Centrica brings back dividend on profit surge

The brawl to take over Downing St has left a lot of policies fall by the wayside. This seems to include an expansion of the oil and gas windfall tax to include utilities, although the much-improved underlying profits and reinstated dividend at British Gas owner Centrica (CNA) could put this back on the table. The half-year numbers came out on the same day as a new forecast for the October household energy price cap: £3,840, as per consultancy BFY Group. 

Centrica reported adjusted earnings of £598mn, compared with £74mn a year ago. The statutory number was hit by a £2.5bn recognised loss on derivative contracts and an increase in an onerous energy supply contract provision. 

British Gas operating profits were down by half on last year at £105mn because of higher bad debt charges, customer service spending and higher costs generally. The energy and marketing segment more than made up for this, moving from an operating loss of £40mn last year to a £278mn profit. 

Chief executive Chris O’Shea said the much-improved earnings would end up helping vulnerable UK residents. “This strength has allowed us to lead the industry in measures to protect and support customers through the most challenging energy crisis in living memory,” he said. The company also supported Ofgem’s move to quarterly price cap reviews and other measures that would allow “well run, responsible suppliers [to] make a fair return”. 

The outlook is rosy, in any case. The company has guided a final dividend of 2p a share, and earnings per share for the full year are forecast by analysts to be significantly higher than last year (11.7p against 4.1p). Buy 

Last IC View: Buy, 77p, 3 Mar 2022