The AGL Energy Limited (ASX: AGL) share price will be on watch this morning following the release of its first-half results for the period ending 31 December 2019, along with an update to its FY20 earnings guidance.
What did AGL announce?
The Aussie energy provider reported statutory profit after tax of $323 million for the 6 months to December 31 2019, up 11% on the prior corresponding period (pcp), while statutory earnings per share was 49.7 cents, up 12%.
Underlying profit after tax was $432 million, down 20% on pcp, while underlying earnings per share was 66.4 cents, down 19%. Net cash from operating activities was $1,135 million, up 67%.
An interim dividend of 47 cents per share (80% franked) was declared, down 8 cents per share, consistent with AGL's policy of paying out 75% of underlying profit after tax over the full year.
Return on equity (rolling 12 months) was reported as 11.2%, down 1.9 percentage points on pcp.
Underlying profit after tax was down 20% in the half. AGL reported this drop was primarily due to the outage of Unit 2 at its Loy Yang power station, increased depreciation following record levels of investment in recent years, and the impact of market headwinds relating to lower year wholesale energy prices and reduced gas volumes.
Operating and developments update
AGL reported that its energy customer accounts were up in the period by 36,000 to more than 3.7 million, and the acquisition of Southern Phone added another 160,000 broadband and mobile services. The company's re-investment in large business electricity customers was also reported to be delivering growth.
In generation, AGL's output was up 3% in the half, despite the Loy Yang outage, reflecting its efforts over the past 12 months to invest in plant availability and coal supply.
AGL also noted that it is expanding and modernising its energy portfolio, announcing 2 major grid-scale battery deals in the half – at Wandoan in Queensland last month and with renewables development group Maoneng across New South Wales in October. It also commissioned the first new gas capacity in the national electricity market for 7 years at Barker Inlet in South Australia.
FY20 guidance
AGL expects its underlying profit after tax for FY20 to be in the upper half of its guidance range of $780 million–$860 million. AGL commented that this reflects AGL's solid portfolio performance and customer growth, despite the Loy Yang outage, higher depreciation costs and market headwinds.
Operating headwinds previously communicated to the market are expected to remain for the second half of FY20 and into FY21. These include lower wholesale prices for electricity and renewable energy generation certificates and increasing fuel costs as legacy supply contracts mature.
AGL's managing director and CEO Brett Redman commented:
Our 2020 half-year result reflects a disciplined approach to executing our strategy and operating the business amid increasing challenges. Profit is down year-on-year as per our guidance, but we are nonetheless tracking ahead of our expectations. We are making our portfolio more resilient and growing our customer base – while delivering disciplined cash and capital management outcomes.
