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

CENTRICA PLC

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E.ON still sees value in Britain despite profit drop

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08/07/2019 | 05:52am EDT
FILE PHOTO: A hot air balloon with the logo of German energy giant E.ON flies at dawn in Ronda

FRANKFURT/DUESSELDORF, Germany (Reuters) - E.ON remains committed to the ailing British retail energy market, its chief financial officer said on Wednesday, allaying concerns the German group could pull out after prolonged profit decline.

By Christoph Steitz and Tom Käckenhoff

E.ON -- one of Britain's "big six" energy providers -- lost about 400,000 clients in Britain in the first six months of the year, hit by a price cap on tariffs and cut-throat competition that has led profits to plunge by 65%.

On a group level, second quarter operating profit fell 18% to 542 million euros (£499.4 million), higher than the 528 million Refinitiv estimate.

"For decades, Britain stood for a reliable energy policy," E.ON's finance chief Marc Spieker told journalists after presenting first-half results. "For about two years we've been seeing the exact opposite."

In a sign of continuing regulatory pressure, Britain's energy watchdog Ofgem on Wednesday said suppliers would need to cut their bills by 6% from Oct. 1, following a drop in wholesale gas and power prices this year.

But Spieker said the market still had good prospects, saying it needed to recover over the medium-term as regulators in Britain, currently in the process of exiting the European Union, realise that the current framework does not work.

He said that customer numbers had shown a slight improvement in July and the first week of August, without going into details.

E.ON, which has around 12% of the British market https://www.ofgem.gov.uk/data-portal/electricity-supply-market-shares-company-domestic-gb, still expects to turn a profit in Britain this year, unlike Npower, the smaller local unit of rival Innogy.

Under an asset swap deal, loss-making Npower is expected to end up in E.ON's ownership as early as next month, which could make Britain an even bigger challenge for the energy group.

Asked about Npower's future, Spieker said that E.ON would not tolerate a business that remained in the red in the long-term, indicating Npower faces another round of restructuring or cost cuts.

E.ON and Npower are two of Britain's main energy suppliers alongside Centrica's British Gas, SSE, Iberdrola Scottish Power, and EDF Energy.

E.ON shares were 0.34 lower at 0945 GMT.

"We think it is more important that E.ON confirmed the synergy target for the Innogy deal," said Thomas Deser, senior portfolio manager at Union Investment, a top 20 shareholder in E.ON.

"The closing ... is the actual driver of E.ON's equity story."

Spieker said that the transaction, under which it will acquire Innogy's retail and networks activities, would result in annual synergies of 600-800 million euros. As part of the deal, Innogy parent RWE, will get the renewable activities from both E.ON and Innogy.

(Additional reporting by Nina Chestney in London; Editing by Michelle Martin and Keith Weir)

By Christoph Steitz and Tom Käckenhoff

Stocks mentioned in the article
ChangeLast1st jan.
CENTRICA PLC -0.30% 73.36 Delayed Quote.-45.62%
E.ON SE -0.63% 9.018 Delayed Quote.4.53%
ELECTRICITÉ DE FRANCE 0.70% 10.865 Real-time Quote.-21.27%
IBERDROLA -0.64% 9.272 End-of-day quote.32.12%
INNOGY SE -0.60% 44.5 Delayed Quote.9.26%
RWE AG 2.92% 28.19 Delayed Quote.48.64%
SSE PLC 0.00% 1236 Delayed Quote.14.29%
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Financials (GBP)
Sales 2019 28 835 M
EBIT 2019 976 M
Net income 2019 146 M
Debt 2019 3 377 M
Yield 2019 6,82%
P/E ratio 2019 14,5x
P/E ratio 2020 9,05x
EV / Sales2019 0,27x
EV / Sales2020 0,26x
Capitalization 4 264 M
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Mean consensus HOLD
Number of Analysts 19
Average target price 78,36  GBp
Last Close Price 73,36  GBp
Spread / Highest target 39,0%
Spread / Average Target 6,81%
Spread / Lowest Target -25,0%
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Managers
NameTitle
Iain C. Conn Chief Executive Officer & Director
Richard Neil Haythornthwaite Chairman
Christopher O’Shea Group Chief Financial Officer & Executive Director
Mike Young Group Chief Information Officer
Margherita Della Valle Independent Non-Executive Director
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1st jan.Capitalization (M$)
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SEMPRA ENERGY31.45%39 047
ORSTED AS42.80%38 502
ENGIE15.37%38 337
NATIONAL GRID PLC11.42%37 021
ELECTRICITÉ DE FRANCE-21.27%36 427