AGL says 2022’s dramas are finally over, but here’s why shareholders should still be worried

AGL’s boardroom fight is over

No ASX 200 company had more boardroom turmoil in 2022 than AGL Energy (ASX:AGL). The company has begun the new year by finally appointing a permanent CEO and CFO. But are the dramas finally behind it?

 

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Months of limbo are over for AGL

AGL’s board resigned en-masse in May last year. This followed successful shareholder activism from Mike Cannon-Brookes that defeated the company’s plans to demerge its coal business from its retail energy business. 

Over 7 months later, the company appointed Damien Nicks as permament CEO, following a three-month stint as the company’s interim boss and a four-year stint as CFO prior to that. Also being promoted from temporary to permanent as Gary Brown, who became temporary CFO following Nicks’ promotion to interim CEO.

 

Other factors still look worrisome

Although the uncertainty of who will manage the company is over for now, the company is still in a state of limbo in a number of respects. 

First, the company’s decarbonisation will need substantial capital investment, up to $20bn before 2030. It is inevitable that some of this will need to be funded with fresh capital, either by partnerships or asset sales.

 

AGL isn’t shooting the lights out

Second, the company’s books are not in the best shape, especially when you consider higher energy prices. Although AGL is profitable, its underlying profit was down 58% (at $225m) and EBITDA was down 27% (at $1.2bn). This was due to lower earnings from trading, increased capacity costs and the absence of insurance proceeds that inflated FY21’s results.

 

 

Although the stock is up in the last 12 months, there’s still a lot of lost ground to recover

Consensus estimates for FY23 suggest 7% EBITDA growth, although they also call for 3% decline in revenue to $12.7bn. And it would not be unreasonable to question if it can achieve higher earnings considering current inflation levels.

AGL shares are actually up 5% in the last year. The share price is down 66% from pre-Corona Crash heights, however.

 

 

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