Profitability

AGL delivered an Underlying Profit after tax of $1,023 million in FY18, up 28% on FY17, and in the upper half of the guidance range of $940 million to $1,040 million provided in August 2017.

The Board declared dividends totalling 117.0 cents per share for FY18, 80% franked and up 29% compared with FY17.

AGL uses two metrics, total shareholder return and return on equity, in its Long-Term Incentive Plans, to align executive remuneration with shareholder outcomes.

Return on equity was 13.0% in FY18, up from 10.2% in FY17.

For more detail on AGL’s financial performance and remuneration outcomes, refer to the 2018 Annual Report.

AGL has issued guidance for FY19 Underlying Profit after tax to be $970 million to $1,070 million.

In February 2018, Moody’s reaffirmed AGL’s credit rating of Baa2, stating that “AGL's credit profile is underpinned by the strength of the company's retail market position and the integrated nature of its operations, through its ownership of a substantial generation fleet.”

Energy sales

Total customer electricity sales volumes decreased by 1.2% to 39,171 GWh. Consumer electricity volumes decreased by 120 GWh or 0.9%, driven by lower average consumption in the residential portfolio as a result of a change in customer mix. Business customer and wholesale customer markets electricity volumes decreased by 359 GWh or 1.4%, predominantly due to the loss of two large volume customers, offset by increased commercial load from existing wholesale customers. Consumer gas volumes increased 1.4 PJ or 2.4% largely driven by higher volume revisions related to the prior year. Business customers and wholesale markets gas volumes decreased 51.2 PJ or 29.9% due to the loss of large business customers and wholesale customers driven by gas supply constraints in the market.

Our customer churn was 18.9%, and was once again lower than the 24.0% churn experienced in the rest of the market, evidence of the strong focus that has been placed on retaining customers.

Total customer numbers were broadly flat in FY18, as growth into the Western Australian gas retail market offset the impact in Queensland and South Australia of increased competition.

Refer to the 2018 Annual Report for detailed performance analysis of AGL’s Customer Markets business.

Wholesale gas portfolio

Limited gas availability and high gas prices have impacted the east-coast domestic gas market, influenced by Australia's gas export trade and unanticipated market pressures. In response to these challenges, we have been investigating options for gas import infrastructure. In August 2017, we announced Crib Point in Victoria as the preferred site for a potential gas import jetty and pipeline to increase energy security and supply for customers in south-eastern Australia, introducing price competition and helping to put downward pressure on wholesale gas prices. In June 2018 we announced that we had reached certain key milestones in relation to the project.

Cost efficiency

AGL plans to undertake a Business Optimisation Program over the three years from FY19 to FY21, under which we are targeting a return to FY17 operating cost levels by FY21, including a $120 million reduction in FY19.