Centrica on Track to Meet Full-Year Targets as Cold Weather Increases Costs -- Update

05/14/18 06:24 AM EDT
   By Adria Calatayud 

British Gas owner Centrica PLC (CNA.LN) said Monday that it is on track to hit dividend and other financial targets for 2018, although it warned that costs linked to cold weather will hit its U.K. adjusted earnings in the first half.

The utility company said adjusted operating profit in U.K. services for the first half will be lower than the year-earlier period, hit by higher costs due to extreme cold weather. Bad weather conditions in February and March boosted energy demand, but also led to higher central-heating boiler breakdowns, the company said. In one week, Centrica fixed 145,00 breakdowns, its busiest week ever and more than double the normal weekly number, it said.

However, the company said 2018 has started well, putting it on track to declare dividends for the full year of 12 pence a share and to deliver its increased savings target.

The company said in February that it would increase its annual cost saving and when the current cost-cutting program ends in 2020, it expects to have saved GBP1.25 billion a year over the period.

Analysts expect Centrica to make a pretax profit of GBP1.13 billion in 2018, according to a consensus estimate provided by FactSet.

At 1005 GMT, Centrica shares are up 0.1% at 147.30.

Investec analyst Roshan Patel said investors greeted Centrica's backing its guidance for 2018, after it had an "awful" 2017. The company's performance last year turned the outlook for the business negative, so a confirmation of its targets for 2018 is a positive, according to Mr. Patel.

"The future destiny of the share price is likely to be heavily dictated by the fate of Centrica's dividend which may hang on planned energy price caps in the UK," AJ Bell investment director Russ Mould said.

The company reiterated that its 2018 targets are subject to weather patterns, commodity prices and the impact of regulatory changes for its U.K. energy supply business.

"While the outcome of regulations to impose a temporary cap on all default energy tariffs in the UK remains uncertain, we continue to participate actively in the consultation process," Chief Executive Iain Conn said. Centrica said it believes it can deliver a sustainable and attractive business in U.K. energy supply, regardless of the outcome of the legislative process.

Revenue growth is expected to be weighted to the second half of the year at Centrica's connected home and distributed energy and power segments, the company said. Consumer accounts fell by 62,000 in the first four months of the year, but the company said net consumer customer-account losses to date have slowed materially relative to the average of 2017.

Centrica said its exploration and production division will be disrupted as full-year production from Spirit Energy is now expected to be in the lower half of the 2018 targeted range of between 50 million and 55 million barrels of oil equivalent, due to unplanned outages at its Morecambe Bay gas fields in the U.K., and production issues on non-operated fields in Norway. Nuclear volumes will be hit by an extended outage at one of the reactors at nuclear power station Hunterston B in Scotland, the company said.


Write to Adria Calatayud at adria.calatayudvaello@dowjones.com


(END) Dow Jones Newswires

May 14, 2018 06:24 ET (10:24 GMT)

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