Member Info for Discodave4561

Sparky

Why the personal insults every time you post?, you appear not to be capable of being civil and just accepting not everyone wears rose tinted glasses like you do - another poster has said the same.

Yes the interims were the interims I can’t change that unfortunately or what the company said, was simply posting up that fact.

Yes wholesale gas spot price has increased since then but YU aren’t paying wholesale gas prices or wholesale electricity prices, they buy from Shell.

If you could post up exactly what they are buying at to establish “normalisation” or not then that would be great. Or post up what you think YU’s interpretation of normalised prices are then that too would be great.

As ever I’m posting factual data combined with my opinions which is all we can do.

None of your insults will deter me from posting and you should be aware of that by now.

Sparky

From interims already posted part:

In addition, tariffs charges to customers are based on a more normalised energy market, which has led to a lower contribution from uncontracted customers (on variable tariffs which track the prevailing energy market) and lower tariffs secured in our contract portfolio.

Nite “more normalised energy markets”. In other words wholesale prices have fallen following the significantly higher prices during the crisis. Yes I believe that the wholesale prices will reduce in time to where they were pre the crisis.

To say prices will not go back to these levels is an opinion, nothing more, no facts to support that view. Needs to be qualified with IMO, or post up the data to support that view. Nobody can make such predictions even experts will have completely opposing forecasts of what will happen in the future to energy prices, much like oil. Yes I thought that energy prices would fall back lower than they have, so shoot me down!, but IMO they will in time.

You paint a very assuming picture - nearly 50% of UK energy came from renewable sources in 2023. If there are to be as you say black outs then what exactly do you think the impact will be on YU and its customer base?. Many of its customers will probably go out of business, and YU’s business in itself would be very precarious dont you think?, a business trying to sell a product that won’t be available at times when customers need it. Those businesses that do need it will seek alternatives themselves at much lower cost like they do in many parts of Africa etc.

Sah

From their interims: In addition, tariffs charges to customers are based on a more normalised energy market, which has led to a lower contribution from uncontracted customers (on variable tariffs which track the prevailing energy market) and lower tariffs secured in our contract portfolio.

And no reason that won’t continue. As you say their customers are highly cost sensitive, which also works the other way in that to keep customers they may / are reducing margins. Yes there is market share to go after but that philosophy assumes the competition will simply sit back and do nothing, well they won’t. They’ve grown to 1.8% of the market (possibly 2% now for FY24), that’s taken over 10 years, their 7% share is an aspiration it’s not saying they will ever get near that and IMO they won’t. That equates to more than British Gas supplying non-donestic customers, which is unrealistically ambitious IMO but hey it makes good PR and draws folks in (like the £100 per share posted by some on here). Don’t believe they’ve supported that aim with any details (if you have details about how they came to that forecast then I’d be grateful to see it). Will growth in income and bottom line margin keep up when energy prices fall back that’s the key, and IMO it won’t but nobody can predict where wholesale prices will go and by when. Their income growth rates and earnings are already showing significant declines. At H1 energy supplied was up 110%, for the year only 78%, revenue was forecast to grow 40% in H2 ir was half that - why?.

Yes I’m harping on - but the cash is again IMO ring fenced to a large degree by the liquidity covenant. All their actions pre and post the cash collateral payback doesn’t send any signals to me that it’s all, or mostly, distributable, quite the opposite.

Just run a screen.

There are 57 companies in the FTSE AIM Allshare index whose TTM div yield was greater than 4%. The largest being 14% (JIM).

Yes there are facts then there are just ramping lies!

Yes I’d completely disagree too, some very false and misleading comments . There are some decent AIM companys that have progressive dividend policies and as I posted 4% yield isn’t going to attract income investors.

Yes YU have also passed the begging bill around in the past (a £12m placing to enable growth back in 2018), so another non factual statement.

Sorry again, phone and this site clearing parts of my posting.

So they stated they would be profitable for FY19, forecasts during that year were given of a net profit of £5m ,they made a loss of nearly £5m. That was with the current CFO coming in to replace the old one who was in post during the accounting issue. As I say, the market doesn’t forget easily.

DYOR

Some Facts (not lies!)

In 2018 they did a placing to raise £12m, some months later there was an accounting issue (revenue recognition being the main issue) and the FCA got involved. FY18 their net profit for the year was forecast to be £3.5m, given the accounting issues they actually made a net loss of £6.3m. The current CFO was then appointed and declared that they would make a profit in FY19 (refer to RNS 9669E). The accounts would be signed off by more than just the CFO. That’s the relatively tarnished history of the company so far but the market takes a very long time to forget such things.

As for their dividend policy, the dividend has increased since they started to make a decent profit, the div yield is currently 4%, which isn’t too bad but isn’t going to attract income investors IMO at that yield when you can achieve in excess of that from a simple cash ISA. The dividend cover they target is 3x, but as yet for FY24 according to Stockopedia the dividend is not one-third of forecast eps, it’s less and could be increased c 2%.

DYOR

Lorenzo

Sorry when pisting on this site using phone it disappears and have to start again so the one para missed something off and should have read:

From the research I’ve done it already looks like their margins are reducing, for FY24 the wholesale gas price was only 17% below FY23, their revenue increased 40%, but the volume of energy supplied increased by 78%, so IMO why such a discrepancy it shouldn’t have fallen that much IMO (bear in mind that they supply more electricity than gas but the wholesale price trends tend to tends to be in line with gas

Lorenzo

Sorry just seen your previous posting.

Their business model is simple, higher wholesale energy prices higher income higher profit. They have minimal Capex requirements as its asset light, they have little in the way of assets (their HQ office is owned by their CEO0.

If you look back at their profitability pre the energy crisis they we’re loss making, the growth in profitability obviously increased massively when wholsale energy was 20+ (the spike could have been higher im going on memory) higher than normal. It has fallen back but as ever during winter it rises again (which is normal).

From the research I’ve done it already looks like their margins are reducing, for FY24 the wholesale gas price was only 17% below FY23, their revenue increased 40%, so IMO why such a discrepancy it shouldn’t have fallen that much IMO (bear in mind that they supply more electricity than gas but the wholesale price trends tend to tends to be in line with gas). Their H2 revenue growth was originally forecast to be 40%, but looks like it will only be half that at 20% (their last trading update wasn’t particularly clear on that, approaching £650m but could be £644m). Either way their H2 revenue growth was has reduced significantly resulting in a revenue miss for the year. Can’t figure that one out, are they reducing their own margin to gain more customers?, are more customers flipping onto non fixed contract rates?, or has Shell taken income by charging them proportionally more? - I don’t know.

Lorenzo DYOR

Earnings growth falling fast as the cost of energy has declined:

FY23 eps growth 547%

FY24 eps growth 16%

FY25e eps growth 7.5%

Costs increasing and bottom line margins reducing. When energy normalises, whenever that may be (FY25?, FY26?) they will struggle to make a profit IMO.

Apologies typo - that should have been “look at their history history since listing”. Their inability to be profitable.

Lorenzo

Been a member here for a while but started to use ADVFN for my sins. So post on other stocks on that BB.

I’ve traded this in both directions for a while now. My underlying synopsis is the same as yours. I don’t believe their earnings will be sustainable once energy prices normalise. I thought that woukd happen by now but it doesn’t look like it. If you look at their history since losing they have only been profitable due to the energy crisis.

More recently, FY24, the growth in earnings has slowed dramatically which is no surprise if you look at how wholesale energy has declined.

I will keep trading the momentum which ever way that goes and wait for the reversal.

Most folks here only post bullish points of view which is understandable as they are long term holders. Thus there is very little balance, so I do my best to counter that, nothing worse than folks believing everything is perfect here and the price can only go up, well it won’t. When energy prices fall back this will not be profitable again IMO.

But don’t take what I say as gospel, DYOR.

If you go long then good luck.

Sparky old pal

Just asking you to post up some facts to support what you said.. Namely that their liquidity covenant doesn’t refer to cash.

From their interims current assets, in other words their liquid assets.

Inventory £1.8m

Trade and other receivables £75.4m

But on the other side Trade and other payables was £117m (ouch)

And cash and cash equivalents £89.4m

Other current liabilities are pretty low £1.9m

So their liquidity covenant is without doubt IMO their cash. Unless you can provide facts to prove any different Sparky old pal.

Sparky old pal, still waiting.

You posted:

‘So I ask again what is the basis of your assumption on a fictitious cash covenant who have spent weeks stating as fact ?”

Liquidity -what liquid assets of any substance do they have other than the cash?, answer none. There is a liquidity covemant that’s fact or are you saying their liquidity covenant doesn’t include cash?, if so post up your facts to prove that. Would also like you to post up why they are sitting on £80m cash earning diddly squat, why they took out £5m debt, why there has been no BB of substance (divs and BB was from their capital recovery not cash balance), no special dividend, and div yield isn’t particularly excessive (from quick calcs it’s not one-third eps which it could be), etc etc,

FY24 gas spot price, which isn’t what YU are paying anyway, was c17% below the FY23 average for the year. Yet with energy supplied up 78% tev was only up 40%. IMO Customers switching to non contract at lower prices, and / or they’ve dropped charges to gain customers and / or Shell are taking margin on the prices they charge YU.

Yes Kubera / nimrod

Historical numbers do look very good but more how earnings growth has actually fallen off a cliff. It all depends obviously on how much they pay for the energy off Shell and how much they can charge their customers to maintain margin. When energy was pre energy crisis their margin was so low they couldn’t achieve a profit. Fair play since the energy crisis they’ve clearly made hay while the sun shines, but it won’t keep shining and the numbers are already reflecting that. The two analysts covering the stock are paid to provide the forecasts, without any timeline and it’s my experience that they are definitely not cast in stone, it’s what the company wants the share to be……..so their CFO selling over half his holdings last year at below target price by some degree suggests that perhaps these targets may not be attained. Also you have posters on here suggesting £100 in the future which IMO is complete famtasy, but hey we all love to believe in our dreams and fantasy’s.

Good luck

Sparky

‘So I ask again what is the basis of your assumption on a fictitious cash covenant who have spent weeks stating as fact ?”

Liquidity -what liquid assets of any substance do they have other than the cash?, answer none. There is a liquidity covemant that’s fact or are you saying their liquidity covenant doesn’t include cash?, if so post up your facts to prove that. Would also like you to post up why they are sitting on £80m cash earning diddly squat, why they took out £5m debt, why there has been no BB of substance (divs and BB was from their capital recovery not cash balance), no special dividend, and div yield isn’t particularly excessive (from quick calcs it’s not one-third eps which it could be), etc etc,

All the numbers are factual if you can’t join the dots then perhaps you should nip to specsavers and change your rose tinted lenses.

The Rev miss was fact, the TU ambiguity was fact, the bad debt provision is fact, the cash sitting there doing nothing is fact, the growth falling is fact, the liquidity covenant is fact, the accrued expenses are fact, the £5m debt is fact, etc etc etc.

You constantly post opinions daybin and day out which aren’t factual and never post IMO, but because you don’t like my opinion you try saying it’s not factual, well trying to see the future isn’t a factual exercise bit one has to use the facts that are available and draw some conclusions, that’s what investing is all about isn’t it.

Ps little pip boy you are a child and need to grow a pair.

Oh Sparky one other point I forgot to mention. You know the one that’s coming but it is relevant IMO - yes the accounting scandal, over estimating their revenue (dodgy meters and admin IMO) and cutting profit by c £10m. Well that’s just a small red flag both for the market and for Shell. The other is their integrity, they made a £12m placing only two months prior to the accounting issue and the FCA only pulled a £300k fine because of how precarious their finances were and also Covid.

Now they say the market never forgets and I’m pretty sure Mr Shell would also be aware if their history. That’s also IMO why the business isn’t being rated as perhaps as high as some here would like.

Sparky

I’m not getting angry. Trouble is you simply won’t allow anyone to post anything unless it meets your very rose tinted perspective.

So in your world Shell are hedging for the supply requirements of YU with absolutely zero risk mitigation?. The liquidity covenant, along with the book value and profitability, is their risk mitigation. Given the only liquid assets YU is their cash then it stands to reason this will have some non distributable limit on it to comply with the liquidity covenant. Now I’ve never said how much, but IMO it’s a decent amount, based on a couple of reasons:- a) SmartestEnergy required £50m collateral when supplying 78% less energy to YU. However that could be c £90m which clearly is too high, but as I state further on IMO they are addressing that, b) YU are doing nothing with the £80m, the divs and small BB were funded via the capital recovery, they haven’t implemented any decent medium term BB programme, they haven’t acquired any other business, they took out £5m of debt for smart metering, no special dividends.

IMO Shell will also have tightened up their invoicing to YU (look at accrued expenses with SmartestEnergy, FY23 circa £61m), which aligns with their covenant and outs additional pressure on YU’s cash flow, hence my point about bad debt provision. IMO they are also charging YU more than SmartestEnergy because they haven’t taken any cash as collateral.

Or in Sparkys world do you believe Shell have said to BK don’t worry about providing any cash collateral to cover all the risks we are taking, no problem, oh and we won’t be charging you anymore than SmartestEnergy either, minimal margin as we aren’t bothered about doing business at no financial gain for us - yeah right whatever!

Yes i don’t have the detail, but have the underlying facts to draw my own assumptions and tbh that’s what investing in a company is all about. I could be wrong but we will see.