24 September 2024
Yü Group
PLC
("Yü
Group", the "Company" or the "Group")
Results for the six months to
30 June 2024
CONTINUED PROFITABLE GROWTH
PROVIDING MATERIALLY INCREASED SHAREHOLDER
RETURNS
Yü Group (AIM: YU.), the independent
supplier of gas and electricity, meter asset owner, and installer
of smart meters to the UK corporate sector, is pleased to announce
its unaudited half-year results for the six months to 30 June
2024.
Key
indicators
|
£m unless stated
|
Six months to 30
June
|
Twelve
months to 31 December
|
|
|
H1 24
|
H1
23
|
Change
|
FY
23
|
|
Financial
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
312.7
|
194.9
|
+60%
|
460.0
|
|
Adjusted
EBITDA1
|
20.4
|
13.7
|
+49%
|
42.6
|
|
Profit before tax
|
19.8
|
8.9
|
+122%
|
39.7
|
|
Net cash inflow
|
56.9
|
17.7
|
+221%
|
13.5
|
|
Net Cash
|
86.8
|
36.6
|
+137%
|
32.1
|
|
Earnings per share
(pence)
(adjusted, fully diluted)
|
88p
|
58p
|
+52%
|
182p
|
|
Dividend per share
(pence)
|
19p
|
3p
|
+533%
|
40p
|
|
|
|
|
|
|
|
Operational
|
|
|
|
|
|
Average monthly bookings
|
46.9
|
51.3
|
-9%
|
55.5
|
|
Meter points supplied
(#'000)
|
72.3
|
39.7
|
+82%
|
53.4
|
|
Contracted revenue:
|
|
|
|
|
|
· for
the next financial year
|
417
|
264
|
+58%
|
520
|
|
· in
aggregate
|
945
|
557
|
+70%
|
826
|
|
TrustPilot Score (#)
|
4.3
|
3.5
|
+0.8
|
4.1
|
|
Smart meter installations
(#'000)
|
9.0
|
4.0
|
+125%
|
8.5
|
|
Smart meter assets
ILARR2
|
0.6
|
0.0
|
+0.6
|
0.2
|
Financial performance
· Revenue increased 60% to £312.7m (H1 23: £194.9m) with strong
organic growth in meter points.
· Adjusted EBITDA increased 49% to £20.4m (H1 23: £13.7m),
representing a 6.5% margin (H1 23: 7.0%) in line with management
expectations.
· Strong
net cash position of £86.8m (H1 23: £36.6m). Net cash inflow of
£56.9m (H1 23: £17.7m), including return of £49.8m cash on deposit
(H1 23: £16.5m outflow) from previous hedging counterparty, and
after £10.2m of capital payments through share buy-back and
dividends.
· EPS
grew 52% to 88p (H1 23: 58p) (adjusted, fully diluted
basis).
· In
line with our progressive dividend policy, a materially increased
interim dividend of 19p per ordinary share (H1 23: 3p) to be paid
in December 2024.
Operational highlights
· Continued strong organic growth with average monthly bookings
of £46.9m (H1 23: £51.3m) and volume of energy supplied to
customers increasing by 110% over the period despite more
normalised commodity markets following the high prices in 2022 and
2023.
· Commodity hedging arrangements working very well and providing
efficient and cost-effective access to gas, electricity and green
markets since the February 2024 signing of a bespoke five-year
agreement with the Shell group.
· Yü
Smart continuing to scale, with 9,000 new smart meters
installations in H1 24, up 125% on H1 23 (4,000 meters). New
in-house engineering training and excellence centre fully embedded,
allowing flexibility to increase headcount quickly as smart meter
installations scale. Headcount increased to 101 field installation
engineers (H1 23: 25).
· Trustpilot rating of 'excellent' following continued focus
on delivery of customer service and shift to digital channels to
enable customers to self-serve. Management continues to target
further improvement in customer service metrics.
· Recognised for the second consecutive year as a 'Top 100 Best
Places to Work' by The Sunday
Times and promoted to the 'Big Organisations'
category.
Outlook
· On
track to deliver continued growth in revenue, smart meter
installations, meter points and energy volume supplied in FY24 and
FY25 as the Group takes advantage of the £50bn+ market
opportunity.
· EPS
forecasted to increase in H2 24 (from H1 24), in line with market
expectations, as the Group continues to deliver on its
strategy.
· Progressive dividend policy provides scope for increased
shareholder returns under growth whilst maintaining dividend cover
of at least 3x in the medium term.
· Strong
net cash position and cash generation, providing additional
opportunity including £9.0m early investment (otherwise due in
August 2025) of renewable obligation certificates to secure a
discount.
· The
Board remain focussed on targeting continued growth in revenue, EPS
and dividend over the medium term as returns are delivered from the
investments made in digital by
default and Yü Smart.
Bobby Kalar, Chief Executive Officer, said:
"Once again, my team has delivered an
excellent performance, and I'm in no doubt that this continued
momentum will deliver a strong full year performance and further
enhance our contracted forward order book. Our simple yet effective
strategy to build strong foundations has resulted in the continued
delivery of our rapid and sustainable growth.
I believe the numbers should do the
'talking'. Revenue is up 60%, adjusted EBITDA is up 49%, cash in
the bank up 137%, meter points on supply up 82% and contracted
revenue increased by 70%. I'm delighted and rightly proud of the
performance of the business against a challenging period of extreme
volatility in the market.
Yü Smart continues to go from
strength to strength. Like all new startups, we've experienced
growing pains and building teams who share our values and habits
has required management attention. However, I'm satisfied good
progress has been made and we have positioned ourselves for
significant meter installation growth. Smart meter installations
are up by 125% and engineering headcount is up 300%.
Our February 2024 new trading deal
with Shell Energy remains strong and their mature and collaborative
approach is already leveraging opportunities not available to us
before. I look forward to further strengthening our
relationship.
The lack of Institutional engagement
has been disappointing, despite management delivering colossal
value year on year. Many AIM companies are questioning the market's
future and the desirability of remaining listed. This has been
reflected in the reduction of quoted companies. The AIM market's
future is delicately balanced and won't be helped if the current
government further punishes and disincentivises entrepreneurial
high growth companies. This lack of recognition is frustrating;
however, we remain focussed on delivering FY24 forecasts and
positioning the Group for another record-breaking performance in
2025. I would like to thank my fantastic team and in particular the
Board who continue to challenge and encourage the executive
team."
Analyst presentation
A presentation for analysts will be
held at 9.00am today, 24 September 2024, at the offices of Teneo,
The Carter Building, 11 Pilgrim Street, London, EC4V
6RN.
1 Adjusted EBITDA is reconciled to operating profit in the
finance review and note 5 to the interim financial
statements.
2 ILARR represented Index-linked annualised recurring revenue
from investment in Smart Meters.
For
further information, please contact:
|
Yü
Group PLC
Bobby Kalar
Paul Rawson
|
+44 (0) 115 975 8258
|
|
Panmure Liberum
Edward Mansfield
Satbir Kler
Anake Singh
|
+44 (0) 20 3100 2000
|
|
Teneo
Giles Kernick
Tom Davies
|
+44 (0) 20 7353
4200
|
Notes to Editors
Information on the Group
Yü Group PLC 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 (in a £50bn+ addressable
market) and value for all of our stakeholders, built on strong
foundations and with a robust hedging policy. The Group has
achieved a compound annual growth rate of over 60% over the last
four years, and has significantly improved margin and profitability
performance. In 2023 the Group launched Yü Smart to support growth
through new opportunities in smart metering
installation.
Chief Executive Officer's Statement
Significant strategic progress
I'm pleased to report a further set
of strong results, aligned with our high growth, profitable
evolution in a significant market, led by our digital by default approach and
adoption of smart meter technology and underpinned by our
experienced team and robust risk management.
Disrupting the energy supply market
The Group continues to be recognised
as one of the fastest growing suppliers in the business-to-business
space, with market share increasing from 1.4% at December 2023 to
1.8%[1]. Whilst a modest share of the
market today, there remains considerable opportunity ahead to take
business from the established and less focussed energy
majors.
The 60% increase in revenue to
£312.7m, and 82% increase in supplied meter points to 72,300,
provides evidence of our progress to date, which is all organic and
follows our robust business selection criteria.
Whilst I or my team will not be
complacent, I am excited to report we see further opportunities
ahead. The Group continues to invest in its customer acquisition
activities and is exploring new partnerships and market segments to
provide new growth channels.
We exit H1 24 with record forward
contracted revenue, with £945m (H1 23: £557m, FY23: £826m) secured
under contract to deliver over the coming four years.
With the market opportunity
available organically there is limited current focus on
acquisitions of customer books, though we will remain open should
opportunities become available.
Our Yütility
Simplicity offering allows small and
medium sized business customers to access simple, reliable and
value for money business utilities. We are passionate in providing
this service in a sector where often customers, and third-party
intermediaries, can be over-looked.
In short, our already secured
contract book, investment in digital by default and Yütility Simplicity approach, in a
substantial £50bn+ market, provides me with significant confidence
in the opportunity ahead.
Scaling our smart metering activities
Our strategy to develop our internal
smart metering capability continues to deliver clear results. Smart
meters provide significant benefits to the customer in providing
clear energy measurement to facilitate better energy management
decisions, and to allow accurate billing of energy supply. These
benefits also support the supplier, enabling better energy hedging
decisions and allowing the offering to new products or solutions to
customers, such as time of
use or pay as you
go tariffs.
I'm pleased to note the increase to
9,000 smart meter installations in the first six months of the
year, an increase of 125% on the same period in 2023. This growth
has been enabled through our investment in our specialist training
and excellence centre in Leicester, which provides our metering
experts with the technical, safety and customer service training to
the Yü Smart way of working.
The increase in engineering
headcount to 101, from 25 at the end of June 2023, has been
facilitated through this new training and excellence centre. The
Group now benefits from a national coverage, with productivity
efficiencies expected as engineer headcount increases
further.
The financial benefits to the Group
from the strategy are also starting to become more material.
Billing from actual readings, rather than estimates, provides
support to cash collection rates from customers. The investment in
meter assets is also increasing, which provides an index-linked
annuity income expected for a period of 15 years+ as the meters
continue to generate revenue irrespective of whether the Group
supply the end property.
In H1 24 the Group has invested
£1.8m in 9,000 new smart meter assets, which is in addition to the
£0.8m invested in FY23 for 4,100 meters. The ILARR from these
13,100 smart meter assets of £0.6m therefore represents an
approximate 4.3 year payback on a long-term (15+ year) asset, with
an index-linked income stream.
We continue to scale our engineering
capability and focus on efficiency of our operations, and whilst we
set an ambitious 25,000 full year target for new meter
installations during 2024, I am pleased to say that this is still
within reach.
Continually improving the Group's
foundations
The Board remains focussed on
ensuring the Group delivers for shareholders and other
stakeholders, and that we achieve controlled and well governed
growth.
I was delighted that our investment
in people and encouraging a challenging yet rewarding culture has
again been recognised in the Times' Top 100 Best Places to Work
awards, and this year being categorised as a Big Organisations reflecting our
increased scale.
It is also very rewarding to see
colleagues join the team, and talent develop within the business,
who can take advantage of career opportunities that present
themselves as the business grows. We have also hired-in significant
and experienced talent where appropriate, with new colleagues often
flourishing when joining a disrupter business where their proven
experience (often from one of the large multi-national competitors)
can make a real and tangible impact.
Our TrustPilot score has improved
though we continue to evolve further in this area, to provide
additional differentiation in our customer positioning. We continue
to invest in enabling customer journey improvements to allow our
customers the simple approach to their utility needs. Whilst
recognising we are not always perfect, the team and I are focussed
on continually improving our performance, systems and processes,
and learning fast from any mistakes.
The Group's new five-year exclusive
commodity trading agreement signed in February 2024 with the Shell
group is providing material benefit. The agreement followed a
significant period of due-diligence either way, enabling the Group
to access efficient, cost and capital-effective access to long term
commodity markets, and proving the Group's maturity in operations.
This new agreement with Shell is sized to meet substantial growth
over the coming years as the Group scales and I remain excited by
the opportunity this enables.
Finally, the capital reduction
process through the cancellation of the share premium account of
the Company in July 2024 has been concluded. Whilst largely
technical in nature, with the change increasing distributable
reserves by £12.3m through the reduction of capital, it provides
additional balance sheet flexibility in the context of the
significant increase in the Group's cash position.
Outlook
The Board targets continued
substantial revenue growth based on the existing forward contract
book and through organic growth. An ambition of 100,000 meters
supplied early in 2025 is a stretch milestone targeted by the
Group.
Smart meter installations in 2024 of
25,000 are targeted, equivalent to exiting the year with an
approximate £1.2m ILARR, whilst also providing further benefits to
energy supply profitability.
We expect to maintain our strong EPS
development in H2 24 from H1 24 is forecasted as revenue growth
flows through to increased profit.
Robust net cash balance expected at
31 December 2024, reflecting strong full year operational cash
inflow and after £9.0m ROCs purchased in advance.
Progressive dividends through higher
EPS and reduction to dividend cover to 3x+ over the short to medium
term provides for potential increased shareholder
distribution.
Finance review
Delivering robust financial metrics
The Group results continue to
deliver against our robust financial framework, leading to
significant organic growth with increased profitability and
enabling increased dividend distributions to shareholders. In
overview:
· Revenue increased 60% to £312.7m
· Aggregate forward contracted revenue up 70% to
£945m
· EPS,
adjusted and fully diluted, up 52% to 88p
· Adjusted EBITDA and Profit Before Tax increased by 49% and
122% respectively
· Net
cash inflow of £56.9m, with closing net cash up 137% to
£86.8m
· £1.8m
investment in smart meters. ILARR8 from smart metering
assets of £0.6m
· Interim dividend of 19p, up from 3p H1 23
|
Financial metrics
|
Six months to 30
June
|
Twelve
months to 31 December
|
|
£m unless stated
|
H1 24
|
H1
23
|
Change
|
FY
23
|
|
|
|
|
|
|
|
Revenue
|
312.7
|
194.9
|
+60%
|
460.0
|
|
Gross margin %
|
13.7%
|
17.2%
|
(3.5%)
|
18.1%
|
|
Net Customer Contribution1 %
|
11.7%
|
13.1%
|
(1.4%)
|
14.9%
|
|
General overheads2 %
|
(5.2%)
|
(6.0%)
|
+0.8%
|
(5.7%)
|
|
Adjusted EBITDA %
|
6.5%
|
7.0%
|
(0.5%)
|
9.3%
|
|
Adjusted EBITDA
|
20.4
|
13.7
|
+49%
|
42.6
|
|
|
|
|
|
|
|
Profit before tax
|
19.8
|
8.9
|
+122%
|
39.7
|
|
Net
cash inflow
|
56.9
|
17.7
|
+221%
|
13.5
|
|
Net
Cash3
|
86.8
|
36.6
|
+137%
|
32.1
|
|
|
|
|
|
|
|
Earnings per share (adjusted,
fully diluted)
|
88p
|
58p
|
+52%
|
182p
|
|
Dividend per share
|
19p
|
3p
|
+533%
|
40p
|
|
|
|
|
|
|
|
1year forward contracted
revenue4
|
417
|
264
|
+58%
|
520
|
|
Aggregate contracted
revenue5
|
945
|
557
|
+70%
|
826
|
|
Non-contracted annualised
revenue6
|
30
|
30
|
-
|
29
|
|
Equiv. volume of energy
supplied7
|
1.0TWh
|
0.5TWh
|
+110%
|
1.2TWh
|
|
Smart meter assets
ILARR8
|
0.6
|
0.0
|
+0.6
|
0.2
|
|
Overdue customer
receivables9
|
3 days
|
4
days
|
+1
day
|
4
days
|
Substantial revenue progression
Revenue of £312.7m represents growth
of 60% on H1 23; and is already 68% of the FY23 total
revenue.
This growth follows the substantial
increase in meter points supplied by the Group (from 39,700 at H1
23 to 72,300 at H1 24), and the 110% growth in the equivalent
volume of energy supplied (EQVS) 7 from 0.5TWh in H1 23
to 1.0TWh in H1 24.
The increase is despite mild
temperatures experienced in Spring 2024, which softened customer
consumption, reducing revenue by c£9m in the period. In addition,
tariffs charges to customers are based on a more normalised energy
market, which has led to a lower contribution from uncontracted
customers (on variable tariffs which track the prevailing energy
market) and lower tariffs secured in our contract
portfolio.
Equivalent volume of energy supplied
(EQVS) is a new measure to provide additional insight as to the
volume of energy delivered to customers, based on electricity
volume equivalent and measured in terawatt hours (being one million
megawatt-hours ("MWh")). This is after considering that a MWh of
electricity is worth, in revenue terms, approximately 4x a MWh of
gas. Whilst the volume delivered is at a lower revenue per MWh,
this commodity market reduction is now largely already priced in
the tariffs included in forward contracted revenue.
Continued revenue progression is
forecast in view of the growth in volume and meter points, on more
normalised tariffs. The Group had £417m already contracted to
deliver in FY25, up 58% on the H1 23 position for FY24. Aggregate
contract revenue of £945m is up 70% on the prior year, a result of
increasing contract lengths.
In short, revenue growth has been
maintained and expected to continue into H2 24 and beyond in view
of increases in market share and visibility of forward contracted
revenue, though revenue growth in H1 24 has been limited to 60% due
to the lower commodity environment and mild spring
temperatures.
Increased adjusted EBITDA, PBT and EPS
Group adjusted EBITDA of £20.4m is
49% up on H1 23 and is 6.5% of revenue (H1 23: 7.0%).
Gross margin of 13.7% is below the
previous year (H1 23: 17.2%) reflecting the reduced volume due to
the weather impact, with some reduced margin as excess energy is
sold back. Margin is further reduced, in line with expectations,
due to a lower benefit from blend
and extend customer offers, certain higher industry costs
and the reduced proportion of variable based tariffs as commodity
markets have normalised.
Net customer contribution margin of
11.7% (H1 23: 13.1%) is after a 2% bad debt charge (H1 23: 4.1%) as
customer collections and the benefits of smart meters continue to
produce improving results. Cash collection in H1 24 remains strong
at 97.3% (H1 23: 98%), particularly when considering the high
growth in the period.
General overheads at 5.2% of revenue
are 0.8% lower than the 6.0% in H1 23. This overhead leverage
benefit, despite higher meter points and volume of energy supplied,
is a result of the cost to serve benefits from our digital by default investments, and
the continued scaling of Yü Smart.
Profit before tax for the period
increased 122% to £19.8m (H1 23: £8.9m) and is after a £1.4m charge
incurred on exit of the Group's previous energy trading
arrangement. Net finance income increased to £1.8m reflecting
significant cash generation and cash deposits held by the
Group.
|
Adjusted EBITDA reconciliation
£m
|
H1 24
|
H1
23
|
FY
23
|
|
Adjusted EBITDA
|
20.4
|
13.7
|
42.6
|
|
Adjusted items:
|
|
|
|
|
Loss on derivative
contracts
|
-
|
(4.2)
|
(3.0)
|
|
Depreciation and
amortisation
|
(1.0)
|
(0.7)
|
(1.5)
|
|
Non-recurring operational
costs
|
(1.4)
|
-
|
-
|
|
Statutory operating profit
|
18.0
|
8.8
|
38.1
|
|
Net finance income
|
1.8
|
0.1
|
1.6
|
|
|
|
|
|
|
Profit before tax
|
19.8
|
8.9
|
39.7
|
|
|
|
|
|
Following the increased profit
before tax, and after considering a higher corporate tax rate,
there remains significant growth in earnings per share on a basic,
reported, level, to 88p (H1 23: 44p) and on a fully diluted,
adjusted, basis also to 88p (H1 23: 58p).
Strong cash generation and cash position
|
Cashflow summary10
£m
|
H1 24
|
H1
23
|
FY
23
|
|
Adjusted EBITDA
|
20.4
|
13.7
|
42.6
|
|
Operating cashflow items:
|
|
|
|
|
Hedging related cash
collateral
|
49.8
|
(16.5)
|
(49.8)
|
|
Non-recurring
costs
|
(1.4)
|
-
|
-
|
|
Corporation tax
paid
|
(6.6)
|
-
|
(0.6)
|
|
Other working capital
movements
|
6.1
|
21.5
|
23.9
|
|
Operating cash flow
|
68.3
|
18.7
|
16.1
|
|
Investing activities
|
(3.1)
|
(0.4)
|
(1.5)
|
|
Financing activities: Debt, leases
and interest
|
1.9
|
(0.1)
|
(0.1)
|
|
Financing activities: Dividends and
buy-back
|
(10.2)
|
(0.5)
|
(1.0)
|
|
Net
cash movement in year
|
56.9
|
17.7
|
13.5
|
|
Closing cash balance
|
89.4
|
36.6
|
32.5
|
|
Net
cash
|
86.8
|
36.6
|
32.1
|
The Group benefits from a strong net
cash position of £86.8m (H1 23: £36.6m) which is net of £2.6m of
borrowings related to a specific £5.2m facility ringfenced for
smart meters.
The Group settled in August 2024 its
c£33.2m liability to Renewable Obligation Certificates ("ROCs") for
the year to 31 March 2024. In August 2024, a benefit from the
improved cash position, the Group purchased a further £9.0m of ROCs
in advance of the due date of 31 August 2025 to secure a discount
in costs.
Cash flow for the period includes
the return of £49.8m cash collateral held with our previous trading
counterparty, less £1.0m non-recurring costs paid on exit, as the
new hedging agreement with the Shell Group was signed. The Board do
not foresee the need to post further cash collateral under this new
five-year arrangement with Shell.
As a result of increased
profitability, the Group has utilised the majority of corporation
tax losses and therefore has made corporate tax payments of £6.6m
on account of FY23 and FY24 liabilities.
Other working capital movements
include the benefit of delayed ROCs payments (collected from
customers) and the outflow from investment in customer acquisition
costs to support sales growth.
The Board current forecast a strong
cash position building for the remainder of FY24 and beyond. This
considers continued capital investment (including in smart metering
and digital), the £9.0m of ROCs purchased in advance (otherwise due
August 2025) to secure a discount, and reflecting a forecast for
total dividends and share buy-back of £13.4m paid in the full
year.
Capital and Dividend
As noted above, the Company reduced
capital through a cancellation of the share premium account after
the 30 June 2024 reporting date. This capital reduction, dated 3
July 2024, totalled £12.3m which transfers from capital to retained
and distributable earnings.
The Company purchased 234,978 of
ordinary shares on 17 May 2024 for a consideration of £4.0m and
transferred the shares to treasury. These shares, which do not
attract voting rights or dividends whilst held in treasury, are
expected to be utilised to satisfy future option
exercises.
In line with its progressive
dividend policy, the Board declare an interim dividend of 19p per
share (H1 23: 3p per share), resulting in a forecasted payment of
£3.2m on the payment date of 20 December 2024. The Group's ordinary
shares will go ex-dividend on 21 November 2024, with a record date
of 22 November 2024.
Notes to finance review:
1 Net Customer Contribution is adjusted gross margin less bad
debt.
2 General overheads are overhead expenses, excluding bad debt,
charged to adjusted EBITDA.
3 Net Cash is cash held less borrowings, excluding lease
liabilities.
4 & 5
1year forward contract revenue represents
contracted revenue under energy supply contracts for the following
annual financial year. Aggregate contract revenue includes all
revenue contracted from the reporting date.
6 Non-contracted annualised revenue reflects the estimated value
of non-contracted energy supply to customers at the period end
date, based on the annualised volume of energy supplied and
relevant prices on that date.
7 Equivalent volume of energy supplied (EQVS) represents volume
of energy delivered to customers, where gas is converted to a proxy
value of electricity (utilising Ofgem benchmark's being 4MWh's of
gas to 1MWh of electricity).
8 ILARR represented Index-linked annualised recurring revenue
from investment in Smart Meters.
9 Overdue customer receivables represent the amount outstanding
and overdue, net of provisions and deferrals, to key customer
receivable balances compared with the revenue
recognised.
10 The statutory format cashflow statement is presented in the
condensed financial statements.
Condensed consolidated statement of profit and
loss and other comprehensive income
For the six months ended 30 June
2024
|
|
|
|
6 months
ended
30
June
2024
(Unaudited)
£'000
|
6 months
ended
30 June
2023
(Unaudited)
£'000
|
12 months
ended
31
December
2023
(Audited)
£'000
|
|
|
Revenue
|
|
312,678
|
194,899
|
460,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs before non-recurring items and
share based payment charges
|
|
(15,456)
|
(12,027)
|
(26,347)
|
|
|
Operating costs - non-recurring
items
|
5
|
(1,359)
|
-
|
-
|
|
|
Operating costs - share based payment
charges
|
|
|
|
|
|
|
Total operating costs
|
3
|
(18,520)
|
(12,498)
|
(27,605)
|
|
|
Net impairment losses on financial and contract
assets
|
13
|
(6,349)
|
(8,085)
|
(14,309)
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
18,010
|
8,759
|
38,082
|
|
|
Finance income
|
4
|
2,177
|
178
|
1,722
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
19,838
|
8,901
|
39,699
|
|
|
|
|
|
|
|
|
|
Profit and total comprehensive
income for the year
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
Basic
|
6
|
£0.88
|
£0.44
|
£1.85
|
|
|
|
|
|
|
|
Condensed consolidated balance sheet
At 30 June 2024
|
|
|
30
June
2024
(Unaudited)
£'000
|
30 June
2023
(Unaudited)
£'000
|
31
December
2023
(Audited)
£'000
|
|
ASSETS
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
Intangible assets
|
9
|
3,165
|
2,810
|
2,561
|
|
Property, plant and equipment
|
10
|
6,405
|
3,838
|
4,613
|
|
Right-of-use assets
|
11
|
2,736
|
1,533
|
1,676
|
|
Deferred tax assets
|
7
|
1,277
|
3,709
|
1,969
|
Trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Inventory
|
12
|
1,838
|
297
|
546
|
|
Trade and other receivables
|
13
|
75,448
|
53,794
|
127,222
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Trade and other payables
|
15
|
(117,321)
|
(73,070)
|
(123,845)
|
|
Corporation tax payable
|
7
|
(1,832)
|
-
|
(4,016)
|
|
Borrowings
|
16
|
(102)
|
-
|
(3)
|
Financial derivative liability
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
Trade and other payables
|
15
|
(15,450)
|
(6,276)
|
(1,281)
|
|
Borrowings
|
16
|
(2,515)
|
-
|
(352)
|
Financial derivative liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Share capital
|
19
|
85
|
83
|
84
|
|
Share premium
|
19
|
12,284
|
11,786
|
11,909
|
|
Merger reserve
|
|
(50)
|
(50)
|
(50)
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statement of changes in
equity
For the six months ended 30 June
2024
|
|
|
|
|
|
|
Balance at 1 January 2024
|
|
|
|
|
|
|
Total comprehensive income for the
period
|
|
|
|
|
|
|
Profit for the period
|
-
|
-
|
-
|
14,687
|
14,687
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners of the
Company
|
|
|
|
|
|
|
Contributions and
distributions
|
|
|
|
|
|
|
Equity-settled share based payments
|
-
|
-
|
-
|
528
|
528
|
|
Deferred tax on share based payments
|
-
|
-
|
-
|
-
|
-
|
|
Proceeds from share issues
|
1
|
375
|
-
|
-
|
376
|
|
Buy-back of shares
|
-
|
-
|
-
|
(3,995)
|
(3,995)
|
Equity dividend paid in the period
|
|
|
|
|
|
Total transactions with owners
of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2023
|
|
|
|
|
|
|
Total comprehensive income for the
period
|
|
|
|
|
|
|
Profit for the period
|
-
|
-
|
-
|
7,310
|
7,310
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners of the
Company
|
|
|
|
|
|
|
Contributions and
distributions
|
|
|
|
|
|
|
Equity-settled share based payments
|
-
|
-
|
-
|
471
|
471
|
|
Deferred tax on share based payments
|
-
|
-
|
-
|
-
|
-
|
|
Proceeds from share issues
|
-
|
1
|
-
|
-
|
1
|
Equity dividend paid in the period
|
|
|
|
|
|
Total transactions with owners
of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statement of cash
flows
For the six months ended 30 June
2024
|
|
|
6 months
ended
30
June
2024
(Unaudited)
£'000
|
6 months
ended
30 June
2023
(Unaudited)
£'000
|
12 months
ended
31
December
2023
(Audited)
£'000
|
|
Cash flows from operating
activities
|
|
|
|
|
|
Profit for the financial period
|
|
14,687
|
7,310
|
30,860
|
|
Adjustments for:
|
|
|
|
|
|
Depreciation of property, plant and
equipment
|
10
|
320
|
167
|
400
|
|
Depreciation of right-of-use assets
|
11
|
334
|
228
|
408
|
|
Amortisation of intangible assets
|
9
|
408
|
339
|
680
|
|
Loss on disposal
|
|
1
|
-
|
-
|
|
Loss on derivative contracts
|
|
-
|
4,221
|
3,046
|
|
(Increase) / decrease in inventory
|
|
(1,292)
|
48
|
(201)
|
|
(Increase) / decrease in trade and other
receivables
|
|
(1,926)
|
17,045
|
(27,848)
|
|
Transfer of cash collateral from / (to)
previous commodity trading counterparty
|
|
49,822
|
(16,500)
|
(49,820)
|
|
Increase in trade and other payables
|
|
5,339
|
3,900
|
49,584
|
|
National insurance on share options
exercised
|
|
-
|
-
|
(108)
|
|
Finance income
|
|
(2,177)
|
(178)
|
(1,722)
|
|
Interest received
|
|
2,177
|
-
|
1,278
|
|
Finance costs
|
|
349
|
36
|
105
|
|
Taxation charge
|
|
5,151
|
1,591
|
8,839
|
|
Corporation tax paid
|
|
(6,641)
|
-
|
(627)
|
Share based payment charge
|
|
|
|
|
Net cash from operating
activities
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
Purchase of property, plant and
equipment
|
|
(2,113)
|
(364)
|
(1,372)
|
Payment of software development
costs
|
|
|
|
|
Net cash used in investing
activities
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
New borrowings
|
|
2,250
|
-
|
356
|
|
Interest paid on borrowings
|
|
(20)
|
-
|
(4)
|
|
Interest paid on lease obligations
|
|
(63)
|
-
|
(81)
|
|
Other interest (paid) / received
|
|
(225)
|
142
|
(20)
|
|
Repayment of principal element of
borrowings
|
|
(29)
|
-
|
(1)
|
|
Repayment of principal element of lease
obligations
|
|
(267)
|
(268)
|
(496)
|
|
Net proceeds from share option
exercises
|
|
376
|
1
|
125
|
|
Cash paid on repurchase of shares
|
|
(3,995)
|
-
|
-
|
|
|
|
|
|
|
Net cash used in financing
activities
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
56,949
|
17,651
|
13,507
|
Cash and cash equivalents at the start of the
period
|
|
|
|
|
Cash and cash equivalents at the end
of the period
|
|
|
|
|
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
2024 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 2024 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 2024 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 2023, which is available on
the Group's investor website (yugroupplc.com). The comparative
figures for the year ended 31 December 2023 have been audited. The
comparative figures for the half year ended 30 June 2023, and the
actual figures for the half year to 30 June 2024, are
unaudited.
The accounting policies adopted in these
condensed consolidated half yearly financial statements are
consistent with the policies applied in the 2023 Group financial
statements.
The consolidated financial statements are
presented in British pounds sterling (£), which is the functional
and presentational currency of the Group. All values are
rounded to the nearest thousand (£'000), except where otherwise
indicated.
Going concern
The financial statements are prepared on a
going concern basis.
At 30 June 2024 the Group had net assets of
£52.2m (30 June 2023: £22.1m and 31 December 2023: £46.8m) and cash
of £89.4m (30 June 2023: £36.6m and 31 December 2023:
£32.5m).
Management prepares detailed budgets and
forecasts of financial performance and cash flow (including capital
commitments) over the coming 18 months as a minimum. 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 deliver strong results.
This has led to adjusted EBITDA (a close 'cash' profitability
measure) in H1 2024 of £20.4m (H1 2023: £13.7m and FY 2023:
£42.6m), which continues the very strong momentum in the Group's
results occurring since 2018. Management is confident in continuing
this improvement in profitability based on its business
model.
Profitability metrics are in line with
management expectations including strong gross margin as the Group
leverages its differentiated offer and analytics to optimise its
commercial position. Bad debt has decreased and is currently under
control, and the Group's investment in Digital by Default is set to
enable more efficient cost to acquire and cost to serve, as well as
further returns over the short to medium term.
Group cash liquidity at the operational level
has remained strong, with the key outflow related to energy
commodity arrangements as covered below. The Group has introduced a
specific debt facility related to certain specific smart metering
asset financing arrangements. This debt facility is expected to be
repaid from the investment in such smart meters and provides some
cost of capital benefit. Despite this debt introduction, the Group
remains in a significant net cash position.
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.
Customer receivables and bad debt
The Board considers customer receivable risks
in view of the wider market, the energy price environment and the
Group's ability to contract and protect its position in respect of
late or non-payment. The performance for H1 2024 continues from the
significant improvement in 2023 as a result of improvements to
processes, including new analysis, changes in contracting
strategies, increase in teams and the expansion of the Group's
smart meter rollout to improve customer outcomes.
The Board performed sensitivities on material
changes to customer payment behaviour including the timing of
payments or if bad debt levels were to increase.
The Group has extensive mitigating actions in
place. This includes credit checks at point of sale and throughout
the customer lifecycle, the requirement for some customers to pay
reasonable security deposits at the point of sale, and the offering
(ensuring compliance with regulation and good industry practice) of
pay as you go products which enable certain customers to access
more favourable tariffs. The Group also supports customers with
payment plan arrangements, for those customers who will, when able,
provide payment, and will ultimately (for some customers, as
appropriate based on the circumstances) progress legal and/or
disconnection proceedings to mitigate further bad debt.
The Board also notes that the prices now being
quoted to customers are back to a more normalised level, broadly
equivalent to tariffs charged prior to the rapid increase in global
commodity markets experienced in 2021 and 2022.
In view of the reduced market prices, and the
Group's ability to manage debt through various mitigating actions,
the Board is confident that there will be no material impact
relevant to the going concern assumption.
Hedging arrangements and new Trading
Agreement
A new five year commodity trading arrangement
between Shell Energy Europe Limited ("Shell") and the main entities
of the Group (including Yü Group PLC, Yü Energy Holding Limited and
Yü Energy Retail Limited), signed February 2024, ("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. This hedging position and the Board defined risk strategy
has mitigated, and is expected to continue to mitigate, the impact
on the Group from underlying movements in global commodity
markets.
As part of the Trading Agreement, Shell
provides exclusive access to commodity products and holds security
over the main 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's main trading entities. In
return, Shell provides cost and value efficient market access
without the need to post cash collateral in the normal course of
operation. The new arrangement with Shell provides significant
advantages to the Group's arrangements, fully supporting the
Group's ambitious growth plans.
The Board carefully modelled in detail, and
continues to monitor, certain covenants related to profitability,
net worth and liquidity associated with the new Trading Agreement
to assess the likelihood of any breach of such agreement and the
impact any such breach would likely have. Such scenarios include
reduced gross margin and increased bad debt, and the impact this
would have on the ability to maintain compliance with
covenants.
After a detailed review, the Board has
concluded that there are no liquidity issues likely to arise in
relation to the hedging arrangements and current market
context.
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. The Board also considers that
there is sufficient headroom to ensure the Group meets covenants
based on various downside scenarios assessed.
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 can
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 2023 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 with some traditional (non-smart) meter types 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 from industry
available historical actual usage data, as appropriate for each
site supplied by the Group.
Revenues for the supply of metering services or
the installation of metering assets are, where for Group companies,
eliminated on consolidation.
Government support to customers
The Energy Bills Relief Scheme ("EBRS"), and
certain less material (for the Group) other schemes, implemented by
HM Government through BEIS, were in place from 1 October 2022 to 31
March 2023 and resulted in customers being provided financial
support through a contribution to their energy charges. The Energy
Bills Discount Scheme ("EBDS") was in place from 1 April 2023 to
the balance sheet date, replacing EBRS.
Under the EBRS and EBDS arrangement, amounts
receivable from BEIS do not impact the Group's contract with
customers, and therefore the amounts contributed under the schemes
are treated as a cash payment towards customer bills. As such,
revenue recognised is based on the amount chargeable per the
contract with customers which is gross of the amount contributed
through EBRS and EBDS.
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 exclude any cash collateral posted with third parties
and bank accounts which are fully secured and locked (for day to day access) by the
Group's bankers (or others). It also excludes cash held in bank
accounts which have, as part of government schemes such as EBRS,
cash balances which are not yet transferred to the Group's main
operating bank accounts.
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. Most 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 period end.
To the extent that any commodity purchase
contracts do not meet the criteria listed above, then such
contracts 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 18.
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. After initial recognition, intangible assets
acquired in a business combination are reported at their initial
fair value less amortisation and accumulated impairment
losses.
Goodwill arising on business combination is
accounted for in line with the business combination
disclosure.
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
Goodwill is not amortised, as it is subject to
impairment review.
Property, plant and equipment
Items of property, plant and equipment are
measured at cost less accumulated depreciation and accumulated
impairment losses.
Plant and machinery includes the Group's
investment in smart metering assets, which are recognised at cost,
including those internal employee and other costs attributable to
the installation and commissioning of the asset to bring it into
use.
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
• Plant and
machinery
-
5 to 15 years
• Computer
equipment
-
3 years
• Fixtures and fittings
-
3 years
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 Group's policy in
relation to business combinations is as disclosed in the Group's
2023 annual report.
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 assesses 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 assets
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.
Inventory
Inventory is held at the lower of cost, being
all directly attributable costs, and net realisable
value.
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
predominantly delivered from its principal activity, which is the
supply of utilities to business customers in the UK. However,
following the development of the Yü Smart activity and the ambition
to increase activities in the financing of smart meters, the Group
introduced new operational segments in 2023.
Segmental profit is measured at two profit
levels, being operating profit, as shown on the face of the
statement of profit and loss, and adjusted EBITDA, as utilised by
management to provide the underlying cash-like profitability of the
segment (and as reconciled to operating profit in note
5).
Assets, liabilities and cash flows related to
the various segments are managed at the Group level and are
therefore not allocated or disclosed for each segment. The Group
does disclose non-current assets and additions of such assets,
allocation of goodwill, and trade and other receivables by segment
in line with its management of the Group's operations. The 30 June
2023 segmental analysis is not provided as a result of the
introduction in the 2023 annual report, though analysis is
available at 30 June 2024 and 31 December 2023.
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 which had no significant effect on the
Group's results.
Any new or amended accounting standards or
interpretations that are not yet mandatory have not been early
adopted. All amendments or standards are not expected to have a
material impact on the entity in the current or future reporting
periods, or on foreseeable future transactions.
2. Segmental analysis
Operating segments
The directors consider there to be three
operating segments, being the supply of utilities to businesses
("Yü Retail"), the installation and maintenance of energy meters
and other assets ("Yü Smart"), and the financing of new meters
("Metering assets"). In addition, the Group eliminates
intra-segment trading, where one segment trades with another, and
has central income, expenses, assets and liabilities ("Group")
which are not directly attributable to the three operating
segments.
|
|
|
|
|
Intra-segment
trading
£'000
|
|
|
|
Revenue
|
312,545
|
5,908
|
192
|
(5,967)
|
-
|
312,678
|
|
Cost of sales
|
(268,329)
|
(4,032)
|
-
|
2,562
|
-
|
(269,799)
|
|
Gross profit
|
44,216
|
1,876
|
192
|
(3,405)
|
-
|
42,879
|
|
Operating costs, before non-recurring items,
share based payments and depreciation
|
(12,844)
|
(1,368)
|
(20)
|
-
|
(162)
|
(14,394)
|
|
Non-recurring items
|
(1,359)
|
-
|
-
|
-
|
-
|
(1,359)
|
|
Share based payments
|
(1,705)
|
-
|
-
|
-
|
-
|
(1,705)
|
|
Depreciation
|
(674)
|
(273)
|
(80)
|
-
|
(35)
|
(1,062)
|
|
Net impairment losses on financial and contract
assets
|
(6,349)
|
-
|
-
|
-
|
-
|
(6,349)
|
|
Operating profit
|
21,285
|
235
|
92
|
(3,405)
|
(197)
|
18,010
|
|
Adjusted EBITDA
|
23,318
|
508
|
172
|
(3,405)
|
(162)
|
20,431
|
|
Non-current assets
|
18,478
|
1,920
|
3,446
|
(2,744)
|
1,592
|
22,692
|
|
Additions of non-current
assets
|
1,359
|
1,394
|
1,766
|
-
|
-
|
4,519
|
|
Goodwill
|
-
|
216
|
-
|
-
|
-
|
216
|
Trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
Intra-segment
trading
£'000
|
|
|
|
Revenue
|
459,797
|
5,555
|
76
|
(5,427)
|
-
|
460,001
|
|
Cost of sales
|
(377,797)
|
(3,053)
|
-
|
3,891
|
-
|
(376,959)
|
|
Gross profit
|
82,000
|
2,502
|
76
|
(1,536)
|
-
|
83,042
|
|
Operating costs, before share based payments
and depreciation
|
(22,317)
|
(2,027)
|
(68)
|
-
|
(447)
|
(24,859)
|
|
Share based payments
|
(1,258)
|
-
|
-
|
-
|
-
|
(1,258)
|
|
Depreciation
|
(1,028)
|
(329)
|
(21)
|
-
|
(110)
|
(1,488)
|
|
Net impairment losses on financial and contract
assets
|
(14,309)
|
-
|
-
|
-
|
-
|
(14,309)
|
|
Loss on derivatives
|
(3,046)
|
-
|
-
|
-
|
-
|
(3,046)
|
|
Operating profit
|
40,042
|
146
|
(13)
|
(1,536)
|
(557)
|
38,082
|
|
Adjusted EBITDA
|
44,116
|
475
|
8
|
(1,536)
|
(447)
|
42,616
|
|
Non-current assets
|
9,814
|
804
|
1,018
|
(327)
|
(4,741)
|
16,050
|
|
Additions of non-current
assets
|
695
|
872
|
1,139
|
(335)
|
133
|
2,504
|
|
Goodwill
|
-
|
216
|
-
|
-
|
-
|
216
|
Trade and other receivables
|
|
|
|
|
|
|
Geographical segments
100% of Group revenue, for all reporting
periods, is generated from sales to customers in the United Kingdom
(2023: 100%).
The Group has no individual customers
representing over 10% of revenue (2023: none).
3. Operating profit
|
|
|
|
|
|
|
Profit for the period has been arrived at after
charging:
|
|
|
|
|
|
Staff costs
|
|
10,187
|
6,757
|
15,564
|
|
Depreciation of property, plant and
equipment
|
10
|
320
|
167
|
400
|
|
Depreciation of right-of-use assets
|
11
|
334
|
228
|
408
|
Amortisation of intangible assets
|
|
|
|
|
4. Finance income and finance costs
|
|
|
|
|
|
Bank interest receivable
|
2,112
|
92
|
783
|
Other interest receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank interest and other finance charges
payable
|
(225)
|
-
|
(20)
|
|
Interest on borrowings
|
(61)
|
-
|
(4)
|
Interest on lease liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
Adjusted EBITDA
reconciliation
|
|
|
|
|
|
Operating profit
|
|
18,010
|
8,759
|
38,082
|
|
Add back:
|
|
|
|
|
|
Non-recurring operational costs
|
|
1,359
|
-
|
-
|
|
Loss on derivative contracts
|
17
|
-
|
4,221
|
3,046
|
|
Depreciation of property, plant and
equipment
|
10
|
320
|
167
|
400
|
|
Depreciation of right-of-use assets
|
11
|
334
|
228
|
408
|
Amortisation of intangibles
|
|
|
|
|
|
|
|
|
|
|
The directors consider adjusted EBITDA to be a
more accurate representation of underlying business performance
(linked to cash from recurring and normalised profitability) and
therefore utilise it as the primary profit measure in setting
targets and managing financial performance.
The loss on derivative contracts of £3,046,000
for the year ended 31 December 2023 and £4,221,000 for the six
months to 30 June 2023 arises on the movement in the financial
derivative asset or liability recognised in the period, as
referenced in note 17. The Board exclude such gain or loss from
adjusted EBITDA as it is unrealised, and as it is considered in the
contract pricing strategy and energy balancing operations of the
Group. All forward commodity contracts at 31 December 2023 and 30
June 2024 are for the Group's "own use" (under IFRS 9) to meet
expected customer demand in the normal course of business, and
therefore there was no gain or loss in respect of the six months to
30 June 2024.
The non-recurring operational costs relate to
fees incurred in the early termination of the Group's previous
commodity trading agreement. A new five year commodity trading
arrangement between Shell Energy Europe Limited ("Shell") and the
main entities of the Group (including Yü Group plc, Yü Energy
Holding Limited and Yü Energy Retail Limited) was signed in
February 2024, providing significant strategic benefits to the
Group. Given the non-recurring nature of these exit costs they have
been excluded from adjusted EBITDA.
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 and excluding treasury
shares.
|
|
|
|
|
Profit for the year attributable to ordinary
shareholders
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary
shares
|
|
|
|
|
At the start of the period
|
16,741,195
|
16,649,618
|
16,649,618
|
|
Effect of shares issued in the
period
|
50,353
|
12,938
|
36,607
|
Effect of purchase of treasury
shares
|
|
|
|
|
Number of ordinary shares for basic earnings
per share calculation
|
16,752,385
|
16,662,556
|
16,686,225
|
Dilutive effect of outstanding share
options
|
|
|
|
Number of ordinary shares for diluted earnings
per share calculation
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
£0.88
|
£0.44
|
£1.85
|
Diluted earnings per share
|
|
|
|
Adjusted earnings per share
Adjusted earnings per share is based on the
after tax result attributable to ordinary shareholders before
non-recurring items and unrealised gains or losses on derivative
contracts and the weighted average number of ordinary shares
outstanding:
|
|
|
|
|
|
|
Adjusted earnings per
share
|
|
|
|
|
|
Profit for the year attributable to ordinary
shareholders
|
|
14,687
|
7,310
|
30,860
|
|
Add back:
|
|
|
|
|
|
Non-recurring operational costs (gross cost,
before tax, of £1,359,000)
|
5
|
1,040
|
-
|
-
|
Loss on derivative contracts after
tax
|
|
|
|
|
Adjusted basic profit for the period
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share
|
|
£0.94
|
£0.64
|
£1.99
|
Diluted adjusted earnings per share
|
|
|
|
|
7. Taxation
The tax charge for the period has been
estimated using a rate of 19% for the period to 31 March 2023 and
25% for the period after, considering certain allowances and
adjustments in calculating the Group's taxable profits.
Deferred taxes at 30 June 2024, 30 June 2023
and 31 December 2023 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
from 1 April 2023 increased from 19% to 25%.
The deferred tax asset is expected to be
utilised by the Group in the coming years and there is no time
limit to utilisation of such losses. 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.
8. Dividends
The Group paid an interim dividend of 3p per
share in 2023.
The directors proposed a final dividend in
relation to 2023 of 37p per share which was paid in the period to
30 June 2024.
The directors propose an interim dividend for
the period to 30 June 2024 of 19p per share (2023: nil per share).
The interim dividend is payable 20 December 2024.
9. Intangible assets
|
|
Electricity
licence
£'000
|
|
|
Software
and
systems
£'000
|
|
|
Cost
|
|
|
|
|
|
|
At 1 January 2024
|
62
|
216
|
686
|
3,419
|
4,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
|
|
At 1 January 2024
|
18
|
-
|
686
|
1,118
|
1,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at 30 June
2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
At 1 January 2023
|
62
|
216
|
686
|
3,289
|
4,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
|
|
At 1 January 2023
|
16
|
-
|
686
|
440
|
1,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at 30 June
2023
|
|
|
|
|
|
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.
Goodwill arose on the acquisition of the
management and certain other assets of Magnum Utilities Limited in
May 2022, forming the foundations for the Yϋ Smart business unit to
deliver the Group's smart metering installation activities.
Goodwill is tested annually for signs of impairment. The underlying
assets related to the goodwill have been classified in a wider cash
generating unit related to smart metering activities.
The customer book intangibles relate to
acquisitions that took place in 2020. They represent the fair value
of the customer contracts purchased in those acquisitions. The
intangible assets were 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.
10. Property, plant and equipment
|
|
|
|
Fixtures
and
fittings
£'000
|
Plant and
machinery
£'000
|
|
|
|
Cost
|
|
|
|
|
|
|
|
At 1 January 2024
|
150
|
3,274
|
738
|
869
|
670
|
5,701
|
|
Additions
|
-
|
-
|
223
|
1,766
|
124
|
2,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
At 1 January 2024
|
-
|
291
|
355
|
24
|
418
|
1,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at 30 June
2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
At 1 January 2023
|
150
|
3,274
|
342
|
73
|
490
|
4,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
At 1 January 2023
|
-
|
182
|
205
|
-
|
301
|
688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at 30 June
2023
|
|
|
|
|
|
|
The majority of plant and machinery additions
relate to investment in smart metering assets, which have an
economic life of 15 years.
11. Right-of-use assets and lease
liabilities
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
At 1 January 2024
|
|
1,966
|
804
|
2,770
|
|
Additions
|
|
-
|
1,394
|
1,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
At 1 January 2024
|
|
835
|
259
|
1,094
|
|
Charge for the period
|
|
83
|
251
|
334
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at 30 June
2024
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
At 1 January 2023
|
|
799
|
-
|
799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
At 1 January 2023
|
|
686
|
-
|
686
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at 30 June
2023
|
|
|
|
|
The Group has a lease arrangement for its main
office facilities in Nottingham which was extended in the year 31
December 2023 (on an arm's length basis with a related party as
disclosed in note 22), and a number of motor vehicle lease
arrangements for engineering installation activities.
Other leases are short term or of low value
underlying assets.
12. Inventory
|
|
|
|
|
Stocks of goods for resale
|
|
|
|
|
|
|
|
|
Inventory relates to smart meters purchased
which are expected to be installed on customer sites as part of the
Group's objective of installing and financing new smart
meters.
13. Trade and other receivables
|
|
|
|
|
|
Current
|
|
|
|
|
Gross trade receivables
|
48,829
|
34,049
|
39,435
|
|
Provision for doubtful debts and expected
credit loss
|
(31,736)
|
(23,329)
|
(27,651)
|
|
Net trade receivables
|
17,093
|
10,720
|
11,784
|
|
Accrued income - net of provision
|
41,839
|
17,410
|
52,325
|
|
Prepayments and pre-contract costs
|
10,892
|
5,190
|
6,244
|
|
Cash collateral deposited for commodity
hedging
|
-
|
16,500
|
49,822
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
|
Prepayments and pre-contract costs
|
|
|
|
|
|
|
|
|
Movements in the provision for doubtful debts
and expected credit loss in gross trade receivables are as
follows:
|
|
|
|
|
|
Opening balance
|
27,651
|
19,499
|
19,499
|
|
Provisions recognised less unused amounts
reversed
|
7,103
|
7,864
|
14,824
|
Provision utilised in the year
|
|
|
|
Closing balance - provision for doubtful debts
and expected credit loss
|
|
|
|
The directors have assessed the level of
provision at 30 June 2024 by reference to the recoverability of
customer receivable balances post the period end, and believe the
provision carried is appropriate and cautious in view of the
context of the wider energy market and economy. The provision for
expected credit loss on accrued income is £956,000 (30 June 2023:
£2,051,000 and 31 December 2023: £1,710,000).
The total net impairment losses on financial
and contract assets of £6,349,000 (H1 2023: £8,085,000 and FY 2023:
£14,309,000) consists of £7,710,000 (H1 2023: £7,864,000 and FY
2023: £14,824,000) on trade receivables, a £754,000 credit (H1
2023: £221,000 charge and FY 2023: £120,000 credit) on accrued
income plus £607,000 credit (H1 2023: £nil and FY 2023: £526,000
credit) for other balances written back.
The directors consider that the carrying amount
of trade and other receivables approximates to their fair value due
to their maturities being short term.
As at 31 December 2023, the Group balance of
£49,822,000 of cash collateral was deposited with the Group's
previous trading commodity partner to cover credit exposure of that
counterparty on the forward hedges entered into by the Group (30
June 2023: £16,500,000). As at 30 June 2024 this collateral has
been fully recovered as part of arrangements to secure new trading
arrangements with Shell.
Included within other receivables is a balance
of £613,000 (30 June 2023: £500,000 and 31 December 2023: £522,000)
which relates to a bank cash deposit. This cash deposit does not
fulfil the criteria of being classified as cash and cash
equivalents in view of the balance being secured and locked for operational activities of
the Group. Group other receivables also includes immaterial amounts
due from BEIS related energy relief schemes.
Analysis of
trade receivables and accrued income
Included within accrued income and trade
receivables are the following gross and expected credit loss
provisions, allocated between active customer accounts, which
represent customers that remain on supply at the balance sheet
date, and those customers which have left the supply ("Terminated")
of the Group. Different provision rates are allocated to active and
Terminated customer balances, and based on the age of the debt,
based on an assessment of expected credit loss for each such
category. The gross amount of trade receivables is stated inclusive
of VAT and CCL of approximately 19% which, on the write-off of
debt, would typically be recoverable and is therefore not provided
for.
|
As at 30 June
2024
|
Active
|
Active
|
Terminated
|
Terminated
|
Total
|
Total
|
|
|
|
Gross
carrying amount
£'000
|
|
Gross
carrying amount
£'000
|
|
Gross
carrying amount
£'000
|
|
|
|
Accrued
income
|
|
|
|
|
|
|
|
|
Not overdue
|
42,795
|
(956)
|
-
|
-
|
42,795
|
(956)
|
41,839
|
|
Total accrued
income
|
42,795
|
(956)
|
-
|
-
|
42,795
|
(956)
|
41,839
|
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
|
|
|
|
|
|
Not overdue
|
4,229
|
(85)
|
2,761
|
(135)
|
6,991
|
(220)
|
6,771
|
|
Overdue less than 90 days
|
5,454
|
(1,766)
|
3,632
|
(2,409)
|
9,086
|
(4,175)
|
4,911
|
Overdue more than 90 days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical comparative amounts at 30 June 2023
were not disclosed.
14. Cash and cash equivalents
As disclosed in note 13, the cash and cash
equivalents amount excludes £613,000 (30 June 2023: £500,000 and 31
December 2023: £522,000) of cash which is included in other
receivables.
15. Trade and other payables
|
|
|
|
|
|
Current
|
|
|
|
|
Trade payables
|
10,531
|
2,448
|
6,492
|
|
Accrued expenses
|
79,759
|
50,777
|
88,737
|
|
Lease liabilities
|
845
|
327
|
354
|
|
Tax and social security
|
12,858
|
8,023
|
15,347
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
|
|
Accrued expenses
|
13,538
|
5,063
|
-
|
|
|
|
|
|
|
|
|
|
|
Lease
liabilities
The incremental borrowing rate determined for
leases is 6%.
The contractual maturities (representing
undiscounted contractual cash flows) of the lease liabilities are
as follows:
|
|
|
|
|
|
Current
|
|
|
|
|
Expiring in less than one year
|
986
|
397
|
450
|
|
Expiring between two to five years
|
1,629
|
841
|
954
|
Expiring after more than five years
|
|
|
|
|
|
|
|
|
The remaining trade and other payables have
undiscounted contractual cash flows equal to their fair value and
are payable within a year.
16. Borrowings
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
|
|
Bank loan
|
2,515
|
-
|
352
|
Borrowings relate to the Group's investment in
smart meters which return an index-linked, recurring annuity over a
15+ year term. The amount outstanding relates to amounts drawn on a
£5.2m facility, agreed during 2023, with Siemens Finance in
relation to the finance of such meters. Repayments are over a 10
year period with a bullet repayment, and with an interest rate
fixed at the date of drawdown. The borrowings are fully secured on
the assets of the wholly owned subsidiary entity, Kensington Meter
Assets Limited.
The bank loan is shown net of unamortised
arrangement fees of £190,000 which are being amortised over the
life of the loan.
The contractual maturities (representing
undiscounted contractual cash flows) of the bank loans are as
follows:
|
|
|
|
|
|
Current
|
|
|
|
|
Expiring in less than one year
|
337
|
-
|
67
|
|
Expiring between two to five years
|
1,365
|
-
|
268
|
Expiring after more than five years
|
|
|
|
|
|
|
|
|
17. Financial derivative liability
|
|
|
|
|
|
Current
|
|
|
|
|
Financial derivative liability
|
-
|
(1,049)
|
-
|
|
Non-current
|
|
|
|
|
Financial derivative liability
|
-
|
(126)
|
-
|
There is no financial derivative asset or
liability as 30 June 2024 and 31 December 2023 as the forward
commodity trades outstanding are intended to be fully utilised for
the Group's "own use" (under IFRS 9) to meet expected customer
demand in the normal course of business. At 30 June 2023, the
£1,175,000 financial derivative liability reflected the fair value
of a small proportion of the Group's forward commodity trades which
were not judged to meet the strict "own use" criteria under IFRS
9.
18. 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 where they are not treated as "own use"
under IFRS 9. 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 trades
entirely in pounds sterling and therefore it has no foreign
currency risk.
The Group has exposure to the following risks
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.
(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, 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
price volatility by entering into back-to-back (to the extent
practical) 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.
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.
If any of the contracts in the Group's
portfolio are expected to be settled net in cash and are not
entered into so as to hedge, in the normal course of business, the
demand of customers, then such trades are measured at fair value.
The gain or loss on remeasurement to fair value is recognised
immediately in profit and loss. All forward trades were considered
to meet the criteria for "own use" at 30 June 2024 and 31 December
2023.
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. In view of the
Group's commodity hedging position and available mitigation, any
major deviation in customer demand is not considered to deliver a
material impact on the Group's financial performance.
Increased volatility of global gas and
electricity commodity prices has 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.
As contracts are expected to be outside of IFRS
9, there is no sensitivity analysis provided on such
contracts.
Liquidity risk from commodity
trading
The Group's trading arrangements can, in the
absence of suitable credit lines or other arrangements being in
place, 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, therefore, lead to a material
exposure arising for any trading counterparty which, in the absence
of a suitable credit arrangement, could result in credit support
such as cash being required as collateral.
As part of the Group's new Trading Agreement
with Shell, signed in February 2024, there is no requirement in the
normal course to provide any such credit support and, as such, no
impact on liquidity risk in the normal course of
business.
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 lower energy commodity markets experienced
at the end of 2023 and 2024, this credit risk is not held at 30
June 2024 and 31 December 2023. However, any such credit exposure
would predominantly arise with the Group's main trading
counterparty, being Shell from February 2024.
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 provision of a smart meter is also mandatory for
some sales channels.
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, and requires
security deposits in advance where appropriate. At 30 June 2024 and
31 December 2023 there were no significant concentrations of credit
risk. The carrying amount of the financial assets (less the element
of VAT and 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 30 June 2024 the Group held a provision
against doubtful debts and expected credit loss of £32,692,000 (30
June 2023: £25,381,000 and 31 December 2023: £29,361,000). This is
a combined provision against both trade receivables at £31,736,000
(30 June 2023: £23,329,000 and 31 December 2023: £27,651,000) and
accrued income at £956,000 (30 June 2023: £2,052,000 and 31
December 2023: £1,710,000). The increase reflects the growth in the
Group's activities, which is mitigated by strong customer
collections recorded in 2024.
In relation to trade receivables, after
provision and accounting for VAT and CCL reclaimable, the exposure
assessed by directors is less than 3% of the gross balance. If this
exposure was +/-1% of that assessed, the gain or loss arising
recognised in the income statement and impacting net assets would
be +/-£488,000.
If the expected customer credit loss rate on
accrued income was +/-1%, the gain or loss arising would be
+/-£428,000.
(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.
The Board also monitors the position in respect
of the Group's performance against covenants as part of its trading
arrangements, and any requirements under its licence to operate
including its Ofgem energy supply licence.
As part of assessing the Group's liquidity, the
Board considers: low profitability; delays in customer receivable
payments; major risks and uncertainties; and the ability to comply
with its Trading Agreements.
Any excess cash balances are held in short-term
deposit accounts which are either interest or non-interest
accounts. At 31 December 2024 the Group had £89,426,000 (30 June
2023: £36,621,000 and 31 December 2023: £32,477,000) of cash and
bank balances (as per note 13).
19. Share capital and reserves
|
|
|
|
|
|
Allotted and fully paid ordinary shares of
£0.005 each
|
|
|
|
|
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. The
movement in the period relates to the exercise of share options at
an exercise prices of between £0.005 and £10.38.
The share premium account represents amounts
received on the issue of new shares in excess of their nominal
value, net of any direct costs of any shares issued. The share
premium movement in the period relates to the excess, where
appropriate, of the price at which options were exercised during
the year over the £0.005 nominal value of those shares.
Treasury
shares
Consideration paid/received for the
purchase/sale of treasury shares is recognised directly in equity.
Shares held by and disclosed as treasury shares are deducted from
contributed equity.
Any excess of the consideration received on the
sale of treasury shares over the weighted average cost of the
shares sold is credited to retained earnings.
On 22 May 2024 the Company, utilising its
existing authority to repurchase its ordinary shares, purchased
234,978 Ordinary Shares at the market price at that time of £17 per
share totalling £3,995,000 to hold in treasury. It is intended that
these Ordinary Shares held in treasury will be utilised to satisfy
future option exercises.
Merger
reserve
The merger reserve was created as part of the
2016 Group reorganisation prior to listing.
Retained
earnings
Retained earnings comprises the Group's
cumulative annual profits and losses.
20. 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. In addition, the Group operates a Shadow
Share Scheme for qualifying employees, which is settled in cash
based on certain performance conditions.
The terms and conditions of the outstanding
grants made under the Group's share options schemes are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
outstanding at
30
June
2024
|
Amount
outstanding
at
31
December
2023
|
|
6 April 2017
|
3
|
6 April
2020
|
6 April
2027
|
£0.005
|
1
|
43,950
|
43,950
|
|
6 April 2017
|
6.5
|
6 April
2020
|
6 April
2027
|
£2.844
|
1
|
87,900
|
87,900
|
|
28 September 2017
|
6.5
|
28 September
2020
|
28 September
2027
|
£5.825
|
1
|
13,500
|
27,000
|
|
9 April 2018
|
6.5
|
9 April
2021
|
9 April
2028
|
£10.38
|
1
|
38,084
|
59,084
|
|
26 September 2018
|
6.5
|
26 September
2021
|
26 September
2028
|
£8.665
|
1
|
-
|
6,539
|
|
25 February 2019
|
6.5
|
25 February
2022
|
25 February
2029
|
£1.09
|
1
|
-
|
20,000
|
|
4 October 2020
|
3
|
30 April
2023
|
4 October
2030
|
£0.005
|
2
|
76,617
|
172,388
|
|
4 October 2020
|
3
|
30 April
2024
|
4 October
2030
|
£0.005
|
3
|
76,617
|
172,388
|
|
13 May 2022
|
2
|
30 April
2024
|
4 October
2030
|
£0.005
|
3
|
-
|
25,539
|
|
1 December 2022
|
3
|
1 January
2026
|
1 July
2026
|
£2.28
|
4
|
154,169
|
156,536
|
|
19 December 2022
|
3.3
|
31 March
2026
|
31 March
2033
|
£0.005
|
5
|
662,000
|
762,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining contractual life of
options outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
The following vesting schedules
apply:
1. 100% of options vest on
the third anniversary of date of grant.
2. 100% of options have
vested on the achievement of a performance condition related to the
Group's share price at a pre‑determined date.
3. The level of vesting is
dependent on a performance condition, being the Group's share price
at a pre-determined date.
4. 100% of options vest on
the third anniversary of the Save As You Earn ("SAYE") savings
contract start date.
5. The level of vesting is
dependent on a performance condition, being the Group's EBITDA over
a qualifying period.
6. The level of vesting is
dependent on a performance condition, being the number of meters
owned at the end of a qualifying period.
The number and weighted average exercise price
of share options were as follows:
|
|
|
|
|
Balance at the start of the period
|
1,533,324
|
1,722,632
|
|
Granted
|
30,000
|
-
|
|
Forfeited
|
(102,367)
|
(97,731)
|
|
Lapsed
|
-
|
-
|
|
|
|
|
Balance at the end of the period
|
|
|
Vested at the end of the period
|
|
|
Exercisable at the end of the period
|
|
|
|
Weighted average exercise price for:
|
|
|
|
Options granted in the period
|
-
|
-
|
|
Options forfeited in the period
|
£0.058
|
£0.534
|
Options exercised in the period
|
|
|
|
Exercise price in the range:
|
|
|
|
From
|
£0.005
|
£0.005
|
|
|
|
|
The fair value of each option grant is
estimated on the grant date using an appropriate option pricing
model. There were no options granted in 2023. The following fair
value assumptions were assumed in the year:
|
|
|
|
|
Dividend yield
|
2.4%
|
-
|
|
Risk-free rate
|
4.31%
|
-
|
|
Share price volatility
|
417%
|
-
|
|
Expected life (years)
|
2
years
|
-
|
Weighted average fair value of options granted
during the period
|
|
|
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:
|
|
|
|
|
Equity-settled share based payment
expense
|
528
|
1,150
|
|
Cash-settled share based payment
expense
|
607
|
-
|
National Insurance costs related to exercise of
share options
|
|
|
Total share based payment charge
|
|
|
Cash-settled share based payment expense in the
period to 30 June 2024 relates to a shadow share scheme issued in
the period.
National Insurance costs relate to Employer's
National Insurance payable on the exercise of unapproved (for tax
purposes) share options.
21. 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 2024 (2023: £nil).
Security
The Group has entered into Trading Agreements
with the Shell Group in February 2024 to provide access to
commodity markets. As part of this arrangement there is a
requirement to meet certain covenants, a fixed and floating charge
(including mandate over certain banking arrangements in the event
of default) over the main trading subsidiaries of the Group, being
Yü Energy Holding Limited and Yü Energy Retail Limited, and a
parent company guarantee from Yü Group PLC.
As part of the Group's activities in financing
smart meters, a Group entity has provided security over such assets
in relation to bank debt provided by Siemens Finance.
Yü Group PLC provides parent company guarantees
on behalf of its wholly owned subsidiaries to a small number of
industry counterparties as is commonplace for the utilities
sector.
As disclosed in note 13, included in other
receivables of the Company and the Group is an amount of £500,000
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 2024 (2023: £nil).
22. 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 six months to 30 June
2024 the Group paid £35,000 in lease rental and service charges to
CPK Investments Limited (30 June 2023: £65,000 and 31 December
2023: £135,000). There was no amount owing to or from CPK
Investments Limited at 30 June 2024 (30 June 2023: £nil and 31
December 2023: £35,000).
The directors, after taking external advice
including from an external independent valuer, reviewed the terms
of the lease with CPK Investments Limited for the Nottingham
head-office. The Group entered into an agreement in April 2023 to
extend the term of the lease and amended certain terms (which
remain on an arms-length basis).
On 17 May 2024 the Company acquired 234,978
ordinary shares, at the then market rate of £17 per share, via its
broker Liberum Wealth Limited. These shares remain in treasury on
30 June 2024. On the same date as the Company's purchase, Paul
Rawson (Chief Financial Officer) and a person closely related to
him, and two employees of the Group, sold shares through Liberum
Capital Limited, of which some such shares were sold at the same
market price (less commission).
All transactions with related parties have been
carried out on an arm's length basis.
23. Net cash / (net debt)
reconciliation
The net cash / (net debt) and movement in the
period were as follows:
|
|
|
|
|
|
Cash and cash equivalents
|
89,426
|
36,621
|
32,477
|
|
Borrowings
|
(2,617)
|
-
|
(355)
|
|
|
|
|
|
The movements in net cash/ (net debt) and lease
liabilities were as follows:
|
|
|
|
|
|
|
|
Balance as at 1 January
2024
|
32,477
|
(355)
|
(32,122)
|
(1,635)
|
30,487
|
|
Cash flows:
|
|
|
|
|
|
|
Movement in cash and cash
equivalents
|
56,949
|
-
|
56,949
|
-
|
56,949
|
|
Drawdown of new borrowings
|
-
|
(2,250)
|
(2,250)
|
-
|
(2,250)
|
|
Interest
|
-
|
(61)
|
(61)
|
(63)
|
(124)
|
|
Repayment
|
-
|
49
|
49
|
330
|
379
|
|
Recognition of leases acquired on right-of-use
assets
|
-
|
-
|
-
|
(1,394)
|
(1,394)
|
Modification of lease liabilities
|
|
|
|
|
|
Balance as at 30 June
2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 1 January
2023
|
18,970
|
-
|
18,970
|
(160)
|
18,810
|
|
Cash flows:
|
|
|
|
|
|
|
Movement in cash and cash
equivalents
|
17,651
|
-
|
17,651
|
-
|
17,651
|
|
Interest
|
-
|
-
|
-
|
(36)
|
(36)
|
|
Repayment
|
-
|
-
|
-
|
268
|
268
|
|
Recognition of leases acquired on right-of-use
assets
|
-
|
-
|
-
|
(1,648)
|
(1,648)
|
Modification of lease liabilities
|
|
|
|
|
|
Balance as at 30 June
2023
|
|
|
|
|
|
24. Post-balance sheet events
On 3 July 2024, the Company's capital reduction
was approved and certified under section 649 of the Companies Act
2006, with the Company's then share premium account balance reduced
to nil. The share premium account of £12,283,683 was credited to
distributable reserves.
There are no other significant post-balance
sheet events.
