TIDMYU.
RNS Number : 8065S
Yu Group PLC
14 March 2023
Yü Group PLC
("Yü Group" or the "Group")
Final results for the year ended 31 December 2022
DELIVERING THE GROWTH STORY AT PACE
Yü Group PLC (AIM; YU.), the independent supplier of gas,
electricity and water to the UK corporate sector, announces its
final audited results for the year to 31 December 2022.
Bobby Kalar, Group Chief Executive Officer, stated:
"I'm pleased to report another fantastic year for Yü Group. We
have once again clearly demonstrated our ability to surpass
financial performance metrics and, with the strong momentum we have
in the business, we are confident of this recurring theme
continuing into 2023.
Our record breaking financial performance and significant
strategic progress is a testament to the strength of the Group.
Revenue increased 79%, EBITDA increased 359%, contracted revenue is
up 57% and cash increased by GBP11.9m. Reflecting our continued
confidence in the business we are also pleased to recommend the
reinstatement of a progressive dividend policy. To achieve this
despite the backdrop of a turbulent energy market is credit to the
strong foundations we have in place and the ability and character
of the team.
It's been a busy year! Developing and integrating our smart
metering business, Yü Smart from a standing start to a fully
functioning business performing at pace has been a particular
highlight. I'm proud to lead a team who have seized this
opportunity to build and grow new capabilities. I clearly see the
ability for the Group to accelerate its profitability by leveraging
off our growing revenues and providing new services. Cash flow and
cash management will remain a key focus, including through our
smart meter rollout.
The EBRS scheme has worked well and rightly delivered support to
our business customers. We will continue working with BEIS to
champion assistance to UK businesses.
Whilst our industry has been plagued by negative impacts and a
lack of investment and support, I am immensely proud to report our
progress and development. The market opportunity is huge, we have a
scalable platform, and we are primed and ready to grow.
We have got off to a fantastic start in 2023 with our
exceptional performance continuing. Whilst we remain vigilant, we
look forward to delivering continued shareholder value in 2023 and
beyond."
Financial & Operational Highlights:
31 December 2022 2021 Change
------------------------------------ --------- ---------
GBP'000 unless stated
Financial:
Revenue 278,587 155,423 +79%
Adjusted EBITDA 1 7,909 1,724 +359%
Profit before tax 5,840 3,392 +72%
Earnings per share (pence):
Adjusted, fully diluted 30p 14p +114%
Statutory, Basic 29p 27p +7%
Final dividend per share
(pence) 3p - +3p
Operating cash inflow/(outflow) 14,737 (774) +GBP15.5m
Net Cash (2) 18,810 6,782 +177%
Overdue customer receivables 5 days 7 days -2 days
(days) (3)
Operational:
Average Monthly Bookings
(GBP'm) GBP24.5m GBP13.8m +78%
Contracted Revenue for next
FY (GBP'm) GBP247m GBP157m +57%
Meter Points (#) 25,500 31,900 -20%
Smart meter installations
(#) 1,033 N.A. -
==================================== ========= ======== =========
Strong financial performance
-- Strong revenue growth, up 79%, to GBP278.6m (FY21:
GBP155.4m). Confidence in continuing growth supported by forward
order book in excess of GBP350m, of which GBP247m (up 57% in the
year) delivers in FY23.
-- Adjusted EBITDA up 359% to GBP7.9m (2021: GBP1.7m) with
adjusted operating margin improved significantly to 2.8% (FY21:
1.1%).
-- Profit before tax up 72% to GBP5.8m (FY21: GBP3.4m), after
non-cash charge of GBP0.9m relating to derivative accounting (2021:
GBP3.3m gain) reflected.
-- Earnings per share, adjusted and fully diluted, increased 114% to 30p (FY21: 14p).
-- Strong operating cash inflow of GBP14.7m (FY21: GBP0.8m
outflow), with GBP18.8m net cash (net of GBP0.2m lease liability)
available as at 31 December 2022 (2021: GBP6.8m).
-- Board proposes a final dividend of 3p per share (2021: nil)
as part of progressive dividend policy, balancing working capital
and investing for growth.
Significant strategic progress
-- Further enhancement of 'Digital by Default' platform
improving customer experience, driving efficiencies, and creating
value through data science.
-- Successful roll out of Yü Smart benefiting customers and
improving debtor control and profitability. Yü Smart is expected to
generate a positive EBITDA contribution in FY23.
Current trading and outlook
-- Very strong start to 2023 with average monthly bookings
significantly ahead of the record GBP24.5m in FY22 and contracted
revenue of GBP247m as at 31 December 2022 for FY23.
-- Meter points now accelerating following strategic
rationalisation in FY22 and after the late 2021 uplift from the
acquisition of the AmpowerUK portfolio.
-- Improving customer cash collection performance and reduced
bad debt exposure, alongside continued overhead efficiency benefits
from 'Digital by Default' and positive contribution from Y ü Smart,
all provide potential for additional margin growth.
-- Management target further improvement in adjusted EBITDA
margin from the 2.8% generated in FY22 (FY21: 1.1%).
Analyst presentation
A presentation for analysts will be held at 10am GMT today,
Tuesday 14 March 2023. Anyone wishing to attend should please
contact yugroup@teneo.com for further information.
1 Adjusted EBITDA is earnings before interest, tax, depreciation
and amortisation, and unrealised gains or losses on derivative
contracts. For FY21, adjusted EBITDA also excludes share based
payments and non-recurring expenses. See reconciliation in note 7
to the financial statements below.
(2) Net cash refers to cash and cash equivalents less the debt
in the Group being GBP0.2m of lease liabilities.
(3) Overdue customer receivables is expressed in days of sales,
and relates to the total balance, net of provisions, of accrued
income which is outside of the normal billing cycle, plus overdue
trade receivables (net of VAT and CCL).
For further information, please contact:
Yü Group PLC
Bobby Kalar
Paul Rawson +44 (0) 115 975 8258
Liberum
Edward Mansfield
William Hall
Cara Murphy +44 (0) 20 3100 2000
--------------------
Teneo
Giles Kernick
Alec Tidbury +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 and value for all of our stakeholders, built on strong
foundations and with a robust hedging policy. In 2022 the Group
launched Yü Smart and Yü Charge to support growth through new
opportunities in smart metering and EV charge installation. With a
significant opportunity in a GBP50bn+ addressable market, Yü Group
continues to deliver on the medium term goal of GBP500m of revenues
with an adjusted EBITDA margin in excess of 4%.
CHAIRMAN'S STATEMENT
Delivering high growth, shareholder returns, innovation and
expert risk management.
-- Maintaining a steadfast commitment to "best-in-class"
corporate governance as we scale the business to meet our highly
ambitious targets in a GBP50bn+ market.
-- An experienced, seasoned board and a highly resolute, expert
management team have continued to thrive and continued to deliver
impressive results in the face of multiple "Black Swan"
challenges.
It is my pleasure to update you on the Group's further progress
toward more meaningful and sustainable profitability, and for the
first time in recent years, the proposed resumption of a modest
dividend. We continue to scale our activities at pace, whilst
maintaining a robust and mature approach to governance, margin
protection and effective risk mitigation.
Since my appointment as Independent Non-Executive Chairman in
January 2020, the Group has successfully weathered and emerged
stronger from a succession of "black swan" events. Although still
with us, the effects of the pandemic from 2020 onward and severe
disruption in the energy supply markets leading to many failed
suppliers in 2021 are starting to abate. In 2022 the war in Ukraine
and movements in the macro-politics of energy supply in general,
ushered in a period of extreme market volatility resulting in
greatly increased commodity prices.
Whilst, more recently, commodity prices have normalised (partly
due to unusually warm temperatures across Europe, a slight increase
in available gas storage levels and relatively lower seasonal
demand) we are very aware of the impact across the markets that
such market volatility can have. In particular, we give great
regard to the effects of this volatility on our loyal customers as
well as any resultant changes or moves in the regulatory and
political context to which, as suppliers of energy to UK business,
we are subject.
I'm pleased and proud to report that the Group, supported by an
experienced Board and a resolute, highly expert management team,
has continued to thrive and deliver impressive results in the face
of these multiple challenges; the ultimate testament to the
strength of the Group.
Continuing to deliver on our strategic priorities
Our mantra and priorities remain the same, being Bigger, Better,
Faster and Stronger.
Financially, we have delivered results ahead of management's
expectations for the year, and our momentum continues to build. Our
FY22 revenue increased significantly, up 79.2% to GBP278.6m.
Adjusted EBITDA has grown from GBP1.7m to GBP7.9m. Profit before
tax is up 71% to GBP5.8m (FY21: GBP3.4m). Adjusted, fully diluted,
EPS increased from 14p to 30p, a 114% increase. Importantly these
results flowed through into cash with net cash held at the end of
the period increased to GBP18.8m, up from GBP6.8m in 2021.
Reflecting our strengthened balance sheet your Board has
recommended a final dividend of 3p per share as part of the
reinstatement of a progressive dividend policy. We have
deliberately proposed a modest dividend to allow for capital to
continue to be invested in to support our continued organic growth
and provide flexibility to undertake additional value-accretive
potential M&A activities which could further enhance the
business and accelerate shareholder returns.
Beyond these financial returns, we are pleased to report strong
performance across other metrics: including in customer service and
employee engagement.
Encouraged by the indefatigable and entrepreneurial vision of
our CEO and supported by a close-knit senior team of
industry-leading quality, we have continued to invest in technology
to maintain the key customer-centric differentiation of our
challenger, agile, business. We continue to position ourselves as
the most agile and leading challenger to the more established and
larger market participants in a GBP50bn+ market.
Our strategies are demonstrably delivering results and enable
the Group to grow our customer book and increase our top-line sales
whilst paying close attention to the quality of our margins across
the links in the value-added chain and cash collection.
Simultaneously we are promoting continual operational efficiencies
within the Group's operations as we drive scale. The recognition
that came from having won the Utility Week "Award for Digital
Transformation" is a testament to the impact of the work undertaken
to date. We have an ongoing programme of further innovations
scheduled for 2023 and beyond.
Our acquisition of certain assets of Magnum Utilities Ltd in the
year, which has been rebranded and is now fully operational as Y
Smart, also launches a new income stream for the Group and is set
to unlock significant business control, pricing, rental and big
data-mining benefits over the near and medium term.
The Directors have an ongoing mission and mandate to identify
and consider further value-enhancing M&A opportunities in order
to progress the profitability of the Group. These are supplementary
to our ambitious targets for accelerating prudent organic
growth.
Strength in depth
Your Board's constant philosophy has been to establish, maintain
and encourage a team ready to scale the Group to beyond the GBP500m
mark of revenue. We have at Board, ExCo and senior leadership
levels, established highly experienced and ambitious specialist
teams. We continue to ensure that all of our teams are fit and
capable of realising the Group's ambition to achieve measured
acceleration in the increase of revenue and adjusted EBITDA.
The Group's operational evolution into new business unit ("BU")
structures, reporting to the CEO, has seen the establishment of
focused senior management teams to further drive specified business
objectives. Close integration and cultural alignment ensure that
optimal outcomes receive meritocratic focus as we continue to
unlock cross-functional synergies and extract the maximum from
every link in the value added chains across the business.
Significant and stretching short-term and long-term targets have
been appropriately set to align outcomes with reward.
Your Board anticipates a highly positive impact from this
approach, both on the Group's overall performance in 2023 and
beyond.
Engagement with our stakeholders and regulatory bodies
During FY22 the Group appointed Liberum as its nominated adviser
and broker ("NOMAD") as part of a set of wider objectives to
enhance our shareholder reach. Our advisers provide us with robust
support in ensuring compliance with AIM regulations, whilst also
enhancing the quality of our engagement with both institutional and
individual investors.
The Board and management team of the Group take a pro-active
approach to engagement with our main Regulators, being Ofgem,
Ofwat, the FCA and AIM. We have established and continue to develop
best practices across the varying regulated areas as they evolve.
During the year there has been an increased level of engagement
with Ofgem and BEIS in response to changes in external market
conditions and the need to address any potential increase in
political and/or reputational risk.
Our approach to customers in debt, and aspects of the management
of some of the Group's key assets have been topics of useful
dialogue. During the year the Group successfully mobilised to
deliver various urgent Government business customer support schemes
originating from BEIS. The most material of these was the Energy
Bill Relief Scheme ("EBRS") which provides a large proportion of
business customers with a significant reduction in their energy
bills from 1 October 2022 to 31 March 2023.
We continue to engage with stakeholders and will fully and
promptly pass through all benefits due to our customers to support
them through this period of unprecedentedly volatile and high
energy commodity prices. Post the EBRS scheme, we will also
implement further schemes as appropriate. We note that current
lower commodity market pricing conditions still suggest a
significant, though hopefully less material, impact on our business
customers' bills.
Ensuring good governance and risk management
To reflect our newer activities in the installation of smart
meters and EV charging units, the Group has established a Safety,
Health, Environmental and Quality ("SHEQ") Committee comprised of
Bobby Kalar (CEO), John Glasgow (Independent non-executive
Director) and other appropriately qualified colleagues.
Your Board maintains a steadfast commitment to "best-in-class"
corporate governance. We seek to ensure that we can take advantage
of the significant market opportunities available to us whilst
keeping a tight focus on the mitigation of risk. This we effect by
ensuring that our governance framework, structures, and day-to-day
practices are fit and robust enough to be able to treat and
navigate even abnormal or atypical market developments, both now
and in the future, as "business as usual".
We continue to evolve the Group's internal capability as we
scale, including through further developing our own internally
available risk and internal control resources.
Reports on the activities of the Board, including the various
topics considered and the Board's Committees, are set out in the
Corporate Governance section of the annual report.
Our risk management framework and principal risks and
uncertainties are outlined further in the annual report, and have
been well tested and reviewed by management, the Audit Committee
and the Board.
Summary: retaining agility and control
Global and market conditions have thrown us several interesting
challenges and yet we have emerged stronger than ever. We continue
to deliver our Bigger, Better, Faster and Stronger strategic
objectives whilst maintaining our characteristic agility as a
determined challenger/disruptor.
Whilst we are pleased with the turn-around in the Group's
performance over the last few years we continue to guard against
complacency regarding the ongoing improvements in our governance
and operational structures.
I'm enthusiastic and confident about what the future holds for
your company and very much look forward to further updating
Shareholders at our scheduled annual general meeting.
CHIEF EXECUTIVE OFFICER'S STATEMENT
Record financial performance and clear momentum.
-- A record breaking financial, operational and growth
performance, exceeding our expectations and delivering shareholder
value.
-- I am in no doubt that we will continue to deliver strong
results and growth over the coming years.
It has been an incredible year for the Group and despite
continued uncertainty in wholesale commodity markets I'm very
pleased with our performance. I am in no doubt that we will
continue to deliver strong results and growth over the coming
years.
Our plan was to be Bigger, Better, Faster and even Stronger than
in 2021. Having achieved this outcome in 2022, our plan for 2023 is
continue this momentum and demonstrate our evolution into a pure
scale mode.
Our revenue, adjusted EBITDA, cash generation, and numerous
operational indicators exceeded management expectations in 2022. We
have also hit the ground running and continuing to build momentum
into 2023. I therefore remain very confident in the Group's ability
to continue to deliver our ambitious strategy and unlock
significant shareholder value.
Demonstrating resilience and growing in an evolving market
2022 continued to provide market challenges to energy suppliers.
In March 2022, as we woke to the announcement that Russia had
invaded Ukraine, we saw unprecedented volatility in the wholesale
gas market sending all time high forward prices even higher.
The energy industry has seen perennial speculation about the
sustainability and profitability of disruptive challengers in the
gas and power supply markets. While the domestic supplier sector
has experienced headwinds with the energy price cap, I see a clear
path to significant growth opportunities in the business supply
sector.
Commodity markets have normalised more recently, but prices
compared to historic norms remain high, though less than their peak
in Q3 2022. In light of this reduction in prices, and the peak over
winter 2022/23, we do not anticipate any material impact on the
Group through the new amended Government support scheme from April
2023.
We remain fully hedged in our commodity position which is
evidenced in our improved profitability despite the market
volatility. However, we have seen some operational disruption,
particularly as market prices have been so volatile leading to the
need for the Group to temporarily and proactively suspend new sales
acquisition activities at several points during 2022. This reduced
the level of new customer bookings that could otherwise have been
achieved. We have also seen, perhaps understandably, customers more
willing to fix prices for only a short period, again reducing the
forward contract book, though we still exit 2022 with record levels
of forward revenue contracted.
Despite this we have managed to continue to deliver high service
levels and have significant momentum into 2023, with bookings being
at record levels despite this market context and volatility.
Shaking the tree as a growing and leading challenger supplier
remains our focus. We pride ourselves on bringing innovation to a
benign market, underpinned by our digital by default approach. This
continues to provide differentiation for the Group.
We also now see a less crowded business-to-business market, with
fewer larger suppliers which leads to a more sustainable market,
and also has the benefit of enabling the Group to differentiate as
a leading challenger. Barriers to entry are high, and compliance
with regulatory requirements even more heightened in view of the
wider context.
In summary, in a volatile market we have performed very well; we
have maintained our discipline and we combine innovation, including
through digital, with robust risk management. I'm convinced, as
markets settle, we can improve our performance even further.
Forming Y Smart
The Group acquired the management team and certain processes and
policies of Magnum Utilities Ltd in May 2022, forming the basis of
Y Smart - a new business set up to deliver installation and
maintenance services for smart meters.
I'm pleased with the integration of this new team, who were busy
over the summer of 2022 securing appropriate accreditations to
operate from August 2022.
Whilst the business will first and foremost focus on installing
smart meters for our supply customers, the service is also being
offered to other suppliers (in the domestic or non-domestic
sectors) and has already secured a contract with a third-party
supplier.
The integration and formation of this new team is an exciting
evolution for the Group, backed by a mandate from Government to
accelerate the implementation. Smart meters provide significant
benefits to our customers and to the Group's operation, and our
involvement in the engineering activities is expected to provide
further profitability improvement in 2023 and beyond.
Ambitious objectives
In addition to the establishment of Y Smart, we have ambitious
further targets to deliver benefits over the short to medium term.
These include:
Organically scaling the business
Revenue increased by 79% in 2022, to GBP279m. With bookings
continuing the strong momentum from Q4 2022 as we enter 2023, and
significant differentiation in our offering including through
digital, we target significant organic revenue increase for 2023
and beyond.
Reduction of bad debt
Our charge for bad debt has increased in 2022 (from 3.1% to 7.7%
of revenue), reflecting the higher commodity markets though also a
consequence of the Supplier of Last Resort ("SoLR") appointments
made in late 2021 and early 2022. The lack of some customer
information through the SoLR process led to difficulties in
following our normal debt processes, and it took some time to work
through the non-paying customer book (albeit such customers
generated higher gross margins). For 2023, we target a significant
reduction in bad debt through this newly cleansed book. We also
plan further operational improvements to reduce this cost
significantly.
Value enhancing acquisitions
We have demonstrated over the last three and a half years our
ability to identify and implement value enhancing acquisitions. We
will continue to assess potential acquisitions and will utilise our
strong balance sheet where the target meets our strategic
objectives.
Providing shareholder value
My team have delivered across numerous stretch targets in 2022
and I have every confidence that they will continue to over deliver
in 2023 and further. Alongside these targets, we have also worked
hard to improve our stakeholder engagement, including with
shareholders.
Our confidence in the Group's balance sheet is reflected in the
establishment of a progressive dividend policy, commencing with our
recommendation to shareholders of a 3p per share final dividend for
FY23. The ex-dividend date is 1 June 2023, with a payment date of
20 June 2023.
We have also worked hard to develop our investor reach, working
with Liberum and other stakeholders to engage with numerous
potential investors, as well as ensuring engagement with existing
stakeholders.
The Group continues to transform. I'm pleased to see the
increased business scale being reflected in the engagement we have
with existing and potential shareholders.
Outlook
-- Current trading remains strong as we enter 2023 and we are
confident of achieving current market expectations;
-- Significant revenue growth expected, supplementing the
GBP247m contracted at the end of 2022 to deliver in 2023;
-- Management target continued improvement in adjusted EBITDA
margin, with reduced bad debt and continued overhead efficiency
benefit as we benefit from our investment in digital;
-- Y Smart now fully operational and targeted to install several thousand meters in 2023; and
-- Continue to seek strategic acquisitions where they enhance returns.
Continuing to deliver
Despite turbulence in the wider market, I'm pleased and proud to
note that we over delivered against our financial and operational
targets in 2022.
The opportunity ahead of us remains huge, and I and the rest of
the Board and management will continue to drive performance to
unlock shareholder benefit. I would also like to thank the entire Y
Group team for their continued efforts.
I look forward to updating the market on our progress in the
coming months.
FINANCE REVIEW
Increased revenue, adjusted EBITDA and cash.
-- We continue strong momentum in financial results, governed via our clear financial framework
In overview
-- Revenue increased 79% to GBP279m
-- Contracted revenue for FY23 of GBP247m, up 57% on prior year
-- Adjusted EBITDA increased to GBP7.9m, up GBP6.2m year on year
-- Profit before tax increased 72% to GBP5.8m
-- Operating cash inflow of GBP14.7m, with net cash available of GBP18.8m
-- Adjusted, fully diluted, EPS of 30p, up 16p in the year
-- Final dividend of 3p per share recommended
Financial metrics Change 2022 2021
GBPm unless stated
------------------------------- ------- -------
Revenue +79.2% 278.6 155.4
Gross margin % +6.0% 15.8% 9.8%
Net customer contribution % +1.5% 8.2% 6.7%
General overheads % +0.3% (5.3%) (5.6%)
Adjusted EBITDA % +1.7% 2.8% 1.1%
------------------------------- ------- ------- ------
Adjusted EBITDA +6.2 7.9 1.7
------------------------------- ------- ------- ------
Profit before tax +2.4 5.8 3.4
------------------------------- ------- ------- ------
Net cash flow +16.6 11.9 (4.7)
------------------------------- ------- ------- ------
Closing cash balance +12 19.0 7.0
------------------------------- ------- ------- ------
Overdue customer receivables -2 days 5 days 7 days
------------------------------- ------- ------- ------
Earnings per share (adjusted,
fully diluted, pence) +16p 30p 14p
------------------------------- ------- ------- ------
Dividend per share (pence) +3p 3p -
=============================== ======= ======= ======
Results summary
Our financial performance for the year ended 31 December 2022
delivered above management expectations in revenue, EBITDA and
cash, and the Board is confident in continuing this strong
trajectory.
Revenue of GBP278.6m represents a 79.2% growth in year, and we
exited 2022 with GBP246.8m (up 57% on the prior year) already
contracted to deliver in 2023.
Adjusted EBITDA (the Board's key profitability measure) at
GBP7.9m (2021: GBP1.7m) represents 2.8% (2021: 1.1%) of revenue.
This performance reflects higher net customer contribution margins
(as we secure additional customer lifecycle value) combined with
improved overhead efficiency from the Group's investment in
digital.
Adjusted EBITDA reconciliation 2022 2021
GBPm
-------------------------------------- ------
Adjusted EBITDA 7.9 1.7
% of revenue 2.8% 1.1%
-------------------------------------- ------ -----
Adjusted items:
Non-recurring costs - (0.6)
Unrealised (loss)/gain on derivative
contracts (0.9) 3.3
Share based payment charge (FY21
only) - (0.2)
Depreciation and amortisation (1.1) (0.7)
-------------------------------------- ------ -----
Statutory operating profit 5.9 3.5
====================================== ====== =====
Reported profit before tax has increased by 72% to GBP5.8m,
reflecting significantly higher adjusted EBITDA (up 359%) in the
year, though non-cash derivative accounting gains reported in FY21
have not, as expected, continued.
The Group continues to follow its stated financial framework
to:
-- drive significant organic growth, supplemented by M&A where value enhancing;
-- improve profitability via increasing customer margins and
unlocking significant overhead leverage savings through our Digital
by Default investments; and
-- maintain robust cash management.
The Board is pleased to announce the proposal of a final
dividend of 3p per share, established under a progressive dividend
policy.
Building recurring revenue
The Group has recorded a 79.2% growth in revenue year on year
(an increase of GBP123.2m) and has good visibility for FY23.
FY22 revenue included a significant contribution from new
bookings, despite some customers in H1 and Q3 2022 delaying
entering new contracts based on the high commodity market
environment. Record monthly bookings of new customers, at GBP48.6m
for Q4 2022, were noted. FY22 revenue also included GBP70m (2021:
GBP11m) from uncontracted ("Non-Firm") customers.
Contracted revenue continues to provide significant forward
visibility in to FY23, with GBP247m already contracted at the end
of 2022 (2021: GBP157m to deliver in 2022). Contract bookings
remain strong as we enter FY23, providing management with
significant confidence that the Group will continue its significant
growth trajectory on an organic basis.
Non-Firm volume on supply as at 31 December 2022 was 99GWh,
representing (based on 31 December 2022 tariffs) annualised revenue
of GBP59m. Non-Firm volume averaged 123GWh in FY22 due to the
particularly significant H1 2022 contribution from our appointment
as Supplier of Last Resort for AmpowerUK, Xcel Power and Whoop
Energy in late 2021 and early 2022.
Investment in Yü Smart
Adjusted EBITDA includes GBP1.1m of operational expenditure
during the ramp up of our new smart metering and EV charger
installation business.
The Group acquired the management and support team, policies and
intellectual property of Magnum Utilities Limited for a total
investment (consideration and implementation costs) of GBP0.2m.
Metering assets of GBP0.3m have also been acquired, in order for
the Group to finance installations to provide an annuity revenue
stream.
The Group expects to achieve significant returns from this new
activity with positive EBITDA from engineering activities in FY23
replacing costs previously outsourced by the Group. In addition,
management expects further benefits through increased penetration
of smart meters, including:
-- additional real-time data to improve billing and hedging accuracy;
-- increased growth rates through the ability to offer more
appropriate products to certain business segments;
-- revenue and bad debt protection, including the potential for
customers to access Pay As You Go products; and
-- asset returns, from the installation of assets.
In relation to assets, the Board is considering an investment
strategy to invest in customer assets, largely funded by debt,
which would provide potentially significant additional shareholder
value.
Leveraging overheads and delivering profit
The Group's overheads were 5.3% of revenue (2021: 5.6%), which
includes 0.4% (as % of revenue) impact from the investment in Yü
Smart. Excluding Yü Smart overheads were 4.9% of revenue, a 0.7%
improvement, driven through digital and scale benefits, with
further value expected over the short to medium term.
Management is targeting a 3.7% overhead at GBP0.5bn revenue,
representing a GBP8m adjusted EBITDA improvement at that scale.
General overheads actual and management FY22 Medium-Term
target Target
GBPm
----------------------------------------- ----------
Revenue GBP279m GBP500m
General overheads %:
Cost to acquire 1.1% 0.9%
Cost to serve 1.7% 1.4%
New business and innovation 0.4% 0.2%
General administrative 2.1% 1.5%
---------- -----------
Total general overheads % 5.3% 3.7%
----------------------------------------- ---------- -----------
Overhead cost GBP14.8m* GBP18.5m
----------------------------------------- ---------- -----------
Overhead saving at scale GBP8.0m
========================================= ========== ===========
* General overheads comprises GBP15.85m operating costs charged
to the income statement, less depreciation and amortisation (as per
note 4) of GBP1.05m.
The Group has recognised a GBP0.9m loss (2021: GBP3.3m gain) on
derivative accounting. This is mechanically a result of the falling
commodity markets leading to a lower mark-to-market asset in
respect of a small proportion of forward commodity hedges. The
Group holds a GBP3.0m financial derivative asset (2021: GBP4.0m) as
at 31 December 2022 which is expected to unwind over the medium
term. The Board notes that the derivative accounting gain or loss
is a non-cash item, hence its consistent exclusion from the Group's
adjusted EBITDA result.
Taxation charge of GBP1.1m (2021: GBP1.1m credit) is through
deferred taxation, with the Group carrying forward large trading
loss allowances (with an asset value of GBP4.7m) to be set against
the Group's future taxable profits. The credit in FY21 included the
benefit from an increased corporation tax rate announced, which
enhanced the value of carried forward allowances.
Cash and balance sheet management
Cash increased by GBP11.9m in the year. The Group remains debt
free save for GBP0.2m of operating lease liability.
Cash flow 2022 2021
GBPm
--------------------------- ------
Adjusted EBITDA 7.9 1.7
Working capital movement 6.8 (2.5)
--------------------------- ------ -----
Operating cash flow 14.7 (0.8)
Investing activities (2.6) (3.7)
Financing activities (0.2) (0.2)
--------------------------- ------ -----
Net cash movement in year 11.9 (4.7)
--------------------------- ------ -----
Closing cash balance 19.0 7.0
=========================== ====== =====
Group receivables and payables have broadly increased in
alignment to the Group's business activities, providing a working
capital benefit to cash. A VAT deferral of GBP1.1m related to
Covid-19 was fully repaid in Q1 2022 which has been more than
off-set by increased payables as the Group benefits from its
positive working capital profile.
Capital investment includes GBP2.2m of Digital by Default
investment, targeted to further enhance Group returns through
growth and efficiency benefits. It also includes the capital
investment of GBP0.3m in establishing Yü Smart.
Dividend and capital management
The Board recommends the payment of a final dividend of 3p per
share, being circa GBP0.5m payable in June 2023. The level of
dividend is sized to represent the significant potential
opportunities to utilise Group cash to further develop the
business.
Capital plans, in order of priority, for the Group are:
1. Working capital and securitisation management, including
maintaining or enhancing credit lines for commodity hedging
2. Operational investment in marketing and sales to drive additional organic growth
3. Capital investment in Digital by Default to drive growth and/or overhead efficiency
4. Asset investment, including in smart meters or EV
infrastructure, largely supported through debt
5. Inorganic growth, with targeted acquisitions which meet our hurdle rate
6. Dividend or other shareholder return of investment
The Board targets a progressive dividend policy, broadly aligned
to earnings growth as the Group benefits from the stated
strategy.
Summary: controlled progression
In summary, the Group is well placed to continue to improve
financial returns to shareholders.
There is significant confidence in maintaining strong growth in
revenue; and our investment in digital and our focus on customer
lifecycle value is expected to further improve adjusted EBITDA
margin.
Our approach to commodity hedging continues to deliver despite
significant market volatility. Our investment in Yü Smart provides
a significant profit improvement opportunity from FY23 and
beyond.
The Board is therefore pleased to report these significantly
improved results in FY22 at revenue, adjusted EBITDA and cash
level, and remain focused on continuing to improve these measures
over the short to medium term.
CONDENSED FINANCIAL STATEMENTS
Condensed consolidated statement of profit and loss and other
comprehensive income
For the year ended 31 December 2022
31 December 31 December
2022 2021
Notes GBP'000 GBP'000
------------------------------------------------ ----- ----------- -----------
Revenue 278,587 155,423
Cost of sales (234,462) (140,180)
------------------------------------------------ ----- ----------- -----------
Gross profit 44,125 15,243
------------------------------------------------ ----- ----------- -----------
Operating costs before non-recurring items
and share based payment charges (15,565) (9,407)
Operating costs - non-recurring items 7 - (644)
Operating costs - share based payment charges 22 (284) (249)
------------------------------------------------ ----- ----------- -----------
Total operating costs (15,849) (10,300)
Net impairment losses on financial and contract
assets 16 (21,420) (4,799)
Other (losses) / gains 7 (926) 3,344
------------------------------------------------ ----- ----------- -----------
Operating profit 4 5,930 3,488
Finance income 5 1 -
Finance costs 5 (91) (96)
------------------------------------------------ ----- ----------- -----------
Profit before tax 5,840 3,392
Taxation 9 (1,071) 1,059
------------------------------------------------ ----- ----------- -----------
Profit and total comprehensive income for
the year 4,769 4,451
------------------------------------------------ ----- ----------- -----------
Earnings per share
Basic 8 GBP0.29 GBP0.27
Diluted 8 GBP0.26 GBP0.26
------------------------------------------------ ----- ----------- -----------
Condensed consolidated balance sheet
At 31 December 2022
31 December 31 December
2022 2021
Notes GBP'000 GBP'000
------------------------------- ----- ----------- -----------
ASSETS
Non-current assets
Intangible assets 11 3,111 1,333
Property, plant and equipment 12 3,641 3,751
Right-of-use assets 13 113 193
Deferred tax assets 15 5,300 5,932
Trade and other receivables 16 - -
Financial derivative asset 17 1,562 870
--------------------------------- ----- ----------- -----------
13,727 12,079
------------------------------- ----- ----------- -----------
Current assets
Stock 345 -
Trade and other receivables 16 54,339 37,339
Financial derivative asset 17 1,484 3,102
Cash and cash equivalents 18 18,970 7,049
--------------------------------- ----- ----------- -----------
75,138 47,490
------------------------------- ----- ----------- -----------
Total assets 88,865 59,569
--------------------------------- ----- ----------- -----------
LIABILITIES
Current liabilities
Trade and other payables 19 (73,860) (49,743)
--------------------------------- ----- ----------- -----------
Non-current liabilities
Trade and other payables 19 (206) (541)
--------------------------------- ----- ----------- -----------
Total liabilities (74,066) (50,284)
--------------------------------- ----- ----------- -----------
Net assets 14,799 9,285
--------------------------------- ----- ----------- -----------
EQUITY
Share capital 21 83 82
Share premium 21 11,785 11,690
Merger reserve 21 (50) (50)
Retained earnings/(accumulated
losses) 21 2,981 (2,437)
--------------------------------- ----- ----------- -----------
14,799 9,285
------------------------------- ----- ----------- -----------
Condensed consolidated statement of changes in equity
For the year ended 31 December 2022
Share Share Merger Retained
capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- -------- --------- --------
Balance at 1 January 2022 82 11,690 (50) (2,437) 9,285
-------------------------------- -------- -------- -------- --------- --------
Total comprehensive income
for the year
Profit for the year - - - 4,769 4,769
-------------------------------- -------- -------- -------- --------- --------
- - - 4,769 4,769
-------------------------------- -------- -------- -------- --------- --------
Transactions with owners
of the Company
Contributions and distributions
Equity-settled share based
payments - - - 210 210
Deferred tax on share based
payments - - - 439 439
Proceeds from share issues 1 95 - - 96
-------------------------------- -------- -------- -------- --------- --------
Total transactions with
owners of the Company 1 95 - 649 745
-------------------------------- -------- -------- -------- --------- --------
Balance at 31 December 2022 83 11,785 (50) 2,981 14,799
-------------------------------- -------- -------- -------- --------- --------
Balance at 1 January 2021 82 11,690 (50) (7,209) 4,513
-------------------------------- -------- -------- -------- --------- --------
Total comprehensive income
for the year
Profit for the year - - - 4,451 4,451
-------------------------------- -------- -------- -------- --------- --------
- - - 4,451 4,451
-------------------------------- -------- -------- -------- --------- --------
Transactions with owners
of the Company
Contributions and distributions
Equity-settled share based
payments - - - 237 237
Deferred tax on share based
payments - - - 84 84
Proceeds from share issues - - - - -
-------------------------------- -------- -------- -------- --------- --------
Total transactions with
owners of the Company - - - 321 321
-------------------------------- -------- -------- -------- --------- --------
Balance at 31 December 2021 82 11,690 (50) (2,437) 9,285
-------------------------------- -------- -------- -------- --------- --------
Condensed consolidated statement of cash flows
For the year ended 31 December 2022
31 December 31 December
2022 2021
GBP'000 GBP'000
----------------------------------------------------- ----------- -----------
Cash flows from operating activities
Profit for the financial year 4,769 4,451
Adjustments for:
Depreciation of property, plant and equipment 325 255
Depreciation of right-of-use assets 80 80
Amortisation of intangible assets 648 352
Unrealised loss/(gains) on derivative contracts 926 (3,344)
Increase in stock (345) -
Increase in trade and other receivables (17,000) (19,700)
Increase in trade and other payables 23,889 17,468
Cash received on obtaining customer contracts - 378
Finance income (1) -
Finance costs 91 96
Taxation 1,071 (1,059)
Share based payment charge 284 249
----------------------------------------------------- ----------- -----------
Net cash from/(used in) operating activities 14,737 (774)
----------------------------------------------------- ----------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment (215) (2,629)
Payment of software development costs (2,210) (1,079)
Payment of consideration on business combination (216) -
----------------------------------------------------- ----------- -----------
Net cash used in investing activities (2,641) (3,708)
----------------------------------------------------- ----------- -----------
Cash flows from financing activities
Net proceeds from share option exercises 96 -
Cash-settled share based payment charge (74) (12)
Interest paid (76) (77)
Principal element of lease payments (121) (120)
----------------------------------------------------- ----------- -----------
Net cash used in financing activities (175) (209)
----------------------------------------------------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents 11,921 (4,691)
Cash and cash equivalents at the start of the year 7,049 11,740
----------------------------------------------------- ----------- -----------
Cash and cash equivalents at the end of the year 18,970 7,049
----------------------------------------------------- ----------- -----------
Notes to the condensed consolidated financial statements
1. Significant accounting policies
Yü Group PLC (the "Company") is a public limited company
incorporated in the United Kingdom, with company number 10004236.
The Company is limited by shares and the Company's ordinary shares
are traded on AIM. These condensed consolidated financial
statements ("Financial Statements") as at and for the year ended 31
December 2022 comprise the Company and its subsidiaries (together
referred to as the "Group"). The Group is primarily involved in the
supply of electricity, gas and water to small and medium sized
entities ("SMEs") and larger corporates in the UK.
Basis of preparation
Whilst the financial information included in this preliminary
announcement has been prepared on the basis of the requirements of
UK-adopted International Accounting Standards in conformity with
the requirements of the Companies Act 2006 and effective at 31
December 2022, this announcement does not itself contain sufficient
information to comply with International Accounting Standards.
The financial information set out in this preliminary
announcement does not constitute the Company's statutory financial
statements for the years ended 31 December 2022 or 2021 but is
derived from those financial statements.
Statutory financial statements for 2021 have been delivered to
the registrar of companies and those for 2022 will be delivered in
due course. The auditors have reported on those financial
statements; their reports were (i) unqualified and (ii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The condensed consolidated financial statements are presented in
British pounds sterling (GBP), which is the functional and
presentational currency of the Group. All values are rounded to the
nearest thousand (GBP'000), except where otherwise indicated.
Going concern
The financial statements are prepared on a going concern
basis.
At 31 December 2022 the Group had net assets of GBP14.8m (2021:
GBP9.3m) and cash of GBP19.0m (2021: GBP7.0m).
Management prepares detailed budgets and forecasts of financial
performance and cash flow (including capital commitments) over the
coming 12 to 36 months. The Board has confidence in achieving such
targets and forecasts and has performed comprehensive analysis of
various risks (including those set out in the Strategic Report) and
sensitivities in relation to performance, the energy market and the
wider economy.
The Group has demonstrated significant progress in its results.
This has led to adjusted EBITDA (a close profitability measure to
cash generated from operations) in 2022 of GBP7.9m (2021: GBP1.7m),
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.
The profitability delivered in 2022 has been achieved by robust
and disciplined management of gross margin; the successful
integration of new customer books awarded to the Group by Ofgem
(AmpowerUK, Xcel and Whoop Energy), and includes GBP1.1m op-ex
investment in Yü Smart, a business which is expected to
significantly contribute to the Group's financial performance. The
Group has continued its prudent hedging policy protecting the Group
from the significant commodity market price volatility recently
experienced, and has successfully implemented BEIS's Energy Bill
Relief Scheme ("EBRS").
The Group has embarked on an ambitious Digital by Default
implementation strategy to help drive further cost efficiency which
is expected to further enhance financial performance as the Group
scales.
Group available cash is at a historic high level, with GBP19.0m
available at 31 December 2022, a material increase on the GBP7.0m
at the end of 2021. This increase is despite significant investment
in digital tools to improve profitability over the medium term, and
the investment in Yü Smart.
The Group has no debt other than GBP0.2m (at 31 December 2022)
in respect of the lease for the Group's Nottingham office.
The Board has assessed risks and sensitivities and potential
mitigation steps available to it in detail and continues to monitor
risk and mitigation strategies in the normal course of
business.
Customer receivables and bad debt
The Board consider customer receivable risks in view of
increased energy prices and cost of living pressures which impact
the wider market. With increased levels of bad debt in FY22, the
Board perform sensitivities on material changes to customer payment
behaviour including the timing of payments or if bad debt levels
continue 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 ongoing bad debt.
The Board has also considered the impact of reduced regulatory
support following the planned removal of the Energy Bill Relief
Scheme ("EBRS") from 1 April 2023, to be replaced with a less
significant scheme for business customers.
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 volatile energy markets
A five year commodity trading arrangement between SmartestEnergy
Ltd and the trading entities of the Group (Yü Energy Holding
Limited and Yü Energy Retail Limited), signed December 2019, ("the
Trading Agreement") enables the Group to purchase electricity and
gas on forward commodity markets. The Trading Agreement enables
forecasted customer demand to be hedged in accordance with an
agreed risk mandate (further detailed in the Group's risk and
uncertainties reporting in the Strategic Report). With the
unprecedented volatility in commodity market prices for forward gas
and electricity, this hedging position and the Board defined risk
strategy has and continues to protect the Group.
As part of the Trading Agreement, SmartestEnergy Ltd holds
security over the trading assets of the Group which could,
ultimately and in extreme and limited circumstances, lead to a
claim on some or all of the assets of the Group. In return, a
variable commodity trading limit is provided, which scales with the
Group, having the benefit of significantly reducing the need to
post cash collateral from cash reserves.
The Board carefully monitors covenants associated with the
Trading Agreement to assess the likelihood of the credit facility
being reduced or withdrawn. Management also maintains close
dialogue with SmartestEnergy Ltd in respect of such covenants and
provides robust oversight of the relevant contracts.
The position in respect of the forward credit exposure is also
monitored and forecasted to understand the potential risks which
may arise:
a) Where commodity market prices increase, the Board considers
credit and contractual exposure to SmartestEnergy Ltd, which (under
a default position) could lead to the unwind of hedges with the
loss of value due to the Group if not successfully recovered under
the contract. With increased market prices, this exposure increased
significantly during 2021 and Q3 and early Q4 of 2022.
b) Where commodity market prices decrease, the Board considers
whether the credit limit provided under the Trading Agreement is
sufficient to prevent the potential for cash calls which may be
more than the Group's available cash reserves. The Board also
considers likely commercial outcomes relevant for such a scenario,
and mitigating actions available to the Group. Mitigating actions
include, where possible, unwinding forward commodity hedge
positions to prevent the credit position increasing further, which
may expose the Group to increased risk over the medium to long
term.
Despite the market volatility experienced in 2022 and early
2023, the Trading Agreement continues to operate well and provides
reliable, efficient and effective access to traded commodity
markets.
The Board also considers its business model and compares it with
competitors which have failed, to determine any other risks related
to the volatile energy markets. This risk is considered lower than
in the previous year, and the Board is satisfied that the Group's
business model is adequately differentiated from these market
issues.
The Board has also considered the impact of reduced regulatory
support following the planned removal of the Energy Bill Relief
Scheme ("EBRS") from 1 April 2023, replaced with a less significant
scheme for business customers. In view of the reduced market
prices, and the Group's ability to manage debt, the Board is
confident that there will be no material impact relevant to the
going concern assumption for the accounts.
After a detailed review, the Board has concluded that there are
no liquidity issues likely to arise (outside of available
mitigating strategies) in relation to the hedging arrangements and
current market context.
Summary
Following extensive review of the Group's forward business plan
and associated risks and sensitivities to these base forecasts (and
available mitigation strategies), the Board concludes that it is
appropriate to prepare the financial statements on a going concern
basis.
Basis of consolidation
The consolidated accounts of the Group include the assets,
liabilities and results of the Company and subsidiary undertakings
in which Yü Group PLC has a controlling interest. Control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and 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 are:
-- the estimated consumption (in lieu of accurate meter readings) of energy by customers;
Revenue estimates are based on industry knowledge or source
information, where available, and can therefore represent estimates
which are lower or higher than the actual out-turn of energy
consumption once accurate meter readings are obtained. The
utilisation of smart or automatic meters is significant and growing
in the Group, which reduces the amount estimated.
-- the level of accrual for unbilled revenue;
To estimate the level of accrual for unbilled revenue,
management estimates the level of consumption, and anticipated
revenue, which is due to be charged to the customer, and recognises
such revenue where it is considered that revenue will flow to the
Group. The estimate of customer consumption is based on available
industry data, and also seasonal usage curves that have been
estimated through historical actual usage data. The accrual for
unbilled revenue is based on prudent assumptions where management
has some doubt on the ability to bill such charges to
customers.
-- the accrual for certain energy costs;
Certain gas and electricity costs (for example, balancing of the
Group's commodity purchases across industry participants; or the
allocation to the Group of "unidentified gas" which the industry
spreads across market participants) are based on industry or
management estimates based on knowledge of the market, historic
norms and estimates of the expected out-turn position which may be
over or underestimates.
-- the recoverability of trade receivables and related expected credit loss provision;
Trade receivables recoverability is estimated, with appropriate
allowance for expected credit loss provisions, based on historical
performance and the directors' estimate of losses over the Group's
customer receivable balances. Management also conducts a detailed
review of significant debtor balances at the year end, including
exposure after VAT and CCL, provisions and other accounting
adjustments are considered. Sensitivity analysis on estimates is
provided in note 20.
-- the level of forward energy commodity contracts which are not
strictly for "own use" under IFRS 9;
The Group enters forward purchase contracts to hedge its
position to closely match customers' expected demand over the term
of the contract and does not engage in speculative trading. Factors
such as the shape/granularity of traded products available (which
do not perfectly align with customer demand) and variations in
energy consumed by customers (as a result of varying customer
behaviour and activity, and (particularly for gas) the weather
impact) can influence the extent of trades which are not strictly
for the Group's "own use". Such contracts are accounted for at fair
value through the Group's profit or loss. The Board estimates the
proportion of forward contracts which are to be assessed at fair
value by considering the expected "normalised" forward traded
position, with reference to historical performance on matching
customer demand and the Group's robustly controlled hedging and
risk strategy. Sensitivity analysis on estimates is provided in
note 20.
-- the assumptions input to the IFRS 2 share option charge calculations;
The share option charge requires certain estimates, including
the volatility in share price, risk-free rates and dividend yields,
together with assessment of achievement of certain vesting
conditions including achievement of share price and EBITDA targets
in performance shares.
-- the recoverability of deferred tax assets.
Deferred tax asset recoverability is assessed based on
directors' judgement of the recoverability of the tax losses by the
realisation of future profits over the short to medium term, which
inherently is based on estimates.
Revenue recognition
The Group enters into contracts to supply gas, electricity and
water to its customers. Revenue represents the fair value of the
consideration received or receivable from the sale of actual and
estimated gas, electricity and water supplied during the year, net
of discounts, climate change levy and value-added tax. Revenue is
recognised on consumption, being the point at which the transfer of
the goods or services to the customer takes place, and based on an
assessment of the extent to which performance obligations have been
achieved.
Due to the nature of the energy supply industry and its reliance
upon estimated meter readings, gas, electricity and water revenue
includes the directors' best estimate of differences between
estimated sales and billed sales. The Group makes estimates of
customer consumption based on available industry data, and also
seasonal usage curves that have been estimated through historical
actual usage data. It also considers any adjustments expected where
an estimated meter reading (using industry data) is expected to be
different to the consumption pattern of the customer.
The Group's operations include the supply of metering services,
or the installation of metering assets, on behalf of Group
companies. Such revenues are eliminated on consolidation. Where
services for metering services or metering installation services
are for the benefit of third parties, revenue is recognised in line
with the work performed. Revenue for smart metering services is
recognised at a point in time.
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, results in customers being provided
financial support through a contribution to their energy charges.
Under the EBRS arrangement, amounts receivable from BEIS do not
impact the Group's contract with customers, and therefore the
amounts contributed under EBRS 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.
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
secured 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 year end.
The commodity purchase contracts that do not meet the criteria
listed above are recognised at fair value under IFRS 9. The gain or
loss on remeasurement to fair value is recognised immediately in
profit or loss.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity
only to the extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the Group's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Company's own
equity instruments or is a derivative that will be settled by the
Company exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of
issue are classified as a financial liability. Where the instrument
so classified takes the legal form of the Company's own shares, the
amounts presented in these financial statements for called up share
capital and share premium account exclude amounts in relation to
those shares.
Details of the sensitivity analysis performed in relation to the
Group's financial instruments are included in note 20.
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.
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
Assets under construction include smart metering, or other
metering, assets which are acquired by the Group on the basis that
they will be installed on customer premises.
Assets under construction are not depreciated until the period
they are brought into use.
Business combinations
The acquisition method of accounting is used to account for
business combinations regardless of whether equity instruments or
other assets are acquired.
The consideration transferred is the sum of the acquisition-date
fair values of the assets transferred, equity instruments issued or
liabilities incurred by the acquirer to former owners of the
acquiree and the amount of any non-controlling interest in the
acquiree.
All acquisition costs are expensed as incurred to profit or
loss.
On the acquisition of a business, the consolidated entity
assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the
contractual terms, economic conditions, the consolidated entity's
operating or accounting policies and other pertinent conditions in
existence at the acquisition date.
Contingent consideration to be transferred by the Group is
recognised at the acquisition-date fair value. Subsequent changes
in the fair value of the contingent consideration classified as an
asset or liability are recognised in profit or loss. Contingent
consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets
acquired and liabilities assumed, and the fair value of the
consideration transferred is recognised as goodwill. If the
consideration transferred and the pre-existing fair values are less
than the fair value of the identifiable net assets acquired, being
a bargain purchase to the Group, the difference is recognised as a
gain directly in profit or loss on the acquisition date, but only
after a reassessment of the identification and measurement of the
net assets acquired and the consideration transferred.
Business combinations are initially accounted for on a
provisional basis. The Group retrospectively adjusts the
provisional amounts recognised and recognises additional assets or
liabilities during the measurement period, based on new information
obtained about the facts and circumstances that existed at the
acquisition date. The measurement period ends on the earlier of (i)
12 months from the date of the acquisition or (ii) when the
acquirer receives all the information possible to determine fair
value.
In determining whether an acquisition of an acquired set of
activities and assets is a business, the "concentration test"
methodology as outlined in IFRS 3 is utilised. Where substantially
all the fair value of the gross assets acquired are attributable to
a single identifiable asset group, such as a customer list, then a
business combination will not occur.
Leased assets
The Group as a lessee
For any new contract entered into the Group considers whether a
contract is, or contains, a lease. A lease is defined as "a
contract, or part of a contract, that conveys the right to use an
asset (the underlying asset) for a period of time in exchange for
consideration". To apply this definition the Group assesses whether
the contract meets three key evaluations which are whether:
-- the contract contains an identified asset, which is either
explicitly identified in the contract or implicitly specified by
being identified at the time the asset is made available to the
Group;
-- the Group has the right to obtain substantially all of the
economic benefits from use of the identified asset throughout the
period of use, considering its rights within the defined scope of
the contract; and
-- the Group has the right to direct the use of the identified
asset throughout the period of use. The Group 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.
Stock
Stock is held at the lower of cost 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 derived from its principal
activity, which is the supply of utilities to business customers in
the UK. Consequently, the Group has one reportable segment, which
is the supply of electricity, gas and water to businesses.
Segmental profit is measured at operating profit level, as shown on
the face of the statement of profit and loss.
As there is only one reportable segment whose profit, expenses,
assets, liabilities and cash flows are measured and reported on a
basis consistent with the financial statements, no additional
numerical disclosures are necessary.
Standards and interpretations
The Group has adopted all of the new or amended accounting
standards and interpretations that are mandatory for the current
reporting period.
Any new or amended accounting standards or interpretations that
are not yet mandatory have not been early adopted.
2. Segmental analysis
Operating segments
The directors consider there to be two operating segments, being
the supply of utilities to businesses ("Yü Retail") and the
installation, maintenance and financing of energy assets ("Yü
Smart"). Information on the revenues arising from the installation,
maintenance and financing of energy assets will be disclosed as an
operating separately when the revenue becomes material to the
Group. Segmental assets and liabilities are not reviewed by the
Board.
Geographical segments
100% of Group revenue, for both financial years, is generated
from sales to customers in the United Kingdom (2021: 100%) and is
recognised at a point in time.
The Group has no individual customers representing over 10% of
revenue (2021: none).
3. Auditor's remuneration
2022 2021
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Audit of the Group financial statements 95 72
Amounts receivable by auditor in respect of:
Audit of financial statements of subsidiaries pursuant
to legislation 55 44
------------------------------------------------------- -------- --------
150 116
------------------------------------------------------- -------- --------
4. Operating profit
2022 2021
GBP'000 GBP'000
-------------------------------------------------------- -------- --------
Profit for the year has been arrived at after charging:
Staff costs (see note 6) 9,045 5,634
Depreciation of property, plant and equipment 325 255
Depreciation of right-of-use assets 80 80
Amortisation of intangible assets 648 352
-------------------------------------------------------- -------- --------
5. Net finance (income)/expense
2022 2021
GBP'000 GBP'000
------------------------------------------------ -------- --------
Bank interest and other finance charges payable 77 77
Interest on lease liabilities 14 19
------------------------------------------------ -------- --------
Total finance costs 91 96
Bank interest receivable (1) -
------------------------------------------------ -------- --------
90 96
------------------------------------------------ -------- --------
6. Staff numbers and costs
The average number of persons employed by the Group (including
directors) during the period, analysed by category, was as
follows:
2022 2021
Number Number
--------------- ------- -------
Engineering 7 -
Sales 24 31
Administration 159 114
--------------- ------- -------
190 145
--------------- ------- -------
The aggregate payroll costs of these persons were as
follows:
2022 2021
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Wages and salaries 8,004 5,043
Social security costs 719 539
Pension costs 144 97
Share based payments 284 249
-------------------------------------------------- -------- --------
9,151 5,928
-------------------------------------------------- -------- --------
Of which:
Amounts charged to operating profit 9,045 5,634
Amounts related to development and implementation
of computer software 106 294
-------------------------------------------------- -------- --------
There were three persons employed directly by the Company during
the year ended 31 December 2022 (2021: three), being the
non-executive directors. The Company's two (2021: two) executive
directors who served during the year have service contracts with a
wholly owned subsidiary of the Company.
Key management personnel
The aggregate compensation made to directors and other members
of key management personnel (being members of the Group's Executive
Committee comprising the Chief Executive Officer, Chief Financial
Officer and other senior leaders) is set out below:
2022 2021
GBP'000 GBP'000
---------------------------------- ------- -------
Short-term employee benefits 2,445 1,191
Social security and pension costs 375 165
Share based payments 252 228
---------------------------------- ------- -------
3,072 1,584
---------------------------------- ------- -------
The highest paid director and remuneration of the executive
directors are as disclosed in the Remuneration Committee Report in
the annual report.
7. Reconciliation to adjusted EBITDA
A key alternative performance measure used by the directors to
assess the underlying performance of the business is adjusted
EBITDA.
2022 2021
GBP'000 GBP'000
----------------------------------------------- ------- -------
Adjusted EBITDA reconciliation
Operating profit 5,930 3,488
Add back:
Share based payment charge - 249
Unrealised loss/(gain) on derivative contracts 926 (3,344)
Non-recurring operational costs - 644
Depreciation of property, plant and equipment 325 255
Depreciation of right-of-use assets 80 80
Amortisation of intangibles 648 352
----------------------------------------------- ------- -------
Adjusted EBITDA 7,909 1,724
----------------------------------------------- ------- -------
The directors consider adjusted EBITDA to be a more accurate
representation of underlying business performance (linked to cash
from recurring and normalised profitability, and available for
shareholders) and therefore utilise it as the primary profit
measure in setting targets and managing financial performance.
From 2022, share based payment charges are included (i.e. set
against) adjusted EBITDA.
The unrealised loss on derivative contracts of GBP926,000 (2021:
gain of GBP3,344,000) arises from a small proportion of forward
commodity hedges which do not meet the strict "own use" criteria
under IFRS 9 ("Financial Instruments"). Such forward commodity
trades are therefore recognised at their fair value, being a
financial asset, as further described in note 17. Such amounts are
typically non-cash impacting.
The non-recurring operational costs in 2021 of GBP644,000
relates to accrued industry costs mutualised across energy market
participants. There are no such costs or gains in 2022.
8. 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.
2022 2021
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Profit for the year attributable to ordinary shareholders 4,769 4,451
---------------------------------------------------------- -------- --------
2022 2021
--------------------------------------------------- ---------- ----------
Weighted average number of ordinary shares
At the start of the year 16,316,215 16,281,055
Effect of shares issued in the year 180,818 18,591
--------------------------------------------------- ---------- ----------
Number of ordinary shares for basic earnings per
share calculation 16,497,033 16,299,646
Dilutive effect of outstanding share options 1,722,632 1,099,153
--------------------------------------------------- ---------- ----------
Number of ordinary shares for diluted earnings per
share calculation 18,219,665 17,398,799
--------------------------------------------------- ---------- ----------
2022 2021
GBP GBP
--------------------------- ---- ----
Basic earnings per share 0.29 0.27
Diluted earnings per share 0.26 0.26
--------------------------- ---- ----
Adjusted earnings per share
Adjusted earnings per share is based on the result attributable
to ordinary shareholders before non-recurring items after tax,
unrealised losses or gains on derivative contracts and the weighted
average number of ordinary shares outstanding (for 2021, the share
based payment charge is excluded):
2022 2021
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Adjusted earnings per share
Profit for the year attributable to ordinary shareholders 4,769 4,451
Add back operating profit adjusting items (per note
7):
Non-recurring items after tax - 522
Unrealised loss/(gain) on derivative contracts after
tax (gross loss, before tax, of GBP926,000) 750 (2,709)
Share based payments after tax - 202
Adjusted basic profit for the year 5,519 2,466
---------------------------------------------------------- -------- --------
Adjusted earnings per share GBP0.33 GBP0.15
Diluted adjusted earnings per share GBP0.30 GBP0.14
---------------------------------------------------------- -------- --------
9. Taxation
2022 2021
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Deferred tax charge/(credit)
Current year 1,365 (631)
Adjustment in respect of prior years (294) (428)
--------------------------------------------------- -------- --------
Total tax charge/(credit) 1,071 (1,059)
--------------------------------------------------- -------- --------
Tax recognised directly in equity
Current tax recognised directly in equity - -
Deferred tax recognised directly in equity (439) (84)
--------------------------------------------------- -------- --------
Total tax recognised directly in equity (439) (84)
--------------------------------------------------- -------- --------
Reconciliation of effective tax rate
Profit before tax 5,840 3,392
--------------------------------------------------- -------- --------
Tax at UK corporate tax rate of 19% (2021: 19%) 1,110 644
Expenses not deductible for tax purposes 50 26
Tax relief on exercise of share options (135) (18)
Impact of temporary differences 130 (94)
Adjustments in respect of prior periods - deferred
tax (243) (428)
Timing difference on utilisation of deferred tax
balances 159 -
Increase in tax rate on deferred tax balances - (1,189)
--------------------------------------------------- -------- --------
Tax charge/(credit) for the year 1,071 (1,059)
--------------------------------------------------- -------- --------
There is no current tax charge for the year (2021: nil).
Deferred taxes at the 31 December 2022 and 31 December 2021 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
increases from the current 19% to 25%.
10. Dividends
The Group did not pay an interim dividend in relation to 2022
(2021: nil per share).
The directors propose a final dividend in relation to 2022 of 3p
per share (2021: nil per share).
11. Intangible assets
Software
Electricity Customer and
licence Goodwill books systems Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ----------- -------- -------- -------- ---------
Cost
At 1 January 2022 62 - 686 1,079 1,827
Additions - 216 - 2,210 2,426
------------------------------ ----------- -------- -------- -------- ---------
At 31 December 2022 62 216 686 3,289 4,253
------------------------------ ----------- -------- -------- -------- ---------
Amortisation
At 1 January 2022 14 - 473 7 494
Charge for the year 2 - 213 433 648
------------------------------ ----------- -------- -------- -------- ---------
At 31 December 2022 16 - 686 440 1,142
------------------------------ ----------- -------- -------- -------- ---------
Net book value at 31 December
2022 46 216 - 2,849 3,111
------------------------------ ----------- -------- -------- -------- ---------
Cost
At 1 January 2021 62 - 686 - 748
Additions - - - 1,079 1,079
------------------------------ ----------- -------- -------- -------- ---------
At 31 December 2021 62 - 686 1,079 1,827
------------------------------ ----------- -------- -------- -------- ---------
Amortisation
At 1 January 2021 12 - 130 - 142
Charge for the year 2 - 343 7 352
------------------------------ ----------- -------- -------- -------- ---------
At 31 December 2021 14 - 473 7 494
------------------------------ ----------- -------- -------- -------- ---------
Net book value at 31 December
2021 48 - 213 1,072 1,333
------------------------------ ----------- -------- -------- -------- ---------
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 of GBP216,000 arises on the acquisition of the
management and certain other assets of Magnum Utilities Limited in
May 2022, as disclosed in note 26. The acquisition created the
foundations for the Yü Smart business unit established in the
year.
Goodwill is reviewed annually for signs of impairment. The
underlying assets related to the goodwill have been classified in a
wider cash generating unity related to smart metering
activities.
The customer book intangibles relate to the two separate
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.
12. Property, plant and equipment
Freehold Fixtures
land and Assets under and Plant and Computer
property construction fittings machinery equipment Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- --------- ------------- --------- ---------- ---------- --------
Cost
At 1 January 2022 3,424 - 337 - 353 4,114
Additions - - 5 73 137 215
-------------------- --------- ------------- --------- ---------- ---------- --------
At 31 December 2022 3,424 - 342 73 490 4,329
-------------------- --------- ------------- --------- ---------- ---------- --------
Depreciation
At 1 January 2022 73 - 103 - 187 363
Charge for the year 109 - 102 - 114 325
-------------------- --------- ------------- --------- ---------- ---------- --------
At 31 December 2022 182 - 205 - 301 688
-------------------- --------- ------------- --------- ---------- ---------- --------
Net book value at
31 December 2022 3,242 - 137 73 189 3,641
-------------------- --------- ------------- --------- ---------- ---------- --------
Cost
At 1 January 2021 150 1,013 80 - 335 1,578
Transfer from asset
under construction 1,013 (1,013) - - - -
Additions 2,261 - 265 - 103 2,629
Disposals - - (8) - (85) (93)
-------------------- --------- ------------- --------- ---------- ---------- --------
At 31 December 2021 3,424 - 337 - 353 4,114
-------------------- --------- ------------- --------- ---------- ---------- --------
Depreciation
At 1 January 2021 - - 41 - 160 201
Charge for the year 73 - 70 - 112 255
Disposals - - (8) - (85) (93)
-------------------- --------- ------------- --------- ---------- ---------- --------
At 31 December 2021 73 - 103 - 187 363
-------------------- --------- ------------- --------- ---------- ---------- --------
Net book value at
31 December 2021 3,351 - 234 - 166 3,751
-------------------- --------- ------------- --------- ---------- ---------- --------
Freehold land of GBP150,000 (at cost and net book value) is
included in freehold land and property.
Assets under construction acquired in 2022 relates to smart
meters which are targeted to fit on customer sites.
13. Right-of-use assets and lease liabilities
Right-of-use
assets
Group GBP'000
----------------------------------- ------------
Cost
At 1 January 2022 799
Additions -
----------------------------------- ------------
At 31 December 2022 799
----------------------------------- ------------
Depreciation
At 1 January 2022 606
Charge for the year 80
----------------------------------- ------------
At 31 December 2022 686
----------------------------------- ------------
Net book value at 31 December 2022 113
----------------------------------- ------------
Cost
At 1 January 2021 799
Additions -
----------------------------------- ------------
At 31 December 2021 799
----------------------------------- ------------
Depreciation
At 1 January 2021 526
Charge for the year 80
----------------------------------- ------------
At 31 December 2021 606
----------------------------------- ------------
Net book value at 31 December 2021 193
----------------------------------- ------------
The Group has a lease arrangement for its main office facilities
in Nottingham. Other leases are short term or of low value
underlying assets. The Nottingham office lease is reflected on the
balance sheet as a right-of-use asset and a lease liability at 31
December 2022 and 31 December 2021.
The table below provides details of the Group's right-of-use
asset and lease liability recognised on the balance sheet at 31
December 2022:
Remaining Borrowing Asset carrying Depreciation Interest
Right-of-use asset term rate amount Lease liability expense expense
------------------ --------- ----------- -------------- --------------- ------------ ---------
Premises 1.5 years 5% GBP113,000 GBP160,000 GBP80,000 GBP14,000
------------------ --------- ----------- -------------- --------------- ------------ ---------
The total cash outflow for leases in 2022 was GBP161,000 (2021:
GBP120,000).
Lease payments not recognised as a liability
The Group has elected not to recognise a right-of-use asset or
lease liability for short-term leases (leases of expected terms of
12 months or less) or leases of low value assets. Payments under
such leases are expensed on a straight-line basis. During FY22 the
amount expensed to profit and loss was GBP40,000 (2021:
GBP1,000).
None of the above leases of the Group are with the Company
entity directly.
14. Investments in subsidiaries
The Company has the following direct and indirect investments in
subsidiaries, all of which are incorporated in the United
Kingdom:
Proportion
of
shares
Company name Holding held Nature of business
------------------------ -------- ---------- ---------------------------------
Yü Energy Holding Ordinary Gas shipping services and holding
Limited shares 100% company
Yü Energy Retail Ordinary
Limited shares 100%(1) Supply of energy to businesses
Ordinary
Yu Water Limited shares 100% Supply of water to businesses
KAL Portfolio Trading Ordinary
Limited shares 100% Dormant
Ordinary Smart metering installation
Yü-Smart Limited shares 100% and maintenance
Ordinary
Yü Services Limited shares 100% Dormant, holding company
Ordinary
Yü PropCo Limited shares 100%(2) Dormant
Kensington Meter Assets Ordinary
Limited shares 100%(2) Financing of energy meter assets
------------------------ -------- ---------- ---------------------------------
All of the above entities are included in the condensed
consolidated financial statements and are direct holdings of the
Company except:
(1) Yü Energy Retail Limited is a subsidiary of Yü Energy
Holding Limited
(2) Yü PropCo Limited and Kensington Meter Assets Limited are
both subsidiaries of Yü Services Limited
15. Deferred tax assets
Deferred tax assets are attributable to the following:
2022 2021
GBP'000 GBP'000
--------------------------------- -------- --------
Property, plant and equipment (21) (45)
Tax value of loss carry-forwards 4,717 5,812
Share based payments 604 165
------------------------------------ -------- --------
5,300 5,932
--------------------------------- -------- --------
Movement in deferred tax in the period:
At Recognised At
1 January Recognised directly 31 December
2022 in income in equity 2022
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ---------- ------------
Property, plant and equipment (45) 24 - (21)
Tax value of loss carry-forwards 5,812 (1,095) - 4,717
Share based payments 165 - 439 604
--------------------------------- ---------- ---------- ---------- ------------
5,932 (1,071) 439 5,300
--------------------------------- ---------- ---------- ---------- ------------
At Recognised At
1 January Recognised directly 31 December
2021 in income in equity 2021
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ---------- ------------
Property, plant and equipment (32) (13) - (45)
Tax value of loss carry-forwards 4,740 1,072 - 5,812
Share based payments 81 - 84 165
--------------------------------- ---------- ---------- ---------- ------------
4,789 1,059 84 5,932
--------------------------------- ---------- ---------- ---------- ------------
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.
16. Trade and other receivables
2022 2021
GBP'000 GBP'000
---------------------------------- -------- --------
Current
Gross trade receivables 30,977 11,618
Provision for doubtful debts and
expected credit loss (19,499) (6,007)
------------------------------------- -------- --------
Net trade receivables 11,478 5,611
Accrued income - net of provision 31,842 21,972
Prepayments 3,065 4,183
Other receivables 7,954 5,573
------------------------------------- -------- --------
54,339 37,339
---------------------------------- -------- --------
Movements in the provision for doubtful debts and expected
credit loss in gross trade receivables are as follows:
2022 2021
GBP'000 GBP'000
--------------------------------------------------- ------- -------
Opening balance 6,007 5,162
Provisions recognised less unused amounts reversed 21,071 4,185
Provision utilised in the year (7,579) (3,340)
--------------------------------------------------- ------- -------
Closing balance - provision for doubtful debts and
expected credit losses 19,499 6,007
--------------------------------------------------- ------- -------
The directors have assessed the level of provision at 31
December 2022 by reference to the recoverability of customer
receivable balances post the year end, and believe the provision
carried is appropriate.
An additional provision of GBP349,000 (2021: GBP614,000) for
expected credit loss on accrued income was charged in the period,
leading to a total provision at 31 December 2022 of GBP1,830,000
(2021: GBP1,481,000). Expected credit losses and the recognition,
where appropriate, of previous customer credit balances are
recognised in the income statement as net impairment losses on
financial and contract assets.
The net impairment losses on financial and contract assets of
GBP21,420,000 (2021: GBP4,799,000) consist of GBP349,000 (2021:
GBP614,000) provision charged for expected credit loss on accrued
income, and GBP21,071,000 (2021: GBP4,185,000) provision for bad
debts and expected credit loss on trade receivables.
The directors consider that the carrying amount of trade and
other receivables approximates to their fair value due to their
maturities being short term.
Other receivables include GBP2,100,000 receivable from the
Government's Energy Bill Relief Scheme (2021: GBPnil). Such amount
was reclaimed and received by the Group in January 2023.
Other receivables include a further GBP69,000 of cash held in
bank accounts owned by the Group which are related to Government
led support for customers.
17. Financial derivative assets
2022 2021
GBP'000 GBP'000
---------------------------- -------- --------
Current
Financial derivative asset 1,484 3,102
------------------------------- -------- --------
Non-Current
Financial derivative asset 1,562 870
------------------------------- -------- --------
The current and non-current financial derivative asset of
GBP3,046,000 (2021: GBP3,972,000) is the fair value of a small
proportion of the Group's overall forward gas and power purchase
contracts. Such contracts do not meet the strict criteria of being
for the Group's "own use" under IFRS 9. They are stated at their
Mark to Market fair value (being the excess of the volume of
commodity purchased valued at market prices available at the
balance sheet date over the traded price of the forward contracts).
The asset has decreased in the year largely due to the decrease in
forward gas and power market prices and as previous lower priced
trades delivered in 2022. The risks and sensitivities in relation
to the asset are further detailed in note 20.
18. Cash and cash equivalents
2022 2021
GBP'000 GBP'000
------------------------- -------- --------
Cash at bank and in hand 18,970 7,049
---------------------------- -------- --------
18,970 7,049
------------------------- -------- --------
The cash and cash equivalents amounts exclude GBP569,000 of cash
which is included in other receivables. GBP500,000 of this cash
balance is held on deposit and secured under arrangements with the
Group's bankers, with a further GBP69,000 having been transferred
to the Group as part of Government led schemes which remains due to
customers at the balance sheet date.
19. Trade and other payables
2022 2021
GBP'000 GBP'000
--------------------------------------- -------- --------
Current
Trade payables 4,636 3,690
Accrued expenses 55,281 34,545
Lease liabilities 112 107
Tax and social security 5,587 6,188
Other payables 8,244 5,213
Amounts due to subsidiary undertakings - -
--------------------------------------- -------- --------
73,860 49,743
--------------------------------------- -------- --------
Non-current
Accrued expenses 158 381
Lease liabilities 48 160
------------------------------------------ -------- --------
206 541
--------------------------------------- -------- --------
20. Financial instruments and risk management
The Group's principal financial instruments are cash, trade and
other receivables, trade and other payables and derivative
financial assets.
Derivative instruments, related to the Group's hedging of
forward gas and electricity demand, are level 1 financial
instruments and are measured at fair value through the statement of
profit or loss. Such fair value is measured by reference to quoted
prices in active markets for identical assets or liabilities. All
derivatives are held at a carrying amount equal to their fair value
at the period end.
The Group has exposure to the following risks from its use of
financial instruments:
a) commodity hedging and derivative instruments (related to
customer demand and market price volatility, and counterparty
credit risk);
b) customer credit risk;
c) liquidity risk; and
d) foreign exchange risk.
(a) Commodity trading and derivative instruments
The Group is exposed to market risk in that changes in the price
of electricity and gas may affect the Group's income or liquidity
position. The use of derivative financial instruments to hedge
customer demand also results in the Group being exposed to risks
from significant changes in customer demand (beyond that priced
into the contracts), and counterparty credit risk with the trading
counterparty.
Commodity and energy prices and customer demand
The Group uses commodity purchase contracts to manage its
exposures to fluctuations in gas and electricity commodity prices.
The Group's objective is to reduce risk in energy prices by
entering into back-to-back energy contracts with its suppliers and
customers, in accordance with a Board approved risk mandate.
Commodity purchase contracts are entered into as part of the
Group's normal business activities.
The majority of commodity purchase contracts are expected to be
delivered entirely to the Group's customers and are therefore
classified as "own use" contracts. These instruments do not fall
into the scope of IFRS 9 and therefore are not recognised in the
financial statements. A proportion of the contracts in the Group's
portfolio are expected to be settled net in cash where 100% of the
volume hedged is not delivered to the Group's customers and is
instead sold back via the commodity settlement process in order to
smooth demand on a real -- time basis. An assumption is made (based
on past experience) of the proportion of the portfolio expected to
be settled in this way and these contracts are measured at fair
value. The gain or loss on remeasurement to fair value is
recognised immediately in profit and loss.
As far as practical, in accordance with the risk mandate, the
Group attempts to match new sales orders (based on estimated energy
consumption, assuming normal weather patterns, over the contract
term) with corresponding commodity purchase contracts. There is a
risk that at any point in time the Group is over or under-hedged.
Holding an over or under-hedged position opens the Group up to
market risk which may result in either a positive or negative
impact on the Group's margin and cash flow, depending on the
movement in commodity prices.
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.
The fair value Mark to Market adjustment at 31 December 2022 for
those contracts not assumed to be strictly for "own use" is a
charge of GBP926,000 (2021: gain of GBP3,344,000). See note 17 for
the corresponding derivative financial asset.
The Group's exposure to commodity price risk according to IFRS 7
is measured by reference to the Group's IFRS 9 commodity contracts.
IFRS 7 requires disclosure of a sensitivity analysis for market
risks that is intended to illustrate the sensitivity of the Group's
financial position and performance to changes in market variables
impacting upon the fair values or cash flows associated with the
Group's financial instruments.
Therefore, the sensitivity analysis provided below discloses the
impact on profit or loss at the balance sheet date assuming that a
reasonably possible change in commodity prices (determined based on
calculated or implied volatilities where available, or historical
data) had occurred and been applied to the risk exposures in place
at that date. In view of the volatile nature of commodity markets,
the sensitivity analysis is based on a change of up to +/-25% in
commodity markets, though additional volatility may be incurred in
view of the current, unprecedented, energy market context of
volatility.
The sensitivity analysis has been calculated on the basis that
the proportion of commodity contracts that are IFRS 9 financial
instruments remains consistent with those at that point. Excluded
from this analysis are all commodity contracts that are not
financial instruments under IFRS 9.
Reasonably 2022 2021
possible Impact on Impact on
increase/ profit profit
decrease and net and net
in assets assets
Open market price of forward contracts variable GBP'000 GBP'000
--------------------------------------- ---------- ---------- ----------
UK gas (p/therm) +/-25% 831 793
UK power (GBP/MWh) +/-25% 2,227 1,470
--------------------------------------- ---------- ---------- ----------
3,058 2,263
--------------------------------------- ---------- ---------- ----------
In addition to the sensitivity noted above, the estimate of the
forward derivative contracts assessed as "own use" results in the
financial asset recognised. If the level of own use of such forward
contracts was amended by +/-1%, then the financial asset and
resulting impact on profit and net assets would be GBP466,000
(2021: GBP1,088,000). Such a sensitivity could occur if, for
example, the Group's estimated forecasted demand from customer
contracts was impacted by factors such as prolonged abnormal
weather patterns, or further unexpected and severe Covid-19
lockdowns. In mitigation, however, demand balancing activities and
trading will significantly reduce any potential gain or loss
arising from the sensitivity noted above, and the Board approved
hedging policy is designed to protect (to the extent possible) the
gross margin as sold on each contract. Customer prices also include
premia in their pricing to account for certain levels of market
risk because of the above in order to reduce the potential for
negative impact on Group profitability.
Liquidity risk from commodity trading
The Group's trading arrangements can result in the need to post
cash or other collateral to trading counterparties when commodity
markets are below the Group's average weighted price contracted
forward. A significant reduction (as noted above) in electricity
and gas markets could lead to a material cash call from these
trading counterparties in the absence of a suitable trading credit
limit. Whilst such a cash call would not impact the Group's profit
(as it represents a forward credit risk assessment of the
counterparty), it would have an impact on the Group's cash
reserves.
The structured trading arrangement, entered with SmartestEnergy
in December 2019, has reduced this liquidity risk in view of the
significant credit limit being provided. This arrangement provides
the trading credit limit (secured on the main trading entities of
the Group and subject to compliance with certain covenants) and as
such reduces the need to lodge cash collateral when commodity
markets decrease. As disclosed in note 1, the Board has considered
the cash flow forecasts, along with the interaction in trading
credit limits and the potential need for cash collateral or letter
of credit support. The Board also monitors the position in respect
of commodity markets and has mitigation plans in place where credit
limits are predicted to be exceeded to reduce, where possible, the
potential impact on the Group due to short-term cash calls. Where
markets fall rapidly and unexpectedly, the cash collateral
requirement may be greater than the Group's cash reserves. In
extreme circumstances, mitigation may include (prior to security
being enacted) reducing the Group's hedged position (reducing
liquidity risk in exchange for increased risk to future market
increases) through to commercial discussion to waive the
requirement to post cash collateral over a short to medium-term
period; or the agreement to provide additional remedial action such
as holding growth activities.
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 2022,
this credit risk has reduced to approximately GBP47m as at 31
December 2022, and has decreased in early 2023 as global market
prices have softened. This credit exposure is predominantly with
the Group's main trading counterparty.
The Board monitors the position in respect of credit exposure
with its trading counterparties, and contracts only with major
organisations which the Board considers to be robust and of
appropriate financial standing.
(b) Customer or other counterparty credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group's
receivables from customers (in addition to trading counterparties
as noted in section (a) above).
These operational exposures are monitored and managed at Group
level. All customers operate in the UK and turnover is made up of a
large number of customers each owing relatively small amounts,
though increased prices have resulted in greater amounts owed by
some customers. 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 required security
deposits in advance where appropriate. At 31 December 2022 there
were no significant concentrations of credit risk. The carrying
amount of the financial assets (less the element of VAT and climate
change levy ("CCL") included in the invoiced balance, which is
recoverable in the event of non -- payment by the customer)
represents the maximum credit exposure at any point in time.
The Board considers the exposure to debtors based on the status
of customers in its internal debt journey, the level of customer
engagement in financing an appropriate solution, the customer's
creditworthiness, the provision for doubtful debts and expected
credit loss held, the level of reclaimable VAT and CCL on the
balances, and cash received after the period end.
At 31 December 2022 the Group held a provision against doubtful
debts and expected credit loss of GBP21,329,000 (2021:
GBP7,488,000). This is a combined provision against both trade
receivables at GBP19,499,000 (2021: GBP6,007,000) and accrued
income at GBP1,830,000 (2021: GBP1,481,000). The increase reflects
an increased business activity and a higher value of Non-Firm
revenue due to increased market prices.
In relation to trade receivables, after provision and accounting
for VAT reclaimable, the exposure assessed by directors is less
than 5% 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 +/-GBP316,000.
If the expected customer credit loss rate on accrued income was
+/-10%, the gain or loss arising would be +/-GBP183,000.
(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,
to ensure credit limits as part of such transactions are monitored,
and any credit cover requirements for other industry participants
which are standard in the energy sector. Scenarios of falling
commodity markets, including potential to mitigate to avoid
significant margin calls for cash collateral, are also considered
by the Board.
In a very low probability scenario where long-term commodity
prices along the curve hedged by the Group decrease (from forward
prices at 1 February 2023) by 25% for the Summer of 2023, and 50%
thereafter, the Group could fully utilise its credit line and
require collateral of up to GBP22m unless this is otherwise
mitigated by actions from management. The Board believes such a
scenario to be a low probability, though monitors the position
regularly to ensure appropriate mitigating actions are instigated
where appropriate. Such mitigating actions would include, in
certain market conditions, the need to temporarily extend credit
lines with trading counterparties, or to unwind some of the forward
hedged position to prevent this credit exposure arising to a level
which could not be met by the Group's cash reserves.
Any excess cash balances are held in short-term deposit accounts
which are either interest or non-interest accounts. At 31 December
2022 the Group had GBP18,970,000 (2021: GBP7,049,000) of cash and
bank balances (as per note 18).
(d) Foreign currency risk
The Group trades entirely in pounds sterling and therefore it
has no foreign currency risk.
21. Share capital and reserves
2022 2022 2021 2021
Share capital Number GBP'000 Number GBP'000
--------------------------------- ---------- -------- ---------- --------
Allotted and fully paid ordinary
shares of GBP0.005 each 16,649,618 83 16,316,215 82
--------------------------------- ---------- -------- ---------- --------
The Company has one class of ordinary share which carries no
right to fixed income. The holders of ordinary shares are entitled
to receive dividends as declared and are entitled to one vote per
share at meetings of the Company.
The movement in reserves is as per the condensed statement of
changes in equity.
Share capital represents the value of all called up, allotted
and fully paid shares of the Company. The movement in the year
relates to the exercise of various share options, at exercise
prices of between GBP0.005 and GBP1.40.
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 year relates to the excess, where appropriate, of the price at
which options were exercised during the year over the GBP0.005 par
value of those shares.
The merger reserve was created as part of the 2016 Group
reorganisation prior to listing.
Retained earnings comprises the Group's cumulative annual
profits and losses.
22. Share based payments
The Group operates a number of share option plans for qualifying
employees. Options in the plans are settled in equity in the
Company.
The terms and conditions of the outstanding grants made under
the Group's schemes are as follows:
Exercisable between
------------------------------
Amount Amount
outstanding outstanding
at at
Expected Exercise Vesting 31 December 31 December
Date of grant term Commencement Lapse price schedule 2022 2021
--------------- -------- -------------- -------------- -------- ----------- ------------ ------------
17 February 17 February 17 February
2016 3 2019 2026 GBP0.09 1 13,500 27,000
22 December 22 December 22 December
2016 3 2019 2026 GBP3.25 1 13,500 13,500
6 April 2017 3 6 April 2020 6 April 2027 GBP0.005 1 43,950 43,950
6 April 2017 6.5 6 April 2020 6 April 2027 GBP2.844 1 87,900 87,900
28 September 28 September 28 September
2017 6.5 2020 2027 GBP5.825 1 40,500 40,500
9 April 2018 6.5 9 April 2021 9 April 2028 GBP10.38 1 59,084 59,084
26 September 26 September 26 September
2018 6.5 2021 2028 GBP8.665 1 6,539 6,539
25 February 25 February 25 February
2019 6.5 2022 2029 GBP1.09 1 20,000 48,497
25 February 25 February 25 February
2019 3 2022 2029 GBP0.005 1 - 250,000
1 February
18 June 2019 3 1 August 2022 2023 GBP1.40 2 - 62,483
4 October 2020 3 30 April 2023 4 October 2030 GBP0.005 3 210,696 210,696
4 October 2020 3 30 April 2024 4 October 2030 GBP0.005 3 172,388 172,388
1 June 2021 3 30 April 2024 4 October 2030 GBP0.005 3 - 76,616
13 May 2022 1 30 April 2023 4 October 2030 GBP0.005 3 12,769 -
13 May 2022 2 30 April 2024 4 October 2030 GBP0.005 3 25,539 -
1 December
2022 3 1 January 2026 4 October 2030 GBP0.005 2 179,267 -
19 December
2022 3.3 30 April 2024 4 October 2030 GBP0.005 4 837,000 -
--------------- -------- -------------- -------------- -------- ----------- ------------ ------------
1,722,632 1,099,153
--------------- -------- -------------- -------------- -------- ----------- ------------ ------------
Weighted average remaining contractual life of options 8.0 years 7.1 years
outstanding at 31 December 2022
--------------------------------------------------------------------------- ---------------- -------------
The following vesting schedules apply to the options:
1. 100% of options vest on the third anniversary of date of grant.
2. 100% of options vest on the third anniversary of the Save As
You Earn ("SAYE") savings contract start date.
3. The level of vesting is dependent on a performance condition,
being the Group's share price at pre-determined dates.
4. The level of vesting is dependent on a performance condition,
being the Group's EBITDA performance (or for 75,000 outstanding
options, asset installation targets) over a qualifying period.
The share price at the date of grant of options during 2022 was
GBP2.08 at 13 May 2022, GBP3.93 at 1 December 2022 and GBP4.18 at
19 December 2022.
The number and weighted average exercise price of share options
were as follows:
2022 2021
shares shares
------------------------------------- --------- ---------
Balance at the start of the period 1,099,153 1,290,699
Granted 1,055,364 76,616
Forfeited (98,482) (233,002)
Lapsed - -
Exercised (333,403) (35,160)
------------------------------------- --------- ---------
Balance at the end of the period 1,722,632 1,099,153
------------------------------------- --------- ---------
Vested at the end of the period 284,973 278,473
------------------------------------- --------- ---------
Exercisable at the end of the period 284,973 278,473
------------------------------------- --------- ---------
Weighted average exercise price for:
Options granted in the period GBP0.393 GBP0.005
Options forfeited in the period GBP0.256 GBP1.880
Options exercised in the period GBP0.289 GBP0.005
------------------------------------- --------- ---------
Exercise price in the range:
From GBP0.005 GBP0.005
To GBP10.38 GBP10.38
------------------------------------- --------- ---------
The fair value of each option grant is estimated on the grant
date using an appropriate option pricing model with the following
fair value assumptions:
2022 2021
------------------------------------------------------ ------- -------
Dividend yield 0% 0%
Risk-free rate 2.1% 1.5%
Share price volatility 117% 115%
Expected life (years) 3 years 3 years
Weighted average fair value of options granted during
the period GBP3.87 GBP2.30
------------------------------------------------------ ------- -------
The share price volatility assumption is based on the actual
historical share price of the Group since listing in March
2016.
The total expenses recognised for the year arising from share
based payments are as follows:
2022 2021
GBP'000 GBP'000
------------------------------------------- -------- --------
Equity-settled share based payment expense 210 237
Cash-settled share based payment expense 74 12
------------------------------------------- -------- --------
Total share based payment charge 284 249
------------------------------------------- -------- --------
Cash-settled share based payment expense relates to employer's
National Insurance payable on the exercise of unapproved (for tax
purposes) share options.
23. Commitments
Capital commitments
The Group has entered into contracts to develop its digital
platform as part of the Digital by Default strategy. Such contracts
may be terminated with a limited timescale and as such are not
disclosed as a capital commitment.
The Group has no other capital commitments at 31 December 2022
(2021: GBPnil).
Security
The Group entered an arrangement with a commodity trading
counterparty, SmartestEnergy Ltd, in December 2019. As part of the
arrangement, there is a requirement to meet certain covenants and a
fixed and floating charge over the main trading subsidiaries of the
Group, Yü Energy Holding Limited and Yü Energy Retail Limited.
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.
Included in other receivables is an amount of GBP500,000 held in
a separate bank account over which the Group's bankers have a fixed
and floating charge.
Contingent liabilities
The Group had no contingent liabilities at 31 December 2022
(2021: GBPnil).
24. 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 2022 the Group paid GBP120,000 in lease
rental and service charges to CPK Investments Limited (2021:
GBP130,000). There was no amount owing to CPK Investments Limited
at 31 December 2022 (2021: GBPnil).
All transactions with related parties have been carried out on
an arm's length basis.
25. Net cash/(net debt) reconciliation
The net cash/(net debt) and movement in the year were as
follows:
2022 2021
GBP'000 GBP'000
-------------------------- -------- --------
Cash and cash equivalents 18,970 7,049
Lease liabilities (160) (267)
Borrowings - -
-------------------------- -------- --------
Net cash 18,810 6,782
-------------------------- -------- --------
Borrowings Leases Cash Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- -------- -------- --------
Net cash/(net debt) as at 1 January
2021 - (368) 11,740 11,372
Cash flows - 120 (4,691) (4,571)
Interest and other changes - (19) - (19)
-------------------------------------- ---------- -------- -------- --------
Net cash/(net debt) as at 31 December
2021 - (267) 7,049 6,782
Cash flows - 121 11,921 12,042
Interest and other changes - (14) - (14)
-------------------------------------- ---------- -------- -------- --------
Net cash/(net debt) as at 31 December
2022 - (160) 18,970 18,810
-------------------------------------- ---------- -------- -------- --------
26. Business combinations
On 9 May 2022 the Group acquired (from administration) certain
assets of Magnum Utilities Limited, including the management team
of the business. The acquisition provided the foundation to create
Yü Smart, being new Group capability to install, service and
maintain smart meters and EV charging assets.
The values identified in relation to the acquisition are final
at 31 December 2022. The fair values of the identifiable assets
acquired and recognised at the date of acquisition were GBP224,000
comprising IT and office equipment of GBP8,000 and goodwill of
GBP216,000. The goodwill is attributable to the management team,
operational and industry knowledge and policies and processes of
the acquired business.
Total consideration and other costs of GBP224,000 were paid at
or closely after completion. No further consideration is payable.
The new business contributed no revenue and total operating costs
of GBP1,100,000 during the year, expensed to operating costs in the
income statement.
No business combinations or acquisitions took place in 2021.
27. Post-balance sheet events
There are no significant post-balance sheet events.
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END
FR DXLFFXXLBBBV
(END) Dow Jones Newswires
March 14, 2023 03:00 ET (07:00 GMT)
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