Payout ratio remains an area of focus. As highlighted in the second quarter report, both Adjusted EBITDA and Funds from Operations ("FFO") were trending below forecast and that trend remains. Payout on Adjusted EBITDA is 65% over the past 12 months, versus 60% a year earlier. Payout ratio on FFO is 172% for the same period up from 96%. It is clear that the payout ratio on FFO will remain well above 100% for the fiscal year and, in all likelihood, the year to come based on current forecasts and dividend levels.
Just Energy remains focused on its debt level and the need to refinance notes coming due in fiscal 2015 and fiscal 2018. In December 2012, the Company was able to access the capital markets raising $105 million through a private placement of debt during the quarter. While the based on the liquidity provided by this issuance, both corporate growth and the dividends can be financed from these proceeds. However, management believes that there needs to be a focus on profitable growth and debt reduction as well as dividends.
Management and the Board of Directors has concluded that it would be appropriate to reduce the dividend effective April 2013 to a level which would allow the funding of necessary growth capital expenditures and the cash repayment of the entire fiscal 2015 $90 million convertible debenture issue if necessary. In addition, the new level of dividend will allow Just Energy to build a cash reserve to potentially purchase a portion of its other outstanding convertible debentures. The Company plans, subject to Toronto Stock Exchange approval, to commence a normal course issuer bid for its three issues of convertible debentures listed on the TSX as well as its shares.
At its regularly scheduled February meeting, the Board of Just Energy has implemented a new dividend policy effective with the April 30, 2013 dividend payment which calls for a monthly dividend of $0.07 per share. That is an annualized $0.84 versus the current $1.24 per share. This level of dividend is intended to fund growth, reduce debt and will target a payout ratio for Funds from Operations of between 60% and 65% in the future.
By creating a more stable financial platform and balance sheet, Just Energy expects to generate continued growth and income for its shareholders.
The Company's published guidance calls for 10% to 12% gross margin growth and 8% to 10% Adjusted EBITDA growth for fiscal 2013. Although overall margin is up 9% year to date, management does not expect it to reach the 10%-12% target range projected for the fiscal year. Continued weak results from the TGF ethanol business and delays in the positive cash impact of colder winter temperatures causes management to currently estimate no more than 8% margin growth for the fiscal year.
Administrative and sales and marketing expenses are growing more quickly than margin as the the expenses more closely track the number of customers in our base. Therefore, roughly flat fourth quarter margins, which is the current forecast, would result in Adjusted EBITDA remaining in the current range of 6% less than the prior fiscal year. The major factors that will continue to impact margin and EBITDA in the fourth quarter will be stabilization of commercial margins around the $64 per RCE level seen in Q3 and the reduced seasonality of the Company's business overall as the percentage of natural gas customers in the overall base declines. As well, the initial margins received from new Momentis independent representatives will slow due to amended compensation plans.
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