The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Morning upsidepotential,
I think the short answer is Yes, YU have very strict criteria and risk management is second to none as they have learned the hard way.
So if say MA Energy went down the pan, YU would bid through Ofgem to take on that book, they will bid in a way that doesn’t affect YU adversely and if they do. It win so be it.
This strategy is to be admired especially as rivals are falling apart all over the place.
What I can see is in the B2B market is a wave of mergers and buyouts.
I have aways thought YU would merge with Smartest Business ( formally Dual )
It would be under the YU banner as listed but the synergies as both use smartest for hedging is huge.
I could be way off the mark but smartest do tend to pick up businesses they work with.
Yes, margin increases will be greatly welcomed.
I suppose whilst I understand that B2B contracts have no price cap, I suppose my point was that if a book is taken over or an acquisition takes place aren’t we obligated to honour fixed price contracts? Also its my understanding that B2B contracts can last up to 5 years?
So gross margin should be way of 10 now low margin contracts have washed through
From annual report
Analysing profitability
Gross margin for the year was 7.6%, up from 4.9% in 2019 despite the 1.5% impact of Covid-19 during 2020. Gross margin for H2 2020 was 9.1% (H1 2020: 5.7%, 2019: 4.9%), showing significant improvement.
Net customer contribution2, representing underlying profitability achieved from customer contracts, was 6.1% for the full year and 6.3% for H2 2020. Management is pleased to report this 2.5x increase in H2 2020 from the prior year (2019: 2.5%)
Also you mentioned taking over existing contracts
Remember B2B isn’t constrained with the price cap like retail so the situation is totally different in a positive way
Oh forgot to add I think small deferred payment was due to Bristol council as well for the purchase.
Thinking about it we are nearly Oct so 2021 is actually not long to go and we are soon into 2022 when YU will really stand out and if the market is still resevered about YU they cannot ignore next year as the MC v turnover v profit will be massively out of kilter when growing at 40 to 50% per annum and on a stupid PE of under 10 with no debt and cash everywhere
If you look at the figures
Overheads have been as high as 7.2% but now 6,2% and I expect this will be under 6% now.
All new contacts are a minimum of high single digit with an average last year of 9.2% but this was diluted slightly with some legacy remaining which have no washed through so gross margin could be over 10 now
So for this year net margin of say 4 to 5%
These are really scrappy figures but we should be looking at a nice profit this year even after Leicester final payment, deferred vat and investments in tech.
Next year is when the big profits start rolling in
Good afternoon Sparky(late to reply),
Yes, the only issue for me is where they take over(acquire new businesses) they are obviously left with legacy contracts which don't necessarily match up with the companies offering and therefore are potentially not profitable, but means Revenue growth and at the point that the new customers renew their contract, they then become profitable.
I am a little unsure as to whether when YU takes over a customer books instead of acquisitions, how that works in terms of would YU have to honour the existing contract of the old supplier(which is what I thought happened) or not?
In any case I feel they have positioned themselves extremely well here and should the Current Liabilities have decreased in relation to Current Assets on HY Reporting, it could place them in an even stronger position particularly when it comes to M&A activity.
I can't say I've seen the mention of only taking business with 9% Gross (Profit?) Margins? I presume that was included in an RNS or interview or something of the like? Good to hear though.
Regards, Upside. :)
Morning upsidepotential,
Growing at the expense of profitability, I take your point but the way the business is currently being Run I think they can do both through organic growth. YU suffered in 2018 and domestic are now through effectively loss leading contracts to gain market share. Bulb a fine example.
YU will now only take on business with gross margins 9% or higher and through carful Rick management a pneumatic discipline we are at the point of explosive growth.
With turnover now balanced against overheads every £1 of new business has no effect on overheads as these are static bar recruiting more customer facing staff to manage the growing client base, but fundamentally we are on the cusp of huge growth organically and a cash register throwing of money.
Due to the current sector troubles YU can sit back and watch it unfold and do not have to buy rivals but hopefully pick up customer books for next to nothing.
Either way we now at a tipping point and I always said 2021 was YUs year and so far I have proved right even with a sector carnage.
Once it all settles down, which it will the competition will be reduced and YU a solid fast growing mid tier moving nicely along to a £B+ turnover top tier challenger in the gold plated B2B sector.
Opportunity is there, YU needs to now forge ahead and gain market share potentially at the expense of profitability but in years to come, it will prove to be a shrewd investment I'm sure ...
Looking at the results to come I would like to see a reduction in the Liquidity Ratio ... YU has already indicated that they have forward paid outstanding liabilities for H2 so I will need to factor that in.
Elexon has expelled three more suppliers from the Balancing and Settlement Code (BSC).
Avro Energy, AMPower UK and Delta Gas And Power are all in Default under Section H3.1.1(c)(iii) of the BSC, Elexon announced yesterday (21 September). This is due to their failure to sufficiently reduce their Credit Cover Percentage over a period of two working days.