AGL Energy Limited is a publicly-listed Australian company that offers energy products and services to the Australian economy. The firm is engaged in both the generation of electricity and retailing of electricity to cater the demand of both residential and industrial customers (AGL, 2015a). The company has started its operation as Australian Gas Light Company in 1837 and came up as AGL Energy Limited in 2006 (AGL, 2015a). The company mainly generates power electricity by utilising thermal, wind and hydroelectricity power. Apart from that, it also uses natural gas and coal seam gas as the source. According to the figure of 2014, AGL Energy Limited has more than 3.8 million suburban and corporate customers from Victoria, New South Wales and Queensland (AGL, 2015a). Apart from huge investments in the supply of electricity and gas, the company is also considered as the largest private owner, operator and developer of renewable energy sources of Australia.
Genesis Energy Limited is a New Zealand based publicly traded electricity company that is engaged in generation of power and LPG retailing (Genesis Energy, 2015b). The company has been founded on 1999 and is presently considered as the largest electricity and natural gas retailer of New Zealand. The company has recorded a market share of 42% in the financial year 2014 (Genesis Energy, 2015b). In 2014, the company has generated 14% electricity of New Zealand and in terms of the capacity (in MW) it is treated as the third largest electricity company of New Zealand.In this report, the recent financial trends of both AGL Energy Limited and Genesis Energy Limited has been analysed with the help of financial statements and ratio analysis.
Financial statements of the companies are the indicator of the current financial health of the company (Edmister, 2013). In addition, with the help of financial statements such as profit and loss account, balance sheet and cash flow, the investors can assume the future projection of the firm. On the other hand, ratio analysis enables the financial analysts to predict the risk factor involved in the particular firm.
In terms of the revenue, AGL Energy Limited has almost 20% higher income compared to that of Genesis Energy Limited. It can be inferred that diversified sources of generating power and large scale of operation can be considered as one of the major factor that has enabled AGL Energy to secure much higher revenue than Genesis Energy. However, most significantly, both the firms have experienced a positive growth in revenues. AGL Energy has recorded a growth of 2.23% in revenues in 2015 (AGL, 2015b). On the other hand, Genesis Energy has also experienced the growth of 2.09% in total revenues during the discussed time period. This increasing trend clearly represents the higher demand of electricity in Australia and New Zealand. Moreover, it can also be inferred that in future, both the companies can experience higher growth of revenues.
However, net profit for AGL has decreased by almost 50% in 2015 than 2014 due to the increased operating cost (AGL, 2015b). In contrast, Genesis Energy has been able to increase the net income by more than 50% in the concerning period (Genesis Energy, 2015a). From this trend, it can be concluded that Genesis Energy has been able to manage its operations in more efficiently compared to that of AGL Energy.
From the analysis of balance sheet, it can be inferred that AGL Energy is in a stronger position in terms of the current assets. As mentioned by Laurent (2009), current assets enhance the ability of the company to deal with unforeseen financial requirements in a better way. Thus, it can be stated that healthier current assets can be a positive aspect for AGL Energy Limited in terms of the future sustainability. However, in this context, it can also be mentioned that too much idle current assets such as inventories can affect the financial performance of AGL Energy Limited. On the other hand, due to the expansion of business, current liabilities of both the firm may have increased in 2015 compared to that of 2014. However, both the companies have managed to reduce the external borrowings and it can be considered as a positive symbol for both the companies. Moreover, AGL Energy has increased investments in the provisions by $300 million which is much higher than Genesis Energy (AGL, 2015b). Therefore, it can be concluded that the management of AGL Energy has planned more efficiently to deal with the untoward market condition.
Cash flow statement of the companies have revealed that AGL Energy has been able to increase the cash inflow from operating activities by almost by 53.57% in 2015 than 2014 (AGL, 2015b). In contrast, Genesis Energy has been able to enhance the same figure by only 4.80% (Genesis Energy, 2015a). On the other hand, cash outflow from investing activity has increased by almost 182% (Genesis Energy, 2015a). High amount of investment in the acquisition activity in 2015 is the main reason behind such figure. In contrast, for Genesis Energy, the investment has declined by almost 40%. Reduction of cost in the purchase of plant and machineries in 2015 compared to 2014 is the prime reason behind this issue. Due to the high amount of repayment of the borrowings, cash outflow from financing activities for AGL Energy has boosted up. Due to the same reason, the cash outflow from financing activity of Genesis Energy has also increased by $52 million.