Yü Group PLC
(the "Group" or "Company")
Trading Statement and Accounting Review
Yü Group PLC, the independent supplier of gas and electricity to the UK corporate sector, announces that after an internal review of the performance of the Group, the Board have identified several areas of significant concern relating to the:
· Recognition of historic accrued income;
· Impairment of Trade Debtors; and
· Gross margins being achieved against prior expectations.
The Board estimates the combined adjustments will lead to around a £10 million reduction in profitability when compared with current market expectations, with the Company reporting a loss for the current financial year.
The Group has significant cash reserves (£11.5 million at 30 September 2018) and has no debt outstanding.
Accrued Income
In line with normal market practices, the Group routinely invoices revenue in the first working days following the month for which the consumption of energy relates, and accrues such revenue in the balance sheet within the Accounts Receivable balance.
The Accrued Income balance in the Company's Annual Accounts is income accrued which is not invoiced shortly following the consumption month, being "Aged Accrued Income". Such balances totalled £4.2 million in the Annual Accounts for the year ended 31 December 2017 and £4.3 million in the Interim Results as at 30 June 2018.
The Group has reviewed the level of the Aged Accrued Income for each customer account, and compared it with the amounts that have been or can be subsequently invoiced. The review has highlighted that a significant amount of the Aged Accrued Income is not recoverable and requires adjustment, thereby reducing profitability in the current year.
Trade Debtor Recoverability
The Board has also reviewed the level of Trade Debtors held. The Board have concluded that the level of non-payment being experienced is significantly above that which has been previously provided for. The requirement for an increase in the bad debt provision held is in addition to any provision required due to the first adoption of IFRS 9 (as disclosed in the Company's interim results to 30 June 2018).
Gross Margin
The Company has re-evaluated business performance as a consequence of the accrued income adjustment noted above. In addition, the Board has taken into account market conditions which continue to compress the gross margins available to energy suppliers.
This re-evaluation has led the Directors to forecast a significant reduction to gross margin in 2018 and beyond.
Summary
As a result of the above, the Board are extremely disappointed to announce this substantial reduction in profitability. The Board have committed to commissioning a forensic review of its systems to fully identify the underlying issues and implement all necessary further measures.
The Board are confident that the Group will achieve profitability for the year ending 31 December 2019, albeit at a lower margin than previous expectations, and is in the process of preparing detailed budgets.
A further announcement will be made as appropriate.
Bobby Kalar, Chief Executive Officer, commented:
"As founder and majority shareholder, nobody is more disappointed in this development than me. Our booked revenue from new sales remains strong and contracted revenue for 2019 is already £67 million as at the end of September 2018. We have improved internal controls around working capital management and the Board is absolutely focused on restoring the profitability of the business."
For further information, please contact:
Yü Group PLC Bobby Kalar Paul Rawson |
Via Alma PR |
Shore Capital Edward Mansfield James Thomas |
+44 (0) 20 7408 4090 |
Alma PR Josh Royston John Coles Robyn Fisher |
+44 (0) 7780 901 979 |
Notes to Editors
Information on the Group
Yü Group PLC, trading as Yü Energy, is an independent supplier of gas and electricity focused on servicing the corporate sector throughout the UK. It has no involvement in the domestic retail market. The Group was listed on the AIM market of the London Stock Exchange following a successful IPO in March 2016.
