TIDMYU.
RNS Number : 5229F
Yu Group PLC
22 March 2022
22 March 2022
Yü Group PLC
("Yü Group" or the "Group")
Final results for the year ended 31 December 2021
STRONG FY21 PERFORMANCE WITH ACCELERATED PROFITABLE GROWTH
STRENGH OF BUSINESS PROVEN IN CURRENT MARKET CONDITIONS
Yü Group PLC (AIM: YU.), the independent supplier of gas,
electricity and water to the UK corporate sector, announces its
final audited results for the year to 31 December 2021.
Bobby Kalar, Group Chief Executive Officer, stated:
"We have delivered on our promise to deliver profitable growth,
which is set to continue.
2021 was a remarkable year and a stellar performance that's seen
the Group outperform forecasts in terms of profitability, growth
and forward looking contracted revenue. Despite the turbulence of
the global energy commodity market the business has remained
focussed and disciplined underpinned by our robust hedging
strategy. Our strategy is working well and the 'hard yards' have
harvested rewards. With a very strong start to 2022 I'm pleased our
January and February bookings, revenue and profitability have
continued the momentum demonstrated in 2021.
Our operational KPI's used to measure and track performance
drove over-performance in 2021. Revenue has increased by 53% to
GBP155m, adjusted EBITDA and profit after tax leapt to GBP1.7m and
GBP4.5m respectively, from losses in 2020, average monthly booking
have jumped by 66% compared to GBP8.3m last year and the meter
points on supply have increased by 83% in the year. I'm pleased our
winning formula will continue in 2022 and beyond.
Our inorganic strategy is contributing positively to our growth
ambition. Being awarded the AmpowerUK B2B customer book in November
by Ofgem, and two more customer books this year, provides an
endorsement of our credentials and gives us confidence we are ready
for bigger books be it via acquisition or via Ofgem's Supplier of
Last Resort process.
We are making good progress with our Digital by Default
strategy, which is seeing us design optimal processes for our
customers with the launch of our digital customer portal and CRM
customer journey. This year we will be supporting our customers
transition on to our digital platform while continuing to deliver
our unparalleled level of service. We now have the digital
foundations in place and firmly embedded and we are looking forward
to further enrichment of our data to drive profitable growth.
It's been a tough year for the energy industry in terms of
unprecedented wholesale gas volatility causing some suppliers to
exit the market, exacerbated by the effects of the pandemic.
However, our results show we have not only 'weathered the storm'
but 'blown it away' in all key areas. Our forward order book at 31
December 2021 stands at a record GBP157m to outflow during FY22.
Our Digital by default transformation strategy is progressing well,
and we've once again demonstrated our ability to migrate customer
books onto our scalable platform. Our focus this year will be to
continue the momentum of 2021 with continued emphasis on growth,
profitability and further developing our already strong forward
order book.
We've become one of the fastest growing utility challenger
brands in the UK and central to this success as always are the
amazing people who I have the good fortune to work with every day.
A huge thank you to all my team."
Financial & Operational Highlights:
31 December 2021 2020
--------------------------------- --------
GBP'000 GBP'000
Revenue 155,423 101,527
Adjusted EBITDA 1 1,724 (1,714)
Profit for the year 4,451 (1,165)
Operating cash inflow/(outflow) (774) 12,102
Cash 7,049 11,740
Overdue customer receivables 7 days 8 days
(2)
Earnings per share:
Adjusted 15p (11)p
Statutory 27p (7)p
--------------------------------- -------- -------
-- Strong revenue growth, up 53%, to GBP155.4m (FY20:
GBP101.5m), driven by high organic growth and the integration of
AmpowerUK's customer book
o Further SoLR awards of Whoop Energy and Xcel Power since
period end
-- Profit after tax of GBP4.5m up from a GBP1.2m loss in FY20
-- Underlying profitability continues to improve, with adjusted
EBITDA increasing to GBP1.7m from a GBP1.7m loss
-- Average annualised monthly bookings of GBP13.8m, an increase from GBP8.3m in FY20
-- Total meter points stood at 31,862, an increase of 83% from the end of FY20
-- Navigated global commodity market price increases via our robust hedging policy
-- Launch of 'Digital by Default' strategy and new customer
portal to increase scale, drive efficiency and create further
value
-- Cash of GBP7.0m (FY20: GBP11.7m), following investment into
'Digital by Default' strategy including the opening of the new
Leicester innovation centre
Current Trading
-- Good revenue visibility with significant forward contracted
revenues book in excess of GBP290m, of which GBP157m due to deliver
in FY22 (an increase of 69% on FY21)
-- Positive FY21 momentum carried into the start of the year
with strong bookings, revenue and profit performance in January and
February 2022
-- Maintained strict hedging policy to mitigate against volatile market conditions
Outlook
-- Significant confidence in high revenue growth based on increased forward contract book
-- Despite turbulence in the wider external market, we remain
strong and focussed on delivering continued profitable and
controlled growth
-- Well positioned given different regulatory framework to B2C suppliers and value of hedge book
-- Excited about the long term benefits we will unlock from our 'Digital by Default' strategy
Analyst presentation
A presentation for analysts will be held at 9am GMT today,
Tuesday 22 March 2022. Anyone wishing to attend should please
contact yugroup@tulchangroup.com for further information.
Market Abuse Regulation (MAR) Disclosure
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ('MAR') which has
been incorporated into UK law by the European Union (Withdrawal)
Act 2018. Upon the publication of this announcement via Regulatory
Information Service ('RIS'), this inside information is now
considered to be in the public domain.
1 Adjusted EBITDA is earnings before interest, tax, depreciation
and amortisation, and also before non-recurring items, share based
payments and unrealised gains or losses on derivative contracts.
See reconciliation in note 7 to the financial statements below.
2 Overdue customer receivables is expressed in days of sales,
and relates to the total balance, net of provisions, of accrued
income which is outside of the normal billing cycle, plus overdue
trade receivables (net of VAT and CCL).
For further information, please contact:
Yü Group PLC
Bobby Kalar
Paul Rawson
+44 (0) 115 975 8258
SP Angel Corporate Finance LLP
Jeff Keating
Bruce Fraser
Caroline Rowe
+44 (0) 20 3470 0470
Tulchan Group
Giles Kernick
Olivia Peters
Oliver Norgate
+44 (0) 20 7353 4200
Notes to Editors
Information on the Group
Yü Group PLC, trading as Yü Energy, is an independent supplier
of gas, electricity and water focused on servicing the SME and
corporate sector throughout the UK. It has no involvement in the
domestic retail market. The Group was listed on the AIM market of
the London Stock Exchange in March 2016.
CHAIRMAN'S STATEMENT
STRONG GROWTH AND FURTHER STRATEGIC PROGRESS
-- Strength of business has allowed the Group to successfully manage market volatility
-- The Group remains well placed to take advantage of market
opportunities and to deliver significant and profitable growth
I am pleased to introduce our 2021 annual results after what has
been a challenging yet fruitful year for the Group.
When I was appointed in January 2020 the Group prepared to set
out on a new and exciting stage in its evolution. This was to scale
up rapidly in a controlled manner, and to increase the maturity of
its governance, enabling it to become a large player in a growing
market.
Since then our country, industry and Group have together faced
significant challenges, which as a Group we have successfully
overcome. The Covid-19 pandemic and more recently the "energy
crisis" and a European war have brought unprecedented increases in
the volatility of global commodity prices. This has led to some
high profile business failures within the wider domestic supply
sector.
Despite this, my summary statement from our 2020 annual report
still holds true: "The Group is now ready to launch a period of
accelerated and sustainable growth as it scales up to address and
increase its rightful share of a GBP50bn+ market." The tests set by
unpredictable increases in energy costs and the subsequent
consolidation in our industry have shown clearly that our systems
and management team are both robust and resilient.
As an agile challenger and post the headwinds of 2020 and 2021,
we now operate in a larger, less competition-filled market. We
remain concentrated on and determined in both maintaining margin
and increasing our market share.
Delivering on our strategic priorities: Bigger, Better, Faster
and Stronger
The Group's strategy is delivering profitable results. Our
Bigger, Better, Faster and Stronger priorities - delivering
significant growth, organic and inorganic, leveraging economies of
scale to improve financial results, providing digitally led
innovation, and maintaining robust risk management - are
consistently applied by our management and are well understood
throughout the organisation.
Our results show a 53% year on year increase in revenue. Basic
earnings per share is 27p/share, up from a 7p/share loss in 2020.
Net profit after tax is GBP4.5m, up from a GBP1.2m loss in the
previous year; adjusted EBITDA increased to GBP1.7m, from 2020's
GBP1.7m loss.
We finished 2021 with GBP157m of revenue already contracted for
the current year, providing further evidence of our growth
potential and the opportunities available in a consolidating
market. I look forward to reporting further revenue growth in 2022
as we take advantage of the available market opportunity. We
anticipate playing an active role in the consolidation process as
well as exploiting our advantages as an agile challenger whose
customer service remains second to none.
The Group's investment in our Digital by Default programme is
set to deliver significant benefit to future results. Innovation
that allows us to attract and serve customers better, understanding
their behaviour and anticipating their needs, gives us a
competitive advantage that will further enhance growth and increase
profitability.
As Chairman, I am particularly pleased by the mature, robust and
balanced approach to governance which is now embedded throughout
the organisation. We have an experienced Board that provides the
necessary combination of challenge and oversight while supporting
agile operational decision making and the performance culture
needed to innovate and excel in a competitive industry. The Board
is ensuring that the Group's growth journey from the opportunities
presented by the market is conducted within a sustainable and
profitable framework.
Our Audit Committee, working closely with the Executive
Committee ("ExCo"), has continued to refine the framework for our
robust risk and opportunity management processes.
Our Remuneration Committee, in a difficult market, has
maintained the alignment of incentives with Group strategy and
shareholder interests.
Engaging with key stakeholders as we grow
As the Group matures, the Board and I are mindful of our
commitments to all stakeholders.
Ofgem appointed us as Supplier of Last Resort ("SoLR") for
AmpowerUK's circa 8,200-meter-point business, along with two
further customer books in February 2022 (Whoop Energy Limited and
Xcel Power Limited), demonstrating the regulator's trust in the
ability of our people and systems to implement such projects. This
followed successful integrations of two other customer books during
2020; we now have a clear, replicable process to follow as we
identify further opportunities, allowing us to bring in and be
ready to onboard thousands of new customers in a matter of
hours.
Our approach to the environment and sustainability is covered
later in this annual report.
We are convinced that key drivers of the Group's performance are
the wellbeing of our people, the continual innovation of our
product offerings, and the reduction of our impact on our planet.
We have made strides in all three areas and will continue to do so
as our business evolves.
We continue to seek improvement in our stakeholder engagement
processes and this is an area receiving constant attention.
We remain highly conscious of the need to ensure that our equity
proposition reaches the widest possible audience of institutions
and investors that may wish to join us on our growth journey.
Summary - relishing challenges and maturely treating risks as
opportunities
Over the past two years the Group has more than passed the tests
that have been set by a series of "black swan" events which have
given rise to abnormally extended and exceptional "macro-market"
conditions.
The Group's well-proven resilience is the direct result of
increased maturity and of an intelligently inculcated positive,
"can-do" attitude to challenges. This has nurtured colleagues'
proven abilities in identifying and extracting advantage and upside
from the risks and opportunities presented.
The combination of these qualities has, yet again, led to a very
marked improvement in the Group's results.
As a key independent disruptor- challenger your Board expects
the Group to continue to benefit from a period of accelerated and
sustainable growth, enhancing performance via its digital
programme, and increasing its share of a GBP50bn+ market.
CHIEF EXECUTIVE OFFICER'S STATEMENT
OUR BUSINESS MODEL IS MORE THAN DELIVERING AS WE CONTINUE RAPID
GROWTH
-- A pleasing performance that once again underscores the
fundamental strength and maturity of our business as we continue to
secure profitable growth
It's been an incredible year not just for the Group but for the
industry domestically and globally. Significant events continue to
change the landscape of the energy industry which I'll expand on
later in this report. In terms of the Group (during what I consider
to be a once in a generation event) it has been an exceptional year
in which we have exceeded operational KPIs and analysts'
forecasts.
The hard work and discipline knitted into the fabric of the
business over the past few years continue to serve us well against
the volatile gas markets and the tailwinds of the pandemic. Our
people, processes and systems have enabled us to unlock
opportunities which have been gross margin enhancing. The last two
years have tested our ability to operate well in such a complex
market and I am pleased our performance continues to go from
strength to strength at a time when the competitive landscape map
has been clearly redrawn and narrowed.
Our strategy is simple, do it better and faster to become bigger
and stronger. Testament to this is the double-digit growth in meter
points on supply, revenues increasing by over 50%, the forward
contracted revenue book in excess of GBP290m, profitability
extensively ahead of market expectations and average customer
contract terms at 30 months.
Last year the Group demonstrated its appetite and ability to
complement its organic growth by successfully acquiring Bristol
Energy's business-to-business ("B2B") customer book, a wholly owned
subsidiary of Bristol City Council, and a smaller customer gas book
from a Midlands based supplier. This year we have reviewed some
significant B2B customer book acquisition opportunities which were
within our sweet spot, and we continue to remain disciplined and
selective. It's my view that we will see further significant
opportunities to grow by acquisition.
In November, through a selective tender process, Ofgem awarded
the Group its first Supplier of Last Resort B2B book. AmpowerUK,
which operated in the small and medium sized business space and had
approximately 8,200 meter points. A smooth transition onboarded
these customers onto our scalable operating platform and the sales
teams have been moving these contracts from standard variable to
fixed rate contracts at current market prices. A further two small
books were awarded to the Group via this process by Ofgem in
February 2022. I am incredibly pleased in our ability to migrate
such books onto our platforms without losing value. Our
relationship with Ofgem remains strong.
The ongoing energy volatility and its effects on UK energy
suppliers have created confusion that somehow Ofgem's regulatory
framework of B2C suppliers is the same as B2B suppliers. Nothing
can be further from the truth. There are two major factors that
have resulted in a record number of energy suppliers ceasing to
operate in the market this year:
1. The price cap which applies to B2C suppliers to help protect
domestic customers from inflation busting tariffs once their
contracted tariff had ended. This sensible approach has
spectacularly backfired as the current global gas price hikes were
not factored in and B2C suppliers, which effectively were being
forced to operate a loss-making business, failed. No such
restriction applies to B2B suppliers and, despite the gas price
hikes, B2B suppliers can pass those increased commodity costs onto
customers very quickly.
2. Forward hedging contracted commodity de-risks market
volatility shock and preserves gross margin at the point of sale.
Suppliers which have not adopted this strategy run the risk of
being exposed if wholesale commodity markets move away from them.
Very quickly, unhedged suppliers can end up servicing loss-making
contracts which is unsustainable. This is even more of a risk for
domestic suppliers, where (unlike in the B2B segment) customers can
typically leave a fixed price contract by giving 30days'
notice.
A combination of one or both the above scenarios has caused 31
energy suppliers to cease trading since 1 January 2021 with all but
5 being B2C suppliers. While I see opportunities in a shrinking
market, the impact of stubbornly high commodity prices and the
uncertainty of the Russian conflict will indeed impact bills for
customers who will still be recovering from the devastating
financial effect of the pandemic.
Yü Group has a risk adverse hedging policy in place and
therefore has not been affected materially by commodity volatility
shock. In current times we keep a close eye on the significant
asset we hold on our long-term hedge book.
Being Digital by Default
As a disruptor I see the future as a highly scalable,
data-driven business bringing innovative products to our customers.
We know that creating the ability for a customer to self-serve by
default is the way the world is moving. Automating manual processes
will bring the right level of predictable outcomes and allow us to
scale as opportunities present themselves. We have successfully
integrated our first Robotic Process Automation ("RPA") project,
called "Rambo", saving hundreds of resource hours a month. This
year we will introduce more RPAs allowing processes to be completed
faster and cheaper. Further, based on the transactional nature of
the back-office function, making the right decisions at the
opportune time can enhance gross margin and reduce value loss and
our data warehouse will give us a single view of the customer
lifecycle and habits.
Yü Group has begun this transformation and invested in
digitising and automating the business in 2021. This investment has
delivered a brilliantly simple set of digital services enabling our
customers and the Group to be Digital by Default and this,
alongside automation of our back-office processes, has supported
significant customer growth while allowing us to reduce our cost to
serve. We have made significant progress already, completing
discovery stages and undertaking various "sprints" to stand up
various enhancements.
These improvements include data collection and capture
capability, automated dynamic dashboard views of key performance
indicators and integrated middleware to allow greater API
integration and various intellectual property developments to
integrate systems together. We still have a number of automated and
digital deliverables that we will launch this year via continued
sprints and evolution. These phases will use decomposition and
pattern recognition to enable complex processes and value enhancing
decision making to be instantaneous through the use of RPA and
inhouse developed algorithms.
Our people
As always, our people are front and centre of the Group's
success. The uncertainty around returning to the office has been a
challenge for some of our colleagues.
This year we have increased staff numbers in areas aligned to
our strategic direction, namely digital transformation, operations
and collections. We have also continued with our internal
apprentice talent pipeline programme, which has been life changing
for the individuals.
New Leicester innovation centre
For the first phase of the project, the office was opened in May
2021 for the sales, marketing and digital transformation teams.
Our staff have been exposed to the latest office designs to help
with our innovation ambitions, and the feedback has been
outstanding.
Wholesale market volatility
Commodity prices have reached record highs this year due to both
macro and micro events which in effect have created the perfect
storm. Due to a colder European spring, which followed a longer
than expected winter, demand continued and supplies remained
low.
In normal circumstances the UK would have covered the shortfall
in supply with Liquified Natural Gas ("LNG"), but Asia has procured
huge quantities as it transitioned its energy supply from coal to
gas. Brazil and Argentina increased their import levels of LNG,
also squeezing European delivery of LNG. In short, an unnatural
demand for LNG by world nations meant that demand outstripped LNG
supply. The ongoing Russian conflict has compounded the situation
further and while the UK imports an exceedingly small percentage
volume from Russia, the same cannot be said for other European
countries and a further squeeze on LNG imports to the UK could see
price hikes continue for some time.
Our trading team has worked to policy on ensuring it is setting
market reflective contract prices. However, businesses which have
not budgeted for the significant increase in their utility costs at
the time of renewal may struggle to pay.
Landscape
Our ability to service UK businesses with their energy needs
quickly and competitively is evident in terms of year on year
growth and we will continue to grow the business in terms of volume
as well as revenue. Adjusted EBITDA improvement will be a
particular focus and our digital transformation programmes will
contribute significantly by reducing wastage, speeding up
transactional processes and reducing the cost to serve. Despite B2B
suppliers exiting, the market remains competitive albeit less
crowded.
We will continue to develop best practice opportunities and use
our entrepreneurial agility to react to market conditions
quickly.
The wholesale gas and electricity market environment remains
turbulent, and we will continue to monitor our price curves very
carefully. Our hedge position remains strong, and our forward
prices reflect market costs. We will also monitor and support our
customers, who will begin to feel the impacts of the market gas
volatility when they come to renew their existing supply contract
terms.
Outlook
-- Current trading remains very strong, providing a high level of excitement in the future
-- High revenue growth forecasted, to add to the GBP157m already
contracted for FY 2022 at the end of 2021
-- Continued profitability improvement to continue the strong
trajectory in gross margin and operation leverage already
demonstrated
-- Our Digital by Default programme set to further enhance
profitability over the short to medium term, as we acquire more
customers, deliver efficiency savings from our largely fixed
overhead base, and drive value from data driven decisions
-- Well positioned, with an increasing market opportunity and a
significant value from the hedge book
-- Ability to add value enhancing acquisitions to complement high organic growth
Summary
In summary, despite turbulence in the wider external market, we
remain strong and focused so as to deliver continued growth in
revenue and profitability.
I am excited about the further benefits we will unlock from our
Digital by Default programme and I look forward to proactively
engaging with shareholders to further expand our reach to existing
and potential investors and other stakeholders.
I look forward to updating on our progress in the coming
months.
FINANCE REVIEW
INCREASING PROFITABILITY AS THE BUSINESS SCALES
-- We continue strong momentum in financial results, governed via our clear financial framework
In overview
-- Revenue increase of GBP53.9m (53%)
-- Contracted revenue for FY 2022 up 69% to GBP157m, and
increased number of "out of contract" customers
-- Adjusted EBITDA increased to GBP1.7m, up GBP3.4m year on year
-- Profit for the year up GBP5.7m in the year, to GBP4.5m
-- GBP7.0m cash available at 31 December 2021 (2020: GBP11.7m)
-- GBP3.7m capital investment to drive forward growth and overhead benefit
Results summary
Results for the year to 31 December 2021 are significantly
increased on the previous year and continue the strong upward
momentum.
Revenue increased 53.1% in the year to GBP155.4m (2020:
GBP101.5m) as high organic growth from new bookings combined with
the integration of AmpowerUK's customer book in November 2021 and
higher tariffs as a result of commodity market prices.
Adjusted EBITDA of GBP1.7m (2020: loss of GBP1.7m) continues the
strong trajectory which has been evident over recent years. The
GBP3.4m year on year improvement follows the clearly defined
strategy to increase net customer contribution whilst extracting
efficiency savings in overheads as the Group scales. The impact
from the Covid-19 pandemic, which was estimated at GBP1.7m in FY
2020, has also been largely mitigated during FY 2021.
The statutory profit for the year of GBP4.5m represents a
GBP5.7m increase in the year (2020: loss of GBP1.2m). Basic
earnings per share of 27p was achieved, up from a loss of 7p per
share in 2020.
Group net cash of GBP6.8m (2020: GBP11.4m) was held. A net
decrease in cash and cash equivalents of GBP4.7m (2020: net
increase of GBP9.4m) during 2021 is predominantly a result of
GBP3.7m of investment in capital expenditure. Working capital cash
flow movements in customer receivables and trade payables have also
increased significantly as the Group scaled revenue in Q4 2021 and
as a consequence of the increased commodity market prices.
Significantly increasing revenues
The Group typically provides one, two or three year contracts,
which gives good forward visibility via a contracted revenue
subscription model. The Group also realises other revenues, which
are generated from a growing number of "out of contract" customers
(who prefer the flexibility to remain on our supply under a fully
flexible arrangement) or through other services or charges
levied.
The Group exited 2020 with an estimated GBP93m of contracted
revenue to deliver in FY 2021. The AmpowerUK integration added
approximately GBP15m of revenue for the last two months of the
year, and contracts secured in 2021, and other revenues,
contributed approximately GBP38m.
A further GBP9m was delivered through a now exited low margin
contract, resulting in the total GBP155m revenue delivered in FY
2021. As a result of record bookings in 2021, the level of
contracted revenue estimated to deliver in FY 2022, as we exited
2021, was GBP157m, representing a substantial (69%) year on year
increase on which to build further revenue.
The Group is also serving additional out of contract customers,
at increased tariffs reflective of the market conditions, providing
further revenue growth opportunity.
The increased contracted revenue and pool of customers providing
out of contract revenue opportunity provide the Board with
significant confidence that a very strong organic growth rate will
continue in FY 2022.
Improved profitability
The Board continues to utilise adjusted EBITDA as its core
profitability measure, being a close proxy to the recurring and
"cash like" profitability of the Group.
Adjusted EBITDA increased by GBP3.4m during the year, to
GBP1.7m. A GBP1.2m profit in the second half of 2021 was achieved,
up from GBP0.5m in H1 2021 and GBP0.1m in H2 2020.
With the exception of the first six months of 2020, which were
materially impacted due the initial Covid-19 lockdown, the Group
has continued to improve underlying profitability for each six
month period from 2019.
Adjusted EBITDA at 1.1% of revenue (2020: -1.7%) is derived from
the profitability from customer contracts (referred to as net
customer contribution) of 6.7% less general overheads, which are
already sized for significant growth, of 5.6%.
Recognising the progress made already to bring the Group to a
profitable footing, the Board remains focused on further improving
adjusted EBITDA to achieve higher returns. Increasing net customer
contribution whilst creating further overhead benefits is core to
this strategy.
Gross margin improved to 9.8% for the year (2020: 7.6%)
demonstrating the successful mitigation provided by the deployed
hedging strategy, and the focus on managing customer contract
lifecycle value. The continually improved systems and processes
which are now firmly embedded in the organisation are providing
further enhancement in value, and this is set to continue as the
digital programme delivers additional benefit.
The integration of AmpowerUK customers and the increased revenue
in Q4 2022 led to a higher bad debt charge in the second half of
the year. The full year charge of 3.1% of revenue was therefore
comparable to FY 2020 of 3.1%.
The relationship between gross margin performance and bad debt
is carefully monitored, with management targeting net customer
contribution when assessing various sales channels or customer
segments available to it.
Net customer contribution at 6.7% has increased in 2021 (2020:
6.1%, or 4.5% including the impact of Covid-19 losses). General
overheads of 5.6% for 2021 (2020: 6.2%) have started to show
benefit from economies of scale. These overheads consist of cost to
acquire ("CtA") (sales and marketing related costs), cost to serve
("CtS") (operational and customer service systems and people to
deliver our core services) and general administrative costs
(premises, occupancy and support function costs).
CtA was 1.6% of revenue in 2021, as benefits from new digital
sales acquisition tools launched in 2020 were secured. CtS and
general administrative overheads were each 2.0% of revenues.
Further scale benefits are targeted in general administrative
costs which are largely fixed in nature. CtS is also targeted to
increase at a slower rate than revenue, as the benefits from the
Group's digital investment are realised.
In summary, the momentum and forward targeting of improvement to
net customer contribution, coupled with the efficiency benefit in
general overheads, are the core areas of the Board's strategy to
further increase adjusted EBITDA.
Robust performance
In addition to a pleasing and robust adjusted EBITDA, the
Group's profit for the year of GBP4.5m is significantly increased
(2020: loss of GBP1.2m). This result is after GBP1.1m of tax credit
(2020: GBP0.4m); and GBP0.2m (2020: GBP0.3m) of share based
payments. The tax credit reflects an increased deferred tax asset,
predominantly from brought forward tax losses which (based on the
announced increase to future corporate tax rates) are more valuable
to the Group.
The profit for the year also includes, before tax, a GBP3.3m
(2020: GBP1.0m) unrealised gain on derivative contracts. This gain
arises on a small proportion of forward commodity purchase
contracts which do not match the strict definition of own use under
IFRS 9, and are therefore assessed at fair value at the balance
sheet date. With the high global commodity market prices the level
of gain has increased substantially during FY 2021.
The Board believes that the associated financial asset (being a
non-cash item) will reduce should the commodity market
restabilise.
Non-recurring costs of GBP0.6m (2020: GBPnil) relate to the
accrual of the Group's estimated share of expected costs
"mutualised" across the energy supply industry from the
unprecedented level of supplier failures. The Board is disappointed
to be incurring such industry costs which are outside the control
of the Group.
Cash flow and working capital
The Group had net cash of GBP6.8m at 31 December 2021 (2020:
GBP11.4m), consisting of GBP7.0m of cash less lease liabilities.
The Group has no other debt.
A net decrease in cash and cash equivalents of GBP4.7m for the
year (2020: increase of GBP9.4m) consists of a GBP0.8m operating
cash outflow (2020: GBP12.1m inflow); a GBP0.2m repayment of leases
and interest (2020: GBP0.1m); and GBP3.7m (2020: GBP2.6m) of
capital expenditure.
For operating activities, trade and other receivables before the
movement in financial derivative assets increased by GBP19.7m
(2020: GBP0.3m), with trade and other payables increasing by
GBP17.5m (2020: GBP4.0m).
Significantly increased revenue for the month of December 2021,
with the integration of AmpowerUK customers and increased out of
contract customers at market reflective higher tariffs, accounted
for a GBP10.8m increase in accrued income to GBP22.0m (2020:
GBP11.2m). This level of accrued income is fully supported by
invoices raised in January 2022 and aligns with the Group's normal
billing cycle.
As well as the growth in revenues, trade and other receivables
also increased as a result of payments to third-party
intermediaries ("TPIs") on commencement of introduced sales
contracts, and the increased derivative financial asset recognised
under IFRS 9.
Countering the significant increase in receivables due to the
Group's sales growth, current trade and other payables increased by
GBP17.5m (2020: GBP4.0m) which is largely a result of increased
accrued expenses for industry and energy costs.
Following significant growth in revenues secured from the
AmpowerUK integration, the record organic growth secured, and the
higher energy market prices, the Board is focused on ensuring the
increased level of working capital movements is managed
appropriately as we rapidly transition to a higher price
environment. In particular the Board is mindful of the potential
delay to our customers' ability to make payments in view of the
significantly increased cost of energy which is being suffered by
those who have not locked in contract tariffs at lower market
prices.
For FY 2020, deferred HMRC payments of GBP3.6m were held under
the Government's Covid-19 support package, which reduced to GBP1.4m
at 31 December 2021. FY 2020 also included a one-off cash inflow of
GBP10.2m as the new structured commodity trading arrangement
resulted in a repayment of previously lodged cash collateral. The
credit limit in place under the Group's trading arrangement is not
currently being utilised in view of the high global market
prices.
As set out in detail in the annual report, the Board monitors
the credit limit provided and risks and mitigation available to it
related to the credit risk with trading counterparties. The Board
also reviews any impact on credit limits and liquidity depending on
the level of global commodity prices compared to the value of the
Group's forward hedged position.
The GBP3.7m of capital expenditure in FY 2021 includes GBP2.6m
(in addition to the GBP1.2m paid prior to FY 2021) for the freehold
acquisition and fit-out of our new innovation centre established in
Leicester. A further GBP1.1m was invested in software and systems
as part of the Group's Digital by Default strategy. The innovation
centre and Digital by Default investments are targeted to drive
significant revenue and profitability improvement in the short and
medium term.
Summary: continuing to successfully implement our financial
framework
We continue to apply our financial framework, to scale revenues
(organically and inorganically) and increase adjusted EBITDA via
improved net customer contribution and reduced overheads (powered
by digital efficiency), whilst maintaining robust cash and working
capital management.
With GBP157m of contracted revenue already secured for FY 2022
as we exited 2021, a stronger market positioning and a higher
market value opportunity following the energy crisis, and increased
numbers of customers on out of contract agreements, we remain
confident that top-line growth will continue. We also continue to
review the market for value enhancing acquisition
opportunities.
With this scale in revenue, we look to continue to enhance gross
margin whilst driving down our cost of bad debt. We therefore
target increasing net customer contribution from the 6.7% (2020:
6.1% pre-Covid-19 impact) achieved in FY 2021, combined with
targets to reduce general overheads from the 5.6% in FY 2021 (2020:
6.2%).
In short, the Board is fully driven to further increase adjusted
EBITDA from the 1.1% achieved in FY 2021 and on significantly
increased revenue.
Condensed consolidated statement of profit and loss and other
comprehensive income
For the year ended 31 December 2021
31 December 31 December
2021 2020
Notes GBP'000 GBP'000
------------------------------------------- ----- ----------- -----------
Revenue 155,423 101,527
Cost of sales (140,180) (93,858)
------------------------------------------- ----- ----------- -----------
Gross profit 15,243 7,669
------------------------------------------- ----- ----------- -----------
Operating costs before non-recurring items
and share based payment charges (9,407) (6,807)
Operating costs - non-recurring items 7 (644) -
Operating costs - share based payment
charges 21 (249) (320)
------------------------------------------- ----- ----------- -----------
Total operating costs 4 (10,300) (7,127)
Net impairment losses on financial and
contract assets 16 (4,799) (3,127)
Other gains 7 3,344 1,011
------------------------------------------- ----- ----------- -----------
Operating profit / (loss) 3,488 (1,574)
Finance income 5 - 74
Finance costs 5 (96) (39)
------------------------------------------- ----- ----------- -----------
Profit / (loss) before tax 3,392 (1,539)
Taxation 9 1,059 374
------------------------------------------- ----- ----------- -----------
Profit / (loss) and total comprehensive
income for the year 4,451 (1,165)
------------------------------------------- ----- ----------- -----------
Earnings / (loss) per share
Basic 8 GBP0.27 (GBP0.07)
Diluted 8 GBP0.26 (GBP0.07)
------------------------------------------- ----- ----------- -----------
Condensed consolidated balance sheet
At 31 December 2021
31 December 31 December
2021 2020
Notes GBP'000 GBP'000
------------------------------ ----- ----------- -----------
ASSETS
Non-current assets
Intangible assets 11 1,333 606
Property, plant and equipment 12 3,751 1,377
Right-of-use assets 13 193 273
Deferred tax assets 15 5,932 4,789
Trade and other receivables 16 870 -
------------------------------ ----- ----------- -----------
12,079 7,045
------------------------------ ----- ----------- -----------
Current assets
Trade and other receivables 16 40,441 18,267
Cash and cash equivalents 17 7,049 11,740
------------------------------ ----- ----------- -----------
47,490 30,007
------------------------------ ----- ----------- -----------
Total assets 59,569 37,052
------------------------------ ----- ----------- -----------
LIABILITIES
Current liabilities
Trade and other payables 18 (49,743) (31,430)
------------------------------ ----- ----------- -----------
Non-current liabilities
Trade and other payables 18 (541) (1,109)
------------------------------ ----- ----------- -----------
Total liabilities (50,284) (32,539)
------------------------------ ----- ----------- -----------
Net assets 9,285 4,513
------------------------------ ----- ----------- -----------
EQUITY
Share capital 20 82 82
Share premium 20 11,690 11,690
Merger reserve 20 (50) (50)
Accumulated losses 20 (2,437) (7,209)
------------------------------ ----- ----------- -----------
9,285 4,513
------------------------------ ----- ----------- -----------
Condensed consolidated statement of changes in equity
For the year ended 31 December 2021
Share Share Merger Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- -------- --------- --------
Balance at 1 January
2021 82 11,690 (50) (7,209) 4,513
-------------------------------- -------- -------- -------- --------- --------
Total comprehensive income
for the year
Profit for the year - - - 4,451 4,451
Other comprehensive income - - - - -
-------------------------------- -------- -------- -------- --------- --------
- - - 4,451 4,451
-------------------------------- -------- -------- -------- --------- --------
Transactions with owners
of the Company
Contributions and distributions
Equity-settled share
based payments - - - 237 237
Deferred tax on share
based payments - - - 84 84
Proceeds from share issues - - - - -
-------------------------------- -------- -------- -------- --------- --------
Total transactions with
owners of the Company - - - 321 321
-------------------------------- -------- -------- -------- --------- --------
Balance at 31 December
2021 82 11,690 (50) (2,437) 9,285
-------------------------------- -------- -------- -------- --------- --------
Balance at 1 January
2020 82 11,690 (50) (6,424) 5,298
-------------------------------- -------- -------- -------- --------- --------
Total comprehensive income
for the year
Loss for the year - - - (1,165) (1,165)
Other comprehensive income - - - - -
-------------------------------- -------- -------- -------- --------- --------
- - - (1,165) (1,165)
-------------------------------- -------- -------- -------- --------- --------
Transactions with owners
of the Company
Contributions and distributions
Equity-settled share
based payments - - - 320 320
Deferred tax on share
based payments - - - 60 60
-------------------------------- -------- -------- -------- --------- --------
Total transactions with
owners of the Company - - - 380 380
-------------------------------- -------- -------- -------- --------- --------
Balance at 31 December
2020 82 11,690 (50) (7,209) 4,513
-------------------------------- -------- -------- -------- --------- --------
Condensed consolidated statement of cash flows
For the year ended 31 December 2021
31 December 31 December
2021 2020
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Cash flows from operating activities
Profit / (loss) for the financial year 4,451 (1,165)
Adjustments for:
Depreciation of property, plant and equipment 255 215
Depreciation of right-of-use assets 80 204
Amortisation of intangible assets 352 132
Unrealised gains on derivative contracts (3,344) (1,011)
Increase in trade and other receivables (19,700) (320)
Increase in trade and other payables 17,468 3,978
Cash received on obtaining customer contracts 378 -
Decrease in cash collateral deposits lodged
with trading counterparties - 10,158
Finance income - (74)
Finance costs 96 39
Taxation (1,059) (374)
Share based payment charge 249 320
----------------------------------------------------- ----------- -----------
Net cash (used in)/from operating activities (774) 12,102
----------------------------------------------------- ----------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment (2,629) (921)
Payment of software development costs (1,079) -
Net cash used for purchase of customer books - (1,673)
----------------------------------------------------- ----------- -----------
Net cash used in investing activities (3,708) (2,594)
----------------------------------------------------- ----------- -----------
Cash flows from financing activities
Cash settled share based payment charge (12) -
Interest (paid)/received (77) 35
Principal element of lease payments (120) (180)
----------------------------------------------------- ----------- -----------
Net cash used in financing activities (209) (145)
----------------------------------------------------- ----------- -----------
Net (decrease)/increase in cash and cash equivalents (4,691) 9,363
Cash and cash equivalents at the start of the
year 11,740 2,377
----------------------------------------------------- ----------- -----------
Cash and cash equivalents at the end of the
year 7,049 11,740
----------------------------------------------------- ----------- -----------
Notes to the condensed consolidated financial report
1. Significant accounting policies
Yü Group PLC (the "Company") is a public limited company
incorporated and domiciled in the United Kingdom, with company
number 10004236. The Company is limited by shares and 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 2021 comprise the Company and its
subsidiaries (together referred to as the "Group"). The Group is
primarily involved in the supply of electricity, gas and water to
small and medium sized entities ("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
UK-adopted International Accounting Standards in conformity with
the requirements of the Companies Act 2006 and effective at 31
December 2021, this announcement does not itself contain sufficient
information to comply with International Accounting Standards.
The financial information set out in this preliminary
announcement does not constitute the company's statutory financial
statements for the years ended 31 December 2021 or 2020 but is
derived from those financial statements.
Statutory financial statements for 2020 have been delivered to
the registrar of companies and those for 2021 will be delivered in
due course. The auditors have reported on those financial
statements; their reports were (i) unqualified and (ii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The change in the basis of preparation from 2020 is required by
UK Company Law for the purposes of financial reporting as a result
of the UK's exit from the European Union on 31 January 2020 and the
cessation of the transition period on 31 December 2020. This change
does not constitute a change in accounting policy, rather a change
in the framework which is required to group use of IFRS in company
law. There is no impact on the recognition, measurement or
disclosure between the two.
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.
Going concern
The financial statements are prepared on a going concern
basis.
At 31 December 2021 the Group had net assets of GBP9.3m (2020:
GBP4.5m) and cash of GBP7.0m (2020: GBP11.7m).
Management prepares detailed budgets and forecasts of financial
performance and cash flow (including capital commitments) over the
coming 12 to 36 months. The Board has confidence in achieving such
targets and forecasts and has performed comprehensive analysis of
various risks (including those set out in the Strategic Report) and
sensitivities in relation to performance, the energy market and the
wider economy.
The Group has demonstrated significant progress in its results.
This has led to adjusted EBITDA profitability in 2021 (a close
profitability measure to cash generated from operations), which is
a significant turnaround in performance from the losses of 2018 and
2019 and continues the positive trend in 2020 despite the impact in
that year of Covid-19.
The profitability delivered in 2021 has been achieved by robust
and disciplined management of gross margin; the addition of value
enhancing integrations (such as the acquisition of Bristol Energy
in 2020 and the integration of AmpowerUK's business book during
2021); and the continued prudent hedging policy protecting the
Group from the significant commodity market price increases
recently experienced.
The Group has embarked on an ambitious Digital by Default
implementation strategy to help drive further cost efficiency which
is expected to further enhance financial performance as the Group
scales.
Group available cash remains at significant levels, with GBP7.0m
available at 31 December 2021. Cash held has reduced in 2021
because of an investment in a newly built innovation and sales
office in Leicester; an increased investment in sales acquisition
costs and the digital programme; and the commencement of payments
on VAT deferred as part of the UK Government's Covid-19 relief
scheme. In view of the significant growth in the business, working
capital movements have increased from Q4 2021, with a GBP19.7m
increased in trade and other receivables (excluding the financial
derivative asset) largely mitigated by a GBP17.5m increase in trade
and other payables.
The Group has no debt other than GBP0.3m (at 31 December 2021)
in respect of the lease for the Group's Nottingham office.
The Board has assessed risks and sensitivities and potential
mitigation steps available to it in detail and continues to monitor
risk and mitigation strategies in the normal course of
business.
Hedging arrangements and volatile energy markets
A five year commodity trading arrangement between SmartestEnergy
Ltd and the trading entities of the Group (Yü Energy Holding
Limited and Yü Energy Retail Limited), signed December 2019, (the
"Trading Agreement") enables the Group to purchase electricity and
gas on forward commodity markets. The Trading Agreement enables
forecasted customer demand to be hedged in accordance with an
agreed risk mandate (further detailed in the Group's risk and
uncertainties reporting in the Strategic Report). With the
unprecedented increase in commodity market prices for forward gas
and electricity, this hedging position has and continues to protect
the Group.
As part of the Trading Agreement, SmartestEnergy Ltd holds
security over the trading assets of the Group which could,
ultimately and in extreme and limited circumstances, lead to a
claim on some or all of the assets of the Group. In return, a
variable commodity trading limit is provided, which scales with the
Group, having the benefit of significantly reducing the need to
post cash collateral from cash reserves.
The Board carefully monitors covenants associated with the
Trading Agreement to assess the likelihood of the credit facility
being reduced or withdrawn. Management also maintains close
dialogue with SmartestEnergy Ltd in respect of such covenants and
provides robust oversight of the relevant contracts.
The position in respect of the forward credit exposure is also
monitored and forecasted to understand the potential risks which
may arise:
a) Where commodity market prices increase, the Board considers
credit and contractual exposure to SmartestEnergy Ltd, which (under
a default position) could lead to the unwind of hedges with the
loss of value due to the Group if not successfully recovered under
the contract. With increased market prices, this exposure increased
significantly during the year.
b) Where commodity market prices decrease, the Board considers
whether the credit limit provided under the Trading Agreement is
sufficient to prevent the potential for cash calls which may lead
to a liquidity issue where in excess of the Group's cash reserves
at that time. The Board also considers likely commercial outcomes
relevant for such a scenario.
Despite the market volatility experienced in 2021, the Trading
Agreement continues to operate well providing reliable, efficient
and effective access to traded commodity markets.
The Board also considers its business model and compares it with
competitors which have failed to determine any other risks in
related to the volatile energy markets. As part of that assessment,
the impact of the price cap on domestic suppliers (which the Group
is not materially exposed to) has been considered. The failure of
certain unhedged B2B suppliers has also been considered. The Board
is satisfied that the Group's business model is adequately
differentiated from these market issues.
In view of energy market volatility and the increased risk for
the sector, the Board has also identified certain mitigation
strategies to manage the commodity market and hedging credit limit
exposures noted above, and continually assess the potential for
material impact.
After detailed review, the Board has concluded that there are no
liquidity issues likely to arise (outside of available mitigating
strategies) in relation to the hedging arrangements and current
market context.
Covid-19
The Group has successfully operated for approximately two years
through the pandemic, with strong improvement in results still
being delivered. Reviews of the impact of lockdowns have also
provided the Board with adequate references to assess risks in
relation to further changes as a result of the pandemic.
The Group successfully implemented its business continuity plan
during the initial March 2020 lockdown and continues to operate to
its high standards of customer care. Employees have been working
productively either at home, in the office or under a hybrid
working model.
The Board remains confident in the Group's ability to grow
market share, despite the wider economic context caused by the
pandemic.
The Group has also seen strong performance in cash collection
since the pandemic began. The Board remains vigilant, however, over
the short to medium term, on the basis of the increased risk of
business failures in some markets which may be further compounded
by increased energy prices.
Summary
Following extensive review of the Group's forward business plan
and associated risks and sensitivities to these base forecasts (and
available mitigation strategies), the Board concludes that it is
appropriate to prepare the financial statements on a going concern
basis.
Basis of consolidation
The consolidated accounts of the Group include the assets,
liabilities and results of the Company and subsidiary undertakings
in which Yü Group PLC has a controlling interest. Control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the
Group has all of the following: power over the investee (i.e.
existing rights that give it the current ability to direct the
relevant activities of the investee); exposure, or rights, to
variable returns from its involvement with the investee; and the
ability to use its power over the investee to affect its returns.
When necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with the
Group's accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on
consolidation.
Use of estimates and judgements
The preparation of the financial statements in conformity with
adopted IFRSs requires the use of estimates and judgements.
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. The key areas of estimation and judgement are:
-- the estimated consumption (in lieu of accurate meter readings) of energy by customers;
-- the level of accrual for unbilled revenue;
-- the recoverability of trade receivables;
-- the level of forward energy commodity contracts which are not
strictly for "own use" under IFRS 9;
-- the assumptions input to the IFRS 2 share option charge calculations; and
-- the recoverability of deferred tax assets.
Revenue estimates are based on industry knowledge or source
information, where available, and can therefore represent estimates
which are lower or higher than the actual out-turn of energy
consumption once accurate meter readings are obtained.
To estimate the level of accrual for unbilled revenue,
management estimates the level of consumption, and anticipated
revenue, which is due to be charged to the customer, and recognises
such revenue where it is considered that revenue will flow to the
Group. The estimate of customer consumption is based on available
industry data, and also seasonal usage curves that have been
estimated through historical actual usage data.
Trade receivables recoverability is estimated, with appropriate
allowance for expected credit loss provisions, based on historical
performance and the directors' estimate of losses over the Group's
customer receivable balances. Sensitivity analysis on estimates is
provided in note 19.
The Group enters forward purchase contracts to hedge its
position to closely match customers' expected demand over the term
of the contract and does not engage in speculative trading. Factors
such as the shape / granularity of traded products available (which
do not perfectly align with customer demand) and variations in
energy consumed by customers (as a result of varying customer
behaviour and activity, and (particularly for gas) the weather
impact) can influence the extent of trades which are not strictly
for the Group's "own use". Such contracts are accounted for at fair
value through the Group's profit or loss. The Board estimates the
proportion of forward contracts which are to be assessed at fair
value by considering the expected "normalised" forward traded
position, with reference to historical performance on matching
customer demand and the Group's robustly controlled hedging and
risk strategy. Sensitivity analysis on estimates is provided in
note 19.
The share option charge requires certain estimates, including
the volatility in share price, risk-free rates and dividend yields,
together with assessment of achievement of certain vesting
conditions.
Deferred tax asset recoverability is assessed based on
directors' judgement of the recoverability of the tax losses by the
realisation of future profits over the short to medium term, which
inherently is based on estimates.
Revenue recognition
The Group enters into contracts to supply gas, electricity and
water to its customers. Revenue represents the fair value of the
consideration received or receivable from the sale of actual and
estimated gas, electricity and water supplied during the year, net
of discounts, climate change levy and value-added tax. Revenue is
recognised on consumption, being the point at which the transfer of
the goods or services to the customer takes place, and based on an
assessment of the extent to which performance obligations have been
achieved.
Due to the nature of the energy supply industry and its reliance
upon estimated meter readings, gas, electricity and water 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 historical
actual usage data. It also considers any adjustments expected where
an estimated meter reading (using industry data) is expected to be
different to the consumption pattern of the customer.
Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other
receivables, cash and cash equivalents and trade and other
payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair
value. Subsequent to initial recognition they are measured at
amortised cost using the effective interest method, less any
impairment and expected credit losses.
Impairment
The Group has elected to measure credit loss allowances for
trade receivables and accrued income at an amount equal to lifetime
expected credit losses ("ECLs"). Specific impairments are made when
there is a known impairment need against trade receivables and
accrued income. When estimating ECLs, the Group assesses
reasonable, relevant and supportable information, which does not
require undue cost or effort to produce. This includes quantitative
and qualitative information and analysis, incorporating historical
experience, informed credit assessments and forward looking
information. Loss allowances are deducted from the gross carrying
amount of the assets.
Trade and other payables
Trade and other payables are recognised initially at fair value.
Subsequent to initial recognition they are measured at amortised
cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term
deposits (monies held on deposit are accessible with one month's
written notice). Cash and cash equivalents excludes any cash
collateral posted with third parties. Bank overdrafts that are
repayable on demand and form an integral part of the Group's cash
management are included as a component of cash and cash
equivalents.
Derivative financial instruments
The Group uses commodity purchase contracts to hedge its
exposures to fluctuations in gas and electricity commodity prices.
The majority of commodity purchase contracts are expected to be
delivered entirely to the Group's customers and therefore the Group
classifies them as "own use" contracts and outside the scope of
IFRS 9 "Financial Instruments". This is achieved when:
-- a physical delivery takes place under all such contracts;
-- the volumes purchased or sold under the contracts correspond
to the Group's operating requirements; and
-- no part of the contract is settled net in cash.
This classification as "own use" allows the Group not to
recognise the commodity purchase contracts on its balance sheet at
the year end.
The commodity purchase contracts that do not meet the criteria
listed above are recognised at fair value under IFRS 9. The gain or
loss on remeasurement to fair value is recognised immediately in
profit or loss.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity
only to the extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the Group's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Company's own
equity instruments or is a derivative that will be settled by the
Company exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of
issue are classified as a financial liability. Where the instrument
so classified takes the legal form of the Company's own shares, the
amounts presented in these financial statements for called up share
capital and share premium account exclude amounts in relation to
those shares.
Details of the sensitivity analysis performed in relation to the
Group's financial instruments are included in note 19.
Intangible assets
Intangible assets that are acquired separately by the Group are
stated at cost less accumulated amortisation and accumulated
impairment losses.
Intangible assets acquired in a business combination are
initially recognised at their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets acquired in a
business combination are reported at their initial fair value less
amortisation and accumulated impairment losses.
Software and system assets are recognised at cost, including
those internal costs attributable to the development and
implementation of the asset in order to bring it into use. Cost
comprises all directly attributable costs, including costs of
employee benefits arising directly from the development and
implementation of software and system assets.
Amortisation is charged to the statement of profit and loss on a
straight-line basis over the estimated useful lives of the
intangible assets from the date they are available for use. The
estimated useful lives are as follows:
-- Licence - 35 years
-- Customer contract books - Over the period of the contracts
acquired (typically 2 years)
-- Software and systems - 3 to 5 years
Property, plant and equipment
Items of property, plant and equipment are measured at cost less
accumulated depreciation and accumulated impairment losses.
Depreciation is recognised in profit or loss on a straight-line
basis over the estimated useful lives of each part of an item of
property, plant and equipment. The estimated useful lives for the
current and comparative periods are as follows:
-- Freehold land - Not depreciated
-- Freehold property - 30 years
-- Computer equipment - 3 years
-- Fixtures and fittings - 3 years
Assets under construction are not depreciated until the period
they are brought into use.
Business combinations
The acquisition method of accounting is used to account for
business combinations regardless of whether equity instruments or
other assets are acquired.
The consideration transferred is the sum of the acquisition-date
fair values of the assets transferred, equity instruments issued or
liabilities incurred by the acquirer to former owners of the
acquiree and the amount of any non-controlling interest in the
acquiree.
All acquisition costs are expensed as incurred to profit or
loss.
On the acquisition of a business, the consolidated entity
assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the
contractual terms, economic conditions, the consolidated entity's
operating or accounting policies and other pertinent conditions in
existence at the acquisition date.
Contingent consideration to be transferred by the Group is
recognised at the acquisition-date fair value. Subsequent changes
in the fair value of the contingent consideration classified as an
asset or liability are recognised in profit or loss. Contingent
consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets
acquired and liabilities assumed and the fair value of the
consideration transferred is recognised as goodwill. If the
consideration transferred and the pre-existing fair values are less
than the fair value of the identifiable net assets acquired, being
a bargain purchase to the Group, the difference is recognised as a
gain directly in profit or loss on the acquisition date, but only
after a reassessment of the identification and measurement of the
net assets acquired and the consideration transferred.
Business combinations are initially accounted for on a
provisional basis. The Group retrospectively adjusts the
provisional amounts recognised and also recognises additional
assets or liabilities during the measurement period, based on new
information obtained about the facts and circumstances that existed
at the acquisition date. The measurement period ends on the earlier
of (i) 12 months from the date of the acquisition or (ii) when the
acquirer receives all the information possible to determine fair
value.
In determining whether an acquisition of an acquired set of
activities and assets is a business, the "concentration test"
methodology as outlined in IFRS 3 is utilised. Where substantially
all of the fair value of the gross assets acquired are attributable
to a single identifiable asset group, such as a customer list, then
a business combination will not occur.
Leased assets
The Group as a lessee
For any new contract entered into the Group considers whether a
contract is, or contains, a lease. A lease is defined as "a
contract, or part of a contract, that conveys the right to use an
asset (the underlying asset) for a period of time in exchange for
consideration". To apply this definition the Group assesses whether
the contract meets three key evaluations which are whether:
-- the contract contains an identified asset, which is either
explicitly identified in the contract or implicitly specified by
being identified at the time the asset is made available to the
Group;
-- the Group has the right to obtain substantially all of the
economic benefits from use of the identified asset throughout the
period of use, considering its rights within the defined scope of
the contract; and
-- the Group has the right to direct the use of the identified
asset throughout the period of use. The Group assess whether it has
the right to direct "how and for what purpose" the asset is used
throughout the period of use.
Measurement and recognition of leases as a lessee
At the lease commencement date, the Group recognises a
right-of-use asset and a lease liability on the balance sheet. The
right-of-use asset is measured at cost, which is made up of the
initial measurement of the lease liability, any initial direct
costs incurred by the Group, an estimate of any costs to dismantle
and remove the asset at the end of the lease, and any lease
payments made in advance of the lease commencement date (net of any
incentives received).
The Group depreciates the right-of-use asset on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease
term. The Group also assesses the right-of-use asset for impairment
when such indicators exist.
At the commencement date, the Group measures the lease liability
at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that
rate is readily available or the Group's incremental borrowing
rate.
Lease payments included in the measurement of the lease
liability are made up of fixed payments (including in-substance
fixed), variable payments based on an index or rate, amounts
expected to be payable under a residual value guarantee and
payments arising from options reasonably certain to be
exercised.
Subsequent to initial measurement, the liability will be reduced
for payments made and increased for interest. It is remeasured to
reflect any reassessment or modification, or if there are changes
in in-substance fixed payments.
When the lease liability is remeasured, the corresponding
adjustment is reflected in the right-of-use asset, or profit and
loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and
leases of low value assets using the practical expedients. Instead
of recognising a right-of-use asset and lease liability, the
payments in relation to these are recognised as an expense in
profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets are
separately identified and lease liabilities have been included in
trade and other payables.
Share based payments
Share based payment arrangements in which the Group receives
goods or services as consideration for its own equity instruments
are accounted for as equity-settled share based payment
transactions, regardless of how the equity instruments are obtained
by the Group.
The cost of equity-settled transactions with employees is
measured by reference to the fair value on the date they are
granted. Where there are no market conditions attaching to the
exercise of the option, the fair value is determined using a range
of inputs into a Black Scholes pricing model. Where there are
market conditions attaching to the exercise of the options a
trinomial option pricing model is used to determine fair value
based on a range of inputs. The value of equity-settled
transactions is charged to the statement of comprehensive income
over the period in which the service conditions are fulfilled with
a corresponding credit to a share based payments reserve in
equity.
Employer's National Insurance costs arising and settled in cash
on exercise of unapproved share options are included in the share
based payment charge in the profit or loss, with no corresponding
credit to reserves in equity.
Pension and post-retirement benefit
The Group operates a defined contribution scheme which is
available to all employees. The assets of the scheme are held
separately from those of the Group in independently administered
funds. Payments are made by the Group to this scheme and
contributions are charged to the statement of comprehensive income
as they become payable.
Taxation
Tax on the profit or loss for the period comprises current and
deferred tax. Tax is recognised in the statement of profit and loss
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the period, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment
to tax payable in respect of previous periods.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilised.
Segmental reporting
In accordance with IFRS 8 "Operating Segments", the Group has
made the following considerations to arrive at the disclosure made
in this financial information.
IFRS 8 requires consideration of the Chief Operating Decision
Maker ("CODM") within the Group. In line with the Group's internal
reporting framework and management structure, the key strategic and
operating decisions are made by the Board of directors, which
regularly reviews the Group's performance and balance sheet
position and receives financial information for the Group as a
whole. Accordingly, the Board of directors is deemed to be the
CODM.
The Group's revenue and profit were derived from its principal
activity, which is the supply of utilities to business customers in
the UK. As a consequence the Group has one reportable segment,
which is the supply of electricity, gas and water to businesses.
Segmental profit is measured at operating profit level, as shown on
the face of the statement of profit and loss.
As there is only one reportable segment whose profits/(losses),
expenses, assets, liabilities and cash flows are measured and
reported on a basis consistent with the financial statements, no
additional numerical disclosures are necessary.
Standards and interpretations
The Group has adopted all of the new or amended accounting
standards and interpretations that are mandatory for the current
reporting period.
Any new or amended accounting standards or interpretations that
are not yet mandatory have not been early adopted.
2. Segmental analysis
Operating segments
The directors consider there to be one operating segment, being
the supply of utilities to businesses.
Geographical segments
100% of Group revenue is generated from sales to customers in
the United Kingdom (2020: 100%) and is recognised at a point in
time.
The Group has no individual customers representing over 10% of
revenue (2020: nil).
3. Auditor's remuneration
2021 2020
GBP'000 GBP'000
---------------------------------------------- -------- --------
Audit of these financial statements 72 68
Amounts receivable by auditor in respect of:
Audit of financial statements of subsidiaries
pursuant to legislation 44 40
116 108
---------------------------------------------- -------- --------
4. Operating expenses
2021 2020
GBP'000 GBP'000
---------------------------------------------- -------- --------
Profit / (loss) for the year has been arrived
at after charging:
Staff costs (see note 6) 5,634 4,455
Depreciation of property, plant and equipment 255 215
Depreciation of right-of-use assets 80 204
Amortisation of intangible assets 352 132
---------------------------------------------- -------- --------
5. Net finance (income)/expense
2021 2020
GBP'000 GBP'000
------------------------------------------------ -------- --------
Bank interest and other finance charges payable 77 16
Interest on lease liabilities 19 23
------------------------------------------------ -------- --------
Total finance costs 96 39
Bank interest receivable - (74)
------------------------------------------------ -------- --------
96 (35)
------------------------------------------------ -------- --------
6. Staff numbers and costs
The average number of persons employed by the Group (including
directors) during the period, analysed by category, was as
follows:
2021 2020
Number Number
--------------- ------- -------
Sales 31 34
Administration 114 77
--------------- ------- -------
145 111
--------------- ------- -------
The aggregate payroll costs of these persons were as
follows:
2021 2020
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Wages and salaries 5,043 3,685
Social security costs 539 373
Pension costs 97 77
Share based payments 249 320
--------------------------------------------------- -------- --------
5,928 4,455
--------------------------------------------------- -------- --------
Of which:
Amounts charged to operating profit / (loss) 5,634 4,455
Amounts related to development and implementation
of computer software 294 -
--------------------------------------------------- -------- --------
There were three persons employed directly by the Company during
the year ended 31 December 2021 (2020: four), being the
non-executive directors. The Company's two (2020: three) executive
directors who served during the year have service contracts with a
wholly owned subsidiary of the Company.
Key management personnel
The aggregate compensation made to directors and other members
of key management personnel (being members of the Group's Executive
Committee comprising the Chief Executive Officer, Chief Financial
Officer and other senior leaders) is set out below:
GBP'000 GBP'000
---------------------------------- ------- -------
Short-term employee benefits 1,191 1,013
Social security and pension costs 165 170
Share based payments 228 310
---------------------------------- ------- -------
1,584 1,493
---------------------------------- ------- -------
For 2020, GBP140,000 of employers National Insurance was
previously disclosed in short-term employee benefits and has now
been reclassified in social security and pension costs.
The highest paid director and remuneration of the executive
directors are as referenced in the remuneration report of the
annual report.
7. Reconciliation to adjusted EBITDA
A key alternative performance measure used by the directors to
assess the underlying performance of the business is adjusted
EBITDA.
2021 2020
GBP'000 GBP'000
---------------------------------------------- ------- -------
Adjusted EBITDA reconciliation
Operating profit / (loss) 3,488 (1,574)
Add back:
Non-recurring operational costs 644 -
Unrealised gain on derivative contracts (3,344) (1,011)
Share based payment charge 249 320
Depreciation of property, plant and equipment 255 215
Depreciation of right-of-use assets 80 204
Amortisation of intangibles 352 132
---------------------------------------------- ------- -------
Adjusted EBITDA 1,724 (1,714)
---------------------------------------------- ------- -------
The non-recurring operational costs of GBP644,000 relates to
accrued industry costs, from legislation governing the Renewable
Obligation scheme, which are mutualised (i.e. spread) across energy
market participants. These costs have increased significantly
because of the unprecedented level of supplier failures;
particularly impacting those operating in the domestic (business to
consumer) market segment. The total charge to the Group for the
compliance year ended 31 March 2021 is GBP454,000. A further
GBP190,000 is estimated and accrued relating to the liability
arising for the period from 1 April 2021 to 31 December 2021. The
directors consider these mutualisation costs non-recurring during
2021 in view of the unprecedented and well-publicised challenges
faced by some suppliers during the year. The directors do not
envisage mutualisation costs will remain at such a significant
level in the future. For 2020 the Group charged mutualisation costs
against the adjusted EBITDA loss. These 2020 costs included the
liability for the compliance period to 31 March 2020 of GBP78,000,
being significantly below the GBP454,000 charge for the compliance
year to 31 March 2021.
Share based payment charges, unrealised gains on derivatives and
depreciation and amortisation of assets are excluded from adjusted
EBITDA. This exclusion of gains and losses is in order for a "near
cash, recurring profit" metric to be derived.
The unrealised gain on derivative contracts of GBP3,344,000
(2020: GBP1,011,000) arises from a small proportion of forward
commodity hedges which do not meet the strict "own use" criteria
under IFRS 9 ("Financial Instruments"). Such forward commodity
trades are therefore recognised at their fair value, being a
financial asset, as further described in note 16 and note 19.
The directors consider adjusted EBITDA to be a more accurate
representation of underlying business performance and therefore
utilise this measure as the primary profit measure in setting
targets and managing financial performance.
8. Earnings per share
Basic earnings/(loss) per share
Basic earnings per share is based on the profit/(loss)
attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding.
2021 2020
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Profit/(loss) for the year attributable to ordinary
shareholders 4,451 (1,165)
---------------------------------------------------- -------- --------
2021 2020
------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares
At the start of the year 16,281,055 16,281,055
Effect of shares issued in the year 18,591 -
------------------------------------------------- ---------- ----------
Number of ordinary shares for basic earnings per
share calculation 16,299,646 16,281,055
Dilutive effect of outstanding share options 1,099,153 929,830
------------------------------------------------- ---------- ----------
Number of ordinary shares for diluted earnings
per share calculation 17,398,799 17,210,885
------------------------------------------------- ---------- ----------
2021 2020
GBP GBP
--------------------------- ---- ------
Basic earnings per share 0.27 (0.07)
Diluted earnings per share 0.26 (0.07)
--------------------------- ---- ------
Adjusted earnings per share
Adjusted earnings per share is based on the result attributable
to ordinary shareholders before non-recurring items after tax and
unrealised gains on derivative contracts and the cost of cash and
equity-settled share based payments, and the weighted average
number of ordinary shares outstanding:
2021 2020
GBP'000 GBP'000
---------------------------------------------------- -------- ---------
Adjusted earnings per share
Profit/(loss) for the year attributable to ordinary
shareholders 4,451 (1,165)
Add back (per note 7):
Non-recurring items after tax (gross cost, before
tax, of GBP644,000) 522 -
Unrealised gain on derivative contracts after tax
(gross gain, before tax, of GBP3,344,000) (2,709) (819)
Share based payments after tax (gross cost, before
tax, of GBP249,000) 202 259
---------------------------------------------------- -------- ---------
Adjusted basic profit/(loss) for the year 2,466 (1,725)
---------------------------------------------------- -------- ---------
Adjusted earnings/(loss) per share GBP0.15 GBP(0.11)
Diluted adjusted earnings/(loss) per share GBP0.14 GBP(0.11)
---------------------------------------------------- -------- ---------
9. Taxation
2021 2020
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Current tax charge
Current year - -
Adjustment in respect of prior years - -
------------------------------------------------------ -------- --------
- -
------------------------------------------------------ -------- --------
Deferred tax credit
Current year (631) (287)
Adjustment in respect of prior years (428) (87)
------------------------------------------------------ -------- --------
(1,059) (374)
------------------------------------------------------ -------- --------
Total tax credit (1,059) (374)
------------------------------------------------------ -------- --------
Tax recognised directly in equity
Current tax recognised directly in equity - -
Deferred tax recognised directly in equity (84) (60)
------------------------------------------------------ -------- --------
Total tax recognised directly in equity (84) (60)
------------------------------------------------------ -------- --------
Reconciliation of effective tax rate
Profit / (loss) before tax 3,392 (1,539)
------------------------------------------------------ -------- --------
Tax at UK corporate tax rate of 19% (2020: 19%) 644 (292)
Expenses not deductible for tax purposes 26 5
Tax relief on exercise of share options (18) -
Impact of temporary differences (94) -
Adjustment in respect of prior periods - current
tax - -
Adjustments in respect of prior periods - deferred
tax (428) (87)
Utilisation of tax losses not recognised for deferred
tax - -
Increase in tax rate on deferred tax balances (1,189) -
------------------------------------------------------ -------- --------
Tax credit for the year (1,059) (374)
------------------------------------------------------ -------- --------
Deferred taxes at the balance sheet date have been measured
using the enacted tax rates at that date and are reflected in these
financial statements on that basis. Following the March 2021
Budget, the tax rate effective 1 April 2023 increases from the
current 19% to 25%.
10. Dividends
The Group did not pay an interim dividend in relation to 2021
(2020: nil per share).
The directors do not propose a final dividend in relation to
2021 (2020: nil per share).
11. Intangible assets
Electricity Customer Software
licence books and systems Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ----------- -------- ------------ ---------
Cost
At 1 January 2021 62 686 - 748
Additions - - 1,079 1,079
----------------------------------- ----------- -------- ------------ ---------
At 31 December 2021 62 686 1,079 1,827
----------------------------------- ----------- -------- ------------ ---------
Amortisation
At 1 January 2021 12 130 - 142
Charge for the year 2 343 7 352
----------------------------------- ----------- -------- ------------ ---------
At 31 December 2021 14 473 7 494
----------------------------------- ----------- -------- ------------ ---------
Net book value at 31 December 2021 48 213 1,072 1,333
----------------------------------- ----------- -------- ------------ ---------
Cost
At 1 January 2020 62 - - 62
Additions - 686 - 686
----------------------------------- ----------- -------- ------------ ---------
At 31 December 2020 62 686 - 748
----------------------------------- ----------- -------- ------------ ---------
Amortisation
At 1 January 2020 10 - - 10
Charge for the year 2 130 - 132
----------------------------------- ----------- -------- ------------ ---------
At 31 December 2020 12 130 - 142
----------------------------------- ----------- -------- ------------ ---------
Net book value at 31 December 2020 50 556 - 606
----------------------------------- ----------- -------- ------------ ---------
The useful economic life of the acquired electricity licence is
35 years, which represents the fact that the licence can be revoked
by giving 25 years' written notice but that this notice cannot be
given any sooner than 10 years after the licence came into force in
January 2013.
The customer book intangibles relate to the two separate
acquisitions that took place in 2020. The customer book intangibles
represent the fair value of the customer contracts purchased in
those acquisitions. The intangible assets are being amortised over
a useful economic life of two years, representing the average
contract length of the customer books acquired.
Software and systems assets relate to investments made in
third-party software packages, and directly attributable internal
personnel costs in implementing those platforms, as part of the
Group's Digital by Default strategy.
The amortisation charge is recognised in operating costs in the
income statement.
12. Property, plant and equipment
Assets Fixtures
Freehold Freehold under and Computer
land Property construction fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- --------- ------------- --------- ---------- --------
Cost
At 1 January 2021 150 - 1,013 80 335 1,578
Transfer from asset
under construction - 1,013 (1,013) - - -
Additions - 2,261 - 265 103 2,629
Disposals - - - (8) (85) (93)
--------------------- -------- --------- ------------- --------- ---------- --------
At 31 December 2021 150 3,274 - 337 353 4,114
--------------------- -------- --------- ------------- --------- ---------- --------
Depreciation
At 1 January 2021 - - - 41 160 201
Charge for the year - 73 - 70 112 255
Disposals - - - (8) (85) (93)
--------------------- -------- --------- ------------- --------- ---------- --------
At 31 December 2021 - 73 - 103 187 363
--------------------- -------- --------- ------------- --------- ---------- --------
Net book value at 31
December 2021 150 3,201 - 234 166 3,751
--------------------- -------- --------- ------------- --------- ---------- --------
Cost
At 1 January 2020 150 - 190 215 1,007 1,562
Additions - - 823 - 98 921
Disposals - - - (135) (770) (905)
--------------------- -------- --------- ------------- --------- ---------- --------
At 31 December 2020 150 - 1,013 80 335 1,578
--------------------- -------- --------- ------------- --------- ---------- --------
Depreciation
At 1 January 2020 - - - 146 745 891
Charge for the year - - - 30 185 215
Disposals - - - (135) (770) (905)
--------------------- -------- --------- ------------- --------- ---------- --------
At 31 December 2020 - - - 41 160 201
--------------------- -------- --------- ------------- --------- ---------- --------
Net book value at 31
December 2020 150 - 1,013 39 175 1,377
--------------------- -------- --------- ------------- --------- ---------- --------
The buildings relate to the new Energy Centre property in
Leicester which has been brought into use during the year. The
property is a sales, marketing and innovation hub for the Group's
activities.
13. Right-of-use assets and lease liabilities
Right-of-use
assets
GBP'000
----------------------------------- ------------
Cost
At 1 January 2021 799
Additions -
Disposals -
----------------------------------- ------------
At 31 December 2021 799
----------------------------------- ------------
Depreciation
At 1 January 2021 526
Charge for the year 80
Disposals -
----------------------------------- ------------
At 31 December 2021 606
----------------------------------- ------------
Net book value at 31 December 2021 193
----------------------------------- ------------
Cost
At 1 January 2020 955
Additions -
Disposals (156)
----------------------------------- ------------
At 31 December 2020 799
----------------------------------- ------------
Depreciation
At 1 January 2020 474
Charge for the year 204
Disposals (152)
----------------------------------- ------------
At 31 December 2020 526
----------------------------------- ------------
Net book value at 31 December 2020 273
----------------------------------- ------------
The Group has a lease arrangement for its main office facilities
in Nottingham. Other leases are short term or of low value
underlying assets. A lease for a temporary Leicester office and a
lease for one vehicle were terminated during 2020.
The Nottingham office lease is reflected on the balance sheet as
a right-of-use asset and a lease liability at 31 December 2021 and
31 December 2020.
The table below provides details of the Group's right-of-use
asset and lease liability recognised on the balance sheet at 31
December 2021:
Remaining Asset carrying Depreciation Interest
Right-of-use asset term amount Lease liability expense expense
------------------ --------- -------------- --------------- ------------ ---------
Premises 2.5 years GBP193,000 GBP267,000 GBP80,000 GBP19,000
------------------ --------- -------------- --------------- ------------ ---------
The total cash outflow for leases in 2021 was GBP120,000 (2020:
GBP180,000).
Lease payments not recognised as a liability
The Group has elected not to recognise a right-of-use asset or
lease liability for short-term leases (leases of expected terms of
12 months or less) or leases of low value assets. Payments under
such leases are expensed on a straight-line basis. During FY 2021
the amount expensed to profit and loss was GBP1,000 (2020:
GBP1,000).
None of the above leases of the Group are with the Company
entity directly.
14. Investments in subsidiaries
The Company has the following direct and indirect investments in
subsidiaries:
Proportion
Country of of
Company name incorporation Holding shares held Nature of business
------------------------ -------------- -------- ------------ ---------------------
Yü Energy Holding Ordinary
Limited United Kingdom shares 100% Gas shipping services
KAL Portfolio Trading Ordinary
Limited United Kingdom shares 100% Dormant
Yü Services Ordinary
Limited United Kingdom shares 100% Dormant
Yü Energy Retail Ordinary Supply of energy to
Limited United Kingdom shares 100% businesses
Yü Group Management Ordinary
Limited United Kingdom shares 100% Dormant
Ordinary Supply of water to
Yu Water Limited United Kingdom shares 100% businesses
------------------------ -------------- -------- ------------ ---------------------
All of the above entities are included in the consolidated
financial statements and have the same registered address as Yü
Group PLC.
15. Deferred tax assets
Deferred tax assets are attributable to the following:
2021 2020
GBP'000 GBP'000
--------------------------------- -------- --------
Property, plant and equipment (45) (32)
Tax value of loss carry-forwards 5.812 4,740
Share based payments 165 81
--------------------------------- -------- --------
5,932 4,789
--------------------------------- -------- --------
Movement in deferred tax in the period:
At Recognised At
1 January Recognised directly 31 December
2021 in income in equity 2021
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ---------- ------------
Property, plant and equipment (32) (13) - (45)
Tax value of loss carry-forwards 4,740 1,072 - 5,812
Share based payments 81 - 84 165
--------------------------------- ---------- ---------- ---------- ------------
4,789 1,059 84 5,932
--------------------------------- ---------- ---------- ---------- ------------
At Recognised At
1 January Recognised directly 31 December
2020 in income in equity 2020
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ---------- ------------
Property, plant and equipment (32) - - (32)
Tax value of loss carry-forwards 4,366 374 - 4,740
Share based payments 21 - 60 81
--------------------------------- ---------- ---------- ---------- ------------
4,355 374 60 4,789
--------------------------------- ---------- ---------- ---------- ------------
The deferred tax asset is expected to be utilised by the Group
in the coming years. The Board forecasts sufficient taxable income
as a result of the growth in the customer base and increased
profitability against which it will utilise these deferred tax
assets.
16. Trade and other receivables
2021 2020
GBP'000 GBP'000
------------------------------------------------- -------- --------
Current
Gross trade receivables 11,618 8,129
Provision for doubtful debts and expected credit
loss (6,007) (5,162)
------------------------------------------------- -------- --------
Net trade receivables 5,611 2,967
Accrued income - net of provision 21,972 11,169
Prepayments 4,183 1,355
Other receivables 5,573 2,148
Financial derivative asset 3,102 628
------------------------------------------------- -------- --------
40,441 18,267
------------------------------------------------- -------- --------
Non-current
Financial derivative asset 870 -
------------------------------------------------- -------- --------
Movements in the provision for doubtful debts and expected
credit loss in gross trade receivables are as follows:
2021 2020
GBP'000 GBP'000
--------------------------------------------------- ------- -------
Opening balance 5,162 4,901
Provisions recognised less unused amounts reversed 4,185 2,420
Provision utilised in the year (3,340) (2,159)
--------------------------------------------------- ------- -------
Closing balance - provision for doubtful debts
and expected credit losses 6,007 5,162
--------------------------------------------------- ------- -------
The directors have assessed the level of provision at 31
December 2021 by reference to the recoverability of customer
receivable balances post the year end, and believe the provision
carried is adequate.
In addition to the amounts recognised in relation to trade
receivables, there was an additional provision charged in the
period of GBP614,000 (2020: GBP707,000), leading to a total
provision against accrued income at 31 December 2021 of
GBP1,481,000 (2020: GBP867,000). Expected credit losses and the
recognition, where appropriate, of previous customer credit
balances are recognised in operating costs.
The net impairment losses on financial and contract assets of
GBP4,799,000 (2020: GBP3,127,000) consists of GBP614,000 (2020:
GBP707,000) provision charged for expected credit loss on accrued
income, and GBP4,185,000 (2020: GBP2,420,000) provision for bad
debts and expected credit loss on trade receivables.
The financial derivative asset is the only trade and other
receivable that falls due after more than one year.
The directors consider that the carrying amount of trade and
other receivables approximates to their fair value due to their
maturities being short term.
Prepayments of GBP4,183,000 (2020: GBP1,355,000) increased as a
result of certain prepaid costs to third-party intermediaries on
the commencement of contracts, and for certain software licence
costs connected with the Group's Digital by Default investment.
Other receivables includes GBP250,000 (2020: GBP250,000) paid in
cash to trading counterparties as collateral. It also includes
GBP142,000 which is due to cover loss-making contracts acquired
following the appointment of the Group as Supplier of Last Resort
of AmpowerUK's activities.
The current and non-current financial derivative asset of
GBP3,972,000 (2020: GBP628,000) is the fair value of a small
proportion of the Group's overall forward gas and power purchase
contracts. Such contracts do not meet the strict criteria of being
for the Group's "own use" under IFRS 9. They are stated at their
Mark to Market fair value (being the excess of: i) the volume of
commodity purchased valued at market prices available at the
balance sheet date; over ii) the traded price of the forward
contracts). The asset has increased in the year due to the
significant increase in forward gas and power market prices. The
risks and sensitivities in relation to the asset are further
detailed in note 19.
17. Cash and cash equivalents
2021 2020
GBP'000 GBP'000
------------------------- -------- --------
Cash at bank and in hand 7,049 11,740
------------------------- -------- --------
7,049 11,740
------------------------- -------- --------
As disclosed in note 16, cash and cash equivalents exclude
GBP500,000 of cash, which is included in other receivables. This
cash balance is held on deposit and secured under arrangements with
the Group's bankers.
18. Trade and other payables
2021 2020
GBP'000 GBP'000
------------------------------------- -------- --------
Current
Trade payables 3,690 2,319
Accrued expenses and deferred income 34,545 19,250
Lease liabilities 107 102
Tax and social security 6,188 5,224
Other payables 5,213 4,535
------------------------------------- -------- --------
49,743 31,430
------------------------------------- -------- --------
Non-current
Accrued expenses and deferred income 381 -
Tax and social security - 843
Lease liabilities 160 266
------------------------------------- -------- --------
541 1,109
------------------------------------- -------- --------
On 7 November 2021 the Group was appointed by Ofgem as Supplier
of Last Resort for AmpowerUK's customer book. As part of the
appointment, the Group agreed to honour an element of customer
credit balances which had accrued prior to appointment, and to
serve a small number of loss-making contracts for the period to
April 2022. There was no consideration payable by the Group. At 31
December 2021, other payables included GBP230,000 of customer
credit balances and estimated losses on onerous contracts acquired
on the AmpowerUK business. A corresponding GBP142,000 asset is
held, as disclosed in note 16. The integration of AmpowerUK's
customer book was not considered to be a business and therefore not
accounted for as a business combination.
On 23 November 2021 the Group obtained a number of small
business customers from another energy supplier. Due to the
prevailing market conditions at the time of the transaction the
total consideration was negative, resulting in a payment to the
Group of GBP378,000 to take on the customer contracts. The fair
value of identifiable assets obtained consisted of GBP368,000 of
onerous contract liabilities and GBP10,000 of customer credit
balance liabilities. At 31 December 2021, other payables included
GBP358,000 relating to these balances.
Non-current accrued expenses, and an element of current accrued
expenses, relate to the estimated ROC mutualisation liability as
detailed in note 7.
Details of lease liabilities are included in note 13.
At 31 December 2020, non-current other payables relate to
deferred VAT and PAYE payments under the UK Government's Covid-19
business relief schemes. Such liabilities are included in current
other payables at 31 December 2021 and will be fully paid during
the first quarter of 2022.
19. Financial instruments and risk management
The Group's principal financial instruments are cash, trade and
other receivables, trade and other payables and derivative
financial assets.
Derivative instruments, related to the Group's hedging of
forward gas and electricity demand, are level 1 financial
instruments and are measured at fair value through the statement of
profit or loss. Such fair value is measured by reference to quoted
prices in active markets for identical assets or liabilities. All
derivatives are held at a carrying amount equal to their fair value
at the period end.
The Group has exposure to the following risks (including the
impact of the Covid-19 pandemic) from its use of financial
instruments:
a) commodity hedging and derivative instruments (related to
customer demand and market price volatility, and counterparty
credit risk);
b) customer credit risk;
c) liquidity risk; and
d) foreign exchange risk.
(a) Commodity trading and derivative instruments
The Group is exposed to market risk in that changes in the price
of electricity and gas may affect the Group's income or liquidity
position. The use of derivative financial instruments to hedge
customer demand also results in the Group being exposed to risks
from significant changes in customer demand (beyond that priced
into the contracts), and counterparty credit risk with the trading
counterparty.
Commodity and energy prices and customer demand
The Group uses commodity purchase contracts to manage its
exposures to fluctuations in gas and electricity commodity prices.
The Group's objective is to reduce risk in energy prices by
entering into back-to-back energy contracts with its suppliers and
customers, in accordance with a Board approved risk mandate.
Commodity purchase contracts are entered into as part of the
Group's normal business activities.
The majority of commodity purchase contracts are expected to be
delivered entirely to the Group's customers and are therefore
classified as "own use" contracts. These instruments do not fall
into the scope of IFRS 9 and therefore are not recognised in the
financial statements. A proportion of the contracts in the Group's
portfolio are expected to be settled net in cash where 100% of the
volume hedged is not delivered to the Group's customers and is
instead sold back via the commodity settlement process in order to
smooth demand on a real-time basis. An assumption is made (based on
past experience) of the proportion of the portfolio expected to be
settled in this way and these contracts are measured at fair value.
The gain or loss on remeasurement to fair value is recognised
immediately in profit and loss.
As far as practical, in accordance with the risk mandate, the
Group attempts to match new sales orders (based on estimated energy
consumption, assuming normal weather patterns, over the contract
term) 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.
Well-publicised increases in global gas and electricity
commodity prices have increased the potential gain or loss for an
over or under-hedged portfolio, and the Group continues to closely
monitor its customer demand forecast to manage volatility. The
Group also applies premia in its pricing of contracts to cover some
market volatility (which has proven to be robust despite the market
context), and contracts with customers also contain the ability to
pass through costs which are incurred as a result of customer
demand being materially different to the estimated volume
contracted.
The fair value Mark to Market adjustment at 31 December 2021 for
those contracts not assumed to be strictly for "own use" is a gain
of GBP3,344,000 (2020: gain of GBP1,011,000). See note 16 for the
corresponding derivative financial asset.
The Group's exposure to commodity price risk according to IFRS 7
is measured by reference to the Group's IFRS 9 commodity contracts.
IFRS 7 requires disclosure of a sensitivity analysis for market
risks that is intended to illustrate the sensitivity of the Group's
financial position and performance to changes in market variables
impacting upon the fair values or cash flows associated with the
Group's financial instruments.
Therefore, the sensitivity analysis provided below discloses the
impact on profit or loss at the balance sheet date assuming that a
reasonably possible change in commodity prices (determined based on
calculated or implied volatilities where available, or historical
data) had occurred and been applied to the risk exposures in place
at that date. In view of the volatile nature of commodity markets,
the sensitivity analysis is based on a change of up to +/-25% in
commodity markets, though additional volatility may be incurred in
view of the current, unprecedented, energy market context of
volatility.
The sensitivity analysis has been calculated on the basis that
the proportion of commodity contracts that are IFRS 9 financial
instruments remains consistent with those at that point. Excluded
from this analysis are all commodity contracts that are not
financial instruments under IFRS 9.
2021 Impact 2020 Impact
Reasonably on profit on profit
possible increase/ and net and net
decrease in assets assets
Open market price of forward contracts variable GBP'000 GBP'000
--------------------------------------- ------------------- ----------- -----------
UK gas (p/therm) +/-25% 793 103
UK power (GBP/MWh) +/-25% 1,470 364
--------------------------------------- ------------------- ----------- -----------
2,263 467
--------------------------------------- ------------------- ----------- -----------
In addition to the sensitivity noted above, the estimate of the
forward derivative contracts assessed as "own use" results in the
financial asset recognised. If the level of own use of such forward
contracts was amended by +/-1%, then the financial asset and
resulting impact on profit and net assets would be GBP1,088,000.
Such a sensitivity could occur if, for example, the Group's
estimated forecasted demand from customer contracts was impacted by
factors such as prolonged abnormal weather patterns, or further
unexpected and severe Covid-19 lockdowns. In mitigation, however,
demand balancing activities and trading will significantly reduce
any potential gain or loss arising from the sensitivity noted
above, and the Board approved hedging policy is designed so as to
protect (to the extent possible) the gross margin as sold on each
contract. Customer prices also include premia in their pricing to
account for certain levels of market risk as a result of the above
in order to reduce the potential for negative impact on Group
profitability.
Liquidity risk from commodity trading
The Group's trading arrangements can result in the need to post
cash or other collateral to trading counterparties when commodity
markets are below the Group's average weighted price contracted
forward. A significant reduction in electricity and gas markets
could lead to a material cash call from these trading
counterparties in the absence of a suitable trading credit limit.
Whilst such a cash call would not impact the Group's profit (as it
represents a forward credit risk assessment of the counterparty),
it would have an impact on the Group's cash reserves.
The structured trading arrangement, entered into with
SmartestEnergy in December 2019, has reduced this liquidity risk in
view of the significant credit limit being provided. This
arrangement provides a significant trading credit limit (secured on
the main trading entities of the Group and subject to compliance
with certain covenants) and as such reduces the need to lodge cash
collateral when commodity markets decrease. As disclosed in note 1,
the Board has considered the cash flow forecasts, along with the
interaction in trading credit limits and the potential need for
cash collateral or Letter of Credit support. The Board also
monitors the position in respect of commodity markets and has
mitigation plans in place where credit limits are predicted to be
exceeded to reduce, where possible, the potential impact on the
Group due to short-term cash calls. In extreme circumstances, such
mitigation may include (prior to security being enacted) reducing
the Group's hedged position (reducing liquidity risk in exchange
for increased risk to future market increases) through to
commercial discussion to waive the requirement to post cash
collateral over a short-to medium-term period; or the agreement to
provide additional remedial action.
Trading counterparty credit risk
In mirror opposite to the liquidity risk noted above, the Group
carries credit risk to trading counterparties where market prices
are above the average weighted price contracted forward. In view of
the significant rise in energy commodity markets this credit risk
has increased significantly to be greater than GBP100m at certain
periods during 2021. This credit exposure is predominantly with the
Group's main trading counterparty.
The Board monitors the position in respect of credit exposure
with its trading counterparties, and contracts only with major
organisations which the Board considers to be robust and of
appropriate financial standing.
(b) Customer or other counterparty 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 (in addition to trading counterparties
as noted in section (a) above).
These operational exposures are monitored and managed at Group
level. All customers operate in the UK and turnover is made up of a
large number of customers each owing relatively small amounts. New
customers have 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 predominantly by direct debit. At the year end there were
no significant concentrations of credit risk. The carrying amount
of the financial assets (less the element of VAT and climate change
levy ("CCL") included in the invoiced balance, which is recoverable
in the event of non-payment by the customer) represents the maximum
credit exposure at any point in time.
The Board considers the exposure to debtors based on the status
of customers in its internal debt journey, the level of customer
engagement in finding an appropriate solution, the customer's
creditworthiness, the provision for doubtful debts and expected
credit loss held, the level of reclaimable VAT and CCL on the
balances, and cash received after the period end.
At 31 December 2021 the Group held a provision against doubtful
debts and expected credit loss of GBP7,488,000 (2020:
GBP6,029,000). This is a combined provision against both trade
receivables at GBP6,007,000 (2020: GBP5,162,000) and accrued income
at GBP1,481,000 (2020: GBP867,000). The increase reflects higher
amounts due as a result of the significant growth in Group revenues
in the year, and the integration of the AmpowerUK customer book
during November 2021.
If the recoverability of customer receivables is +/-5% to that
assessed by the directors, the gain or loss arising recognised in
the income statement and impacting net assets would be
+/-GBP32,000. If the expected customer credit loss rate on accrued
income was +/- 10%, the gain or loss would be +/-GBP144,000.
(c) 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.
Management also monitors the position in respect of the Group's
performance against covenants as part of its trading arrangements,
to ensure credit limits as part of such transactions are monitored,
and any credit cover requirements for other industry participants
which are standard in the energy sector.
Any excess cash balances are held in short-term deposit accounts
which are either interest or non-interest accounts. At 31 December
2021 the Group had GBP7,049,000 (2020: GBP11,740,000) of cash and
bank balances, as per note 17.
(d) Foreign currency risk
The Group trades entirely in pounds sterling and therefore it
has no foreign currency risk.
Impact from the Covid-19 pandemic
Whilst the Covid-19 pandemic continues to have a significant
impact on the UK economy, these events are now largely considered
as part of the Group's business as usual operations. Previous
impacts have been on customer demand and market price volatility,
the potential to continue to operate an efficient business model
under "lockdown", and the potential for increased levels of bad
debt as a result of the wider economic context.
The Group has performed well despite the impact of Covid-19, and
the Board is confident in its ability to continue to monitor and
mitigate such risks. As a result, the impact of the Covid-19
pandemic is implicitly included in the sections above.
20. Share capital and reserves
2021 2021 2020 2020
Share capital Number GBP'000 Number GBP'000
--------------------------------- ---------- -------- ---------- --------
Allotted and fully paid ordinary
shares of GBP0.005 each 16,316,215 82 16,281,055 82
--------------------------------- ---------- -------- ---------- --------
The Company has one class of ordinary share which carries no
right to fixed income. The holders of ordinary shares are entitled
to receive dividends as declared and are entitled to one vote per
share at meetings of the Company.
The movement in reserves is as per the condensed statement of
changes in equity.
Share capital represents the value of all called up, allotted
and fully paid shares of the Company. On 12 July 2021 an employee
exercised 35,160 share options. The exercise price was GBP0.005 per
share.
The share premium account represents amounts received in excess
of the nominal value of shares on the issue of new shares, net of
any direct costs of any shares issued.
The merger reserve was created as part of the 2016 Group
reorganisation prior to listing.
Retained earnings comprises the Group's cumulative annual
profits and losses.
21. Share based payments
The Group operates a number of share option plans for qualifying
employees. Options in the plans are settled in equity in the
Company. The options are subject to a vesting schedule, details of
which are listed below.
The terms and conditions of the outstanding grants made under
the Group's schemes are as follows:
Exercisable between
-----------------------------
Amount Amount
outstanding outstanding
at at
Expected Exercise Vesting 31 December 31 December
Date of grant term Commencement Lapse price schedule 2021 2020
--------------- -------- ------------- -------------- -------- --------- ------------ ------------
17 February 17 February 17 February
2016 3 2019 2026 GBP0.09 1 27,000 27,000
22 December 22 December 22 December
2016 3 2019 2026 GBP3.25 1 13,500 13,500
6 April 2017 3 6 April 2020 6 April 2027 GBP0.005 1 43,950 79.110
6 April 2017 6.5 6 April 2020 6 April 2027 GBP2.844 1 87,900 158,220
28 September 28 September 28 September
2017 6.5 2020 2027 GBP5.825 1 40,500 40,500
9 April 2018 6.5 9 April 2021 9 April 2028 GBP10.38 1 59,084 78,351
26 September 26 September 26 September
2018 6.5 2021 2028 GBP8.665 1 6,539 6,539
25 February 25 February 25 February
2019 6.5 2022 2029 GBP1.09 1 48,497 53,333
25 February 25 February 25 February
2019 3 2022 2029 GBP0.005 1 250,000 250,000
1 February
18 June 2019 3 1 August 2022 2023 GBP1.40 2 62,483 86,138
4 October 2020 3 30 April 2023 4 October 2030 GBP0.005 3 210,696 287,312
4 October 2020 3 30 April 2024 4 October 2030 GBP0.005 3 172,388 210,696
1 June 2021 3 30 April 2024 4 October 2030 GBP0.005 3 76,616 -
1,099,153 1,290,699
--------------- -------- ------------- -------------- -------- --------- ------------ ------------
Weighted average remaining contractual life of options
outstanding at 31 December 2021 7.1years
----------------------------------------------------------------------------- ------------
The following vesting schedules apply:
1. 100% of options vest on third anniversary of date of grant.
2. 100% of options vest on third anniversary of the Save As You
Earn ("SAYE") savings contract start date.
3. Level of vesting is dependent on a performance condition,
being the Group's share price at pre-determined dates in the
future.
The number and weighted average exercise price of share options
were as follows:
2021 2020
Shares Shares
------------------------------------- --------- ---------
Balance at the start of the period 1,290,699 830,468
Granted 76,616 498,008
Forfeited (233,002) (37,777)
Lapsed - -
Exercised (35,160) -
------------------------------------- --------- ---------
Balance at the end of the period 1,099,153 1,290,699
------------------------------------- --------- ---------
Vested at the end of the period 278,473 318,330
------------------------------------- --------- ---------
Exercisable at the end of the period 278,473 318,330
------------------------------------- --------- ---------
Weighted average exercise price for:
Options granted in the period GBP0.005 GBP0.005
Options forfeited in the period GBP1.88 GBP1.35
Options exercised in the period GBP0.005 -
------------------------------------- --------- ---------
Exercise price in the range:
From GBP0.005 GBP0.005
To GBP10.38 GBP10.38
------------------------------------- --------- ---------
The fair value of each option grant is estimated on the grant
date using an appropriate option pricing model with the following
fair value assumptions:
2021 2020
------------------------------------------------------ ------- -------
Dividend yield 0% 0%
Risk-free rate 1.5% 1.5%
Share price volatility 114.6% 117.1%
Expected life (years) 3 years 3 years
Weighted average fair value of options granted during
the period GBP2.30 GBP0.90
------------------------------------------------------ ------- -------
The share price volatility assumption is based on the actual
historical share price of the Group since IPO in March 2016.
The total expenses recognised for the year arising from share
based payments are as follows:
2021 2020
GBP'000 GBP'000
------------------------------------------- -------- --------
Equity-settled share based payment expense 237 320
Cash-settled share based payment expense 12 -
------------------------------------------- -------- --------
Total share based payment charge 249 320
------------------------------------------- -------- --------
Cash-settled share based payment expense relates to employer's
National Insurance payable on unapproved share options when
exercised.
22. Commitments
Capital commitments
The Group has entered into contracts to develop its digital
platform as part of the Digital by Default strategy. Such contracts
may be terminated with a limited timescale and as such are not
disclosed as a capital commitment.
The Group has no other capital commitments at 31 December 2021.
At 31 December 2020, the Group had capital commitments related to
the investment in freehold buildings of GBP2,207,000.
Security
Yü Group PLC provides parent company guarantees on behalf of its
wholly owned subsidiaries to a small number of industry
counterparties as is common place for the energy sector.
The Group entered into an arrangement with a commodity trading
counterparty, SmartestEnergy Limited, in December 2019. As part of
the arrangement, there is a requirement to meet certain covenants
and a fixed and floating charge over the main trading subsidiaries
of the Group, Yü Energy Holding Limited and Yü Energy Retail
Limited.
As disclosed in note 16, included in other receivables of the
Company and the Group is an amount of GBP500,000 held in a separate
bank account over which the Group's bankers have a fixed and
floating charge.
Contingent liabilities
The Group had no contingent liabilities at 31 December 2021
(2020: GBPnil).
23. Related parties and related party transactions
The Group has transacted with CPK Investments Limited (an entity
owned by Bobby Kalar). CPK Investments Limited owns one of the
properties from which the Group operates via a lease to Yü Energy
Retail Limited. During 2021 the Group paid GBP120,000 in lease
rental and service charges to CPK Investments Limited (2020:
GBP120,000). There was no amount owing to CPK Investments Limited
at 31 December 2021 (2020: GBP10,000 creditor).
All transactions with related parties have been carried out on
an arm's length basis.
24. Net cash/(net debt) reconciliation
The net cash/(net debt) and movement in the year were as
follows:
2021 2020
GBP'000 GBP'000
-------------------------- -------- --------
Cash and cash equivalents 7,049 11,740
Lease liabilities (267) (368)
Borrowings - -
-------------------------- -------- --------
Net cash 6,782 11,372
-------------------------- -------- --------
Borrowings Leases Cash Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- -------- -------- --------
Net cash/(net debt) as at 1 January
2020 - (597) 2,377 1,780
Cash flows - 180 9,363 9,543
New and exited leases - 72 - 72
Interest and other changes - (23) - (23)
-------------------------------------- ---------- -------- -------- --------
Net cash/(net debt) as at 31 December
2020 - (368) 11,740 11,372
-------------------------------------- ---------- -------- -------- --------
Cash flows - 120 (4,691) (4,571)
Interest and other changes - (19) - (19)
-------------------------------------- ---------- -------- -------- --------
Net cash/(net debt) as at 31 December
2021 - (267) 7,049 6,782
-------------------------------------- ---------- -------- -------- --------
25. Post-balance sheet events
The Group was appointed by Ofgem as Supplier of Last Resort for
two small suppliers (Whoop Energy Limited and Xcel Power Limited)
from 19 February 2022. The appointment provided an additional
circa.850meter points.
There are no other significant post-balance sheet events.
Annual Report and Annual General Meeting
Copies of the Annual Report and Accounts for the year ended 31
December 2021 will be available to download from the Company's
website at www.yugroupplc.com later today, Tuesday 22 March 2022.
Hard copies will be posted to shareholders on 4 April 2022.
The AGM is scheduled to take place on 26 May 2022 and the AGM
notice is included in the Annual Report and Accounts.
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