It may seem odd, but the loss of 226,000 consumer accounts in the first half of 2018 marked a positive turnaround for beleaguered energy supplier Centrica (CNA). That decline – just 1 per cent of the customer base – isn't as severe as last year, thanks largely to growth in the services and connected home businesses. But celebration may be premature. With the energy price-cap legislation on the horizon, challenges in the UK consumer energy market look unlikely to let up.
The group has made some efforts to protect itself. Encouraging customers to switch from the standard variable tariff (which will be affected by the cap) to its fixed-term tariffs sent SVT contracts down to 3.5m from 4.3m this time last year. Meanwhile, cost-cutting initiatives should ensure £200m of savings before the year-end.
Rivals such as SSE (SSE) has reacted to the cap by looking to minimise their exposure to the consumer market, shifting instead towards generation and business supply. Unfortunately, Centrica’s business-facing division has had problems of its own. Management mentioned an improved performance in the UK, offset by challenges in other business units, but these improvements are hard to find, with total accounts down 7 per cent.
In spite of the challenges, management said it is on track to maintain the full-year dividend at 12p. Bloomberg forecasts an adjusted EPS of 13.5p for the full year (from 12.6p in 2017).
| CENTRICA (CNA) | ||||
| ORD PRICE: | 146p | MARKET VALUE: | £8.24bn | |
| TOUCH: | 145.5-145.6p | 12-MONTH HIGH: | 206p | LOW: 123p |
| DIVIDEND YIELD: | 8.2% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 58p* | NET DEBT: | 71% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 (restated) | 14.3 | 79.0 | 0.8 | 3.6 |
| 2018 | 15.3 | 415 | 4.3 | 3.6 |
| % change | +7 | +425 | +438 | |
| Ex-div: | 10 Oct | |||
| Payment: | 22 Nov | |||
| *Includes intangible assets of £4.69bn, or 83p a share | ||||
