$600 million investment in acquisitions, solid organic growth and operational improvements drive strong results
TORONTO, Feb. 23, 2012 /CNW/ - Direct Energy, one of North America's largest competitive energy and energy-related services providers*, today announced a 31 percent increase in operating profit for the full year 2011 from C$377 million (pounds Sterling 234 million) to C$494 million (pounds 312 million).
Direct Energy is the North American subsidiary of Centrica plc (LSE: CNA). Centrica reported full year 2011 revenues of pounds 22.8 billion (C$36.2 billion) and earnings of pounds 1.3 billion (C$2.1 billion).
The increase in profit at Direct Energy was driven by operational improvements and cost efficiencies, both upstream and downstream, and the impact of recently completed acquisitions. The company also experienced strong organic growth in customer numbers, partly as a result of 22 new market entries in the U.S. Northeast. Direct Energy's year-over-year revenue increased from C$9.6 billion (pounds 6.0 billion) in 2010 to C$9.7 billion (pounds 6.1 billion) in 2011.
"We have continued to pursue an aggressive growth strategy for North America with C$600 million in acquisitions completed in the past 12 months," said Chris Weston, President and CEO of Direct Energy. "Additionally, we're continuing to build our existing base and strengthen key market positions while driving operational improvements throughout the company."
Direct Energy's commercial and industrial energy business achieved a 24 percent increase in operating profit year over year, driven by high sales productivity and high levels of customer service. Direct Energy's residential energy business increased its customer accounts by 18 percent in 2011. Strong acquisitive and organic growth in the U.S. Northeast and Texas has offset declining customer numbers in Ontario resulting from challenges created by a difficult market structure.
Operating profit for Direct Energy's home services business increased 83 percent, largely driven by an increase in customer accounts and the full-year impact of the Clockwork Home Services acquisition announced in 2010. Clockwork's nationally branded services franchises include Mister Sparky®, Benjamin Franklin Plumbing® and One Hour Air Conditioning & Heating®.
Despite low natural gas prices across North America, profitability in Direct Energy's upstream and wholesale business improved significantly compared to 2010, driven by a full-year contribution from the Wildcat Hills assets in Alberta and improved power asset performance in Texas.
Mr. Weston added, "Despite challenges presented by low gas prices and unfavorable economic conditions, we were able to achieve strong growth in 2011. For 2012, we are well positioned to drive further organic growth by building on our existing base, strong market positions, and vertically integrated model."
Full year 2011 highlights from Direct Energy's lines of business include:
Direct Energy Business
- Operating profit increased 24 percent to C$174 million (pounds 110 million)
- Gross revenue increased by 1 percent to C$4.4 billion (pounds 2.75 billion) as volume growth offset the impact of the lower commodity price environment
- Electricity volumes grew by 17 percent and gas volumes grew by 13 percent
Direct Energy Residential
- U.S. customer numbers increased 18 percent to more than three million following organic growth and the acquisitions of Gateway Energy, First Choice Power and Vectren Source
- Expansion of the Texas pre-paid product offering continued, with a monthly compounded growth rate of 16 percent
- Implementation of the Texas transformation program was completed, consolidating our billing platform and delivering improved customer service
- Implementation of a streamlined operating model, positioning the business to deliver a better customer experience, attract and develop the best talent, and operate more efficiently through continued growth in 2012
Direct Energy Services
- Operating profit increased 83 percent to C$44 million (pounds 28 million) following full integration of Clockwork Home Services in the U.S.
- Acquisition of Home Warranty of America (HWA), which is on track to close in Q2 2012, provides a further platform for growth, including cross-selling of energy and services and leveraging the HWA platform with our existing Canadian home protection plan business
Direct Energy Upstream
- Operating profit of C$20 million (pounds 13 million) reflecting strong performance from both our gas and power businesses
- Successful integration of the Wildcat Hills (Alberta) gas assets acquired from Suncor and Shell
- Gas production volumes grew 39 percent and our proven and probable reserves grew 14 percent
- Power generation volumes increased by 36 percent
About Direct Energy
Direct Energy is one of North America's largest energy and energy-related services providers with more than six million residential and commercial customer relationships. Direct Energy provides customers with choice and support in managing their energy costs through a portfolio of innovative products and services. A subsidiary of Centrica plc (LSE: CNA), one of the world's leading integrated energy companies, Direct Energy operates in 46 states plus DC and 10 provinces in Canada. To learn more about Direct Energy, visit www.directenergy.com.
The results reported in British pounds are expressed in Canadian dollars (based on monthly average FX rates) except where noted. For reference average full year rates are: For 2011: pounds 1 = C$1.5855; 2010: pounds 1 = C$1.6035
* Based on customer numbers across deregulated energy markets
SOURCE Direct Energy
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