Previously Announced Strategic Review Progressing
Base EBITDA from Continuing Operations of $49.1 million
Impact of Cost Control Efforts Beginning to Yield Results
TORONTO, Nov. 06, 2019 (GLOBE NEWSWIRE) -- Just Energy Group Inc. (“Just Energy”) or (the “Company”) (TSX:JE; NYSE:JE) announced solid second quarter fiscal 2020 results with improved gross margin and higher Base EBITDA from continuing operations compared to both the same quarter last year and first quarter of fiscal 2020.
Gross margin and Base EBITDA from continuing operations increased in the current quarter despite a reduction in sales, largely due to improved margin optimization in North America, lower administrative costs and a $15.2 gain on the contingent consideration associated with the Filter Group acquisition, partially offset by higher selling and marketing and bad debt expenses.
“While the strategic review is ongoing, we remain focused on running our business well. We are driving performance improvements and focusing on best-in-class customer service, as we shape a brighter future for Just Energy,” said Just Energy’s President and Chief Executive Officer, R. Scott Gahn. “Our objective for the remainder of the fiscal year is clear: we are focused on signing high-quality customers while we continue to lower our cost structure and drive improved profitability.”
“In addition, we have implemented stringent controls and disposed of non-core operations to allow us to focus on our higher-margin North American operations,” Mr. Gahn added. “I am confident that our unwavering commitment to balance sheet discipline, focus on superior returns on invested capital, and drive for performance improvements will set the stage for predictable, prolonged and stable growth for Just Energy.”
Key Developments:
(compared to second quarter fiscal 2019, unless otherwise stated)
Financial Highlights | |||||||
For the three months ended September 30, 2019 | |||||||
(thousands of dollars, except where indicated and per share amounts) | |||||||
% increase | |||||||
Fiscal 2020 | (decrease) | Fiscal 2019 | |||||
Sales | $ | 768,440 | (4)% | $ | 804,309 | ||
Gross margin | 155,384 | 4% | 149,022 | ||||
Administrative expenses | 41,466 | (7)% | 44,478 | ||||
Selling and marketing expenses | 54,279 | 8% | 50,427 | ||||
Restructuring costs | - | - | 1,319 | ||||
Finance costs | 28,451 | 41% | 20,123 | ||||
Profit (loss) from continuing operations | 83,581 | NMF3 | (54,335) | ||||
Profit (loss) from discontinued operations | (9,809) | NMF3 | 32,885 | ||||
Profit (loss)1 | 73,772 | NMF3 | (21,450) | ||||
Profit (loss) per share from continuing operations available to shareholders – basic | 0.55 | (0.38) | |||||
Profit (loss) per share from continuing operations available to shareholders – diluted | 0.45 | (0.38) | |||||
Dividends/distributions | 3,289 | (85)% | 22,330 | ||||
Base EBITDA from continuing operations2 | 49,069 | 31% | 37,380 | ||||
Base Funds from continuing operations2 | 25,960 | 4% | 25,022 | ||||
Payout ratio on Base Funds from continuing operations2 | 13% | 89% |
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 Q2 fiscal 2020’s Management’s Discussion and Analysis.
3 Not a meaningful figure
Outlook
Just Energy continues to focus on enhancing its customer base by adding new high-quality customers and providing a variety of energy management solutions to its customer base to drive customer loyalty and improved profitability.
The impact of cost cutting initiatives implemented to date is evident in the second quarter results and Just Energy expects this progress to continue as additional changes are made. The Company has identified approximately $60 million in cost cutting initiatives in fiscal year 2020 and will continue to review its operations for additional ways to improve efficiencies and lower its cost structure.
The recent sale of two non-core operations demonstrates Just Energy’s commitment to focus on its higher-margin North American operations. The sale of the U.K. and Ireland operations are expected to close by the end of 2019. The Company continues to actively market its remaining non-core operations.
The previously announced strategic review remains active and is progressing. Just Energy has not set a specific timeframe for the conclusion of the strategic review. The Company plans to provide an update when the Board has approved a specific course of action.
Just Energy remains focused on best-in-class service to its customers while the review is underway.
The strategic review has provided necessary insights into understanding how best to unlock additional value from the business through a comprehensive review of capital expenditures, streamlining the organization, and further refinement of the geographic footprint via disposition of non-core businesses.
Management is maintaining its previously issued fiscal year 2020 Base EBITDA from continuing operations in the range of $180 million to $200 million, as well as fiscal 2020 free cash flow guidance of between $50 million to $70 million, defined as cash flow from operating activities minus cash flow from investing activities.
Embedded Gross Margin | |||||||||||||||||||||||
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Management’s estimate of the future embedded gross margin is as follows: | |||||||||||||||||||||||
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(millions of dollars) | |||||||||||||||||||||||
As at | As at | Sept. 30 vs. | As at | 2019 vs. | |||||||||||||||||||
Sept. 30, | June 30, | June 30 | Sept. 30, | 2018 | |||||||||||||||||||
2019 | 2019 | variance | 2018 | variance | |||||||||||||||||||
Commodity EGM | $ | 1,852.5 | $ | 1,870.8 | (1)% | $ | 2,050.6 | (10)% | |||||||||||||||
Value-added products and services (“VAPS”) EGM | 39.5 | 44.1 | (10)% | 45.2 | (13)% | ||||||||||||||||||
Total EGM from continuing operations | $ | 1,892.0 | $ | 1,914.9 | (1)% | $ | 2,095.8 | (10)% |
Customer Summary | ||||
As at | As at | |||
Sept. 30, | Sept. 30, | % increase | ||
2019 | 2018 | (decrease) | ||
Commodity | 1,110,000 | 1,240,000 | (10)% | |
VAPS | 68,000 | 34,000 | 100% | |
Commodity and VAPS bundle | 20,000 | 31,000 | (35)% | |
Total customer count | 1,198,000 | 1,305,000 | (8)% |
Total customer count decreased 8% to 1,198,000 in the second fiscal quarter compared to the prior comparable quarter excluding discontinued operations. The decline in customers is a result of the Company’s focus on renewing and signing higher quality and long-lasting customers, as well as the natural attrition of the customer base. The customer count captures customers with a distinct service address. These customers can have multiple products contracted with Just Energy and multiple active assets installed by Just Energy. The total VAPS customer count also includes 27,000 distinct customers from Filter Group’s water filter subscriptions, with 29,000 active assets and 73,000 smart thermostat customers.
Gross Margin per RCE | |||||||||
Q2 Fiscal | Number of | Q2 Fiscal | Number of | ||||||
2020 | RCEs | 2019 | RCEs | ||||||
Consumer customers added and renewed | $ | 314 | 161,000 | $ | 322 | 220,000 | |||
Consumer customers lost | 331 | 157,000 | 190 | 147,000 | |||||
Commercial customers added and renewed1 | 87 | 110,000 | 96 | 179,000 | |||||
Commercial customers lost | 91 | 45,000 | 81 | 100,000 |
1 Annual gross margin per RCE excludes margins from Interactive Energy Group and large Commercial and Industrial customers.
COMMODITY RCE SUMMARY | ||||||||||||
July. 1, | Failed to | Sept. 30, | Sept. 30, | |||||||||
2019 | Additions | Attrition | renew | 2019 | % decrease | 2018 | % decrease | |||||
Consumer | ||||||||||||
Gas | 384,000 | 10,000 | (29,000 | ) | (8,000 | ) | 357,000 | (7)% | 464,000 | (23)% | ||
Electricity | 957,000 | 61,000 | (83,000 | ) | (20,000 | ) | 915,000 | (4)% | 1,031,000 | (11)% | ||
Total Consumer RCEs | 1,341,000 | 71,000 | (112,000 | ) | (28,000 | ) | 1,272,000 | (5)% | 1,495,000 | (15)% | ||
Commercial | ||||||||||||
Gas | 435,000 | 17,000 | (9,000 | ) | (6,000 | ) | 437,000 | - | 438,000 | - | ||
Electricity | 1,789,000 | 80,000 | (34,000 | ) | (44,000 | ) | 1,791,000 | - | 1,792,000 | - | ||
Total Commercial RCEs | 2,224,000 | 97,000 | (43,000 | ) | (50,000 | ) | 2,228,000 | - | 2,230,000 | - | ||
Total RCEs | 3,565,000 | 168,000 | (155,000 | ) | (78,000 | ) | 3,500,000 | (2)% | 3,725,000 | (6)% |
Balance Sheet & Liquidity
Earnings Call
The Company will host a conference call and live webcast with R. Scott Gahn, Just Energy’s Chief Executive Officer, and Jim Brown, Chief Financial Officer to review the fiscal second quarter results beginning at 10:00 a.m. Eastern Time on Nov. 7, 2019.
Just Energy Conference Call and Webcast
Those who wish to participate in the conference call may do so by dialing 1-877-501-3160 in the U.S. and Canada. International callers may join the call by dialing 1-786-815-8442. The Conference ID# is 8978072. The call will also be webcast live over the internet at the following link:
https://edge.media-server.com/mmc/p/srxeoecw
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 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 and Canada, 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
This press release may contain forward-looking statements. 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, statements and information regarding the completion of the sale of Hudson Energy Supply UK and Just Energy Ireland Limited and the timing for completion thereof, the satisfaction of closing conditions to the sale of Hudson Energy Supply UK and Just Energy Ireland Limited, the Company’s ability to improve its business by boosting efficiency and lowering costs, the success of the Company’s cost reductions and optimization efforts, the ability of the Company to reduce selling, marketing and general and administrative expenses and the quantum of such reductions and the impact thereof on the Company’s current fiscal year, the Company’s ability to identify further opportunities to improve its cost structure, the results of the strategic review process, general economic and market conditions, 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, results of litigation 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 and Exchange Commission’s website at www.sec.gov or through Just Energy’s website at https://investors.justenergy.com.
Neither the Toronto Stock Exchange nor the New York Stock Exchange has approved nor disapproved of the information contained herein.
NON-IFRS MEASURES
The financial measure such as “EBITDA”, “Base EBITDA”, “FFO”, “Base FFO”, “Base FFO Payout Ratio”, “free cash flow” 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. This financial measure 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 Just Energy Q2 Fiscal 2020 Quarterly Report’s Management’s Discussion and Analysis 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
Investors
Michael Cummings
Alpha IR
Phone: (617) 982-0475
michael.cummings@alpha-ir.com
Media
Boyd Erman
Longview Communications
Phone: 416-523-5885
berman@longviewcomms.ca