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As the AGM notice was not tagged on to the end of the Annual Report, a separate letter and formal notice has been published - https://www.yugroupplc.com/wp-content/uploads/2024/04/20.03.24_YUG_AR23_AGM.pdf

My attention was caught by -- change of venue from Teneo's offices (PR agents) to Osborne Clarke (newly appointed corporate financial solicitors, energy is one of their specialities).

The share buy back resolution, allows for up to 10% of the shares to be bought on the market, within quite a generous price mechanism (over the normal 5% premium of the average closing price in the previous 5 trading days).

The capital reduction is timetabled to be completed by 03.07.24 - allows for any special dividend to be paid from this date. Pointless speculating, but it means one could be declared at any time the directors see fit, they don't have to wait until the interims and the normal interim dividend date (December). I think they will pay one at some point in the year, but when ... ... ... ??? Alternatively, allows them to start a buy back, again at their discretion.

Not sure that Miton will be increasing now. Last time I looked, Yu was at about 8.5% of both the micro / small cap investment trust and the unit trust. They are capped at 10% max for one stock. SP now up by 50%. They will be forced to reduce in these two funds. They may of course be able to trade stock into their diverse income trust, which also holds, and is a much larger fund, so the 10% threshold is no where in sight. Clearly IIs now buying, may be knocking on Miton's door to release some stock - at an acceptable price of course!

Lucain - Ipc will no doubt reply himself.

But, since when are companies valued on their accounting assets? Eps for 2023 was 199p (adj) and 182p (diluted). Yu is still on a PER of less than 10. Most in the sector are on around 15 times, including TEP (adj basis). Brokers have noted the Opus takeover by Drax at 10 times EBITDA. Yu group EBITDA for 2023 was 42.6m. 10 times is 426m, plus cash of £60m (ie the 80m less accrued ROC payments), so say a rounded up £500m. Equates to just under £30 per share, oddly enough is also 15 times PER! Current price action here is all pointing to a significant re-rate towards a 'normal' market valuation. Though as the IC article shows, the market still perceives some risk from historic issues. At some point the SP will consolidate, but where ... ... ... ??????

Extract

"Part of the reason there is less competition in the SME space, however – and why some suppliers are actively abandoning it – is because it is risky. The likelihood of customers paying their bills is dependent on the economic backdrop, and balance sheets are laden with money earned but not yet received. Yu Group’s accrued income, net of provisions made for bad debt, jumped by 64 per cent to £52.3mn in 2023.

An accounting scandal in 2018, relating to a massive miscalculation of Yu Group’s accrued income, also casts a long shadow."

Conclusion

"Small utility players are clearly risky. In the case of Yu Group, it's also important to remember that the market rarely reacts well when darling stocks unexpectedly disappoint. However, their compelling customer propositions should not be ignored, and it will be fascinating to see how they fare as the energy market finds its new normal."

The article does not give a recommendation, it is reporting only. No mention is made on valuation or even the low PER! The writer of the article offers nothing new and has simply read the broker notes, and quotes from them. The other stock covered is TEP, and likewise bad debt, which has doubled at TEP, is highlighted as an increasing risk. IC - "As with Yu Group, there are also concerns that unusual market conditions have artificially boosted growth."

Last year's no AGM update was a disaster. They clearly promised an update on AGM day in the final results and AR - end of Chairman's report. This year no specific reference to the AGM is given - hence, do not assume there will be a TU at the AGM! They may leave it until end of May, as last year, or drop a random one any time!

Also, the AR is out earlier this year, with the final results RNS. There is no notice of the AGM at the end of AR, like last year, when the AR was published with the AGM notice RNS. Clearly a shift their reporting style & timetable.

I would add that they are still contradicting themselves between their text and the numbers used in the DCF. They clearly indicate £1bn plus revenue will come with 100,000 meters and state margins in the range 6% - 8% (EBITDA). Yet in the DCF margins drop to 3% and revenue growth is much slower. Their TP / valuation would be far, far higher (double nearly) if they used their own numbers in the calculation!

They refer to Opus and say it was 9.5 times EV at takeout, and Yu should be higher (because of the growth and digital platform) - which is above their TP!

A fuller list of shareholders is given (over 0.5% holdings). Basically, as the IR page, plus a long list of investment platforms, nominee holdings. No IIs in sight, and no liquidity for them to buy in. The list is about 93% of the total.

Investor Presentations - I have received clarification from Yu IR. The analyst presentation will not be published on the website. They were in fact only referring to the slide deck (which as you all know is up on the site).

Having pressed them on Investor Meet, they say no date has been set, but were vague about timing. They expect one will be held at some point "over the coming months". Given how many companies use IM and very often on the day of results release, I find this disappointing (putting it mildly). Good Energy for example is doing IM on results day, on the 26th.

See page 42 of the AR about the importance of shareholder engagement!

Investors seek a clear grasp of the Group’s financial health ... ... etc

Includes -

* Online presentations at key times of the year (AGM/Annual Results), alongside conferences and live presentations run by external investor platforms (I take this to mean Investor Meet or similar)

Quick calculation is revenue of £690m, EBITDA of £41.4m, with tax at 25% and 16.8m shares is eps at 246p

Correction - EBITDA is £55.2m at 8%. PAT is £41.4m and eps 246p on these figures.

Sheltie - only SP Angel (on Yu's IR website) and Liberum (on Research Tree).

Both have very similar forecasts and price targets. Though for now, they are taking guidance from the company. Company has given guidance for a 50% increase in revenue and EBITDA margin close to 8%. Quick calculation is revenue of £690m, EBITDA of £41.4m, with tax at 25% and 16.8m shares is eps at 246p. I think we will be somewhere at eps of 300p (and some on here are suggesting higher).

It doesn't help that broker target prices still have us on PERs under 10!

Thanks for the de-brief, Gacky.

Churn is a shocker! Crafty TPIs, explains why they (Yu) are wanting to develop the self marketing side, with less reliance on TPIs. But shows how attractive Yu are to NEW customers. If only they could keep them. Also, confirms what I've said before about acquisitions - they are risky, and there's no guarantee customers will stay, as with the Solrs.

Interesting point re Shell wanting a stake - it's too lowly priced for BK to accept. But may come in the future with a sensible valuation.

Share premium is needed - cash balances are way over distributable reserves. Legal process expected to complete in Q3, allowing for a special dividend perhaps in Q4, with the interim payment (ie December!)

I was sceptical about a share buyback before. But they now mention it - it won't take much of one to move up the price, so they may do this to get the SP up, if the market doesn't do it on its own. The company will not have any qualms about bidding up the price (within the limits allowed), whereas many investors do. £1m to £2m, 1% of the capital would be enough imo to make a real difference.

I've said many times, the only way in for IIs is a placing from BK - won't happen until the price is right. It's looking like the company is positioning itself in this direction.

Thanks again Gacky.

Https://www.yugroupplc.com/wp-content/uploads/2024/03/Yu-Group-PLC-2023-FY-Results-Presentation.pdf

Presentation slides now up.

Right - can't say much as still going through it all. Annual report up on investor relations site, presentation will be uploaded soon.

Standout points so far noted

Adjusted eps, not diluted, of 199p - call it two quid!

ROC monies were accrued at £21.8m at balance sheet date (£11.3m 2022).

EBITDA margin was 7% in H1 and 10.9% in H2. Yes, 10.9% and these strong margins are expected to continue, not fall as per past broker notes! (They may fall back a tad, imo, but I reckon will still be 9% plus).

Capital allocation is being set at approx. 1/3 payout going forwards, with the proviso that the balance is for acquisitions, but if no acquisitions made, additional distributions of surplus will be made (ie special dividends). Cancelling the share premium account and adding this to distributable reserves is part of this process in giving them full flexibility over the use of excess cash. There is a hint in the Annual Report that a special dividend will be paid at some time in 2024 (see page 32). As Yu is now much bigger, there are very few targets left, which are do-able ie they're too big, or basically not for sale.

Next target is £1bn revenue, but they show a new model based on £50m a month bookings (was £20m) with revenue increasing to £3bn - is this a hint of a medium term target?

IR have told me that this morning's analyst presentation may be made available on their website in the following days. A bit vague - could mean just the slides, or may mean video playback?

My caution over the speculated £20m special dividend was justified, however, given the above points, from the company itself, has prevented a drop in the share price. More importantly, previous highs from 2018 are now cleared, so freeing up the chart to hopefully re-rate this some what. In time I think the dividend policy will be increased (a bigger % payout) as it becomes less likely acquisitions will be made.

Anyways - what isn't paid out this time around is added to the pot as possible payout next time in 6 months!

I'm apprehensive here. Tip sheets are out, volume and interest in the share is very low. Results will be in line with brokers etc etc. And the shares are priced as they are. I have no doubts the dividend will be significantly up on the expected 17p total for the year, but very nervous, as any disappointment (on the £20m) will drop the price. There are many shares with high yields (including Premier Miton at 10%), so a jump up in price is far from guaranteed. They usually say little about current trading at this point in the year, and currently brokers have falling margins and flattish profits forecast. The market in its wisdom has it all 'priced' in!

My own view is that eps in the region of 300p is on the cards for 2024 and 2024 dividends will exceed £1 per share. I know where I'd value this, but I am not the market!

I think a lot of the questions and discussion will be around the Shell deal. Is it on better terms, so they pay less, allowing for a bigger gross margin / or pass the lower cost on to customers to increase market share? What are the credit payment terms, have they got an extra month working capital benefit? Does it allow them to go for bigger customers / blue chips to really go for growth? About acquisitions, will they consider buying a whole supplier rather than a book, ie the systems, staff and office premises, how would they integrate this?

Any way, keep an eye out for notice of IM presentation which will allow retail investors to pitch questions.

Share split - do you have the stomach for this? You have in the order of 150,000 shares?

As the traders bounce this around by £3 - £4 in a week, isn't it hard enough seeing your holding lose / gain half a million pounds on their games? Let's say we get a decent dividend and SP lifts to £20, and a 4 for 1 split, so the SP adjusts to £5. The traders will still be trading for the £2 plus movements - and your emotions will be going ape as you lose a couple of million on the drops!

Consider LSEG, GAW, AZN, CRDA, RKT, DGE, FOUR, BVXP, AHT, NXT, SPX, JDG. The last one, Judges Scientific has only 7m shares in issue and valued at just over £700m. No share splits, happy on AIM. And I suspect very happy long, long term shareholders.

https://www.investments.halifax.co.uk/chart/advanced-chart/?csid=51454&ticker=JDG

A lot of nervousness here. Very little volume. Results should be in line with brokers, so few traders buying in expecting a beat and not forgetting that the tip sheets are out / taken profits. It all hangs on the dividend policy - needs to be a high enough payout to give yield support to the price. Also, if the hinted special dividend falls short, we can expect a lead-balloon drop on results - made worse by increasing tightness in liquidity - which, as we know works both ways, the rise this morning for example on very low volume.

Last year results were out as the SVB banking crisis broke. The support is ending (Bank Term Funding Program) for the losses on Treasuries and now the crisis in commercial real estate is breaking - looks like they will let these banks fail, but bail out depositors. Not good news for equities in general.

https://youtu.be/XP4Ri8QcB10?si=55xIbi5Akwo5At07&t=142

Sparks, I think you have access to Liberum's notes?

Their TP is barely 10 PER. This is not a growth rating, in fact indicates profits will be flat at best, if not falling. Hardly something to buy into as a long term investment. Likewise, looking at the DCF calculation, they do actually show profits and margins to fall significantly, EBITDA to drop back to £30.5m on a 3.2% margin. And they have this level mapped out to 2032. Unfortunately, in the small and micro cap space, IIs rely on the company's brokers - they don't do their own research into these companies, there's simply far too many of them. And the brokers are by nature, are very conservative in forecasts. I can't see this changing.

All the points you list are pretty much known, therefore, in the price. The only unknown is the capital / dividend policy going forwards. If this is set out clearly, including significant distributions, then the sp should lift to reflect a reasonable yield. The Shell deal gives them the freedom now to do this. Looking back to the IM questions on dividends, and the collateral question (see the unedited question on the Q&A tab on IM), they were clearly constrained in what they could say and do, by these issues. Not any more.

With decent dividends, a dividend yield that is sustainable, more IIs should begin to take notice. Once they are aware of the stock, they will be more inclined to do their own research / calculations. If they determine the company is a growth stock, then the PER may then rise. Eventually leading to II demand over the shares in the market, and they will ask BK to place some of his.

This is how I see the roadmap out of the low valuations. As each set of results shows increasing customers and profits, coupled with increased dividends, this should play out. Cash and dividends are king here. We need that £1.20 dividend!

Liberum are certainly chancing their neck with the dividend comment. Looks very affordable in terms of the cash balance, but looks high in terms of the percentage of eps for the year, and a big jump from last year's 10%. It's set an expectation, which if not met will tank the SP on results day. If true, it's one hell of a good dividend yield this price.

Hi Ipc - yes, should now become a decent income stock, and a dividend yield should support a better share price. If it's made clear the 2023 dividend will be at least paid again in 2024, then at a 6% yield hopefully puts at £20 (120p dividend). The SP won't react until the final results and the actual dividend policy is released. They will need to be more explicit - ie, state a minimum payout ratio or similar going forwards, which will then allow IIs to buy in confidence, knowing where they stand.