YU Group is a classic owner driven business with the CEO controlling over 50% of the equity. This is reflected in superior execution capabilities, tight cost control and a very well managed balance sheet for a high growth business. (Interim results announced in September showed 60% revenue increase, £86.8m net cash on balance sheet and 52% eps growth with contracted revenue for the year ahead up 58%) Worth noting that YU have increased engineers on Smart meters from 25 at H1 23 to over 100 at H2 24. Analysts forecasts may prove too conservative with trading update and capital markets day on 21st January. DGI9 is down 37% and YU Group up 46% over last 12 months I will continue to back the management owned business over the fund owned business
Hi Bill, that factoid of investment in engineers is good to see. Clearly Yu must see Smart Meters as a profitable area to be involved in - although you presumably take the point that the profitability for that segment isn’t there in Yu’s latest numbers (as was claimed).
KKR the PE house also believed Smart Meters as profitable last year, when they paid £1.3bn for SMS Plc a firm that manages 4.5m Smart Meters. Fewer Smart Meters than Arqiva. Another read across I should have put in my article.
Three points:
I don’t dispute Yu has impressive growth. But I bet you wouldn’t have placed DGI9/Arqiva alongside it on valuation metrics. Interesting to think Arqiva could be a supplier to Yu - as Arqiva benefits from the overall growth of Smart Meters given the Comms aspect (one of two providers in the UK)
When energy supply appears to offer a much more attractive growth opportunity (per their deck) what is Yu’s rationale for Smart Meters? I suppose the answer is synergy, but what do you think? Do some Yu investors see it as a distraction?
What do you think about the future penetration of the remaining 45% of gas/electricity meters moving to Smart Meters? Has this part of the market reached saturation where all those willing to have Smart Meters now have them? Will the UK government make it mandatory? The UK energy policy 2025-2030 appears to rely on Smart Meters to introduce variable energy pricing (which is impossible without smart meters).
YU have a five year commodity trading arrangement with Shell Energy enabling the Group to purchase electricity and gas on forward commodity markets. The trading agreement enables
forecasted customer demand to be hedged in accordance with an agreed risk mandate. YU run a capital light model but unlike a broker with an element of risk.
YU Group is a direct energy supplier (not a broker) of electricity, gas and water only to the SME sector, installing smart meters for free to their customers as part of the overall package. I assume this benefits both customers and YU giving better information of likely demand etc. Not sure there is that much similarity between the 2 businesses https://www.yuenergy.co.uk,
Obviously this is a highly regulated market and investment is dictated by government appartchiks.
any take on the Dec 19th Ofwat report and the amount of allowed investment into smartmetering 2025-2030 and how this might impact Arqiva's business? Other areas for investment may also require 'monitoring' though not explicitly accounted for below (i.e sewage)
""We are also backing continued progress on reducing leakage and we propose targets that would represent a 17% reduction over 2025-30 (compared to the 2024-25 submitted baseline). Our final decisions allow English water companies to invest £717 million in leakage enhancement to reach these levels,using innovative smart technologies and better data. This is in addition to the benefits gained through significant funding of smart metering""
YU Group is a classic owner driven business with the CEO controlling over 50% of the equity. This is reflected in superior execution capabilities, tight cost control and a very well managed balance sheet for a high growth business. (Interim results announced in September showed 60% revenue increase, £86.8m net cash on balance sheet and 52% eps growth with contracted revenue for the year ahead up 58%) Worth noting that YU have increased engineers on Smart meters from 25 at H1 23 to over 100 at H2 24. Analysts forecasts may prove too conservative with trading update and capital markets day on 21st January. DGI9 is down 37% and YU Group up 46% over last 12 months I will continue to back the management owned business over the fund owned business
Hi Bill, that factoid of investment in engineers is good to see. Clearly Yu must see Smart Meters as a profitable area to be involved in - although you presumably take the point that the profitability for that segment isn’t there in Yu’s latest numbers (as was claimed).
KKR the PE house also believed Smart Meters as profitable last year, when they paid £1.3bn for SMS Plc a firm that manages 4.5m Smart Meters. Fewer Smart Meters than Arqiva. Another read across I should have put in my article.
Three points:
I don’t dispute Yu has impressive growth. But I bet you wouldn’t have placed DGI9/Arqiva alongside it on valuation metrics. Interesting to think Arqiva could be a supplier to Yu - as Arqiva benefits from the overall growth of Smart Meters given the Comms aspect (one of two providers in the UK)
When energy supply appears to offer a much more attractive growth opportunity (per their deck) what is Yu’s rationale for Smart Meters? I suppose the answer is synergy, but what do you think? Do some Yu investors see it as a distraction?
What do you think about the future penetration of the remaining 45% of gas/electricity meters moving to Smart Meters? Has this part of the market reached saturation where all those willing to have Smart Meters now have them? Will the UK government make it mandatory? The UK energy policy 2025-2030 appears to rely on Smart Meters to introduce variable energy pricing (which is impossible without smart meters).
OB
YU have a five year commodity trading arrangement with Shell Energy enabling the Group to purchase electricity and gas on forward commodity markets. The trading agreement enables
forecasted customer demand to be hedged in accordance with an agreed risk mandate. YU run a capital light model but unlike a broker with an element of risk.
YU Group is a direct energy supplier (not a broker) of electricity, gas and water only to the SME sector, installing smart meters for free to their customers as part of the overall package. I assume this benefits both customers and YU giving better information of likely demand etc. Not sure there is that much similarity between the 2 businesses https://www.yuenergy.co.uk,
How is depreciation only £1m for 6 months operations in £312.7m revenue and they only own £6.4m of PP&E if they are not a broker?
Doesn’t add up.
OB
Obviously this is a highly regulated market and investment is dictated by government appartchiks.
any take on the Dec 19th Ofwat report and the amount of allowed investment into smartmetering 2025-2030 and how this might impact Arqiva's business? Other areas for investment may also require 'monitoring' though not explicitly accounted for below (i.e sewage)
""We are also backing continued progress on reducing leakage and we propose targets that would represent a 17% reduction over 2025-30 (compared to the 2024-25 submitted baseline). Our final decisions allow English water companies to invest £717 million in leakage enhancement to reach these levels,using innovative smart technologies and better data. This is in addition to the benefits gained through significant funding of smart metering""