Wholesale and retail electricity generator and provider AGL Energy Ltd (ASX: AGL) today released its half-year results to 31 December 2016. With rising profits and a higher dividend payout ratio, there should be plenty for shareholders to like. Here's what you need to know:
- Revenue rose 7.7% to $6,030 million
- Statutory Net Profit After Tax (NPAT) was $325 million, up from a $449 million loss in 2016 (due to write-downs)
- Underlying NPAT rose 3.7% to $389 million
- Dividends of 41 cents per share, up from 32.8 cents last year
- Payout ratio of 75% going forwards, compared to 60% to 65% previously
- Made investments into several renewable energy funds, the Powering Australia Renewables Fund (PARF) and Energy Impact Fund (EIF)
- Outlook for full-year profit of $720 million to $800 million, expected to be towards the higher end of this range
- Rising wholesale electricity prices expected to remain a tailwind
So What?
A respectable result from AGL, which benefited significantly from rising wholesale prices despite a 1.1% decline in the number of retail customer accounts. The company's ongoing strong cash generation prompted management to announce an upgrade to the dividend and a buyback in September last year, which has contributed to the company's recent strong run in its share price.
During the year, AGL also disposed of several of its renewable assets into the Powering Australia Renewable Fund (PARF), in which it has a 20% equity stake. AGL also made commitments for up to US$200 million to the US-based Energy Impact Fund, cementing AGL's commitment to new and better sources of energy. AGL's adventures in renewable energy are interesting to watch, although the company 's huge coal-powered assets keep it well and truly in the fossil-fuel energy camp for now.
Now What?
To my mind, AGL looks expensive for what shareholders are receiving – but then I said that last year as well. The rising dividends and the share buybacks are a good step forward for total returns, but again I feel that most of the impact is priced into the share price already. Full year investors could get around a 3.4% dividend franked to 80%, which is also not hugely appealing.
