 the Group held a provision against doubtful
debts of GBP50,000 (2015: GBPnil).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Board is
responsible for ensuring that the Group has sufficient liquidity to
meet its financial liabilities as they fall due and does so by
monitoring cash flow forecasts and budgets. In order to enter into
the necessary commodity purchase contracts, the Group is required
to lodge funds on deposit with its bank. These funds (GBP3.4m at 31
December 2016) are used as collateral, allowing the bank to issue
letters of credit (LOCs) to the relevant trading counterparties in
the wholesale energy market. The Board has considered the cash flow
forecasts, along with the collateral and LOC requirements, for the
next 12 months, which show that the Group expects to operate within
its working capital facilities throughout the year.
Any excess cash balances are held in short-term, interest
bearing deposit accounts. At 31 December 2016 the Group had GBP5.2m
of cash and bank balances.
Foreign currency risk
The Group trades entirely in sterling, hence it has no foreign
currency risk.
11. Share based payments
The Group operates an EMI share option plan for qualifying
employees of the Group. Options in the plan are settled in equity
in the Company. The options are subject to a vesting schedule, but
not conditional on any performance criteria being achieved. The
only vesting condition is that the employee is employed by the
Group at the date when the option vests.
During the year the company made the following grants:
Date of Ex. Price Expected Lapse Outstanding at
grant term date 31 Dec 2016
17 February 17 Feb
2016 GBP0.09 2 Years 2026 1,000,000
17 February 17 Feb
2016 GBP0.09 3 Years 2026 81,000
22 December 22 Dec
2016 GBP3.25 3 Years 2026 13,500
The number and weighted average exercise
price of share options was as follows:
2016 2015
Balance at the
start of the period - -
Granted 1,108,000 -
Forfeited (13,500) -
Lapsed - -
Exercised - -
Balance at the
end of the period 1,094,500
------------- -------
Vested at the end
of the period -
------------- -------
Exercisable at
the end of the
period -
------------- -------
Weighted average exercise
price for:
2016 2015
Options granted
in the period GBP0.13 -
Options forfeited
in the period GBP0.09 -
options exercised
in the period - -
Exercise price
in the range:
From GBP0.09 -
To GBP3.25 -
The fair value of each option grant is estimated on the grant
date using a Black Scholes option pricing model with the following
fair value assumptions:
2016 2015
Dividend yield - -
Risk free rate 1.50% -
Share price volatility 35.39% -
Expected life (years) 2.55 -
Weighted average fair value of options granted during the period GBP1.75 -
The Group also operates a share bonus plan for all qualifying
employees of the Group. The plan is settled in cash and is subject
to certain financial targets for the next three financial years. On
meeting these financial targets each financial year, 50,000
notional shares are awarded to the Group bonus pool. At the end of
the third financial year (31 December 2018) the value of the pool
will be based on the share price of the Group one week after the
announcement of the results for the year ended 31 December 2018,
and will be distributed to all qualifying employees.
The total expenses recognised for the year and the total
liabilities recognised at the end of the year, arising from share
based payments are as follows:
2016 2015
GBP'000 GBP'000
Equity settled share
based payment expense 1,272 -
Cash settled share
based payment expense 72 -
1,344 -
-------- --------
11. Executive Bonuses
As a result of the financial performance in the year to 31
December 2016, the executive directors are entitled under the terms
of their service contracts to cash bonuses amounting to GBP325,000
in aggregate, being GBP125,000 due to Bobby Kalar and GBP100,000
each to Nick Parker and Garry Pickering (together, the "Executive
Directors"). The Executive Directors have agreed to waive these
cash bonuses in full. The Remuneration Committee has agreed that,
in lieu of these bonuses, the Executive Directors be granted share
options over ordinary shares in the Company, with the exercise
price being the nominal value of the shares. The number of options
to be granted is to be determined by reference to the amount of the
bonus payment waived and the five day volume weighted average share
price immediately following the announcement of the 2016 financial
results. The options will be exercisable from the third anniversary
of the date of grant.
The new option award is accounted for under IFRS 2 to reflect
the agreement in place at the year-end date which covers the
service already provided by the Directors in 2016 and for further
years of service until the options vest in April 2020. The IFRS 2
charge has therefore been split over the four year three month
service period, with the charge taken in these financial statements
in relation to 2016 being GBP81,126.
This approach is designed to enable the Board to retain capital
in the Group to support the continued momentum in the Group's
growth and development, while providing the Executive Directors
with a longer term incentive to increase shareholder value.
12. Related parties and related party transactions
The Group has transacted with the following related parties
during the current and prior financial periods:
-- CPK Investments Limited (an entity owned by Bobby Kalar);
-- Better Business Energy Limited (an entity owned by Bobby
Kalar); and
-- Jinny Kalar (wife of Bobby Kalar).
CPK Investments Limited owns the property from which the Group
operates and rents it to Kensington Power Limited under an
operating lease. During 2016 the Group paid GBP99,000 in lease
rentals and service charges to CPK Investments Limited (14 months
ended 31 December 2015: GBP72,000).
Of the GBP99,000 lease payments GBP35,000 was classified as a
pre-paid dilapidation provision at the year end in relation to the
newly refurbished first floor of the Group headquarters.
In 2014, the Group made payments on behalf of CPK Investments
Limited for consultancy services totalling GBP23,006. This amount
was outstanding at 31 December 2015, but was repaid during
2016.
Better Business Energy Limited has provided funding to the Group
in the past to support working capital requirements, such as staff
costs. The balance of the loan outstanding at 31 December 2015 was
GBP250,000. This loan was repaid in full during 2016.
During the year, Jinny Kalar provided administration and
consulting services to the Group. She received total remuneration
of GBP20,500 during 2016.
All transactions with related parties have been carried out on
an arms-length basis.
13. Post-Balance sheet events
There are no significant or disclosable post-balance sheet
events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UBOKRBOAOUAR
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March 28, 2017 02:01 ET (06:01 GMT)
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