Gas distribution group Centrica told investors last month that rising wholesale gas prices - which prompted rival nPower to implement dramatic price rises recently - had reduced margins in its retail business, British Gas. However, they also boosted returns at upstream arm Centrica Energy, enabling the group to hit earnings forecasts for the year as a whole.
That said, it now seems inevitable that Centrica will have to raise prices in the months ahead, although it may be holding off making an announcement to help maintain the progress it has been making in winning back the 978,000 customers it lost in 2006. For investors, the possible impact on retail margins from further rises in wholesale prices is a concern. So the shares, which trade on a PE ratio of 12 for 2007, look high enough at 340p.
| Company name | Price (p) | Mkt val. (£m) | P/E ratio | Div. yld (%) | 12M price chng.(%) | Last IC view |
|---|---|---|---|---|---|---|
| CENTRICA | 336.5 | 12383.13 | 10.1 | 3.37 | -7.49 | Fairly priced, 340p, 2 August 2007. |
