The AGL Energy Limited (ASX: AGL) share price will be on watch on Friday.
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Why is the AGL share price on watch?
Investors will be watching AGL's shares today after the company released an update on its guidance for FY 2023 and FY 2024.
According to the release, the company is now expecting its earnings to be as follows in FY 2023:
- Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) between $1,330 million and $1,375 million (previous guidance was between $1,250 and $1,375 million).
- Underlying profit after tax between $255 million and $285 million (previous guidance was between $200 and $280 million).
Management advised that these ranges reflect an improved second half performance, driven by increased generation due to improved plant availability and a reduction in forced outages. Also contributing were higher customer margins due to disciplined margin management and an increase in customer services.
The company has also provided its guidance for FY 2024, which reveals an expectation for a jump in earnings. Though, given how energy bills are getting out of control, this is unlikely to be a surprise to readers. It expects:
- Underlying EBITDA of between $1,875 million and $2,175 million (~50% increase year over year).
- Underlying profit after tax between $580 million and $780 million (~100% increase year over year).
Management revealed that the anticipated increase in AGL's earnings for FY 2024 reflects higher wholesale electricity pricing, improved plant availability, and flexibility of its asset fleet.
Dividend policy
Potentially holding back the AGL share price a touch today could be an update on the company's dividend policy.
Effective from the FY 2024 interim dividend, AGL will target a payout ratio of 50% to 75% of underlying profit after tax. This compares to its current target payout ratio of 75%.
Management advised that this change reflects AGL's commitment to maintaining a Baa2 investment grade credit rating. It also enables the flexible deployment of capital, to strengthen the core business and realise timely opportunities through the energy transition, all whilst maximising returns to shareholders.
In addition, subject to AGL's taxable income and the recoupment of tax losses in the future, AGL may begin to pay partly franked dividends from the interim FY 2025 dividend.
