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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Centrica plc    CNA   GB00B033F229

CENTRICA PLC

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Centrica profits plunge on energy price cap, lower gas prices

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02/13/2020 | 04:19am EST
FILE PHOTO:  Electricity pylons are seen in London

Profits at British utility Centrica slumped 35% last year, hit by a government price cap on some energy bills and the impact of lower natural gas prices on its production business, sending its shares down as much as 17% on Thursday.

The company, whose British Gas unit is Britain’s largest energy supplier, said adjusted operating profit fell to 901 million pounds from 1.39 billion pounds in 2018.

"2019 operating profit and earnings were materially impacted by a challenging environment, most significantly the implementation of the UK default tariff cap and falling natural gas prices," said chief executive Iain Conn in a statement.

"Looking to 2020, we expect to deliver earnings momentum relative to 2019 from our core customer divisions, but upstream (production) earnings are likely to be impacted by the lower commodity price environment."

Centrica shares traded as low as 69.84 pence, their weakest since mid-October.

The company said it expected 1.6-1.8 billion pounds of adjusted operating cash flow this year, down from 1.83 billion in 2019, due to low energy prices.

A cap on electricity and gas bills came into effect in January 2019 and was a flagship policy of former British Prime Minister Theresa May to end what she called "rip-off" prices.

Last week, energy regulator Ofgem reduced the cap from April 1 as wholesale prices had fallen between August 2019 and January 2020. Wholesale gas prices are around their lowest since 2009 due to oversupply and high storage levels.

"We are in a very over-supplied situation. Front-end (prices) will stay weak through this year. If it does so, we expect earnings to be broadly balanced," Conn said on a media call.

"Clearly if (wholesale) prices go back up, the upstream profit would go up and we get the value of our hedges back as we sell the gas to our customers."

Centrica said extended outages at two British nuclear power plants due to operational issues last year had also been a factor in the lower operating profit.

Nuclear generation volumes were down 14% to 10.2 terawatt hours in 2019 compared with 2018, due to outages at EDF Energy's Dungeness B and Hunterston B nuclear power stations.

Centrica has a 20% stake in Britain's nuclear fleet but has said it wants to sell that by the end of 2020.

"We can't be certain we will sell the whole thing this year. We may have to sell our interest in two tranches and may not get both of them away this year," Conn said.

Centrica's total customer accounts, which includes energy supply, home services and solutions in Britain, Ireland and North America, grew by 3%, or 722,000, last year.

UK home energy supply customer accounts fell by 286,000, although the rate of loss was less than 2018, even amid high price competition and customer switching, Centrica said.

By Nina Chestney

Stocks mentioned in the article
ChangeLast1st jan.
CENTRICA PLC 1.77% 79.38 Delayed Quote.-11.11%
ELECTRICITÉ DE FRANCE 1.08% 13.55 Real-time Quote.36.48%
ENGIE 0.70% 16.595 Real-time Quote.15.24%
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Financials (GBP)
Sales 2020 28 562 M
EBIT 2020 936 M
Net income 2020 517 M
Debt 2020 3 494 M
Yield 2020 6,30%
P/E ratio 2020 12,4x
P/E ratio 2021 9,61x
EV / Sales2020 0,28x
EV / Sales2021 0,28x
Capitalization 4 616 M
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Technical analysis trends CENTRICA PLC
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TrendsBearishNeutralNeutral
Income Statement Evolution
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Mean consensus HOLD
Number of Analysts 18
Average target price 84,61  GBp
Last Close Price 79,38  GBp
Spread / Highest target 32,3%
Spread / Average Target 6,59%
Spread / Lowest Target -11,8%
EPS Revisions
Managers
NameTitle
Iain C. Conn Chief Executive Officer & Executive Director
Jonathan Scott Wheway Chairman
Christopher O'Shea Group Chief Financial Officer & Executive Director
Charles Cameron Director-Technology & Engineering
Mike Young Group Chief Information Officer
Sector and Competitors
1st jan.Capitalization (M$)
CENTRICA PLC-11.11%5 985
NATIONAL GRID PLC12.65%48 390
ORSTED AS11.73%46 987
ELECTRICITÉ DE FRANCE36.48%45 609
SEMPRA ENERGY4.59%44 661
ENGIE15.24%43 468