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Centrica shares crash after loss of 823,000 customers

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.

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