Thursday, 19 February 2015

Centrica - Dividend Cut!

Centrica - owner of British Gas - is a  FTSE 100 company with a market cap. of around £13bn. It operates predominantly in the UK and USA (Direct Energy) and has 35,000 employees serving 30 million customers.

I purchased Centrica for my shares ISA in November 2013 - here’s a link to the post

They have today reported results for the full year to 31st December 2014 (link via Investegate). Although total revenues increased 11%,  adjusted EPS over the year fell by 28% to 19.2p (2013 26.6p) . CNA reported a 35% reduction in operating profits to £1.75bn (2013 £2.69bn).

Newly appointed Chief Executive Iain Conn said:  '2014 was a very difficult year for Centrica and the recent fall in the oil and gas prices creates further challenge,'

'We are cutting investment and costs in response. However, it is with regret that, along with reducing capital expenditure and driving efficiency beyond planned levels, we have taken the difficult decision to rebase the dividend by 30%, commencing with the final distribution for 2014.'

The full year dividend has been cut to 8.4p making a total of 13.5p for the full year - a reduction of 21% (2013 17p). Not what an income investor wants to hear but it looks like the management had few options given the reduction to profits and earnings.

Management actions to address the situation include a 40% reduction in exploration and production capital expenditure to £650m by 2016, with a  focus on competitiveness, service and efficiency in the downstream business, as well as a new group-wide performance improvement plan, with a particular focus on costs. The longer term strategy is currently under review and the Company will announce their plans at the time of the interim results in July.

The results were not well received by the market and at the time of posting the share price was down 8% at 257p. So far, not one of my better purchase decisions!

No comments:

Post a Comment