- Strong Operating Performance Drives Gross Margin Increase of 8% and Base EBITDA Growth of 6%
- Reaffirms Fiscal 2017 Base EBITDA Guidance of $223 million to $233 million
TORONTO, ONTARIO--(Marketwired - Aug. 10, 2016) - Just Energy Group, Inc. (TSX:JE)(NYSE:JE), an energy management solutions provider specializing in electricity, natural gas, solar and green energy, today announced results for its first quarter fiscal 2017.
Key Highlights:
Financial highlights | ||||||||
For the three months ended June 30 | ||||||||
(thousands of dollars, except where indicated and per share amounts) | ||||||||
% increase | ||||||||
Fiscal 2017 | (decrease) | Fiscal 2016 | ||||||
Sales | $ | 898,409 | (4 | )% | $ | 933,015 | ||
Gross margin | 162,672 | 8 | % | 150,907 | ||||
Administrative expenses | 44,701 | 19 | % | 37,598 | ||||
Selling and marketing expenses | 57,790 | (8 | )% | 62,781 | ||||
Finance costs | 17,973 | 7 | % | 16,856 | ||||
Profit1 | 482,671 | NMF3 | 129,671 | |||||
Profit per share available to shareholders - basic | 3.24 | 0.87 | ||||||
Profit per share available to shareholders - diluted | 2.51 | 0.71 | ||||||
Dividends/distributions | 18,793 | 1 | % | 18,699 | ||||
Base EBITDA2 | 41,141 | 6 | % | 38,875 | ||||
Base Funds from operations2 | 25,669 | (14 | )% | 29,818 | ||||
Payout ratio on Base Funds from operations2 | 73 | % | 63 | % | ||||
Embedded gross margin2 | 1,936,500 | 4 | % | 1,858,600 | ||||
Total customers (RCEs) | 4,386,000 | (5 | )% | 4,609,000 |
1 | Profit includes the impact of unrealized gains, which represents the mark to market of future commodity supply acquired to cover future customer demand. 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 Management's Discussion and Analysis. |
3 | Not a meaningful figure. |
"During the first quarter we continued to deliver strong operational performance while making significant progress along our strategic initiatives for the Company," commented Co-CEO Deb Merril. "Despite being our seasonally slowest quarter historically, and a very tough comparison to the strong first quarter of fiscal 2016, we are very pleased with the results for the first quarter. Sales were off slightly from the all-time Company record first quarter gross additions delivered last year, primarily due to the increased competition that tends to follow a lower commodity price environment, and our profitability continued to improve as a result of pricing discipline throughout the Consumer and Commercial customer base."
Co-CEO, James Lewis added, "Base EBITDA improved 6% as strong performance offset the increase in prepaid commission expenses during the period. When excluding this additional expense item, Base EBITDA increased by an impressive 25% to $48.8 million for the first quarter of fiscal 2017. Gross margin improved by 8% versus the same period of last year, driven by continued margin improvement efforts, disciplined pricing strategies and an increase from foreign exchange. While sales and net customer additions declined in the first quarter, as compared to a very strong first quarter of fiscal 2016, due to our refusal to engage in risky pricing tactics that would ultimately damage our improved profitability profile, we feel strongly that our margin per customer improvement initiative will continue to deliver in fiscal 2017 and beyond."
Co-CEO, Deb Merril concluded, "We're off to a strong start to fiscal 2017 and remain confident we can deliver on our previously provided Base EBITDA guidance for the full year while also achieving significant strategic milestones. We remain focused on restructuring our debt in a favorable manner in the coming months while also pursuing geographic expansion in Europe, where we expect to expand into at least two new nations in fiscal 2017. Beyond those initiatives, we feel the consistent, performance-based results that have now become the norm at Just Energy will be accentuated as we continue to successfully embrace the customer and build longer-term loyalty programs. We will accomplish this by offering a differentiated product suite that will drive our market position growth in a very profitable manner moving forward and ultimately securing our position as world-class energy management solutions provider globally."
First Quarter Operating Performance
http://media3.marketwire.com/docs/1065519.pdf.
Just Energy delivered another quarter of strong operating and financial performance as the ongoing focus on increasing gross margin through a more selective sales and renewal process continues to drive profitability across the business and allowed the Company to overcome prepaid commission expense and perform in line with a very strong comparable first quarter of 2016.
ANNUAL GROSS MARGIN PER RCE
Q1 Fiscal | Number of | Q1 Fiscal | Number of | |||
2017 | customers | 2016 | customers | |||
Consumer customers added and renewed | $ | 207 | 216,000 | $ | 204 | 238,000 |
Consumer customers lost | 195 | 133,000 | 187 | 167,000 | ||
Commercial customers added and renewed | 80 | 260,000 | 80 | 390,000 | ||
Commercial customers lost | 76 | 206,000 | 68 | 217,000 |
Customer Aggregation
Margin per RCE improvements during the quarter demonstrated continued success of Just Energy's margin improvement initiatives. The Company remains focused on maintaining its profitable customers and ensuring that variable rate customers meet base profitability profiles, even if this results in higher attrition. This improved profitability per RCE will add to the Company's future margins over and above any growth in the customer base.
April 1, | Failed to | June 30 | % increase | June 30 | % increase | |||||||
20161 | Additions | Attrition | renew | 2016 | (decrease) | 2015 | (decrease) | |||||
Consumer Energy | ||||||||||||
Gas | 661,000 | 27,000 | (38,000 | ) | (8,000 | ) | 642,000 | (3 | )% | 699,000 | (8 | )% |
Electricity | 1,234,000 | 78,000 | (66,000 | ) | (21,000 | ) | 1,225,000 | (1 | )% | 1,233,000 | (1 | )% |
Total Consumer RCEs | 1,895,000 | 105,000 | (104,000 | ) | (29,000 | ) | 1,867,000 | (1 | )% | 1,932,000 | (3 | )% |
Commercial Energy | ||||||||||||
Gas | 251,000 | 8,000 | (5,000 | ) | (7,000 | ) | 247,000 | (2 | )% | 241,000 | 2 | % |
Electricity | 2,374,000 | 92,000 | (40,000 | ) | (154,000 | ) | 2,272,000 | (4 | )% | 2,436,000 | (7 | )% |
Total Commercial RCEs | 2,625,000 | 100,000 | (45,000 | ) | (161,000 | ) | 2,519,000 | (4 | )% | 2,677,000 | (6 | )% |
Total RCEs | 4,520,000 | 205,000 | (149,000 | ) | (190,000 | ) | 4,386,000 | (3 | )% | 4,609,000 | (5 | )% |
1 | The balance as at April 1, 2016 has been adjusted for customers who have either grown above 15 RCEs (becoming a Commercial customer) or have fallen below 15 RCEs (becoming a Consumer customer) during the fiscal year 2016. At the beginning of each fiscal year, Just Energy will adjust the opening balances to reflect any changes in allocation of customers between the Consumer and Commercial divisions as a result of the increases or decreases in the annual consumption. |
Balance Sheet & Liquidity
The Company continued to pursue aggressive debt reductions in the first quarter of 2017. As of June 30, 2016 Just Energy's book value net debt was 2.6x Base EBITDA, consistent with the net debt to EBITDA reported at March 31, 2016 and lower than the 3.0x reported for the prior comparable period.
Outlook
Just Energy continues to deploy its strategy to become a world-class consumer enterprise delivering superior value to its customers through a range of energy management solutions and a multi-channel approach. Growth plans center on geographic expansion, structuring superior product value propositions, and enhancing the portfolio of energy management offerings. The Company's geographic expansion is centered on Europe where the Company expects to expand into two new European markets in fiscal 2017 and remains committed to evaluating further potential expansion in continental Europe and beyond over the longer-term. Superior value propositions such as the new flat-bill product has now been rolled out in six new markets; energy management solutions such as solar are actively marketed in California, New York and New Jersey, a new commercial energy storage pilot is being planned; and the newly launched Just Energy Perks customer loyalty program is generating great interest and traction.
Based on the strong first quarter performance, management believes that the Company will achieve its previously provided fiscal 2017 Base EBITDA guidance range of $223 million to $233 million, reflecting continued double-digit percentage growth year over year. Fiscal 2017 guidance includes deductions to Base EBITDA of approximately $40.0 million for prepaid commercial commissions, which would previously have been included as amortization within selling and marketing expenses. This represents a $22.0 million increase over fiscal 2016 and reflects a go forward run rate for this incremental deduction in future years. Just Energy expects to offset this headwind with continued strong gross margin performance.
Just Energy's solar program commenced in California and New York during fiscal 2016, with expansion to New Jersey in fiscal 2017. In fiscal 2017, Just Energy Solar, along with TerraPass, are expected to contribute $10 million towards the double-digit percentage Base EBITDA target.
During the quarter, the Company early redeemed $25 million of the senior unsecured notes outstanding. In addition to the ongoing debt reduction effort, the Company remains committed to refinancing its debt in a favorable manner. In-line with this commitment, management is actively evaluating the many options available to the Company to refinance the debt over the coming months in a shareholder-friendly manner.
Earnings Call
The Company will host a conference call and live webcast to review the first quarter results beginning at 10:00 a.m. Eastern Standard Time on Thursday, August 11, 2016, followed by a question and answer period. Rebecca MacDonald, Executive Chair, President & Co-Chief Executive Officers James Lewis and Deb Merril, and Chief Financial Officer Pat McCullough 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 1-888-465-5079 and entering pass code 9813813#. The call will also be webcasted live over the internet at the following link:
http://event.onlineseminarsolutions.com/r.htm?e=1233324&s=1&k=A64DB8BB822DD19759B74C38D6FABFA4
An audio tape rebroadcast will be available starting at 12:30 p.m. EST August 11, 2016 until September 10, 2016 at 11:59 p.m. EST. To access the rebroadcast please dial 1-888-843-7419 and enter the participant code 9813813#.
About Just Energy Group Inc.
Established in 1997, Just Energy (NYSE:JE)(TSX:JE) is an energy management solutions provider specializing in electricity, natural gas, solar and green energy. With offices located across the United States, Canada, and the United Kingdom, Just Energy serves close to two million residential and commercial customers. The company offers a wide range of energy products and home energy management services including long-term fixed-price, variable-price, and flat-bill programs, smart thermostats, and residential solar panel installations. Just Energy Group Inc. is the parent company of Amigo Energy, Commerce Energy, Green Star Energy, Hudson Energy, JE Solar, Tara Energy and TerraPass. Visit justenergygroup.com to learn more.
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, results of litigation, 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.
Neither the Toronto Stock Exchange nor the New York Stock Exchange has approved nor disapproved of the information contained herein.
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