AGL +5.92%: delivered a broadly in-line FY26 result, but it was the FY27 outlook and better-than-feared dividend expectations that drove the stock. While headline FY27 EBITDA guidance is below prior consensus, expectations had already been cut significantly, and the combination of cost reductions, lower finance costs and a higher dividend payout provided some welcome relief.
Key results:
- Revenue $13.59bn, versus $13.79bn expected.
- Earnings (EBITDA) $2.10bn, +2.2%.
- Profit (NPAT) $631m, -1.7%, versus $639.5m expected.
- Final dividend 26cps, up from 25cps.
- FY27 profit guidance $470-670m. ~5% above consensus at the mid-point
Looking forward, AGL expects stable consumer energy margins, a full-year contribution from the Liddell Battery and further cost reductions, targeting $50m of sustainable net opex savings by FY27, with $30m already achieved. These benefits will be partly offset by lower wholesale electricity prices rolling through contracted positions and higher gas costs as favourable legacy supply contracts expire. Importantly for income investors, AGL is targeting a 55-60% payout ratio in FY27, with dividends expected to remain fully franked.
MM’s view: The result itself was fairly uneventful, but the outlook was better than the market had feared, which explains today’s strong reaction. Earnings are still facing pressure as legacy gas contracts roll off and electricity prices normalise, but strong cash flow, cost reductions and a more generous dividend profile provide support. After a period of meaningful earnings downgrades, today’s result suggests expectations have become more realistic.
MM remains long and bullish AGL in the Active Income Portfolio
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