Friday newspaper share tips: Top up shares in Centrica

The Times’ Tempus thinks it might be the bottom of the decline of Centrica.

The utility company said its full year earnings would be in-line with forecasts in a pre-close statement on Thursday at the end of what the British Gas owner admitted was a difficult year.

British Gas' residential energy supply margins will be squeezed in the second half by the second 5% tariff cut, which left account volumes largely unchanged since the half-year, will remain "within the range of recent years".

British Gas business will report a small loss, while US-based Direct Energy will deliver "material operating profit growth".

Tempus noted that the decline in the wholesale gas price can be blamed for most of the issues, compounded by a threatened regulatory crackdown.

However it highlighted that its chief executive Iain Conn, who has been in the role for just under a year, has made some tough choices including slashing the company’s dividend and it’s starting to pay off.

“Mr Conn inspires confidence — he looks like a man with a good plan. The company is on track to deliver £2 billion of cash this year. Capital spending is falling as promised. Costs are being reduced as signalled.”

With the share price down at new lows, Tempus rated it a ‘buy’, saying that the company’s shareholders who have stuck with the company since its privatisation should top up.

Meanwhile Questor in The Telegraph believes that Sports Direct shares aren’t worth holding on to any more, and rated them at ‘sell’

The retailer posted a 25% jump in first half pre-tax profit on flat revenue thanks in part to the continued roll-out of large format city stores.

For the 26 weeks to 25 October, pre-tax profit came in at £187.3m from £149.7 on revenue of £1.4bn, up just 0.1% from the same period last year, which was boosted by the World Cup.

Underlying pre-tax profit was up 3.6% to £166.4m and the group said gross sports retail margin gained 110 basis points to 45.6%.

However it was also in focus in The Guardian after it reported that some of its temporary workers were getting paid less than the minimum wage.

An investigation by the paper revealed that many of the company’s warehouse staff were being paid an effective rate of about £6.50 an hour against the statutory rate of £6.70, which could be saving the firm millions of pounds a year at the expense of some of its workers.

Questor said the company has now hit a wall with the shares looking increasingly expensive after the slowdown in sales in the first half.

“In a worrying trend ahead of the crucial Christmas period, the core sports retail division reported revenue up only 0.2% to £1.2bn, compared with an 8.3% increase in the same period last year, and more than 13% in the year before that.”

It said it’s another worrying sign that the UK consumer spending spree funded through personal borrowing is coming to an end.

“With flat sales, lower operating profits, cost pressures and no dividend, there is little value on offer here," Questor believed.