Energy for businesses independent Yu Group (YU.:AIM) is fast delivering on its promise to shake-up a part of the supply industry distinctly lacking in options. Still massively dominated by the big six, the company, which trades under the Yu Energy brand, is trying to leverage its flexibility, value for money and high-quality service proposition to wrestle business customers away from the clutches of rivals.
It's made stellar progress since in the first half this year to 30 June, ramping sales and contracted revenue (effectively future sales not yet billed), while it's now booking about £3 million per month of new business.
This is a multi-billion pound market and a huge growth opportunity for Yu if it can prove is execution. According to Ofgem data, about 90% of small and medium-sized businesses are big six customers and a staggering 40% have not considered changing supplier in five years.
Part of the reason is that fixed term contracts are still enforced across the business energy supply industry, unlike the consumer market, where customers can switch at the figurative drop of a hat.
Tellingly, while the headline operating figure shows a loss of £284,000, most of that was down to funding hedging mechanisms demanded by the industry watchdog, CEO Bobby Kalar and CFO Nick Parker told Shares today. The underlying figure was about breakeven, with cash flow modestly positive on the same basis.
But just look at the implied growth going forward, if the company shows it can walk its talk.
Shore Capital estimates
Investors should take confidence from dividends. It is paying its first interim of 0.75p, and analyst at Shore Capital have been encouraged to up their full year payout to 2p per share, from the previous 1.35p.
That's not a yield to write home about (roughly 0.8% after today's shares 7.5% share price surge to 250p), but three years from now it'll be four-times as much.
Having joined the AIM market at 185p per share on 17 March, we took a good look at the story the following months (21 April, read here), concluding that the company was definitely one to watch. We were clearly too cautious.