AGL Energy share price on watch after weak FY 2020 guidance

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electricity, energy, utilities

The AGL Energy Limited (ASX: AGL) share price will be on watch this morning following the release of its full year results.

How did AGL perform in FY 2019?

For the 12 months ended June 30, the energy company posted a 43% decline in statutory profit after tax to $905 million. On a per share basis this was 138 cents per share, which was also down 43% on FY 2018’s result.

Things were better on an underlying basis, with AGL Energy reporting a 2% increase in underlying profit after tax to $1,040 million. Underlying earnings per share was also up 2% to 158.6 cents.

The company reported net cash from operating activities of $1,599 million, down 25% on the prior corresponding period. Despite this, AGL declared a final dividend of 64 cents per share, which was up 1 cent from the same period last year. This dividend will be 80% franked.

AGL managing director and CEO, Brett Redman, appeared to be pleased with the company’s performance in FY 2019.

He said: “…we were encouraged to see an increase in customer numbers over the course of the year and a reduction in the levels of customer churn – as well as near record generation output from our electricity fleet, including an increasing share of non-thermal generation as we deliver the Silverton and Coopers Gap wind projects via the Powering Australian Renewables Fund.”

Outlook.

Unfortunately for shareholders, the company is forecasting a sharp drop in underlying earnings in FY 2020.

Its guidance is for underlying profit after tax to be between $780 million and $860 million in FY 2020. This will be a 17.3% to 25% decline on FY 2019’s result and is due partly to the outage at Unit 2 at AGL Loy Yang.

Mr Redman explained: ““Our expectation for materially lower earnings in FY20 reflects the impact of the extended outage of Unit 2 at AGL Loy Yang we announced in June, higher depreciation following our recent increases in capital investment, and operating headwinds from lower wholesale electricity and renewable energy certificate prices, higher input fuel costs and the re-regulation of retail standing offer prices for electricity.”

The managing director was optimistic on the future, though. Advising: “Despite this lower earnings outlook, AGL’s operating outlook remains strong. We have entered the new financial year in a robust financial position, meaning we can invest back into the business and execute our growth strategy at the same time as we undertake the on-market share buyback we have announced today.”

In respect to its on-market share buyback, this morning the company revealed that it plans to buy back up to 5% of its issued share capital. Based on its last closing share price, this equates to approximately $650 million.

Perth Energy acquisition.

In addition to this, the company has announced the signing of an agreement with Infratil Ltd (ASX: IFT) for the purchase of the Perth Energy business.

Perth Energy is Western Australia’s leading independent energy retailer, marketing electricity and gas to small and medium size enterprises and commercial and industrial users.

The agreement will see AGL Energy pay $74 million now and a further $19 million contingent on final financial outcomes under a material contract and the tax treatment of certain penalty refunds which Perth Energy expects to be entitled to claim.

Rival Origin Energy Ltd (ASX: ORG) is scheduled to release its full year results in two weeks on August 22.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019

 

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