YU Group beats FY20 expectations and upgrades outlook for FY21

Vox Markets
Vox Newswire
10:25, 26th January 2021

Yu Group (YU. FOLLOW) FY20 trading update reveals the Company has outpoured market expectation at both the Revenue and EBITDA levels and upgrade expectations for FY21e.

Financial Highlights

Revenue for the period was significantly ahead of market expectation at over £100m.

The company tendered for a record £2.5bn gas and power businesses during 2020 with the group establishing their first digital sales channel during the period to complement their existing platform for rapid growth.

It’s worth specifically noting, its first digital channel which was launched during 1H20, immediately exceeded the company’s expectations with £21.5 million of annualised revenue booked in 2H20, which is quite remarkable in the sector.

Overall, volume demand during the second half was approximately 94% of pre covered levels indicating the company now has a well-diversified portfolio clients across multiple sectors of the economy.

Importantly, all legacy contracts have now been we removed from the sales ledger and replaced with high-quality clients on high-margin contracts.

Importantly for shareholders, the strong revenue performance was successfully translated into a strong EBITDA performance for 2H20, despite the obvious impact and operational disruption caused by the pandemic.

The Company also recorded a record Bill to Cash ratio of 99% resulting in a strong cash position of £11.7m, an increase of £9.3m during 2020 (FY19: £2.4m) as at 31 December 2020.

Bobby Kalar, Group Chief Executive Officer, said: "I'm pleased to report an extremely strong trading performance, accelerating throughout H2 2020, that has resulted in the Group expecting to exceed FY 2020 revenue, cash and profit market expectations. Despite the inevitable challenge of the pandemic, we've successfully and seamlessly adjusted our business to manage the impact on our customers without detriment to our growth strategy and operational performance.”

Operational Highlights

Meter point numbers for the Company are now approaching 18,000 (2019: 8,724), post the successful onboarding of two acquisitions during H2 2020, provides investors with some indication of the Company’s ability to scale profitably.

From an operational point of view, the Company successfully migrated 100% office based staff to 100% remote working during the period, with minimal disruption to customer service and operational continuity, which also indicates operational resilience and a potential to further reduce overheads going forward.

Customer service is a significant differentiator for the industry and Yu Group consistently ranked amongst the best during the period.

Bobby Added, “Acquiring and successfully migrating two B2B customer books during the first lockdown was another first for the Group. Both acquisitions were immediately cash generative and profitable. We expect there to be further consolidation in the market and are ready to take advantage of these value creating opportunities. I'm very pleased with the Group's operational, strategic and financial development this year. Our strengthened Board has settled in well, helping to create a more joined up collaborative organisation with strong accountability and encouragement to pursue a disciplined growth agenda. Our relationship with Smartest Energy remains strong and we continue to explore mutually beneficial opportunities.”

FY21 Outlook

Record sales during 2H20 are expected to continue into the current financial trading period with approximately £93m already contracted at higher margin to that in FY20.

With the Company’s stated strategy to maintain a 70% customer retention target, the launch of additional digital growth channels in 2021 should enable the Company to its share of the available addressable £35billion market.

The contracted revenue, combined with continued strong organic growth from new bookings, are expected to significantly increase analyst FY21e expectations post publication of the FY20 results.

In closing, Bobby said; “The Board's expectations for full year ending 31 December 2021 are now ahead of previous levels. I'm encouraged by the strong finish to the year. In addition, we are seeing the strong sales momentum continuing into January 2021 and we are confident it will continue. This reinforces our confidence that British businesses continue to find new ways of running their successful operations even in the current climate. We look forward to launching more new sales channels in 2021. I'm pleased that our meter point count as of 31 December 2020 was approaching 18,000, an increase of over 100% since the beginning of 2020. The majority of the meter point growth was booked in H2 as the sales channels gathered momentum, and we will see this positively impact revenue in 2021 and beyond.  

“The onboarding of our new nominated advisor, broker and financial PR advisors has brought a renewed sense of ambition and focus in helping the Group accelerate institutional investor access. It also helps to showcase our story and progress on platforms like AJ Bell and Vox Markets. This year we will see more investor engagement, and our 'upwards and outwards' approach will see us take our growth story to a wider audience.

Investors will take significant confidence from the strong organic growth and margin expansion achieved in the period with positive contributions from the Group's customer book acquisitions and the actions taken to reduce the impact of Covid-19 during the period. The confident high-growth outlook for FY21e is well underpinned by the strong balance sheet, with £11.7m of cash held at 31 December 2020 and continued momentum from the Total Average Monthly Bookings achieved in 2H20 of £10.3m. Management have stated this strong momentum is expected to continue into FY21 as the Group continues to increase its share of the available £35bn addressable market, and on this performance, who would question them.

YU. price chart

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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