Centrica plunged the most in 20 years as earnings are expected to fall below market consensus after a disappointing performance by its energy supply business.
The U.K.’s biggest energy supplier to homes is grappling with government intervention on bills that would cap the amount customers pay on default tariffs. The company announced this week that it will voluntarily phase out so-called standard variable tariffs for new customers. Its market share is also shrinking amid an increasing choice of suppliers and the utility lost more than 800,000 customers since the end of June.
“The scale of customer losses in the residential market in the U.K. is alarming,” said John Musk, an analyst at RBC Europe Ltd. in London.
Centrica is forecasting earnings per share of 12.5 pence, down 26 percent from last year, according to a trading statement published Thursday. The average estimate by 20 analysts polled by Bloomberg is 15.5 pence. The drop reflects lower-than-expected adjusted operating profit in North America and the U.K., the Windsor, England-based utility said.
Centrica will probably announce “more efficiencies” in February and has set a plan for the next five years, Chief Executive Officer Iain Conn said on a call with analysts. No part of its financial framework has changed, he said.
The company’s stock fell as much as 18 percent to 133.7 pence and traded at 137 pence at 8:42 a.m. in London. It’s down 42 percent this year, the worst performer in the 29-member Stoxx 600 Utilities Index, which has gained 7.2 percent this year.
Centrica’s plunge dragged down other energy suppliers. SSE Plc dropped as much as 3.1 percent, while Iberdrola SA slid as much as 0.5 percent.
Maintaining Dividend
Centrica will be able to maintain its dividend with net debt and adjusted operating cash flow on target. The company is “willing to operate with dividend cover from earnings below historic levels” if necessary, according to the statement.The number of U.K. customers at the end of October fell by 823,000 since 30 June, with 150,000 choosing to switch after a price rise in September.
The North America business is expected to report full year adjusted operating profit of 80 million pounds, with “highly competitive market conditions and low price volatility putting significant downwards pressure on realized power margins, and low volatility also reducing opportunities for gas optimization,” Centrica said in the statement.
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