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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Yu Group Plc | LSE:YU. | London | Ordinary Share | GB00BYQDPD80 | ORD GBP0.005 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1,875.00 | 1,860.00 | 1,890.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Combination Utilities, Nec | 278.59M | 4.77M | 0.2923 | 64.15 | 305.93M |
From Apr 2019 to Apr 2024
TIDMYU.
RNS Number : 0705R
Yu Group PLC
19 September 2017
19 September 2017
Yü Group PLC
(the "Group")
Results for the six months to 30 June 2017
Yü Group PLC, the independent supplier of gas and electricity to the UK corporate sector, announces its half year results for the six month period to 30 June 2017.
Financial Highlights:
Hot Features
Premium
Six months Year
to 30 June to 31
December
2017 2016 2016
-------- -------- ----------
GBP'000 GBP'000 GBP'000
Revenue 20,758 5,089 16,264
Gross profit 3,668 1,069 3,443
Gross margin 17.7% 21.0% 21.2%
Operating profit/(loss)
before tax:
Adjusted(*) 1,165 (285) 205
Statutory 694 (1,329) (1,518)
Operating cash
inflow/(outflow) 1,082 (216) (870)
Earnings/(loss)
per share:
Adjusted(*) 6.6p (2.0p) 1.0p
Statutory 3.8p (9.9p) (10.2p)
Dividend per share 1.00p 0.75p 2.25p
Cash 5,885 5,959 5,197
========================== ======== ======== ==========
-- Revenue increased more than 400 per cent. compared to H1 2016 and 85 per cent. compared to H2 2016
-- Increase in contracted future revenue adding to the Group's high level of visibility:
o contracted and recognised revenue for the year to 31 December 2017 currently stands at GBP39.0 million, ahead of expectations
o revenues for the year to 31 December 2018 expected to be substantially ahead of current expectations with contracted revenue already at GBP23.2 million
*Adjusted results are calculated before IPO related costs in 2016 and share based payments
Operational Highlights:
-- Increased focus on larger corporates and broker sales channel delivering rapid growth, albeit with lower gross margin in line with management expectations
-- Commissions paid to energy brokers now identified as a separate cost due to growth in larger corporate customers
-- Direct sales to SME customers growing rapidly, in line with increased staff numbers -- Customer renewal rate continues to be above 80 per cent
-- Recruited senior management team to oversee sales, marketing, HR, operations, IT and finance to ensure balance between growth and cost control is maintained as the Group expands
Bobby Kalar, Chief Executive Officer, said:
"I am delighted to report that investment in our infrastructure to scale the business has resulted in a significant increase in expected revenues for the current year and beyond. We will continue to build on our investment to strengthen the business further for future growth.
"The rapid increase in revenue means that we expect profits this year and next year to be ahead of expectations. This has been achieved in conjunction with the increased investment in staff and a shift in revenue mix towards larger corporate customers and the broker sales channel. Maintaining the culture and vision for the business has been a priority, and I am pleased that our steadfast approach is proving successful.
"We continue to focus upon cash generation with Group cash balances rising in the first six months of the year by GBP688,000 to GBP5.9 million, and operating cash inflow of GBP1.1 million. This supports our progressive dividend policy and thus we are delighted to be able to announce an enhanced interim dividend of 1.00p per share, an increase of 33 per cent.
"We have entered the second half with a robust financial position, high levels of visibility over future revenue, a strong pipeline and a large market opportunity, which leaves the Board confident in the future growth prospects for the Group."
For further information, please contact:
Yü Group PLC Bobby Kalar Nick Parker +44 (0) 115 975 8258 Shore Capital Bidhi Bhoma Edward Mansfield Anita Ghanekar +44 (0) 20 7408 4090 Alma PR John Coles Hilary Buchanan Robyn Fisher +44 (0) 20 8004 4218
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.
Interim Review
The Board of Yü Group PLC announces the results for the six months ended 30 June 2017.
Operational Review
The Board is delighted to report that the business continues to grow ahead of expectations as the move towards larger corporates has a positive impact on revenue growth. This development was made possible by the funds raised at the IPO in March 2016 which are being used as collateral for the Group's hedging policy with letters of credit lodged with counterparties in the wholesale energy market.
The growth has also come about due to the on-going investment in sales and support staff which has generated a rapid cash pay back in terms of increased sales. Employee numbers have risen from 67 at this time last year to 102 today. Further recruitment is expected in the second half of the year as we continue to take advantage of the market opportunity. Furthermore, we have been successful in recruiting a senior management team to help with the challenges that rapid growth brings for a company of our size. The six individuals recruited have wide experience of sales, marketing, finance, human resources, IT and energy industry operations in larger corporates that reflect best practice. This investment will ensure that we maintain high standards in terms of customer service as well as adhering to stringent industry regulations.
Annualised bookings each month have risen from an average of GBP3.0 million in the first six months of last year to GBP3.75 million per month in the first six months of this year. It is expected that this average monthly bookings number will increase significantly in the second half of the year, to approximately GBP5.0 million per month, as the enlarged sales team has an increased impact.
The total of recognised revenue plus contracted revenue for 2017 indicates that the revenues for the current year are likely to be in excess of GBP39 million. This compares with GBP16.2 million in 2016. Furthermore, contracted revenue for 2018 as at the beginning of September amounted to GBP23.2 million, an increase of GBP3 million since the trading update on 17 July 2017. When combined with the increase in annualised bookings, this provides considerable comfort that the rapid growth will continue. The Board anticipates that ultimately the revenues for 2018 are likely to be substantially ahead of current expectations and profitability will also be ahead of current market expectations.
Renewal rates for direct sales have remained in excess of 80 per cent. Expectations for future renewal rates remaining at this level are based on the prudent assumption that business from brokers will not be renewed. We are carefully monitoring the level at which the Group re-wins broker and larger corporate business.
The Group continues to adhere to its stated policy in terms of its commodity purchasing and hedging with letters of credit being put in place, supported by the Group's cash reserves, such that the forward sales of the Group are, as far as possible, backed by forward purchases in the gas and electricity markets. Although we continue to benefit from improved credit terms, in the unlikely event that there is a sustained and unusual level of commodity market volatility, the collateral demands on the Group would increase. In the event that this occurred, in order to maintain a risk averse approach, the Group would slow the rate of growth accordingly. This would have little impact on the current expectations for 2017 and 2018, but could potentially slow the anticipated rate of growth in 2019.
Financial Review
As previously indicated, in the first six months of the year there has been a four-fold increase in revenues to GBP20.8 million (H1 2016: GBP5.1 million), as a result of the enhanced sales teams that have been put in place.
As anticipated, the Group's margin has declined to 17.7 per cent in the first half of the year when compared with the previous reporting period (year to December 2016: 21.2 per cent), partly because margins were enhanced to some extent in the prior year due to the Group not being as highly hedged prior to the IPO (at a time when wholesale prices were falling) and also due to the shift in revenue mix towards larger corporates.
The increase in sales to the larger corporate sector has meant that there has been an increase in the commissions paid to energy brokers who are often employed by these larger customers. In consequence, broker commissions have now been separately identified as a cost to the business in order to provide clarity. Total broker commissions paid in the first six months of the year were GBP554,000 which compares to GBP126,000 in the same period last year. Overall, it is anticipated that going forward broker commissions will represent circa 2.5 per cent of total sales.
Administration expenses have been carefully controlled with investment being made into the sales and support functions so that the Group can build its customer base and deliver the service that is so important for continuing sales growth and customer retention. Customer renewal rates for direct sales were maintained above 80 per cent. reflecting our focus upon customer service and building upon the subscription model which helps to underpin the Board's confidence in future growth. The Group is also continuing to focus on developing a blue chip client base.
The adjusted operating profit for the period under review was GBP1,165,000 (2016 trading loss: GBP285,000). Adjusted earnings per share were 6.6 pence (H1 2016 loss per share: 2.0 pence before non-recurring costs relating to the IPO).
Net cash balances as at 30 June 2017 had risen to GBP5.9 million (31 December 2016: GBP5.2 million), despite investing heavily in more sales and support staff. Of this balance GBP3.0 million (31 December 2016: GBP3.4 million) was utilised as collateral for letters of credit issued to counter-parties in regard to the stated hedging policy. In the second half of the year the level of cash generation will be slightly impacted by various annual industry payments that are due during the autumn months, but cash balances are still anticipated to increase.
Dividend
The Board's strategy is to focus on the growth of the Group's business. However, due to the cash generating capabilities of the business the Board intends to continue the Group's progressive dividend policy and proposes to pay an interim dividend of 1.00p per share (2016: 0.75p per share). The ex-dividend date is 23 November 2017 with a record date of 24 November 2017. The dividend will be paid to shareholders on 9 January 2018.
Outlook
With rapid sales growth being delivered each month, margins and costs being carefully monitored and kept under control and a subscription model that generates cash, the Board looks forward to the future with confidence. It is now anticipated that revenue for 2017 will be significantly ahead of market expectations and substantially ahead of expectations for 2018. Profitability will also be ahead of anticipated performance for both financial years, underpinned by a strong and growing contracted revenue base.
Bobby Kalar Nick Parker CEO CFO 19 September 2017 19 September 2017
Condensed consolidated statement of profit and loss and other comprehensive income for the six months ended 30 June 2017
6 Months ended 30 June 2017 6 Months ended 30 June 2016 12 Months ended 31 December 2016
(Unaudited) (Unaudited) (Audited)
Exceptional Exceptional Exceptional
Adjusted Items Total Adjusted items Total Adjusted Items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 20,758 - 20,758 5,089 - 5,089 16,264 - 16,264
Cost of Sales (17,090) - (17,090) (4,020) - (4,020) (12,821) - (12,821)
------------------ ------------------------ ------------ -------------- --------- ------------ -------- --------- ------------ ---------------
Gross Profit 3,668 - 3,668 1,069 - 1,069 3,443 - 3,443
------------------ ------------------------ ------------ -------------- --------- ------------ -------- --------- ------------ ---------------
Operating costs
before
exceptionals and
IFRS 2 (2,503) - (2,503) (1,354) - (1,354) (3,238) - (3,238)
Operating costs -
exceptional IPO
costs - - - - (379) (379) - (379) (379)
Operating costs -
IFRS 2 share
option charge - (471) (471) - (665) (665) - (1,344) (1,344)
------------------ ------------------------ ------------ -------------- --------- ------------ -------- --------- ------------ ---------------
Total operating
costs (2,503) (471) (2,974) (1,354) (1,044) (2,398) (3,238) (1,723) (4,961)
Profit/(Loss)
from operations 1,165 (471) 694 (285) (1,044) (1,329) 205 (1,723) (1,518)
------------------ ------------------------ ------------ -------------- --------- ------------ -------- --------- ------------ ---------------
Finance Income 6 - 6 - - - 19 - 19
Finance Costs (25) - (25) - - - (29) - (29)
Profit/(Loss)
before tax 1,146 (471) 675 (285) (1,044) (1,329) 195 (1,723) (1,528)
------------------ ------------------------ ------------ -------------- --------- ------------ -------- --------- ------------ ---------------
Taxation (223) 80 (143) 113 - 113 (59) 228 169
Profit/(Loss) for
the Year 923 (391) 532 (172) (1,044) (1,216) 136 (1,495) (1,359)
------------------ ------------------------ ------------ -------------- --------- ------------ -------- --------- ------------ ---------------
Other
comprehensive
income - - - - - - - - -
Total
comprehensive
income/(expense)
for the year 923 (391) 532 (172) (1,044) (1,216) 136 (1,495) (1,359)
------------------ ------------------------ ------------ -------------- --------- ------------ -------- --------- ------------ ---------------
Earnings/(Loss)
per share
Basic (Pence) 3.8p (9.9p) (10.2p)
------------------ ------------------------ ------------ -------------- --------- ------------ -------- --------- ------------ ---------------
Diluted (Pence) 3.5p (9.9p) (10.2p)
------------------ ------------------------ ------------ -------------- --------- ------------ -------- --------- ------------ ---------------
Condensed consolidated balance sheet
As at 30 June 2017
30 June 30 June 31 December
2017 2016 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
ASSETS
Non-current
assets
Property plant
and equipment 408 182 209
Intangible
assets 57 58 57
Deferred
tax 547 317 467
------------ ------------ ------------
1,012 557 733
Current
assets
Trade and other
receivables 6,465 1,876 4,891
Cash and cash
equivalents 5,885 5,959 5,197
------------ ------------ ------------
12,350 7,835 10,088
Total assets 13,362 8,392 10,821
------------ ------------ ------------
LIABILITIES
Current
liabilities
Trade and other
payables (6,982) (3,499) (5,340)
Non-current
liabilities (121) - (72)
Total liabilities (7,103) (3,499) (5,412)
------------ ------------ ------------
Net assets 6,259 4,893 5,409
------------ ------------ ------------
Equity
Share capital 70 70 70
Share premium - - -
Merger
reserve (50) (50) (50)
Retained
earnings 6,239 4,873 5,389
------------ ------------ ------------
6,259 4,893 5,409
------------ ------------ ------------
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2017
Share Capital Share Premium Merger Reserve Retained Earnings TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2017 70 - (50) 5,389 5,409
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Total comprehensive income for
the period
Profit for the period - - - 532 532
Other comprehensive income - - - - -
-------------------------------- ------------------ -------------- --------------- ------------------ --------
- - - 532 532
-------------------------------- ------------------ -------------- --------------- ------------------ --------
Transactions with owners of the
company
Contributions and distributions
Equity settled share based
payments - - - 423 423
Deferred tax on share based
payments - - - - -
Dividends paid in the period - - - (105) (105)
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Total transactions with owners - - - 318 318
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Balance at 30 June 2017 70 - (50) 6,239 6,259
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Balance at 1 January 2016 50 - (50) (986) (986)
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Total Comprehensive Income for
the period
Loss for the period - - - (1,216) (1,216)
Other comprehensive income - - - - -
-------------------------------- ------------------ -------------- --------------- ------------------ --------
- - - (1,216) (1,216)
-------------------------------- ------------------ -------------- --------------- ------------------ --------
Transactions with owners of the
company
Contributions and distributions
Equity settled share based
payments - - - 665 665
Deferred tax on share based
payments - - - - -
Proceeds from IPO share issue 20 7,480 - - 7,500
Share issue costs - (1,070) - - (1,070)
Capital restructuring - (6,410) - 6,410 -
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Total transactions with owners 20 - - 7,075 7,095
Balance at 30 June 2016 70 - (50) 4,873 4,893
--------------------------------- ------------------ -------------- --------------- ------------------ --------
Condensed consolidated statement of cash flows
For the six months ended 30 June 2017
6 months ended 6 months ended 12 months ended
30 June 2017 30 June 2016 31 December 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit/(loss) for the financial period 532 (1,216) (1,359)
Adjustments for:
Depreciation of property plant and equipment 95 48 108
Amortisation of intangible assets 1 1 2
Finance income (6) - (19)
Finance costs 25 - 29
Taxation 143 (113) (169)
Share based payment charge 423 665 1,344
Increase in trade and other receivables (1,574) (813) (3,828)
Increase in trade and other creditors 1,443 1,212 3,022
Net cash from operating activities 1,082 (216) (870)
--------------- --------------- -----------------
Cash flows from investing activities
Purchase of property plant and equipment (295) (75) (162)
Interest received 6 - 19
Net cash from investing activities (289) (75) (143)
--------------- --------------- -----------------
Cash flows from financing activities
Net proceeds from issue of new shares - 6,430 6,413
Equity dividends paid (105) - -
Repayment of borrowings - (227) (250)
Net cash from financing activities (105) 6,203 6,163
--------------- --------------- -----------------
Net increase in cash and cash equivalents 688 5,912 5,150
Cash and cash equivalents at the start of the
period 5,197 47 47
---------------
Cash and cash equivalents at the end of the
period 5,885 5,959 5,197
=============== =============== =================
Notes to the condensed consolidated half yearly financial statements
1. General information
Reporting entity
Yü Group PLC (the "Company") is a public limited company incorporated and domiciled in the United Kingdom. The Company's ordinary shares are traded on AIM. These condensed consolidated half yearly financial statements ("Half yearly financial statements") as at and for the six months ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as the "Group"). The Group is primarily involved in the supply of energy to SMEs and larger corporates in the UK.
Basis of preparation
The condensed consolidated interim financial information for the six months ended 30 June 2017 has been prepared in accordance with the presentation, recognition and measurement requirements of applicable International Financial Reporting Standards adopted by the European Union ('IFRS') except that the Group has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK Companies listed on AIM, in the preparation of the condensed consolidated interim financial information.
The unaudited condensed consolidated interim financial report for the six months ended 30 June 2017 does not include all of the information required for full annual financial statements, and does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. This report, should therefore, be read in conjunction with the Group financial statements for the year ended 31 December 2016, which is available on the Group's investor website. The comparative figures for the year ended 31 December 2016 have been audited. The comparative figures for the half year ended 30 June 2016 are unaudited.
The accounting policies adopted in these condensed consolidated half yearly financial statements are consistent with the policies applied in the 2016 group financial statements.
The condensed consolidated financial information is presented in British pounds sterling (GBP) and all values are rounded to the nearest thousand (GBP000) except where otherwise indicated.
Going concern
At 30 June 2017 the Group had net assets of GBP6.3m (30 June 2016: net assets of GBP4.9m). Management prepare detailed budgets and forecasts of financial performance and cash flow over the coming 12 to 36 months. Based on the current projections the Directors consider it appropriate to continue to prepare the financial statements on a going concern basis.
Principal risks and uncertainties
The principal risks and uncertainties faced by the group in the half year ended 30 June 2017 are consistent with those identified and disclosed in the 2016 group financial statements.
Use of estimates and judgements
The preparation of financial information in conformity with adopted IFRSs requires the use of estimates and assumptions. Although these estimates are based on management's best knowledge, actual results ultimately may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Revenue recognition
The Group enters into contracts to supply gas and electricity to its customers. Revenue represents the fair value of the consideration received or receivable from the sale of actual and estimated gas and electricity supplied during the year, net of discounts, climate change levy and value added tax. For both electricity and gas supplied, revenue is recognised on consumption.
Revenue is recognised when the associated risks and rewards of ownership have been transferred, to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group and where the revenue can be measured reliably.
Due to the inherent nature of the industry and its reliance upon estimated meter readings, revenue includes the Directors' best estimate of differences between estimated sales and billed sales. The Group makes estimates of customer consumption, based on available industry data, and also seasonal usage curves that have been estimated through historic actual usage data.
2. Segmental analysis
Operating segments
The Directors consider there to be one operating segment, being the supply of energy to SMEs and larger corporates.
Geographical segments
100 per cent of the Group revenue is generated from sales to customers in the United Kingdom (2016: 100 per cent).
The Group has no individual customers representing over 10 per cent of revenue (2016: none).
3. Exceptional items and broker commissions
The Group incurred legal and professional fees in the year ended 31 December 2016 of GBP379,000 in relation to the placing of ordinary shares and admission to AIM.
The IFRS 2 share option charge incurred in the first 6 months of 2017 was GBP471,000 (H1 2016: GBP665,000). The directors are of the opinion that by reporting the adjusted operating profits before charging share based payments, a more representative figure for the relevant profitability of the company can be derived.
Broker commissions for the 6 months ended 30 June 2017 totalled GBP554,000 (H1 2016: GBP126,000).
4. Earnings per share
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Profit/(Loss) attributable
to ordinary shareholders 532 (1,216) (1,359)
No. No. No.
Weighted average number
of ordinary shares
At the start of the period 14,054,055 10,000,000 10,000,000
Effect of shares issued
in the period - 2,338,878 3,212,229
----------- ----------- -------------
Weighted average number
of ordinary shares 14,054,055 12,338,878 13,212,229
----------- ----------- -------------
Pence Pence Pence
Basic profit/(loss) per
share 3.8 (9.9) (10.2)
=========== =========== =============
Adjusted earnings per share
Adjusted earnings per share is based on the result attributable to ordinary shareholders before exceptional items and the cost of share based payments, and the weighted average number of ordinary shares outstanding:
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Adjusted earnings per
share
Profit/(loss) for the
period 532 (1,216) (1,359)
Add back:
Exceptional items - 380 379
Share based payment charge
after tax 391 589 1,116
--------- --------- -------------
Adjusted basic earnings/(loss)
for the period 923 (247) 136
--------- --------- -------------
Pence Pence Pence
Adjusted basic earnings/(loss)
per share 6.6 (2.0) 1.0
========= ========= =============
Diluted loss per share
No. No. No.
Basic weighted average
number of shares 14,054,055 12,338,878 13,212,229
Dilutive potential ordinary
shares 1,257,382 810,293 953,564
----------- ----------- -----------
Diluted weighted average
number of shares 15,311,437 13,149,171 14,165,793
----------- ----------- -----------
Pence Pence Pence
Diluted earnings per
share 3.5 (9.9) (10.2)
Diluted adjusted earnings
per share 6.0 (2.0) 1.0
=========== =========== ===========
5. Taxation
The tax charge for the period has been estimated using a blended rate of 19.5% on taxable profits, and 17% on deferred tax items.
6. Dividends
The directors propose an interim dividend of 1.0p per share in relation to the year ended 2017 (2016: 0.75p per share).
7. Trade and other receivables
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Trade receivables 3,738 - 2,663
Accrued income 2,404 1,782 1,904
Prepayments 363 94 83
Other receivables (40) - 241
6,465 1,876 4,891
======== ======== ============
8. Cash and cash equivalents
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 162 1,206 379
Short term deposits 5,723 4,753 4,818
-------- -------- ------------
5,885 5,959 5,197
======== ======== ============
9. Trade and other payables
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Current
Trade Payables 310 483 431
Accrued expenses 5,487 1,567 3,602
Deferred income - 1,203 -
Corporation tax 223 - 25
Other payables 962 246 1,282
-------- -------- ------------
6,982 3,499 5,340
======== ======== ============
Non-current
Group share bonus liabilities 121 - 72
======== ======== ============
10. Financial instruments and risk management
The Group's principal financial instruments are cash, trade receivables and trade payables. The Group has exposure to the following risks from its use of financial instruments:
Market risk
Market risk is the risk that changes in market prices, such as commodity and energy prices, will affect the Group's income.
Commodity and energy prices
The Group uses commodity purchase contracts to manage its exposures to fluctuations in gas and electricity commodity prices. The Group's objective is to minimise risk from fluctuations in energy prices by entering into back-to-back energy contracts with its suppliers and customers. Commodity purchase contracts are entered into as part of the Group's normal business activities, the Group classifies them as "own use" contracts. This classification as "own use" allows the Group not to recognise the commodity purchase contracts on its balance sheet at the period end.
As far as possible the Group attempts to match up all new sales orders with corresponding commodity purchase contracts. There is a risk that at any point in time the Group is over or under hedged. Holding an over or under hedged position opens the Group up to market risk which may result in either a positive or negative impact on the Group's margin and cash flow, depending on the movement in commodity prices.
The Board has evaluated and continues to evaluate the use of commodity purchase contracts and whether their classification as "own use" is appropriate. On the basis that the key requirements are as listed below, it has concluded that this classification is appropriate:
-- Physical delivery takes place under all contracts;
-- The volumes purchased or sold under the contract correspond to the Group's operating requirements;
-- The contracts are not considered to be written options as defined by IAS 39;
-- There are no circumstances where the Group would settle the contracts net in cash, nor does the Group take delivery of the commodities and sell them within a short period for trading purposes.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers.
These trading exposures are monitored and managed at Group level. All customers are UK based and turnover is made up of a large amount of customers each owing relatively small amounts. Any potential new customer has their credit checked using an external credit reference agency prior to being accepted as a customer.
Credit risk is also managed through the Group's standard business terms, which require all customers to make a monthly payment by direct debit. At the period end there were no significant concentrations of credit risk. The carrying amount of the financial assets represents the maximum credit exposure at any point in time.
At 30 June 2017 the Group held a provision against doubtful debts of GBP100,000 (2016: GBP50,000).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Board is responsible for ensuring that the Group has sufficient liquidity to meet its financial liabilities as they fall due and does so by monitoring cash flow forecasts and budgets. In order to enter into the necessary commodity purchase contracts, the Group is required to lodge funds on deposit with its bank. These funds (GBP3.0m at 30 June 2017) are used as collateral, allowing the bank to issue letters of credit (LOCs) to the relevant trading counterparties in the wholesale energy market. The Board has considered the cash flow forecasts, along with the collateral and LOC requirements, for the next 12 months, which show that the Group expects to operate within its working capital facilities throughout the period.
Any excess cash balances are held in short-term, interest bearing deposit accounts. At 30 June 2017 the Group had GBP5.9m of cash and bank balances.
Foreign currency risk
The Group trades entirely in sterling, hence it has no foreign currency risk.
11. Share based payments
The Group operates an EMI share option plan for qualifying employees of the Group. Options in the plan are settled in equity in the Company. The options are subject to a vesting schedule, but not conditional on any performance criteria being achieved. The only vesting condition is that the employee is employed by the Group at the date when the option vests.
During the period the company made the following grants:
Date of Ex. Price Expected Lapse No. of options grant term date granted 6 April 6 April 2017 GBP0.005 3 Years 2027 114,270 6 April 6 April 2017 GBP2.844 3 Years 2027 228,540
The number and weighted average exercise price of share options was as follows:
30 June 30 June 31 December
2017 2016 2016
Balance at the start 1,094,500 - -
of the period
Granted 342,810 1,094,500 1,108,000
Forfeited - - (13,500)
Lapsed - - -
Exercised - - -
---------- ---------- ------------
Balance at the end of
the period 1,437,310 1,094,500 1,094,500
---------- ---------- ------------
Vested at the end of 500,000 - -
the period
---------- ---------- ------------
Exercisable at the end - - -
of the period
---------- ---------- ------------
Weighted average exercise
price for:
Options granted in the GBP1.90 GBP0.09 GBP0.13
period
Options forfeited in - - GBP0.09
the period
Options exercised in - - -
the period
Exercise price in the
range:
From GBP0.005 GBP0.09 GBP0.09
To GBP3.25 GBP0.09 GBP3.25
The fair value of each option grant is estimated on the grant date using a Black Scholes option pricing model with the following fair value assumptions:
30 June 30 June 31 December
2017 2016 2016
Dividend yield - - -
Risk free rate 1.50% 1.50% 1.50%
Share price volatility 35.39% 35.39% 35.39%
Expected life (years) 3 3 2.55
Weighted average fair GBP2.84 GBP0.005 GBP1.75
value of options granted
during the period
The Group also operates a share bonus plan for all qualifying employees of the Group. The plan is settled in cash and is subject to certain financial targets for the financial years ending 2016, 2017 and 2018. On meeting these financial targets each financial year, 50,000 notional shares are awarded to the Group bonus pool. At the end of the third financial year (31 December 2018) the value of the pool will be based on the share price of the Group one week after the announcement of the results for the year ended 31 December 2018, and will be distributed to all qualifying employees.
The total expenses recognised for the period and the total liabilities recognised at the end of the period, arising from share based payments are as follows:
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
Equity settled share
based payment expense 422 665 1,272
Cash settled share based
payment expense 49 - 72
-------- -------- ------------
471 665 1,344
-------- -------- ------------
12. Post-Balance sheet events
There are no significant or disclosable post-balance sheet events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGUWGBUPMGCR
(END) Dow Jones Newswires
September 19, 2017 02:00 ET (06:00 GMT)
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