Centrica profit and earnings slip but beat expectations

For the year ended 31 December, adjusted pre-tax profit fell to £1.13bn from £1.33bn in 2014, as revenue slipped 5% to £28bn.

Earnings per share of 17.2p were down 4% from the previous year, but ahead of analysts’ expectations.

Adjusted earnings, meanwhile, fell to £863m from £903m the year before, surpassing expectations of around £850m.

Profit at British Gas, the company’s household gas and electricity unit, rose 31% to £574m as consumption returned to more normal levels following a mild 2014.

The energy company declared a final dividend of 8.43p, in line with the previous year and expectations, and taking the full year dividend to 12p compared with 13.5p in 2014.

Chief executive Iain Conn said: “Centrica has delivered a resilient financial performance, with solid 2015 adjusted earnings despite the challenge of falling wholesale oil and gas prices. Operating cash flow has been strong, and with capital discipline this has allowed the group to reduce net debt. In 2016 we expect operating cash flow also to be over £2bn.

“We have a clear strategy for delivering growth and returns built around the customer and I am encouraged by the progress we have made. We remain confident that our plans and underlying performance momentum will allow us to more than balance cash flows and deliver at least 3-5% per annum underlying operating cash flow growth to 2020, even in the current environment, so underpinning a progressive dividend policy.”

Centrica said the steep falls in wholesale commodity prices will continue to have a material impact on the operating cash flows from its E&P and central power generation businesses in 2016 and beyond, if current levels persist.

However, on a cheerier note, it said the customer-facing businesses are delivering resilient cash flows, and the group’s cost efficiency programme is starting to bear fruit.

The company said that should current low wholesale prices continue beyond this year, it has the flexibility to reduce its E&P capital expenditure further to the bottom end of its £400-£600m range.

“Centrica’s full year results are resilient in the context of a very challenging environment, which is reassuring in the circumstances,” said Steve Clayton, head of equity research at Hargreaves Lansdown.

“Cost and efficiency savings are progressing well and capital expenditure (capex) is being reduced. This is helping to support cash flows, dividends and net debt reduction. Centrica has stated that even if current commodity prices persist it should still be able to grow its operating cash flows, while capex in the upstream business can be reduced further if necessary. This should help underpin confidence in the dividend.”

At 0928 GMT, Centrica shares were up 3.8% to 201.50p.