Proactive Investors -
- UK enters recession
- FTSE opens higher
- Centrica (LON:CNA) rallies despite lower profits
‘Bargain gas hurts British Gas’
This is what Adam Vettese, market analyst at eToro sais of British Gas owner Centrica’s results: "A dividend increase and a share buyback scheme are the noises shareholders want to hear and Centrica's share price this morning reflects that.
“However, digging a bit deeper, there are signs that the good times may be fading for the British Gas owner. Profit has slipped, margins are being squeezed and gas prices are a fraction of what they were in their 2022 pomp.
“Centrica has acknowledged that they do not expect to see the same one-off cost benefits they did last year going forward, and combined with gas prices now hovering near four-year lows, 2024 is shaping up to be a challenging year."
Shares rallied 6.4% in opening exchanges.
Airbus earnings down
In Europe, Airbus’ reported annual earnings fell -14% year on year to €4.6 billion (£3.9 billion), with net income falling -11% to €3.8 billion.
Self-financed R&D expenses ticked 5.7% higher to €3.26 billion.
Gross commercial aircraft orders totalled 2,319 compared to 1,078 in 2022, with the order backlog amounting to 8,598 commercial aircraft at the end of 2023.
“In 2023 we recorded strong order intake across all our businesses and we delivered on our commitments. This was a significant achievement given the complexity of the operating environment,” said chief executive Guillaume Faury.
Shares were seen 1.45% lower at €148.
Back in London, the FTSE 100 remains in a strong position despite GDP figures pointing to a recession, with the lead index up 40 points to 7,607.
Centrica profits hit by lower commodity prices
As expected, Centrica PLC’s earnings were hit by lower commodity prices in 2023, with the British Gas owner’s adjusted operating profit falling 17% year on year to £2.75 billion.
This adjusted result excludes the disposed Spirit Energy Norway assets in 2023, and the impact of unrealised hedging losses in 2022.
Retail profit rose to £800 million, driven by a return to profitability in British Gas Services & Solutions and cost recoveries in British Gas Energy.
However, profits from Optimisation and Infrastructure activities were affected by lower commodity prices and volatility, as well as the introduction of the Electricity Generator Levy in Nuclear operations.
Free cash flow stood at £2.2 billion, slightly down from £2.5 billion in the previous year, and the company ended the year with a robust balance sheet and adjusted net cash of £2.7 billion, up from £1.2 billion in 2022.
Chief executive Chris O’Shea commented: “We are pleased to report that this strong underlying operational performance has continued into early 2024. As you would expect, sharply lower commodity prices and reduced volatility will naturally lower earnings in comparison to 2023 as we return to a more normalised environment.
“Our performance over the past year has reinforced our confidence in delivering against our medium-term sustainable profit ambitions and continuing to create value for shareholders.”
O’Shea touted Centrica’s voluntary customer support policies: “At the start of the energy crisis we committed to contribute a material sum from British Gas Energy and Bord Gáis Energy profits to support our customers.
Whilst we are starting to see material commodity price falls, today we have committed another £40 million, bringing the total voluntary customer support to £140 million, more than any other supplier.”
Shares opened 0.3% higher at 134.76p