Genesis Energy lifts retail margins

Genesis Energy fattened margins from its retail business as part of a broader strategy to create deeper, more valuable customer relationships.

The country's biggest electricity retailer lost electricity and gas customers in the final six months of 2016 but managed to lift earnings from the unit through a combination of hiking prices, reining in its appetite to compete too aggressively for customers, and cutting internal costs.

Genesis boosted earnings before interest, tax, depreciation and amortisation 10% to $62.7 million from its retail business in the six months ended December 31 on a 0.7% dip in revenue to $717.5 million. The ebitdaf margin increased to 8.7% of revenue from 7.9% a year earlier. Through that period, electricity customers fell 1.6% to 514,155 and gas customers slipped 0.4% to 106,388, while warmer weather saw reduced demand for electricity sales which were down 3.3%.

Chief executive Marc England told an investor and analyst briefing that the company was analysing customers more closely with a view to pursuing value over volume.

"We've put pricing changes in where we can, where we think it's appropriate to focus on value," Mr England said. "The result is we accepted some ICP (installation control point) losses as we transition from volume to value – that's an inevitable outcome."

Genesis increased time-of-use pricing plans 5.1% in the period and mass market prices 1.8%. Over the same period, government figures show electricity consumer prices were up 0.3%.

The power company, which has about 26% of the retail market, is overhauling its corporate structure to become more customer-centric and ultimately sees power generation as part of the supply chain, Mr England said.

The intense price competition isn't abating, and Mr England said that heightens Genesis's focus on deepening its customer relationship to lift loyalty and cut churn rates.

Genesis was more circumspect in its sales and commission structures in chasing customers in the half, lowering its cost of acquisition by 15%.

The power company also trimmed $1.1 million from its employee bill to $14.1 million. Genesis wants to increase its use of cheaper self-service and online customer transactions and has cut fulltime equivalents retail staff numbers by 11% over the past 18 months.

Genesis shares fell 1.4% to $2.10, and have gained 22% over the past 12 months.

(BusinessDesk)