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Centrica reducing upstream costs

The British Gas owner reported another profit loss as weak commodity prices dampened profits for its exploration and production activity
February 18, 2016

Weak commodity prices continued to hurt Centrica (CNA) last year, despite the energy group dialling down its exploration and production (E&P) activity as part of its strategic review. Centrica Energy's operating profit fell 61 per cent over the reported period. At a group level, this reduction in power generation reduced Centrica's cost of sales and left gross profit higher, but a hefty £2bn impairment charge on its E&P and power generation assets helped deliver an operating and pre-tax loss.

IC TIP: Hold at 201p

British Gas generated an increase of almost a third on its residential energy supply operating profit, as average gas consumption increased by around 5 per cent. However, disruption caused by switching customer accounts to a new billing system resulted in a £22m operating loss for British Gas's business energy supply operations, resulting in an overall fall of 2 per cent in divisional operating profit.

On the other side of the Atlantic, Direct Energy enjoyed a massive 119 per cent rise in operating profit to £328m thanks to a colder start to 2015, and higher-margin contracts bedding in. The US utility was also without the hefty costs caused by Polar Vortex damage to its network in 2014.

Bloomberg consensus forecasts give adjusted EPS of 15.6p for the 2016 financial year, compared with 17.2p in FY2015.

 

CENTRICA (CNA)

ORD PRICE:201.3pMARKET VALUE:£10.2bn
TOUCH:201.2-201.4p12-MONTH HIGH:290pLOW: 183p
DIVIDEND YIELD:6%PE RATIO:na
NET ASSET VALUE:23p*NET DEBT:£4.75bn

Year to 31 DecTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
201122.81.278.615.4
201223.92.4224.016.4
201326.61.6518.417.0
201429.4-1.14-20.213.5
201528.0-1.40-14.912.0
% change-5---11

Ex-div: 12 May

Payment: 23 Jun

*Includes intangible assets of £3.82bn, or 75p a share