Member Info for Discodave4561

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?

Sparky

Sorry only just digested your last comment.

Doesn’t concern me, I’m not a long term holder, it’s not on my radar now in terms of trading strategy, have already stated what that is likely to be up to, on, and after the TU. Long or short.

As you know I always thought the deal collateral was equity (BK’s) not assets / the business, which could have presented greater opportunity for trading, but that’s not the case by the looks of it.

There has been widespread IT issues impacting RNS feeds etc, so trading volume today may be impacted?.

Sparky

Not trying to make a point, simply trying to understand more about the deal. Yes lots of businesses have covenants on debt from financial institutions, this isn’t security for funds it’s security for a service. Shell wouldn’t have wasted time insisting on this covenant for assets if they thought it’s not ever going to happen, likewise BK wouldn’t have agreed if he believed it will be breached.

Will reserve comment on your assumption about why the market has priced YU as they have.

The drop on open this morning was as I expected, let’s see if the bulls re-enter today and Monday.

Note 25 - Security

The Group has entered into Trading Agreements with the Shell Group in February 2024 to provide access to commodity markets. As part of this arrangement there is a requirement to meet certain covenants, a fixed and floating charge (including mandate over certain banking arrangements in the event of default) over the main trading subsidiaries of the Group, being YU Energy Holding Limited and YU Energy Retail Limited, and a parent company guarantee from the Company.

So YU breach the covenants (whatever they are specifically - the WC?) and Shell get the business.

SNN / NG

Can I ask - if the business defaults on the working capital requirement (whatever that actually is!), then Shell get the business?, is that correct? or have I completely misunderstood.

Surely if that’s the case it’s important to know and understand the risks as holders!. I know I would want to know.

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.

SNN

Thanks for that. Interesting thought but is the months WC value in addition to what WC they require?.

May be missing something but if the months WC is the collateral why have they also had to provide their assets as security too?.

Just curious, as posted it’s the Shell deal that concerns me more, mainly because they’ve not disclosed anything other than there’s no cash collateral requirement (which also confuses me because what exactly is working capital if not cash on the balance sheet).

Anyway, I’ll see now what tomorrow brings. Sorry as well but I don’t see that range on the weekly chart (looks more like £16 - £19, no expert mind.

SNN I meant to ask:

Did you manage to read the Shell security charge document? (I’m sure you posted link, apologies if it wasn’t you). I did at its above my pay grade, I thought KAL Portfolio was mentioned but did only scan the document - do you know what YU asset the charge related to?.

Hi SNN

Yes sorry pips equals pence.

I’d raised my stop this morning to 1875 to ensure I’d still make the 30 pips (the spread on SB’s are greater than the market spread). It got hit on the early pm dip. Volume seemed to be falling away prior to the closing auction and the bears had taken over and it was in the red.

I note that the UT has closed the price at 1900 (crafty sods lol), but would expect this to open lower in the morning. Will then see if buyers return again. But now on closing price since confirmation of the TU it’s risen 13% (which isn’t too bad for holders and traders may think that’s it, don’t know).

SB hit my floating stop so only made 30 pips.

Oh well, a smaller profit than thought. May try again before the TU.

It’s active it just doesn’t have any significant accounting transactions.

Enzo

It’s now on their website - the 23rd.

Thanks MrG

Yeah think SNN posted this previously. Did read but tbh it’s beyond me. Clearly Shell have an asset of YU Group as security but not too certain which asset it related to - think it was their subsidiary/holding company KAL Portfolio Holdings Ltd. I note that yesterday BK ceased his 75% of KAL but not too certain if this is part of the charge.

If someone could enlighten me / this board, would be appreciated.

Thanks

2227

The devils in the detail.

Anyway, decent volume again today and 3 trading days to go.

NG

It’s the Shell deal that’s my biggest concern, or would be if a holder. The agreement is for 5 years and surprised something so variable and correlated with growth (which makes sense from Shells perspective) like WC is the collateral element. They (Shell) I’m guessing will also have a cash charge or fixed fee (do you know what that is?). Their own UK energy supply business didn’t do too well either despite their commodity buying power / hedging - but best I stop there as I do have a glass half emoty type of strategy where investments are concerned.

NG

Not too certain as their WC could be quite significant based on your £2bn turnover by 2026, that’s over four times last years income. Using the WC Turnover ratio based on FY23 finals data that equates to a ratio of 14.4x. So using that ratio the WC for £2bn sales would be circa £140m.

They have no doubt got a better handle on what that collateral commitment actually looks like over the longer term.

Ipc - thanks for clarifying.

NG - I’d read that some collateral (other than cash) was part of the deal hence my thinking that BK could do a secondary placing with Shell the other party. He has the opportunity to take some well earned profit, it improves liquidity and Shell get a decent equity stake in the business. Hear what you say that that was kicked into the long grass, but time will tell.

You mention that the actual collateral was one month of WC, which I’m surprised at as that is in effect cash on the BS and if defaults could prove to be an issue? (with all that cash perhaps not too much of an issue?). Out of interest do you know what a month of WC equates to?. The accounts are only a snapshot in time so difficult to get a feel as to what that might be. From the finals it’s about £30m from memory for that instant in time.

Thanks

NG

That’s exactly what I’ve used to get my figs. If they only give H1 Rev in the TU then it’s still up for guesswork anyway until Sept interims.

Have you any views on BK reducing his holding?, it would help liquidity. As you said Shell wanted a stake in the business then a decent secondary placing by BK would be a win win IMO.

2227

Fair point but margins have been quite variable.

Long SB at 1845 this morning just after 9am. Tight stop which I’ll float. Volume is picking up so will see how it goes. Could be close to new 52w high by 22nd (looking at 100 points). If it is then will close and review depending on the TU.

Thanks ipc, I’m still going more conservative, but not by much:

Rev £300m - £310m?

Pbt £24m - £26m

Eps circa 105p to say 115p?

Can I just ask, you say pbt £25m (which I agree) but I don’t get an eps of 120p, it’s c 111p, what tax rate and shares in issue did you use?

Thanks