Commenting on the quarterly results, CEO Ken Hartwick stated: "Just Energy's third quarter was another strong quarter of growth as reflected in our 341,000 new customers resulting in 10% year over year growth in our base and 14% year over year growth in our future embedded gross margin. We were able to generate this growth despite a challenging commodity environment, heightened competition and poor economics for our ethanol business, all of which contributed to weaker year over year margin and adjusted EBITDA. These results contributed to the increase in our payout ratio to levels above our targeted range. With an embedded margin of $15.19 per Just Energy share to end the quarter, there is a solid underpinning to our equity and evidence of our future financial strength which will allow us to continue executing on our long-term growth strategy.
"Our management team and Board of Directors regularly review Just Energy's debt levels and our payout ratio. Management's recommendation to the Board was based on the quality of Just Energy's investment opportunities and the available access to the capital markets for funding our continued growth. The conclusion was that the long term interests of shareholders would be better served by a reduction of the current dividend to $0.84 per year, an amount which should allow us to reduce our payout below 100% in fiscal 2014, fund our growth and build a cash reserve to pay down our debt on maturity. This new dividend level still leaves Just Energy as one of the highest yielding investment options in our industry and in the markets in general."
Executive Chair Rebecca MacDonald added: "Our Board of Directors reviews our dividend policy and capital allocation annually. In the review for the coming year, they considered the best long term interests of our shareholders and the management's recommendations for use of capital. In line with this effort, we have elected to reduce our dividend rate effective the April 30, 2013 payment and reallocate our capital priorities toward what we believe to be high return investments that have and will continue to increase the future embedded margin in our contracts. As this margin is realized, we expect our payout ratio on funds from operations to fall into the target range of 60% to 65% by the end of fiscal 2015."
Third Quarter Operating Performance
The third quarter financial results showed continued strong growth in Just Energy's core business as reflected in both number of customers and the future embedded margin those customers will generate. Both measures were up double digits from a year earlier. A challenging commodity price environment combined with poor markets for the non-core ethanol business resulted in weaker than expected margin and EBITDA from the Company.
Customer additions in the third quarter were 341,000, up 10% from fiscal 2012 and the second highest total registered in Just Energy's history. The overall customer base, including National Home Services ("NHS") installations, grew to 4.3 million, up 11% from a year earlier.
New additions were solid in all segments of the business led by 150,000 new residential customers, up 34% from the 112,000 added in the third quarter of fiscal 2012. Commercial additions totaled 191,000, down slightly from the record 198,000 added in the prior fiscal year. NHS saw a 44% year over year growth in total installations growing to 222,000 customers.
To view the Graph associated with this release, please visit the following link: http://media3.marketwire.com/docs/JEGraph.pdf.
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