Just Energy Group Inc. (Canada) T.JE

RE:So Where Are ...

[JohnWalker]

Just Energy Reports Fiscal First Quarter 2020 Results

 Previously Announced Strategic Review Progressing
Base EBITDA from Continuing Operations of $24.2 Million
Business Remains Strong with Embedded Gross Margin of $2.1 Billion
Common Share Dividend Suspended as part of Strategic Review
Walter M. Higgins III has been appointed to the Board of Directors

TORONTO, Aug. 14, 2019 (GLOBE NEWSWIRE) -- Just Energy Group Inc. (TSX:JE; NYSE:JE) (“Just Energy” or the “Company”), a 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 first quarter fiscal 2020.

Key Developments:

• Industry veteran Walter M. Higgins III will join the Board of Directors to strengthen board independence and to provide deep industry expertise to support the ongoing strategic review process.
   
• Previously announced strategic review is ongoing and progressing within the special committee’s expectations.
   
• During the first quarter, the Company took actions to significantly increase cash flow including exercising the accordion option associated with its credit facility, repaying and extending the remaining portion of the Company’s 6.5% Convertible Bond and taking operational measures to decrease negative cash flows associated with bad debt in Texas. With operational actions taken to reduce Texas bad debt and fourth fiscal quarter 2019 cost reductions beginning to take effect the Company has confiden ce in its ability to generate positive cash flows from the business.
   
• As part of the strategic review the Board of Directors has decided to suspend its common share dividend until further notice.
   
• Company plans to dispose of its assets in the U.K. due to a decision taken during the strategic review. The disposal of these assets is expected to occur during the strategic review process.

• Gross margin from continuing operations was flat at $132.3 million due to margin optimization in North America despite a smaller book of business, prior period adjustment related to the winter delivery period as compared to the prior year, and the bad debt impairment.
   
• Base EBITDA from continuing operations, which reflects the Company’s decision to dispose of its business in the U.K., was $24.2 million, a year-over-y ear decrease of 31% with gross margin flat to the prior year, and higher amortization of customer acquisition costs in the quarter.
   
• Embedded gross margin amounted to $2.1 billion (including $175.6 million of discontinued operations embedded gross margin), a decrease of 3% due to decline in the North American customer base in part associated with bad debt in Texas, which was partially offset by gross margin optimization initiatives and a favorable foreign exchange impact.
   
• Administrative expenses from continuing operations increased 2% to $40.8 million, due to a stronger US dollar and increased professional fees in the first quarter of fiscal 2020 offset by cost savings initiatives announces at year end. Fourth fiscal quarter 2019 administrative cost reductions will begin to accrue in the second fiscal quarter 2020 and beyond.
   
• Selling and marketing exp enses from continuing operations were $61.7 million, an increase of 47% primarily due to higher amortization of capitalized commissions due to the impact of fiscal year 2019 IFRS 15 accounting changes.
   
• Finance costs amounted to $23.5 million, an increase of 44% due to higher interest expense from the increased utilization of the credit facility, higher interest rates, higher premiums and fees, collateral related costs associated with Texas electricity markets, and supplier credit term extensions.
   
• Total RCE count from continuing operations decreased 4% year-over-year to 3,565,000 as a result of the Company’s focus on renewing and signing higher quality customers, natural attrition of the customer base, and the impact of the bad debt impairment
   
• Management revised its fiscal year 2020 base EBITDA from continuing operations guidance range to be $180 mil lion to $200 million and fiscal year 2020 free cash flow guidance of between $50 million to $70 million, excluding U.K. discontinued operations. Fiscal year 2020 free cash flow was negatively impacted by impairment of Texas bad debt.
   
• During the quarter, management identified operational issues in customer enrolment and non-payment of accounts receivable in the Texas residential market, resulting in an aggregate adjustment of $58.6 million. Management also proceeded to identify collection issues in the U.K. market, resulting in an aggregate adjustment of $74.1 million. As a result, the Company recorded additional allowances for doubtful accounts which are included in the Company’s restated third quarter and year-end financial statements for fiscal year 2019, and in the Company’s first quarter results for fiscal year 2020, as referenced within each respective management discussion and analysis.