Yu Group PLC Annual Report 2019

FY2019 Annual Report · Yu Group PLC

Loading PDF…

YÜTILITY
SIMPLICITY

GROUP PLC

YÜ GROUP PLC
Annual report and financial statements 2019

INNOVATIVE AND
SIMPLE BUSINESS
UTILITY SOLUTIONS

Yü Group PLC is driving innovation in energy
and utility supply solutions for UK businesses.

We provide gas, electricity and water supply solutions to SMEs and
corporate customers. Our multi-utility offering and excellent customer
service is focused on making it easier for businesses to manage their
utilities. Our agile approach allows us to quickly test new routes to
market alongside product innovation to drive scale and differentiation.

We have established strong foundations, have implemented
actions to mitigate the impact of Covid-19, and will be ready
to scale up in what is a £35 billion B2B addressable market.1”

STRATEGIC REPORT

Business review

FINANCIAL REVIEW
» Revenue increased by 38 per cent. to £111.6m (2018: £80.6m).

Statutory loss of £5.0m for FY 2019, an improvement

of 20.7 per cent. on FY 2018 (£6.3m loss)

» Gross margin improvement, with 4.9 per cent. for FY 2019 (2018
restated2: 4 per cent.), and 6.7 per cent. for H2 2019 (2.1 per cent.
for H2 2018)

» Adjusted EBITDA3 loss of £4.2m (2018 loss: £6.3m), above market
expectations. H2 2019 losses less than 60 per cent. of H1 2019

loss as legacy, low margin contracts continue to expire

» Overdue customer receivables of seven days at 31 December 2019,

an improvement from nine days at 31 December 20184

» Net cash of £1.8m (net of lease liability under IFRS 165) at

31 December 2019 (2018: £14.6m). Cash collateral of £10.4m,

prior to the impact of the new £13.0m credit facility to support

the Group’s hedging activities

» Contracted revenue for 2020, as at 31 December 2019, of £79.5m
(£88m at 31 December 2018 contracted for 2019) based on estimated

usage of customers (prior to any impact from Covid-19)

» Legacy, low margin contracts account for £35m of contracted

revenue for FY 2020, and less than £5m for FY 2021

» Financial impact from Covid-19, including available support

from the Government, is evolving and is deemed to represent
a material risk for the Group. Available cash at 31 March 2020
of £10.9m, with a further £6.1m in collateral deposits

OPERATIONAL REVIEW
» Business continuity plan deployed in reaction to Covid-19.
Proactive monitoring and forward analysis of business and

financial risks together with rolling mitigation programmes

have been undertaken and are being implemented

» Reshaping of the Board finalised and senior management team

strengthened in key areas

» Business fully reset with stronger governance, internal control

and management. Further investment in systems and technology

to automate key processes

» Reducing impact expected from legacy, low margin contracts

in FY 2020. New contracts secured at higher margin

» Sales bookings achieving higher gross margins and increasing

in H2 2019. Significant market opportunity remains

» Trustpilot score of 4.5 stars (2018: 3.5 stars), a leader

in the B2B energy supply market

» Commercial arrangements finalised for new Leicester office
due to open in 2021 to support the Group’s growth ambition

Source: independent analysis from Bfy Consulting of B2B energy supply market volumes,
February 2020, at £0.14/MWh for electricity and £0.88/therm for gas.
The year ended 31 December 2018 has been restated to reclassify £2,625,000 of amounts payable
to third-party intermediaries from operating costs to cost of sales.
Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, and also before
non-recurring items, share based payments and unrealised gains or losses on derivative contracts.
For FY 2018, it also excludes the impact of first-time adoption of IFRS 9. See reconciliation in note 7
to the financial statements.
Overdue customer receivables is expressed in days of sales, and relates to the total balance, net of
provisions, of accrued income which is outside of the normal billing cycle, plus overdue trade receivables
(net of VAT and CCL).
IFRS 16 results in a lease liability and corresponding asset being booked, for assets used under
operating leases.

STRATEGIC REPORT

01 Business review

02 At a glance

04 Our business model

06 Chairman’s statement

10 Chief Executive Officer’s statement

13 Our markets

14 Our strategy

16 Our key performance indicators

18 Finance review

21 Risks and uncertainties

27 Section 172

Climate change and
environmental considerations

29 Our people

CORPORATE GOVERNANCE

32 Board of Directors

34 Chairman’s introduction to governance

36 Corporate governance report

38 Audit Committee report

39 Remuneration report

41 Directors’ report

Statement of Directors’ responsibilities

FINANCIAL STATEMENTS

Independent auditor’s report

Consolidated statement of profit and loss
and other comprehensive income

Consolidated and Company balance sheet

Consolidated statement of changes in equity

Company statement of changes in equity

Consolidated statement of cash flows

Notes to the consolidated
financial statements

71 Notice of annual general meeting

73 Company information

Read more about our strategy
page 14

Covid-19
The business risk related to Covid-19
is further detailed in the Finance Review,
and the annual report, together with the
actions taken to mitigate, as much as
possible, the risks.

This pandemic is clearly a worrying
time for the global population, for people
in the UK, and, of course, for the wider
economy and our business customers. Our
Group generates a significant proportion
of revenue from sectors which are likely to
have been materially impacted by Covid-19,
which we are continuing to monitor.

STRATEGIC REPORTOur four strategic priorities are used to ensure organisational
focus, set key performance indicators to track progress and
ultimately create shareholder value.”

As CEO of a growing and maturing business,
my priority has been ensuring our colleagues’,
customers’ and other stakeholders’ health
and safety is considered. We have closely
followed official health advice, taken steps
to mitigate the impact on our employees,
and successfully implemented our
business continuity plan.

I’m proud of my team’s response and thank
them for their continued efforts to maintain
health and safety, whilst keeping the business
running to serve our customers and key
partners. In line with Government guidance
all of our staff have been successfully
transitioned to remote working status
with minimal disruption to customers
or working practices.

Market context
There has been a significant reduction in
forward gas and electricity commodity
market prices during 2019 and early 2020,
driven by various macroeconomic factors,
including excess gas becoming available in
the global market and, more recently, the
economic impact Covid-19 is having on
economic growth. This commodity market
price reduction has two contrasting impacts
on our business. Firstly, customers are more
likely to take advantage of the lower market
to “lock in” the reduction for the coming
years. Whilst the revenue booked may be
lower in absolute terms (as a result of the
lower commodity market) for individual
customers, the margin per customer
opportunity is not adversely impacted.

Secondly, a reducing forward commodity
market leads to trading counterparties
being exposed to mark-to-market risk if
the purchase of commodity is not fulfilled,
traditionally leading to “cash calls” being
made. Such cash calls led to £10.4m of
deposits being lodged as collateral with
trading counterparties at 31 December 2019
(£nil at 31 December 2018).

Our new structured trading arrangement
with SmartestEnergy, part of the major
Japanese entity Marubeni provides a
c.£13.0m variable credit facility which

is designed to scale up in tandem with
the growth in the business. This has the key
benefit of freeing up cash, enabling a more
efficient use of the Group’s capital. I’m
pleased that our Group has secured this
new arrangement; following a period of
significant due diligence, our strategic
goals and core principles are aligned
and I look forward to working closely
with our new partners over the coming
months and years.

Market opportunity
I founded this business when, as a small
business owner myself (operating in the
care home sector), I had lost all faith in
the major energy companies. I didn’t feel
as though I was receiving a fair service,
or value for money and all I wanted was
an easy experience and to feel like a
customer. It is this position that drives me
in my passion to provide a new approach,
based on simplicity and innovation.

Competition in the B2B energy supply market
is less prevalent than the domestic sector.
In the last nine months, there have been
no new B2B supply licence applications to
Ofgem for either gas or electricity. There
are additional barriers to entry in the B2B
market, such as the need to provide half
hourly pricing, which requires additional
operations and technical capability. The B2B
market is dominated by larger players who
have inefficient, expensive and inflexible

systems and less ability to understand and
serve the customer. I believe that the market
dynamics give the Group a great opportunity.
Our success in this market depends on
providing simple and innovative solutions
which can be accessed easily and a good, fair,
service to our customers so they remain with
us, and by controlling our costs as we scale.

Once the economy recovers the potential
for growth is enormous. As in the business
to consumer market, opportunities will
arise where synergies will further push
our growth and provide greater return.
We currently only serve 0.2 per cent.1 of
the B2B market and our Group is now in
a position to scale rapidly, offering a fresh,
new approach to businesses’ utility needs.

The Group offers leading customer
service and simple, innovative products
to businesses across the UK. For example,
we are the only multi-utility (gas, electricity
and water) supplier enabling business
customers to receive simple bundled
products for all their utilities. Our three-ring
pick up policy, UK call centre and use
of digital technologies make it easy for
customers and partners to engage with us.

In addition, our internal criteria to select
the right growth opportunities has been
enhanced and we now target our efforts
more carefully regarding the customers we
wish to serve and the channels we use to
develop our business.

MARKET OPPORTUNITY

BOOKINGS PER CHANNEL

8,724
Yü Group
meter points

1,700,000
meters
(gas and power)
in the market

16%
direct bookings

84%
indirect bookings

16+

Source: independent analysis from Bfy Consulting of B2B energy supply market, February 2020.

Annual report and financial statements 2019 YÜ GROUP PLC

99
+
K
84
+
K
Chief Executive Officer’s statement continued

Bookings
Bookings represent the annualised value
of contracts secured during a period and
are a core indicator for business growth.
Our average monthly bookings for FY 2019
were £4.2m (FY 2018: £8.4m), with an
increase in H2 2019 (£5.3m) when compared
to H1 2019 (£3.2m). The Board believes
the Group can now manage significantly
increased levels of bookings, post the
establishment of new automated
processes and stronger governance.

Gross margin on bookings during FY 2019
have averaged high single digit gross margins,
which is broadly double the gross margins
achieved on bookings in FY 2018. This
increased gross margin will continue to
flow through to an improved financial
position over FY 2020 and beyond as the
legacy, low margin contracts expire.

Average monthly bookings
£m

£4.2m

7
3

1
5

4
8

3
1
H

5
2
H

The Group ended 2019 with £79.5m of
revenue, prior to any impact from Covid-19,
contracted for FY 2020. Of the contracted
revenue, approximately £45m was booked in
FY 2019 at increased margins. The remaining
£35m contracted revenue are legacy, low
margin contracts. The majority of these
legacy contracts will expire in FY 2020, leading
to enhanced gross margins from FY 2021.

Our business foundations
We have always had ambitious plans to scale
the business and to that end the Group has
established strong business foundations
upon which to build. These systems will
help us manage the unprecedented market
turmoil that is currently being experienced
and will leave us well positioned as and
when the situation improves.

Customer service also remains a top priority.
The Group continues to offer a three-ring pick
up policy, providing dedicated relationship
managers to resolve customer queries.
Our Trustpilot score has improved from 3.5
stars at 31 December 2018 to 4.5 stars at
31 December 2019. This score ranks the
Group as a leader in the B2B energy
supply sector.

As well as the strengthened and refocused
Board, an experienced and committed
management team has been established
to drive business performance. We have
implemented a new people strategy and
work hard to engage and empower teams
and to promote the Group’s values.

We have also commenced an ambitious
plan to build on improved sales and
onboarding processes to bring new digital
tools to our customers and to utilise them
to improve efficiency in our operations.

Summary
I am satisfied that the business has
turned a corner and achieved a full reset.
Our goal, in time, is to be one of the largest
“go to” SME utility suppliers in the UK.

The work done has been immense:

» strengthening of the Board to create
good corporate governance and a
support mechanism for the Executive
to explore new synergies;

» redesigning the organisational

structure and recruiting a strong
Executive Committee to manage the
sales strategy, commercial function
and risk management;

» a renewed discipline on gross margin
throughout the business and a strong
approach to debt management, which
is already showing a positive impact;

» our new deal with SmartestEnergy

which has effectively removed cash as
a barrier to growth and means we can
significantly scale the business for the
next three to four years without having
to lodge cash;

» a commitment to further accelerate

our customer experience by digitising
our business and reducing the cost
to serve; and

» utilising data to drive insight to better
understand market habits and risks,
which I believe is a game changing
growth accelerator.

Notwithstanding the challenges caused by
Covid-19, I am confident the past “chapter”
can now be closed and am expecting to
report more positive updates in the future.

Lastly this has been an enormous team
effort and my sincere gratitude to all my
team; I look forward to returning the
business back to profit soon.

Outlook
The business has been reset and I fully
believe that the experience and processes
we now have established will drive
sustainable, profitable growth, once the
economic context recovers. Gross margin
improved to 4.9 per cent. for FY 2019 (2018
restated: 4 per cent.), and 6.7 per cent.
for H2 2019 (2.1 per cent. for H2 2018).

Our Adjusted EBITDA loss has decreased
significantly, from £5.3m in H2 2018 to £1.6m
in H2 2019, and our overdue customer
receivables position has improved by two days,
to stand at seven days, demonstrating our
clear financial and working capital discipline.

The Group exceeded market forecasts in
relation to revenues and Adjusted EBITDA
in FY 2019.

The Board is continuously assessing
and managing the impact of the Covid-19
outbreak on the business and the financial
and operational performance of the Group.
Some revenue reduction impact is
anticipated as a result of lower demand
from business customers across Great
Britain, and as sales bookings decrease
due to a change in customer priorities.
The impact from Covid-19 on bad debt,
operating cash flows (through late payment
of customer receivables) and reduced
sales growth is also uncertain, as the UK
economy deals with the impact of the
pandemic, although the reassurance
from the UK Government to support
businesses is pleasing to hear.

The Group’s business model, strategy
and risk management are in a much
more robust position than previously,
with significantly improving margins
and Adjusted EBITDA in the medium
term. Although the short-term business
consequences from the outbreak of Covid-19
are largely uncertain, the medium to
long-term growth opportunity remains

clear and the Group’s core target.

Bobby Kalar
Chief Executive Officer
6 April 2020

YÜ GROUP PLC Annual report and financial statements 2019

STRATEGIC REPORT

Our markets

BUSINESS ENERGY
INNOVATION

A significant market.

We are on a mission to disrupt the business utility market, continuously innovating to deliver Yütility Simplicity for businesses.
Utility supply is a fundamental requirement for all businesses across the UK. As such, the Group is largely “sector agnostic”.
There are 1.7 million business gas and electricity meter points, and the Group currently supplies around 9,000 of them.
At approximately 0.2 per cent. of the business to business supply market, the scale of the opportunity to grow is enormous.

SMALL AND MEDIUM-SIZED BUSINESSES

Engaging directly with small,
medium and multi-site businesses

45%
of the market engage directly
with suppliers to switch1

635,000
customers have never switched1

We’re driving growth by targeting
the 810,000 businesses which engage
directly with energy suppliers, and the
635,000 businesses that haven’t switched
their business energy supplier.

We use digital tools and innovative
solutions to overcome three barriers
for these customers: Trust, Hassle and
Cost. We provide great service, simple

straightforward communication
and utilities all under one roof
to drive cost efficiency.

We have developed our online channel to
provide quick and easy quotes, employing
digital marketing strategies to reach these
audiences with investment in marketing
automation to optimise communication.

THIRD-PARTY INTERMEDIARIES AND PARTNERS

Engaging through TPIs or
carefully selected partners,
to secure new business

330,000
businesses engage through TPIs
to source their energy supply1

We’ve expanded our offering to brokers,
adding water supply, EV charging and
power usage reporting to our portfolio.

We have invested in a new portal enabling
us to drive efficiency and scale, allowing
broker access to instant online quoting
and contracts in a cost-efficient manner.

Partnerships provide innovative new
routes to market for Yü Group and ways
for partners to drive additional revenue
and engage their client base.

OUR TARGET CUSTOMER
They value a fair and easy service
A large proportion of small and medium-sized businesses are time poor. As a consequence, they may
not engage with their energy supplier and are likely to be on expensive tariffs, suffering poor service.
We can provide a fair price through a quick quote, easy sign-on process and a long-term “hassle free”
experience for these customers.

8 seconds
average time to
answer the phone

Multi-site or multi-product
Our unique multi-fuel products combine gas, electricity and water to make it easier for customers
to manage all their utilities. We also offer additional services, such as electric vehicle charge points.
Customers can make savings as we pass on benefits from business efficiencies in serving the customer.

Acceptable return and credit risk
Our commercial processes balance the various business acquisition and service costs, the gross margin
achievable and the likelihood of bad debt. The approach is now tailored so that it provides the optimum
mix between growth and net customer contribution profitability. The current economic crisis reinforces
our determination to continue our drive to work with more robust and profitable customers. Given our
success in this ambition over the last year, we remain confident in our ability to achieve this strategy
over the medium and long term.

Source: independent analysis from Bfy Consulting of B2B energy supply market, February 2020.

Supply of gas,
electricity and water
solutions include energy
efficiency and EV charging

£5.3m
average monthly bookings
in H2 2019

Annual report and financial statements 2019 YÜ GROUP PLC

Our strategy

CLEAR STRATEGIC
PRIORITIES

Improving business performance in a £35 billion market.

1. GROWTH

2. PROFITABILITY

There are over 1.7 million customer meter points throughout
the UK, across various market segments. We look to scale
our business through our core electricity and gas supply
offering, supplemented by additional complementary
products as appropriate.

We secure new customers through varied routes to
market and in line with our commercial criteria. We also
offer great customer service so as to focus on retaining
our valuable customers.

Progress in 2019
» Achieved 38 per cent. growth in revenue in FY 2019
» Average monthly bookings of £4.2m for FY 2019,
increasing from £3.2m in H1 to £5.3m in H2

» Exited 2019 with £79.5m of revenue contracted
for FY 2020, at an increased gross margin to the

exit of 2018. Such contracted revenue excludes any

reduction as a consequence of lower energy volume

consumed by customers due to Covid-19

» Established strong commercial and financial controls

on sales processes

» Extended offering to include energy efficiency

and electric vehicle charge points

» Established a new Leicester office to increase
direct sales, and entered contracts to secure

a new purpose-built office from 2021

Priorities in 2020
» Further preparation for expansion of sales, marketing
and innovation teams in our new Leicester office

» Increase number of customers with multiple fuels

and/or multiple products

» Expand bookings in partnership and indirect
channels, utilising the recently launched portal

» Increase our B2B market share from the current

0.2 per cent.

» Manage impact on growth from the Covid-19

outbreak, and the onward economic environment

Sustainable profitability is targeted by balancing the net
contribution from customers and general overhead costs.
Through improving gross margin on bookings and managing
lifecycle value of those contracts (including bad debt), the
Group achieves a contribution from customers. General
overheads (which represents the costs to acquire customers,
to operationally service contracts and the general
administrative costs) are controlled to balance the growth
and customer service aspirations of the Group – enabling
economies of scale as the business develops.

Progress in 2019
» Net customer contribution1 increased from -0.4 per cent.

in FY 2018 to 2.5 per cent. in FY 2019

» General overheads reduced from 7.4 per cent.

in FY 2018 to 6.3 per cent. in FY 2019

» New dunning process implemented, to improve cash

collection performance

» Improved commercial focus in the operational

teams, including appointment of a new

Head of Debt and Commercial

» Migrated gas CRM system onto common platform

with electricity

» Introduced new portal quoting system for use

by brokers and partners

Priorities in 2020
» Manage the increased risk of bad debt as a result

of the Covid-19 virus outbreak

» Automate sales onboarding and operational processes
» Leverage economies of scale from business foundations
» Continue to expand sales via lower cost to acquire
channels, including online and partner models

Net customer contribution represents, as a percentage
of revenue, the amount excluding any one-off costs of gross
margin, less bad debt.

Links to KPIs

Links to risks

Links to KPIs

Links to risks

A B

YÜ GROUP PLC Annual report and financial statements 2019

STRATEGIC REPORTKEY TO KPIS

A Contracted revenue

B Average monthly new bookings

C Total meter points

D Net customer contribution

E General overheads

KEY TO RISKS

Revenue recognition

Credit risk

Trading risk

Covenant breach

5 Data integrity

F Overdue customer receivables

Relationship with regulatory bodies

3. CASH GENERATION

4. SOLID FOUNDATIONS

The Group benefits from a cash generative working
capital cycle. Short payment terms with customers
are typical, which results in cash collection prior
to cash outflows. The Group also takes advantage
of certain seasonal benefits to its cash processes.

The Group targets positive operational cash flows as a
result of the working capital cycle and looks to manage
the risk of cash volatility caused by margin calling from
trading counterparties through a new partnership.

Progress in 2019
» Operational cash outflow of £10.7m, of which £10.4m
relates to an increase in cash collateral deposits lodged

with trading counterparties

» New structured trading arrangement with

SmartestEnergy, providing a variable c.£13m credit line

» Further reduction in overdue customer receivables,
from nine days at 31 December 2018 to seven days

at 31 December 2019

Priorities in 2020
» Generate operational cash inflow, including realising

the benefit of the new structured trading arrangement

» Continued active management of the Group’s trade
receivables balance, particularly in view of the

economic outlook as a result of the Covid-19 pandemic

» Management of capital expenditure related to the

investment in the new Leicester property and certain

technology investments

The Group operates in an enormous market and continues
to scale. Managing such growth requires robust governance,
customer centricity and a workforce fully engaged and
aligned to the Group’s vision.

The Group has invested in an experienced and capable
Executive Management Team, key systems are in place
on which to build and scale the business and processes
and people are aligned to a common purpose.

Progress in 2019
» Commissioned, received and incorporated the

suggestions from two further independent “health check”

reports from PwC regarding the Group’s internal controls

» Strengthened Board of Directors and Executive
Management Team, to manage significant growth

» Embedded new delegated levels of authority,
governance and internal control frameworks

and tightened key financial controls – particularly

around customer billing and cash collection

» Trustpilot score improved from 3.5 stars at

31 December 2018 to 4.5 stars at 31 December 2019

» Launch of the Group’s values to all employees:
Customer; Innovation; Teamwork; and Integrity

Priorities in 2020
» Retain and develop systems and processes to
continually improve customer service levels

» Further embed the new corporate values
» Continued development of systems and processes
as the Group scales, including automation processes

» Close monitoring of internal control and risk
environment, including close management

of commodity hedging activities

» Ensuring compliance with covenants in the structured

trading arrangements

» Manage business and operational systems under
business continuity conditions, where necessary

Links to KPIs

Links to risks

Links to KPIs

Links to risks

A D

Annual report and financial statements 2019 YÜ GROUP PLC

Our key performance indicators

MEASURING PROGRESS

Contracted revenue
(£m)

£80m

-10%

Average monthly new bookings
Average contract term: 22 months (£m)

Total meter points

£4.2m

-50% (£5.3m for H2 2019)

8,724

0.2% of GB markets

8
2

0
5

8
8

0
8

9
0

7
3

1
5

4
8

Definition
Contracted revenue comprises the estimated
value of revenue, based on contracts with
customers, for the subsequent 12 months.
The actual amount recognised might typically
vary by up to 10 per cent. due to the inherent
estimation involved in this calculation.

Due to the unprecedented and, as yet,
unknown impact from Covid-19, the amount
recognised may be significantly below the
£80m currently contracted, in view of the
potential risk of lower customer demand
than initially assumed.

Performance
Contracted revenue secured at the end
of FY 2019 of £80m is below that at the end
of FY 2018 (£88m). Whilst contracted revenue
has declined, the Board is pleased with the
underlying result, as the level of gross margin
secured on contracted revenue is significantly
above the historical levels.

Target
The Board had targeted an increase to
contracted revenue at the end of FY 2020,
pre the exceptional impact on this indicator
as a result of potentially reduced growth as
a consequence of the Covid-19 outbreak.

Link to strategy

Definition
Bookings represent the annualised revenue
(or contract term if less than one year) of new
business signed in the year, averaged on a
monthly basis. Such bookings are typically
secured through renewal of contracts with
existing customers, or through the acquisition
of new customers. Bookings will result in
additional contracted revenue, dependent
on contract start dates. As with contracted
revenue, the revenue actually achieved from
such bookings may vary by up to 10 per cent.
due to the inherent estimation involved
under normalised conditions.

Performance
The significant growth experienced
in FY 2018 was based on lower gross
margin contracts, which led to a significant
improvement in FY 2018. Whilst bookings
have been lower in FY 2019, the Board is
pleased to report that bookings are now with
stronger customers (who meet the Group’s
more stringent requirements, particularly
regarding an internal assessment of the
ability of the customer to pay their bills) and
with increased gross margins. The upward
trend was also pleasing, with H1 2019 of
£3.2m increasing to H2 2019 of £5.3m.

Target
The Board has invested significantly in sales
and marketing and targeted an increase from
the level in H2 2019 for FY 2020, though the
impact of Covid-19 on the market opportunity
is being assessed.

Link to strategy

7
0
1
1

1
2
3
4

1
6
3
7

3
2
7
9

4
2
7

Definition
The total meter points demonstrate the gas
and electricity supply points served by the
Group at the relevant year end.

Performance
The decrease in meter points on supply at
31 December 2019 reflects a more prudent
sales approach based on revised criteria for
securing and retaining business.

The total UK business gas and electricity market
is circa 3.5 million, highlighting that there is
significant market opportunity available.

Target
The Group broadly targeted a modest
increase in meter points during 2020,
with significant growth thereafter.

Link to strategy

COVID-19

The Board continues to assess,
and take steps to mitigate to the
extent possible, the impact on key
performance indicators in FY 2020
and beyond as a result of the
Covid-19 pandemic outbreak.

See page 25 for the specific
risks and uncertainties from
Covid-19

YÜ GROUP PLC Annual report and financial statements 2019

STRATEGIC REPORTKEY TO STRATEGY

Growth

Profitability

Cash generation

Solid foundations

Net customer contribution

General overheads

Overdue customer receivables

2.5%

Improvement of 2.9% in 2019

6.3%

Improvement of 1.1% in 2019

7 days

Improvement of 2 days in 2019

4
2
1

4
0
-

1
9

4
7

4
1

Definition
Net customer contribution has recently been
introduced as a KPI. It measures the profit
contribution, in Adjusted EBITDA, directly
linked to customer contracts – consisting of
the gross margin reported (adjusted for any
non-recurring items), less the bad debt and
expected credit loss charged in overheads.

Net customer contribution can vary as
the Group flexes its commercial strategic
objectives. Such changes can be a result
of differing sales channels, the scale of
customer and their energy consumption, the
perceived credit risk of the customer being
able to pay their bill and the underlying
performance of the UK economy.

Performance
Performance has improved in the year, led
by a more stringent commercial criteria at
contract inception relating to the margin
expectation and assessment of customers’
ability to pay. In addition, the Group has
implemented various initiatives to improve
its financial and commercial control and
to reduce gross margin leaked due to the
previously poorly integrated systems.

Target
The Group continued to target an
improvement for FY 2020, as legacy, low
margin contracts expire and are replaced
by more robust contracts. A high single
digit margin is targeted in the medium term.
However, the impact on the UK economy due
to the Covid-19 pandemic is to be understood
further, and specifically the potential to
increase the bad debt charge incurred by
the Group.

Link to strategy

Definition
General overheads per cent. represent the
percentage of revenue charged to Adjusted
EBITDA as overheads of the Group. It comprises
the operating costs on a normalised, recurring,
basis and pre the impact of equity-settled
share based payments, movements in
derivatives charged to the income statement,
and exceptional costs. Operating costs also
excludes any bad debt or charges for expected
credit losses, which are classified in the net
customer contribution KPI.

Definition
Overdue customer receivables (“OCR”)
represent the amount outstanding and
overdue, net of provision, to key customer
receivable balances, compared with the
revenue recognised. Such balances are the
amounts held in relation to accrued income
which is beyond the normal one month billing
cycle, plus trade receivables (net of VAT and
CCL) that are overdue. Management utilises
this metric as it assesses the risk to the
income statement on such balances.

Performance
The Board is pleased to report an 1.1 per cent.
reduction in general overheads, continuing
the favourable trend from FY 2017 through
to FY 2019. General overheads are broadly
equally split between costs to acquire, costs
to serve and general administrative costs.
The Board targets a level spend in costs to
acquire, though will flex such investment as
new opportunities are identified across varying
sales channels. Costs to serve are semi-fixed
in nature, relating to the operational fulfilment
of the Group’s customer contracts. Such costs
are mainly in IT systems and people costs and
economies of scale are anticipated as the
Group expands its revenues over the medium
term. General administrative costs are largely
fixed in nature, relating to the core business
infrastructure in the Group.

Target
The Group will continually review opportunities
to automate processes and improve systems to
improve profitability by the reduction in general
overheads as a percentage of revenues.

Link to strategy

Performance
The Board is pleased to report the two day
improvement to OCR, representing a close
control over trade receivables and billing.

Target
The Group now has targeted such balances
to remain below an industry benchmarked
ten days, though the impact of Covid-19 will
be carefully assessed.

Link to strategy

OTHER KPIs

In addition, the Board and Executive
Management Team monitor various
other metrics to manage the business
and drive forward profitability. Such
metrics include the externally reported
Trustpilot score, employee engagement
per cent., contract renewal rates,
profitability returns by sales channel,
internal control actions overdue and
compliance with covenants and with
internal risk policies.

Annual report and financial statements 2019 YÜ GROUP PLC

Finance review

IMPROVING FINANCIAL
PERFORMANCE

The Group recorded a gross margin of
4.9 per cent. for FY 2019, an improvement
from the 4.0 per cent. recognised in FY
20182. Gross margin in H2 2019 achieved
6.7 per cent., compared to 2.1 per cent.
in H2 2018 and 3.2 per cent. in H1 2019.
This improvement in gross margin from H2
2018 to H2 2019 reflects the reduced impact
of legacy, low margin contracts after the
various initiatives taken by the Group in
early 2019.

Assessing the impact of Covid-19
The potentially unprecedented (in modern
times) impact as a result of the Covid-19
virus pandemic is an evolving picture
across the world – and the health, societal
and economic impacts are still being
understood as the Group’s annual
accounts are published.

The Board is committed to working
with all stakeholders, our customers,
colleagues, suppliers, regulators and
members of the local communities in
which we operate, to ensure the Group
plays its part in combating the virus,
and its associated impacts.

The business and financial risks associated
with the Covid-19 outbreak are being
closely monitored by the Board, and
mitigating actions are being taken where
possible. The key business risks and
actions include:

» Health and safety: The Group is

taking appropriate steps to protect its
employees and other key stakeholders,
based on Government advice.

» Business continuity and customer
service: The Group has implemented
its business continuity plan to ensure
key operations and customer service
teams can operate, alongside key
support functions.

» Lower commodity sales volume:
Social distancing and the potential
closure or reduction in business output
across the UK is likely to suppress
customer demand for energy, which

reduces revenues, gross margin and,
ultimately, the EBITDA of the Group.
Significant differences between forecasted
customer demand and actual demand
can also create additional risks (or
opportunities) from commodity market
volatility as the Group rebalances its
hedged position. The Board will continue
to monitor this risk and take appropriate
action to reduce the impact.

» Curtailed growth: The Group’s

strategic priorities include a significant
focus to scale the business to benefit
from the economies of scale, and to
achieve profitability. The Group also
planned the further expansion of sales
activities in a new Leicester office. The
impact on UK businesses may reduce
the ability to scale at the rates previously
considered and this is being closely
monitored by the Board.

» Economic context, bad debt and

working capital: The Government has
announced certain measures to support
businesses across the UK – specifically
aimed at small and medium-sized
entities, which is the Group’s target
market. However, the economic impact
of the virus pandemic could impact the
ability for customers to meet their
contractual liabilities on time, impacting
cash flow, and could ultimately lead to
higher levels of bad debt and reduce
the Group’s profitability.

Measures at UK level, including the
announced Government support to
businesses, together with the swift and
robust measures taken by the Group during
2020, are mitigating some of the impact
of the Covid-19 outbreak. In addition, the
Group’s new trading arrangement with
SmartestEnergy has created additional
cash flow to provide a level of headroom
to the Group’s balance sheet, leading
to a more robust position.

Ultimately, like many other companies,
the Board considers that there is currently
a material new risk in the Group’s business
model which needs to be monitored carefully.

Paul Rawson
Chief Financial Officer

Our key financial metrics
are showing a positive
trend and we have good
visibility and stronger
commercial oversight.

Results
The results for the year to 31 December 2019
have seen a 38 per cent. growth in revenue to
£111.6m (2018: £80.6m). Most encouragingly,
the tighter commercial and financial
management across the business is
now being evidenced in the improved
financial results.

The Group’s Adjusted EBITDA1 loss of £4.2m
for FY 2019 exceeded market expectations
and is significantly below the £6.3m loss level
in FY 2018. The half-yearly trend is also
encouraging, with the Adjusted EBITDA
loss reducing from £5.2m for H2 2018, to
£2.7m for H1 2019 and £1.6m for H2 2019.

£’000

H2
2019

H1
2019

H2
2018

H1
2018

Revenue 55,052 56,561 47,305 33,330

Gross
margin % 6.7% 3.2%

2.1% 6.7%

Adjusted
EBITDA

(1,568) (2,674) (5,238)

(1,045)

YÜ GROUP PLC Annual report and financial statements 2019

STRATEGIC REPORTSuch uncertainty predominantly relates to
the wider economic impact of the Covid-19
outbreak, and the timescales over which
the virus may continue to disrupt the UK
economy. In view of the level of uncertainty,
the Board has concluded that such
uncertainty is so material that it may cause
significant doubt on the Group’s ability to
continue as a going concern, as disclosed
in note 1 to the financial statements.

The Board is focused on protecting, first
and foremost, the health and safety of its
colleagues, customers and partners, at what
is a difficult time for all. The Board is also
confident in the Group’s ability to “weather
the storm”, especially after the work done
in FY 2019 to fully reset the Group.

See an assessment of the
business risk to Covid-19 on
page 25, and in notes 1 and 19
of the financial statements

Analysing profitability
The Board monitors profitability, as a
percentage of revenue, by breaking down
Adjusted EBITDA between net customer
contribution and general overheads:

» Net customer contribution

represents the contribution to profit
of the Group’s core activities and
consists of gross margin (excluding any
non-recurring items excluded from
Adjusted EBITDA) less bad debt.

» General overheads, being overheads
charged to Adjusted EBITDA excluding
bad debt, represents the investment in
sales, general administrative costs and
the costs incurred to manage the
customers contracts.

% of revenues

FY 2019

FY 2018

Adjusted EBITDA

(3.8%)

(7.8%)

Of which:

Net customer
contribution

2.5%

General overheads

(6.3%)

(0.4%)

(7.4%)

Net customer contribution for FY 2019
was 2.5 per cent., compared to a negative
contribution of 0.4 per cent. in FY 2018.
The improvement is a consequence of the
higher gross margins through stronger
commercial actions and the reduction
in the level of bad debt. The Board targets
a “mid to high single digit” net customer
contribution based on the revised sales
and commercial policies now in place –
with ultimately the Group achieving nearer
the level of 12.4 per cent. reported (after
restatement) for FY 2017. This target is prior
to the impact of the Covid-19 outbreak,
which is further considered below.

General overheads have decreased as
a proportion of revenue to 6.3 per cent.
in FY 2019 (2018: 7.4 per cent.). The Group
has continued to invest significantly in
sales and marketing to take advantage
of the market opportunity available.
The remaining overheads are allocated
between cost to serve, which is expected
to benefit from economies of scale as the
Group grows and automates processes,
and the more fixed in nature general
administrative costs.

As the Group grows over the medium
term, the level of general overheads as
a percentage of revenue is expected to
decrease based on the Group benefiting
from economies of scale.

The Group’s loss for the year was
£5.0m, an improvement from the
£6.3m loss in FY 2018. The loss for
FY 2019 includes costs outside of Adjusted
EBITDA related to certain non-recurring
items, share based payment charges and
unrealised losses on derivative contracts.
The reconciliation of statutory loss to
Adjusted EBITDA is included in note 7
of the financial statements.

Forward visibility
The Group monitors its forward contract
book which gives good visibility of the revenues
expected (on a normalised, pre Covid-19
basis) over the coming periods from
contracts which have been entered into.
At 31 December 2019, the Group had such
contracted revenues of £79.5m for FY 2020.

The level of contracted revenue is below
the £88m contracted at 31 December 2018
for FY 2019. This slowdown follows a reset
of the Group’s commercial strategy in early
2019, which contributed to a reduced level
of average monthly bookings for FY 2019,
of £4.2m (2018: £8.4m). Whilst the level of
gross margin on bookings has increased
significantly, the reduced bookings are
expected to result in a flatter revenue
in FY 2020.

Legacy contracts, which were typically
booked at low single digit gross margins,
are expiring and are either being renewed
at higher margins or ‘“positively lost”
(i.e. not renewed) due to the stricter
commercial and financial criteria now
applied. These legacy, low margin
contracts contribute approximately
£35m of the £79.5m contracted revenue
for FY 2020, and less than £5m for FY
2021. As these low margin contracts time
expire and are replaced by higher-margin
contracts, the net customer contribution
is expected to increase.

Forward contracted revenue for the year
to 31 March 2021 is split between 43 per
cent. of customers who are likely to be
significantly impacted by Covid-19, such as
schools, retail outlets, hotels, restaurants
and leisure venues. Medium risk customer
segments, such as supply to offices,
manufacturing plants and construction
sites, represent 41 per cent. of contracted
revenue, and the remaining 16 per cent.
relates to lower risk businesses such as
manufacturing and healthcare sites.

The reduced volume of energy will reduce
revenues and gross margin for FY 2020,
though such impact will depend on the
overall impact across all business sectors on
their energy consumption, and the length of
time for which the Covid-19 crisis continues.
The reduced margin, impact on hedging
position of any over-purchased consumption
and any consequential impact to bad debt
and working capital management may be
significant to the Group, though is not
easily estimated in view of the evolving
nature of the crisis.

Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, and before certain exceptional or one-off costs. The reconciliation
between IFRS and Adjusted EBITDA, as an alternative reporting measure, is included in note 7 to the financial statements.

Gross margin per cent. is after reclassification of third-party intermediary costs to be included in cost of sales. Such costs were previously allocated
as overheads.

Annual report and financial statements 2019 YÜ GROUP PLC

The Group targets financing the residual
value through a loan facility, when
appropriate during FY 2020. Beyond the
new property, the Group does not expect
significant capital expenditure beyond the
level in FY 2019.

The Group paid the 2018 interim dividend
in January 2019. The Board does not propose
the payment of a dividend for FY 2019.

Cash position and liquidity
The Group has cash available, with
£10.9m cash at bank at 31 March 2020
and a further £6.1m in cash collateral.

UK Government announcements
related to the deferral of VAT, and potential
financing, provides additional comfort, and
the Group also has certain other commercial
levers to manage its liquidity over this
period of uncertainty.

Summary
The Group has taken numerous financial
and commercial measures to improve its
financial returns and to benefit from the
available market opportunity. These results
are starting to be shown in the evolution of
the financial results of the Group.

The impact of Covid-19 represents
an evolving and material uncertainty
to the Group’s business model, though
the Board continues to take all appropriate
action to protect health and to mitigate,
to the extent possible, the impact which
the pandemic has on the Group’s
financial performance.

Paul Rawson
Chief Financial Officer
6 April 2020

Finance review continued

Balance sheet, net cash and
working capital performance
Customer receivables have reduced
by £0.6m in the year despite the Group’s
revenue growth. Trade receivables have
decreased by £0.2m to £2.9m (net of
£4.9m provision) at 31 December 2019
(31 December 2018: balance of £3.1m,
net of £4.8m provision). Accrued income,
net of expected credit loss provisions,
has decreased by £0.4m to £9.3m
at 31 December 2019 (£9.7m at
31 December 2018).

Overdue customer receivables (“OCR”)
were seven days at 31 December 2019,
an improvement of two days from the
position at 31 December 2018. The Board
is pleased with the continued performance
on OCR, having reduced the metric from
14 days at 31 December 2017, which is
utilised to ensure revenue and debtors
are under close management.

The Group has net cash, being cash and
cash equivalents less debt (in the form of
lease liabilities), of £1.8m, excluding £10.4m
of cash posted with trading counterparties.
In accordance with IFRS 16 “Leases”, a
liability of £0.6m has been recognised in
the year, with a corresponding asset value
of £0.5m. The recognition of this liability
and assets relates, primarily, to property
leased by the Group under operating
leases which were, prior to IFRS 16, not
held as an asset or liability on the Group’s
balance sheet. The Group continues to
have no bank or other debt.

The Group’s total cash outflow during the
year to 31 December 2019 was £12.2m, of
which £11.3m relates to operational activities.

Of the operational cash outflow, £10.4m
is attributable to the payment of trading
counterparty deposits required in line with
the Group’s forward commodity trading
arrangements due to the significant decline
in forward commodity markets.

The benefit from the Group’s new
structured trading arrangement with
SmartestEnergy (“the Facility”), providing a
variable credit line of approximately £13m,
had not been realised at 31 December 2019.
The new Facility will free up cash which
would otherwise be needed as collateral
with trading counterparties. To secure
the Facility, the Group has agreed certain
covenants, and fixed and floating charges,
related to the main trading subsidiaries of
the Group. Regular and constructive dialogue
with our trading partners in relation to the
potential impact of the Covid-19 pandemic
on aspects of the Facility arrangement has
been welcomed by the Board.

The remaining operational cash outflow
of £0.9m mainly derives from the Adjusted
EBITDA loss, the prepayment of certain
industry costs, and the benefit from the
Group’s positive working capital cycle.

The Group is investing in a new purpose-built
sales, marketing and innovation office in
Leicester. This property has led to a cash
outflow in H2 2019 of £0.3m, and a further
£0.7m which has been paid in Q1 of FY 2020.

Cash flow (£m)

)

(

)

5
0

(

0.0
-2.0
-4.0
-6.0
-8.0
-10.0
-12.0
-14.0
-16.0
-18.0
-20.0

)

)
3

1
1
(

)

6
0

(

)

2
0

(

4
0
1

(

)

1
2

(

y
r
t
s
u
d
n

s
t
n
e
m
y
a
p
e
r
p

9
5

s
m
e
t
i

a
t
i
p
a
c

g
n
k
r
o
w
r
e
h
t

a
t
i
p
a
C

e
r
u
t
i
d
n
e
p
x
e

e
c
n
a
n
i
f

d
n
a
t
s
e
r
e
t
n

w
o

l
f
h
s
a
c

a
n
o
i
t
a
r
e
p
o

a
t
o
T

)

2
0

(

)
2

2
1
(

a
t
i
p
a
c

w
o

l
f

h
s
a
c

a
t
o
T

d
n
a
d
n
e
d
v
D

A
D
T
B
E

d
e
t
s
u
d
A

s
t
s
o
c

g
n
i
r
r
u
c
e
r
-
n
o
N

g
n
d
a
r
t

r
o
f

a
r
e
t
a

l
l

o
c
h
s
a
C

Increase

Decrease

Total

YÜ GROUP PLC Annual report and financial statements 2019

STRATEGIC REPORT

Risks and uncertainties

MANAGING OUR RISKS

We monitor, assess and mitigate the principal risks and uncertainties facing the Group
based on the likelihood of their occurrence and potential impact they would have.

Approach to risk
The Board is responsible for maintaining the Group’s risk management
and internal control systems and for the monitoring and mitigation
of risk (and opportunity) in line with the Group’s objectives. The
Audit Committee also reviews risks on behalf of the Board and
provides further oversight and risk mitigation when working with
executive team members.

The key features of the Group’s systems of internal control are:

» a risk and internal control improvement register is maintained
by the internal control manager and reviewed regularly by the
Board. The risks are identified and discussed by the department
heads and then the Executive Committee before being
reported to the Board;

» an organisational structure with clear segregation of duties,

control and levels of authority;

» strong policies and procedures are in place around

what constitutes good governance and a solid internal
control framework;

» some internal audit assurance is provided by independent
ad-hoc third-party reviews and via internal compliance
and quality function roles;

» a regular risk and internal control forum takes place, chaired
by the internal control and risk manager. This gives clear visibility
and accountability for the internal control environment of the
Group; and

» formal hedging policies and a risk mandate that govern the

Group’s approach to forward purchase of commodity contracts.

h
g
H

t
c
a
p
m

m
u
d
e
M

w
o
L

Low

Medium

Likelihood

High

BOARD
The Board of Directors is ultimately
responsible for risk management

EXECUTIVE
COMMITTEE
Assesses key risks in all
areas of the business and
the necessary action
to help mitigate
those risks

AUDIT COMMITTEE
Reviews risks, mitigation
actions, systems and
controls. Liaises with
external auditor and
advisers to ensure control
environment is managed

INTERNAL
CONTROL FORUMS

Monitor and report
on control
environment of
the Group

COMPLIANCE AND
QUALITY TEAM

Tests key areas of
internal control and
compliance

THIRD-PARTY
REVIEWS

Ad-hoc reviews

POLICIES, PROCEDURES,
REPORTING AND REVIEW
Documented controls, delegated levels of
authority and management review processes

Annual report and financial statements 2019 YÜ GROUP PLC

Risks and uncertainties continued

PRINCIPAL RISKS
AND UNCERTAINTIES

The risk related to Covid-19 is assessed on page 25.

1. REVENUE RECOGNITION

2. CREDIT RISK
Customers do not pay their bills

Description
With the continued growth in the business, the wider
economic environment and the inherent risk that customers
may not be able to pay, there is a risk of the Group incurring
losses due to the non-payment of invoices.

Mitigation
Stringent credit checking policies are being applied across
all sales channels to ensure the contracts secured by the
Group are with the right type of customers.

An increased level of resource, coupled with improved
systems and collections processes, has led to improved
collections performance during FY 2019.

The Group also reviews trade receivables carefully to
ensure provisions are booked to cover expected credit
losses at the balance sheet date.

Description
Due to the inherent nature of the industry and its
reliance upon estimated meter readings, revenue
includes the Directors’ best estimate of differences
between estimated sales and billed sales. When customers
are unable to be billed for technical reasons, such as a
failure in communicating to an automatic meter, a best
estimate of the level of accrued income that is to be
recognised also needs to be made by management.
Given the process for estimating involves a number of
variables, there is a risk that the level of accrued income
reported is inaccurate and not ultimately recoverable.

Mitigation
Strict internal policies, processes and guidelines that
were introduced in 2018 have continued to operate
throughout 2019 to ensure that the Group’s revenue
recognition policy is appropriate, and that accrued
income is at a manageable level.

The level of accrued income held at 31 December 2019,
which has not been billed in January 2020, is £0.3m
(2018: £0.4m). This level of accrued income is net of a
provision based on an assessment, under IFRS 9, of the
level of expected credit loss of the balance. This area
of the Group’s revenue is continuously assessed in
order to ensure the amounts are recoverable or are
not recognised in revenue.

Link to strategy

Change

Link to strategy

Change

No change

Decrease

KEY TO STRATEGY

Growth

Cash generation

Profitability

Solid foundations

YÜ GROUP PLC Annual report and financial statements 2019

STRATEGIC REPORT3. TRADING RISK
Volatility in commodity prices and customer demand

4. COVENANT BREACH

Description
The new trading agreement with SmartestEnergy Limited
helps reduce the risk of cash calls from a falling commodity
market (as described in risk 3), although does, however,
introduce a new risk to the Group. As part of the agreement,
the Group has provided certain security and commitments
to SmartestEnergy and is required to adhere to and report
on a number of covenants on a monthly basis. Any covenant
breach could have serious implications on the Group’s ability
to continue to trade if corrective action is not taken in a
timely fashion.

Mitigation
The Group has an experienced management team and a
highly experienced trading team. Management will continue
to forecast Group performance throughout the period of
the new trading arrangement to enable early sight of any
potential issues that may lead to a possible covenant breach.
There are a number of levers available to the Group to avoid
a potential covenant breach, including slowing down the
growth rate or reducing certain discretionary spends.

Description
The energy commodity market was extremely volatile in
2019 and since the end of Q3 2019 has seen a continued
downward trend in prices. Although a falling commodity
market provides an opportunity from a sales and profitability
perspective (as customers lock in the lower value) it opens
the Group up to a significant cash liquidity risk, as the
mark-to-market position the business holds with its
commodity trading counterparties leads to an increased
likelihood of a “cash call” for additional trading security.
Changes in customer demand can also generate risk or
opportunities to manage across the customer portfolio.

Mitigation
Towards the end of 2019 the Group entered into a new
structured trading arrangement with SmartestEnergy
Limited. The arrangement involves Yü Group PLC exclusively
purchasing its energy commodity from Smartest going
forward and novating its existing forward purchase trades
with other trading counterparties over to Smartest as
soon as practicable. The benefit of this arrangement is a
significantly higher credit limit than the previous position,
and a credit line that will scale with the Group as it grows.
This arrangement will significantly reduce the need to
post-cash collateral deposits as described above.

The Group also monitors closely the customer demand
forecasted across its contracts, and utilised analysis
of past performance, to ensure appropriate trading
decisions are taken.

See also note 19, note (b) in the financial statements.

Link to strategy

Change

Link to strategy

Change

Decrease

New 2019 risk

Annual report and financial statements 2019 YÜ GROUP PLC

Risks and uncertainties continued

5. DATA INTEGRITY

6. RELATIONSHIP WITH
REGULATORY BODIES

Description
As with all energy supply businesses, the Group is reliant
on large amounts of data for the business to function
effectively. If controls fail or systems are unavailable for a
prolonged period, there is a risk that the business would
be unable to issue invoices to customers or to communicate
with the energy industry and so would be unable to collect
the cash necessary to settle its liabilities or operate under
its licence obligations.

There is also a risk that data control processes are
not present to reconcile data across financial, billing
and other systems, leading to inappropriate reporting
and potential loss to the Group.

Dealing with large volumes of data also presents a risk
in terms of a potential data security breach. There have
been several high profile data security breaches in other
organisations over the last few years. Such a breach incurs
both financial and reputational penalties.

Mitigation
To deal with the risk of system downtime, the business
has a business continuity plan. This involves system
backups and measures to restore business operation
as soon as possible.

Reconciliation of energy consumption and financial data,
particularly in relation to the Group’s bill to cash cycle, has
continued to improve throughout 2019. The new robust
processes adopted in late 2018/early 2019 have now had a
chance to bed in and become part of the business as usual
monthly activities. These processes have been subject to
two external “health check” reviews in 2019 and have been
shown to be operating effectively.

To help mitigate against a potential data security breach,
the business operates robust physical and system access
controls. Controls on elements of these are subject to
external audit.

Description
The Group is a licensed gas, electricity and water supplier,
and therefore has a direct relationship with the various
regulatory bodies within the industry, in particular Ofgem.
If the Group fails to maintain an effective relationship
with these regulatory bodies and comply with its licence
obligations, it could be subject to fines or even the
removal of its respective licences.

As an AIM company, the Group is also subject to certain
financial regulations and regulatory bodies, such as the
AIM Rules for Companies and the Financial Conduct
Authority (“FCA”).

Mitigation
The Group has a management team and senior staff
with extensive industry experience and broad experience
in dealing effectively with the various regulatory bodies.
The Group has an internal compliance team that focuses,
amongst other things, on energy industry regulatory
compliance and any ongoing regulatory communication
that the Group is involved in. The Group monitors and takes
appropriate actions in relation to complying with regulation.

The Board co-operated fully with the requirements of the
FCA investigation into the matters identified in Q4 2018,
with the FCA announcing it was discontinuing its
investigation in May 2019.

The Board is committed to ensuring that the Group
remains compliant with all industry and AIM regulations
at all times and will actively seek clarification and an open
dialogue channel if there is any requirement to do so.

Discussions, via the Group’s nominated adviser, with
the AIM regulator on ensuring the appropriate action
and follow-up has been taken by the Group following the
accounting issues identified in 2018 have been ongoing.
The Directors believe there is a risk in relation to regulatory
action as a result of the issues identified in 2018 and have
made allowance for the estimated costs of such action in
the accounts based on an assessment of financial exposure.
The Directors are confident that the steps taken to strengthen
the Board since the issues were identified, and the various
control improvements and external reviews undertaken,
now result in reduced risk for the future.

Link to strategy

Change

Link to strategy

Change

Slight decrease

Decrease

KEY TO STRATEGY

Growth

Cash generation

Profitability

Solid foundations

YÜ GROUP PLC Annual report and financial statements 2019

STRATEGIC REPORT7. THE POTENTIAL IMPACT FROM THE COVID-19 VIRUS

The risk of the global pandemic, Covid-19,
is considered by the Directors to be a
material uncertainty for the Group in
view of its unprecedented impact
across society and the potential to
impact the UK economy and the
Group’s target market.

The Board is continuing to assess the
risks posed by Covid-19, which range
from the health and safety of employees,
partners and other stakeholders to
the ability of the Group to operate in its
target market in serving UK small and
medium-sized businesses.

Whilst the Board believes the Group is
better placed than ever (after improving
various controls and processes after
a period of business “reset”, and after
obtaining new credit facilities for trading
arrangements), and is pleased with the
successful deployment of the business

continuity plan, the risks associated with
Covid-19 will be continually monitored
and re-assessed as they evolve.

businesses (with “whatever it takes”)
and the energy sector will all place
the Group in a stronger position.

The key risks, and the mitigating actions
taken, are shown below.

The combined effect of the below risks
could lead to a potentially significant
impact on the Group’s ability to meet
market expectations and could,
ultimately and in extreme and continued
circumstances, result in cash flow issues
for the Group to manage. The Board has
therefore run various sensitivity scenarios
to consider this risk further.

Various mitigating actions implemented
by the Board (such as business continuity
initiatives, and changes to hedging
processes) together with the
announcements and action taken by
the UK Government to support UK

Whilst the financial level of such risks is
still developing, and not easily quantifiable
based on the fast-moving nature of the
issue, the assumption of the Directors is
that the Group has sufficient headroom
to continue to “weather the storm”.

The Board continues to assess this risk,
taking appropriate action and engaging
with key stakeholders so as to monitor
the evolving situation actively.

See, also, the following notes to the
financial statements:

» note 1, for consideration of the
impact on going concern; and

» note 19 (f), for risks and sensitivities

related to Covid-19.

Risk

Action

Health
and safety

The Group has implemented various initiatives, based on the UK Government’s advice,
to protect employees and other key stakeholders. Such matters include the transfer of
teams to work remotely, providing communication on hygiene and other health advice,
and the support of vulnerable individuals who may be at a higher risk of serious illness.

The Board, management team and all colleagues will continue to prioritise the safety
of all stakeholders as the impact of the global pandemic is felt.

Potential risk of
financial impact

Low

Business
continuity
and
customer
service

The Group takes its responsibility to customers seriously and had, already, enhanced
and tested its business continuity plan.

Low

The Group will continue to focus on ensuring customers can access the Group
and access key services, to provide support in what is a difficult time.

In addition, the Group continues to operate its key functions across the customer
and supplier lifecycle.

In common with most other businesses, the productivity and costs associated with
temporarily closing the Group’s key offices will require careful management during
the period of social distancing.

Annual report and financial statements 2019 YÜ GROUP PLC

Risks and uncertainties continued

7. THE POTENTIAL IMPACT FROM THE COVID-19 VIRUS CONTINUED

Risk

Action

Lower
commodity
sales
volume

Customers have entered contracts based on their expected energy consumption.
The measures implemented, such as social distancing, is likely to reduce business
customers’ energy demand, leading to reduced revenue for the Group below the
contracted revenue level assumed.

In addition, if such commodity volume is significantly below the Group’s normalised
customer demand, then the Group is more exposed to commodity market movements
where any “long” position (i.e. purchase of too much energy) will need to be sold back.

The Group has already begun to assess and take corrective action on its hedging
policies to take into account the potential for reduced volume of commodity sales
over the short to medium term.

Potential risk of
financial impact

Low to
medium

Curtailed
growth

The Group has established new sales processes, management and direct sales teams,
as well as increasing its operational base in Leicester. These actions are to take advantage
of the significant addressable market available to the Group, which will also leverage
the Group’s overhead base.

Medium

The Covid-19 outbreak is anticipated to restrict the level of new bookings achieved
by the Group, which may delay the ability to scale.

The Group serves UK small and medium-sized businesses, which operate across various
market segments: from retail to hospitality, leisure, sports stadia and manufacturing.

Medium
to high

Depending on the economic impact on customers, less the ultimate mitigating actions
from the Government or other subsidies, the Group’s ability to collect its customer
receivables on time, or at all in some instances, requires careful monitoring.

As well as the impact on the Group’s working capital requirement and the level of bad
debt charged to profit, a significant and prolonged impact to bad debt will increase
the likelihood of a default in a covenant under the structured trading arrangement,
leading to additional cash outflows for the Group if the trading credit line is reduced.

Economic
context,
increased
bad debt
and
working
capital

BREXIT

The Directors have considered the impact of Brexit on the business and, at this stage, do not believe that it will have
a significant impact on either the day to day running or the longer-term prospects of the Group.

YÜ GROUP PLC Annual report and financial statements 2019

STRATEGIC REPORTSection 172

STATEMENT IN RELATION
TO SECTION 172 OF THE
COMPANIES ACT

The Directors ensure a
focus on quality management,
ensuring high standards of
conduct and sound business
ethics, including clear and
well-communicated Company
values and policies.”

The Directors consider, both individually
and collectively, that they have acted in a
way they consider promotes the success
of the Group for the longer term.

This includes ensuring due regard to the benefit of its members
as a whole, and basing decisions after considering the likely
consequences across all stakeholders: shareholders, employees,
customers, suppliers, regulators, and the community in which
the Group operates.

The Directors also ensure a focus on quality management,
ensuring high standards of conduct and sound business
ethics, including clear and well-communicated Company
values and policies.

The Group’s governance frameworks, as referenced in the
corporate governance section of this annual report from
page 34, provide further information on how the Directors
ensure appropriate consideration for such decisions.
The Directors’ Report on page 41 also contains additional
information on the engagement with key stakeholders.

The Strategic Report outlines where shown the Group’s
approach across various matters: including interaction with
key stakeholders in the business model section on page 5;
the approach to engagement and development of employees
on page 29; and the environmental context in which the Group
operates on page 28.

Read more at yugroupplc.com

Annual report and financial statements 2019 YÜ GROUP PLC

Climate change and environmental considerations

ENVIRONMENTAL CONTEXT
IN WHICH WE OPERATE

We support businesses in their energy
transition, supporting the deployment
of lower carbon technologies.

The Board continually assesses its business model, and
business offering, including the impact of climate change and
wider environmental considerations. There is an energy transition
towards a lower carbon, more local and digitalised energy system.

The Board develops strategies to assist businesses in the energy
transition, including the provision of new technologies which assist
the transition to a lower carbon economy. Such solutions offered
to businesses include:

Electric vehicle chargers

Energy efficiency reporting and support

SMETS2 smart meters

Green energy

The Group also is aware of its impact on the environment in
its own operation. Smart and efficient lighting, the installation
of EV charge points and recycling are just some of the ways that
the Group reduces its own impact on the environment.

Fuel mix disclosure
The Group trades gas and power from commodity markets
to supply to its business customers. The energy procured
by the Group depends on the end requirements of the
customer and the generation method from the Group’s trading
counterparties. The fuel mix disclosure of the Group is disclosed
at www.yuenergy.co.uk/support/annual-fuel-mix-disclosure/.
The Board will continually look to increase the proportion of fuel
sourced from renewable or low carbon sources of generation,
including via the promotion of the Group’s green gas and
power solutions.

PROVIDING GREEN ELECTRICITY

We have for some time provided customers with the
option to source 100 per cent. certified renewable
electricity, helping businesses to show a positive
commitment to sustainable values. Backed by the Ofgem
administered REGO scheme, this allows businesses to
report zero carbon emissions on their electricity usage
and certify that their electricity is from 100 per cent.
certified renewable sources.

As part of our commitment to providing sustainable
energy solutions, we have now taken our green electricity
offering to the next level. Working with SmartestEnergy
as our sourcing partner, we can now provide businesses
with 100 per cent. clean energy generated directly from
a specified wind farm. This gives customers reassurance
that they are taking a fully clean, green product,
traceable to source.

Our clear, green energy is generated from the Carno II
wind farm in Wales, which at the time of its construction
in 1996 was the biggest onshore wind farm in Europe.

YÜ GROUP PLC Annual report and financial statements 2019

STRATEGIC REPORTOur people

UNLEASHING OUR
PEOPLE POTENTIAL

We have the knowledge, resources and passion throughout the business
with a playing to win mindset to drive our future success.

Culture
Yü aims to create a dynamic and inspiring
work culture where ambition thrives, and
our people aspire to achieve real change
in the business for our customers, the
energy industry and the local community
as a whole.

Transparency and communication are key
to our culture.

Monthly “Yü Mad” (you made a difference)
sessions are where all colleagues receive
updates and are able to ask questions
of the senior management, and for the
business to recognise individuals who
have gone above and beyond whilst role
modelling our four values and seven habits.

These values and habits are ingrained in
Yü’s culture, from recruitment to an annual
awards ceremony celebrating the people
who truly demonstrate these behaviours.

Corporate social responsibility
Mind is the charity our colleagues voted
to support in 2019. Its purpose is to raise
awareness about mental health, a major issue
in different communities across the nation.

During the year, activities focused on
removing the stigma about mental health
and allowing people to open up in a safe
environment to talk about the issues.

Over £2,000 was raised for Mind
through various activities, half of which
was match funded by the Group.

People strategy
We developed our people strategy to
enable Yü to maintain agility in times of
change. However the organisation structures
its business or how we adjust our strategic
priorities, growing talent from within is key.

The three focus areas of our people
strategy are:

» preparing our people for the future;

» providing opportunities; and

» recognising performance.

The Group also launched a save as you
earn scheme in the year to more closely
link employees with the development
of the Company and the share price.

People are at the
heart of our values and
habits, and this allows
us to create the right
performance culture.”

Navaz Dean
Group HR Director

OUR EMPLOYEES

Average employee
engagement

69%

Gender

Male

Number of employees

Ethnicity

Spread of ages

Female

Aged 18–25

Aged 26–35

Aged 36–45

Aged 45+

129

Asian

Black

Mixed

White British

White Other

Other

Annual report and financial statements 2019 YÜ GROUP PLC

Our people continued

Performance leadership
We continue with our rigorous approach
to performance leadership (“PL”), training and
development to ensure consistent standards and
strong people capability are at the heart of our business
growth. This helps line managers have timely, open and
honest conversations about the required standards
for the role or task and allows managers to direct
colleagues to the relevant support resources: internal
mentoring, coaching or our online eLearning platform.
The PL approach is all about supporting colleagues and
helping them to be the best version of themselves,
allowing them to unlock their full potential.

Colleagues that consistently demonstrate high levels
of performance and potential continue to be placed
onto our internal talent programme. These colleagues
receive leadership development, coaching, mentoring
and technical training and form part of our future
leaders pipeline.

TEAM OF THE YEAR:
INDIRECT SALES TEAM

The whole team has changed the way it works and adapted to changes
within the business, whilst still demonstrating the Yü Energy habits and
delivering a strong performance against targets.

PEOPLE AGENDA

Apprentices – we have continued with our successful
apprenticeship programme which has formed an important
pipeline of talented individuals. All individuals that completed
the programme have been offered permanent full-time roles.

Placement students – this has proved successful once
again. We partnered with local universities to provide one year
placements in marketing, HR and commercial, strengthening
links with these institutions to bring fresh thinking and talent
into the organisation.

Employee engagement – we continue involving and listening
to our colleagues across the organisation to create the right
conditions for them to be their best each day. We also hold
employee engagement surveys, the results of which are critical
to the development of the organisation by bringing new and
innovative ideas into Yü.

In 2019 we heard our colleagues’ views and decided that the
previous Company values did not represent our diverse and
growing workforce. We refreshed our values to enable our
colleagues to be more committed to the organisation’s goals
and values with an enhanced sense of their own well-being.

COLLEAGUE OF THE YEAR:
JOSH SANDERS

Josh has worked consistently hard on a range
of complex projects, developing a huge amount
of industry knowledge and putting in a great amount
of effort to make sure things work behind the scenes.
Josh always goes the extra mile.

YÜ GROUP PLC Annual report and financial statements 2019

STRATEGIC REPORTOVERVIEW: OUR CULTURE, VALUES AND HABITS

The Yü values and habits provide a common, unifying platform to create the right performance culture across
the business. Our values are an essential part of the organisational culture and form the core of how our people
behave. The four values, Customers, Integrity, Teamwork and Innovation, underpin the seven Yü habits.

OUR VALUES

Customers
We are passionate about our
customers and strive to meet
or exceed their expectations
on every experience.

Integrity
We are trusted and
accountable to uphold the
highest standards of integrity
in all of our actions.

Teamwork
We work together seamlessly
across boundaries to meet
the needs of our customers
and to help our Company win.

Innovation
We use our imagination to
drive innovation through a
continuous learning mindset.

The seven habits are the tangible behaviours that help to deliver our culture. They are measurable and observable,
helping the business to set standards for how we expect our people to behave. Our teams receive feedback on how
well they demonstrate these habits as part of the performance leadership process.

Be proactive

Sharpen the saw

Begin with the
end in mind

Synergise

7
habits of
Yü Energy

Put first
things first

Seek first to understand
then to be understood

Think win/win

Annual report and financial statements 2019 YÜ GROUP PLC

Board of Directors

Robin Paynter Bryant
Independent Non-executive
Chairman

A R

Skills and experience
Robin has more than three decades of
experience in corporate finance, with a
strong background in utilities. After joining
City merchant bank Hill Samuel & Co. Ltd.
in 1983 to work on asset, liability and
treasury risk management for utilities and
large companies, he worked at financial
institutions including LCF Edmond de
Rothschild, Credit Lyonnais Securities,
Daiwa Europe and the Industrial Bank of
Japan/Mizuho Corporate Bank. With
international experience across water,
electricity, and oil and gas, he has advised
companies such as Severn Trent Water Plc,
Endesa SA, Italgas SpA, and Centrex
European Energy & Gas AG. He has
previously served as a non-executive
director of Ofwat (the water services
economic regulatory authority) and Prime
International Investments Group Plc and
as a board member of London Merchant
Bank Ltd. Robin joined Yü Group in
January 2020.

Bobby Kalar
Chief Executive Officer

Paul Rawson
Chief Financial Officer

Skills and experience
Bobby has a degree in electrical and
electronics engineering, and started
his career working as an electronics
engineer at Marconi PLC. In 2000,
having moved to London to work for
COLT Telecommunications, he headed a
team of engineers involved with the bid
and installation of the congestion charge
scheme in London on behalf of the Mayor
of London’s Transport for London initiative.
Following this major project Bobby invested
in the care home sector, eventually owning
and running a group of four care homes.
In 2013 he sold the care homes so that he
could focus on the market opportunity
presented by the deregulation of the
energy sector. He is the sole founder
of the Group.

Skills and experience
Paul has a degree in accountancy and is a
qualified chartered accountant (ICAEW)
with a history in financial and commercial
management in high growth businesses.
In 2001 he left KPMG to join the energy
industry in what is now the Engie Group,
where he held various senior financial and
general management positions. These
ranged from the financial and commercial
aspects of a £100m investment project to
generate and supply energy across the
London Olympic Park to a number of
energy related M&A transactions. Paul was
latterly responsible, as divisional CEO, for
energy solutions spanning the retail supply
of gas and electricity to businesses, and
the provision of low carbon generation,
energy Software as a Service and smart
building technologies. Paul joined Yü
Group in September 2018.

External appointments
Robin is currently a director of Unity Link
Financial Services Limited.

External appointments
None.

YÜ GROUP PLC Annual report and financial statements 2019

CORPORATE GOVERNANCEJohn Glasgow
Independent
Non-executive Director

Anthony (Tony) Perkins
Senior Independent
Non-executive Director

A R
A

RA
A

COMMITTEE KEY

A Audit Committee

R Remuneration Committee

C Committee Chairman

Skills and experience
John has over 35 years’ experience in
engineering, operations, trading and IT
across the energy industry. Senior roles
have included head of Powergen technical
audit and head of Powergen’s energy
management centre, covering energy
trading and power plant portfolio
optimisation, and general manager of
Powergen Energy Solutions. Latterly,
he was in board roles including head
of strategy at the establishment of the
new E.ON Energy Services business, E.ON
director of new connections and metering
and director of operations and asset
management at E.ON Central Networks.
During this time John was also a board
member of the Energy Networks Association
and a member of the DECC Energy
Emergencies Executive Committee (“E3C”).
Upon leaving E.ON John became managing
director of Sterling Power Utilities Ltd
until autumn 2013.

Skills and experience
Tony has a degree in accountancy and
is a Fellow of The Institute of Chartered
Accountants in England and Wales. He left
BDO in 2019 where he was a senior audit
partner for many years, having joined the
firm in 1980 and a partner from 1990. He has
acted for many fully listed and AIM companies
in the professional services, natural resources,
technology, manufacturing and retail sectors.
He has extensive experience in financial,
governance and risk management. He has
advised on corporate strategy, transactions
and expansion of businesses in the UK
and internationally. Tony has held senior
management positions at BDO as a
member of the firm’s leadership team
including head of its London operations
and national head of audit. Tony joined
Yü Group in January 2020.

External appointments
John is also a board member of the
St Modwen Environmental Trust.

External appointments
Tony is currently a director
of Bernhard & Co. Limited.

Annual report and financial statements 2019 YÜ GROUP PLC

Chairman’s introduction to governance

EXPERIENCED AND
STRENGTHENED BOARD

Robin Paynter Bryant
Chairman

Dear shareholder,

Following my recent appointment to the
Board of Directors in January 2020 and as
your Independent Non-executive Chairman
I felt it appropriate to provide an updated
report on our governance structure.

My experience with energy and utility
companies in the UK and internationally
as a non-executive board member at
Ofwat (the economic regulatory authority
for water) and as a corporate financier in
the City has given me a good understanding
of the sector. I am now greatly looking
forward to serving the Group’s shareholders
as your Chairman.

Board composition and
governance structure
From January 2020 (i.e. post the year under
review) the Board has been restructured
and strengthened.

I welcome the appointment of Tony Perkins
(ex partner at BDO LLP where he was head
of London audit, and previously head of
national audit) as Non-executive Senior
Independent Director and Chairman of the
Audit Committee. Tony brings invaluably
robust financial acumen and adds great
depth of multi-sectorial experience to
the business.

John Glasgow continues as an Independent
Non-executive Director, and Chairman of
the Remuneration Committee, whilst also
brings his previous senior experience gained
at Powergen and E.on.

I believe that my fellow independent NEDs
will greatly serve to reinforce the Board’s
“scaling” and “mentoring” capabilities as
the Company relaunches into sustained
and sustainable growth.

Two further Board members are drawn
from amongst the Executive Directors.
One is the CEO and majority shareholder,
Bobby Kalar, whose strategic vision is also
complemented by that of fellow Executive
Board member and CFO, Paul Rawson,
ex-KPMG and Engie, who also serves
as Company Secretary and who, since
his appointment in late 2018, has been
instrumental in effecting a “reset” of
the Company.

The Executive Committee (“ExCo”) reports
to the Board via and through the CEO and
this strong and experienced management
team has now been re-engineered and is
tasked with implementing the business plan
as agreed by the Board. This ExCo (under the
leadership of the CEO), consisting of various
Executive Management Team members,
drives the day to day activities of the business,
reporting to, and seeking strategic and other
counsel from, the Board as a whole.

20+

BOARD COMPOSITION
Independent Non-executive Chairman (1)
Independent Non-executive Directors (1)
Executive Directors (3)

31 December 2019

80+

TENURE
More than three years (4)
Between one and three years (1)
Under one year (0)

80+

SECTOR EXPERIENCE
Previous energy sector experience (4)

Other sector experience (1)

YÜ GROUP PLC Annual report and financial statements 2019

CORPORATE GOVERNANCE20
+
60
+
M
20
+
0
+
M
20
+
M
The current structure and composition is
designed to best suit the agile decision-making
and governance requirements of a Company
which has successfully undertaken an effective
“reset” and which is now poised for a period
of sustained and sustainable growth.

Stakeholder engagement
and feedback
The Board of Directors makes itself available
to stakeholders as appropriate. Such
stakeholders range from our shareholders,
regulators (including financial and utilities
regulators), nominated adviser, customers,
partners and people.

In relation to shareholder engagement,
I will ensure that the Board and I represent
the interests of all the shareholders.

There is a clear and documented relationship
with Bobby Kalar, who founded the Group
and remains majority shareholder as well as
CEO. The maintenance of formal and agreed
distinctions and responsibilities brings clarity
to the definition of roles amongst Bobby,
all other members of the Board and me. It is
key to managing these varied and multiple
interactions. Bobby Kalar has demonstrated,
having very actively promoted a refreshed
set of Board dynamics, a keen understanding
of the governance requirements of a growing
business. This in turn has greatly assisted
the Board and me in reconciling the potential
tensions occasioned by his “dual hatting”
of roles within the enterprise.

Robin Paynter Bryant
Chairman
6 April 2020

Summary
Whilst the work done to date has been
essential, we are not complacent. The rest
of the Board and I will continue to develop
our governance processes and systems
going forward to ensure we are fully prepared
and in step with the increasing growth of
the Group.

GOVERNANCE OVERVIEW

JOHN GLASGOW,
IND. NON-EXEC.

CHAIRMAN OF
REMCO.

s
r
o
t
c
e
r
i
D

f
o
d
r
a
o
B

SHAREHOLDERS

ROBIN PAYNTER
BRYANT,
IND. NON-EXEC.
CHAIRMAN

TONY PERKINS,
SID, NON-EXEC.

CHAIRMAN OF
AUDITCO.

BOBBY KALAR,
CEO

PAUL RAWSON,
CFO AND CO. SEC.

EXCO

20+

BOARD COMPOSITION
Independent Non-executive Chairman (1)
Independent Non-executive Directors (2)
Executive Directors (2)

31 March 2020

40+

TENURE
More than three years (2)
Between one and three years (1)
Under one year (2)

60+

SECTOR EXPERIENCE
Previous energy sector experience (3)

Other sector experience (2)

Annual report and financial statements 2019 YÜ GROUP PLC

40
+
40
+
M
20
+
40
+
M
40
+
M

Corporate governance report

STRONG LEADERSHIP

Statement by the Directors on compliance with the Code of best practice.

The Board seeks to follow best practice in
corporate governance appropriate to the
Company’s size and in accordance with the
regulatory framework that applies to AIM
companies. The Board has decided to
apply and adhere to the Quoted
Companies Alliance (“QCA”) Code.

The QCA Code ensures a worthwhile,
effective and flexible governance model.
It encourages positive engagement between
the Company and all its stakeholders.
Good governance is one of the foundations
of a sustainable corporate growth strategy.
The QCA Code is constructed around 10 broad
principles. The appropriate application
of these principles will ensure that good
governance practices are in place. Details
of how the Group is applying those
principles can be found on the investor
relations section of the Company website
at www.yugroupplc.com.

The Board
The Group is controlled through a Board
of Directors, which at 31 December 2019
comprised a Non-executive Chairman,
three Executive Directors and one other
Non-executive Director, for the proper
management of the Company and the
Group. The Chairman during 2019 was

Ralph Cohen and the Chief Executive
Officer was and continues to be Bobby
Kalar. Both of the Non-executive Board
members, Ralph Cohen and John Glasgow,
were considered to be independent
throughout 2019.

Subsequent to the year end on 8 January
2020 two new Independent Non-executive
Board members were appointed to
strengthen the overall governance and
control environment of the Group. Robin
Paynter Bryant was appointed as Chairman,
to replace Ralph Cohen, who stepped
down from the Board on 8 January 2020.
Tony Perkins was appointed as Senior
Independent Director.

On 7 February 2020, Garry Pickering
resigned from the Board of Directors to
take on a new, non-Board, position in the
Group whilst remaining on the Executive
Committee. The Board therefore now
consists of three Independent Non-executive
Directors and two Executive Directors.

The Board operates both formally, through
Board and Committee meetings, and
informally, through regular contact among
Directors and members of the Executive
Management Team. There is a schedule of
matters that are specifically referred to the

Board for its decision, including approving
the interim and annual financial results,
setting and monitoring of strategy and
examining business expansion possibilities.
It is a requirement that the Board be
supplied with information in a timely
manner, in a form and quality appropriate
to enable it to discharge its duties.

The Directors can obtain independent
professional advice at the Group’s expense
in the performance of their duties as Directors.

Board Committees
The Board Committees comprise the Audit
Committee and the Remuneration Committee.

Audit Committee
During 2019 the Audit Committee
comprised two members, Ralph Cohen
(who was Chairman of the Audit
Committee) and John Glasgow.

The Audit Committee now comprises
three members, who are all Independent
Non-executive Directors: Tony Perkins
(Chairman), John Glasgow and Robin
Paynter Bryant. The Group’s external
auditor, along with the wider Board, is
invited (as appropriate) to attend the
Audit Committee meetings.

BOARD ROLES AND RESPONSIBILITIES

COMMITTEE ROLES

INDEPENDENT NON-EXEC. CHAIRMAN
» Ensures clarity in the governance of the Company
» Enables effective Board debate and
constructive challenge of the Executive
» Member of Remuneration and Audit Committees
» Responsible to shareholders and stakeholders

SENIOR INDEPENDENT
NON-EXEC. DIRECTOR
» Chairman of Audit Committee
and member of
Remuneration Committee
» Assesses performance of Chairman
and other Board members
» Ensures robust and constructive
challenge to the Board

INDEPENDENT
NON-EXEC. DIRECTOR
» Chairman of Remuneration
Committee and member
of Audit Committee
» Ensures challenge
and oversight of
Board decisions

CHIEF EXECUTIVE
OFFICER
» Contributes majorly to Group
strategy and new product initiatives
» Ensures the Board-agreed strategy
is clearly transmitted to ExCo
» Responsible for successful
implementation of business plan by
senior management

CHIEF FINANCIAL
OFFICER AND COMPANY
SECRETARY
» Prepares annual accounts,
financial reporting and planning
» Management of financial
risk/opportunity
» Supports the operation
of the Board

YÜ GROUP PLC Annual report and financial statements 2019

AUDIT COMMITTEE
» Financial reporting and
monitors internal controls
» Sets risk appetite and
appropriate risk/opportunity
assurance policies for whole
Board approval

REMUNERATION
COMMITTEE
» Sets and benchmarks the
Executive Directors’
remuneration framework for
the whole Board approval
» Sets and reviews bonus and
reward mechanisms linked
to Company performance
» Guides ExCo on retention
policies for key senior
managers

CORPORATE GOVERNANCERemuneration Committee
The Chairman of the Remuneration
Committee is John Glasgow; Tony Perkins
and Robin Paynter Bryant are the other
Independent Non-executive members.
During 2019 the Remuneration Committee
comprised two members, being John Glasgow
and Ralph Cohen. The Committee meets
periodically as required and is responsible
for overseeing the policy regarding
Executive remuneration whilst the Board
as a whole is responsible for approving the
remuneration packages for the Group’s
Executive Management Team. It is also
responsible for reviewing incentive
schemes for the Group as a whole.

Nominations Committee
As the Board is small, there is currently no
separate, standing Nominations Committee.
This will be reviewed as the Group and
Board develop over time. The appointment
of new Directors is considered by ad-hoc
committees of the Board, typically led by
the Non-executive Directors, and final
decisions rest with and involve the Board
as a whole.

Risk management
and internal controls
The Directors are responsible for the
Group’s system of internal control and for
reviewing its effectiveness, while the role
of management is to implement Board
policies on risk management and control.
The Board has continued to implement
various improvements to the internal
control environment operating within the
Group throughout 2019.

It should be recognised that the Group’s
system of internal control is designed to
manage, rather than eliminate, the risk of
failure to achieve the Group’s business

ATTENDANCE AT MEETINGS

objectives and can only provide reasonable,
and not absolute, assurance against
material misstatement or loss.

resource on the definition and management
of strategic risk appetite as well as risk
and opportunity assurance.

The Group operates a series of controls to
meet its needs. These controls include,
but are not limited to, a clearly defined
organisational structure, written policies,
a comprehensive annual strategic planning
and budgeting process and detailed monthly
reporting. The annual budget is approved
by the Board as part of its normal
responsibilities. In addition, the budget
figures are regularly reforecast to facilitate
the Board’s understanding of the Group’s
overall position throughout the year and
this reforecast is reported to the Board
in addition to the reporting of actual
results during the year.

The Audit Committee receives reports
from management and the external
auditor concerning the system of internal
control and any material control weaknesses.
Any significant risk issues are referred to
the Board for consideration. During 2019
the Audit Committee received two separate
health check reviews from a third party
appointed to thoroughly investigate the
matters leading to the losses in FY 2018,
and the prior period adjustment, to ensure
all learnings and corrective actions have
been taken. The focus of the reviews has
been on the controls around the integrity
and reconciliation of data, the analysis of
credit risk of customers, the forecasting of
gross margin and the recognition of revenue.
The health check reports have provided
the Board with confidence that the previously
identified control weaknesses and data
issues that came about following a period
of rapid expansion are now being managed
and monitored effectively. The Audit
Committee has now focused additional

Shareholder communications
The Chief Executive Officer and the Chief
Financial Officer regularly meet with existing
shareholders and potential investors to
foster a mutual understanding of objectives.
In particular, meetings with analysts and
shareholders are held following the
announcement of results. Feedback from
these meetings and market updates prepared
by the Company’s nominated adviser are
presented to the Board to ensure it has
an understanding of shareholders’ views.
The Chairman and the other Non-executive
Directors are available to shareholders to
discuss strategy and governance issues.

The Directors encourage the participation
of all shareholders, including private
investors, at the annual general meeting.
The results of the polls and proxy votes on
each resolution are declared shortly after
the meeting by means of an announcement
on the London Stock Exchange and via the
Company’s website. The annual report and
accounts are published on the Company’s
website, www.yugroupplc.com, and can be
accessed by shareholders.

Our people
A significant part of the foundations of the
Group has been the continued investment
in our team.

During 2019 average staff numbers grew
from 136 to 141 people. We will continue
to invest in growing our team, where
appropriate, to take advantage of the
market opportunity and expand the
skills available to the Group to meet
its strategic objectives.

Meetings attended

Main Board

Audit Committee

Remuneration Committee

Total number of meetings

Ralph Cohen

John Glasgow

Bobby Kalar

Garry Pickering

Paul Rawson

Robin Paynter Bryant and Tony Perkins were appointed in January 2020 and were therefore not due to attend any meetings in 2019.

Meeting attended

Meeting not attended

Not due to attend

Annual report and financial statements 2019 YÜ GROUP PLC

Audit Committee report

ROBUST OVERSIGHT

Membership and scope
of the Audit Committee
During the year, the Audit Committee
comprised two members, who were both
Non-executive Directors: Ralph Cohen
(Chairman) and John Glasgow. The Group’s
external auditor, along with the wider
Board, is invited to attend the Audit
Committee meetings.

Subsequent to the year end on 8 January
2020, two new Non-executive Directors
were appointed as members of the Audit
Committee, Tony Perkins and Robin Paynter
Bryant. At the same time, the existing Audit
Committee Chairman, Ralph Cohen, retired
from his position as Yü Group PLC Chairman
and stepped down as Chairman of the
Audit Committee and Tony Perkins as
Senior Independent Director was appointed
as the new Audit Committee Chairman.

The Audit Committee has responsibility for,
among other things, the monitoring of the
financial integrity of the financial statements
of the Group and the involvement of the
Group’s auditor in that process. It focuses,
in particular, on compliance with accounting
policies and ensuring that an effective system
of audit and financial control is maintained.
It also focused on reviewing risks and
opportunities, and on ensuring appropriate
policies to mitigate risks are in place.

The ultimate responsibility for reviewing
and approving the annual report and
accounts and the half-yearly reports
remains with the Board.

The Audit Committee meets at least twice
a year at the appropriate times in the
financial reporting and audit cycle, and
at such other times as may be
deemed necessary.

The terms of reference of the Audit
Committee cover such issues as membership
and the frequency of meetings, together
with requirements of any quorum for,

and the right to attend, meetings. The
responsibilities of the Audit Committee
covered in its terms of reference include the
following: external audit, financial reporting,
internal controls and risk management.
The terms of reference also set out the
authority of the Committee to carry out
its responsibilities.

Any non-audit services that are to be
provided by the external auditor are
reviewed in order to safeguard auditor
objectivity and independence. The
external auditor has the opportunity
during the Audit Committee meetings to
meet privately with Committee members
in the absence of Executive management.

The Audit Committee is responsible for
reviewing the Company’s procedures
for the identification, assessment,
management and reporting of risks.

The Company has a whistleblowing policy,
through which staff may notify management
or Non-executive Directors of any concerns
regarding suspected wrongdoing or dangers
at work.

Review
The Audit Committee met six times
during 2019.

The Audit Committee continues to take a
lead role in reviewing the internal control
processes applied within the Group, and
in appropriately following up the findings
from the independent internal investigation
and subsequent PwC health check reviews
carried out in 2019, to ensure all actions
are taken following the issues announced
in October 2018.

Tony Perkins
Chairman of the Audit Committee
6 April 2020

Tony Perkins
Committee Chairman

MEMBERS

Tony Perkins
(incoming Committee
Chairman – appointed
8 January 2020)

Ralph Cohen
(outgoing Chairman –
resigned 8 January
2020)

John Glasgow

Robin Paynter Bryant
(appointed 8 January
2020)

YÜ GROUP PLC Annual report and financial statements 2019

CORPORATE GOVERNANCERemuneration report

EVALUATING REWARD AND
LINKING TO PERFORMANCE

John Glasgow
Committee Chairman

MEMBERS

John Glasgow
Committee Chairman

Ralph Cohen
(resigned 8 January
2020)

Robin Paynter Bryant
(appointed 8 January
2020)

Tony Perkins
(appointed 8 January
2020)

As an AIM listed company, Yü Group PLC is
not required to comply with Schedule 8 of
the Large and Medium-sized Companies
and Groups (Accounts and Reports)
Regulations 2008. The content of this
report is unaudited unless stated.

Membership of the
Remuneration Committee
During the year, the Remuneration
Committee comprised the two
Non-executive Directors, John Glasgow
(Chairman) and Ralph Cohen. Subsequent
to the year end, on 8 January 2020, Ralph
Cohen retired from the Board and the
Remuneration Committee and the two new
Non-executive Directors, Robin Paynter
Bryant and Tony Perkins, were appointed.

The Remuneration Committee sets Board
Executive Directors‘ targets and reviews their
performance. It makes recommendations to
the Board on matters relating to remuneration,
terms of service, granting of share options
and other equity incentives.

The Remuneration Committee met
twice in 2019.

Remuneration policy
The objectives of the remuneration
policy are to enable the Company to
attract, retain and motivate its Board
Executive Directors, while ensuring that
the overall remuneration is aligned with
the performance of the Group and
preserves an appropriate balance of
remuneration and shareholder value.

Non-executive Directors
Remuneration of the Non-executive
Directors is determined by the Board
Executive Directors. Non-executive Directors
are not entitled to pensions, annual bonuses
or employee benefits. They are entitled to
participate in the Group save as you earn
scheme relating to the Company’s shares
but none of them do at this time.

The annual fee for each Non-executive
Director is as follows:

Robin Paynter Bryant – £45,000
(appointed 8 January 2020)

Tony Perkins – £35,000 (appointed
8 January 2020)

John Glasgow – £31,500

Ralph Cohen – £31,500 (resigned from
the Board 8 January 2020)

Their appointment may be terminated with
three months’ written notice at any time.

Directors’ remuneration
The normal remuneration arrangements
for Executive Directors consist of basic
salary, employer contributions to defined
contribution pensions, annual performance
related bonuses and participation in a
long-term incentive plan.

No Executive Director bonuses are payable
in the year ended 31 December 2019.

The CEO has (and COO had during the year
under review) service agreements that can
be terminated by either party by giving at
least 12 months’ written notice.

The remuneration committee reviews
the performance of the Executive Directors
and makes recommendations to the Board
on matters relating to remuneration, terms
of service, granting of share options and
other equity incentives.”

Annual report and financial statements 2019 YÜ GROUP PLC

Remuneration report continued

Directors’ remuneration continued
The service agreement with the CFO can be terminated by either party by giving at least seven months’ written notice, such notice
increasing by one month for each completed year of service to a maximum of 12 months in total.

Following the year under review, Garry Pickering resigned from the Board and took up a new position in the Group’s Executive
Management Team. Garry entered into a new employment contract with the Group reflecting this change. The role of Chief Operating
Officer is not being replaced on the Board.

Directors’ interests
Details of the Directors’ shareholdings are included in the Directors’ Report on page 41.

Directors’ share options
Aggregate emoluments disclosed in the Directors’ remuneration table do not include any amounts for the value of options to acquire
ordinary shares in the Company granted to or held by the Directors. Details of options for Directors who served during the year
and to the date of this report are as follows:

Executive

Bobby Kalar

Garry Pickering (resigned 7 February 2020)

Paul Rawson (appointed 3 September 2018)

No Non-executive Director holds share options in the Company.

Directors’ remuneration

Number of
options at
31 Dec 2019

Weighted
average
exercise price

155,934

124,747

256,539

£3.21

£0.23

Executive

Bobby Kalar

Nick Parker (resigned 31 July 2018)

Garry Pickering (resigned 7 February 2020)

Paul Rawson (appointed 3 September 2018)

Non-executive

Ralph Cohen (resigned 8 January 2020)

John Glasgow

Salary/fees
£’000

Bonus
£’000

Benefits
£’000

Employer’s
pension
contributions
£’000

Pay in lieu
of notice
£’000

Total 2019
£’000

Total 2018
£’000

231

—

185

178

658

—

241

—

190

183

678

260

284

203

875

John Glasgow
Chairman of the Remuneration Committee
6 April 2020

YÜ GROUP PLC Annual report and financial statements 2019

CORPORATE GOVERNANCEDirectors’ report

The Directors present their annual report and the audited
consolidated financial statements of the Group for the year
ended 31 December 2019 (“FY 2019”).

Strategic Report
The Group has chosen in accordance with section 414C(11)
of the Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 to set out in the Group’s Strategic Report certain
information required by Schedule 7 of the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008
to be contained in the Directors’ Report.

Registered office
The registered office of Yü Group PLC (registered in England and
Wales no. 10004236) is CPK House, 2 Horizon Place, Nottingham
Business Park, Mellors Way, Nottingham NG8 6PY.

Dividends
The Board does not propose the payment of a final dividend
in respect of FY 2019 (FY 2018: nil).

The Board did not pay an interim dividend in relation to 2019
(2018: 1.2p per share).

Directors
The Directors of the Group during the year and up to the date
of signing the financial statements were:

» Ralph Cohen (resigned

8 January 2020)

» Robin Paynter Bryant

(appointed 8 January 2020)

» Tony Perkins (appointed

8 January 2020)

» John Glasgow
» Bobby Kalar
» Paul Rawson
» Garry Pickering (resigned

7 February 2020)

The Company maintains Directors’ and Officers’ liability insurance.

Significant shareholders
The Company is informed that, at 1 March 2020, individual
registered shareholdings of more than 3 per cent. of the
Company’s issued share capital were as follows:

Bobby Kalar
Jonathan Turner
Jamieson Principal
Pension Fund
Nick Parker
Garry Pickering

Number of ordinary % of issued ordinary
share capital

shares held

8,652,649
872,043

830,000
500,000
500,000

53.15%
5.36%

5.10%
3.07%
3.07%

Directors’ shareholdings
The beneficial interests of the Directors in the share capital
of the Company at 1 March 2020 were as follows:

Number of ordinary % of issued ordinary
share capital

shares held

Executive Directors
Bobby Kalar
Paul Rawson
Garry Pickering (resigned
7 February 2020)

Non-executive Directors

Ralph Cohen

John Glasgow
Robin Paynter Bryant
Tony Perkins

Number of ordinary % of issued ordinary
share capital

shares held

54,054

10,000
—
—

0.33%

0.06%
—
—

Employees
The Group’s Executive management regularly delivers briefings
on the Group’s strategy and performance.

The Group remains committed to fair treatment of people with
disabilities in relation to job applications, training, promotion and
career development. Every effort is made to find alternative jobs for
those who are unable to continue in their existing job due to disability.

The Group takes a positive approach to equality and diversity.
The Group promotes equality in the application of reward policies,
employment and development opportunities, and aims to support
employees in balancing work and personal lifestyles.

Annual general meeting
The annual general meeting of the Group is to be held on
21 May 2020. The notice of meeting appears on pages 71 and 72
of these financial statements.

Political and charitable donations
During the year ended 31 December 2019 the Group made
political donations of £nil (2018: £nil) and charitable donations
of £1,019 (2018: £nil).

Supplier payment policy and practice
The Group does not operate a standard code in respect
of payments to suppliers. The Group agrees terms of payment
with suppliers at the start of business and then makes payments
in accordance with contractual and other legal obligations.
The number of creditor days outstanding at 31 December 2019
was five days (2018: six days).

Subsequent events
The outbreak of Covid-19, impacting the UK from Q1 2020, is
being assessed by the Board and is disclosed further in the risk
and uncertainties section of the annual report.

Statement of disclosure of information to auditor
As at the date this report was signed, so far as each of the
Directors is aware, there is no relevant information of which the
auditor is unaware and each Director has taken all steps that he
ought to have taken as a Director in order to make himself aware
of any relevant audit information and to establish that the auditor
is aware of that information.

Auditor
In accordance with section 489 of the Companies Act, a resolution
for the reappointment of RSM UK Audit LLP as auditor of the Company
is to be proposed at the forthcoming annual general meeting.

8,652,649
33,503

53.15%
0.21%

On behalf of the Board

500,000

3.07%

Paul Rawson
Director
6 April 2020

Annual report and financial statements 2019 YÜ GROUP PLC

make judgements and accounting estimates that are
reasonable and prudent;

for the Group financial statements, state whether they have
been prepared in accordance with IFRSs adopted by the EU
and for the Company financial statements state whether
applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained
in the Company financial statements; and

prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s
and the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and the
Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible
for safeguarding the assets of the Group and the Company and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Yü Group website.

Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.

Statement of Directors’ responsibilities

In respect of the annual report and the financial statements

The Directors are responsible for preparing the Strategic Report
and the Directors’ Report, the Corporate Governance Report
and the financial statements in accordance with applicable
law and regulations.

Company law requires the Directors to prepare Group and
Company financial statements for each financial year. The
Directors are required by the AIM Rules of the London Stock
Exchange to prepare Group financial statements in accordance
with International Financial Reporting Standards (“IFRS”) as
adopted by the European Union (“EU”) and have elected under
company law to prepare the Company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law).

The Group financial statements are required by law and IFRS
adopted by the EU to present fairly the financial position and
performance of the Group; the Companies Act 2006 provides
in relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true
and fair view are references to their achieving a fair presentation.

Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group and the Company for that period.

In preparing each of the Group and Company financial
statements, the Directors are required to:

a. select suitable accounting policies and then apply

them consistently;

YÜ GROUP PLC Annual report and financial statements 2019

CORPORATE GOVERNANCEIndependent auditor’s report

To the members of Yü Group PLC

Opinion
We have audited the financial statements of Yü Group PLC
(“the parent company”) and its subsidiaries (“the Group”) for the
year ended 31 December 2019 which comprise the consolidated
statement of profit and loss and other comprehensive income,
consolidated and Company balance sheets, consolidated and
Company statement of changes in equity and consolidated
statement of cash flows and notes to the financial statements,
including a summary of significant accounting policies. The financial
reporting framework that has been applied in the preparation
of the Group financial statements is applicable law and
International Financial Reporting Standards (“IFRSs”) as adopted
by the European Union. The financial reporting framework that
has been applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 101 “Reduced
Disclosure Framework” (United Kingdom Generally Accepted
Accounting Practice).

In our opinion:

the financial statements give a true and fair view of the state of the
Group’s and of the parent company’s affairs as at 31 December
2019 and of the Group’s loss for the year then ended;

the Group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;

the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and

the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section
of our report. We are independent of the Group and the parent
company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to SME listed
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.

Material uncertainty related to going concern
We draw attention to note 1 in the financial statements, which
indicates that the Group may be adversely affected by the growing
impact of the Covid-19 (coronavirus) outbreak. The Group is
assuming that it can manage cash pressures in the current
unprecedented trading environment and that its credit facility
provider will continue to be supportive and not withdraw the
Group’s facilities in the event of a covenant breach. Whilst the
Directors are taking action to mitigate the impact, given the
unpredictable nature and impact of the outbreak, and how rapidly
the responses to the outbreak are changing, the Directors are
unable to predict the full extent of the impact with regards to the
going concern basis of accounting and its related disclosures. As
stated in note 1, these events or conditions, along with the other
matters as set forth in note 1, indicate that a material uncertainty
exists that may cast significant doubt on the Company’s ability to
continue as a going concern. Our opinion is not modified in
respect of this matter.

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Group and
parent company financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation
of resources in the audit and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the Group and parent company financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.

In addition to the matter described in the Material uncertainty related to going concern section we have determined the matters
described below to be the key audit matters to be communicated in our report.

Group key audit matters

The risk

Our response

Revenue recognition and accrued income
Refer to the accounting policy in note 1 regarding revenue and accrued income and note 16 regarding trade and other receivables.

Appropriate and accurate income recognition is required
to be applied by the Directors to ensure that revenue is
accrued and recognised appropriately in the financial
statements. Revenues are based on the volumes supplied
to customers using estimates and meter readings. Where
recent meter information is limited, assumptions are made
to estimate the volumes of energy consumed by customers.
Actual and expected usage information together with the
contractual rates are used to accrue revenue which is then
billed to customers. There is a risk that revenue and accrued
income is recognised inappropriately.

For revenue and accrued income we verified the appropriateness of
the recognition policy applied. We selected a sample of contracts
and transactions and considered whether revenue had been
recognised in accordance with the contract and was subsequently
billed. For income accrued at the year end, additional procedures
were undertaken to check that this was subsequently billed. We
considered the integrity of the revenue information used for the
basis of our procedures through agreement through to the financial
systems and the amounts recognised in the financial statements.
We considered the Group’s disclosures in relation to revenue recognition.

Annual report and financial statements 2019 YÜ GROUP PLC

Independent auditor’s report continued

To the members of Yü Group PLC

Key audit matters continued
Group key audit matters continued

The risk

Our response

Trade receivable and accrued income recoverability
Refer to the accounting policy in note 1 regarding revenue and accrued income, note 16 regarding trade and other receivables
and note 19, which considers credit risk.

The Group has a significant number of customers with a varied
credit risk profile which could impact the recoverability of
trade receivables and income accrued on customer contracts.

The majority of trade receivables are past due and a proportion
of accrued income is not billed immediately following the month
end which means it can become old and more difficult to
recover. Management’s assessment of the recoverability
and expected credit loss for trade receivables and accrued
income with their customers is inherently judgemental.
There is a risk that the net trade receivables and accrued
income will be recovered at amounts materiality different
to the value recognised.

The methodology utilised by management to calculate the provision
including expected credit loss was reviewed. We independently profiled
the Group’s customers using external data to verify their identity, to
identify those accounts with a potentially elevated credit risk and
quantify the potential exposure within both trade receivables and
accrued income. We selected a sample of accounts and performed
detailed testing to invoices and cash receipts. The impairment and
expected credit loss provision was considered through a combination
of analytical procedures, the results of tests of detail and recent
collection history.

There were no parent company key audit matters.

Our application of materiality
When establishing our overall audit strategy, we set certain
thresholds which help us to determine the nature, timing and
extent of our audit procedures. When evaluating whether
misstatements, both individually and on the financial statements
as a whole, could reasonably influence the economic decisions of
the users we take into account the qualitative nature and the size
of the misstatements. During planning, materiality for the Group
financial statements as a whole was calculated as £500,000
which was not significantly changed during the course of our
audit. Materiality for the parent company financial statements
as a whole was calculated as £363,000, which was not significantly
changed during the course of our audit. We agreed with the Audit
Committee that we would report to them all unadjusted differences
in excess of £25,000, as well as differences below that threshold
that, in our view, warranted reporting on qualitative grounds.

An overview of the scope of our audit
Our Group audit approach focused on the parent company,
the trading subsidiaries and the consolidation which have been
subject to a full scope audit to Group materiality. These audits
covered more than 99 per cent. of Group revenue, 99 per cent.
of Group loss before taxation and 99 per cent. of the Group’s
total assets.

Other information
The Directors are responsible for the other information. The other
information comprises the information included in the annual report,
other than the financial statements and our Auditor’s Report thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance
conclusion thereon.

In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement
in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report
in this regard.

Opinions on other matters prescribed
by the Companies Act 2006
In our opinion, based on the work undertaken in the course
of the audit:

the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and

the Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements.

Matters on which we are required to report
by exception
In light of the knowledge and understanding of the Group and the
parent company and their environment obtained in the course of
the audit, we have not identified material misstatements in the
Strategic Report or the Directors’ Report.

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTSMatters on which we are required to report
by exception continued
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:

» adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or

the parent company financial statements are not in agreement
with the accounting records and returns; or

certain disclosures of Directors’ remuneration specified by law
are not made; or

» we have not received all the information and explanations

we require for our audit.

Auditor’s responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at: http://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our Auditor’s Report.

Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities
Statement set out on page 42, the Directors are responsible for the
preparation of the financial statements and for being satisfied that
they give a true and fair view, and for such internal control as the
Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.

In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate
the Group or the parent company or to cease operations, or have
no realistic alternative but to do so.

Use of our report
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members
as a body, for our audit work, for this report, or for the opinions
we have formed.

Ian Wall (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP,
Statutory Auditor
Chartered Accountants
Suite A, 7th Floor
City Gate East
Tollhouse Hill
Nottingham
NG1 5FS
6 April 2020

Annual report and financial statements 2019 YÜ GROUP PLC

Consolidated statement of profit and loss and other comprehensive income

For the year ended 31 December 2019

Revenue

Cost of sales

Gross profit

Operating costs before non-recurring items, unrealised gains on derivative
contracts and IFRS 2 charges

Operating costs – non-recurring items

Operating costs – unrealised losses on derivative contracts

Operating costs – IFRS 2 charges

Total operating costs

Loss from operations

Finance income

Finance costs

Loss before tax

Taxation

Loss for the year

Other comprehensive income

Total comprehensive income for the year

Earnings per share

Basic

Diluted

31 December
2019
£’000

31 December
2018 (restated)
£’000

Notes

111,613

(106,128)

5,485

80,635

(77,387)

3,248

(10,362)

(11,963)

(378)

(518)

(125)

(11,383)

(5,898)

(112)

(5,977)

1,009

(4,968)

—

(441)

(125)

(314)

(12,843)

(9,595)

(63)

(9,637)

3,370

(6,267)

—

(4,968)

(6,267)

(£0.31)

—

(£0.42)

—

The year ended 31 December 2018 has been restated to reclassify, due to a change in accounting policy, £2,625,000 of amounts
payable to third-party intermediaries from operating costs to cost of sales.

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTSConsolidated and Company balance sheet

At 31 December 2019

ASSETS

Non-current assets

Intangible assets

Property, plant and equipment

Right-of-use assets

Deferred tax

Current assets

Trade and other receivables

Cash and cash equivalents

Total assets

LIABILITIES

Current liabilities

Trade and other payables

Non-current liabilities

Total liabilities

Net assets

EQUITY

Share capital

Share premium

Merger reserve

Retained earnings

Group

Company

31 December
2019
£’000

31 December
2018
£’000

31 December
2019
£’000

31 December
2018
£’000

Notes

671

481

4,355

5,559

25,886

2,377

28,263

33,822

(28,076)

(448)

(28,524)

5,298

11,690

(50)

(6,424)

5,298

395

—

3,325

3,774

13,569

14,612

28,181

31,955

(21,517)

—

(21,517)

10,438

11,689

(50)

(1,282)

10,438

—

340

—

361

16,045

500

16,545

16,906

(440)

—

(440)

—

4,642

12,365

17,007

—

16,466

17,007

11,690

(50)

4,744

16,466

11,689

(50)

5,287

17,007

The Company is taking advantage of the exemption in section 408 of the Companies Act 2006 not to present its individual statement
of comprehensive income and related notes. The Company incurred a loss of £494,000 for the year (2018: £300,000).

The financial statements on pages 46 to 70 were approved by the Board of Directors on 6 April 2020 and signed on its behalf by:

Bobby Kalar
Chief Executive Officer

Paul Rawson
Chief Financial Officer

Annual report and financial statements 2019 YÜ GROUP PLC

Consolidated statement of changes in equity

For the year ended 31 December 2019

Balance at 1 January 2019

Adjustment following adoption of IFRS 16

Adjusted balance at 1 January 2019

Total comprehensive income for the year

Loss for the year

Other comprehensive income

Transactions with owners of the Company

Contributions and distributions

Equity-settled share based payments

Deferred tax on share based payments

Proceeds from share issues

Equity dividend paid in the year

Total transactions with owners
of the Company

Balance at 31 December 2019

Balance at 1 January 2018

Total comprehensive income for the year

Loss for the year

Other comprehensive income

Transactions with owners of the Company

Contributions and distributions

Equity-settled share based payments

Deferred tax on share based payments

Proceeds from share issues

Share issue costs

Equity dividend paid in the year

Total transactions with owners
of the Company

Balance at 31 December 2018

Share
capital
£’000

—

Share
premium
£’000

11,689

—

11,689

Merger
reserve
£’000

(50)

—

(50)

—

11,690

—

12,079

(390)

—

11,689

—

(50)

—

(50)

Retained
earnings
£’000

(1,282)

(125)

(1,407)

(4,968)

—

(4,968)

125

—

(195)

(49)

(6,424)

6,366

(6,267)

—

(6,267)

685

(1,600)

—

(466)

(1,381)

(1,282)

Total
£’000

10,438

(125)

10,313

(4,968)

—

(4,968)

125

(195)

(47)

5,298

6,386

(6,267)

—

(6,267)

685

(1,600)

12,090

(390)

(466)

10,319

10,438

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTSCompany statement of changes in equity

For the year ended 31 December 2019

Balance at 1 January 2019

Total comprehensive income for the year

Loss for the year

Other comprehensive income

Transactions with owners of the Company

Contributions and distributions

Share based payments

Deferred tax on share based payments

Proceeds from share issues

Equity dividend paid in the year

Total transactions with owners
of the Company

Balance at 31 December 2019

Balance at 1 January 2018

Total comprehensive income for the year

Loss for the year

Other comprehensive income

Transactions with owners of the Company

Contributions and distributions

Share based payments

Deferred tax on share based payments

Proceeds from share issues

Share issue costs

Equity dividend paid in the year

Total transactions with owners
of the Company

Balance at 31 December 2018

Share
capital
£’000

—

Share
premium
£’000

11,689

Merger
reserve
£’000

(50)

Retained
earnings
£’000

5,287

—

11,690

—

12,079

(390)

—

11,689

—

(50)

—

(50)

(494)

—

(494)

125

—

(195)

(49)

4,744

6,967

(300)

—

(300)

685

(1,599)

—

(466)

(1,380)

5,287

Total
£’000

17,007

(494)

—

(494)

125

(195)

(47)

16,466

6,987

(300)

—

(300)

685

(1,599)

12,090

(390)

(466)

10,320

17,007

Annual report and financial statements 2019 YÜ GROUP PLC

Consolidated statement of cash flows

For the year ended 31 December 2019

Cash flows from operating activities

Loss for the financial year

Adjustments for:

Depreciation of property, plant and equipment and right-of-use assets

Amortisation of intangible assets

Finance income

Finance costs

Taxation

Share based payment charge

Increase in cash collateral deposits lodged with trading counterparties

Increase in trade and other receivables

Increase in trade and other creditors

Decrease in provisions for employee benefits

Net cash used in operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Net interest

Net cash used in investing activities

Cash flows from financing activities

Net proceeds from share placing and option exercises

Dividend paid during the year

Repayment of borrowings and leasing liabilities

Net cash (used in)/from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at the start of the year

Cash and cash equivalents at the end of the year

31 December
2019
£’000

31 December
2018
£’000

(4,968)

(6,267)

397

(33)

112

(1,009)

125

(10,408)

(1,909)

6,411

—

(11,280)

(565)

(79)

(644)

(195)

(118)

(311)

(12,235)

14,612

2,377

291

(21)

(3,370)

685

—

(3,404)

11,072

(371)

(1,320)

(147)

(42)

(189)

11,700

(466)

—

11,234

9,725

4,887

14,612

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTSNotes to the consolidated financial statements

1. Significant accounting policies
The consolidated financial statements of the Group for the year ended 31 December 2019 were approved and authorised for issue in
accordance with a resolution of the Directors on 31 March 2020. Yü Group PLC is a public limited company incorporated in the United
Kingdom, with company number 10004236. The Company is limited by shares and the Company’s ordinary shares are traded on AIM.

Basis of preparation
The consolidated financial statements have been prepared in accordance with EU-endorsed International Financial Reporting Standards
(“IFRSs”), IFRIC interpretations and the Companies Act 2006. The Company has elected to prepare its parent company financial statements in
accordance with UK accounting standards (UK Generally Accepted Accounting Practice), including FRS 101 “Reduced Disclosure Framework”.

The consolidated financial statements are presented in British pounds sterling (£) and all values are rounded to the nearest thousand
(£’000), except where otherwise indicated.

Going concern
The financial statements are prepared on a going concern basis.

At 31 December 2019 the Group had net assets of £5.3m (2018: net assets of £10.4m). Management prepares detailed budgets and
forecasts of financial performance and cash flow (including capital commitments as disclosed in note 22) over the coming 12 to 36 months.
The Group has confidence in achieving such targets and forecasts in a normal business environment.

The Group’s low margin, legacy contracts are unwinding and being replaced with higher-margin contracts with more robust customers.
Losses have therefore decreased significantly, and the Directors are confident of a continued improvement on a normalised basis.

In December 2019 the main trading entities of the Group (Yü Energy Holding Limited and Yü Energy Retail Limited) entered into a new
structured trading arrangement, for an initial period of five years, with SmartestEnergy Limited. The facility with Smartest will currently
provide a variable credit facility to support the Group’s hedging position, leading to a corresponding benefit to the Group’s cash
position. The Board monitors covenants associated with this facility.

The risks related to the Covid-19 pandemic have been assessed by the Board and are further detailed in the Strategic Report on page 25.

The unprecedented events, which are still evolving, are likely to have a short to medium-term impact on the Group’s financial performance,
though are not easily forecasted. The Directors have prepared detailed revised forecasts based on a variety of scenarios in relation to
the pandemic, and stress cases of key assumptions.

To date, the Group has not experienced any significant impact on its financial performance.

The Directors have, however, considered the Groups exposure to business segments which are expected to be materially impacted by
the social distancing measures introduced in March 2020. This assessment has classified its forward contracted revenue (to March 2021)
between segments which are high risk (retail, leisure venues, etc.), medium risk (manufacturing, real estate, etc.) and lower risk (for example
the healthcare or utility sector). The Group has a significant (c.45 per cent.) exposure to high risk sectors, with a further c.40 per cent.
exposure in medium sectors.

The Group anticipates a reduced revenue and margin from such customers, reducing forward profitability and resulting in a mark-to-market
loss on energy overpurchased which is to be sold back to market. The Directors have also assumed that Covid-19 may result in additional
customer credit losses (in the form of bad debt) or late customer payments, which will impact on the Group’s ability to generate
operating cash flow.

The Directors are taking all available steps to efficiently manage cash flow, to reduce costs and to plan appropriate mitigative commercial
actions to take during this period of instability across the UK economy. Constructive dialogue is ongoing with the Group’s trading counterparty
(which provides a material credit facility under the Group’s structured trading arrangements) related to the potential future breach of
certain covenants in the event of a significant impact on business performance. Further, whilst the Board has not yet secured assistance
from sources of Government or regulatory support (such as the deferral of certain industry obligations and payments) as may be or
become available, discussions and representations are ongoing both through sector representative groups and directly to Ofgem.
The Board acknowledges and welcomes the Government’s commitment to support businesses through this uncertain period and
awaits further information in order to be in a position to gain access to such assistance as it may potentially be able to secure.

The Directors’ assessment of scenarios related to Covid-19 continuing over Q2 2020 and beyond, with enhanced levels of credit loss,
may result in significant financial pressure and the technical but commercially manageable temporary breach of certain covenants.

Based on the above, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.
However in view of the unprecedented coronavirus outbreak, and the risks it may pose to the Group, together with the essentially
unpredictable and constantly evolving nature of the pandemic, the Directors have decided to formally note the existence of a level
of material uncertainty which may potentially cast doubt on the Group’s future ability to continue as a going concern.

The financial statements do not include any adjustments that would result from the basis of preparation as a going concern being inappropriate.

Annual report and financial statements 2019 YÜ GROUP PLC

Notes to the consolidated financial statements continued

1. Significant accounting policies continued
Basis of consolidation
The consolidated accounts of the Group include the assets, liabilities and results of the Company and subsidiary undertakings in which
Yü Group PLC has a controlling interest. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group
controls an investee if, and only if, the Group has all of the following: power over the investee (i.e. existing rights that give it the current
ability to direct the relevant activities of the investee); exposure, or rights, to variable returns from its involvement with the investee;
and the ability to use its power over the investee to affect its returns. When necessary, adjustments are made to the financial statements
of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity,
income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Use of estimates and judgements
The preparation of the financial statements in conformity with adopted IFRSs requires the use of estimates and assumptions.
Although these estimates are based on management’s best knowledge, actual results ultimately may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods affected. The key areas of estimation and judgement are the estimated
consumption (in lieu of accurate meter readings) of energy by customers, the level of accrual for unbilled revenue, the inputs to the IFRS 2
share option charge calculations and the recoverability of deferred tax assets and trade receivables.

Revenue estimates are based on industry knowledge or source information, where available, and can therefore represent estimates
which are lower or higher than the actual out-turn of energy consumption once accurate meter readings are obtained.

To estimate the level of accrual for unbilled revenue, management estimates the level of consumption, and anticipated revenue, which
is due to be charged to the customer, and recognises such revenue where it is considered that revenue will flow to the Group.

Inputs to IFRS 2 share option charge calculations are based on estimates of share price volatility, the expected time to exercise of such
options and the risk-free rate of return.

Deferred tax assets recoverability is assessed based on Directors’ judgement of the recoverability, by the realisation of future profits,
of the tax losses over the short to medium term, which inherently is based on estimates.

Trade receivables recoverability is estimated, with appropriate allowance for expected credit loss provisions, based on historical
performance and the Director’s estimate of losses over the Group’s customer receivable balances.

Revenue recognition
The Group enters into contracts to supply gas, electricity and water to its customers. Revenue represents the fair value of the
consideration received or receivable from the sale of actual and estimated gas, electricity and water supplied during the year, net of
discounts, Climate Change Levy and value added tax. Revenue is recognised on consumption being the point at which the transfer of
the goods or services to the customer takes place and based on an assessment of the extent to which performance obligations have
been achieved.

Due to the nature of the energy supply industry and its reliance upon estimated meter readings, both gas and electricity revenue includes the
Directors’ best estimate of differences between estimated sales and billed sales. The Group makes estimates of customer consumption based
on available industry data, and also seasonal usage curves that have been estimated through historical actual usage data.

Financial instruments
Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents and trade and other payables.

Trade and other receivables

Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost
using the effective interest method, less any impairment and expected credit losses.

Trade and other payables

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost
using the effective interest method.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and short-term deposits (monies held on deposit are accessible with one month’s
written notice). Cash and cash equivalents excludes any cash collateral posted with third parties. Bank overdrafts that are repayable
on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents.

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS1. Significant accounting policies continued
Financial instruments continued
Derivative financial instruments

The Group uses commodity purchase contracts to hedge its exposures to fluctuations in gas and electricity commodity prices.
The majority of commodity purchase contracts are expected to be delivered entirely to the Group’s customers and therefore the Group
classifies them as “own use” contracts and outside the scope of IFRS 9 “Financial Instruments”. This is achieved when:

» a physical delivery takes place under all such contracts;

the volumes purchased or sold under the contracts correspond to the Group’s operating requirements; and

» no part of the contract is settled net in cash.

This classification as “own use” allows the Group not to recognise the commodity purchase contracts on its balance sheet at the year end.

The commodity purchase contracts that do not meet the criteria listed above are recognised at fair value under IFRS 9. The gain or loss
on remeasurement to fair value is recognised immediately in profit or loss.

Classification of financial instruments issued by the Group

Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

(a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets

or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and

(b) where the instrument will or may be settled in the Group’s own equity instruments, it is either a non-derivative that includes

no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by
the Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified
takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and
share premium account exclude amounts in relation to those shares.

Intangible assets
Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.

Amortisation is charged to the statement of profit and loss on a straight-line basis over the estimated useful lives of the intangible assets,
unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each
balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

» Licence

–

35 years

Property, plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property,
plant and equipment. The estimated useful lives for the current and comparative periods are as follows:

» Freehold land

» Freehold property

» Computer equipment

» Fixtures and fittings

–

Not depreciated

30 years

3 years

Assets under construction are not depreciated until the period they are brought in to use.

Annual report and financial statements 2019 YÜ GROUP PLC

Notes to the consolidated financial statements continued

1. Significant accounting policies continued
Leased assets
The Group as a lessee

For any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is, or contains, a lease. A lease
is defined as “a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange
for consideration”. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:

the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified
at the time the asset is made available to the Group;

the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period
of use, considering its rights within the defined scope of the contract; and

the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has
the right to direct “how and for what purpose” the asset is used throughout the period of use.

Leases signed before 1 January 2019 are treated in accordance with the disclosure noted in changes in accounting policy below.

Measurement and recognition of leases as a lessee

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use
asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the
Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance
of the lease commencement date (net of any incentives received).

The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end
of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment
when such indicators exist.

At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate.

Lease payments included in the measurement of the lease liability are made up of fixed payments (including in-substance fixed),
variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising
from options reasonably certain to be exercised.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured
to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.

When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the
right-of-use asset is already reduced to zero.

The Group has elected to account for short-term leases and leases of low value assets using the practical expedients. Instead of recognising
a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line
basis over the lease term.

On the statement of financial position, right-of-use assets have been included in property, plant and equipment and lease liabilities
have been included in trade and other payables.

Share based payments
Share based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are
accounted for as equity-settled share based payment transactions, regardless of how the equity instruments are obtained by the Group.

The grant date fair value of share based payment awards granted to employees is recognised as an employee expense, with a corresponding
increase in equity, over the period that the employees become unconditionally entitled to the awards. The fair value of the options
granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were
granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and
non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the
number of awards that do meet the related service and non-market performance conditions at the vesting date. For share based
payment awards with non-vesting conditions, the grant date fair value of the share based payment is measured to reflect such
conditions and there is no true-up for differences between expected and actual outcomes.

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS1. Significant accounting policies continued
Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the statement of profit and loss except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted
or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business
combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
temporary difference can be utilised.

Segmental reporting
In accordance with IFRS 8 “Operating Segments”, the Group has made the following considerations to arrive at the disclosure made
in this financial information.

IFRS 8 requires consideration of the Chief Operating Decision Maker (“CODM”) within the Group. In line with the Group’s internal
reporting framework and management structure, the key strategic and operating decisions are made by the Board of Directors, which
regularly reviews the Group’s performance and balance sheet position and receives financial information for the Group as a whole.
Accordingly, the Board of Directors is deemed to be the CODM.

The Group’s revenue and profit were derived from its principal activity, which is the supply of utilities to business customers in the UK.
As a consequence the Group has one reportable segment, which is the supply of electricity, gas and water to businesses. Segmental
profit is measured at operating profit level, as shown on the face of the statement of profit and loss.

As there is only one reportable segment whose losses, expenses, assets, liabilities and cash flows are measured and reported on

a basis consistent with the financial statements, no additional numerical disclosures are necessary.

Standards and interpretations
The Group has adopted all of the new or amended accounting standards and interpretations issued by the International Accounting
Standards Board (“IASB”) that are mandatory for the current reporting period.

Any new or amended accounting standards or interpretations that are not yet mandatory have not been early adopted.

Changes in accounting policies – IFRS 16 “Leases”
This note explains the impact of the adoption of IFRS 16 “Leases” on the Group’s financial statements and discloses the new accounting
policies that have been applied from 1 January 2019.

The Group has adopted IFRS 16 retrospectively from 1 January 2019 and has not restated comparatives for the 2018 reporting period,
as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new
leasing rules are therefore recognised in the opening balance sheet on 1 January 2019.

Annual report and financial statements 2019 YÜ GROUP PLC

Notes to the consolidated financial statements continued

1. Significant accounting policies continued
Changes in accounting policies – IFRS 16 “Leases” continued
Adjustments recognised on adoption of IFRS 16

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as “operating
leases” under the principles of IAS 17 “Leases”. These liabilities were measured at the present value of the remaining lease payments,
discounted using the Group’s incremental borrowing rate as of 1 January 2019. The weighted average incremental borrowing rate
applied to the lease liabilities on 1 January 2019 was 5 per cent.

The Group does not have any leases that were previously classified as finance leases under IAS 17.

Operating lease commitments disclosed at 31 December 2018

Less:

Impact of discounting

Short-term leases recognised as an expense on a straight-line basis

Lease liability recognised at 1 January 2019

Of which:

Current lease liabilities
Non-current lease liabilities

£’000

669

(94)

(6)

569

96
473

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;

reliance on previous assessments on whether leases are onerous;

the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases;

the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and

the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

For all contracts that existed prior to 1 January 2019, the Group has not applied IFRS 16 to reassess whether each contract is, or contains, a lease.

The impact of IFRS 16 on the previously reported equity of the Group is £125,000 as detailed in the consolidated statement of changes
in equity on page 48.

The Group had leases prior to 1 January 2019 for its Nottingham office premises and a number of vehicles. Rental contracts are typically
made for fixed periods of 3 to 10 years but may have extension options. Lease terms are negotiated on an individual and arm’s length
basis and contain different terms and conditions. The lease agreements do not impose any covenants.

For the financial year 2018 and prior, leases of property, plant and equipment were classified as either finance or operating leases.
Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line
basis over the period of the lease.

From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to
profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value
of the following lease payments:

fixed payments (including in-substance fixed payments), less any lease incentives receivable;

variable lease payments that are based on an index or a rate;

» amounts expected to be payable by the lessee under residual value guarantees;

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS

1. Significant accounting policies continued
Changes in accounting policies – IFRS 16 “Leases” continued
Adjustments recognised on adoption of IFRS 16 continued
»

the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

» payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease if such rate is available. If that rate cannot be
determined the Group’s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with comparable terms and conditions.

Right-of-use assets are measured at cost comprising the following:

the amount of the initial measurement of lease liability;

» any lease payments made at or before the commencement date less any lease incentives received;

» any initial direct costs; and

restoration costs.

Changes in accounting policies – third-party intermediary costs

2. Segmental analysis
Operating segments
The Directors consider there to be one operating segment, being the supply of utilities to businesses.

Geographical segments
100 per cent. of the Group revenue is generated from sales to customers in the United Kingdom (2018: 100 per cent.).

The Group has no individual customers representing over 10 per cent. of revenue (2018: nil).

3. Auditor’s remuneration

Audit of these financial statements

Amounts receivable by auditor in respect of:

Audit of financial statements of subsidiaries pursuant to legislation

Other services pursuant to legislation:

– Corporate tax services

– Payroll services

4. Operating expenses

Profit for the year has been arrived at after charging:

Staff costs (see note 6)

Depreciation of property, plant and equipment

Amortisation of intangibles

Operating lease rentals

2019
£’000

107

2019
£’000

4,981

397

—

2018
£’000

149

2018
£’000

5,067

291

145

Annual report and financial statements 2019 YÜ GROUP PLC

Notes to the consolidated financial statements continued

5. Net finance costs

Bank interest and other finance charges payable

Bank interest receivable

2019
£’000

112

(33)

2018
£’000

(21)

6. Staff numbers and costs
The average number of persons employed by the Group (including Directors) during the period, analysed by category, was as follows:

Sales

Administration

The aggregate payroll costs of these persons were as follows:

Wages and salaries

Social security costs

Pension costs

Share based payments

2019
Number

2018
Number

141

2019
£’000

4,336

437

125

4,981

136

2018
£’000

4,287

422

314

5,067

There were two persons employed directly by the Company during the year ended 31 December 2019 (2018: two), being the
Non-executive Directors. The Company’s three (2018: three) Executive Directors who served during the year have service contracts
with a wholly owned subsidiary of the Company.

Key management personnel
The aggregate compensation made to Directors and other members of key management personnel of the Group is set out below:

Short-term employee benefits

Pension costs

Share based payments

2019
£’000

1,338

125

1,496

2018
£’000

1,377

654

2,049

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS7. Reconciliation to Adjusted EBITDA
A key alternative performance measure used by the Directors to assess the underlying performance of the business is Adjusted EBITDA.

Adjusted EBITDA reconciliation

Loss from operations

Add back:

Non-recurring operational costs

Non-recurring mutualisation costs

Impact of first-time adoption of IFRS 9

Unrealised loss on derivative contracts

Equity-settled share based payment charge

Depreciation of property, plant and equipment

Amortisation of intangibles

Adjusted EBITDA

2019
£’000

2018
£’000

(5,898)

(9,595)

378

236

—

518

125

397

441

—

1,768

125

685

291

(4,242)

(6,283)

The 2019 non-recurring operational costs of £378,000 consist of restructuring payroll costs and legal and professional fees in relation to
the issue identified in the Q4 2018 accounting review and regulatory investigation. No further costs beyond those accrued are anticipated.

The mutualisation costs of £236,000 relate to Renewable Obligation Certificate (“ROC”) and Capacity Market costs that have been levied
on the Group over and above the expected costs, to cover the cost of other failing suppliers in the market.

The unrealised loss on derivative contracts is excluded from Adjusted EBITDA in view of its non-cash nature, with significant variability
as the forward energy commodity market moves.

Following the adoption of IFRS 16 the Group now recognises depreciation on the right-of-use asset and an interest expense on the lease
liability as included in note 13. The comparable 2018 Adjusted EBITDA loss excluding the lease rental costs would have been £6,138,000.

8. Earnings per share
Basic loss per share
Basic loss per share is based on the loss attributable to ordinary shareholders and the weighted average number of ordinary
shares outstanding.

Loss for the year attributable to ordinary shareholders

Weighted average number of ordinary shares

At the start of the year

Effect of shares issued in the year

Number of ordinary shares for basic earnings per share calculation

Dilutive effect of outstanding share options

Number of ordinary shares for diluted earnings per share calculation

Basic earnings per share

Diluted earnings per share

2019
£’000

2018
£’000

(4,968)

(6,267)

2019

2018

16,267,555

14,054,055

11,133

787,370

16,278,688

14,841,425

786,547

768,025

17,065,235

15,609,450

2019
£

(0.31)

—

2018
£

(0.42)

—

Annual report and financial statements 2019 YÜ GROUP PLC

Notes to the consolidated financial statements continued

8. Earnings per share continued
Adjusted earnings per share
Adjusted earnings per share is based on the result attributable to ordinary shareholders before exceptional items and the cost of cash
and equity-settled share based payments, and the weighted average number of ordinary shares outstanding:

Adjusted earnings per share

Loss for the year attributable to ordinary shareholders

(4,968)

(6,267)

2019
£’000

2018
£’000

Add back:

Non-recurring items after tax (see note 7 – gross cost of £614,000)

Unrealised loss on derivative contracts after tax (gross cost of £518,000)

Share based payments after tax (gross cost of £125,000)

Adjusted basic loss for the year

Adjusted earnings per share

9. Taxation

Current tax charge

Current year

Adjustment in respect of prior years

Deferred tax credit

Current year

Adjustment in respect of prior years

Total tax credit

Tax recognised directly in equity

Current tax recognised directly in equity

Deferred tax recognised directly in equity

Total tax recognised directly in equity

Reconciliation of effective tax rate

Loss before tax

Tax at UK corporate tax rate of 19% (2018: 19%)

Expenses not deductible for tax purposes

Tax relief on exercise of share options

Adjustment in respect of prior periods – current tax

Adjustments in respect of prior periods – deferred tax

Utilisation of tax losses not recognised for deferred tax

Reduction in tax rate on deferred tax balances

497

420

101

357

101

254

(3,950)

(5,555)

2019
£

(0.24)

2018
£

(0.37)

2019
£’000

2018
£’000

—

(1,009)

—

(1,009)

—

(5,977)

(1,136)

(3)

—

120

—

(13)

(3,357)

—

(3,357)

(3,370)

—

(1,600)

(9,637)

(1,831)

(1,927)

—

369

Taxation credit for the year

(1,009)

(3,370)

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS9. Taxation continued
A reduction in the UK corporation tax rate from 19 per cent. to 17 per cent. (effective from 1 April 2020) was substantively enacted on
6 September 2016. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these
financial statements. In the 11 March 2020 Budget it was announced that the UK taxation rate will remain at the current 19 per cent.
and not reduce to 17 per cent. from 1 April 2020. This will have a consequential effect on the Group’s future tax charge. If this rate
change had been substantively enacted at the current balance sheet date the deferred tax asset would have increased by £512,000.

10. Dividends
The Group did not pay an interim dividend in relation to 2019 (2018: 1.2p per share).

The Directors do not propose a final dividend in relation to 2019 (2018: nil per share).

11. Intangible assets

Cost

At 1 January 2019

Additions

Disposals

At 31 December 2019

Amortisation

At 1 January 2019

Charge for the year

Disposals

At 31 December 2019

Net book value at 31 December 2019

Cost

At 1 January 2018

Additions

Disposals

At 31 December 2018

Amortisation

At 1 January 2018

Charge for the year

Disposals

At 31 December 2018

Net book value at 31 December 2018

Electricity
licence
£’000

—

The useful economic life of the acquired electricity licence is 35 years, which represents the fact that the licence can be revoked by giving
25 years’ written notice but that this notice cannot be given any sooner than 10 years after the licence came into force in January 2013.

The above intangible assets are Group assets only. The Company has no intangible assets.

Annual report and financial statements 2019 YÜ GROUP PLC

Notes to the consolidated financial statements continued

12. Property, plant and equipment

Freehold land
£’000

Assets under
construction
£’000

Fixtures and
fittings
£’000

Computer
equipment
£’000

Cost

At 1 January 2019

Additions

Disposals

At 31 December 2019

Depreciation

At 1 January 2019

Charge for the year

Disposals

At 31 December 2019

—

150

—

150

—

190

—

190

—

Net book value at 31 December 2019

150

190

Cost

At 1 January 2018

Additions

At 31 December 2018

Depreciation

At 1 January 2018

Charge for the year

At 31 December 2018

Net book value at 31 December 2018

—

197

(54)

215

141

(54)

146

189

197

141

927

153

(73)

1,007

588

230

(73)

745

262

788

139

927

358

230

588

339

Total
£’000

1,124

565

(127)

1,562

729

289

(127)

891

671

977

147

1,124

438

291

729

395

Included within the above items of property, plant and equipment is £340,000 (£nil at 31 December 2018) of freehold land and assets
under construction which are owned by the Company. These Company balances correspond to the freehold land and assets under
construction assets of the Group in the table above.

13. Leases
The Group has entered into lease arrangements for its main office facilities in Nottingham and Leicester and for some vehicles. With the
exception of short-term leases and leases of low value underlying assets, each lease is reflected on the balance sheet as a right-of-use
asset and a lease liability. The Group discloses its right-of-use assets as a separate line item in fixed assets on the face of the balance
sheet and its lease liabilities as part of trade and other payables (see note 18).

Property leases generally have a lease term ranging from 3 years to 10 years. Leases of vehicles are generally limited to a lease term
of 3 years.

Each lease typically imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the
right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive
termination fee. Some leases contain an option to extend the lease for a further term. For leases over office buildings the Group is
obligated to keep those properties in a good state of repair and return the properties in their original condition at the end of the lease.
Further, the Group must insure items of property, plant and equipment and incur maintenance fees on such items in accordance with
the lease contracts.

The table below provides details of the Groups right-of-use assets and lease liabilities recognised on the balance sheet at 31 December 2019:

Right-of-use asset

Premises

Vehicles

Total

Remaining term

Asset carrying
amount

Lease liability

Depreciation
expense

Interest expense

2.5 to 4.5 years

£473,000

£589,000

£104,000

2 years

£8,000

£4,000

£35,000

£1,000

£481,000

£597,000

£108,000

£36,000

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS13. Leases continued
Lease payments not recognised as a liability
The Group has elected not to recognise a right-of-use asset or lease liability for short-term leases (leases of expected term of 12 months
or less) or for leases of low value assets. Payments under such leases are expensed on a straight-line basis. During FY 2019 the amount
expensed to profit and loss was £6,000.

None of the above leases of the Group are with the Company entity directly.

14. Investments in subsidiaries
The Company has the following direct and indirect investments in subsidiaries:

Company name

Country of
incorporation

Holding

Proportion of
shares held

Yü Energy Holding Limited

United Kingdom

Ordinary shares

KAL Portfolio Trading Limited

United Kingdom

Ordinary shares

Yü Services Limited

United Kingdom

Ordinary shares

Yü Energy Retail Limited

United Kingdom

Ordinary shares

Yü Group Management Limited

United Kingdom

Ordinary shares

Yü Water Limited

United Kingdom

Ordinary shares

100%

Nature of business

Gas shipping services

Dormant

Supply of energy to businesses

Dormant

Supply of water to businesses

All of the above entities are included in the consolidated financial statements.

All of the above entities have the same registered address as Yü Group PLC. The address is listed as part of the Company information
on page 73.

15. Deferred tax assets
Deferred tax assets are attributable to the following:

Property, plant and equipment

Tax value of loss carry-forwards

Share based payments

Movement in deferred tax in the period:

Property, plant and equipment

Tax value of loss carry-forwards

Share based payments

Property, plant and equipment

Tax value of loss carry-forwards

Share based payments

Group

Company

2019
£’000

(32)

4,366

4,355

2018
£’000

(32)

3,357

—

3,325

2019
£’000

—

2018
£’000

—

At
1 January 2019
£’000

Recognised
in income
£’000

Recognised
directly in equity
£’000

At
31 December 2019
£’000

(32)

3,357

—

3,325

—

1,009

—

1,009

—

(32)

4,366

4,355

At
1 January 2018
£’000

Recognised
in income
£’000

Recognised
directly in equity
£’000

At
31 December 2018
£’000

(32)

—

1,600

1,568

—

3,357

—

3,357

—

(1,600)

(32)

3,357

—

3,325

The deferred tax asset is expected to be utilised by the Group in the coming years. The Group is forecast to generate sufficient taxable
income as a result of the growth in the customer base against which it will utilise these deferred tax assets.

Annual report and financial statements 2019 YÜ GROUP PLC

Notes to the consolidated financial statements continued

16. Trade and other receivables

Gross trade receivables

Provision for doubtful debts and expected credit loss

Net trade receivables

Accrued income – net of provision

Prepayments

Other receivables

Financial derivative asset

Amount due from subsidiary undertakings

Group

2019
£’000

7,801

(4,901)

2,900

9,278

2,185

11,523

—

2018
£’000

7,898

(4,803)

3,095

9,688

245

406

135

—

25,886

13,569

Movements in the provision for doubtful debts and expected credit loss are as follows:

Opening balance

Additional provisions recognised

Provision utilised in the year

Unused amounts reversed

Closing balance – provision for doubtful debts and expected credit losses

Company

2019
£’000

2018
£’000

—

500

—

15,545

16,045

2019
£’000

4,803

2,931

(2,833)

—

4,901

—

4,642

2018
£’000

272

4,531

—

4,803

The Directors have assessed the level of provision at 31 December 2019 by reference to the recoverability of customer receivable
balances post the year end, and believe the provision carried of £4,901,000 is adequate.

In addition to the £2,931,000 (2018: £4,531,000) provision recognised in relation to trade receivables, there was an additional provision
of £159,000 (2018: £875,000) made against accrued income.

None of the Group’s receivables fall due after more than one year.

The amount due from subsidiary undertakings in the books of Yü Group PLC at 31 December 2019 is non-interest bearing and is
repayable on demand. Subsequent to the year end, the subsidiary undertakings drew down on the newly arranged formal loan facility
(key terms of which are that the loan is payable in 14 months following written request from Yü Group PLC and interest is payable by the
subsidiary undertakings at a rate of 2 per cent. above Bank of England base rate).

The Board of Yü Group PLC has considered the provisions around impairment of intercompany indebtedness contained within IFRS 9
“Financial Instruments” and has concluded that an expected credit loss provision of £250,000 be booked against the outstanding
intercompany receivables.

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

Group other receivables includes £10,408,000 (2018: £nil) paid in cash to trading counterparties as collateral.

The Company other receivables balance of £500,000 relates to a non-cash and cash equivalent deposit.

17. Cash and cash equivalents

Cash at bank and in hand

Short-term deposits

Group

Company

2019
£’000

2,377

—

2,377

2018
£’000

11,112

3,500

14,612

2019
£’000

500

—

500

2018
£’000

8,865

3,500

12,365

The short-term deposit at 31 December 2018 related to cash held at bank which was utilised to support collateral in the form of letters
of credits with trading counterparties.

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS18. Trade and other payables

Current

Trade payables

Accrued expenses and deferred income

Corporation tax

Lease liabilities

Derivative financial liability

Other payables

Amounts due to subsidiary undertakings

Non-current

Lease liabilities

Details of the lease liabilities are included in note 13.

Group

2019
£’000

1,409

20,889

—

149

383

5,246

—

28,076

2018
£’000

1,231

15,603

—

4,667

—

21,517

448

—

Company

2019
£’000

2018
£’000

—

140

—

300

440

—

19. Financial instruments and risk management
The Group’s principal financial instruments are cash, trade receivables, trade payables and derivative financial assets and liabilities.
The Group has exposure to the following risks from its use of financial instruments:

(a) Fair values of financial instruments
Fair values

Derivative financial instruments are measured at fair value through profit and loss. The derivative instruments are level 1 financial
instruments and their fair value is therefore measured by reference to quoted prices in active markets for identical assets or liabilities.
All derivatives are held at a carrying amount equal to their fair value at the period end.

(b) Market risk
Market risk is the risk that changes in market prices, such as commodity and energy prices, will affect the Group’s income.

Commodity and energy prices

The Group uses commodity purchase contracts to manage its exposures to fluctuations in gas and electricity commodity prices.
The Group’s objective is to reduce risk from fluctuations in energy prices by entering into back to back energy contracts with its suppliers
and customers, in accordance with a Board approved risk mandate. Commodity purchase contracts are entered into as part of the
Group’s normal business activities. The majority of commodity purchase contracts are expected to be delivered entirely to the Group’s
customers and are therefore classified as “own use” contracts. These instruments do not fall into the scope of IFRS 9 and therefore are
not recognised in the financial statements. A proportion of the contracts in the Group’s portfolio are expected to be settled net in cash
where 100 per cent. of the volume hedged is not delivered to the Group’s customers and is instead sold back to the grid in order to
smooth demand on a real time basis. An assumption is made based on past experience of the proportion of the portfolio expected
to be settled in this way and these contracts are measured at fair value. The gain or loss on remeasurement to fair value is recognised
immediately in profit or loss.

As far as possible, in accordance with the risk mandate, the Group attempts to match new sales orders with corresponding commodity
purchase contracts. There is a risk that at any point in time the Group is over or under hedged. Holding an over or under hedged
position opens the Group up to market risk which may result in either a positive or negative impact on the Group’s margin and cash
flow, depending on the movement in commodity prices.

The Board continues to evaluate the use of commodity purchase contracts and whether their classification as “own use” is appropriate.
The key requirements considered by the Board are as listed below:

» whether physical delivery takes place under the contracts;

the volumes purchased or sold under the contract correspond to the Group’s operating requirements; and

» whether there are any circumstances where the Group would settle the contracts net in cash.

All commodity purchase contracts are entered into exclusively for own use, to supply energy to business customers. However, as noted
above, a number of these contracts do not meet the stringent requirements of IFRS 9, and so are subject to fair value measurement
through the income statement.

Annual report and financial statements 2019 YÜ GROUP PLC

Notes to the consolidated financial statements continued

19. Financial instruments and risk management continued
(b) Market risk continued
Commodity and energy prices continued

The fair value mark-to-market adjustment at 31 December 2019 is a loss of £518,000 (2018: loss of £125,000). See note 18 for the
corresponding derivative financial liability.

The Group’s exposure to commodity price risk according to IFRS 7 is measured by reference to the Group’s IFRS 9 commodity contracts.
IFRS 7 requires disclosure of a sensitivity analysis for market risks that is intended to illustrate the sensitivity of the Group’s financial
position and performance to changes in market variables impacting upon the fair values or cash flows associated with the Group’s
financial instruments.

Therefore, the sensitivity analysis provided below discloses the impact on profit or loss at the balance sheet date assuming that a
reasonably possible change in commodity prices had occurred and been applied to the risk exposures in place at that date. The
reasonably possible changes in commodity price used in the sensitivity analysis were determined based on calculated or implied
volatilities where available, or historical data.

The sensitivity analysis has been calculated on the basis that the proportion of commodity contracts that are IFRS 9 financial instruments
remains consistent with those at that point. Excluded from this analysis are all commodity contracts that are not financial instruments
under IFRS 9.

Open market price of forward contracts

UK gas (p/therm)

UK power (£/MWh)

Reasonably
possible increase/
decrease in
variable

Impact on profit
and net assets
£’000

+/-50%

303

285

588

Liquidity risk from commodity trading

The Group’s trading arrangements can result in a cash call being made by counterparties when commodity markets are below the Group’s
traded position. A significant reduction in electricity and gas markets could lead to a material cash call from the Group’s trading counterparties.
Whilst such a cash call would not impact the Group’s profit, it would have an impact on the Group’s cash reserves. As described below,
the new structured trading arrangement with SmartestEnergy has reduced this liquidity risk.

(c) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group’s receivables from customers.

These trading exposures are monitored and managed at Group level. All customers are UK based and turnover is made up of a large
number of customers each owing relatively small amounts. New customers have their credit checked using an external credit reference
agency prior to being accepted as a customer.

Credit risk is also managed through the Group’s standard business terms, which require all customers to make a monthly payment
predominantly by direct debit. At the year end there were no significant concentrations of credit risk. The carrying amount of the
financial assets (less the element of VAT and CCL included in the invoiced balance, which is recoverable in the event of non-payment
by the customer) represents the maximum credit exposure at any point in time.

The ageing of trade receivables, net of bad debt provision, at the balance sheet date was:

Not past due

Past due (0–30 days)

Past due (31–120 days)

More than 120 days

2019
£’000

1,529

1,302

—

2,900

2018
£’000

104

1,949

1,006

3,095

At 31 December 2019 the Group held a provision against doubtful debts of £5,858,000 (2018: £5,678,000). This is a combined provision
against both trade receivables (£4,901,000) and accrued income (£957,000).

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS19. Financial instruments and risk management continued
(d) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Board is responsible for
ensuring that the Group has sufficient liquidity to meet its financial liabilities as they fall due and does so by monitoring cash flow
forecasts and budgets. In order to enter into the necessary commodity purchase contracts, the Group is required to lodge funds on
deposit with either its bank or direct with our commodity trading counterparties. At 31 December 2019 the Group had £10.4m lodged
as cash collateral with trading counterparties (2018: £3.5m lodged as collateral with banking partners to provide a letter of credit).
On 16 December 2019 the Group announced a new structured trading arrangement with SmartestEnergy Limited. This arrangement
provides a significant credit facility and as such reduces the need to lodge cash collateral. The Board has considered the cash flow
forecasts, along with the collateral and LOC requirements, for the next 12 months, which show that the Group expects to operate within
its working capital facilities throughout the year excluding any impact from Covid-19 (as disclosed in note 1 to the financial statements
and in the risks and uncertainties section of the Strategic Report).

Any excess cash balances are held in short-term, interest bearing deposit accounts. At 31 December 2019 the Group had £2.4m of cash
and bank balances, as per note 17.

(e) Foreign currency risk
The Group trades entirely in pounds sterling and therefore it has no foreign currency risk.

(f) Impact from the Covid-19 virus outbreak
The Covid-19 pandemic impacted the UK post the year end. There is a risk that the resulting impact on the UK economy will reduce
the recoverability of customer receivables (being trade receivables and accrued income).

The total customer receivables balance at 31 December 2019, net of provision for doubtful debts and expected credit losses,
is £12,178,000. The Directors assess the level of provision as adequate after consideration of cash received post 31 December 2019.

The risk of the virus outbreak impacting the recoverability of customer receivables balances in the future is being monitored closely
by the Board and is further detailed in the Strategic Report’s review of the risks and uncertainties related to Covid-19. The Board
is also monitoring any impact in the reduction of customer volume, and therefore the revenue of the Group.

The UK Government has noted the intention to do “whatever it takes” to protect the economy, and as such the risk of significant
business failure is reduced.

However, in assessing sensitivity to the level of credit risk on customer receivables, a 10 per cent. increase in the level of bad debt will
result in approximately £1,200,000 of additional excepted credit loss.

If energy commodity volumes consumed by customers significantly decrease as a result of the outbreak (and outside the normal
operating assumptions of the Group), there may be exposure to additional mark-to-market volume risk as some of the volume purchased
forward would need to be sold. The impact could also be increased if the reduction in customer demand coincided with further declines
in energy commodity markets. Whilst the Directors have taken steps to mitigate this action, the sensitivity caused by a 10 per cent. decline
in contracted revenue for the year ended 31 March 2021 would reduce gross margin by approximately £350,000, excluding any gain or
loss on the sale of commodity.

20. Share capital and reserves

Share capital

2019
Number

2019
£’000

2018
Number

Allotted and fully paid ordinary shares of £0.005 each

16,281,055

16,267,555

The Company has one class of ordinary share which carries no right to fixed income. The holders of ordinary shares are entitled
to receive dividends as declared and are entitled to one vote per share at meetings of the Company.

2018
£’000

Annual report and financial statements 2019 YÜ GROUP PLC

Notes to the consolidated financial statements continued

20. Share capital and reserves continued

At 1 January 2019

IFRS 16 adjustment

Loss for the year

Share based payment charge

Proceeds from share issues

Deferred tax on share based payment charge

Equity dividend paid

At 31 December 2019

At 1 January 2018

Loss for the year

Share based payment charge

Proceeds from share issues

Share issue costs

Deferred tax on share based payment charge

Equity dividend paid

At 31 December 2018

Share
capital
£’000

—

Share
premium
£’000

11,689

Merger
reserve
£’000

(50)

—

11,690

—

12,079

(390)

—

(50)

—

11,689

(50)

Retained
earnings
£’000

(1,282)

(125)

(4,968)

125

—

(195)

(6,424)

6,366

(6,267)

685

—

(1,600)

(466)

(1,282)

The Company only movement in reserves is as per the Company’s statement of changes in equity as detailed on page 49.

The merger reserve was created as part of the 2016 Group reorganisation.

On 28 February 2019 an employee exercised 13,500 share options. The exercise price was £0.09 per share.

During FY 2018 1,013,500 share options were exercised by employees. The exercise price in all instances was £0.09 per share.

21. Share based payments
The Group operates a number of share option plans for qualifying employees of the Group. Options in the plans are settled in equity in
the Company. The options are subject to a vesting schedule, but not conditional on any performance criteria being achieved. The only
vesting condition is that the employee is employed by the Group at the date when the option vests.

On 18 June 2019, the Group made its first round of awards under the new SAYE plan. This plan is available to all employees of the Group.

The terms and conditions of the outstanding grants made under the schemes are as follows:

Exercisable between

Date of grant

Expected term

Commencement

Lapse

Exercise
price

Vesting
schedule

Amount
outstanding at
31 December 2019

17 February 2016

22 December 2016

6 April 2017

28 September 2017

9 April 2018

26 September 2018

25 February 2019

18 June 2019

6.5

17 February 2019

17 February 2026

22 December 2019

22 December 2026

6 April 2020

6 April 2027

28 September 2020

28 September 2027

9 April 2021

9 April 2028

26 September 2021

26 September 2028

25 February 2022

25 February 2029

25 February 2022

25 February 2029

1 August 2022

1 February 2023

£0.09

£3.25

£0.005

£2.844

£5.825

£10.38

£8.665

£1.09

£0.005

£1.40

27,000

13,500

79,110

158,220

40,500

78,351

6,539

60,000

250,000

117,248

830,468

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS21. Share based payments continued
The following vesting schedules apply:

1. 50 per cent. of options vest on first anniversary of date of grant and 50 per cent. vest on second anniversary.

2. 100 per cent. of options vest on third anniversary of date of grant.

3. 100 per cent. of options vest on third anniversary of savings contract start date.

The number and weighted average exercise price of share options were as follows:

Balance at the start of the period

Granted

Forfeited

Lapsed

Exercised

Balance at the end of the period

Vested at the end of the period

Exercisable at the end of the period

Weighted average exercise price for:

Options granted in the period

Options forfeited in the period

Options exercised in the period

Exercise price in the range:

From

2019

2018

573,290

437,248

(166,570)

—

1,464,310

154,317

(31,837)

—

(13,500)

(1,013,500)

830,468

573,290

40,500

£0.55

£2.29

£0.09

—

£7.41

£5.67

£0.09

£0.005

£10.380

£0.005

£10.380

The fair value of each option grant is estimated on the grant date using a Black Scholes option pricing model with the following fair
value assumptions:

Dividend yield

Risk-free rate

Share price volatility

Expected life (years)

Weighted average fair value of options granted during the period

2019

1.5%

2018

0.29–0.35%

1.5%

124.3–127.8%

36.0–36.7%

3–6.5 years

£1.14

£5.67

The share price volatility assumption is based on the actual historical share price of the Group since IPO in March 2016.

The total expenses recognised for the year arising from share based payments are as follows:

Equity-settled share based payment expense

Cash-settled share based payment expense/(gain)

2019
£’000

125

—

125

2018
£’000

685

(371)

314

Annual report and financial statements 2019 YÜ GROUP PLC

Notes to the consolidated financial statements continued

22. Commitments
Capital commitments
The Group has entered into an agreement to purchase a newly developed office building and associated land at a site in Leicester city
centre. At 31 December 2019 the Group had incurred £340,000 of cost which is currently included in the fixed assets total as £150,000
of land and £190,000 assets under construction. The Group has a remaining capital commitment at 31 December 2019 of £3,090,000
(2018: £nil).

The remaining cash flows are anticipated to be staggered between 2020 and H1 2021, at which time the Group should take possession
of the completed building.

Security
The Group has entered into an arrangement with a new trading counterparty, SmartestEnergy Limited (“Smartest”), in December 2019.
As part of this arrangement, Smartest has a fixed and floating charge over the main trading subsidiaries of the Group, Yü Energy
Holding Limited and Yü Energy Retail Limited.

As disclosed in note 16, included in other receivables is an amount of £500,000 held in a separate bank account over which the Group’s
bankers have a fixed and floating charge.

Contingent liabilities
The Group had no contingent liabilities at 31 December 2019 (2018: £nil).

23. Related parties and related party transactions
The Group has transacted with CPK Investments Limited (an entity owned by Bobby Kalar). CPK Investments Limited owns the
property from which the Group operates from via a lease to Yü Energy Retail Limited. During 2019 the Group paid £120,000 in lease
rentals and service charges to CPK Investments Limited (2018: £120,000). The amount owing to CPK Investments at 31 December 2019
was £10,000 (2018: £nil).

All transactions with related parties have been carried out on an arm’s length basis.

24. Post-balance sheet events
The Covid-19 pandemic started to materially impact the UK from March 2020. The Directors’ assessment of the potential risk and
impact are further disclosed in the risk and uncertainties section of the Strategic Report, and in note 1 to the financial statements.

There are no other significant or disclosable post-balance sheet events.

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS To re-elect Anthony Perkins, who retires as a Director
of the Company pursuant to Article 90.2 of the Company’s
Articles of Association.

This power is in substitution for all existing powers under
section 570 of the Act (which, to the extent unused at the date
of this resolution, are revoked with immediate effect).

To reappoint RSM UK Audit LLP as the auditor of the Company.

Notice of annual general meeting

Notice is given that the fourth annual general meeting of Yü Group PLC
(“the Company”) will be held at CPK House, Mellors Way, 2 Horizon
Place, Nottingham Business Park, Nottingham, United Kingdom
NG8 6PY on 21 May 2020 at 11.30am for the following purposes:

To consider and, if thought fit, to pass the following resolutions
as ordinary resolutions:

To receive the Company’s annual accounts and the
Strategic, Directors’ and Auditor’s Reports for the year
ended 31 December 2019.

To re-elect Bobby Kalar, who retires by rotation as a Director
of the Company pursuant to Article 94 of the Company’s
Articles of Association.

To re-elect Robin Paynter Bryant, who retires as a Director
of the Company pursuant to Article 90.2 of the Company’s
Articles of Association.

To authorise the Audit Committee to determine the
remuneration of the auditor.

That, pursuant to section 551 of the Companies Act 2006 (“the Act”),
the Directors be generally and unconditionally authorised to allot
shares in the Company or to grant rights to subscribe for or to
convert any security into shares in the Company up to an aggregate
nominal amount of £27,135.09, provided that this authority shall
expire at the conclusion of the next annual general meeting of
the Company after the passing of this resolution or on 21 August
2021 (whichever is the earlier), save that the Company may make
an offer or agreement before this authority expires which would
or might require shares to be allotted or rights to subscribe for or
to convert any security into shares to be granted after this authority
expires and the Directors may allot shares or grant such rights
pursuant to any such offer or agreement as if this authority
had not expired.

This authority is in substitution for all existing authorities
under section 551 of the Act (which, to the extent unused at
the date of this resolution, are revoked with immediate effect).

To consider and, if thought fit, pass the following resolutions as
special resolutions:

That, subject to the passing of resolution 7 and pursuant
to section 570 of the Act, the Directors be and are generally
empowered to allot equity securities (within the meaning
of section 560 of the Act) for cash pursuant to the authority
granted by resolution 7 as if section 561(1) of the Act did not
apply to any such allotment, provided that this power shall
be limited to the allotment of equity securities:

8.1

in connection with an offer of equity securities (whether
by way of a rights issue, open offer or otherwise):

8.1.1

8.1.2

to holders of ordinary shares in the capital of the
Company in proportion (as nearly as practicable)
to the respective numbers of ordinary shares
held by them; and

to holders of other equity securities in the capital
of the Company, as required by the rights to those
securities or, subject to such rights, as the
Directors otherwise consider necessary,

but subject to such exclusions or other arrangements
as the Directors may deem necessary or expedient
in relation to treasury shares, fractional entitlements,
record dates or any legal or practical problems under
the laws of any territory or the requirements of any
regulatory body or stock exchange; and

8.2

otherwise than pursuant to paragraph 8.1 of this resolution,
up to an aggregate nominal amount of £8,140.52,

and this power shall expire at the conclusion of the next
annual general meeting of the Company after the passing
of this resolution or on 21 August 2021 (whichever is the
earlier), save that the Company may make an offer or agreement
before this power expires which would or might require equity
securities to be allotted for cash after this power expires and
the Directors may allot equity securities for cash pursuant to
any such offer or agreement as if this power had not expired.

That, pursuant to section 701 of the Act, the Company be and
is generally and unconditionally authorised to make market
purchases (within the meaning of section 693(4) of the Act) of
ordinary shares of £0.005 each in the capital of the Company,
provided that:

9.1

9.2

9.3

the maximum aggregate number of ordinary shares
which may be purchased is 1,628,105;

the minimum price (excluding expenses) which may
be paid for an ordinary share is £0.005; and

the maximum price (excluding expenses) which may be
paid for an ordinary share is an amount equal to 105 per
cent. of the average of the middle market quotations for
an ordinary share as derived from the Daily Official List
of the London Stock Exchange plc for the five business
days immediately preceding the day on which the
purchase is made,

and (unless previously revoked, varied or renewed) this authority
shall expire at the conclusion of the next annual general meeting
of the Company after the passing of this resolution or on
21 August 2021 (whichever is the earlier), save that the Company
may enter into a contract to purchase ordinary shares in the
capital of the Company before this authority expires under which
such purchase will or may be completed or executed wholly or
partly after this authority expires, and may make a purchase
of ordinary shares in the capital of the Company pursuant
to any such contract as if this authority had not expired.

By order of the Board

Paul Rawson
Secretary
6 April 2020

Registered office:
CPK House, 2 Horizon Place,
Nottingham Business Park, Mellors Way,
Nottingham, United Kingdom, NG8 6PY

Registered in England and Wales no. 10004236

Annual report and financial statements 2019 YÜ GROUP PLC

Notice of annual general meeting continued

Notes
Entitlement to attend and vote
1.

The right to vote at the meeting is determined by reference to
the register of members of the Company. Only those persons
whose names are entered on the register of members of the
Company at 6.00pm on 19 May 2020 (or, if the meeting is
adjourned, 6.00pm on the date which is two working days
before the date of the adjourned meeting) shall be entitled to
attend and vote in respect of the number of shares registered
in their names at that time. Changes to entries on the register
of members after that time shall be disregarded in determining
the rights of any person to attend and/or vote (and the number
of votes they may cast) at the meeting. However, in light of the
coronavirus pandemic situation, shareholders and their proxies
will not be allowed to attend the meeting in person if the
Government’s social distancing advice remains.

Proxies
2.

A shareholder is ordinarily entitled to appoint any other person
as his or her proxy to exercise all or any of his or her rights to
attend and to speak and vote at the meeting and, on a poll,
vote instead of him or her. A proxy need not be a shareholder
of the Company. However in light of the coronavirus pandemic
situation, shareholders are urged to appoint the Chairman of
the meeting as his or her proxy, as shareholders and their
proxies will not be allowed to attend the meeting in person
if the Government’s social distancing advice remains.

A proxy may only be appointed in accordance with the
procedures set out in note 6 and the notes to the proxy form.
A form of proxy is enclosed.

A vote withheld is not a vote in law, which means that the vote
will not be counted in the calculation of votes for or against
the resolution. If no voting indication is given in the proxy
form, your proxy will vote or abstain from voting at his or her
discretion. Your proxy will vote (or abstain from voting) as he
or she thinks fit in relation to any other matter which is put
before the AGM.

In the case of joint holders, where more than one of the joint
holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority
is determined by the order in which the names of the joint holders
appear in the Company’s register of members in respect of
the joint holding (the first-named being the most senior).

To be valid, a proxy form must be received by post at the offices of
the Company’s registrars, Neville Registrars Limited, Neville House,
Steelpark Road, Halesowen, West Midlands B62 8HD, no later than
11.30am on 19 May 2020 (or, if the meeting is adjourned, no later
than 48 hours (excluding any part of a day that is not a working
day) before the time of any adjourned meeting).

To change your proxy instructions simply submit a new proxy
appointment using the methods set out above. Any amended
proxy appointment received after the time specified above will
be disregarded.

Where you have appointed a proxy using the hard-copy proxy
form and would like to change the instructions using another
hard-copy proxy form, please contact Neville Registrars Limited.

In order to revoke a proxy instruction you will need to inform
the Company by sending a signed hard-copy notice clearly
stating your intention to revoke your proxy appointment to
Neville Registrars Limited. In the case of a member which is
a company, the revocation notice must be executed under
its common seal or signed on its behalf by a duly authorised
officer of the company or an attorney for the company. Any
power of attorney or any other authority under which the
revocation notice is signed (or a notarially certified copy of such
power or authority) must be included with the revocation notice.
The revocation notice must be received by Neville Registrars
Limited prior to the commencement of the annual general
meeting or adjourned meeting at which the vote is given or,
in the case of a poll taken otherwise than on the same day
as the meeting or adjourned meeting, before the time
appointed for taking the poll.

10. If you attempt to revoke your proxy appointment but the

revocation is received after the time specified then your proxy
appointment will remain valid.

Corporate representatives
11. A shareholder which is a corporation may ordinarily authorise
one or more persons to act as its representative(s) at the meeting.
Each such representative may exercise (on behalf of the
corporation) the same powers as the corporation could
exercise if it were an individual shareholder, provided that
(where there is more than one representative and the vote
is otherwise than on a show of hands) they do not do so in
relation to the same shares. However, in light of the coronavirus
pandemic situation, such representatives will not be allowed
to attend the meeting in person (whilst the Government’s
social distancing advice remains in place) and therefore
corporations are urged to complete and return their proxy
form appointing the Chairman as their proxy.

Method of voting
12. Voting on all resolutions will be decided on a show of hands

unless a poll is duly demanded (i) before or on declaration
of the result of a vote on a show of hands or (ii) on the
withdrawal of any other demand for a poll.

Documents available for inspection
13. The following documents will be available for inspection

during normal business hours at the registered office of the
Company and at the Company’s business address, CPK House,
2 Horizon Place, Nottingham Business Park, Mellors Way,
Nottingham NG8 6PY, from the date of this notice until
the end of the meeting:

13.1 copies of the service contracts of the Executive

Directors; and

13.2 copies of the letters of appointment of the

Non-executive Directors.

Biographical details of Directors
14. Biographical details of all those Directors who are offering

themselves for reappointment at the meeting are set out on
pages 32 and 33 of the enclosed annual report and accounts.

YÜ GROUP PLC Annual report and financial statements 2019

FINANCIAL STATEMENTS