Yu Group PLC (LON:YU.) Trading Update and Notice of Results

Yü Group PLC, the independent supplier of gas, electricity and water to the UK business sector, is pleased to provide an update on trading for the year ended 31 December 2019.

Financial highlights:

· Revenues for FY 2019 expected to be approx. £110m (2018: £80.6m), an increase of c.35% and ahead of market expectations

· Adjusted EBITDA for FY 2019 expected to be at least in line with market expectations

o Significant improvement from H1 to H2 as Group’s strategic actions take effect

· Cash and trading counterparty deposits of £12.6m (2018: £14.6m)

· Positive outlook as Group anticipates material improvement to Adjusted EBITDA for FY 2020, with higher gross margins being achieved

Operational highlights

· Entry into £13.0m facility with SmartestEnergy to support the Group’s hedging and reduce the Group’s working capital requirements

· Senior management team strengthened with appointment of Sales & Marketing Director and Board changed post period end

· Commercial arrangements finalised for new Leicester office due to open in 2021 to support the Group’s growth

Bookings, representing the annualised value of new or renewed contracts entered into with customers during FY 2019, averaged £4.2m per month (FY 2018: £8.4m). The monthly average bookings have increased from £3.2m in H1 2019 to £5.1m in H2 2019, and this upward momentum is expected to continue in FY 2020.

Bookings were deliberately slowed in early 2019 whilst processes and systems were redesigned, and certain contracts which had negative EBITDA contribution (due to low margin or high credit risk) were not renewed. The sales operating model was also revised, including the creation of a new Sales & Marketing Director role and the implementation of new targets and incentivisation metrics. The Board is pleased with the execution of its strategy to focus on the quality of revenue it generates.

Contracted revenue for FY 2020 was £79.5m at 31 December 2019. The Board is confident that the revenue now contracted, plus the future business that it will book, will deliver a higher forward gross margin and EBITDA contribution than that contracted in 2018 and prior.

Group cash and trading counterparty deposits as at 31 December 2019 were £12.6m (2018: £14.6m), consisting of £2.1m in cash (2018: £14.6m) supplemented by £10.5m (2018: £nil) of trading counterparty deposits. The trading cash calls have been made due to the significant decrease in forward energy commodity markets experienced in the year.

The new hedging facility (“Facility”) arranged with SmartestEnergy will materially reduce volatility in the Group’s cashflow and cash balances caused by advanced deposits. The c.£13m Facility, which scales with the business, is anticipated to impact cashflow favourably in H1 2020 as the Group transfers its trades from its legacy arrangements to SmartestEnergy.

Adjusted EBITDA is currently expected to be at least in line with market expectations, with H2 2019 losses significantly below the loss in H1 2019 as the strategic actions implemented through FY 2019 start to produce results. This upward trend is expected to continue, and the Board looks forward to the future with growing confidence.

Notice of year end results

The Group intends to publish its full year results on Tuesday 31 March 2020.

Bobby Kalar, Chief Executive of Yü Group, commented:

“Our team’s determination over this past year to transform Yu Group into a disciplined, higher margin business has been momentous and necessary. Significant controls implemented across the organisation have now been embedded by the business and are showing a positive contribution towards areas such as cash collections, revenue protection and gross margin optimisation. With a new and evolving Board capable of guiding us in our next phase of growth, and our new progressive trading arrangement with SmartestEnergy to enhance and futureproof our cashflow, the focus in the year ahead is to continue to build on this solid platform and accelerate manageable growth whilst reducing the cost to serve.

“A core indicator, Adjusted EBITDA, is improving in line with our plan and we are able to invest in our automated digital strategy. I’m confident we have weathered the storm and while we remain cognisant of lessons learned, we are now very much a forward-facing business. I look forward to a successful year ahead.”

Information on the Group

Yü Group PLC, trading as Yü Energy, is an independent supplier of gas, electricity and water focused on servicing the business sector throughout the UK. It has no involvement in the retail supply of energy to the domestic sector. The Group was listed on the AIM market of the London Stock Exchange in March 2016.


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