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The hedging was in place in September and Yu Group have always hedged each contract so that it is not exposed to the fluctuating energy prices (be that Gas or Electricity.) However, if you look at how the gas and to a lesser extent electricity prices have fallen over the last 4 months. The collateral required will have increased significantly as prices fell. The cash collateral will be returned as the contracts mature. Yu Group used to say they would need £20m cash buffer for this purpose, but as the amount of business they are writing goes up so has the cash call for collateral. If the price had remained static rather than falling the y/e cash figure would have been £80m.
ADW the cash figure stated in the January trading update is around £32m, but that figure doesn't include almost £50m which is Yu Group's cash held as collateral at Smartest Energy against Yu Groups hedging position. When a new client accepts a quote from Yu Group for say a two year contract, Yu Group hedges the forward cost of the gas or electricity used in that contract for the two year period. If the price of gas drops then Yu needs to post collateral against the forward contracts, which unwind over the course of the two year contract. Hope that makes sense. Over the next 4 and 1/2 months that collateral will be paid back to Yu group, and their cash figure will be £80m (plus profits made over H1.)
Just to keep people informed. BK and PR are out on the road meeting institutions with Liberum on the 19th to the 22nd March. This is to discuss and explain the Prelim results for FY 2023. 7 weeks yesterday before we get a lot more flesh on the bone.
Howard, our close last night was an all time closing high. There may have been an intraday mark at £13.45, but the highest closing price was last night. Therefore there is no resistance from here! I am guessing that is why the chartists are buying today, as the shares are on a technical chart breakout! However, the real excitement will come with the trading update that will probably be the 23rd January. That is when the market will see how cheap this stock is and I expect the price to fly.
This is going to get the chartists very excited. The stock has broken out, and there is no resistance above the current share price. HOWEVER, the real action will come when those that follow fundamentals see the trading update. This share is crazy cheap for the growth that is coming. It will be cheaper than it has ever been when the figures come out. Even after going from 50p to £13, it is about to become very cheap on P/E grounds.
Looks like the IC article could create the demand for the chart breakout. Then the trading update will send things wild a week or two tomorrow! I think that this TU will be a game changer for Yu Group, we will be on a mid to high single digit P/E and 2024 earnings will be more than double the 2023 EPS of around 170p. Hold for Gold!
Yes, Liberum have arranged an Industrials and Support Services conference on the 11/1/24. The conference has 22 companies attending and management are available for one on one meetings. The event lasts from 9:30 until 17:30. I don't know the location, and I am not attending this one.
IPC, let me put it another way. Let say you have 100k shares of Yu Group and they payout £12.2m in dividend. Lets say there are 17m shares in issue. You would get £71,765 in dividends (before tax.)
Then, lets says rather than paying out £12.2m in dividend they bought 1m shares and reduced the number of shares in issue to 16m.
Then lets say at the end of 2024 the company on £1bn of sales at 8% net EBITDA margin, made £64m profit after tax. That would mean that if they had 17m shares EPS would be 376p, but if they had 16m EPS would be 400p if you put both the EPS's on 15x p/e the share price would be either £56.47 or £60. Therefore, if you still had your 100k shares at the end of 2024 then you would be £353,000 better off with the share buyback, rather than having the £71,765 in dividend.
That is the power of a share buyback over a dividend.
Happy New Year IPC, I too think it will be a cracker, and can't wait for the TU later this month! (I wonder if they will go earlier in Jan as nothing in November?!) There are a few reasons why I think they will do both a better Divi and a share buyback. The first reason is that we have a very big share holder who may not want too much income in the form of dividends for tax reasons. The second is that they haven't bought anything with their warchest, as the return from their own shares would provide a higher return, than a target. The third is that a share buyback would increase the EPS on the remaining shares and make them more valuable. Another is because we have so few shares in issue the increase in share price from the purchases would in my view increase the share price by more than the dividend payment would. No reason they couldn't put a few million into each. I don't know about you, but I would prefer capital growth over income. A share buyback would help the former more.
Happy New Year to Yu all! I have a funny feeling that 2024 is going to get off to an explosive start for us holders of Yu Group. The trading update when it comes will: "Blow the bloody doors off!" as Michael Caine would have put it! I am expecting that Revenue will be well over £500m. If my research is correct the company received £236.36m in the first half against billed, 98.156%. (Please do your own research.) If I heard correctly they added 9,000 meters in just two months during the second half, so meters could be around 60k at the y/e. Big clients coming on board not just Hays Travel, but some other household names that will get punters very excited. 100,000 meter target WILL be exceeded. I predict 2024 will be transformational for the company and for shareholders, I am expecting a bigger dividend and a share buyback, to enhance the EPS of the remaining holders. I totally agree with SNN EPS 170p 2023 going to around 400p 2024. I expect they will enter 2024 with around £600m already booked. I think the average monthly bookings for 2023 will not be less than £58.3m.
We went up just over 140% last year, it could be more this year as we are now so much cheaper, and growing like a train! There is nowhere else I would rather be!! DYOR.
Thanks Dave, I hope yu and your family had a lovely Christmas too! I appreciate your thanks, and will try and make some useful contributions in 2024 as well. I feel the New Year could be a very profitable one for us all in this company. The traction that the company is gaining will hopefully be appreciated by the market, and we will see some new institutions join the register. I don't think it will be negative for the company if the present government abolishes IHT as I can't see any AIM IHT companies on the register. I think we will see an amazing update in January, there were little snippets that slipped out on the Capital Markets day that lead me to think that things were going extremely well during 2023. 2024 will be amazing if they achieve their targets.
I wish all holders a very happy New Year, I think everyone will be very happy if still here in a years time! £35 to £50 for me!!
Just to keep people informed, Yu Group is going to be one of 22 companies at Liberum's Industrials and Support Services conference on the 11/01/24 from 9.30 until 17.30, and available for in person meetings. No mention of who they are sending, but my guess would be BK and PR.
JL the bid for SMS today has 2 implications for Yu Group, firstly Yu Smart that they are building up very quickly, is very attractive as a stand alone business. The predictable long revenue stream can be valued easily and is attractive to pension scheme's and private equity alike.
More importantly is there is going to be £1.3bn of cash in the AIM market looking for businesses like SMS and which YU is creating. Let's hope we see some of it come into Yu Group!!
SNN Looking at your post regarding forward contracted sales for 2024, knowing that the company had £358m at the end of August and the last 1/4 is usually the highest for monthly bookings, then I think your figure of £600m is very achievable indeed. Most of what they sign up in the last 1/4 will be for sales in the next year. Then I was having a think and looking at the broker forecasts for 2024 & 25. The total revenue figure for 2024 is £568m and for 2025 it's £630m. I reckon that they will have more then the total revenue figure for 2024 in the book by 31/12/23, and I think there is a good possibility they will have the total revenue figure for 2025 in the book by 31/12/23!! Just so you know how I get there, I am expecting Average monthly bookings for 2023 of around £60m pcm, (£51.3m in the first six month (confirmed!) Then £70m average in the second 1/2.) I think that the last three months could be around £85m per month!
If the above proves correct and we haven't got long to wait to find out. I reckon that the forward sales for 2025 on the 31/12/24 will be around £1bn!! Especially if they beat their meter target of 100,000 at the end of 2024. (Which they will.)
They could do nothing Sparky, however, I feel that that would be highly unlikely. Paul Rawson was clear in the investor meet company that he wanted £20m of working capital on the balance sheet. This is to cover margin during periods of volatility in commodity markets. They will also want to be able to demonstrate balance sheet strength to the larger clients they are going after. Also as SNN says some is non-distributable. But there is enough left to keep shareholders happy too. I still feel that there will be some allocated to a share buyback. They always get the market excited!