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£200k for 400 customers is a £500.00 cost per customer. Seems high unless very good margin contracts. Pursuing the right strategy though.

If they owe £1.3M I'd assume at least a few thousand customers. Ofgem will hold an auction v.soon if payment isn't made.

Did anyone pick up MA energy - believe they didn't pay ROCs and all commercial customers..

Other companies of note are Corona Energy, CNG.
These are too big for Yu to acquire but good benchmarks for performance.
The accounts won't tell you GM% you'll need to do your own calculations from data available in accounts.

For a benchmark on pnl margins go online to companies house and download the accounts of BES Utilities and Dual energy - be sure to order subsidiaries as well and this will give you a good indicator of gross margins these companies are making. BES is the top margin performing SME supplier in the market - check historic accounts for proof. will cost you a few quid per company.

Sorry think I misunderstood previous post you mean Yu merge with Dual.
This only makes sense to me if all of the overhead in Dual could be removed and migrated to Yu.

Thats an interesting theory Sparky, I think if Yu did get taken over by smartest they would delist from the LSE as Smartest have plenty of backing from Japanese backers and at current valuation would not be a good outcome for shareholders

Big bite, I'm sorry you can't swipe to a side churn by having a good customer service ethos and relying on Trustpilot scores (which by the way are able to be manipulated) although I'm sure Yu show all reviews.

The commercial utility market is driven in toto by price - I challenge you to ring a 100 SMES and tell them we'll charge you more but give you a better service and see how many switch.

Let me give you an example of how important churn is - a monthly customer churn rate of just 1.5% means an annual loss of 18% of the base so what that means is every year if Yu didn't add any new customers revenue would decline by roughly 18%.

So if T/O was £100M the loss in revenue for the next year will be £18M which means to generate the growth your talking about not only does Yu need to replace the revenue lost to churn but also needs to add net new customers to meet the revenue targets you think are achievable.

The best Utility company's report churn, average revenue per customer and a whole raft of other metrics which Yu don't report on. Check out the annual report or 6 monthly report of TelecomPlus plc (TEP) to see the metrics they report and how Yu could improve its reporting. This would save us having to factor estimates on churn into calculations.

Bigbite - thats a nice analysis but the one thing you don't factor in is customer churn rate which is never reported on by Yu and this is a fundamental KPI which should be reported on by a Utility business.

There are also some big assumptions your making that the uplift on previous years revenue will be at similar levels in future years.
If Covid weren't in play I might agree with you however I will err on the side of caution given the current macro economic climate.

I am pleased however with the guidance given by the board for 2021 re B/E and really hope that they see the potential to acquire smaller suppliers as the core way to grow the business.

No brokers = no commission = more margin for Yu. Thats the way to go.

All good here thanks Sparky, hope you are too!

BK's tone is positive and upbeat which is how a CEO should be.

As for acquisitions I think this really is their best bet for growing the business at scale, I would start off with smaller SME suppliers of which there are around 40 to go at. If they target small suppliers with 1-3000 meters this would be a good start.

As I said earlier if they can convince a bank to give them an acquisitions war chest then Yu could act as a consolidator in the marketplace.

My take:

Negatives:

- Revenue down for 2020, 2019 was £120M.
- Will reduce further in 2021 (contracted revenue for 2021 stands at £71M - unlikely this gets back to 2019 levels in 2021. (given Bristol Energy represents around £16M of annualised revenue for 2021 my earlier analysis showing that revenue was reducing fast proved to correct - contracted revenue would have been around £56M for 2021).
- Overheads at 6.3% are still too high.
- Gross margins are still too low despite the almost complete wash through of loss making contracts.
- Board forecasts breakeven at best for 2021 - someone forecast 2-3M profit on this board ;-) take them rose tinted glasses off mate!
- Deferrals of taxes, I don't see the point - no interest to be made on this.
-The number of business failures will increase due to lockdown measures.
-The revenue from BE acquisition seems to reduced quickly over 12 months.

Positives:

- The need to make a 7- 10% margin to make a good net profit (nothing new), this is possible - BES Utilities achieve this on commercial gas and power.
-Bookings growth speeding up.
- 99.5% cash collection is excellent.
-online automation.
-if Yu can approach bank for financing facility to fund acquisitions this is the way Yu should focus on growing.

Summary:

Its going to take longer than expected for a potential turnaround here.
Faster switching means customers can leave suppliers more quickly, hopefully YU can take advantage of Ofgems faster switching initiative.
Looking at another £1-1.5M loss for H2 2020.

Thats fair enough ;-)

Rather surprising they've renewed a contract with a company that went into administration.

Given Covid and football crowds not returning to stadiums anytime soon Yu could be looking at taking a double hit on this customer as many football clubs hit the wall over the next year.

Note the point was made to illustrate the consumption of a meter being more relevant than the volume of meters being supplied.

On the face of it this looks like a great deal for Yu

Deal analysis as follows:

£1.24M cash on completion.
£580k of liabilities assumed.
£100k deferred payment.
Total paid = £1.91M

Yu have also got their hands on £1M of debt, assume 95% of this is collected = £950k received from customers

So total net cash paid will be around £960k
4000 meters = a cost per meter of £240.00

Revenue in last year was £15.4M now lets assume over the next 12 months 20% drops off until the new customers get used to being served by Yu.

That will mean Yu should have an extra £12.8M of revenue.
At todays wholesale prices and based on prices Bristol sold these contracts at I'm going to be bold and predict Yu can make 15% margin on these contracts based on hedging at todays wholesale prices.

15% of £12.8M revenue = an extra £1.92M gross margin per year. (Note YU will have managed to do this without increasing overhead apart from taking on Bristols energy specialist team which could be £100k in salaries per year.)

Future forecast updated as follows:

2020 FY loss of £4M assuming this purchase is put through as cost of sales.
2021 £0.5 - 1M profit

Re the number of meters I wouldn't give to much weight to the actual number of meters, more important is the volume of kWh associated with each meter.
ie when Yu lost Bolton FC that was a massive consumption meter that could equal 500 high street shops consumption - trust that makes sense.

Well impressed with some of these responses. I think we've all had a good crack at where we think Yu is.
Lets take a breather and see where the business is at the end of the year.
Take care all.

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.

MKS can I also ask you to go back on this thread -a fellow investor was concerned what the gross margin was in H1 2020 as it wasn't in the recent update. (Why, we don't know). What we do know is they made a £2M loss.

I therefore provided an analysis of what I believed the gross margin was in H1. My calculations came out at almost 3%.

I was asked yesterday to provide a valuation on the business.

You will note that Yu expressly advised in the recent RNS that they have cash in the bank to make their industry payments. (Why announce they have money to pay their debts as if this is something to be proud of). My friend sparky believed Yu paid its RO in advance however we know this isn't correct.

Yes Yu will benefit from the Smartest deal but as per recent RNS an amount of cash is still held as collateral with trading parties.

The current industry payment due in August is for periods Apr 19 to March 20.

Note we are now in August 20 so Yu is carrying 5 months worth of cash which doesn't belong to them in relation to RO payments.

My valuation is on a cash free debt free basis as of today!!! I trust you understand that definition.

1. I said upto 20%!!!!
2. if customer has low consumption the percentage will be greater.
3. If customer has high consumption the percentage will be lower.
4. My overall point is that just because usage was impacted by C19, that doesn't mean they lost revenue on the fixed element of the invoice and therefore revenue shouldn't have decreased by 21% overall between H1 2019 and H1 2020
5. This means they business has lost more customers than it has gained.
6. YU never reports on meters or customer numbers, why??
7. Instead we have to do our own analysis to work out whats really happening. I've never heard of anyone report on monthly bookings.
8. To see how they should be reporting numbers for a utility business take a look at the annual reports/trading updates of the Utility Warehouse (TEP) Clear, precise reporting, no smoke and mirrors. You know exactly how the business is performing. (& no I'm not an investor in TEP)
9. Yu - take a leaf out of their book.

The covid impact should have only impacted Q2 revenue, not the whole of H1 revenue.

So if H1 revenue was £56M in 2019, average that out over 6 months thats approximately £9.33M per month

The board advised a 35% drop in consumption was expected - note the drop in consumption does not impact the fixed daily standing charge that Yu levies on all of its customers. What that means is that whilst consumption would be reduced, fixed daily standing charge revenue would remain constant - this equates to up to 20% of a customers invoice and sometimes more.

Therefore for three months at £9.33M = £28M
A 35% reduction in Q2 revenue would equate to a reduction of £8.4M on the previous H1 period

The actual reduction was £11M

Therefore this business is in decline.

A rough stab would look something like this for me;

If Yu called collected all of its debt from customers and had its collateral returned from its trading parties I think there would be around £6M cash left in the business plus the value of the customer book - the value of the customer book isn't easy but based on my recent analysis I think they're making around 2-3% gross profit on circa £90M of annual revenue which is around £2.7M

If Yu sold the company privately on cash free debt free basis I think they could reasonably expect to receive £2.7M (equivalent of 1 years gross profit) plus the £6M cash left in the business £8.7M would be a rough guess.

estimate based on an asset sale.

I think theres around 16.5M shares in issue so I would say the current value should be around 53p per share.

There are 50 different ways to value a company and this is just one I would use, others on this board might have a different method.

Mine also takes into account that this customer base is declining as evidenced by recent H1 results.