Centrica Earnings Contain ‘Litany of Negatives’: Street Wrap

(Bloomberg) -- Centrica Plc results included a “litany of negatives,” analysts at JPMorgan wrote after the British Gas-owner cut its dividend for the first time since 2015. Shares fell as much as 12%, and RBC Capital Markets said that today’s announcement may not mark the bottom for the stock.

The shares fell to the lowest in 21 years after first-half profit missed expectations, with the company’s U.K. domestic energy supply unit still facing a tough market. Still, the departure of chief executive officer Iain Conn may pave the way for a new strategy, JPMorgan said.

Here’s what analysts had to say about the results:

JPMorgan, Christopher Laybutt

(Neutral)

• Despite prepping the market for a potential dividend cut earlier in the year, the actual cut still “remarkably” came in below expectations
• Key positive was that CEO Iain Conn will step down in 2020, paving the way for a “fresh perspective on strategy”
• But this will be offset by the “litany of negatives” in the earnings release

RBC, John Musk

(Underperform)

• Much of what the results contain was expected but that doesn’t mean there isn’t further downside for the shares; “we don’t think today’s announcements necessarily signal the bottom in the share price”
• Company maintained its guidance but if rebased for disposal of nuclear and E&P assets, earnings per share should be lower for the year
• Nothing in the earnings to signal a “reversal in fortunes”

Morgan Stanley, Timothy Ho

(Underweight)

• Rebased dividend to 5p for the full-year is lower than consensus expectations, which had generally anticipated a cut to around 6p
• Would expect to see more pressure on full-year earnings estimates given Centrica is flagging heavy weighting to the second half

Jefferies, Ahmed Farman

(Hold)

• Ebit for first half is 20% lower than consensus due mainly to losses in Centrica’s North American business, lower gas prices and writedowns
• Dividend also cut by more than Jefferies had anticipated and the company’s U.K. domestic energy supply remains tough, though churn in this unit may be starting to moderate

--With assistance from Lisa Pham and Blaise Robinson.

To contact the reporters on this story: Sam Unsted in London at sunsted@bloomberg.net;Ivan Edwards in London at iedwards16@bloomberg.net

To contact the editor responsible for this story: Beth Mellor at bmellor@bloomberg.net

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