AGL reports solid result in soft demand conditions

AGL Energy Limited (AGL) today reported a statutory net profit after tax of $570 million for the year ended 30 June 2014, an increase of 52% on the statutory profit reported in FY13. The main reason for the increase was the substantial decline in significant items which fell from $290 million in FY13 to $20 million in FY14.

The statutory result included changes in the fair value of certain energy derivatives and the inclusion of $20 million of significant items associated with the acquisition of Australian Power and Gas Company Limited (APG) and Macquarie Generation, partly offset by an income tax credit arising from adjustments to tax depreciation of the Southern Hydro assets.

AGL’s Underlying Profit of $562 million was down 3.9% on the prior corresponding period. Underlying Profit¹ is the statutory net profit after tax adjusted for significant items and changes in the fair value of certain energy derivatives.

AGL has declared a final dividend of 33.0 cents per share, which brings the total dividend for the year to 63.0 cents. The final dividend will be fully franked.

RESULT OVERVIEW:

• Revenue $9,543 million, down 1.8%
• Statutory NPAT $570 million, up 52%
• Underlying Profit $562 million, down 3.9%
• Statutory EPS 102.2 cents per share, up 49.9%
• Underlying EPS 100.8 cents per share, down 5.2%
• Underlying Operating cash flow before interest & tax $1,149 million, down $30 million
• 2014 final dividend of 33.0 cents per share (100% franked), unchanged

Commenting on the full year results, AGL Managing Director, Michael Fraser, said:

“The result reflects the difficult operating environment faced by all the major energy companies. As well as the record warm winter weather conditions experienced this year we saw a further drop in customer demand for energy.

“On a more positive note, we successfully integrated the APG retail business which grew our customer base to 3.8 million. We have also announced this morning that we have concluded a deal to acquire the Macquarie Generation assets in NSW creating a long term low cost advantage for AGL in our biggest market. We expect this acquisition will be immediately accretive to earnings.”

Macquarie Generation (MacGen) acquisition: AGL has separately announced today that it has concluded an agreement to acquire MacGen for a purchase price of $1,505 million. To partly fund the acquisition, AGL has also announced the launch of a pro rata accelerated renounceable entitlement offer to raise approximately $1.2 billion.

Dividends: AGL has declared a fully franked final dividend of 33.0 cents per share.

The final dividend will be paid on 30 September 2014. The record date to determine shareholders’ entitlements to the final dividend is 4 September 2014. Shares will commence trading ex-dividend on 2 September 2014. 

The AGL Dividend Reinvestment Plan will operate in respect of the dividend. Shares will be allotted at the simple average of the daily weighted average market price at which AGL’s ordinary shares are traded on the ASX during each of the 10 trading days commencing on 8 September 2014. In view of the overlap between the periods for determining the issue price of shares under the DRP and the exercise price in respect of the rights entitlement offer, the Directors have determined that no discount will apply in respect of the issue price of shares under the DRP.

Outlook: On 17 July 2014, AGL advised the market that the repeal of the carbon tax would reduce FY15 Earnings Before Interest and Tax (EBIT) by a gross amount of $186 million, with a further reduction in EBIT of approximately $14 million due to the closure of its LPG extraction plant at Kurnell as a consequence of the closure of the Caltex Oil Refinery. AGL also advised the market that this combined reduction in EBIT of $200 million would be largely offset by strong growth in other parts of AGL’s business, including additional gas sales in Queensland.

Because an agreement for its acquisition had not then been concluded, the announcement did not include any earnings contribution in FY15 from MacGen. MacGen is expected to add approximately $75 million to Underlying Profit (including funding costs) in FY15.

AGL will provide formal guidance of its FY15 earnings outlook at its Annual General Meeting on 23 October 2014.

Conference call: A webcast and conference call will be held today to discuss AGL’s 2014 profit result.

A copy of the investor presentation is attached.

^1. AGL’s policy for reporting Underlying Profit is consistent with this guidance. The Directors have had the consistency of the application of the policy reviewed by AGL’s external auditors.

About AGL
AGL is one of Australia's leading integrated energy companies and largest ASX listed owner, operator and developer of renewable energy generation in the country. Drawing on over 175 years of experience, AGL operates retail and merchant energy businesses, power generation assets and an upstream gas portfolio. AGL has one of Australia's largest retail energy and dual fuel customer bases. AGL has a diverse power generation portfolio including base, peaking and intermediate generation plants, spread across traditional thermal generation as well as renewable sources including hydro, wind, landfill gas and biomass. AGL is taking action toward creating a sustainable energy future for our investors, communities and customers.