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Let review in 2021 as you are making assumptions on unknowns, like I am in margins etc
Bottom line facts is the trend is improving on gross margins and overheads and these are stated facts through 2018 and 2019. We also know the ****ty low margin contracts expire end of 2020.
Cash collection is also 99.5% so bad debt is currently 0.5% not 5% I am not saying this could get worse who knows
Let’s all have a debate 30th sept 2020 when we get half year to get more clarify on gross margins, cash collection etc
What about the bad debt? you can take off 5% at least for that on turnover. You can gloss this up all you want but this is a failed business. Loads of money invested, losses every year and now they have credit from Smartest just to survive. Which is a debt - they owe this money to them. Can't see them making any money unless they scale a lot faster and keep overheads low. Players like Bulb and Octopus have entered the business market and have much lower rates than YU, just look at the Bulb website. These players are very well funded!
and you have just hit the nail on the head my friend, its all about Margins and overheads
2018 Margin 4% - Overheads - 7.4%
2019 Margin 4.7% but in H2 the margin was 6.7 as the low margin contracts finish - Overheads 6.3%
doesn't take a rocket scientist to see the business isn't profitable cost more to run the business that the Margin on services provided
New CFO hit the nuclear button in late 2018 and the business was reset
so improvements in just over 12 months
Gross Margin are up from 4% to 6.7% this will increase further as still in 2020 35M of turnover is against Low margin contracts so in 2020 Gross margin will increase to say 7-7.5% but the real figure not until 2021 when all the low margin contract have gone so no dilution to the new Gross margin which is statement as High single digit ( in my book this is between 8-9 % )
new business is booming and double 2019 and upto 6.2M per month even with COVID 19 so even with the revenue hit in Q2 2019 I still think we could beat 2019 FY of 111M
so say we hit normalised usage for H2 2020 but turnover is upto 65M with margin at 7% and overheads has reduced to 6% that leave 1M so taking out other stuff you could be looking at Breakeven for H2 and a loss for FY of say 2M - now before we get into the 2M loss for H1 a lot of factor in play here as YU would have pre ordered from Smartest and this was under utilised and would have been sold back at a loss so lots of factors other than margins in the H1 loss
so lets jump to 2021 0 Margin at 8 % , overheads 5.5% and turnover 130M
10.4M - 7M - 3.4M profit
I know these are very basic numbers like yours but you can see the direction is positive for 2021 and net margin is heading towards 2-3% of turnover and improving
so YU could be very profitable as turnover grows especially as Market cap is only 12M
Sparky, analysing H1 2020 now mate ;-)
We're now trying to ascertain the gross margin generated in H1 2020 based on the RNS which stated a loss of £2M on turnover of £45M.
My analysis: (Improved and updated to cover the impact if Covid 19 did't happen) see below.
1. They reported a 6 month loss of £2M
2. They reported revenue at £45M
3. Overheads based on FY 2019 report = 6.3% of turnover therefore 6.3% of £45M = £2.85M in overheads incurred for H1
My only assumption is that the overheads are broadly inline with FY 2019 pro rata for 6 months.
From the above three numbers its easy to work out the gross margin as follows:
£45M (revenue)- 2.85M (overheads) - ( unknown £ direct costs) = £2M loss
Therefore YU's wholesale energy costs must have been = £44.15M
Now calculate £44.15M as a percentage of £45M (This comes to just over 98%)
Gross margin therefore = 1.88% or to be kind lets say 2%
Theres no point referring to gross margins in previous periods 12 months ago as they are history. Lets deal with the current numbers.
You can't add in the 30% lost revenue in Q2 due to Covid without the extra direct costs. If we did there would be an extra 9.75M of revenue and an extra £9.57M of cost so potentially an extra £200k of gross profit which would have reduced the loss to around £1.8M.
If this analysis isn't properly challenged with counter analysis I won't post further on the matter as its too easy to say I'm just a shorter or only post negative which is the level of response received of late. Neither of which are true.
Just for the record
Gross margin improved to 4.9 per cent. for FY 2019 (2018 restated: 4 per cent.), and 6.7 per cent. for H2 2019 (2.1 per cent. for H2 2018).
Trend is gross margin is improving significantly and H1 was probably higher than 6.7 not 3.
That is why customer numbers dropped in 2019 and new booking down as they worked through the expiry of the very low margin business.
Now all new booking are high end single digit at 6.2m a month.
These are the facts from annual report and when half your figures come out I expect margins will be at or around 6-8 % but will some low margins to wash through until 2021 as they have stated.
· Reducing impact expected from legacy, low margin contracts in FY 2020. New contracts secured at higher margin
· Sales bookings achieving higher gross margins and increasing in H2 2019
Therefore if they book 120 to 130m for 2021 and overheads stable a net profit for 2021.
2020 if no second wave break even or slight loss, FY