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Yü Group PLC to grow SME energy business thanks to IPO

A £10mln share sale (raising £7.5mln for the company) is designed to fund the emerging energy provider’s expansion as it asks British SME customers to switch from ‘big six’.

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Currently 90% of UK SME’s get gas and electricity from the ‘big six’, Yü highlighted.

Yü Group PLC share trading began today, opening at 190.50p per share, reaching a high of 193.50p this morning. 

The company, which supplies gas and electricity to small and medium enterprises (SMEs), told investors it would be issuing its new shares at 185p each, that will see the UK utility firm realise a £26mln valuation.

Some £10mln worth of shares will be sold via an oversubscribed placing, and £7.5mln of the proceeds will be received by the company.

Yü plans to be the leading supplier of energy to UK SMEs.

About 90% of British SMEs get their energy from the ‘big six’, according to Ofgem stats highlighted by Yü, and 40% of those businesses haven’t considered changing suppliers in the past five years.

It presents a significant commercial opportunity, said Yü.

“The funds being raised will enable us to accelerate our growth and provide an increasing number of SME's the energy they need at the right price and with the level of service that they deserve,” said Bobby Kalar, Yü’s chief executive and majority shareholder.

He added: "We have been delighted with the level of support from institutional investors, and we look forward to welcoming them as shareholders.

“The placing was significantly over-subscribed, which speaks volumes about the quality of business we have built, especially given current market conditions.”

Cash raised by the company is expected to support a larger customer base, finance an expanded sales operation and provide working capital as the company goes after larger customers (as restrictions under the UK’s ‘controlled market entry’ or CME process are lifted).

New energy providers are required to undergo the CME process, which limits the number of new customers a company can sign up each month following their launch.

Last March, Yü exited the CME process for non-half hourly meter users (NHH), which typically are smaller SMEs, and it expects to exit the half hourly meter users (HH) during summer 2016.

HH users are typically larger companies and high energy users.

Currently Yü is limited to accepting fifteen new HH meter points per month, due to the CME, and it is subject to a ‘hard cap’ of 100 new meter points until the CME ends.

Yü expects the CME exit for HH users will be a significant driver for future growth for the company.

Kalar, prior to the flotation, owned 100% of Yü, and following the placing of new shares and the sale of some of his existing holdings he will retain 61.54% of the company.

Institutional investors - namely Octopus Investments, Miton, Seneca Partners, Legal & General Investment Management, Hargreave Hale and Artemis Investment Management - join the list of significant shareholders as a result of the float.

Octopus will own 9.84% while Miton becomes the next largest holder with 7.56%.

Yü intends to pay a maiden dividend for the current financial year, ending December 31 2016, and it says the policy will be ‘progressive’ thereafter.

Quick facts: Yü Group PLC

Price: 81.5 GBX

AIM:YU.
Market: AIM
Market Cap: £13.27 m
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