It has been a horrendous few years for the British Gas owner. From £4 highs in late 2013 it had collapsed to a near 20 year low of £1.26 by the start of February 2018. It does, however, seem to have somewhat stabilised, spending the last few months ranging between £1.40 and £1.55, with a brief foray to £1.64 over the summer. Centrica now sits at a current trading price of £1.45, recently hurt by fears that a no deal Brexit is growing ever closer.
The firm’s last update, its half year results at the end of July, didn’t do much to reassure investors. Though revenue was up 7% to £15.3 billion, underlying operating profit was down 4% to £782 million.
The main catalyst for that decline was a 20% plunge in operating profits at Centrica Consumer to £430 million. That’s the section of the business that contains British Gas, with the brand shedding 341,000 customers during the 6 months to the end of June.
There was also the ongoing impact of last April’s price cap on pre-payment meters, as well as higher wholesale energy costs that weren’t passed on to customers. This meant the surge in energy use during the Beast from the East wasn’t the boon to Centrica is could have been, especially since that period saw the company incur an additional £15 million in call-out costs.
There were a few positives, however, namely that it said it would meet its full year financial targets, and wouldn’t touch its 12p per share annual dividend.
Another comment to that effect, i.e. that the full year dividend will indeed be maintained, could help give Centrica a lift on Thursday. Investors will also want to see some kind of staunching of the customer-losses at British Gas, alongside a word on the effects of the new energy price cap set to come into play at the start of 2019.
Centrica (LON:CNA) has a consensus rating of ‘Hold’ alongside an average target price of £1.62.
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