Join our daily newsletter At The Bell to receive exclusive market insights
- AGL Energy has seen its share price drop today following its annual report for the 2019 financial year and a weak profit guidance for 2020
- Statutory profit after tax was down 43 per cent on last year. The company blames higher forward electricity prices as a key reason for this drop
- AGL revealed an expected underlying profit after tax of between $780 million and $860 million for the 2020 financial year
- AGL also announced a $650 million share buyback, which is set to take place over the next 12 months
- To top things off, the company has revealed plans to buy Perth Energy Holdings for $93 million
Energy giant AGL Energy has seen its share price drop today following its annual report for the 2019 financial year and a weak profit guidance for 2020.
The ASX200 company revealed its statutory net profit after tax (NPAT) was down 43 per cent on last year, sitting at $905 million by the end of June. For comparison, this figure sat at $1.58 billion for the financial year ending in June 2018.
The profit drop is largely due to a 25 per cent decrease in net cash from operating activities for AGL. The company blames higher forward electricity prices as a predominant reason for this drop.
AGL did highlight a contrast between the statutory profit and underlying profit, however. Fairly strong earnings, according to AGL, saw underlying profit after tax up a slight two per cent, sitting at $1.04 billion for 2019.
Similarly, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was up two per cent at $2.285 billion.
Yet, these figures are eclipsed by the company’s profit guidance for the 2020 financial year. AGL revealed an expected underlying profit after tax of between $780 million and $860 million for the 2020 financial year.
AGL said an increase in depreciation expenses and rising fuel costs are key contributors to the weak guidance. The real kicker, however, is a key unit at the company’s Loy Yang power station being out of business until December 2019.
According to AGL, damages to the stator and rotor components of the unit, which were caused by a power outage in June, are predicted to result in up to $100 million in losses.
AGL CEO and Managing Director Brett Redman said despite the lower yearly profit and future earnings outlook, things weren’t bad for the company from an operations standpoint.
“It was a record year for capital expenditure, as we continued to increase investment in our existing generation fleet,” Brett said.
He said the company also progressed the construction of a power station in South Australia set to be delivered in the 2020 financial year, and completed the final year of its Customer Experience Transformation program.
“Against this backdrop, 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”, he said.
Along with its annual earnings report and profit guidance, AGL also announced a $650 million share buyback, which is set to take place over the next 12 months.
The company said the buyback is an appropriate mechanism to return excess liquidity to shareholders.
“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,” Brett said.
To top of a big day of announcements for the company, AGL also revealed plans to buy Perth Energy Holdings for $93 million. Perth Energy is currently owned by Infratil, and is home to the 120 megawatt Kwinana Swift Power Station.
“Perth Energy, as WA’s third-largest electricity retailer and a gas retailer to business customers, is a strong strategic fit for us as we seek to expand WA and will provide greater flexibility for our management of our WA gas position,” Brett told shareholders.
The ups and downs of AGL’s annual report didn’t seem to sit well with the market. Shares in AGL Energy are currently down 5.7 per cent, trading for $18.86 in a $12.37 billion market cap as at 12:15pm AEST.
