AGL Energy Ltd earnings results

CommSec CommSec

 

8 August 2019

Results 

Full Year 2019

Full Year 2018

Change

Revenue ($m)

13,246

12,816

+3.4%

Bloomberg Consensus ($m)

13,219

 

 

Statutory Profit After Tax ($m)

905

1,582

-42.8%

Significant Items ($m)

135

564

-76%

Underlying Profit After Tax ($m)

1,040

1,018

+2%

Operating Costs ($m)

1,548

1,559

-0.7%

Final Dividend ($)

0.64

0.63

+1.6%

AGL Energy (AGL) facing headwinds with profit guidance under pressure

Results

  • Electricity and gas provider, AGL Energy (AGL) saw revenue rise 3%, beating Bloomberg consensus, at $13.25 billion, but reported a near 43% decline in headline profit to $905 million for FY19. Underlying profit, which removes one-off significant items, saw a slight 2% lift to $1.04 billion for the year.

Drivers

  • AGL attributed the fall in statutory profit to a non-cash write down of $139 million (compared to a $562 million gain in FY18) which weighed on its total significant items of $135 million. Higher forward prices for electricity and AGL’s hedging position also impacted profit.
  • Underlying profit was improved due to margin growth in wholesale electricity markets as prices rose and costs fell. Customer numbers also improved on the prior year with lower customer churn (view on how many customers left the business). However, gains were restrained by lower large business gas volumes and higher depreciation among operations.
  • Depreciation of assets also rose 10% or $57 million to $625 million with the proposed closure of the Liddell station in NSW while AGL Hydro also saw higher depreciation.

Dividend

  • AGL declared a final dividend of $0.64 per share, 80% franked. The dividend is payable on 20 September 2019 with the ex-dividend date of 21 August 2019. 
  • In addition to the dividend payment, AGL is intending to undertake an on-market buy-back of up to 5% of issued shares over 12 months starting from 23 August 2019, returning approximately $650 million back to shareholders.

Outlook

  • Underlying profit is expected to be reduced by as much as 14%, to a range of $780-$860 million in FY20. One of the major impacts will be the previously announced outage of the Loy Yang power station in Victoria, which is estimated to cost between $80 million and $100 million. Impacts will also come from lower wholesale electricity prices and higher input fuel costs. 
  • On the retail side, margins are expected to be squeezed as more competition and offers could see more customers leave.
  • AGL also announced a proposed deal to buy a WA energy company, Perth Energy, for as much as $93 million. Completion of the transaction is targeted for late September 2019.

Share price

  • Investors reacted negatively to the result, due to the lower FY20 profit guidance. AGL shares fell as much as 6.3% while the stock price continues to underperform the ASX 200 index. At the time of writing, AGL shares are down ~8.5% in 2019 compared to a ~15% gain for the ASX 200.

 


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