Yu Group (YU.) has continued to justify its reputation for rapid expansion. The business energy supplier beat expectations for revenue and gross profit growth in the period thanks to its focus on recruiting larger corporate customers and making better use of broker sales channels. Substantial increases in contracted work also suggests the top-line momentum is being maintained – management is expecting revenues of £81m for 2018 and already has £60m in revenues signed up for 2019.
However, rapid growth can weigh on certain performance metrics. Gross margins have continued to slip, reaching 16.2 per cent in the period, from 17.4 per cent for 2017 and 21.2 per cent in 2016. However, chief executive Bobby Kalar said margin compression was to be expected when pursuing higher-value corporate clients, and the decline was in line with management expectations. House broker Shore Capital expects the margin to continue to drop, although at a slowing rate, reaching 15.8 per cent in 2020. It expects adjusted EPS of 25.6p in 2018, from 17p last year.
The question is whether the group can maintain its breakneck level of growth, and the early signs are positive. Management estimates its current share of the electricity meter market as less than 0.25 per cent, and a little over 0.3 per cent of the gas meter market. Net cash more than doubled in the period, and the group has been building headcount to drive further sales growth, taking the total number of employees to 149 at the end of June, from 110 in December.
| YU GROUP (YU.) | ||||
| ORD PRICE: | 965p | MARKET VALUE: | £ 157m | |
| TOUCH: | 950-980p | 12-MONTH HIGH: | 1,425p | LOW: 490p |
| DIVIDEND YIELD: | 0.3% | PE RATIO: | 49 | |
| NET ASSET VALUE: | 136p | NET CASH: | £18.2m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 20.8 | 0.7 | 3.80 | 1.00 |
| 2018 | 35.8 | 2.0 | 10.6 | 1.20 |
| % change | +73 | +198 | +179 | +20 |
| Ex-div: | 22 Nov | |||
| Payment: | 08 Jan | |||
