Yu Group expects swing to loss as old contracts restrict margins

Yu Group's shares dipped on Tuesday as it reported that it was anticipating a swing to an interim loss, as its margins had been dampened by existing lower-margin contracts which it had entered into before the start of the current year.

The independent gas, electricity and water supplier said it remained "wholly focussed" on restoring profitability and continuing to accelerate its growth, with a new sales strategy of targeting contracts with an increased margin and lower credit risk than historically realised.

Despite margin issues over the first half of the year, the AIM-traded company said it expected revenue for the six months ended 30 June to come in at more than £55m - up from £35.8m in the same period last year - and said it had approximately £45m of contracted revenue which is expected to be recognised through the remainder of the year.

Even so, the lower margin contracts mean that Yu Group anticipated a swing to an interim adjusted EBITDA loss of between £2.5m and £3.0m, though the business remained confident that its actions would translate into improved results.

Meanwhile, it said it was continuing to invest in group infrastructure, having recently announced the expansion of its Leicester-based sales team in order to drive sales growth and customer retention.

Bobby Kalar, chief executive of Yu, said: "Whilst realigning and resetting business controls and processes has been absolutely necessary, investing in the future and ensuring long term growth remains a key focus of mine.

"The planned investment we have made in Leicester further positions us to secure new business at higher margins and to capitalise on the significant market opportunity available, whilst continuing to deliver market leading customer service."

Yu Group's shares were down 9.09% at 155.00p at 1115 BST.