AGL Energy Limited (ASX: AGL) - Meltdown in shares despite 30% leap in underlying EPS for FY18

Power utility stock, AGL crashed this morning even after announcing better-than-expected profit results for fiscal year 2018. The stock slipped by 4.09% to $21.11.

On 9 August 2018, AGL Energy Limited announced its annual results for financial year ending 30 June 2018. AGL FY18 profit surged to $1,587 million, up 194% from $539 million in the previous year. It is sharply due to positive movements in the fair value of financial instruments. The underlying Earnings per share were up by 30% to $1.56 in comparison to $1.19 in previous financial year. The management indicated company’s recent multibillion-dollar investments in electricity generation portfolio has played a key role in AGL’s positive financial results for FY18.

Underlying profit after tax was up by 28% to $1,023 million from $802 in FY17. The increase in Underlying Profit reflected 35% earnings growth in AGL’s Wholesale Markets business unit, which offsets a decline of $238 million in the Customer Markets business unit’s earnings and increased depreciation & amortization cost of $558 million in FY18 as compared to $484 million in previous year.

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Gearing ratio was down to 21.8% in FY18 as Net Debt of the company reduced to $2,369 million from $3,178 million in FY17. Net tangible asset per share has gone up by 19.4% to $7.81. AGL has declared a final dividend for FY18 of $0.63 per share, 80% franked, which turns company’s total dividend declared to be $1.17 per share. The distribution of final dividend is reported to be paid on 21 September 2018 to the shareholders recorded for entitlement as on 23 August 2018. With the increased earnings and dividend declared to the company’s shareholders in FY18, Return on Equity soar to 13% from 10.2% in previous financial year. AGL’s FY19 guidance has been underlying profit after tax to come between $970 million to $1,1070 million, which is a bit soft. The company also targets to bring down operating cost by $120 million in FY19. The company targets a dividend payout ratio of circa 75% of underlying profit after tax.

The company also notified its members of the next Annual General Meeting scheduled to be held on 26 September 2018 at Melbourne, Victoria. The meltdown in AGL stock left the tables unturned as the company ponders to know what’s in the mind of investors. At the moment, soft FY19 guidance and commodity prices may be impacting the stock.

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