Member Info for ontheupupup

I'm not convinced that this trading facility should provide any reason for optimism. Smartest energy are covered 100% of their exposure by the Ofgem supplier of last resort process meaning if Yu went bust, Ofgem would appoint a new supplier and the industry ie all other energy suppliers would be liable for the costs - one of those being Smartest energy as Yu's new chief creditor. Note further that Flow Energy had a similar 5 year trading agreement with Shell and this didn't help them. If Yu produce a trading update showing higher gross margins and reducing overheads that would be real progress. I would like to see a turnaround here but looking for solid credentials in results

wholesale energy prices are falling, expect more cash margin calls

lets see what the cash position is like on the next update. Below £10m I expect.

On the flip side of my analysis, if Yu can get gross margins up to 10% there could be a profitable business here - achieving EBITDA of £3-4M.

The business expects turnover of £95M
Gross margins of 3.2% = £3.04M
Circa 9500 meters on supply
Margin per meter = £3.04M/9500 = £320 per meter per annum

Overheads circa £4.5M
Cost to serve per meter = £4.5M/9500 = £474.00 per annum per customer

Loss per customer = £320 -£474 = (£154) per customer per annum

IMO forecasted loss for the year at Yu is therefore 9500 x £154 = (£1.46M)

(Loss excludes costs of new sales operation and any new business they generate which I expect to at least increase loss by (£0.85M) to the above figure - 30 sales agents x £25k annual salary plus overhead)

The ro payment due runs from April 18 to March 19 so current cash position also includes tax they’ve collected from April 19 to Sept 19 so when next cash position is revealed remember to deduct a 5 month accrual for the payment due this time next year.

Following on from that valuation - if 16M shares in issue and business value is £3M - that equates to a share price of 20p

Does anyone have a view on the current market value of the company?
i.e if Yu put itself up for sale tomorrow, how much would it be worth...
If turnover is around £95M and gross profit is 3.2%, I'd value the business book at £3M which would be the equivalent of one years gross margin on all contracts. (Assuming all contracts have a minimum of one year left to run).

approximately 20% of last years turnover - circa £15M

Excellent point, this large industry payment is known well in advance of the due date and should be made public

RNS states they have a £22.9M accrual due to the industry but only £17m cash in the bank. hmmmm

Good morning, just wondered what the boards view on here is regarding Octopus offloading 50% of their shareholding? Surely if good news was coming they would have held for the rebound.

Or do you think the share price fell through their stop loss and was forced to sell by the funds own rules for investing?

Appreciate your thoughts.

Best.

The wholesale price was significantly more than 8p in the year you state baseload and peak could be hedged around £55 per MWh, distribution charges around £25 per MWh, ROC’s another £20 per MWh, on top of that other charges of TNUoS, Metering, FITs, Imbalance, Elecon costs mean cost at least 10-11 pence per unit. We need next set of results to see how margin has been impacted but my guess is we’re break even to loss making for at least next 12 months. If Bobby can retain and renew customers onto profitable tariffs we’ll see a turnaround but this will take time.

Also on renegotiating contracts, that depends on the source of the contract - eg. direct sales or external broker. if broker very possible that at the end of contract the customer will churn if the price is not competitive.

Thats true, it would be very useful to know if Yu hedge 100% of the energy cost element at the start of a contract. If they do they will have some protection built in as wholesale cost of power is now up 50% - google ICE UK baseload/peak data set. The concern I have is how they've managed to mis-judge the expected revenue of each contract.
Each electricity meter has an EAC - industry jargon for estimated annual consumption, Yu will hedge against this and should use this as a basis for forecasting revenue per contract. they either use very poor billing software or/and have an accountant that doesn't understand the nature of metered volumes v's estimates and the ability to forecast expected revenues. I do think this will bounce but the company needs to show a good understanding of the above principles.

The main problem Yu face for the next 24 months is the fact that they've locked customers into fixed price contracts at a negative margin due to poor tariff analysis. No good having £67M of contracted revenue when cost of supply could be in excess of £70M. All customer contracts may need to be re-priced before we see a return to profit.

Thanks Shylock, I do realise that and Kennedy owns 23% so 75% should be no problem. Utilisoft has hardly grown it recent years. It's supplier in a box service is not very marketable because of the extremely high set up and recurring costs -approx £500K. Also, how many suppliers have entered the market recently, a handful at best. The rest of the utility market is already using their software so no new revenue there which raises the question - where's the growth in revenue coming from? 3 other company's also offer supplier in a box solution - g4s and utiliteam more cost effectively than Utilisoft. Saddled with high AIM costs it's a no brainer to delist and reduce costs at the earliest opportunity. Which will leave us in a poor position. I've read this board for over a year now and respect you and kamel, as I, like you two was hoping for big things from the SMART opportunity. Best of luck chaps.

In my view Utilisoft are not going to continue as a plc, they will delist and you will get next to nothing back on your investment. Just sold my entire holding which was significant - I've seen it before and the signs are here. If you've got the minerals to hold on, good luck to ya.

The question now is who is going to be the driving force behind this business, look at the existing management, mainly pen pushers. Kennedy got us in trouble but he was also the man with the vision. The sales director at BGL hasn't closed a decent deal in at least a year, theres been a few small software deals done through utilisoft but nothing major. Big 6 are now starting roll out of smart meters, BGL nowhere to be seen. This business will be sold off to a bigger utilities intermediary such as G4S or Logica. I think the legacy of this company will be that it had a massive influence on smart metering but never really capitalised on the opportunity. Shame because I'm into this share quite big, need 15p to break even so holding on until buyer arrives.

The only profitable part of the business is Utilisoft, Bglobal metering struggling to compete with players such as G4S that are winning all the big 6 smart metering contracts. Suggest best thing for BGL is to sell metering business to a company such as G4S and focus on software business. Former director wants PK out and former directed is a heavy weight in the industry. The new business ventures such as newtech trainingare a waste of time and money and will not generate any significant revenue.