Pulse Energy narrows full-year loss, forecasts positive earnings this year

Small-scale electricity retailer Pulse Energy [NZAX: PLE] narrowed its full-year net loss, sales volumes rose, bad debts fell, operating expenses were kept under control, and the company switched banks to arrangements it expects will lower interest costs in the year ahead.

The loss was $2.9 million before fair value movements in the year ended March 31, from a loss of $4.8 million the previous year, said the Auckland-based company, which is controlled by Buller Electricity and listed on the NZAX small cap board. Including accounting adjustments, it reported a loss of $38,602 from a profit of $3.9 million a year earlier.

Pulse reported a loss of $1.1 million on an earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments basis, the latter being a significant non-cash item because Pulse hedges its future exposure to changes in electricity prices. That was a 63.5% improvement on the previous year's ebitdaf loss.

There was a turnaround in the second half of the year to a $1.7 million ebitdaf profit and the company "expects to be profitable at the ebitdaf line in the 2016 financial year," directors said in a statement.

The result was achieved on a 27% increase in revenue to $101.8 million, compared with $74.1 million the previous year, while operating expenses of $102.4 million were 25% up on the previous year.

"Customer numbers grew by 7317 to 54,761 during the period, following from our more than 15,000 customers gained in the year to March 31, 2014," Pulse said. "Constraints on the balance sheet meant the company had to slow down growth while new financial arrangements were established.

"Pulse believes it is now at a sustainable scale and is working to optimise its operations and financial performance."

The financial statements show Pulse has accumulated losses on its balance sheet totalling $36.1 million, a figure calculated after the impact of changes in the value of financial instruments, which moved strongly in Pulse's favour in the past two years but which have no cash impact.

The company continued to show negative cashflow from operations, at $290,942, a substantial improvement on the previous year's negative operational cash flow of $2 million.

During the year, it received $13.9 million in shareholder loans while repaying loans from shareholders of $14.4 million and issued $4.8 million of convertible notes at the same time as entering into new banking arrangements with Bank of New Zealand and dropping Westpac Banking Corp, which had required a parent guarantee. Borrowing costs were expected to be lower with BNZ, it said.

The company also discovered during the year that it was under-recovering the cost of electricity network charges, at a net cost of "just under $1 million," partly through mispricing and partly through "other issues" that "have been resolved or are currently being addressed."

The impact in the current financial year is expected to be "an immaterial amount."

(BusinessDesk)