AGL Heats Up Record Profit
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AGL Energy revealed a sharp rebound in earnings for 2016-17 yesterday, forecast more of the same this financial year and shareholders are going to be showered with loot.
The company lifted its 2016-17 dividend by 25% to a total of 91 cents a share. AGL said it was boosting its final dividend for the year to June to (https://www.agl.com.au/about-agl/media-centre/asx-and-media-releases/2017/august/fy17-financial-results) by 14 cents to 50 cents a share (a record). That’s an increase of 38.8%.
Full year dividend of 91 cents is up 33.8%.
AGL’s underlying profit was $802 million up from $701 million - up a ’sedate’ 14%. And for this year (2017-18) the company is forecast underlying profits will leap to the range of $940 million to $1.04 billion.
If the top of the range if achieved the increase will be more than 25%. AGL Energy was one of the companies who met the PM and others in the Federal Government yesterday - and AGL knew they were about to report one of the best profits in its history with more to come next year.
No wonder AGL shares are up 32% in the past year and more than 14% so far in 2017.
But yesterday, after jumping to a high of $26.14, the shares backtracked and ended the day down 1.8% at $24.57.
AGL said its full-year statutory net profit was $539 million for the year to June 30, well above last year’s $408 million loss, when earnings were hit by significant items and adjustments in the fair valuation of its assets (impairments).
“The increase was driven by the optimisation of AGL’s portfolio to realise the benefit of recent conditions in the wholesale electricity market and by AGL’s transformation efforts, more than offsetting higher commodity costs and a reduction in wholesale gas margins,” the company said yesterday.
Australia’s second-largest energy retailer said its underlying profit, excluding significant items, was $802 million, up 14.4% from $701 million in 215-16. The result topped both analyst forecasts and AGL's own guidance of an underlying profit between $760 million and $800 million.
And if AGL’s 2017-18 profit hits the top of its forecast range for this year ($940 million and $1.04 billion), it means its profits will have jumped nearly 50% in the course of two years.
"[This year] we are focussed on supporting affordable, sustainable and secure energy markets for all our customers," chief executive Andy Vesey said in a statement to the ASX on Thursday.
AGL said the improved result was driven by improved conditions in the wholesale energy market and the management of its energy generation fleet to take advantage of that situation. Wholesale electricity prices have increased recently after the closure of the large Hazelwood brown coal power station in Victoria.
Mr Vesey took a wipe at the government’s lack of progress on resolving the issue of a clean energy target, as recommended in its Finkel review of the sector, noting "the considerable uncertainty" in the industry.
"Despite the considerable uncertainty our industry faces, AGL committed investment of approximately $1 billion to growth and transformation programs during FY17. At the same time, our capital management initiatives during the year will result in more than $1.1 billion being returned to shareholders as a result of our dividend policy and on-market share buy-back,” he said.
“In FY18, we are focused on supporting affordable, sustainable and secure energy markets for all our customers. AGL and its partners are progressing projects with a value of more than $2 billion to bring new, low emissions electricity generation and more competitive gas supply to the Australian market. We will also be investing in product and service innovation to empower customers and improve their energy experience. At the same time, we continue to assess opportunities to leverage our energy retailing platform into new geographies,” he added.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.