Ann: Appendix 4C - quarterly, page-37

LPEs latest 4c certainly turned out to be mixed bag that has left much of the market in a state of uncertainty.
One the one hand it failed to produce the expected CFP, and on the other launched an expansion into a previously untapped market, nearly twice the size of its original target.
On the CFP fail it was a little glib to state “ is not unexpected “ when.

The previous quarter was already CFP positive despite having one off costs absorbed .
GWHs under billing had risen by 21.1 GWH to 177 GWH
It included 3 peak volume consumption months
Cash reciepts rose by 1.05 million and operating costs were steady.

Examining the 4c it is the rise in COGs spend by 1.6 million that creates the problem.
Spending an extra 1.6 to increase reciepts by 1.05 is hard to explain.
LPE do try
It is normal to have a delay between LPE paying for electricity and customers paying for it, so electricity purchases in one quarter are only partly billed and received in the same quarter.
A greater proportion of customers are now on quarterly billing delaying receipts even further across quarters
A banking settlement lag caused more receipts to transfer to the next quarter
Higher environmental charges.

The graph below shows the gross margin over this and previous quarters. It is based purely on COGs and reciepts in the 4Cs so does not compare true margin per GWH sold
Dropping to 15.1% in the last 4c shows it is out of step this time and should reflect as increased receipts in the next quarter. But as can be seen higher customer consumption increases cash spend without an immediate corresponding increase in receipts for the quarter
In the next quarter growth should be a sum of both strata conversion (~21GWh) and direct market customers (`15 Gwh), all up 36 Gwh which is great in growth terms, but affects cash flow.
Longer term as the base of GWH that have been in the system for more than 3 months grows, greater stability will develop as the ratio of new customers to old customers drops.
I take comfort in the knowledge that each GWH that becomes billable will return its percentage margin in the 12 months forward