TIDMYU.
RNS Number : 0369Z
Yu Group PLC
15 May 2019
Yü Group PLC
(the "Group")
Final results for the year ended 31 December 2018
Yü Group PLC (AIM; YU.), the independent supplier of gas,
electricity and water to the UK corporate sector, announces its
final results for the year to 31 December 2018.
Financial Review:
31 December 2018 2017 (restated)
--------------------------------- -------- ----------------
GBP'000 GBP'000
Revenue 80,635 45,631
Adjusted EBITDA* (6,283) 1,537
Adjusted PBT (6,618) 1,271
(Loss)/profit for the
year (6,267) 711
Operating cash (outflow)/inflow (1,320) 533
Cash 14,612 4,887
Overdue customer receivables** 9 days 14 days
(Loss)/earnings per share:
Adjusted (37.0)p 10.0p
Statutory (42.0)p 5.0p
Dividend per share 1.2p 3.0p
================================= -------- ----------------
*Adjusted EBITDA is earnings before interest, tax, depreciation
and amortisation and also before non-recurring costs, share based
payments and unrealised gains or losses on derivative contracts.
For FY 2018, it also excludes the impact of first time adoption of
IFRS 9.
** Overdue customer receivables relate to the total accrued
income which is outside of the normal billing cycle, plus overdue
trade receivables (net of VAT and CCL), net of provision for
doubtful debts.
-- Revenue increased by 77 per cent. to GBP80.6m (2017: GBP45.6m)
-- Adjusted EBITDA loss of GBP6.3m (2017: GBP1.5m profit),
following a detailed accounting review
-- Restatement of prior year accounts, reducing 31 December 2017 net assets by GBP2.4m
-- Cash and cash equivalents of GBP14.6m at 31 December 2018 and GBP16.5m at 30 April 2019
-- Contracted revenue for 2019, as at 31 December 2018, of GBP88m
-- Overdue customer receivables of 9 days at 31 December 2018,
down from 14 days at 31 December 2017
-- Raised GBP11.6m (net of costs) from a share placing in March 2018
Operational Review:
-- Implementation of new control, accounting and governance
processes, supported by a third-party review by PwC
-- Invested in further strengthening management, sales and
product development teams, and back office teams to improve
systems, controls and management information
-- Continued to trade forward gas and electricity markets to
reduce risk of energy market volatility
-- Launch of our business water retail product offering
-- Maintained customer service levels (including three ring pick up policy)
Bobby Kalar, Group Chief Executive Officer, said:
"The accounting and system failings uncovered in the second half
of 2018 have had a major impact on the Group and I would personally
like to apologise to all our stakeholders for the mistakes made. We
have made significant progress in implementing new systems and
processes and the Board is confident that we have weathered the
storm.
"The business rationale remains strong with an enormous
potential market for a high-quality service provider of gas,
electricity and water to the SME and corporate sector. I believe
the Group is well placed to achieve long term profitable growth
underpinned by the people and systems we have in place."
The information communicated in this announcement would have
constituted inside information for the purposes of Article 7 of
Regulation 596/2014.
For further information please contact:
Yu Group PLC +44 (0) 115 975 8258
Bobby Kalar
Paul Rawson
Shore Capital +44 (0) 20 7408 4090
Edward Mansfield
Anita Ghanekar
James Thomas
Alma PR +44 (0) 20 3405 0205
Josh Royston
John Coles
Hilary Buchanan
Helena Bogle
Notes to Editors
Information on the Group
Yü Group PLC, trading as Yü Energy, is an independent supplier
of gas, electricity and water focused on servicing the corporate
sector throughout the UK. It has no involvement in the domestic
retail market. The Group was listed on the AIM market of the London
Stock Exchange in March 2016
Chairman's statement
Review of the year
The continued growth of the business in the year was
overshadowed by the serious accounting issues identified in a
review by our incoming CFO in October 2018. This resulted in a
readjustment to the Group's profitability expectations and has led
to a deeply disappointing set of results, with a net loss
recognised for FY 2018 of GBP6.3m. In addition, a further GBP2.4m
reduction to the previously reported net assets at 31 December 2017
has been recognised.
The Group has experienced rapid growth over the last few years
and we can now see that certain data, financial and systems
processes did not keep up with the requirements of a larger
business. Whilst issues such as the level of bad debt and revenue
recognised as accrued income had always been reviewed, the quality
of the data at operational level was, in hindsight, insufficient.
On behalf of the Board I apologise for the damage these
shortcomings have inflicted on the Group and assure you that it has
intensified my own, and the whole Board's, desire to ensure solid
foundations are built for the future.
The Group remains debt free and, at 31 December 2018, held
GBP14.6m of cash. Investment in the Group's growth has continued,
with over 35 per cent. of our staff at 31 December 2018 being
focused on sales, marketing and product development.
Market context
The discovery of the accounting issues coincided with a
deterioration in trading conditions in energy supply markets. There
has been a spate of business failures in the recent past in the
domestic energy supply sector, due in some measure to a difficult
set of market conditions. Energy commodity costs increased
significantly throughout FY 2018, and the adverse weather
conditions, particularly the "Beast from the East" in early 2018,
led to some unexpected costs.
Yü Group, by contrast, operates in the business to business
sector. We use our experienced team and strong cash reserves to
operate a hedging policy that reduces the Group's exposure to
volatile commodity markets in line with an agreed risk mandate.
Controlling growth
The Group has expanded significantly, from revenues of less than
GBP4m in 2015 to revenues in excess of GBP80m in 2018. The Board
recognises that this rapid growth, despite continued investment,
outstripped the capabilities of the Group's systems and
controls.
The audit committee and the wider Board have led and implemented
numerous measures over recent months to improve governance and
internal controls. The weaknesses identified were particularly
focused around the control of complex energy data across many
thousands of customer sites; the revenue recognised in our accounts
based on these data sources; the recoverability of our trade
receivables based on our credit control processes; and the
forecasting of gross margin.
The Board has worked tirelessly in investigating and resolving
these matters and will continue to make further incremental
improvements as appropriate. The Board is also co-operating fully
with the Financial Conduct Authority, and all other regulatory
bodies.
While many of these governance and internal control improvements
have been identified and addressed internally, the Board also
commissioned an independent review, by DLA Piper LLP and PwC LLP,
in relation to the data and accounting processes, and a more
general review of the internal controls in operation across the
Group. A new auditor, RSM, was also appointed to provide a clear
and fresh review of our financial status and results.
The audit committee recognises the positive reaction by the
employees of Yü Group in embracing the new processes and controls
required to enhance the business.
Based on this, the Board is confident that our controls and
processes are more robust and that the necessary foundations are in
place to deliver, in a controlled manner, the future growth of the
business.
The future
My boardroom colleagues and I are absolutely committed to
restoring profitability as soon as possible, whilst recognising
that it will take a little time for low margin contracts to
expire.
Numerous initiatives are in progress to restore shareholder
value. These include ensuring that robust and efficient back office
systems and controls are in place; cross-selling additional product
offerings to our existing customers; and closely monitoring the
Group's working capital requirements and bad debt exposure.
The Board considers that the Group's continued customer service
focus, strong balance sheet and cash position and significant
market opportunity, provide a positive base from which to recover
from the setbacks of 2018. I look forward to providing further
updates on these topics in due course.
Chief Executive Officer's Statement
Introduction
The Group increased revenue significantly during the year ended
31 December 2018 and continued to deliver excellent customer
service whilst remaining focused on driving core growth and
investment for the future.
That said, the announcement by the Company on 24 October 2018
regarding the accountancy and systems shortcomings has had a
profound effect on both the business and me personally. These
issues are of a magnitude that initially shocked, and the financial
results have left me deeply disappointed, particularly so in
trusted people and partners on whom the business relied upon for
expertise. However, I am determined to redress the historic issues
and reposition the business to grow shareholder value.
The Group was founded to address a gap in the market for a
fresh, nimble supplier which could scale. There remains a
considerable opportunity, but as we have seen over the past few
years other players have tried to enter the market, resulting in
more competition. We have seen competitor models that sacrifice
margin and/or take significant market risks to scale and then fall
foul to commodity market volatility. We will continue to trade
forward gas and electricity markets to reduce risks of market
volatility and build a scalable and sustainable business.
Following internal reviews and external advice, policies and
procedures have been put in place to allow us to embrace change
whilst maintaining continuity of service. In short, lessons have
been learnt and implemented. I believe there is still a huge
opportunity to grow our business, especially since Ofgem recently
announced tighter licensing rules for prospective new suppliers.
The business has made good progress and, along with my management
team, I remain absolutely committed to pushing the business onwards
and upwards and getting us back on track for measured growth, with
an aim to restore shareholder faith and value in the business.
Our cash position remains strong with GBP14.6m as of 31 December
2018, and we are debt free. I believe our cash position will be
enhanced by a greater emphasis on credit control and revenue
protection.
As a consequence of an upward wholesale commodity market, we
have seen greater use of brokers by businesses which require
validation and assurance that they are getting the most competitive
deal. We work well with a select number of brokers whose aims and
ethics are aligned with ours.
Customer service and satisfaction continues to be our driver and
a key differentiator. As we have introduced greater policy
compliance and processes and focused on ensuring the relationship
with our customers is on a sensible commercial basis, there will
inevitably be some changes to satisfaction statistics. This is to
be expected and I am confident will only be temporary.
The challenge for the year ahead is to continue to invest and
grow our core product offering and manage our risks. We also will
utilise new technologies to provide greater business efficiency,
and plan to strengthen our management team further so that we can
more readily deploy innovation and technology to develop and launch
products that complement our core business faster.
Our people
Our people remain at the heart of everything we do. Maintaining
a good Company environment and culture whilst experiencing rapid
growth has been a challenge but the business has worked hard to
develop and foster a set of values and behaviours that has seen a
cultural shift in habits and outcomes. Investment in our people has
and will continue to yield benefits.
Finding colleagues with the right mix of skills and experience
to help drive the performance of the business is vital for ensuring
the continuing strength of the Group. Looking at our people and
trying to understand how we can help them help the Group is
something we have done throughout the year.
Our new Chief Financial Officer, Paul Rawson, joined in
September 2018. Paul has many years of financial and operational
experience and, most significantly, relevant sector expertise
having previously been responsible for a large energy business.
Paul has been a welcome addition to the team and is working hard to
further strengthen the finance and operational functions.
We have also developed our management team in the last year,
with some senior appointments across sales, product development,
commercial, operations, finance, debt collection and credit
control.
Our increasing investment in our teams across all business
activities provides a genuine opportunity for the Group's future.
We are small enough to maintain a focus on customer service,
delivering great new products to market, and to harness an agile
and innovative culture. We also have the necessary scale to be able
to invest in the people, processes and systems to ensure we are an
efficient and professional business.
With our focus on involving our employees in our journey, I am
pleased to confirm that in 2019 we will be launching a Save As You
Earn scheme for employees to invest in the shares of the Group.
Growth
We continue to invest in sales and strategy to help deliver
better sales through different platforms and teams. Increased
investment in sales systems has helped promote customer engagement
and improve the onboarding journey.
During FY 2018 our average monthly new bookings (being the
annualised revenue value of contracts secured) was GBP8.4m. The
Group is now being more prudent in the new business it books, with
an increased focus on quality, and average monthly new bookings
have therefore significantly reduced in the first four months of
2019.
In an upward commodity market, we have seen greater use of Third
Party Intermediaries ("TPI") by businesses which require validation
and assurance that they are getting the most competitive deal. The
TPI channel, which is high volume but lower margin, has been
impacted with the increased focus on the quality of business and
margin. We are working hard to be selective in what contracts we
onboard, with particular emphasis on credit risk, sector and
margin.
2019 and beyond will see the business leveraging the overhead
investment in product development, design and deployment. We will
continue to scale our portfolio in a measured way but also use our
customer portfolio to identify opportunities that complement our
core product range and offer these through all of our sales
channels.
The Board is focused on identifying incremental revenue
opportunities within our existing commercial book throughout 2019.
Retention of customers is very important to the growth of our
business and our average contract term for contracts live at 31
December 2018 is 22 months, up from 18 months in December 2017.
Our retention rate tracks the level of customer meters that are
still supplied gas, power and water over a given period. The
retention rate was 43 per cent. between 31 December 2017 and 31
December 2018 (consistent with the 43 per cent. for the previous
year). We continue to provide customers with favourable new
contract terms or flexible transition arrangements for times when
their initial contract expires.
New products
Whilst our core business is as a regulated supplier of
utilities, we see synergies around value added products and
services which would help our customers either make better or more
efficient use of their energy usage.
The Group has developed various new propositions during the last
12 months and will continue to provide solutions to meet the needs
of our customers.
We have successfully launched a water supply offering and are
the only major licensed provider of gas, power and water to GB
businesses.
More recently, the Group has launched a product providing
customers with access to smart meters and smart devices. This has
been in response to the Government's SMETS 2 2020 deadline.
Customers can request a free smart meter from us to be installed at
their convenience.
Electric vehicles are on the increase as cost and access improve
in the UK. In response we have launched an EV charging product for
business customers who see the benefits and returns of having
charging points installed in their car parks.
We have also launched an online quoting tool, enabling small
businesses to get a business energy quote in under a minute. This
helps to drive additional customer acquisition for time-pressured
business customers who want a quick and easy approach to switching
their energy.
Risk management
The Group has continued to forward purchase its energy commodity
requirements to create an effective hedge to volatile energy
markets. Whilst it is not possible for any energy supplier to
remove all the financial risk, I am confident that we have a robust
hedging policy that mitigates our exposure to a manageable level.
The Group is fortunate to have significant sector expertise in this
area.
Credit lines with trading partners have not grown with the
increased revenue. Cash is currently being used to manage the
collateral requirements of the Company's hedging policy. We
continue to explore improved trading arrangements which may allow
the Group to redirect cash into growth opportunities.
We have also enhanced, and continue to improve, our controls
around customer credit checking and protecting our income, and have
strengthened our team in this area.
I am confident that we now have robust management information,
processes and systems that will enable us to focus on mitigating
risk and maximising financial returns in the future.
Summary
The Board has worked tirelessly to steer the business through an
extremely challenging period and we look forward to a period of
stability.
Repositioning the business for sustainable growth and
profitability is a key priority of mine. Whilst much has been done
over the past six months to strengthen process and standardise
working practices, I will not be content until we have restored
shareholder trust and value.
The Group will continue to concentrate on getting value out of
its contracted order book for 2019 and continue to selectively
onboard profitable business. Being more efficient in our operations
to capture value and recover cash is already yielding results and
we will continue to find opportunities to strengthen this
further.
I strongly believe that significant opportunities remain to
continue to grow the business both in terms of scaling our supply
offering and by launching products that sit comfortably within our
core business.
I thank my team for all its work over the last few months, and I
am convinced that the Group has a great future.
Outlook
Contracted revenue for FY 2019 was GBP88m at 31 December 2018,
and the Board therefore expects revenues to exceed the level
recognised in FY 2018. The Board is, however, anticipating the year
on year growth rate to be significantly below that previously
achieved as a result of a more prudent level of bookings being
targeted.
The Board targets gross margin of between 7.5 per cent. and 10
per cent. for FY 2019 and remains committed to managing overheads
to target a positive adjusted EBITDA as soon as possible.
While there are opportunities in the B2C market, our commitment
remains to be focused in the B2B market, where I believe we have an
expertise.
Finance Review
Results
The results for the year to 31 December 2018 have seen a 77 per
cent growth in revenues, to GBP80.6m (2017: GBP45.6m).
Gross profit for FY 2018 was GBP5.9m (2017, as restated:
GBP6.8m), resulting in a decline in gross margin percentage to 7.3
per cent (2017, as restated: 14.9 per cent). This level of
profitability is a result of a number of low margin contracts
entered in to during 2017 and 2018, which has diluted the overall
level of profitability achieved by the Group. Such contracts will
take time to expire in the context of our average contract term
being 22 months.
The Group has recognised a net loss for the year of GBP6.3m
(2017, as restated: profit of GBP0.7m).
A substantial increase in the bad debt provision of the Group
has been incurred in FY 2018, with a charge to the income statement
of GBP5.4m (FY 2017 restated charge of GBP0.2m). These losses are
largely as a result of a high proportion of the growth from
contracts booked in FY 2017 and FY 2018 being with customers who
have a poor payment history. This resulted in limited recovery of
trade receivables, and a significant expected credit loss at the
end of the year. The GBP5.4m charge for FY 2018 consists of a
GBP3.6m bad debt charge and GBP1.8m in relation to the first-time
adoption of IFRS 9. Management of trade receivables is clearly a
continued focus area of the Group for FY 2019 in view of the
material impact on profitability during FY 2018.
Cash and working capital
The Group held GBP14.6m of cash and cash equivalents at 31
December 2018 (2017: GBP4.9m).
The Group had an operating cash outflow of GBP1.3m (2017:
GBP0.5m inflow) for the year, with a net increase in cash and cash
equivalents of GBP9.7m (2017: GBP0.3m outflow). The Group raised
GBP11.6m, net of costs, in March 2018 through a placing of
1,200,000 new ordinary shares of GBP0.005 each. The Group also paid
dividends of GBP0.5m during the year.
The Board has now increased control and visibility of its
working capital requirement, and particularly overdue customer
receivables(1) , which measures the days outstanding of overdue
trade receivables and overdue billing. The Board is pleased to see
a 36 per cent reduction from the 14 days outstanding at 31 December
2017 to the nine days outstanding at 31 December 2018, although it
will not be complacent in monitoring the position.
Of the GBP14.6m cash balance, GBP3.5m is held in deposits with
the Group's bankers to support letters of credits ("LoCs") provided
to trading counterparties. Such LoCs provide a level of collateral
required to support the Group's trading activities. The Board
continues to monitor the level of cash collateral required,
including via LoCs, to maintain the increase in trading activities
in line with expected revenue growth. This requirement for cash
collateral can also lead to volatility in the Group's cash balance
in a falling commodity market, which the Board continues to monitor
closely. For this reason, the Board is reviewing alternative
options for its trading arrangements.
Review of prior years
Following an internal review of data from the Group's billing
and accounting systems and a review of the recoverability of trade
receivables owed by customers and of the process for accounting for
accrued income, the Board has concluded that a restatement of prior
year accounts is necessary.
As a result, the Group's net assets at 31 December 2017 have
been reduced by GBP2.4m. This adjustment mainly relates to a
reduction in the trade and other receivables balance at 31 December
2017 and 1 January 2017 of GBP2.8m and GBP1.3m respectively.
Revenue Visibility
A feature of the Group's business model is that it enters into
contracts with businesses to supply essential services. These
contracts typically have a fixed price per kWh of energy consumed,
for an estimated level of consumption. Whilst consumption can vary
from this forecast, the Board has a good level of certainty over
the revenue to be expected from its contracts, following
improvements to the management of data in relation to revenue
recognition processes.
The Group also benefits from economies of scale as the business
grows its offer, having established appropriate systems and teams
to cater for growth.
At the end of 2018 the Group supplied over 9,700 separate meters
with gas, electricity or water. The majority of these services were
provided to small, medium and multi-site corporate businesses
across Great Britain. The level of meters supplied represents only
0.3 per cent of the GB business market, highlighting the size of
the opportunity available to the Group.
At 31 December 2018, the Group had GBP88m of revenue contracted
for FY 2019 (31 December 2017: GBP50m for FY 2018). Whilst
encouraging in revenue terms, the margin achievable from these
contracts, and the level of bad debt charge being experienced by
the Group, has led the Board to review its sales acquisition and
customer lifecycle strategy. This has led to a significantly
reduced level of monthly bookings in the first four months of FY
2019 when compared with the same period for FY 2018.
Profitability
The Group has previously reported adjusted profit before tax as
a key alternative business measure. Following review, the Board now
considers that adjusted earnings before interest, tax, depreciation
and amortisation ("Adjusted EBITDA") is a more appropriate
measure(2) in order to review the normalised profit which is
potentially convertible to cash.
Adjusted EBITDA for the year ended 31 December 2018 is a loss of
GBP6.3m (2017: profit of GBP1.5m).
The Board has implemented various initiatives to improve
Adjusted EBITDA for FY 2019 and beyond, including:
-- enhancing gross margin via a more focused sales acquisition
and customer lifecycle strategy. The Board is working on
initiatives to enhance the 7.3% gross margin achieved in FY 2018 to
a higher, single digit percentage over the short to medium
term;
-- reducing overheads (before bad debt and broker commissions)
as a percentage of revenue by leveraging existing systems and teams
as the business scales up. Such overheads represented 7.3% of
revenue in FY 2018. The Board is working on initiatives so that the
absolute value of such overheads does not increase from FY 2018
levels, despite revenue growth;
-- a significant focus on improvements to reduce the level of
bad debt charge included in overheads, which totalled GBP3.6m in
Adjusted EBITDA for FY 2018, representing 4.5% of revenue.
These initiatives will take time to deliver results to increase
the Adjusted EBITDA reported by the Group. However, the Board has
every confidence that, after the work performed to date, we can
turn around the fortunes of the Group.
Dividends
The Group paid an interim dividend of 1.2p per share (2017
interim: 1p per share). No final dividend is being declared (2017:
2p per share).
1 Overdue customer receivables relate to the total accrued
income which is outside of the normal billing cycle, and overdue
trade receivables (net of VAT and CCL), net of provision for
doubtful debts
2 In reporting Adjusted EBITDA, the Group excludes certain gains
and losses, including: Interest; Tax; Depreciation; Amortisation;
Charges from equity settled share-based payments; unrealised gains
or losses on derivative contracts. Adjusted EBITDA also excludes
any one-off restructuring costs and, for FY 2018, the charges
related to first time adoption of IFRS 9 (Financial
Instruments).
Condensed consolidated statement of profit and loss and other
comprehensive income
For the year ended 31 December 2018
31 December 31 December
2018 2017 (restated)
GBP'000 GBP'000
--------------------------- ----------- ----------------
Revenue 80,635 45,631
Cost of sales (74,762) (38,813)
---------------------------- ----------- ----------------
Gross profit 5,873 6,818
---------------------------- ----------- ----------------
Operating costs before
non-recurring items,
unrealised gains on
derivative contracts
and IFRS 2 charges (14,588) (5,194)
Operating costs -
non-recurring items (441) -
Operating costs -
unrealised (losses)/gains
on derivative contracts (125) 259
Operating costs -
IFRS 2 charges (314) (1,099)
---------------------------- ----------- ----------------
Total operating costs (15,468) (6,034)
---------------------------- ----------- ----------------
(Loss)/profit from
operations (9,595) 784
Finance income 21 14
Finance costs (63) (68)
---------------------------- ----------- ----------------
(Loss)/profit before
tax (9,637) 730
Taxation 3,370 (19)
---------------------------- ----------- ----------------
(Loss)/profit for the year (6,267) 711
---------------------------- ----------- ----------------
Other comprehensive income - -
---------------------------- ----------- ----------------
Total comprehensive
(expense)/income for
the year (6,267) 711
---------------------------- ----------- ----------------
Earnings per share
Basic GBP(0.42) GBP0.10
Diluted - GBP0.09
---------------------------- ----------- ----------------
Condensed consolidated balance sheet
At 31 December 2018
31 December 31 December 1 January
2018 2017 (restated) 2017 (restated)
GBP'000 GBP'000 GBP'000
------------------------------ ----------- ---------------- ----------------
ASSETS
Non-current assets
Property, plant and equipment 395 539 209
Intangible assets 54 56 57
Deferred tax 3,325 1,568 467
------------------------------- ----------- ---------------- ----------------
3,774 2,163 733
------------------------------ ----------- ---------------- ----------------
Current assets
Trade and other receivables 13,569 10,165 3,557
Cash and cash equivalents 14,612 4,887 5,197
------------------------------- ----------- ---------------- ----------------
28,181 15,052 8,754
------------------------------ ----------- ---------------- ----------------
Total assets 31,955 17,215 9,487
------------------------------- ----------- ---------------- ----------------
LIABILITIES
Current liabilities
Trade and other payables (21,517) (10,458) (5,340)
Non-current liabilities - (371) (72)
------------------------------- ----------- ---------------- ----------------
Total liabilities (21,517) (10,829) (5,412)
------------------------------- ----------- ---------------- ----------------
Net assets 10,438 6,386 4,075
------------------------------- ----------- ---------------- ----------------
EQUITY
Share capital 81 70 70
Share premium 11,689 - -
Merger reserve (50) (50) (50)
Retained earnings (1,282) 6,366 4,055
------------------------------- ----------- ---------------- ----------------
10,438 6,386 4,075
------------------------------ ----------- ---------------- ----------------
Condensed consolidated statement of changes in equity
For the year ended 31 December 2018
Share Share Merger Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- --------- --------
Balance at 1 January 2018
(as previously reported) 70 - (50) 8,793 8,813
Impact of prior period adjustment
(note 3) - - - (2,427) (2,427)
---------------------------------- -------- -------- -------- --------- --------
Balance at 1 January 2018
(restated) 70 - (50) 6,366 6,386
---------------------------------- -------- -------- -------- --------- --------
Total comprehensive income
for the year
Loss for the year - - - (6,267) (6,267)
Other comprehensive income - - - - -
---------------------------------- -------- -------- -------- --------- --------
- - - (6,267) (6,267)
---------------------------------- -------- -------- -------- --------- --------
Transactions with owners
of the Company
Contributions and distributions
Equity-settled share based
payments - - - 685 685
Deferred tax on share based
payments - - - (1,600) (1,600)
Proceeds from share issues 11 12,079 - - 12,090
Share issue costs - (390) - - (390)
Equity dividend paid in
the year - - - (466) (466)
---------------------------------- -------- -------- -------- --------- --------
Total transactions with
owners of the Company 11 11,689 - (1,381) 10,319
---------------------------------- -------- -------- -------- --------- --------
Balance at 31 December 2018 81 11,689 (50) (1,282) 10,438
---------------------------------- -------- -------- -------- --------- --------
Balance at 1 January 2017
(as previously reported) 70 - (50) 5,389 5,409
Impact of prior period adjustment
(note 3) - - - (1,334) (1,334)
---------------------------------- -------- -------- -------- --------- --------
Balance at 1 January 2017
(restated) 70 - (50) 4,055 4,075
---------------------------------- -------- -------- -------- --------- --------
Total comprehensive income
for the year
Profit for the year - - - 711 711
Other comprehensive income - - - - -
---------------------------------- -------- -------- -------- --------- --------
- - - 711 711
---------------------------------- -------- -------- -------- --------- --------
Transactions with owners
of the Company
Contributions and distributions
Equity-settled share based
payments - - - 800 800
Deferred tax on share based
payments - - - 1,116 1,116
Equity dividend paid in
the year - - - (316) (316)
---------------------------------- -------- -------- -------- --------- --------
Total transactions with
owners of the Company - - - 1,600 1,600
---------------------------------- -------- -------- -------- --------- --------
Balance at 31 December 2017
(restated) 70 - (50) 6,366 6,386
---------------------------------- -------- -------- -------- --------- --------
Condensed consolidated statement of cash flows
For the year ended 31 December 2018
2018 2017 (restated)
GBP'000 GBP'000
-------------------------------------------------------- -------- ---------------
Cash flows from operating activities
(Loss)/profit for the financial year (6,267) 711
Adjustments for:
Depreciation of property, plant and equipment 291 211
Amortisation of intangible assets 2 1
Finance income (21) (14)
Finance costs 63 68
Taxation (3,370) 19
Share based payment charge 685 800
Increase in trade and other receivables (3,404) (6,608)
Increase in trade and other creditors 11,072 5,046
(Decrease)/increase in provisions for employee benefits (371) 299
-------------------------------------------------------- -------- ---------------
Net cash (used in)/from operating activities (1,320) 533
-------------------------------------------------------- -------- ---------------
Cash flows from investing activities
Purchase of property, plant and equipment (147) (541)
Net Interest (42) 14
-------------------------------------------------------- -------- ---------------
Net cash used in investing activities (189) (527)
-------------------------------------------------------- -------- ---------------
Cash flows from financing activities
Net proceeds from share placing and option exercises 11,700 -
Dividend paid during the year (466) (316)
Repayment of borrowings - -
-------------------------------------------------------- -------- ---------------
Net cash from/(used in) financing activities 11,234 (316)
-------------------------------------------------------- -------- ---------------
Net increase/(decrease) in cash and cash equivalents 9,725 (310)
Cash and cash equivalents at the start of the year 4,887 5,197
-------------------------------------------------------- -------- ---------------
Cash and cash equivalents at the end of the year 14,612 4,887
-------------------------------------------------------- -------- ---------------
Notes to the condensed consolidated financial report
1. Reporting entity
Yü Group PLC (the "Company") is a public limited company
incorporated and domiciled in the United Kingdom. The Company's
ordinary shares are traded on AIM. These condensed consolidated
financial statements ("Financial statements") as at and for the
year ended 31 December 2018 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
Whilst the financial information included in this preliminary
announcement has been prepared on the basis of the requirements of
International Financial Reporting Standards ("IFRSs") in issue, as
adopted by the European Union ("EU") and effective at 31 December
2018, this announcement does not itself contain sufficient
information to comply with IFRS.
The financial information set out in this preliminary
announcement does not constitute the company's statutory financial
statements for the years ended 31 December 2018 or 2017 but is
derived from those financial statements.
Statutory financial statements for 2017 have been delivered to
the registrar of companies and those for 2018 will be delivered in
due course. The auditors have reported on those financial
statements; their reports were (i) unqualified (ii) did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The condensed consolidated financial information is presented in
British pounds sterling (GBP) and all values are rounded to the
nearest thousand (GBP000) except where otherwise indicated.
Going concern
At 31 December 2018 the Group had net assets of GBP10.4m (2017:
restated net assets of GBP6.4m). Management prepares detailed
budgets and forecasts of financial performance and cash flow over
the coming 12 to 36 months. Based on the current projections the
Directors consider it appropriate to continue to prepare the
financial statements on a going concern basis.
The Group's hedging strategy and cash collateral requirements of
the required trading arrangements are principal considerations of
the Board when assessing the Group's ability to continue as a going
concern. Management has also considered the material losses
incurred in FY 2018 and any subsequent impact on the potential to
control the level of bad debt incurred by the Group, the ability to
enhance gross margin on customer contracts, and the control of key
financial data in the business. The regulatory context of the
Group, following the accounting issues notified to the market in
2018, is a further principal consideration.
Use of estimates and judgements
The preparation of the financial information in conformity with
adopted IFRSs requires the use of estimates and assumptions.
Although these estimates are based on management's best knowledge,
actual results ultimately may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected. The key areas of estimation and judgement are the level
of accrual for unbilled revenue, the inputs to the IFRS 2 share
option charge calculations and the recoverability of deferred tax
assets and trade receivables.
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.
Revenue is recognised when the associated risks and rewards of
ownership have been transferred, to the extent that it is probable
that the economic benefits associated with the transaction will
flow to the Group, and where the revenue can be measured
reliably.
Due to the nature of the energy supply industry and its reliance
upon estimated meter readings, both gas and electricity revenue
includes the Directors' best estimate of differences between
estimated sales and billed sales. The Group makes estimates of
customer consumption based on available industry data, and also
seasonal usage curves that have been estimated through historical
actual usage data.
The Directors have considered the new revenue standard, IFRS 15
"Revenue from Contracts with Customers". Having reviewed the
framework of the new standard in detail, and given the Group's
current revenue recognition policy and the nature of the industry
in which the Group operates, it is not believed that IFRS 15 has
any material impact on the Group's revenue recognition
methodology.
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 losses.
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). Bank overdrafts that are repayable on demand and
form an integral part of the Group's cash management are included
as a component of cash and cash equivalents.
Derivative financial instruments
The Group uses commodity purchase contracts to hedge its
exposures to fluctuations in gas and electricity commodity prices.
The majority of commodity purchase contracts are expected to be
delivered entirely to the Group's customers and therefore the Group
classifies them as "own use" contracts and outside the scope of
IFRS 9. This is achieved when:
-- a physical delivery takes place under all such contracts;
-- the volumes purchased or sold under the contracts correspond
to the Group's operating requirements; and
-- no part of the contract is settled net in cash.
This classification as "own use" allows the Group not to
recognise the commodity purchase contracts on its balance sheet at
the year end.
The commodity purchase contracts that do not meet the criteria
listed above are recognised at fair value under IFRS 9. The gain or
loss on remeasurement to fair value is recognised immediately in
profit or loss.
Classification of financial instruments issued by the Group
Following the adoption of IAS 32, 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's 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.
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 grant date fair value of share based payment awards granted
to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the
employees become unconditionally entitled to the awards. The fair
value of the options granted is measured using an option valuation
model, taking into account the terms and conditions upon which the
options were granted. The amount recognised as an expense is
adjusted to reflect the actual number of awards for which the
related service and non-market vesting conditions are expected to
be met, such that the amount ultimately recognised as an expense is
based on the number of awards that do meet the related service and
non-market performance conditions at the vesting date. For share
based payment awards with non-vesting conditions, the grant date
fair value of the share based payment is measured to reflect such
conditions and there is no true-up for differences between expected
and actual outcomes.
Taxation
Tax on the profit or loss for the period comprises current and
deferred tax. Tax is recognised in the statement of profit and loss
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the period, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment
to tax payable in respect of previous periods.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilised.
2. Segmental analysis
Operating segments
The Directors consider there to be one operating segment, being
the supply of electricity, gas and water to SMEs and larger
corporates.
Geographical segments
100 per cent of the Group revenue is generated from sales to
customers in the United Kingdom (2017: 100 per cent).
The Group has no individual customers representing over 10 per
cent of revenue (2017: nil).
3. Prior Period Adjustment - Correction of an error
Following a detailed accounting review carried out by the Board
and the audit committee in Quarter 4 of 2018, a prior period
adjustment has arisen. These adjustments relate to errors that
impact the financial statements previously reported for the years
ended 31 December 2016 and 31 December 2017.
The errors arose as a result of the incorrect measurement of
accrued income (based on an inaccurate data set being utilised) and
due to the impairment of trade receivables.
The impairment of trade receivables is a result of ledger
reconciliation issues between the Group's accounting and billing
systems, and the non-recoverability of amounts due from customers
who had entered administration or liquidation at the relevant
balance sheet date. The Group has therefore not restated the prior
year in relation to any provision against trade receivables on
customer balances due at 31 December 2017 which have, in many
cases, not been paid during FY 2018. Such balances have resulted in
a bad debt charge for FY 2018 and are therefore included the FY
2018 reported loss for the year.
The Board has also reviewed whether a further adjustment for
IFRS 9 is appropriate at 1 January 2018, on first-time adoption of
the accounting standard. No further adjustment has been made to
trade receivables as any additional expected credit loss
anticipated at that point is not considered to be significant.
The Board and audit committee have implemented various control
and improvement measures as a result of the identification of the
prior period errors.
The net impact in relation to the errors identified is to reduce
the level of trade and other receivables reported in the previously
reported financial statements and a resulting impact on tax. This
reduction is GBP1,334,000 in relation to the 31 December 2016
balance sheet. The cumulative impact at 31 December 2017 is to
reduce trade and other receivables by GBP2,846,000 (of which
GBP1,512,000 reduces the profit before tax for the year ending 31
December 2017) and to reduce the corporation tax liability by
GBP419,000.
The total impact on equity is to reduce the 31 December 2016
balance by GBP1,334,000 and to reduce the 31 December 2017 balance
by GBP2,427,000. The net impact for the year ended 31 December 2017
is a decrease in profit of GBP1,093,000.
Impact on equity (Increase/(decrease) in equity)
31 December 1 January
2017 2017
GBP'000 GBP'000
Trade and other receivables (2,846) (1,334)
Total Assets (2,846) (1,334)
Corporation tax payable 419 -
Total liabilities 419 -
---------------------------- ----------- ---------
Net impact on equity (2,427) (1,334)
---------------------------- ----------- ---------
Impact on statement of profit or loss (increase/(decrease) in
profit)
31 December
2017
GBP'000
Revenue (1,330)
Operating costs (182)
Corporation tax expense 419
Net impact on profit for the year (1,093)
----------------------------------- -----------
Impact on basic, diluted and adjusted Earnings Per Share (EPS)
(Increase/(decrease) in EPS)
31 December
2017
pence
Basic EPS attributable to ordinary shareholders (0.8)
Diluted EPS attributable to ordinary shareholders (0.7)
Adjusted EPS attributable to ordinary shareholders (0.7)
4. Reconciliation to Adjusted EBITDA
A key alternative performance measure used by the Directors to
assess the underlying performance of the business is adjusted
EBITDA.
2018 2017
GBP'000 GBP'000
----------------------------------------------- -------- --------
Adjusted EBITDA Reconciliation
(Loss)/profit from operations (9,595) 784
Add back:
Non-recurring items 441 -
Impact of first time adoption of IFRS 9 1,768 -
Unrealised loss/(gain) on derivative contracts 125 (259)
Depreciation of property plant and equipment 291 211
Amortisation of intangibles 2 1
Equity-settled share based payment charge 685 800
----------------------------------------------- -------- --------
Adjusted EBITDA (6,283) 1,537
----------------------------------------------- -------- --------
The Group previously reported adjusted profit before tax, which
is adjusted EBITDA less interest, depreciation and amortisation.
Adjusted profit before tax is a loss of GBP6,618,000 (2017:
restated profit of GBP1,271,000).
The 2018 non-recurring items of GBP441,000 consist of GBP210,000
of restructuring payroll costs and GBP231,000 of legal and
professional fees in relation to the Q4 2018 accounting review and
ongoing regulatory investigation.
5. Earnings per share
Basic (loss)/earnings per share
Basic (loss)/earnings per share is based on the (loss)/profit
attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding.
2018 2017 (restated)
GBP'000 GBP'000
---------------------------------------------------- -------- ---------------
(Loss)/profit for the year attributable to ordinary
shareholders (6,267) 711
---------------------------------------------------- -------- ---------------
2018 2017
--------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares
At the start of the year 14,054,055 14,054,055
Effect of shares issued in the year 787,370 -
--------------------------------------------------- ---------- ----------
Number of ordinary shares for basic earnings per
share calculation 14,841,425 14,054,055
Dilutive effect of outstanding share options 768,025 1,133,070
--------------------------------------------------- ---------- ----------
Number of ordinary shares for diluted earnings per
share calculation 15,609,450 15,187,125
--------------------------------------------------- ---------- ----------
2018 2017 (restated)
GBP GBP
--------------------------- ------ ---------------
Basic earnings per share (0.42) 0.05
Diluted earnings per share - 0.05
--------------------------- ------ ---------------
Adjusted earnings per share
Adjusted earnings per share is based on the result attributable
to ordinary shareholders before exceptional items and the cost of
cash and equity-settled share based payments, and the weighted
average number of ordinary shares outstanding:
2018 2017 (restated)
GBP'000 GBP'000
----------------------------------------------------- -------- ---------------
Adjusted earnings per share
(Loss)/profit for the year attributable to ordinary
shareholders (6,267) 711
Add back:
Non-recurring items after tax (see note 4) 357 -
Unrealised loss/(gain) on derivative contracts after
tax 101 (210)
Share based payments after tax 254 912
----------------------------------------------------- -------- ---------------
Adjusted basic earnings for the year (5,555) 1,413
----------------------------------------------------- -------- ---------------
2018 2017 (restated)
GBP GBP
---------------------------- ------ ---------------
Adjusted earnings per share (0.37) 0.10
---------------------------- ------ ---------------
6. Dividends
The Group proposed and paid an interim dividend in relation to
2018 of 1.2p per share (2017: 1.0p per share). The total interim
dividend of GBP195,211 was paid to shareholders on 8 January
2019.
The Directors do not propose a final dividend in relation to
2018 (2017: 2.0p per share).
7. Trade and other receivables
Group Company
--------------------------------------- ------------------------- ------------------
2018 2017 (restated) 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- -------- --------------- -------- --------
Gross trade receivables 7,898 2,681 - -
Provision for doubtful debts and
expected credit loss (4,803) (272) - -
3,095 2,409 - -
Accrued income - net of provision 9,688 6,876 - -
Prepayments 245 235 - -
Other receivables 406 386 - -
Financial derivative asset 135 259 - -
Amount due from subsidiary undertaking - - 4,642 1,355
--------------------------------------- -------- --------------- -------- --------
10,474 7,756 4,642 1,355
--------------------------------------- -------- --------------- -------- --------
13,569 10,165 4,462 1,355
--------------------------------------- -------- --------------- -------- --------
Movements in the provision for doubtful debts and expected
credit loss are as follows:
2018 2017 (restated)
GBP'000 GBP'000
--------------------------------- -------- ---------------
Opening balance 272 50
Additional provisions recognised 4,531 222
Provision utilised in the year - -
Unused amounts reversed - -
--------------------------------- -------- ---------------
4,803 272
--------------------------------- -------- ---------------
In addition to the GBP4,531,000 (2017: GBP222,000 restated)
provision recognised in relation to trade receivables, there was an
additional provision of GBP875,000 (2017: GBPnil) made against
accrued income.
None of the Group's receivables fall due after more than one
year.
The amount due from subsidiary undertakings in the books of Yü
Group PLC is non-interest bearing and is repayable on demand. The
Board of Yü Group PLC has considered the provisions around
impairment of inter-company indebtedness contained within IFRS 9
"Financial Instruments" and has concluded that in light of future
growth and profitability projections and the control exerted over
its subsidiary operations, it is satisfied that there is no case
for impairment of its intercompany receivables.
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
Trade receivables and accrued income at 31 December 2017 have
been restated by GBP266,000 and GBP2,580,000 respectively to
correct the error as explained in note 3. In addition, an amount of
GBP5,294,000 has been reclassified at 31 December 2017, which
reduces trade receivables and increases accrued income by
GBP5,294,000 respectively.
8. Cash and cash equivalents
Group Company
------------------------- ------------------ ------------------
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- -------- --------
Cash at bank and in hand 11,112 1,387 8,865 904
Short-term deposits 3,500 3,500 3,500 3,500
------------------------- -------- -------- -------- --------
14,612 4,887 12,365 4,404
------------------------- -------- -------- -------- --------
The short-term deposit relates to cash held at bank which is
utilised to support collateral, in the form of letters of credits,
with trading counterparties.
9. Trade and other payables
Group Company
------------------------------ ------------------------- ------------------
2018 2017 (restated) 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- --------------- -------- --------
Current
Trade payables 1,231 2,044 - -
Accrued expenses 15,603 7,081 - -
Corporation tax 16 29 - -
Other payables 4,667 1,304 - -
------------------------------ -------- --------------- -------- --------
21,517 10,458 - -
------------------------------ -------- --------------- -------- --------
Non-current
Group share bonus liabilities - 371 - 371
------------------------------ -------- --------------- -------- --------
The 2017 corporation tax liability balance has been restated
(previously stated as a liability of GBP448,000) as a result of the
prior period adjustment and reduction in Group profit as described
in note 3.
Details of the Group share bonus scheme are included in note
11.
10. Financial instruments and risk management
The Group's principal financial instruments are cash, trade
receivables, trade payables and derivative financial assets and
liabilities. The Group has exposure to the following risks from its
use of financial instruments:
(a) Fair values of financial instruments
Fair values
Derivative financial instruments are measured at fair value
through profit and loss. The derivative instruments are level 1
financial instruments and their fair value is therefore 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.
(b) Market risk
Market risk is the risk that changes in market prices, such as
commodity and energy prices, will affect the Group's income.
Commodity and energy prices
The Group uses commodity purchase contracts to manage its
exposures to fluctuations in gas and electricity commodity prices.
The Group's objective is to reduce risk from fluctuations in energy
prices by entering into back to back energy contracts with its
suppliers and customers, in accordance with a board approved risk
mandate. Commodity purchase contracts are entered into as part of
the Group's normal business activities. The majority of commodity
purchase contracts are expected to be delivered entirely to the
Group's customers and are therefore classified as "own use"
contracts. These instruments do not fall into the scope of IFRS 9
and therefore are not recognised in the financial statements. A
proportion of the contracts in the Group's portfolio are expected
to be settled net in cash where 100 per cent of the volume hedged
is not delivered to the Group's customers and is instead sold back
to the grid in order to smooth demand on a real time basis. An
assumption is made based on past experience of the proportion of
the portfolio expected to be settled in this way and these
contracts are measured at fair value. The gain or loss on
remeasurement to fair value is recognised immediately in profit or
loss.
As far as possible, in accordance with the risk mandate, the
Group attempts to match new sales orders with corresponding
commodity purchase contracts. There is a risk that at any point in
time the Group is over or under hedged. Holding an over or under
hedged position opens the Group up to market risk which may result
in either a positive or negative impact on the Group's margin and
cash flow, depending on the movement in commodity prices.
The Board continues to evaluate the use of commodity purchase
contracts and whether their classification as "own use" is
appropriate. The key requirements considered by the Board are as
listed below:
-- whether physical delivery takes place under the contracts;
-- the volumes purchased or sold under the contract correspond
to the Group's operating requirements; and
-- whether there are any circumstances where the Group would
settle the contracts net in cash.
All commodity purchase contracts are entered into exclusively
for own use, to supply energy to business customers. However as
noted above, a number of these contracts don't meet the stringent
requirements of IFRS 9, and so are subject to fair value
measurement through the income statement.
The fair value mark to market adjustment at 31 December 2018 is
a loss of GBP125,000 (2017: gain of GBP259,000). See note 7 for the
corresponding derivative financial asset.
The Group's exposure to commodity price risk according to IFRS 7
is measured by reference to the Group's IFRS 9 commodity contracts.
IFRS 7 requires disclosure of a sensitivity analysis for market
risks that is intended to illustrate the sensitivity of the Group's
financial position and performance to changes in market variables
impacting upon the fair values or cash flows associated with the
Group's financial instruments.
Therefore, the sensitivity analysis provided below discloses the
impact on profit or loss at the balance sheet date assuming that a
reasonably possible change in commodity prices had occurred, and
been applied to the risk exposures in place at that date. The
reasonably possible changes in commodity price used in the
sensitivity analysis were determined based on calculated or implied
volatilities where available, or historical data.
The sensitivity analysis has been calculated on the basis that
the proportion of commodity contracts that are IFRS 9 financial
instruments remains consistent with those at that point. Excluded
from this analysis are all commodity contracts that are not
financial instruments under IFRS 9.
Reasonably Impact on
profit
Possible and net
increase/ assets
Open market price of forward contracts decrease GBP'000
in variable
--------------------------------------- ------------ ---------
UK gas (p/therm) +/-10 % 74
UK power (GBP/MWh) +/-10 % 226
--------------------------------------- ------------ ---------
300
--------------------------------------- ------------ ---------
Liquidity risk from commodity trading
The Group's trading arrangements can result in a cash call being
made by counter-parties when commodity markets are below the
Group's traded position. A significant reduction in electricity and
gas markets could lead to a material cash call from the Group's
trading counter-parties. Whilst such a cash call would not impact
the Group's profit, it would have an impact on the Group's cash
reserves.
(c) Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's receivables from customers.
These trading exposures are monitored and managed at Group
level. All customers are UK based and turnover is made up of a
large number of customers each owing relatively small amounts. New
customers have their credit checked using an external credit
reference agency prior to being accepted as a customer.
Credit risk is also managed through the Group's standard
business terms, which require all customers to make a monthly
payment predominantly by direct debit. At the year end there were
no significant concentrations of credit risk. The carrying amount
of the financial assets represents the maximum credit exposure at
any point in time.
The ageing of trade receivables, net of bad debt provision, at
the balance sheet date was:
2018 2017 (restated)
GBP'000 GBP'000
----------------------- -------- ---------------
Not past due 104 52
Past due (0-30 days) 1,949 1,419
Past due (31-120 days) 1,006 629
More than 120 days 36 309
----------------------- -------- ---------------
3,095 2,409
----------------------- -------- ---------------
At 31 December 2018 the Group held a provision against doubtful
debts of GBP5,678,000 (2017: restated GBP272,000). The 2018
provision is a combined provision against both trade receivables
(GBP4,803,000) and accrued income (GBP875,000).
(d) Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Board is
responsible for ensuring that the Group has sufficient liquidity to
meet its financial liabilities as they fall due and does so by
monitoring cash flow forecasts and budgets. In order to enter into
the necessary commodity purchase contracts, the Group is required
to lodge funds on deposit with its bank. These funds (GBP3.5m at 31
December 2018) are used as collateral, allowing the bank to issue
letters of credit ("LOCs") to the relevant trading counterparties
in the wholesale energy market. The Board has considered the cash
flow forecasts, along with the collateral and LOC requirements, for
the next 12 months, which show that the Group expects to operate
within its working capital facilities throughout the year.
Any excess cash balances are held in short-term, interest
bearing deposit accounts. At 31 December 2018 the Group had
GBP14.6m of cash and bank balances, as per note 8.
(e) Foreign currency risk
The Group trades entirely in pounds sterling and therefore it
has no foreign currency risk.
11. Share based payments
The Group operates a number of share option plans for qualifying
employees of the Group. Options in the plans are settled in equity
in the Company. The options are subject to a vesting schedule, but
not conditional on any performance criteria being achieved. The
only vesting condition is that the employee is employed by the
Group at the date when the option vests.
The terms and conditions of the grants made under the schemes
are as follows:
Exercisable between
---------------------------
Amount
outstanding
at
Expected Exercise Vesting 31 December
Date of grant term Commencement Lapse price schedule 2018
-------------- -------- ------------- ------------ -------- --------- ------------
17 February 17 February 17 February
2016 2 2018 2026 GBP0.09 1 -
17 February 17 February 17 February
2016 3 2019 2026 GBP0.09 2 40,500
22 December 22 December 22 December
2016 3 2019 2026 GBP3.25 2 13,500
6 April 2017 3 6 April 2020 6 April 2027 GBP0.005 2 114,270
6 April 2017 6.5 6 April 2020 6 April 2027 GBP2.844 2 208,632
28 September 28 September 28 September
2017 6.5 2020 2027 GBP5.825 2 54,000
9 April 2018 3 9 April 2021 9 April 2028 GBP0.005 2 43,160
9 April 2018 6.5 9 April 2021 9 April 2028 GBP10.38 2 92,689
26 September 26 September 26 September
2018 6.5 2021 2028 GBP8.665 2 6,539
-------------- -------- ------------- ------------ -------- --------- ------------
573,290
-------------- -------- ------------- ------------ -------- --------- ------------
The following vesting schedules apply:
1. 50 per cent of options vest on first anniversary of date of
grant and 50 per cent vest on second anniversary.
2. 100 per cent of options vest on third anniversary of date of grant.
The number and weighted average exercise price of share options
were as follows:
2018 2017
------------------------------------- ----------- ---------
Balance at the start of the period 1,464,310 1,094,500
Granted 154,317 396,810
Forfeited (31,837) (27,000)
Lapsed - -
Exercised (1,013,500) -
------------------------------------- ----------- ---------
Balance at the end of the period 573,290 1,464,310
------------------------------------- ----------- ---------
Vested at the end of the period - 500,000
------------------------------------- ----------- ---------
Exercisable at the end of the period - -
------------------------------------- ----------- ---------
Weighted average exercise price for:
Options granted in the period GBP7.41 GBP2.43
Options forfeited in the period GBP5.67 GBP0.09
Options exercised in the period GBP0.09 -
------------------------------------- ----------- ---------
Exercise price in the range:
From GBP0.005 GBP0.005
To GBP10.380 GBP5.825
------------------------------------- ----------- ---------
The fair value of each option grant is estimated on the grant
date using a Black Scholes option pricing model with the following
fair value assumptions:
2018 2017
------------------------------------------------------ ----------- -----------
Dividend yield 0.29-0.35% 0.3%
Risk-free rate 1.5% 1.5%
Share price volatility 36.0-36.7% 30.4-33.4%
Expected life (years) 3-6.5 years 3-6.5 years
Weighted average fair value of options granted during GBP5.67 GBP3.27
the period
------------------------------------------------------ ----------- -----------
The share price volatility assumption is based on the actual
historical share price of the Group since IPO in March 2016.
The Group had previously operated a share bonus plan for all
qualifying employees of the Group. The plan was intended to be
settled in cash if certain financial targets were met. The value of
the bonus pool was to be determined by the number of notional
shares contributed to the pool (50,000 per year based on
achievement of certain financial targets) and the share price
growth of each tranche of shares. However given the financial
performance of the Group in 2018, the restatement of prior year
financial figures and the subsequent decline in the Group share
price, the scheme has been closed.
The total expenses recognised for the year arising from share
based payments, are as follows:
2018 2017
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Equity-settled share based payment expense 685 800
Cash-settled share based payment (gain) / expense (371) 299
-------------------------------------------------- -------- --------
314 1,099
-------------------------------------------------- -------- --------
12. Commitments
Capital commitments
The Group had no capital commitments at 31 December 2018 (2017:
GBPnil).
Contingent liabilities
Following the findings of the internal accounting review in
October 2018, the Financial Conduct Authority ("FCA") commenced an
investigation as to whether the market announcements made by the
Group between 6 March 2018 and 24 October 2018 accurately reflected
the Group's financial status. The Board is also providing
information via its nominated advisor in relation to adherence to
AIM rules.
The Board is not able to confirm with any certainty the
likelihood and, if appropriate, the quantum of any losses to be
incurred as a result of such investigations.
The Board has reviewed the matter with its legal advisors and
considered regulator guidelines on fines and precedent cases. This
review has led the Board to consider that any loss, if incurred, is
not likely to be significant in the context of the Group's ability
to trade as a going concern. The Board will continue to co-operate
fully with regulators to ensure the matters are resolved as soon as
possible, and that all lessons are learnt.
The Group had no contingent liabilities at 31 December 2017.
13. Related parties and related party transactions
The Group has transacted with the following related parties
during the current and prior financial periods:
-- CPK Investments Limited (an entity owned by Bobby Kalar); and
-- Better Business Energy Limited (an entity owned by Bobby Kalar);
CPK Investments Limited owns the property from which the Group
operates and rents it to Kensington Power Limited under an
operating lease. During 2018 the Group paid GBP120,000 in lease
rentals and service charges to CPK Investments Limited (2017:
GBP120,000). The amount owing to CPK Investments at 31 December
2018 was GBPnil.
During the prior year GBP51,207 owed by Better Business Energy
Limited was written off. The amount owing to/from Better Business
Energy Limited at 31 December 2018 was GBPnil (2017: GBPnil).
All transactions with related parties have been carried out on
an arm's length basis.
14. Post-balance sheet events
There are no significant or disclosable post-balance sheet
events.
Copies of the Annual Report and Accounts for the year ended 31
December 2018 will be available to download from the Company's
website at www.yugroupplc.com later today, Wednesday 15 May 2019.
Hard copies will be posted to shareholders on 28 May 2019.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BZLLFKEFFBBL
(END) Dow Jones Newswires
May 15, 2019 02:01 ET (06:01 GMT)
Yu (LSE:YU.)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Yu (LSE:YU.)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
