Centrica resumed dividend payments for the first time since the start of the pandemic as profits from selling oil and natural gas rose six-fold.
Adjusted operating profit climbed to £857 million ($1 billion) as the company’s North Sea business and its stake in the UK’s nuclear fleet benefited from soaring gas and power prices. The dividend will be restarted at 1 pence per share and the company expects to pay roughly one third of the full year amount as an interim, according to a statement.
The payout to shareholders could draw political backlash as it comes on the heels of Britain’s windfall tax on the profits of oil and gas producers. Surging earnings from oil companies including Shell are a direct result of the high energy prices that have stoked inflation, piled pressure on consumers and led to predictions of a Europe-wide recession.
“We are very aware of the difficult environment many customers are facing and we will continue supporting them”, said Centrica Chief Executive Officer Chris O’Shea, adding that he expects growth to continue in the second half of the year.
Centrica expects earnings per share to be at the top end of analyst expectations 10.1-15 pence for the full year.
“This appears to be an exceptionally strong set of results from Centrica and the return to dividends should be well received,” said John Musk, analyst at RBC Europe Ltd.
The Windsor-based company rejoined the FTSE 100 in May after a stellar run in its share price. Centrica, which is the parent of British Gas, has said that it expects earnings to surge this year on the back of rising energy prices. Bumper profits for such a high-profile UK firm are likely to draw criticism from fuel-poverty groups, who are hearing more from people worried about mounting debts.
Calls are growing for the government to do more to help people deal with record high energy bills. Lawmakers warned this week that a planned £400 discount on energy bills for every household in October won’t be enough to support lower-income families.
However, profits at the company’s British Gas unit that supplies consumers fell 43% to £98 million in the first half of the year amid “high and volatile prices” that sent many providers out of business.
“We continue to believe we need to see significant change to address the underlying issues in the UK’s complex energy regulations,” Centrica said in the statement. The impact of a 3% drop in customer numbers and customers switching to the default price cap tariff negatively impacted adjusted operating profit by about £20 million.
Centrica’s market value has grown to £5.3 billion from £2.7 billion in 2020, data compiled by Bloomberg show, though that’s still far off its £18 billion valuation in 2013. Centrica scrapped its dividend two years ago as the impact of Covid-19 rippled through the industry and forecasts for lower earnings and increased competition dragged its shares down.
Centrica received first approval earlier this month to re-open gas storage site Rough. The cost of converting it back to holding gas before altering it to a hydrogen storage asset is expected to be £2 billion.
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