Friday newspaper share tips: Centrica, BAE Systems

Calmer waters may lie ahead for Centrica this year if the company's boss can deliver on the promises made to investors, the Financial Times's Lex column said.

Impairments on Centrica's exploration, production and power assets rose to over £1.8bn pushing the company's full year profits into the red.

The dividend was cut, as expected, but Centrica's boss, Iain Conn, promised a progressive dividend, with the pay-out set to grow over the next few years as cash flows rise by 3% to 4% per annum.

Conn's confidence stemed from the lower cost forecasts for oil, thermal gas and a projected power price of £35 per megawatt.

However, the base for the expected improvement had still been lowered.

Centrica put the firm's debt on review for downgrade, but at least the firm would not have to hive-off assets just to cover dividends, Lex said.

Indeed, cash flow after investment should remain more than strong enough this year and next to please investors, even should commodity prices drop again, the tipster went on to say.

"If Mr.Conn can deliver on his latest promises, he can expect an easier rhythm to life at Centrica this year," Lex concluded.

BAE Systems is going through a fallow period, with investors in effect being asked to wait for improvement, The Times's Tempus said, who advised clients to pick-up the stock.

Nonetheless, US defence spending was on the thaw after an austerity-imposed hiatus.

Similarly, the UK's strategic defence and security review in November projected increased spending over the next decade.

As payments feed through from the development of programmes analysts believe cash flow will rise towards £1bn from around £400m in 2016, Tempus explained.

However, the drop in the oil price may have put a crimp in BAE's plans, leading to delays in an order for a further 48 Eurofigher jets from Saudi Arabia.

Another order from Kuwait for 28 fighters is also pending, although both are likely to materialise eventually.

The company also booked writedowns on its Australian shipyard.

"The engineering group is in a fallow period, with revenues and earnings from defence set to flow through, but the yield is attractive for now. Buy for the long-term," Tempus said.