- Group profitability weighted to first half
- Shares down more than 5% year-to-date
- Interim results will be released on 25 July
Shares in Centrica (CNA) were down more than 5% to 135p in morning trading despite the utilities firm saying trading so far this year had been ‘in line’ with expectations against a backdrop of a more ‘normalised’ external environment.
Investors might have been spooked by the utilities firm caution for the rest of the year which mentioned ‘uncertainties’ like weather, commodity prices, regulation and government policy and the warning profitability will be weighted to the first half.
The company will benefit from hedging on commodity prices in this period but not in the second half of the year.
Ahead of the company’s (annual general meeting) AGM, the British Gas-owner said all retail supply and optimisation businesses will be within their medium-term sustainable adjusted profit ranges in 2024, two years ahead of schedule.
These medium-term sustainable operating profit ranges are: British Gas Residential energy supply £150 million to £250 million, British Gas Services & Solutions £100 million to £200 million, Centrica Energy £250 million to £350 million, Bord Gáis and Business Energy Supply £100 million to £200 million.
'SUPER-SIZED PROFITS THING OF THE PAST'
Russ Mould, investment director at AJ Bell said: ‘Usually when a company talks about returning to a more normalised environment that’s good news but for energy outfit Centrica it means the super-sized profits its wholesale operation enjoyed from a spike in commodity prices are a thing of the past.
‘Hedging has helped shield the British Gas owner from the impact of a softer gas market in the first half of the year, but the full impact is coming in the second half. In the circumstances there will be some relief the company still expects to meet full-year expectations.
‘Centrica struggled before the energy crisis and moving forward we will find out if the business and current management can perform against a less helpful backdrop.
‘Current boss Chris O’Shea has restored some stability to the group, but he has been a lucky general and his record is not entirely unblemished – with the forced installation of prepayment meters creating controversy and drawing political fire.
‘One lasting legacy of the energy price surge is an improved competitive position for British Gas which historically had been haemorrhaging customers to smaller rivals – many of which have now disappeared or are a shadow of their former selves.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author (Sabuhi Gard) and article editor (Tom Sieber), own shares in AJ Bell.
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