An entertaining game of monopoly

After doubling the size of AGL in the past 12 months, the task now was how to maintain earnings per share.

That was the opening point of a highly illuminating address by AGL Ltd managing director Len Bleasel, at the Bourse Talk Luncheon conducted by the AICD/Securities Institute luncheon and sponsored by Minter Ellison Lawyers at the Adelaide Festival Centre on May 24.

Bleasel outlined the corporate strategies being progressed to maintain AGL's momentum which had seen the share price improve about $2 a share to around $9.30 during a rampant bear market.

Of these perhaps the most important was deriving revenue from unregulated areas of business. A few years ago 80 percent of AGL's revenue came from regulated markets - mainly electricity and gas pipelines. Today around 66 percent of revenue was derived from regulated areas of the economy and the plan was to get this down to 50 percent.

Five years ago there were about 40 players in the industry, he said. Today there were around 30 and Bleasel predicted that probably about half a dozen would survive and prosper.

"It's a scale game," Bleasel said. "Retailing is about margins - and in our business it's good to spread overhead costs as widely as possible."

He added, somewhat tongue in cheek: "There's nothing wrong with monopolies - especially when you own them."

AGL has two million customers for gas, electricity, water and sewerage services.

It recently became a large New Zealand player with about a third of the company recently acquired in that country at price/earnings multiples of less than 8.5.

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