Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a1071736

Centrica shares crash after loss of 823,000 customers

Shares in British Gas owner endure their worst day ever after profit warning following the loss of 823,000 customers in just four months.

 
Centrica shares crash after loss of 823,000 customers
 

Shares in Centrica (CNA) have endured their worst ever day, tumbling 17.3% to 135p as the British Gas owner issued a profit warning after losing 823,000 customers.

The company said full-year earnings per share were likely to reach just 12.5p, down 26% on last year and well below market expectations, after the loss of 823,000 customers in just four months.

'Trading conditions continue to be highly competitive and performance delivery since mid-year within the Centrica business energy supply businesses has been disappointing,' the company said.

Centrica's problems will raise fears over its dividend, despite the company's attempt to reassure investors.

In its trading statement, Centrica said debt and cashflow expectations meant the current full-year dividend level was underpinned.

'While the group is implementing its strategy to continue to shift the portfolio towards the customer and diversifying and growing new sources of gross margin, we would be willing to operate with dividend cover from earnings below historic levels,' it added.

Jefferies analyst Ahmed Farman said that meant Centrica was unlikely to be able to bring back the dividend closer towards historic levels, with Ian Conn having cut payouts in one of his first acts as chief executive in 2015.

'This suggests to us that dividend growth is unlikely in 2017, and is likely to be in line with 2016 dividend of 12p,' he said. 

With today's heavy fall, that places the shares on a near-9% yield. 'Something has to give further down the line,' said Helal Miah, investment research analyst at The Share Centre.

'Without any significant improvements in operating performance and earnings, we feel that management will have to cave in and cut the dividend in the near future,' he said.

'Moreover, with the government and regulators constantly looking over their shoulder combined with the threat of price caps on energy tariffs, our confidence in the share price has been sapped further.'

Lee Wild, head of equity strategy at Interactive Investor, agreed that that pricing pressure was a threat to payouts.

'Despite attempts to reassure that the generous dividend is safe, the risk of a cut remains real as the government continues a crackdown on expensive energy bills,' he said.

Today's bad news is the latest in a strong of disappointing updates from Centrica, whose shares have fallen 42% this year. 

Pricing pressure has hurt its retail business, while outage issues at its Morecambe plant have limited the ability of its exploration and production division to exploit a recovery in oil prices.

But its business-facing division is now being hit, especially in the US, where it has taken a £46 million write-down.

'The group could ill-afford having to break more bad news, but unfortunately, that's exactly what it's done,' said George Salmon, equity analyst at Hargreaves Lansdown.

'The real kick in the teeth is that few anticipated the source of the latest trouble.'

The news will serve as a blow to Mark Barnett, one of the biggest backers of the company, holding the shares in his £5.2 billion Invesco Perpetual Income and £10.5 billion High Income funds.

Iain Stewart, manager of the £10.4 billion Newton Real Return fund, is also a large investor.

6 comments so far. Why not have your say?

Peter in Cornwall

Nov 23, 2017 at 17:54

Surprise, surprise. We left BG some years ago as their alleged "Customer Service" was not just woeful.if you asked them a difficult question they would simply put the phone down on you. Untraceable.

report this

richard tomkin

Nov 23, 2017 at 20:27

Theoretically it would be possible,by mass switching from a given provider,to bring a utility company to its knees.A name for this might be,not crowd funding,but crowd bleeding.Centrica says it lost 823,000 people last year,but suppose it was 2,000,000.Maybe this weapon is the ultimate consumer sanction

against rapacious utilities.

report this

Franco

Nov 24, 2017 at 12:15

I am surprised to learn that some people have found someone at BG to answer their questions. All I can find on their website is a list of pre-written questions and answers.

The worst customer service it has ever been my misfortune to encounter.

report this

mikest

Nov 25, 2017 at 08:22

Isn’t CNA the company that raised their prices by 16% in August? What did they think was going to happen

report this

Dennis .

Nov 25, 2017 at 18:07

Can someone remind me if Centrica is the outfit spun off from National Grid earlier this year?

report this

richard tomkin

Nov 26, 2017 at 11:13

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire Guide to Investment Trusts


In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.

Watch Now

More about this:

Look up the funds

  • Invesco Perpetual Income
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Invesco Perpetual High Income
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Newton Real Return GBP Inc A
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the shares

  • Centrica PLC (CNA.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • Iain Stewart
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Mark Barnett
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

Archive

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Read more...

March of the millennials: young mega fund managers

by Citywire on Dec 18, 2017 at 00:01

Sorry, this link is not
quite ready yet