Centrica Slumps Most Since 2008 After Cuts Dividend on Loss

Centrica Plc slumped the most since 2008 in London as the biggest energy supplier to U.K. homes cut dividend payments after weak oil and gas prices led to a surprise loss.

Centrica swung to a 2014 net loss of 1 billion pounds ($1.6 billion) from a 950 million-pound profit, the Windsor, England-based company said in a statement on Thursday. The result disappointed as the average of 11 analyst estimates compiled by Bloomberg was for profit of 945 million pounds.

The final dividend for 2014 was 8.4 pence a share, down from 12.08 pence a year earlier, marking the start of a 30 percent reduction in the company’s payouts, Centrica said. Earnings per share slid to 19.2 pence from 26.6 pence and is expected to fall a further 2.5 pence in 2015, it said.

“What was a big disappointment was the dividend cut,” Angelos Anastasiou, an analyst at Whitman Howard Ltd. in London, said in an e-mail. “And the outlook for a drop in earnings per share in 2015 was equally disappointing.”

Centrica declined 8.5 percent to 257.10 pence by the close of London trading, the biggest drop since Dec. 1, 2008.

It will shrink exploration and production spending by 250 million pounds this year to about 800 million pounds. Centrica expects 150 million pounds more to be shaved off its budget in 2016 as the company sees prices for oil and gas holding at lower levels for the next two years after the recent slump.

The company is putting on hold new projects after writing down the value of its assets in the North Sea and in power.

Government Probe

Lower oil and gas prices also made it “challenging” to sell the company’s Trinidad and Tobago assets, Iain Conn, the newly appointed chief executive officer, said in the statement. He said the company has no other plans for divestments.

Centrica wrote down almost 1.4 billion pounds in total, half of which is related to its exploration and production activities, including fields in the U.K. and Norway. In its power unit, the company wrote down 673 million pounds, the bulk of which was for its Langage and Humber stations and its nuclear investments in the U.K.

Centrica retained the Langage and Humber gas-fired power stations it tried to sell as bids were too low and will probably close Killingholme and Brigg next year, Conn told a conference call. It’s in consultation with employees, he said.

Aside from the strain on oil and gas production, Centrica is among six U.K. power suppliers preparing for a government-backed competition probe. Lawmakers have mooted breaking up operations of suppliers including SSE Plc, Iberdrola SA’s Scottish Power, RWE AG’s nPower, Electricite de France SA and EON SE.

With a U.K. general election less than three months away, utilities are under pressure from all parties to cut prices.

Centrica reported adjusted operating profit fell to 1.7 billion pounds in 2014 from 2.7 billion pounds, while adjusted net income sank to 962 million pounds from 1.37 billion pounds.

Conn joined in January from BP Plc, replacing Sam Laidlaw, who had been with Centrica for almost a decade.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE