TIDMYU.
RNS Number : 7075A
Yu Group PLC
27 September 2022
Yü Group PLC
(the "Group")
Results for the six months to 30 June 2022
CONTINUED FINANCIAL AND OPERATIONAL OUTPERFORMANCE
Yü Group PLC (AIM; YU.), the independent supplier of gas,
electricity and water to the UK corporate sector, and smart meter
installation services, announces its unaudited half year results
for the six months to 30 June 2022.
Bobby Kalar, Chief Executive Officer, said :
" We continue to reiterate our promise to keep delivering
profitable growth and are confident this is set to continue.
I'm very pleased to report another set of excellent results
reflecting a strong and reliable performance. Remembering this is
our fourth consecutive and consistent set of results I'm proud to
confirm our key financial KPI's are performing well and have
exceeded our forecasts following two recent upgrades. Revenue is up
by 96%, cash in hand has increased 37%, average monthly booking
have increased by 49% and EBITDA has jumped over 400% compared to
H1 2021. Our strategy is working well and our strengthened and
highly disciplined business driven by our joined up processes,
people and platforms continues to deliver a seamless customer
experience.
Our digital transformation program is on course and several
digital projects are now live and embedded into the business. We
will see additional benefits of reduced operating costs, better
efficiencies and greater predictability as we scale these digital
channels.
While I'm pleased with the recent government Energy Bills Relief
Scheme announcement, pledging support for business customers with
their increased energy costs, I fear businesses will feel the
ongoing pressure of volatile wholesale commodity prices for some
time. We will continue to work hard to help our customers manage
these difficult market conditions.
A GBP300m Mark to Market trading position gives me comfort our
hedge book is very strong, in accordance with our hedging policy,
and provides significant confidence in forward gross margin.
The successful launch of Yü Smart is a game changer in terms of
value chain ownership. As well as supplying energy to our business
customers we have gained certification from the Retail Energy Code
(REC) and approval from Elexon and Xoserve to operate as a Meter
Equipment Manager (MEM) and Meter Installer (MI) for both gas and
electricity customers, creating the opportunity to install and
maintain SMETS2 meters. In addition, owning the asset, creating an
annuity income, provides an exciting new value pool for the Group
to benefit from. I look forward to updating the market as we
rapidly scale this capability.
We performed well in the pandemic; even better in 2021, despite
challenges in the market; and we expect even better performance in
the remainder of 2022 and beyond. I'm reassured our business
continues to prosper and will use its strength and experience as an
anchor for any further turbulence. As we continue to enjoy the
fruits of our hard work, I look forward to delivering significant
shareholder value in the near future.
Finally, I would like to thank my wonderful team who continue to
support the Board's target to achieve GBP500m revenue at over 4%
EBITDA as soon as possible. "
Highlights
GBP'm unless stated 6 months ended 30 12 months
June
2022 2021 Change 2021
------------------------------- ------ ----- ------ ---------
Financial
Revenue 129.2 65.8 96% 155.4
Adjusted EBITDA(1) 2.7 0.5 440% 1.7
Profit after tax 4.4 0.9 389% 4.5
Cash 15.7 11.5 37% 7.0
Earnings per share (diluted):
Adjusted 10p 0.4p +9.6p 14p
Statutory 26p 5p +21p 26p
Operational
Average monthly bookings 14.3 9.6 49% 13.8
Meter points (#'000) 26.1 20.8 25% 31.9
------------------------------- ------ ----- ------ ---------
Note:
1. Adjusted EBITDA represents earnings before interest, tax,
depreciation and amortisation. It also excludes the gain of GBP3.3m
in relation to the Group's financial derivative asset and, in 2021,
excluded share based payment charges and non-recurring costs.
-- Revenue growth of 96.3% to GBP129.2m (H1 2021: GBP65.8m),
through strong organic growth, as the Group benefits from its
improved customer proposition
-- Digital by Default strategy accelerating the benefits of
operational leverage and margin expansion with EBITDA margins
expanding to 2.1% (H1 2021: 0.8%),
o Gross margin improvement from 7.8% to 14.1%
o Overhead costs have decreased from 6.1% of revenue in H1 2021,
to 4.6% in H1 2022
-- Adjusted EBITDA increased to GBP2.7m (H1 2021: GBP0.5m), and
already exceeding the 12 months of FY 2021
-- Profit before tax increased to GBP4.4m (H1 2021: GBP0.9m)
benefiting from a GBP3.3m gain based on our GBP0.3bn MtM hedge
position, leading to a GBP7.3m financial derivative asset at H1
2022
-- Robust commodity hedging position is underpinning strong
performance, as the business is well protected against
unprecedented price volatility in the energy markets
-- Average monthly bookings have increased by 49% to GBP14.3m
(H1 2021: GBP9.6m) while the number of meter points has increased
by 25% compared with 30 June 2021
-- Yü Smart successfully launched and will further improve
debtor control, margins and profitability as it scales, and asset
ownership will unlock new annuity incomes for the Group
-- Group remains well capitalised with strong cash position at
GBP15.7m (H1 2021: GBP11.5m). Reflecting confidence in the ongoing
performance of the Group, the Board is actively considering the
introduction of a progressive dividend to be confirmed at the
Company's full year results, with capital allocation being balanced
against the growth opportunities presented to the Group.
Outlook
-- The Board expects the record H1 performance to continue for
the remainder of the financial year and beyond, with continued
strong trading already evident in Q3 2022
-- Contracted revenue of GBP119m secured for 2023, at 31 August
2022, providing good forward revenue visibility
-- Yü Smart is expected to become profitable in FY 2023 with
significant opportunities to develop and grow the business and
unlock new margin opportunities
-- The Board welcomes the support announced by the government
through the energy bill relief scheme, which provides clarity and
will help businesses through the coming winter.
Yü Group PLC
Bobby Kalar
Paul Rawson +44 (0) 115 975 8258
Liberum - Nominated Adviser
and Broker
Edward Mansfield
William Hall
Cara Murphy +44 (0) 20 3100 2000
--------------------
Tulchan Group
Giles Kernick
Olivia Peters +44 (0) 20 7353 4200
--------------------
Analyst presentation
A presentation for analysts will be held at 9.00am today, 27
September at the offices of Tulchan Communications, 85 Fleet
Street, EC4Y 1AE. To register to attend or for webcast details
please contact Yugroup@tulchangroup.com .
Notes to Editors
Information on the Group
Yü Group PLC, trading as Yü Energy, is a leading supplier of gas
and electricity focused on servicing the corporate sector
throughout the UK. We drive innovation through a combination of
user-friendly digital solutions and personalised, high quality
customer service. The Group plays a key role supporting businesses
in their transition to lower carbon technologies with a commitment
to providing sustainable energy solutions.
Yü Group has a clear strategy to deliver sustainable profitable
growth and value for all of our stakeholders built on strong
foundations and with a robust hedging policy. In 2022 the Group
launched Yü Smart to support growth through new opportunities in
smart metering and EV charge installation. With a significant
opportunity in a GBP50bn addressable market Yü Group continues to
deliver on the medium term goal of GBP500m of revenues with an
adjusted EBITDA margin in excess of 4%.
Chief Executive Officer's Statement
Delivering on our strategy
I'm delighted to report a very strong trading and financial
performance, with continued improvement in profitability and with
the Group exceeding all key financial and operational metrics.
We have now delivered four half-year periods of consistent and
consecutive growth and I'm excited about the momentum we are
carrying in to H2 2022 and beyond.
Our strategic focus on being Bigger (high growth), Better (more
profitable), Faster (digital by default) and Stronger (cash and
governance focus) continues to deliver.
Growth has continued apace with revenues of GBP129.2m, up by 44%
against H2 2021 and up 96% on H1 2022 (H1 2021: GBP65.8m), and
already stands at 83% of that achieved in FY 2021 (itself a
record).
The high price environment being experienced in the market has
resulted in an increase in uncontracted revenues as businesses
defer entry into fixed contracts at elevated prices. Uncontracted
revenues represented 18% of H1 2022 revenues.
Strong bookings performance led to a 25% growth in number of
meter points served and a high level of forward contracted revenue.
As at 31 August 2022 the Group has GBP119m of contracted revenues
for FY 2023 (up 31% on prior year) underpinning the Group's growth
trajectory in H2 2022 and beyond.
Profitability has also increased, and we maintain our target to
achieve revenues of GBP0.5bn, at 4%+ EBITDA.
Our Digital by Default programme has accelerated our margin
development and is delivering consistency of data across the Group
to effectively serve customers and manage the Group's risk profile.
We see the investment made as a significant growth driver for the
future with a scalable platform now in place. Customers can obtain
a live priced quote in under 30 seconds, and onboard seamlessly
hands-free and without the need to contact in person. We continue
to automate customer experiences and have flexible and fully
configurable API plug and play technologies which can maintain our
agility as a leading challenger supplier. Our platform is designed
to allow us to easily enter new and complimentary product
offerings.
This Digital by Default approach unlocks new sales channels,
with the ability for customers and energy broker (TPIs) to
self-serve, bringing enhanced overhead efficiency and operational
leverage to improve margins. Alongside the financial benefits the
consistency of data enables informed decisions to effectively
manage risk and enables the Group to understand the needs and
habits of our customers through data analytics.
In summary, we have in place robust and scalable systems which
is accelerating growth - and this seamless customer experience,
driven by our joined-up processes, people and platforms, highlights
the strength of our business.
Delivering from our strong foundations
Our commodity hedging position is a strong platform for
continued success. The Board estimates the value of the hedge book,
on a Mark to Market ("MtM") basis, at GBP300m at 20 September 2022.
This provides significant market opportunity over the rest of 2022
and FY 2023 and FY 2024.
Bad debt has increased in H1 2022 in absolute terms, reflecting
the growth of the business. Importantly overdue customer
receivables have remained flat at 7 days. Alongside this gross
margin has improved to 14.1% (H1 21: 7.8%) through various
commercial activities and a prudent and optimised hedge position.
Management expects to continue to navigate the highly volatile
global market prices utilising the digital tools, knowledge and
processes developed over recent times, and is confident in
improving net customer contribution to unlock further value.
The Board welcomes the announcement from government of the
significant Energy Bill Relief Scheme to support customers through
the winter period. We continue to work with BEIS on the
implementation of the package, with details still being assessed,
though consider the impact on customers to be very helpful. We
remain hopeful that government will extend the scheme beyond the
initial six month period, if market prices require, for some
customers in certain highly impacted sectors.
The Group maintains a strong balance sheet and will consider
investments to drive further growth opportunities to scale even
more rapidly. We remain vigilant for any acquisitions available,
though are disciplined (as has been proven on our acquisitions to
date) to target only value enhancing opportunities.
Delivering for the future
The Group invested in the people, policies, processes and
certain other intellectual property of Magnum Utilities, a leading
smart meter installer, in Q2 2022. Since then, the team has been
working to launch our new business unit, Yü Smart, which has now
successfully commenced operation with the first meters installed
and a growing team of meter installers in place.
Our Yü Smart business unit will provide metering services to our
own energy supply business alongside other suppliers. This service
provides significant benefits to our Group: to fully control the
customer smart meter installation journey; provide customers with
additional insight on their energy usage; and to reduce bad debt
exposure in the supply business.
The acquisition also allows new growth initiatives in relation
to EV charger installations.
In addition, the Group will invest from Q4 2022 to own smart
meter assets, providing a long-term recurring and profitable
annuity.
The Board is pleased with performance to date and have increased
guidance on two occasions this year. We maintain a positive outlook
and note market expectations are rightfully prudent in view of the
high volatility in market prices.
That said, the Board is confident on achieving the increased
market expectations and on the ability to deliver the Group's
medium-term targets of GBP500m revenues at 4%+ EBITDA.
The talent and commitment I can draw upon from our colleagues is
leading us to significantly improved performance, and I reiterate
my thanks to them in continuing to deliver the Group's
objectives.
Financial Review
GBP'm unless stated H1 2022 H1 2021 FY 2021
Revenue 129.2 65.8 155.4
Gross Margin % 14.1% 7.8% 9.8%
Net Customer Contribution
% 6.7% 6.8% 6.7%
Overheads % (4.6%) (6.1%) (5.6%)
Adjusted EBITDA % 2.1% 0.7% 1.1%
Adjusted EBITDA 2.7 0.5 1.7
Depreciation (0.6) (0.4) (0.7)
Non-recurring - - (0.6)
Share based payments - (0.2) (0.2)
Financial derivative gain 3.3 1.2 3.3
Tax (1.0) (0.2) 1.0
-------- -------- -------
Profit after tax 4.4 0.9 4.5
Earnings per share (diluted):
Adjusted 10p 0.4p 14p
Statutory 27p 6p 26p
Operating cash flow 10.3 2.3 (0.8)
Overdue customer receivables 7days 7days 7days
Cash 15.7 11.5 7.0
------------------------------- -------- -------- -------
Delivering significant increase in revenue
Group revenue has increased to GBP129.2m, a 96% increase on H1
2021, or 120% increase after considering the previously announced
exit in FY 2021 from a GBP7m low margin contract.
This strong performance is a factor of the integrations of the
various Supplier of Last Resort ("SoLR") books in late 2021 and
early 2022, together with continued high monthly bookings
(partially reflecting the high price environment) and an increased
contribution from customers wishing to remain on our variable
tariff.
GBP'm unless stated 6 months ended 30
June
Change 2022 2021
--------------------------------- ------ ---------- --------
Revenue
Firm book (contracted) 51.8 104.3 52.5
Non-firm book (uncontracted) 18.9 23.4 4.5
Other (water and other charges) (0.1) 1.5 1.6
Exited contract (7.2) - 7.2
Total Revenue 63.4 129.2 65.8
--------------------------------- ------ ---------- --------
Forward contracted revenue as at 31 August 2022, to deliver in
FY 2023, is GBP119m being 31% up on the comparable position at 31
August 2021. Along with the SoLR books, the increase in
uncontracted revenues is a result of customers who have decided to
delay entering a new fixed price contract because of the high
commodity market environment.
Management has significant confidence in achieving revenue
market expectations based on current trading.
Gross margin and Adjusted EBITDA are not expected to be impacted
by the government Energy Billing Relief Scheme. BEIS have also
noted that the scheme will be cash neutral for suppliers.
Delivering sustainable profitable growth
Gross margin has significantly improved in the period, to 14.1%
(H1 2021: 7.8%) largely because of a strong hedge book and the
significant uncontracted customer base.
Bad debts have been provisioned at 7.4% (FY 2021: 3.1%) of
revenues, on a prudent basis reflecting the increased tariffs being
experienced by customers. The Energy Bill Relief Scheme, plus our
drive to install additional smart meters, are expected to reduce
this level of bad debt in H2 2022, though management will remain
focussed on customer payment performance.
General overheads are benefiting from significant efficiency,
largely driven through investment in our Digital by Default
strategy and continues to reduce cost to acquire and cost to serve.
Overheads at 4.6% of revenue are significantly below the 5.6%
across FY 2021, and trending positively towards our target to
achieve overheads below 3.5% of revenue at GBP500m revenues.
Whilst the Board are confident that this strong profitability
trajectory will continue in the short and medium term, there will
be no complacency. Optimisation of our GBP300m MtM valued hedge
book, coupled with further focus on bad debt and leveraging scale
benefits in overheads all provide positive momentum into FY 2023.
Commercial strategies identified and tested in various market
conditions over recent years should also provide opportunity to
unlock value - in high or decreasing commodity market
environments.
In addition, our activities in Yü Smart will unlock additional
value in the supply chain, whilst supporting a reduction in bad
debt. A cGBP1.3m working capital requirement (financed from Group
cash reserves) and investment of cGBP2.7m into meter assets from Q4
2022 and into FY 2023 could generate (post tax, pre indexation)
levered returns of over 30% and a recurring, profitable annuity
income.
Delivering strong cash flow and working capital
The Group has a strong balance sheet, with GBP15.7m cash
available on 30 June 2022, up from GBP11.5m at June 2021. The Group
continues to have no debt.
On 31 August 2022 the Group settled its full annual ROC bill on
time, and closed August with GBP5.1m of cash, being ahead of
management expectations. Group cash by 31 December 2022 is targeted
to significantly exceed the GBP7.0m cash held on 31 December
2021.
Whilst the Board remain mindful on the pressures on customers,
and the level of bad debt provisioning has increased, Overdue
Customer Receivables (being an indicator of unprovided for customer
receivables at the balance sheet date) have remained flat at 7days
of sales (H1 2021: 7 days). The roll out of smart meters under the
Yü Smart business will further enhance the Group's debtor controls.
The Board are currently examining the most appropriate means to
finance the expansion of the Yü Smart business but can confirm it
will be without recourse to equity.
Delivering on our financial framework
Our clear management targets remain; to deliver GBP500m revenue
at over 4% EBITDA in the medium term.
We will achieve this by continued discipline across our
financial framework: to drive organic and inorganic growth;
unlocking customer lifecycle opportunities and optimising our hedge
book; whilst benefiting from overhead and digital driven overhead
efficiencies as we maintain cash discipline.
The Board look forward to updating stakeholders in the coming
months as we progress towards these objectives.
Condensed consolidated statement of profit and loss and other
comprehensive income
For the six months ended 30 June 2022
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
--------------------------------------- ------ ------------ ------------ ------------
Revenue 129,221 65,816 155,423
Cost of sales (111,008) (60,673) (140,180)
------------------------------------------ ------ ------------ ------------ ------------
Gross profit 18,213 5,143 15,243
------------------------------------------ ------ ------------ ------------ ------------
Operating costs before non-recurring
items and share based payment charges (6,405) (4,400) (9,407)
Operating costs - non-recurring items 5 - - (644)
Operating costs - share based payment
charges 17 (48) (191) (249)
------------------------------------------ ------ ------------ ------------ ------------
Total operating costs 3 (6,453) (4,591) (10,300)
Net impairment losses on financial and
contract assets 12 (9,614) (632) (4,799)
Other gains 5 3,355 1,248 3,344
------------------------------------------ ------ ------------ ------------ ------------
Operating profit 5,501 1,168 3,488
Finance income 4 - 1 -
Finance costs 4 (24) (25) (96)
------------------------------------------ ------ ------------ ------------ ------------
Profit before tax 5,477 1,144 3,392
Taxation 7 (1,040) (224) 1,059
------------------------------------------ ------ ------------ ------------ ------------
Profit and total comprehensive income
for the year 4,437 920 4,451
------------------------------------------ ------ ------------ ------------ ------------
Earnings per share
Basic 6 GBP0.27 GBP0.06 GBP0.27
Diluted 6 GBP0.26 GBP0.05 GBP0.26
------------------------------------------ ------ ------------ ------------ ------------
Condensed consolidated balance sheet
At 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
--------------------------------------- ----- ------------ ------------ -----------
ASSETS
Non-current assets
Intangible assets 9 2,578 359 1,333
Property, plant and equipment 10 3,636 3,776 3,751
Right-of-use assets 11 153 233 193
Deferred tax assets 4,892 4,566 5,932
Trade and other receivables 12 1,793 - 870
--------------------------------------- ----- ------------ ------------ -----------
13,052 8,934 12,079
--------------------------------------- ----- ------------ ------------ -----------
Current assets
Trade and other receivables 12 38,059 19,185 40,441
Cash and cash equivalents 13 15,657 11,473 7,049
--------------------------------------- ----- ------------ ------------ -----------
53,716 30,658 47,490
--------------------------------------- ----- ------------ ------------ -----------
Total assets 66,768 39,592 59,569
--------------------------------------- ----- ------------ ------------ -----------
LIABILITIES
Current liabilities
Trade and other payables 14 (48,754) (30,439) (49,743)
--------------------------------------- ----- ------------ ------------ -----------
Non-current liabilities
Trade and other payables 14 (4,243) (3,564) (541)
--------------------------------------- ----- ------------ ------------ -----------
Total liabilities (52,997) (34,003) (50,284)
--------------------------------------- ----- ------------ ------------ -----------
Net assets 13,771 5,589 9,285
--------------------------------------- ----- ------------ ------------ -----------
EQUITY
Share capital 83 82 82
Share premium 11,690 11,690 11,690
Merger reserve (50) (50) (50)
Retained earnings/(accumulated losses) 2,048 (6,133) (2,437)
--------------------------------------- ----- ------------ ------------ -----------
13,771 5,589 9,285
--------------------------------------- ----- ------------ ------------ -----------
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2022
Share Share Merger Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- -------- --------- --------
Balance at 1 January 2022 82 11,690 (50) (2,437) 9,285
-------------------------------- -------- -------- -------- --------- --------
Total comprehensive income
for the period
Profit for the period - - - 4,437 4,437
Other comprehensive income - - - - -
-------------------------------- -------- -------- -------- --------- --------
- - - 4,437 4,437
-------------------------------- -------- -------- -------- --------- --------
Transactions with owners
of the Company
Contributions and distributions
Equity-settled share based
payments - - - 48 48
Deferred tax on share based
payments - - - - -
Proceeds from share issues 1 - - - 1
-------------------------------- -------- -------- -------- --------- --------
Total transactions with
owners of the Company 1 - - 48 1
-------------------------------- -------- -------- -------- --------- --------
Balance at 30 June 2022 83 11,690 (50) 2,048 13,771
-------------------------------- -------- -------- -------- --------- --------
Balance at 1 January 2021 82 11,690 (50) (7,209) 4,513
-------------------------------- -------- -------- -------- --------- --------
Total comprehensive income
for the period
Profit for the period - - - 920 920
Other comprehensive income - - - - -
-------------------------------- -------- -------- -------- --------- --------
- - - 920 920
-------------------------------- -------- -------- -------- --------- --------
Transactions with owners
of the Company
Contributions and distributions
Equity-settled share based
payments - - - 156 156
Deferred tax on share based
payments - - - - -
Proceeds from share issues - - - - -
-------------------------------- -------- -------- -------- --------- --------
Total transactions with
owners of the Company - - - 156 156
-------------------------------- -------- -------- -------- --------- --------
Balance at 30 June 2021 82 11,690 (50) (6,133) 5,589
-------------------------------- -------- -------- -------- --------- --------
Condensed consolidated statement of cash flows
For the six months ended 30 June 2022
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
----------------------------------------------------- ------------ ------------ ------------
Cash flows from operating activities
Profit for the financial period 4,437 920 4,451
Adjustments for:
Depreciation of property, plant and equipment 168 72 255
Depreciation of right-of-use assets 40 48 80
Amortisation of intangible assets 332 247 352
Unrealised gains on derivative contracts (3,355) (1,248) (3,344)
Decrease/(increase) in trade and other receivables 4,814 330 (19,700)
Increase in trade and other payables 2,767 1,523 17,468
Cash received on obtaining customer contracts - - 378
Finance income - (1) -
Finance costs 24 25 96
Taxation 1,040 224 (1,059)
Share based payment charge 48 156 249
----------------------------------------------------- ------------ ------------ ------------
Net cash from/(used in) operating activities 10,315 2,296 (774)
----------------------------------------------------- ------------ ------------ ------------
Cash flows from investing activities
Purchase of property, plant and equipment (53) (2,360) (2,629)
Net payment of software development costs (1,205) (119) (1,079)
Net cash invested on acquisition of assets and
on obtaining operating licence (372) - -
----------------------------------------------------- ------------ ------------ ------------
Net cash used in investing activities (1,630) (2,479) (3,708)
----------------------------------------------------- ------------ ------------ ------------
Cash flows from financing activities
Cash-settled share based payment charge - - (12)
Net proceeds from share option exercises 1 - -
Interest (paid)/received (17) (24) (77)
Principal element of lease payments (61) (60) (120)
----------------------------------------------------- ------------ ------------ ------------
Net cash used in financing activities (77) (84) (209)
----------------------------------------------------- ------------ ------------ ------------
Net increase/(decrease) in cash and cash equivalents 8,608 (267) (4,691)
Cash and cash equivalents at the start of the
period 7,049 11,740 11,740
----------------------------------------------------- ------------ ------------ ------------
Cash and cash equivalents at the end of the
period 15,657 11,473 7,049
----------------------------------------------------- ------------ ------------ ------------
Notes to the condensed consolidated financial statements
1. Significant accounting policies
Yü Group PLC (the "Company") is a public limited company
incorporated 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 half yearly financial statements as
at and for the six months ended 30 June 2022 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 SMEs and larger corporates in the UK.
Basis of preparation
The condensed consolidated interim financial information for the
six months ended 30 June 2022 has been prepared in accordance with
UK-adopted International Accounting Standards.
The unaudited condensed consolidated interim financial report
for the six months ended 30 June 2022 does not include all of the
information required for full annual financial statements and does
not comprise statutory accounts within the meaning of section 434
of the Companies Act 2006. This report should therefore be read in
conjunction with the Group annual report for the year ended 31
December 2021, which is available on the Group's investor website
(yugroupplc.com). The comparative figures for the year ended 31
December 2021 have been audited. The comparative figures for the
half year ended 30 June 2021, and the actual figures for the half
year to 30 June 2022, are unaudited.
The accounting policies adopted in these condensed consolidated
half yearly financial statements are consistent with the policies
applied in the 2021 Group financial statements.
The consolidated financial statements are presented in British
pounds sterling (GBP), which is the functional and presentational
currency of the Group. All values are rounded to the nearest
thousand (GBP'000), except where otherwise indicated.
Going concern
The financial statements are prepared on a going concern
basis.
At 30 June 2022 the Group had net assets of GBP13.8m (30 June
2021: GBP5.6m and 31 December 2021: GBP9.3m) and cash of GBP15.7m
(30 June 2021: GBP11.5m and 31 December 2021: GBP7.0m).
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 and sensitivities in relation to performance, the
energy market and the wider economy.
The Group continues to demonstrate significant progress in its
results. This has led to adjusted EBITDA profitability (a close
profitability measure to cash generated from operations) in H1 2022
which is significantly above the same period in 2021.
The Group has increased gross margin, whilst controlling general
overheads, leading to improved financial outcomes. The Board has
continued to invest in state of the art systems which is expected
to provide further returns over the short to medium term. The
Group's investment into Yu Smart, the engineering capability to
accelerate the roll out of smart meters to existing and new
customers, also provides confidence in further improving
profitability.
Group available cash remains at significant levels, and the
Group has met its obligation to pay its annual Renewable Obligation
scheme liability for the compliance year to 31 March 2022 to Ofgem
by the 31 August 2022 deadline.
The Group has no debt other than GBP0.2m (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.
Volatile energy markets
Global energy markets have significantly increased, resulting in
an underlying increase in costs to acquire wholesale costs which
are having to be passed on to customers in their prices.
The Board has reviewed the Group's hedge position, which
provides significant mitigation to the rising energy costs from its
current portfolio. The Group has also, on various occasions,
suspended or amended its sales acquisition targets to prevent
signing potentially loss making business.
The Board remain vigilant in relation to the risk of bad debt as
customers renew contracts onto significantly increased rates,
though note that the level of bad debt rate, and extent of support
provided by Government, is under significant public discussion. The
Board has considered various scenarios to consider the position in
respect of profitability as impacted by the level of bad debt, and
the mitigating value of the forward hedge book where markets remain
high.
Hedging arrangements
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. 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 of the main trading 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 and 2022, 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 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.
Covid-19
The Group's response to Covid-19, with continued operation and
servicing of customers, provides confidence in the Group's ability
to continue to trade were further lock-downs required due to the
pandemic. The Board do not, therefore, foresee any liquidity issues
likely to arise as a result of Covid-19, though will continue to
monitor the situation.
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 remain as
detailed in the Group's 2021 annual report.
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.
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 and supply and operating licence assets are
recognised at cost, including those internal costs attributable to
the development and implementation of the assets to bring them into
use. Cost comprises all directly attributable costs, including
costs of employee benefits arising directly from the development
and implementation of the asset.
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:
-- Supply and Operating Licence - 10 years to 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 to 5 years
Assets under construction are not depreciated until the period
they are brought into use.
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.
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.
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 (2021: 100%) and is recognised at a point in
time.
The Group has no individual customers representing over 10% of
revenue (2021: nil).
3. Operating expenses
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- -------- -----------
Profit for the period has been arrived at
after charging:
Staff costs 3,147 2,703 5,634
Depreciation of property, plant and equipment 168 72 255
Depreciation of right-of-use assets 40 48 80
Amortisation of intangible assets 332 247 352
---------------------------------------------- -------- -------- -----------
4. Net finance (income)/expense
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
------------------------------------------------ -------- -------- -----------
Bank interest and other finance charges payable 17 17 77
Interest on lease liabilities 7 8 19
------------------------------------------------ -------- -------- -----------
Total finance costs 24 25 96
Bank interest receivable - (1) -
------------------------------------------------ -------- -------- -----------
24 24 96
------------------------------------------------ -------- -------- -----------
5. Reconciliation to adjusted EBITDA
A key alternative performance measure used by the directors to
assess the underlying performance of the business is adjusted
EBITDA.
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- -------- -----------
Adjusted EBITDA reconciliation
Operating profit 5,501 1,168 3,488
Add back:
Non-recurring operational costs - - 644
Unrealised gain on derivative contracts (3,355) (1,248) (3,344)
Share based payment charge - 191 249
Depreciation of property, plant and equipment 168 72 255
Depreciation of right-of-use assets 40 48 80
Amortisation of intangibles 332 247 352
---------------------------------------------- -------- -------- -----------
Adjusted EBITDA 2,686 478 1,724
---------------------------------------------- -------- -------- -----------
The Board has decided to include, from 2022, the share based
payment charge in adjusted EBITDA in order to reflect that such
charges are regular operating charges of the business. The share
based payment charge was excluded from adjusted EBITDA in 2021. On
a comparable basis the 30 June 2021 and 31 December 2021 adjusted
EBITDA results would decrease by GBP191,000 and GBP249,000
respectively.
The 2021 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.
Unrealised gains on derivative contracts 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 GBP3,355,000 (30
June 2021: GBP1,248,000 and 31 December 2021: GBP3,344,000) 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.
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.
6. Earnings per share
Basic earnings per share
Basic earnings per share is based on the profit attributable to
ordinary shareholders and the weighted average number of ordinary
shares outstanding.
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
--------------------------------------------- -------- -------- -----------
Profit for the year attributable to ordinary
shareholders 4,437 920 4,451
--------------------------------------------- -------- -------- -----------
30 June 30 June 31 December
2022 2021 2021
----------------------------------------------- ---------- ---------- -----------
Weighted average number of ordinary shares
At the start of the period 16,316,215 16,281,055 16,281,055
Effect of shares issued in the period 125,000 - 18,591
----------------------------------------------- ---------- ---------- -----------
Number of ordinary shares for basic earnings
per share calculation 16,441,215 16,281,055 16,299,646
Dilutive effect of outstanding share options 804,932 1,303,043 1,099,153
----------------------------------------------- ---------- ---------- -----------
Number of ordinary shares for diluted earnings
per share calculation 17,246,147 17,584,098 17,398,799
----------------------------------------------- ---------- ---------- -----------
30 June 30 June 31 December
2022 2021 2021
-------------------------- ------- ------- -----------
Basic earnings per share GBP0.27 GBP0.06 GBP0.27
Diluted earnings per share GBP0.26 GBP0.05 GBP0.26
-------------------------- ------- ------- -----------
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, for 2021, the cost of
cash and equity-settled share based payments, and the weighted
average number of ordinary shares outstanding:
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
----------------------------------------------- -------- --------- -----------
Adjusted earnings per share
Profit for the year attributable to ordinary
shareholders 4,437 920 4,451
Add back (per note 5):
Non-recurring items after tax - - 522
Unrealised gain on derivative contracts after
tax (gross gain, before tax, of GBP3,355,000) (2,718) (1,011) (2,709)
Share based payments after tax - 155 202
----------------------------------------------- -------- --------- -----------
Adjusted basic profit for the period 1,719 64 2,466
----------------------------------------------- -------- --------- -----------
Adjusted earnings per share GBP0.10 GBP0.004 GBP0.15
Diluted adjusted earnings per share GBP0.10 GBP0.004 GBP0.14
----------------------------------------------- -------- --------- -----------
7. Taxation
The tax charge for the period has been estimated using a rate of
19% on taxable profits. The Group has incurred a charge against
deferred tax in the period, rather than a current tax charge.
Deferred taxes at the balance sheet date have been estimated
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 from 1 April 2023 increases from the
current 19% to 25%.
8. Dividends
The directors do not propose an interim dividend in relation to
2022 (2021: nil per share).
9. Intangible assets
Software
Operating Customer and
Goodwill licence books systems Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- --------- -------- -------- ---------
Cost
At 1 January 2022 - 62 686 1,079 1,827
Additions 230 142 - 1,205 1,577
------------------------------- -------- --------- -------- -------- ---------
At 30 June 2022 230 204 686 2,284 3,404
------------------------------- -------- --------- -------- -------- ---------
Amortisation
At 1 January 2022 - 14 473 7 494
Charge for the year - 1 172 159 332
------------------------------- -------- --------- -------- -------- ---------
At 30 June 2022 - 15 645 166 826
------------------------------- -------- --------- -------- -------- ---------
Net book value at 30 June 2022 230 189 41 2,118 2,578
------------------------------- -------- --------- -------- -------- ---------
Investments in intangible assets include the costs related to
the formation of the Yü Smart business which will install, maintain
and finance smart meters, and provide electric vehicle charger
installations. Goodwill arises on the purchase of assets from
Magnum Utilities Limited, including the proven management and
support team and operational policies and procedures. Investments
also include the costs to obtain appropriate licences and
accreditations and bring the business into operation.
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.
For comparative purposes, the net book value of intangible
assets decreased from GBP606,000 at 1 January 2021 to GBP359,000 at
30 June 2021.
10. Property, plant and equipment
Fixtures
Freehold Freehold and Computer
land property fittings equipment Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- --------- --------- ---------- --------
Cost
At 1 January 2022 150 3,274 337 353 4,114
Additions - - - 53 53
Disposals - - - - -
--------------------- -------- --------- --------- ---------- --------
At 30 June 2022 150 3,274 337 406 4,167
---------------------- -------- --------- --------- ---------- --------
Depreciation
At 1 January 2022 - 73 103 187 363
Charge for the year - 55 57 56 168
Disposals - - - - -
--------------------- -------- --------- --------- ---------- --------
At 30 June 2022 - 128 160 243 531
---------------------- -------- --------- --------- ---------- --------
Net book value at 30
June 2022 150 3,146 177 163 3,636
---------------------- -------- --------- --------- ---------- --------
For comparative purposes, the net book value of property, plant
and equipment assets increased from GBP1,377,000 at 1 January 2021
to GBP3,776,000 at 30 June 2021 as a result in the investment in
the Group's freehold property in Leicester.
11. Right-of-use assets and lease liabilities
Right-of-use
assets
Group GBP'000
------------------------------- ------------
Cost
At 1 January 2022 799
Additions -
Disposals -
------------------------------- ------------
At 30 June 2022 799
------------------------------- ------------
Depreciation
At 1 January 2022 606
Charge for the year 40
Disposals -
------------------------------- ------------
At 30 June 2022 646
------------------------------- ------------
Net book value at 30 June 2022 153
------------------------------- ------------
The Group has a lease arrangement for its office facilities in
Nottingham. Other leases are short term or of low value underlying
assets.
For comparative purposes, the net book value of right-of-use
assets decreased from GBP273,000 at 1 January 2021 to GBP233,000 at
30 June 2021.
12. Trade and other receivables
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
------------------------------------------ -------- -------- -----------
Current
Gross trade receivables 23,320 11,017 11,618
Provision for doubtful debts and expected
credit loss (13,672) (6,272) (6,007)
------------------------------------------ -------- -------- -----------
Net trade receivables 9,648 4,745 5,611
Accrued income - net of provision 14,994 8,569 21,972
Prepayments 3,854 2,094 4,183
Other receivables 4,029 1,901 5,573
Financial derivative asset 5,534 1,876 3,102
------------------------------------------ -------- -------- -----------
38,059 19,185 40,441
------------------------------------------ -------- -------- -----------
Non-current
Financial derivative asset 1,793 - 870
------------------------------------------ -------- -------- -----------
Movements in the provision for doubtful debts and expected
credit loss in gross trade receivables are as follows:
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
------------------------------------------ ------- ------- -----------
Opening balance 6,007 5,162 5,162
Provisions recognised less unused amounts
reversed 10,813 1,110 4,185
Provision utilised in the year (3,148) - (3,340)
------------------------------------------ ------- ------- -----------
Closing balance - provision for doubtful
debts and expected credit losses 13,672 6,272 6,007
------------------------------------------ ------- ------- -----------
The directors have assessed the level of provision at 30 June
2022 by reference to the recoverability of customer receivable
balances post the year end, and believe the provision carried is
adequate.
The total net impairment losses on financial and contract assets
of GBP9,614,000 (30 June 2021: GBP632,000 and 31 December 2021:
GBP4,799,000) consists of a credit of GBP1,199,000 (30 June 2021
credit: GBP478,000 and 31 December 2021 charge: GBP614,000) for
expected credit loss on accrued income, and GBP10,813,000 (30 June
2021 charge: GBP1,110,000 and 31 December 2021 charge:
GBP4,185,000) provision for bad debts and expected credit loss on
trade receivables.
The directors consider that the carrying amount of trade and
other receivables approximates to their fair value due to their
maturities being short term.
The current and non-current financial derivative asset of
GBP7,327,000 (30 June 2021: GBP1,876,000 and 31 December 2021:
GBP3,972,000) 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 from the start of 2021 due to the significant
increase in forward gas and power market prices.
13. Cash and cash equivalents
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
------------------------- -------- -------- -----------
Cash at bank and in hand 15,657 11,473 7,049
------------------------- -------- -------- -----------
15,657 11,473 7,049
------------------------- -------- -------- -----------
The cash and cash equivalents balance 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.
14. Trade and other payables
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- -----------
Current
Trade payables 3,134 2,272 3,690
Accrued expenses and deferred income 31,783 17,589 34,545
Lease liabilities 109 80 107
Tax and social security 5,176 5,583 6,188
Other payables 8,552 4,915 5,213
------------------------------------- -------- -------- -----------
48,754 30,439 49,743
------------------------------------- -------- -------- -----------
Non-current
Accrued expenses and deferred income 4,139 3,330 381
Lease liabilities 104 234 160
------------------------------------- -------- -------- -----------
4,243 3,564 541
------------------------------------- -------- -------- -----------
The Group had previously taken advantage of the UK Government's
Covid-19 business relief schemes. Such liabilities have now been
settled in full and were previously included in tax and social
security (30 June 2021: GBP3,400,000 and 31 December 2021:
GBP1,400,000).
Current accrued expenses at 30 June 2022 includes the Group's
liability to pay Ofgem the Renewable Obligation payment for the
scheme period ended 31 March 2022. This liability was settled
on-time on the payment due date of 31 August 2022.
15. 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; and
c) liquidity risk.
The Group has limited exposure to foreign exchange risk, save
for the impact on global commodity markets.
(a) Commodity hedging 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 30 June 2022 for
those contracts not assumed to be strictly for "own use" is a gain
of GBP3,355,000 (30 June 2021: gain of GBP1,248,000 and 31 December
2021: gain of GBP3,344,000). See note 12 for the corresponding
derivative financial asset.
Sensitivity analysis in relation to the movement in energy
commodity markets were noted in the annual financial
statements.
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 GBP250m at certain
periods. 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.
The Board is aware of the Government's proposed energy price
support package to business to assist in mitigating the impact on
significant price increases which may reduce the likelihood of
additional bad debt costs in the future.
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 financing 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.
(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.
16. Share capital and reserves
30 June 30 June 31 December 31 December
2022 2022 2021 2021
Share capital Number GBP'000 Number GBP'000
--------------------------------- ---------- -------- ----------- -----------
Allotted and fully paid ordinary
shares of GBP0.005 each 16,566,215 83 16,316,215 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 Group movement in reserves is as per the statement of
changes in equity.
Share capital represents the value of all called up, allotted
and fully paid shares of the Company. On 13 May 2022, 250,000 share
option were exercised at a price of 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.
17. 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 30 June 31 December
Date of grant term Commencement Lapse price schedule 2022 2021
--------------- -------- ------------- -------------- -------- --------- ------------ ------------
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 43,950
6 April 2017 6.5 6 April 2020 6 April 2027 GBP2.844 1 87,900 87,900
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 59,084
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 48,497
25 February 25 February 25 February
2019 3 2022 2029 GBP0.005 1 - 250,000
1 February
18 June 2019 3 1 August 2022 2023 GBP1.40 2 56,570 62,483
4 October 2020 3 30 April 2023 4 October 2030 GBP0.005 3 210,696 210,696
4 October 2020 3 30 April 2024 4 October 2030 GBP0.005 3 172,388 172,388
1 June 2021 3 30 April 2024 4 October 2030 GBP0.005 3 - 76,616
13 May 2022 3 30 April 2024 4 October 2030 GBP0.005 3 38,308 -
--------------- -------- ------------- -------------- -------- --------- ------------ ------------
804,932 1,099,153
--------------- -------- ------------- -------------- -------- --------- ------------ ------------
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. The SAYE shares were
exercised in full in early H2 2022 as disclosed in note 21.
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:
30 June 31 December
2022 2021
shares shares
------------------------------------- --------- -----------
Balance at the start of the period 1,099,153 1,290,699
Granted 38,308 76,616
Forfeited (82,529) (233,002)
Lapsed - -
Exercised (250,000) (35,160)
------------------------------------- --------- -----------
Balance at the end of the period 804,932 1,099,153
------------------------------------- --------- -----------
Vested at the end of the period 326,970 278,473
------------------------------------- --------- -----------
Exercisable at the end of the period 326,970 278,473
------------------------------------- --------- -----------
Weighted average exercise price for:
Options granted in the period GBP0.005 GBP0.005
Options forfeited in the period GBP0.10 GBP1.88
Options exercised in the period GBP0.005 GBP0.005
------------------------------------- --------- -----------
Exercise price in the range:
From GBP0.005 GBP0.005
To GBP0.005 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:
30 June 31 December
2022 2021
------------------------------------------------------ ------- -----------
Dividend yield 0% 0%
Risk-free rate 1.5% 1.5%
Share price volatility 109.7% 114.6%
Expected life (years) 2 years 3 years
Weighted average fair value of options granted during
the period GBP2.07 GBP2.30
------------------------------------------------------ ------- -----------
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:
30 June 31 December
2022 2021
GBP'000 GBP'000
------------------------------------------- -------- -----------
Equity-settled share based payment expense 48 237
Cash-settled share based payment expense - 12
------------------------------------------- -------- -----------
Total share based payment charge 48 249
------------------------------------------- -------- -----------
Cash-settled share based payment expense in 2021 relates to
employer's National Insurance payable on unapproved share options
when exercised.
18. 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 30 June 2022 (30
June 2021: nil).
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 Ltd, 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.
Included in other receivables of 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 30 June 2022 (2021:
GBPnil).
19. 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 the period the Group paid GBP60,000 in lease
rental and service charges to CPK Investments Limited (30 June
2021: GBP60,000). There was no amount owing to CPK Investments
Limited at 30 June 2022 (2021: GBPnil).
All transactions with related parties have been carried out on
an arm's length basis.
20. Net cash/(net debt) reconciliation
The net cash/(net debt) and movement in the period were as
follows:
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -----------
Cash and cash equivalents 15,657 11,473 7,049
Lease liabilities (213) (314) (267)
Borrowings - - -
-------------------------- -------- -------- -----------
Net cash 15,444 11,159 6,782
-------------------------- -------- -------- -----------
Borrowings Leases Cash Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- -------- -------- --------
Net cash/(net debt) as at 1 January
2022 - (267) 7,049 6,782
Cash flows - 61 8,625 8,686
Interest and other changes - (7) (17) (24)
------------------------------------ ---------- -------- -------- --------
Net cash/(net debt) as at 30 June
2022 - (213) 15,657 15,444
------------------------------------ ---------- -------- -------- --------
21. Post-balance sheet events
On 9 August 2022 the Group announced the exercise of 56,570 Save
As You Earn share options at an exercise price of GBP1.40 per
share.
On 8 September 2022 there was an announcement that the
Government would launch an energy price support scheme for domestic
and non-domestic customers to mitigate some of the impact of
increased prices due to high global commodity markets. The scheme
is anticipated to run from 1 October 2022 for a period of six
months.
There are no other significant or disclosable balance sheet
events.
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