Bay Street News

Just Energy Reports Second Quarter 2019 Results

Base EBITDA growth of 81% year-over-year
Embedded gross margin highest in the Company’s history
Base Funds from Operations TTM payout ratio improved to 82%

TORONTO, Nov. 07, 2018 (GLOBE NEWSWIRE) — Just Energy Group, Inc. (TSX:JE; NYSE:JE), a leading consumer company specializing in electricity and natural gas commodities, energy efficiency solutions, renewable energy options, and water quality and filtration devices, today announced results for its fiscal 2019 second quarter ended September 30, 2018.

Key Highlights:


Financial highlights
For the three months ended September 30      
(thousands of dollars, except where indicated and per share amounts)      
               
        % increase      
  Fiscal 2019   (decrease)   Fiscal 2018
Sales $ 956,843     12 %   $ 851,927  
Gross margin   173,339     22 %     142,663  
Administrative expenses   58,508     25 %     46,806  
Selling and marketing expenses   56,749     (3 )%     58,577  
Finance costs   20,123     61 %     12,521  
Loss1   (21,450 )   67 %     (64,923 )
Loss per share available to shareholders – basic and diluted   (0.16 )         (0.48 )
Dividends/distributions   22,330     4 %     21,468  
Base EBITDA2   37,261     81 %     20,548  
Base Funds from Operations2   26,223     241 %     7,683  
Payout ratio on Base Funds from Operations2   85%           279%  

Financial highlights
For the six months ended September 30      
(thousands of dollars, except where indicated and per share amounts)      
               
        % increase      
  Fiscal 2019   (decrease)   Fiscal 2018
Sales $ 1,833,300     8 %   $ 1,699,633  
Gross margin   326,871     9 %     300,226  
Administrative expenses   114,190     20 %     95,437  
Selling and marketing expenses   107,292     (8 )%     116,653  
Finance costs   36,463     49 %     24,511  
Profit (loss) for the period1   (62,873 )   (242 )%     44,386  
Profit (loss) per share available to shareholders – basic   (0.45 )         0.21  
Profit (loss) per share available to shareholders – diluted   (0.45 )         0.17  
Dividends/distributions   44,592     3 %     43,251  
Base EBITDA2   64,541     22 %     53,057  
Base FFO2   44,337     57 %     28,191  
Payout ratio on Base FFO2   101%           153%  
Embedded gross margin2   2,336,200     45 %     1,615,000  
Customer count   1,633,000     3 %     1,580,000  
Total ending RCEs   4,164,000     2 %     4,087,000  
Total gross RCE additions   619,000     12 %     555,000  
Total net RCE additions (reductions)   1,000     NMF 3     (124,000 )

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. 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 2019’s Management’s Discussion and Analysis.
3 Not a meaningful figure

“We are pleased with the second quarter results and our progress toward our fiscal year expectations, as our accomplishments are demonstrating our resolve and commitment to faster execution,” said Just Energy’s Chief Executive Officer, Patrick McCullough. “The second quarter results exceeded expectations as swift pricing optimization actions successfully expanded to a broader audience and our risk management discipline neutralized the impact of summer weather on supply costs. These actions are also evident in our record-level embedded gross margin on our existing book of business as our core commodity business continues to perform well. We expect to see these actions continue to contribute in the fiscal third and fourth quarters, driving performance beyond historical levels and supporting guidance for the current fiscal year and earnings growth into the future.”

Mr. McCullough continued, “Looking ahead, 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. While there is still much work to be done, we are beginning to demonstrate our resolve and commitment to faster execution, and we are confident we will build on our current momentum in delivering on our fiscal 2019 expectations while also setting the stage for profitable long-term growth.”

Embedded gross margin 
Management’s estimate of the future embedded gross margin is as follows:
(millions of dollars)
                           
      As at     As at   Sept 30 vs.     As at   2018 vs.
  Sept. 30, June 30,   June 30 Sept. 30,   2017 
  2018 2018   variance 2017   variance
Future embedded gross margin   $ 2,336.2   $ 1,963.6   19%   $ 1,615.0   45%
Annual gross margin per RCE              
      Q2 Fiscal   Number of     Q2 Fiscal   Number of
    2019   customers   2018   customers
                     
Consumer customers added or renewed   $ 333   257,000   $ 197   285,000
Consumer customers lost     210   174,000     201   186,000
Commercial customers added or renewed1     96   230,000     88   180,000
Commercial customers lost     82   125,000     78   112,000

1 Annual gross margin per RCE excludes margins from IEG and large Commercial and Industrial customers.

Customer Aggregation (RCEs)        
                 
  July 1,     Failed to Sept. 30, % increase Sept. 30, % increase
  2018 Additions Attrition renew 2018 (decrease) 2017 (decrease)
Consumer Energy              
Gas 637,000 30,000 (27,000 ) (19,000 ) 621,000 (3 )% 627,000 (1 )%
Electricity 1,189,000 102,000 (85,000 ) (43,000 ) 1,163,000 (2 )% 1,168,000  
Total Consumer RCEs 1,826,000 132,000 (112,000 ) (62,000 ) 1,784,000 (2 )% 1,795,000 (1 )%
Commercial Energy            
Gas 421,000 47,000 (10,000 ) (4,000 ) 454,000 8 % 337,000 35 %
Electricity 1,926,000 111,000 (39,000 ) (72,000 ) 1,926,000   1,955,000 (1 )%
Total Commercial RCEs 2,347,000 158,000 (49,000 ) (76,000 ) 2,380,000 1 % 2,292,000 4 %
Total RCEs 4,173,000 290,000 (161,000 ) (138,000 ) 4,164,000   4,087,000 2 %

Balance Sheet & Liquidity

Outlook

Just Energy is executing a strategic shift from a retail energy provider to a consumer company focused on differentiated value-added 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. Just Energy’s unique offering of value added products and services seeks to address its customers’ concerns around their family’s health and wellbeing, 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 customer growth through its retail and other primary channels 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 the first half of fiscal 2019 to attract higher margin customers in conjunction with implementing a price optimization strategy company-wide. To further drive profitability, Just Energy has 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 year’s third and fourth quarters, driving performance beyond historical levels and supporting guidance for the current fiscal year and earnings growth into the future.

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. Upon achieving the stated guidance range for fiscal 2019, the Company will achieve a dividend payout ratio of approximately 75% which is well within management’s expectations and offers support for the dividend moving forward.

Earnings Call

The Company will host a conference call and live webcast to review the fiscal second quarter results beginning at 10:00 a.m. Eastern Time on November 8th, 2018 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 toll-free, 1-877-300-9306 in the U.S. or 1-855-669-9657 in Canada, and ask to be joined into the Just Energy call. The call will also be webcast live over the internet at the following link:

https://www.webcaster4.com/Webcast/Page/1731/27819

An audio rebroadcast will be available starting one hour after the conference concludes and will be available until November 15th, 2018. To access the rebroadcast please dial 1-877-344-7529 and use replay access code 10125190. The webcast will also be archived on the JE investor relations website for one year.

About Just Energy Group Inc.

Founded in Canada in 1997, Just Energy (NYSE:JE, TSX:JE) 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 justenergygroup.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 measure 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. 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 this measure is 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 September 30, 2018 for the Company’s definition of “EBITDA” and other none-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