Centrica warns annual profit will miss expectations

Centrica shares plunged to an 18-year low after the energy supplier warned annual profit would miss market expectations due to poor performance at its business energy supply division.

In a trading update, Britain’s biggest energy provider said it faced competitive market conditions for business energy supply in North America and the UK. The company is also taking a one-off charge of £46m after tax in North America after reviewing the value of unbilled power revenues.

As a result, 2017 earnings per share will be about 12.5p – below market consensus of 15.2p. Investors were also unnerved by Centrica's loss of 823,000 consumer customers from July to October.

Centrica shares fell 16.7% to 136.10p at 08:20 GMT – their lowest level since the first half of 1999.

The company, which owns British Gas, sought to allay concerns about its dividend, which is important to its 650,000 small investors, many of whom acquired shares when the former state utility was privatised in 1986.

Centrica said the annual dividend was supported by net debt within its target range of £2.5-3bn and operating cash flow of more than £2bn. It is willing for dividend cover from earnings to be below historic levels for “a period of time”, it added

Iain Conn, Centrica’s chief executive, said: “Although some aspects of our delivery in the second half of 2017 have been disappointing, I remain encouraged by our progress in implementing our strategy. The balance sheet has been materially strengthened, and we continue to focus on improving our underlying performance.”

When Centrica cut the 2014 dividend to save cash and support its credit rating it was the first reduction in the payout since it was formed from the 1997 breakup of British Gas.

Russ Mould, investment director at stockbroker AJ Bell, said: “A profit warning amid falling customer numbers and price pressure means that shares in Centrica are showing a double-digit fall in early trade amid worries over the long-term sustainability of the dividend."

Centrica's shares have slumped from 234p at the start of 2017 amid investor concerns about tougher regulation and the government's proposed price cap on home energy bills.