## Financial Results 

The statutory net profit of your company was $558.7 million compared with $356.1 million last year. However, a more useful comparison for shareholders is that, on an underlying basis, net profit of $431.1 million was up only slightly on last year’s $428.9 million. 

This underlying result would have reached our original expectations were it not for an unusual set of weather events which happened across eastern and southern Australia in late January and early February. 

Subsequently, the Board commissioned a review of AGL’s electricity hedging policies and procedures to consider whether there were actions that could reasonably have been taken to reduce the financial consequences of these events. That review confirmed that the weather events in late January and early February were very unusual and statistically would only be expected to occur very infrequently. While AGL could theoretically have put in place additional hedging cover, the cost of doing so would have far outweighed the occasional losses suffered in such unusual circumstances. Most importantly the review confirmed that AGL’s hedging policies and procedures are appropriately designed and implemented. 

This was a challenging year for AGL, but the Board is confident our strategy will deliver improved returns for shareholders in the years to come. 

## Dividend 

Although the underlying profit is relatively flat compared with last year, I am pleased to report a small increase in the final dividend. The final dividend of 31 cents will bring the total dividend for the year to 60 cents, an increase of 1 cent on last year’s total dividend. I am also pleased to report that the final dividend will be fully franked. For the forseeable future, we anticipate that dividends will be fully franked. 

## Strategy 

The Board remains committed to AGL’s vertical integration strategy and its potential to create value from developing our depth and reach in Australian electricity and gas markets. 

Encouraging progress has been made against the milestones on this strategic journey. I did however just want to comment on one high profile strategic opportunity AGL did not finally pursue. The partial privatisation of the New South Wales electricity industry was a complex process but did eventually offer a potential opportunity to quickly increase AGL’s electricity market share in New South Wales. 

From the outset of the acquisition process, your Board and management were determined that any acquisition had to be value accretive. This discipline is critical if we are to succeed in improving our average return on funds employed. 

