ii view: British Gas owner Centrica burned by mini-heatwave

AGM trading update

• Centrica Energy divisional profits now expected to be at the lower end its previous £250-300 million range
• Now expects a full-year loss for the gas storage division to be at the higher end of its previous £50-100 million range
• Continues to expect a full-year dividend of 5.5p per share in 2025 versus 4.5p in 2024

ii round-up:

British Gas owner Centrica (LSE:CNA) today maintained its full-year profit expectations and reiterated its plan to increase the 2025 dividend payment to 5.5p from 4.5p in 2024, but investors have focused on a cautious outlook.  

Unseasonally warm weather impacted the group’s British Gas residential supply business, although annual adjusted operating profit is still expected to be within management’s medium-term targets. 

Shares in the FTSE 100 company fell 6% in UK trading having come into this latest news up by close to a fifth year to date. That’s similar to bundled utility provider Telecom Plus (LSE:TEP) and comfortably ahead of a near 4% gain for the FTSE 100 index in 2025. 

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As well as supplying energy, Centrica also owns oil and gas production assets, along with energy storage and trading businesses and a 20% interest in the UK’s portfolio of existing nuclear power stations.

Full-year profit at the group’s oil and gas business, Centrica Energy, are now expected to be second-half weighted and come in at the lower end of management’s previous £250-300 million range. This is largely due to more challenging gas and power trading. 

The annual loss for the company’s gas storage division is now expected to be at the higher end of its previous £50-100 million range, with the risk that it misses City expectations for a loss of around £64 million. 

There was no update regarding Centrica’s nuclear business interests, although analysts await a UK government spending update potentially on 11 June. 

Centrica's first-half results are scheduled for 24 July. 

ii view:

Headquartered in Berkshire, Centrica employs around 21,000 people including approximately 7,000 gas boiler engineers. Brands supporting its core British Gas supply business include Dyno, Hive and PH Jones. Irish operations come under the Bord Gáis brand. 

Energy storage assets include the offshore Rough gas storage facility. Oil and gas production assets sit under the Spirit Energy brand and take in the Morecambe Bay gas field. Geographically, the UK generated 82% of revenue in 2024. The Republic of Ireland accounted for 5%, Europe 7%, and the rest of the world 6%. 

For investors, the weather and its unseasonal swings can cause uncertainty over customer energy demand at its supply business. Changes by the regulator and the government can impact. Costs generally for businesses such as wages remain heightened, while one-year estimated future dividend yields of over 4% at rival energy concerns National Grid (LSE:NG.), Telecom Plus and Shell (LSE:SHEL) all compare to a yield of around 3.6% at Centrica.

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More favourably, strong cashflows left Centrica with adjusted net cash of £2.9 billion as of late December, supporting shareholder returns. A transformation programme at the company over recent years has looked to offer a more stable platform to build on. The group’s diversity of businesses regularly sees tough conditions for one area countered by strengths for another, while management continues to assess and invest in energy transition opportunities such as solar farms and carbon capture.  

In all, the volatility of the weather and energy prices now regularly make for a more turbulent share price. That said, exposure to a diversity of energy businesses and a focus on shareholder returns are likely to see existing fans stick with Centrica.   

Positives

• A diversity of businesses
• Net cash held

Negatives

• Subject to government scrutiny 
• The weather can impact

The average rating of stock market analysts:

Buy