Growth funded by hedging capacity

Yu Group's first-half results, read alongside the extension of the group's hedging Facility with Shell Energy Europe in May, show how much of the Business energy supplier's expansion rests on access to wholesale markets without tying up cash.

Yu Group (LSE:YU.), branded Yü Energy, supplies electricity, gas and water to small and medium-sized businesses across the UK. Unlike suppliers that buy energy only as customers need it, the group seeks to hedge the energy it has contracted to sell, which means it needs reliable access to forward wholesale markets.

About the company

Yu Group supplies electricity, gas and water to small and medium-sized businesses across the UK under the Yü Energy brand. It hedges the energy it has contracted to sell, so it needs Forward Market access. Its meter points, which are the individual Supply connections, are the measure of its customer base.

What the Shell extension provides

On 21 May 2026 the company announced a three-year extension of its hedging facility with Shell Energy Europe, taking it to 2032. The original five-year arrangement had been set up in February 2024. The extension significantly increases Volume capacity, requires no cash Collateral for mark-to-market movements and can support annual revenues significantly above £2bn. The company linked it to its growth plan, to flexibility in product development and to a target of a 7% to 9% share of its market by 2028.

The collateral point matters. When wholesale prices fall after a supplier has hedged, trading counterparties often Demand cash to cover the paper loss. Avoiding that requirement protects Liquidity during volatile periods, which has been a decisive Factor in supplier failures in recent years.

The first-half figures

In the six months to 30 June 2026, Revenue rose 19% to £405m and meter points increased 43% to 153,000. Energy volumes supplied rose 25%. Adjusted EBITDA grew more slowly, by 4% to £24m, while adjusted Diluted Earnings per Share rose 7% to 103p. The Interim Dividend was increased 9% to 24p and cash stood at £129m.

Contracted revenue for the next financial year was £674m, up 40%, and aggregate contracted revenue across future periods reached £1.7bn, up 42%. LSE:YU. said the group was on track to meet full-year market expectations for revenue, adjusted EBITDA and adjusted diluted earnings per share.

Why revenue is outpacing profit

The gap between 19% revenue growth and 4% EBITDA growth means the adjusted EBITDA Margin narrowed to about 5.9% from roughly 6.8% a year earlier. Simply doubling first-half revenue gives an annualised figure of about £810m, well below the more than £2bn the Shell facility is said to support, so hedging capacity should not be the immediate constraint on growth. The binding limits are more likely to be customer acquisition, Credit risk and the margin the group can earn on each new contract.

Risks

Business customers can default when trading conditions weaken, a particular exposure for a supplier focused on small firms. Regulatory changes from Ofgem, shifting wholesale prices and intense competition for business contracts could squeeze margins, and winning share at speed can attract lower-margin customers. The 2028 Market Share range is a management target rather than a forecast.

Growth and margin arithmetic

Revenue of £405m with adjusted EBITDA of £24m gives a margin of about 5.9%. A year earlier, revenue of about £340m and EBITDA of about £23m imply a margin of about 6.8%. Meter points rose 43% to 153,000, while volumes rose 25% and revenue 19%, so revenue per meter point fell. This suggests the new customers are smaller on average, or that prices per unit have fallen.

Earnings and dividend

Adjusted diluted earnings per share of 103p, up 7%, grew faster than EBITDA at 4%, possibly because of lower interest or tax or share count changes. The interim dividend of 24p, up 9%, is about 23% of the half's earnings per share. Cash of £129m is a large balance relative to EBITDA of £24m for the half, though a supplier's cash may be partly committed to customer or market obligations.

Contracted revenue

Contracted revenue of £674m for the next financial year, up 40%, and aggregate contracted revenue of £1.7bn, up 42%, provide visibility. They imply that contracts extend beyond a year, with about £1.0bn in later periods. Contracted revenue growth of 40% exceeds revenue growth of 19%, which points to higher revenue in coming periods.

The market share target

A target of 7% to 9% of the market by 2028 depends on continuing growth in meter points and volumes. The hedging facility supports annual revenues significantly above £2bn, which is about five times the current half-year revenue annualised at £810m, so the capacity is not a constraint on the plan. The absence of cash collateral requirements protects liquidity if wholesale prices fall.

The supply and wholesale model

A business energy supplier signs contracts with customers at fixed prices for a period, and then buys the energy in the wholesale market to cover those commitments. If the supplier hedges in advance, it locks in the cost, which protects the margin from price swings during the contract. The cost of doing this is that it needs access to wholesale markets and enough capacity with counterparties.

Collateral is the cash a trading counterparty asks for when the market moves against the hedged position. Suppliers without enough liquidity can be forced to find large sums at short notice, which is what happened to some suppliers in recent years. The absence of cash collateral requirements under the extended facility removes that risk from the group's liquidity.

The size of the customer base, 153,000 meter points, shows how the group has grown. Smaller business customers are usually more profitable per unit than large industrial customers, but they also require more administration and carry a higher risk of non-payment, which is why credit control is important.

The expansion in volumes of 25% is greater than revenue growth of 19%, which suggests that energy prices per unit were lower than in the prior period. Because revenue includes pass-through energy costs, it can rise or fall with wholesale prices without much effect on profit.

The contracted revenue of £1.7bn means that a large share of future revenue is already agreed, though it depends on customers remaining on supply and on the company delivering energy as agreed.

What comes next

LSE:YU. has typically issued a full-year trading update in January, followed by results in March. Investors will then look for confirmation that full-year expectations were met, whether EBITDA growth caught up with revenue in the second half, and progress in meter points towards the 2028 market share target.