Page 18 - AGL Sustainability Report 2011

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Economic
AGL Energy Limited 16
Introduction to ongoing proftability
In a capital constrained environment, shareholder
returns as measured by underlying proft are increasingly
important. Continued focus on its integrated business
strategy will position AGL to deliver growth in coming
years.
Approach
AGL retails gas and electricity to residential, small business,
commercial and industrial customers. The cost of supply fluctuates
with movements in energy prices. AGL’s integrated business strategy
balances risk between upstream supply of energy and customer
demand for energy.
Vertical integration provides AGL with a natural hedge against
energy price movements, while providing access to multiple profit
pools. Horizontal integration through operating across the National
Electricity Market provides further diversification of earnings
streams. Benefits flow through to customers in the form of lower
energy costs and to shareholders in the form of dividends resulting
from diversified sources of income and improved quality of earnings.
This approach is known as the AGL integrated business strategy.
Vision for ongoing profitability
: AGL’s vision is to have an
industry leading earnings profile based on sustainable business
practices.
Drivers:
Delivery of AGL’s integrated business strategy has a direct
influence on the underlying profit result and on other financial
performance indicators. Optimisation of performance in the
three business areas of electricity generation (Merchant Energy),
Upstream Gas and Retail Energy is addressed on
pages 17 to 19.
Performance
AGL delivered an Underlying Profit of $431.1 million for FY2011,
representing a 0.5% increase compared to the prior corresponding
period. This result was below the initial guidance range ($450–$490
million) issued to the market on 21 October 2010, but within the
upper end of the revised guidance range of $415–$440 million
issued on 7 February 2011. The underlying profit was largely driven
by strong Retail performance, off-set by reduced Loy Yang earnings
and impacts of one-off weather events.
On 27 October 2011, AGL announced a guidance range of
$470-$500 million for FY2012.
AGL shareholders were paid dividends totalling 60.0 cents per share
for the full financial year FY2011, an increase of 1.0 cent per share,
or 1.7%, on the FY2010 dividend.
Ongoing profitability
Underlying Proft
Legend
Actual
Target
0
100
200
300
400
500
$million