Base EBITDA increased 11% in the quarter driven by robust gross margin improvement
Embedded gross margin remains stable at $2.3 Billion
Management reaffirms full fiscal year Base EBITDA guidance
TORONTO, Feb. 06, 2019 (GLOBE NEWSWIRE) -- Just Energy Group Inc. (TSX:JE; NYSE:JE), leading consumer company focused on essential needs including electricity and natural gas commodities, health and well-being products, and utility conservation, today announced results for its third quarter of fiscal 2019. All dollar amounts are expressed in Canadian dollars unless otherwise noted.
Key Highlights:
Financial highlights | |||||||
For the three months ended December 31 | |||||||
(thousands of dollars, except where indicated and per share amounts) | |||||||
% increase | |||||||
Fiscal 2019 | (decrease) | Fiscal 2018 | |||||
Sales | $ | 966,653 | 6% | $ | 912,203 | ||
Gross margin | 188,513 | 10% | 171,305 | ||||
Administrative expenses | 56,031 | 11% | 50,389 | ||||
Selling and marketing expenses | 57,255 | 3% | 55,547 | ||||
Finance costs | 22,762 | 72% | 13,266 | ||||
Profit for the period1 | 27,025 | NMF3 | 208,415 | ||||
Profit per share available to shareholders – basic | 0.17 | 1.40 | |||||
Profit per share available to shareholders – diluted | 0.16 | 1.12 | |||||
Dividends/distributions | 21,434 | - | 21,501 | ||||
Base EBITDA2 | 58,216 | 11% | 52,507 | ||||
Base Funds from Operations2 | 32,059 | (15)% | 37,539 | ||||
Payout ratio on Base Funds from Operations2 | 67% | 57% |
Financial highlights | |||||||
For the nine months ended December 31 | |||||||
(thousands of dollars, except where indicated and per share amounts) | |||||||
% increase | |||||||
Fiscal 2019 | (decrease) | Fiscal 2018 | |||||
Sales | $ | 2,799,953 | 7% | $ | 2,611,836 | ||
Gross margin | 515,384 | 9% | 471,531 | ||||
Administrative expenses | 170,221 | 17% | 145,826 | ||||
Selling and marketing expenses | 164,547 | (4)% | 172,200 | ||||
Finance costs | 59,225 | 57% | 37,777 | ||||
Profit (loss) for the period1 | (35,848) | NMF3 | 252,801 | ||||
Profit (loss) per share available to shareholders – basic | (0.28) | 1.60 | |||||
Profit (loss) per share available to shareholders - diluted | (0.28) | 1.32 | |||||
Dividends/distributions | 66,026 | 2% | 64,752 | ||||
Base EBITDA2 | 122,757 | 16% | 105,564 | ||||
Base FFO2 | 76,396 | 16% | 65,730 | ||||
Payout ratio on Base FFO2 | 86% | 99% | |||||
Embedded gross margin2 | 2,322,900 | 19% | 1,956,000 | ||||
Customer count | 1,647,000 | 2% | 1,607,000 | ||||
Total ending RCEs | 4,133,000 | - | 4,114,000 |
1 Profit (loss) includes the impact of unrealized gains (losses), which represents the mark to market of future commodity supply acquired to cover future customer demand as well as weather hedge contracts as part of the risk management practice. The supply has been sold to customers at fixed prices, minimizing any realizable impact of mark to market gains and losses.
2 See “Non-IFRS financial measures” in Q3 Fiscal 2019’s Management’s Discussion and Analysis.
3 Not a meaningful figure
“We are pleased with the third quarter results and remain on track to achieve our fiscal year expectations, as our margin enhancement actions and expanded offering of value-added products and services are driving strong performance,” said Just Energy’s chief executive officer, Pat McCullough. “Our core business remains strong and our accomplishments are demonstrating the initial success of our transformation strategy. This can be seen in the growth of our value-added products, including the acquisition of the water filtration business, and the increased customer profitability profile. The collective efforts to improve profitability and attract and retain strong-fit customers is evident in our ability to maintain record-level embedded gross margin on our existing book of business as our core commodity business continues to support our performance.”
Mr. McCullough continued, “Looking ahead, we expect that our ongoing resolve and commitment to faster execution will drive performance beyond historical levels and support our ability to achieve fiscal year guidance and drive earnings growth well into the future. Our healthy core business, combined with the expanded offering of value-added products and services, will generate significant capital to not only support future dividend payments, but also the pursuit of growth opportunities that support our strategic shift to be a consumer-focused company.”
Embedded gross margin | ||||||||||||||
Management's estimate of the future embedded gross margin is as follows: | ||||||||||||||
(millions of dollars) | ||||||||||||||
As at | As at | Dec. 31 vs. | As at | 2018 vs. | ||||||||||
Dec. 31, | Sept 30, | Sept 30, | Dec. 31, | 2017 | ||||||||||
2018 | 2018 | variance | 2017 | variance | ||||||||||
Commodity embedded gross margin | $ | 2,276.9 | $ | 2,291.0 | (1)% | $ | 1,956.0 | 16% | ||||||
VAP embedded gross margin | 46.0 | 45.2 | 2% | - | - | |||||||||
Total embedded gross margin | 2,322.9 | 2,336.2 | (1)% | $ | 1,956.0 | 19% |
Customer Summary | ||||||||
As at | As at | |||||||
Dec. 31, | Dec. 31, | % increase | ||||||
2018 | 2017 | (decrease) | ||||||
Commodity | 1,432,000 | 1,530,000 | (6)% | |||||
VAP | 69,000 | 25,000 | 176% | |||||
Commodity and VAP Bundle | 146,000 | 52,000 | 181% | |||||
Total customer count | 1,647,000 | 1,607,000 | 2% |
Annual gross margin per RCE | ||||||||||
Q3 Fiscal | Number of | Q3 Fiscal | Number of | |||||||
2019 | RCEs | 2018 | RCEs | |||||||
Consumer customers added and renewed | $ | 347 | 177,000 | $ | 225 | 183,000 | ||||
Consumer customers lost | 309 | 156,000 | 189 | 120,000 | ||||||
Commercial customers added and renewed1 | 80 | 175,000 | 73 | 239,000 | ||||||
Commercial customers lost | 70 | 113,000 | 77 | 157,000 |
1 Annual gross margin per RCE excludes margins from Interactive Energy Group and large Commercial and Industrial customers.
Customer Aggregation (RCEs) | |||||||||||||||
Oct. 1, | Failed to | Dec. 31, | % | Dec. 31, | % increase | ||||||||||
2018 | Additions | Attrition | renew | 2018 | decrease | 2017 | (decrease) | ||||||||
Consumer Energy | |||||||||||||||
Gas | 621,000 | 34,000 | (24,000) | (15,000) | 616,000 | (1)% | 617,000 | - | |||||||
Electricity | 1,163,000 | 81,000 | (81,000) | (25,000) | 1,138,000 | (2)% | 1,171,000 | (3)% | |||||||
Total Consumer RCEs | 1,784,000 | 115,000 | (105,000) | (40,000) | 1,754,000 | (2)% | 1,788,000 | (2)% | |||||||
Commercial Energy | |||||||||||||||
Gas | 454,000 | 16,000 | (11,000) | (8,000) | 451,000 | (1)% | 365,000 | 24% | |||||||
Electricity | 1,926,000 | 107,000 | (41,000) | (64,000) | 1,928,000 | - | 1,961,000 | (2)% | |||||||
Total Commercial RCEs | 2,380,000 | 123,000 | (52,000) | (72,000) | 2,379,000 | - | 2,326,000 | 2% | |||||||
Total RCEs | 4,164,000 | 238,000 | (157,000) | (112,000) | 4,133,000 | (1)% | 4,114,000 | - |
Balance Sheet & Liquidity
Outlook
Just Energy is executing a strategic shift from a retail energy provider to a consumer company focused on differentiated value-add products, unparalleled customer satisfaction and profitable customer growth. Just Energy’s strategic transformation from an era of price-based commodities sold through third parties to a future as a more customer-centric consumer company is well underway. The Company’s near-term success starts with its core business. The core commodity business continues to perform well and the embedded gross margin on its existing book of business remains at a Company record high of $2.3 billion. Just Energy’s unique offering of value-added products and services seeks to address its customers’ concerns around their families’ health and well-being, utility conservation and essential energy needs in their homes. To achieve profitability and optimize growth in the remainder of fiscal 2019 and beyond, Just Energy will drive sales, gross margin and high-quality customer growth through its multi-channel strategy by aggressively promoting these three product growth categories, while developing additional strategic, alternative channels. Just Energy will also deploy a consistent value-creation product strategy across the consumer business.
Just Energy has undertaken several initiatives in fiscal 2019 to attract higher margin customers in conjunction with implementing margin enhancement actions across the organization. To further drive profitability, Just Energy implemented cost cutting initiatives and will continue its efforts to reduce administrative expenses through greater automation and consolidation of support activities. Just Energy expects to see the results of these actions continue to contribute in the fiscal fourth quarter, driving performance beyond historical levels and supporting guidance for the current fiscal year and earnings growth into the future.
Just Energy’s core business is healthy and growing, as profitability per customer is improving and the strategic shift to a consumer-focused company is on track. The Company is focused on a manageable set of strategic initiatives that will build on the current momentum and continue contributing to the Company’s profitability.
As a result, management reaffirms its guidance for fiscal 2019 Base EBITDA in the range of $200 million to $220 million. This expectation reflects the implementation of IFRS 15 for the full fiscal year.
Just Energy’s balance sheet remains strong and the Company remains fully committed to returning capital to shareholders through dividend distributions.
Earnings Call
The Company will host a conference call and live webcast to review the fiscal third quarter results beginning at 10:00 a.m. Eastern Time on February 7th, 2019 followed by a question and answer period. Chief executive officer, Patrick McCullough, and chief financial officer, Jim Brown will participate on the call.
Just Energy Conference Call and Webcast
Those who wish to participate in the conference call may do so by dialing 1-877-501-3160 (from inside the U.S.) or 1-786-815-8442 (from outside the U.S.) and using the Conference ID 1676017. The call will also be webcast live over the internet at the following link:
https://edge.media-server.com/m6/p/3b7c2v4v
A webcasted replay for the call will also be archived on the JE investor relations website a few hours after the event.
About Just Energy Group Inc.
Just Energy is a leading consumer company focused on essential needs, including electricity and natural gas commodities; health and well-being, such as water quality and filtration devices; and utility conservation, bringing energy efficient solutions and renewable energy options to consumers. Currently operating in the United States, Canada, the United Kingdom, Germany, Ireland and Japan, Just Energy serves residential and commercial customers. Just Energy is the parent company of Amigo Energy, EdgePower Inc., Filter Group Inc., Green Star Energy, Hudson Energy, Interactive Energy Group, Just Energy Advanced Solutions, Tara Energy, and terrapass. Visit https://investors.justenergy.com/ to learn more. Also, find us on Facebook and follow us on Twitter.
FORWARD-LOOKING STATEMENTS
Just Energy's press releases may contain forward-looking statements including statements pertaining to customer revenues and margins, customer additions and renewals, customer attrition, customer consumption levels, general and administrative expenses, dividends, distributable cash and treatment under governmental regulatory regimes. These statements are based on current expectations that involve a number of risks and uncertainties which could cause actual results to differ from those anticipated. These risks include but are not limited to levels of customer natural gas and electricity consumption, rates of customer additions and renewals, rates of customer attrition, fluctuations in natural gas and electricity prices, changes in regulatory regimes and decisions by regulatory authorities, competition and dependence on certain suppliers. Additional information on these and other factors that could affect Just Energy's operations, financial results or dividend levels are included in Just Energy's annual information form and other reports on file with Canadian securities regulatory authorities which can be accessed through the SEDAR website at www.sedar.com, on the U.S. Securities Exchange Commission’s website at www.sec.gov or through Just Energy's website at www.justenergygroup.com.
NON-IFRS MEASURES
The financial measures, such as “EBITDA”, Base EBITDA, FFO, Base FFO, Base FFO Payout Ratio and Embedded Gross Margin do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other companies. These financial measures should not be considered as an alternative to, or more meaningful than, net income (loss), cash flow from operating activities and other measures of financial performance as determined in accordance with IFRS, but the Company believes that these measures are useful in providing relative operational profitability of the Company’s business. Please refer to “Key Terms” in the Company’s management’s discussion and analysis of financial condition and results of operations of the Company for the three and nine months ended December 31, 2018 for the Company’s definition of “EBITDA” and other non-IFRS measures.
Neither the Toronto Stock Exchange nor the New York Stock Exchange has approved nor disapproved of the information contained herein.
FOR FURTHER INFORMATION PLEASE CONTACT:
Jim Brown
Chief Financial Officer
Just Energy
713-544-8191
jbrown@justenergy.com
or
Michael Cummings
Investor Relations
Alpha IR Group
617-982-0475
michael.cummings@alpha-ir.com