Yu Energy Share Chat (YU.)

Correction - right the first time. Yu Energy Holding then owns the supply company (Yu Energy Retail).

Well, working capital is a vague term, with more than one meaning. Is it gross W/c - ie one month of cost of sales, or net - ie one month trade debtors, less the trade creditors? In which case W/c is negative. Yu paid Smartest after Yu received payments from its customers. It could mean effectively one month of gross profit. Does it include or exclude the accrued ROC payments? Frankly, it's pointless worrying over this, as a holder. It's clear to me it's in Shell's interest to help Yu scale quickly - to boost Shell's income. Shell are willing to finance the working capital to this end. If there is extended credit given to Yu, this may be to help Yu gain more blue chip customers, who will be themselves on extended credit from Yu. There's no way in my mind that Shell deal has any 'negatives' in it, for the company.

Chart - https://www.google.com/finance/quote/YU:LON?sa=X&ved=2ahUKEwjroYD7krCHAxWKWUEAHQSkA4cQ3ecFegQIORAf&window=5D

Click 5 day.

Thanks SNN for the chart and your thoughts on the Shell deal.

I’m not as relaxed or confident about the Shell deal, but hey I’m not a holder. But do think they need to disclose more detail about the deal (yes I accept that they can’t reveal everything but so far they’ve said very little - it’s a key element of their business).

I’d always gone on WC as current assets less current liabilities - so I thank you for highlighting there’s actually more variants! - every day is a day for learning. But again there needs to be more clarity as the business grows this requirement could become quite substantial.

Interesting point about the definition of WC. Sometimes it seems to be used almost interchangeably as 'cash in hand'.

So, the last trading day before the long awaited H1 trading update. Little trade on Friday due to the computer outages around the world. Interesting to see where we end today. I hope tomorrow at 7am we see the cash figure has gone above £100m, the number of meters is up from 31/12/23 (53,400) to above (77,500.) That would be a net H1 increase of 24,000 meters. The same in H2 would mean ending the year with over 100,000 if they do the same in H2.

Last year Yu Group added 14,000 meters in both H1 and H2. It would be a big step up, but fingers crossed they can achieve that. Cash conversion around 98%. Hoping to hear if there are any issues with bad debts, hopefully these are being managed effectively. Also, want to see a big upgrade from Liberum in their accompanying note. Price target moving up from £20.50. Also hoping for some guidance as what is going to happen regarding special dividend and small share buyback. 20p special and a £4m share buyback would be enough for me. I am happy for the company to hold the cash for the time being.

This update should see the next leg up. GLA.

The shackles have been of for some time now so confirmation tomorrow that it’s game on for 100,000 would be most welcome. YU always over deliver have done for several years now and I expect 2024 is going to be the defining year for the market to realise YU isn’t some lumbering energy company but a company rapidly heading towards being a significant player in the SME arena , and that the SP is ludicrous and has been overlooked for years by the market.

Don’t quite know what “shackles” you are referring to Sparky - Clearly those Directors who sold a significant chunk of their holdings (the CFO’s sale in particular along with their retail Director) in April and May felt differently.

Folks may find this quarterly report by Begbies Traynor (Red Flag Reort) of interest, for the likely impact to businesses like YU and other investments you may have.

“Over 600,000 UK firms face financial strain amidst challenging economic climate”

Https://www.investegate.co.uk/announcement/rns/begbies-traynor-group--beg/latest-red-flag-alert-report-for-q2-2024/8322175

Wonder if £19 will hold today?

Any positives ?

Long or short overnight ? Or no position ?

Of course there are. Make the most of the elevated charges and margins due to higher energy costs, there is scope for growth, like to see Smart meter installs for other suppliers.

Any negatives?

I have given previously my biggest fear, they grow to fast to soon which has multiple knock on effect across the entire business.

Energy prices collapse again can’t see this for many years or until the world becomes more stable

UK spirals into recession and bad debt become a major issue

Could go on and on but the key with risk is the probability and currently the closest threat to YU is growing to fast.

Next biggest threat is a labour government taxing to death anyone and everything stifling investment in the country, inflation monster returning and higher interest rates killing businesses

Shell deal I see as a partnership but yes potential risks if the CFO screws up but hats like any business breach covenants, most get resolved amicably but huge red flag if covenants breached.

BK get worn out and accepts a low ball offer nothing we can do about it as he hold all the cards with 53% same with an offer he can block it.

Ultimately YU IMHO is a low risk play compared to most sectors as a defensive play ie other sectors will feel the horrors way before YU.

Also YU isn’t exactly priced like a tech stock on a PE of 30,40 50 or higher again another safety net.

Sparky

Sparky

Thanks for flagging some risks but IMO the majority you cite are sectorial and applicable to most businesses.

You mention covemants and if breached most get resolved amicably - IMO the Shell deal is my main area of concern on a few major points: 1/ In this case if they breach covenants, which nobody actually knows the specific details, then Shell will simply and happily walk away with the business, no amiable discussions there!. 2/ You then mention there’s a risk if the CFO screws up, well within a month of his appointment he stated (the business stated based on his financial forecasts) via RNS that they would be making a profit the following year FY19, they made a £4.97m loss!. Yes it was 5 years ago but personally I’ve little confidence with the CFO and perhaps the market does too?. 3/ How good are Shell at hedging for YU?. They couldn’t make a profit for their own energy retail business, they piled in over £1bn to try and make it work and failed. They sold to Octopus who made a decent profit in 2022 (be interesting to see if they did in 2023 after taking on Shells customers).

Then there’s potentially major issues with YU’s customers being miss-sold contracts by using energy brokers (most of YU’s customers use energy brokers) and claiming compensation (it’s been highlighted recently in the press). Perhaps the brokers are all above board and it’s not significant, but I’d be somewhat concerned if the Ombudsman /FCA get involved.

Do have other concerns I’ve researched but these two are the main ones. Yes I’m not a long term holder, so yes it’s arguably not my concern anyway, but I do research thoroughly as that identifies trading options / potential for the short term. Folks can DYOR.

As for my current position Sparky, I’ve already stated that quite clearly.

Why do you seem to think Shell are trying to screw over YU ? Do you think BK would bet 200m on red ?

It’s a partnership I don’t know why you think Shell are out to destroy businesses, never heard such trumped up rubbish in my life.

Well if that’s your view of how companies work together we may as well all give up and go home because your view is every one is out to screw everyone.

Utter insanity. And why you keep positing it everywhere time and time again is beyond me as it only serves one purpose you want to SP down simple as that so you make money.

Let’s be pretty blunt about it.

40 mins to go and then all bets are on.

We can discuss a lot of your concerns tomorrow DD as I notice more and more your making bold assumptions left right and centre. Yes assumptions not fact but your personal assumptions

Roll on 0700hrs tomorrow and please remember DD this is a TU not some detailed H1 report you get that Sept.

So silly comments like why have they not mentioned what commission they are paying Shell or what the net margin is

It will be a basic statement, turnover, profit, EPS, meter points numbers and all unaudited and also probably FY outlook

Sparky

I’ve never ever said that Shell are out to destroy YU, as SNN has also posted: YU breach their covenant and Shell get the business. As per Note 25 in the AR. That’s a fact not an assumption.

Rawson messed up that’s a fact not an assumption, Shell couldn’t make their own energy retail business work at a profit so they offloaded that’s fact not an assumption. nobody yet knows how well Shell have performed compared to say SmartestEnergy that’s a fact not an assumption, nobody knows they rue cost of the deal that’s a fact too. Hopefully the TU and H1 will in part answer this latter fact.

Folks who have used energy brokers are suing their suppliers that’s a fact too and the majority of YU customers use energy brokers.

https://www.bbc.co.uk/news/uk-england-tyne-68072768.amp

I don’t want the sp to fall, not unless I’m short, likewise I wanted the sp to go up when I was long and thankfully it duly obliged.

I’m not positive or negative on YU short / medium term have stated that quite clearly. I’m trading the momentum whichever way that is. Can’t be any clearer really. If you believe my posts have any influence whatsoever then you are in the wrong game.

Today’s volume hasn’t been too bad but it’s not likely to make a new high (which I thought it might). Perhaps tomorrow on news it will, who knows. I’ve also posted my views on that too.