Yu Group (YU. ) outlined its final results for the year to 31 December 2020 that the business is “primed and ready for profitable growth” following a strong performance in 2020.
The Group, which supplies gas, electricity and water to UK SMEs, highlighted revenue had come in ahead of market expectations for the period at £101.5m (FY19: £111.6m), which has further strengthened its 2021 contracted revenue from the £93m already secured in 2020 - a rise of 16% on prior year (FY19: £80m contracted for FY 2020).
The group stated, “Our strong top line performance and earnings in FY20 have exceeded market expectations and are a clear indicator of our positive trajectory and speed of travel.”
Yu said average monthly bookings have nearly doubled year-on year to £8.3m (FY19: £4.2m) while the average contract term booked has also increased to 24 months (FY19: 22 months).
The group said new booked business had outperformed expectations, ‘more so given the added pressure of Covid-19 and the effect on British businesses.’ Meanwhile, its monthly run rate in 2020 averaged £8.2m with H1 averaging £6.2m and H2 averaging £10.3m.
Yu's CEO, Bobby Kalar, said “net customer contribution, which measures gross margin less bad debt, rose to 6.1% in 2020, up from 2.5% in 2019, demonstrating a clear improving trend and this gives the Board significant comfort that the business is performing ahead of plan.”
In addition to strong organic growth, Yu highlighted that it had successfully completed two competitor book acquisitions 2H20. Yu, which describes these acquisitions as immediately earnings-enhancing, said this was “a clear demonstration” of both intent and capability.
Kalar said, “Underpinning our growth ambitions in an extraordinarily large market is our sound balance sheet, experienced and vested management team and scalable platform.”
The strength of its top-line financial performance was also reflected in the £1.2m loss at the operating line, which was also significantly ahead of market expectations compared to its loss of £5m in 2019.
The group said it maintains a strong cash position and as at 31 December 2020, Yu held £11.7m of cash compared to £2.4m in FY19, with 99% of operational bill to cash conversion.
“Given the collective shock suffered by British businesses in an extraordinary year, I am pleased with the Group's operational performance. Our intra month bill to cash position has remained strong and we continue to have significant cash in the bank, while maintaining a laser like focus on collection of customer receivable balances,” commented Kalar.
Outlook
Building on its ‘very strong’ 2020 performance, Yu said the new financial year has ‘started strongly’ with contracted revenue already over 90% of the revenue recorded in FY 2020.
The group highlighted that average monthly bookings during 1Q21 are already performing ahead of 2020 following a very strong 2H20 where monthly bookings averaged £10.3m.
Yu said renewal rates of 60% are also targeted to increase to over 70% this year; and the average number of products enjoyed by each customer are also expected to expand.
As a result of this accelerating organic growth performance Yu expects revenue in FY21 to be significantly above the £101.5m delivered in FY 2020; and ahead of market expectations. It also expects adjusted EBITDA to be “significantly ahead of market expectations” for 2021.
It said, ‘Our confidence is based on the high quality, profitable and growing contract book in place; the impact of H2 2020 acquisitions to flow into 2021; and a strong emphasis on control of overheads using digital technology as Yu embarks on its rapid scale phase.’
“Our strategy is working well and as such the Board is confident that the business is on track to deliver its operational KPIs and to report profitable growth in FY2021,” said CEO, Kalar.
He added, “We have made a good start to 2021. I'm pleased to be able to look forward to the future with absolute confidence. From the 'hard yards' I see good times ahead."
On the back of its final results, CEO, Bobby Kalar said 2020 had been a “defining year” for the company “underscoring the strength, maturity and momentum” of the overall business.
As a result of a strong performance, Yu told investors that it expects revenue in FY21 to be ‘significantly above’ the £101.5 million delivered in FY20 and ahead of market expectations.
Shares in Yu have seen nearly a four-fold increase in value since the start of 2021 with the stock retracing some of its most recent gains during morning trading at 336p.
Reasons to YU.
Yü Group is an independent supplier of gas, electricity and water 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 in March 2016.
“The growth objective for 2020 was very clear that, having strengthened the business for significant sustainable growth, we would begin to rapidly scale,” Yu wrote back in January.
The company told investors that having achieved upward momentum in its performance, it is now focused on the next phase of its evolution which includes, inter alia, delivering organic growth, driving profitability and utilising digital technologies and innovation.
In short, the company highlighted that it is now ready to launch “a period of sustainable growth as it scales up to address and increase its rightful share of a £35bn market.”
For more news and updates on Yu Group: