Just Energy Group Inc. (“Just Energy” or the “Company”) (TSX:JE;
NYSE:JE), a retail energy provider specializing in electricity and
natural gas commodities and bringing energy efficient solutions and
renewable energy options to customers, announced its fourth quarter
and year-end results for fiscal 2020.
“In Fiscal 2020 we took significant steps to
further reduce spend, streamline our portfolio, stabilize liquidity
and add high-quality customers across our key markets in North
America,” said Just Energy’s President and Chief Executive Officer,
R. Scott Gahn. “We exceeded our spend reduction target of $60
million for fiscal 2020 by improving operations in our core North
American commodity business. These completed actions will
deliver approximately $100 million in savings in fiscal 2021
relative to our fiscal 2019 performance, highlighting our
operational improvements from completing our strategic review.
These savings exclude the incremental bad debt savings that we are
realizing from our enhanced controls. However, we continue to
operate in a difficult situation as a Company, facing significant
liquidity risks. Moreover, Just Energy has material debt
obligations coming due in the near future, namely the $370 million
Credit Facility which matures on September 1, 2020.”
“We continue to work diligently to review and
address our financial processes. From these efforts, we have
restated the first quarter of fiscal 2019 results, which reduced
our fiscal 2019 Base EBITDA to $160.8 million. These efforts do not
impact future cash flows or the performance of the business. Base
EBITDA from continuing operations in fiscal 2020 was $185.8
million, inclusive of the $22.0 million positive adjustment from
the reduction in the Filter Group earn-out liability.”
“We have taken several difficult but necessary
steps to protect the health and safety of our employees, customers
and communities during the COVID-19 pandemic. We continue to
closely monitor the situation and are encouraged by the resiliency
of our people and our business. While COVID-19 has delayed
the next phase of performance transformation, including enhancing
our sales channels to deliver historic levels of new customers, we
remain confident that the steps we are taking now to rebuild these
channels positions us well for the future.”
Mr. Gahn added, “Despite near-term uncertainties
due to COVID-19, our business continues to operate efficiently. We
are keenly focused on our cost optimization efforts, acquiring high
quality customers and our ongoing efforts to transform sales
channels in our core North American markets, all of which will
support our mission to drive long-term profitability.”
Key developments:
- Strategic Review provided valuable
insights into how best to unlock additional value from the
business. As a result, Just Energy plans to remain a standalone
energy retailer and take steps to strengthen its balance
sheet.
- Fourth quarter Base EBITDA
increased 25% to $74.6 million, primarily due to the significant
increase in Base gross margin and the decrease in selling and
marketing expenses and bad debt expense, excluding $6.1 million for
non-recurring charges for Strategic Review costs and the Texas
residential enrolment and collections impairment. Fiscal 2020 Base
EBITDA is $185.8 million, inclusive of the $22.0 million positive
adjustment from the reduction in the Filter Group earn-out
liability.
- Base gross margin increased 5% to
$180.4 million in the fiscal fourth quarter, primarily due to
margin improvement initiatives and supply cost management driving
lower costs, partially offset by the decline in the customer base.
Annual Base gross margin was $610.6 million an increase of 3% from
the prior fiscal year.
- Total spend reduction in fiscal
2020 of $68.3 million versus fiscal 2019 achieved through lower
Administrative expenses ($11.3 million), Selling non-commission and
marketing expenses ($12.7 million), capital expenditures ($29.5
million) and fiscal 2019 restructuring costs ($14.8 million).
Fiscal 2021 cost-savings relative to fiscal 2019 expected to reach
$100 million. -- Administrative expenses,
excluding Strategic Review costs of ~$13.9 million, decreased 7%
from $165.3 million in fiscal 2019 to $154.0 million in FY2020 as
result of cost-reduction efforts and organizational simplification
during FY2020. -- Selling non-commission
and marketing expenses decreased 14% from $90.8 million in fiscal
2019 to $78.1 million in fiscal 2020 due to optimization of selling
overhead and eliminating low-return selling activities.
-- Capital expenditures decreased by 62% from
$43.5 million in FY2019 to $16.5 million in fiscal 2020 due to
improved capital allocation and processes.
- Total residential customer
equivalent (“RCE”) count decreased 7% year-over-year to 3.4
million, reflecting the transition from an RCE-driven focus to a
greater emphasis on attracting and retaining strong-fit customers
that will drive profitability.
- Embedded gross margin (“EGM”) of
$1,807.8 million decreased 14% compared to the embedded gross
margin as at March 31, 2019, driven by the decline in the commodity
EGM due to a decline in the North American commodity customer
base.
- Fiscal 2019 Base EBITDA has been
re-stated, reducing fiscal 2019 Base EBITDA to $160.8 million
(excluding previously reported discontinued operations). The impact
of this re-statement does not have a cash impact on future
performance.
|
Financial
highlights |
For the three
months ended March 31 |
|
|
(thousands of
dollars, except where indicated and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
% increase |
|
|
|
Fiscal 2020 |
|
(decrease) |
Fiscal 2019 |
Sales |
$ |
675,683 |
|
(15)% |
$ |
797,409 |
Cost of goods sold |
|
388,174 |
|
(32)% |
|
574,543 |
Gross margin |
|
287,509 |
|
29% |
|
222,866 |
Realized change of derivative
instruments and other |
|
(107,089) |
|
112% |
|
(50,435) |
Base gross margin |
|
180,420 |
|
5% |
|
172,431 |
Administrative expenses4 |
|
46,051 |
|
18% |
|
38,998 |
Selling commission
expenses |
|
36,983 |
|
(6)% |
|
39,480 |
Selling non-commission and
marketing expenses |
|
16,584 |
|
(30)% |
|
23,861 |
Restructuring costs |
|
- |
|
NMF 3 |
|
8,862 |
Finance costs |
|
26,770 |
|
(6)% |
|
28,581 |
Impairment of goodwill,
intangible assets and other |
|
92,401 |
|
NMF 3 |
|
- |
Loss from continuing
operations |
|
(138,210) |
|
NMF 3 |
|
(25,817) |
Loss from discontinued
operations |
|
(2,721) |
|
(97)% |
|
(93,593) |
Loss1 |
|
(140,931) |
|
18% |
|
(119,410) |
Loss per share from continuing
operations available to shareholders – basic |
|
(0.93) |
|
|
|
(0.23) |
Loss per share from continuing
operations available to shareholders – diluted |
|
(0.93) |
|
|
|
(0.23) |
Dividends/distributions |
|
- |
|
NMF 3 |
|
22,004 |
Base EBITDA from continuing
operations2 |
|
74,632 |
|
25% |
|
59,479 |
Total gross customer (RCE)
additions |
|
245,000 |
|
12% |
|
219,000 |
Total net customer (RCE) additions2 |
|
(44,000) |
|
(13)% |
|
(39,000) |
1 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 the Fiscal 2020 Annual Report’s Management’s
Discussion and Analysis. 3 Not a meaningful figure. 4 Includes $6.1
million of Strategic Review costs for the fourth quarter of fiscal
2020.
|
Financial
highlights |
For the years
ended March 31 |
|
|
(thousands of
dollars, except where indicated and per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
% increase |
|
|
|
Fiscal 2020 |
|
(decrease) |
Fiscal 2019 |
Sales |
$ |
2,772,809 |
|
(9)% |
$ |
3,038,438 |
Cost of goods sold |
|
2,136,456 |
|
(9)% |
|
2,359,867 |
Gross margin |
|
636,353 |
|
(6)% |
|
678,571 |
Realized change of derivative
instruments and other |
|
(25,773) |
|
(69)% |
|
(83,776) |
Base gross margin2 |
|
610,580 |
|
3% |
|
594,795 |
Administrative expenses4 |
|
167,936 |
|
2% |
|
165,328 |
Selling commission
expenses |
|
142,682 |
|
18% |
|
120,960 |
Selling non-commission and
marketing expenses |
|
78,138 |
|
(14)% |
|
90,778 |
Restructuring costs |
|
- |
|
- |
|
14,844 |
Finance costs |
|
106,945 |
|
22% |
|
87,779 |
Impairment of goodwill,
intangible assets and other |
|
92,401 |
|
NMF 3 |
|
- |
Loss from continuing
operations |
|
(298,233) |
|
116% |
|
(138,272) |
Loss from discontinued
operations |
|
(11,426) |
|
(91)% |
|
(128,259) |
Loss for the year1 |
|
(309,659) |
|
16% |
|
(266,531) |
Loss per share from continuing
operations available to shareholders – basic |
|
(2.05) |
|
|
|
(1.00) |
Loss per share from continuing
operations available to shareholders – diluted |
|
(2.05) |
|
|
|
(1.00) |
Dividends and
distributions |
|
26,195 |
|
(70)% |
|
88,030 |
Base EBITDA from continuing
operations2 |
|
185,836 |
|
16% |
|
160,758 |
Free cash flow2 |
|
24,596 |
|
128% |
|
(88,037) |
Embedded gross margin2 |
|
1,807,832 |
|
(14)% |
|
2,097,800 |
Total customers (RCEs) |
|
3,396,000 |
|
(7)% |
|
3,638,000 |
Total gross customer (RCE)
additions |
|
716,000 |
|
(29)% |
|
1,011,000 |
Total net customer (RCE) additions |
|
(242,000) |
|
NMF 3 |
|
(28,000) |
1 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 the Fiscal 2020 Annual Report’s Management’s
Discussion and Analysis. 3 Not a meaningful figure. 4 Includes
$13.9 million of Strategic Review costs for fiscal 2020 for the
fourth quarter of fiscal 2020.
Balance sheet and liquidity
- Total cash and available liquidity
on the credit facility as of March 31, 2020 was $87.2 million due
to actions the Company has taken to reduce costs and improve
liquidity and available supplier credit.
- Total debt increased 8% from $725.4
million as at March 31, 2019 to $782.0 million as at March 31, 2020
driven by additional withdrawals on the credit facility and the
8.75% loan, partially offset by the partial redemption of the 6.5%
convertible debentures and continued reduction of the Filter Group
debt.
Embedded
gross margin |
|
|
|
|
|
|
|
|
(millions of dollars) |
|
|
|
|
|
|
|
|
Fiscal |
|
Fiscal |
|
2020 vs.2019 |
|
2020 |
|
2019 |
|
variance |
Embedded gross margin |
$ |
1,807.8 |
|
$ |
2,097.8 |
|
(14)% |
|
|
|
|
|
|
|
|
The decrease in the Company’s embedded gross
margin is due to the decline in the North American commodity
customer base, partially offset by the stronger U.S. dollar.
Total customer
count |
|
|
|
|
|
|
|
|
As at |
As at |
|
|
March 31, |
March 31, |
% increase |
|
2020 |
2019 |
(decrease) |
|
|
|
|
Consumer |
988,000 |
1,159,000 |
(15)% |
Commercial |
119,000 |
120,000 |
(1)% |
Total customer count |
1,107,000 |
1,279,000 |
(13)% |
- Total customer count decreased 13%
to 1,107,000 compared to the prior year, excluding discontinued
operations. The decline in customers is a result of the Company’s
focus on renewing and adding 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.
Gross margin per RCE
|
|
|
Fiscal |
|
Number of |
|
|
Fiscal |
|
Number of |
|
|
2020 |
|
RCEs |
|
2019 |
|
RCEs |
|
|
|
|
|
|
|
|
|
|
|
Consumer customers added or
renewed |
|
$ |
386 |
|
526,000 |
|
$ |
300 |
|
880,000 |
|
|
|
|
|
|
|
|
|
|
|
Commercial customers added or
renewed1 |
|
|
92 |
|
682,000 |
|
|
76 |
|
742,000 |
|
|
|
|
|
|
|
|
|
|
|
1Annual gross
margin per RCE excludes margins from Interactive Energy Group and
large Commercial and Industrial customers. |
Total RCE
summary |
|
|
|
|
|
|
|
|
|
|
Apr 1, |
|
|
Failed to |
Mar. 31, |
% increase |
|
2019 |
Additions |
Attrition |
renew |
2020 |
(decrease) |
Consumer |
|
|
|
|
|
|
Gas |
406,000 |
37,000 |
(92,000) |
(26,000) |
325,000 |
(20)% |
Electricity |
993,000 |
209,000 |
(259,000) |
(67,000) |
876,000 |
(12)% |
Total
Consumer RCEs |
1,399,000 |
246,000 |
(351,000) |
(93,000) |
1,201,000 |
(14)% |
Commercial |
|
|
|
|
|
|
Gas |
436,000 |
88,000 |
(72,000) |
(23,000) |
429,000 |
(2)% |
Electricity |
1,803,000 |
382,000 |
(190,000) |
(229,000) |
1,766,000 |
(2)% |
Total
Commercial RCEs |
2,239,000 |
470,000 |
(262,000) |
(252,000) |
2,195,000 |
(2)% |
Total
RCEs |
3,638,000 |
716,000 |
(613,000) |
(345,000) |
3,396,000 |
(7)% |
- Consumer RCE additions amounted to
246,000 for the year ended March 31, 2020, a 48% decrease from
corresponding year ended March 31, 2019, primarily driven by a
greater emphasis on attracting and retaining strong-fit customers
that will drive greater profitability and the natural attrition in
response to the pricing actions implemented in fiscal 2020.
- Commercial RCE additions were
470,000 for the three months ended March 31, 2020, a 13% decrease
over the prior comparable period of fiscal 2019 due to competitive
pressures on pricing in the U.S. market. Commercial failed to renew
RCEs for the year ended March 31, 2020 of 252,000 RCEs decreased
13% from the corresponding period in March 31, 2019.
- The Consumer attrition rate
increased five percentage points to 26% and the Commercial
attrition rate increased two percentage points to 9%. Consumer
attrition was severely affected in FY2020 by the rectified Texas
enrollment issues. The Company expects Consumer attrition rates to
subside and be in line with historical lower levels during early
FY2021.
- The Consumer renewal rate increased
to 77%, and the Commercial renewal rate decreased by one percentage
point to 50% as compared to the prior year. The increase in the
overall Consumer renewal rate was driven by improved retention
offerings, offset by attrition while the decline in the Commercial
renewal rate reflected a very competitive market for Commercial
renewals with competitors pricing aggressively and Just Energy’s
focus on improving retained customers’ profitability rather than
pursuing low margin growth.
Outlook
In fiscal 2020, Just Energy committed to
reducing the overhead costs in our business and significantly
improving the quality of our customer book.
In fiscal 2020, the Company achieved a total
reduction in spend (overhead and capital) of approximately $70
million relative to fiscal 2019. In fiscal 2021 the Company
expects to benefit from the full run-rate of these savings and
achieve a sustainable spending rate of approximately $100 million
less than fiscal 2019. The Company is committed to continuously
evaluating all spend and identifying future opportunities to
streamline the business.
The recent market exits demonstrate Just
Energy’s commitment to focus on its North American operations. The
sale of the U.K., Ireland and Japan operations are now complete, as
is the sale of the Company’s Georgia assets. Just Energy continues
to actively evaluate the optimal strategy for our remaining
non-core operations, particularly value-added products considering
the Company’s renewed focus on its commodity business.
Given the uncertainty associated with COVID-19,
and the impact it has had on sales, the Company is providing a
wider than normal guidance range of between $130 and $160 million
of Base EBITDA for fiscal 2021. The Company also expects to achieve
between $70 and $100 million of unlevered free cash flow in fiscal
2021 subject to the extent that management decides to reduce
extended supplier payables. As the year progresses and the Company
has a clearer understanding of the impact of the pandemic the
Company will revisit its guidance.
Earnings call
The Company will host a conference call and live
webcast with R. Scott Gahn, chief executive officer, and Jim Brown,
chief financial officer, to review the fiscal fourth quarter
results beginning at 11:30 a.m. Eastern Time on July 8th, 2020.
Just Energy Conference Call and Webcast
- Wednesday, July 8th, 2020
- 11:30 a.m. ET
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 9897748. The call will also be webcast
live over the internet at the following link:
https://edge.media-server.com/mmc/p/v54zs6sk
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 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., Hudson Energy,
Interactive Energy Group, Tara Energy, and terrapass.
Visit https://investors.justenergy.com/ to learn more.
Also, find us on Facebook and follow us
on Twitter.
FORWARD-LOOKING STATEMENTSThis
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, guidance for Base EBITDA for the fiscal year ending
March 31, 2021; 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; discussions with
lenders, the impact of COVID-19; the Company’s transition
from a purely RCE driven focus; improvement in the Company’s
expected credit loss experience; the Company’s ability to attract
and retain strong-fit customers and the impact thereof on the
achievement by the Company of greater profitability; and the impact
of the actions and remediation efforts taken or implemented by the
Company in remediating the material weaknesses in the Company’s
internal controls over financial reporting. These statements are
based on current expectations that involve several risks and
uncertainties which could cause actual results to differ from those
anticipated. These risks include, but are not limited to, the
impact of the evolving COVID-19 pandemic on the Company’s business,
operations and sales, including risks associated with reliance on
suppliers, uncertainties relating to the ultimate spread, severity
and during of COVID-19 and related adverse effects on the economies
and financial markets of countries in which the Company operates,
the ability of the Company to successfully implement its business
continuity plans with respect to the COVID-19 pandemic, the
Company’s ability to access sufficient capital to provide liquidity
to manage its cash flow requirements, general economic, business
and market conditions, the ability of management to execute its
business plan, levels of customer natural gas and electricity
consumption, extreme weather conditions, rates of customer
additions and renewals, customer credit risk, rates of customer
attrition, fluctuations in natural gas and electricity prices,
interest and exchange rates, actions taken by governmental
authorities including energy marketing regulation, increases in
taxes and changes in government regulations and incentive programs,
changes in regulatory regimes, results of litigation and decisions
by regulatory authorities, competition, the performance of acquired
companies 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 www.justenergygroup.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 measures such as “EBITDA”, “Base
EBITDA, “Base gross margin”, “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 Fiscal 2020 Annual 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 BrownChief Financial OfficerJust
Energy713-544-8191jbrown@justenergy.com
or
InvestorsMichael CummingsAlpha
IRPhone: (617) 982-0475 JE@alpha-ir.com
MediaBoyd ErmanLongview
CommunicationsPhone: 416-523-5885berman@longviewcomms.ca
Source: Just Energy Group Inc.
Just Energy (NYSE:JE)
Historical Stock Chart
From Mar 2024 to Apr 2024
Just Energy (NYSE:JE)
Historical Stock Chart
From Apr 2023 to Apr 2024