Very mixed fortunes for Centrica and Aston Martin shares

A closer look at Centrica’s shares dropping 4% and Aston’s rising 9%.

Dividend-starved Centrica (LSE:CNA) shareholders faced more frustration today after annual results from the British Gas owner kept them in the dark about when fortunes might improve.

Shares dropped 2p to 51.6p as Centrica passed on another dividend and declined to give guidance on 2021 trading due to continued uncertain trading conditions caused by Covid-19.

Earnings per share from continuing operations fell 35% to 2.8p as a combination of warmer weather, low commodity prices and the pandemic's impact on industrial demand hit recovery hopes in 2020. British Gas Energy's profits fell 35% to just £80 million, with its number of customers falling 2% over the year to below seven million.

The Services division grew profits by 12% to £201 million, despite a 3% fall in customer numbers as periods of lockdowns resulted in fewer sales opportunities.

Chris O'Shea, who was appointed chief executive last April, warned shareholders that the journey to transform Centrica had only just started. His focus is on improving customer experience and employee retention, as well as shoring up the balance sheet.

He said: “It won't be easy, but I am confident we have the people, the brands and the market positions to deliver a successful turnaround in the coming years.”

Last month's completion of the sale of North American business Direct Energy for $3.6 billion (£2.54 billion) is one positive step as it helps Centrica to reduce debt from £2.8 billion at the end of 2020.

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It also intends to sell its Spirit Energy exploration and production business, the value of which should benefit from the recent spike in wholesale commodity prices. However, Centrica's plans to offload its 20% stake in the UK fleet of nuclear power stations are on hold.

A restructuring drive is expected to be largely complete this year, leading to a total reduction of 5,000 roles and a more competitive cost structure. However, Centrica faces industrial action with around 7,000 British Gas engineers staging a four-day walk-out from tomorrow.

When O'Shea started in his role shares were trading at just 30p and the lowest level since the company was created out of British Gas in 1997. They've recovered since then, but any hopes of revisiting the 200p level seen in 2017 will depend on the dividend outlook.

It paid 12p a share until a cut to 5p in 2019 and then the suspension of dividends completely due to the pandemic. Centrica said today: “We recognise the importance of dividends to shareholders and intend to recommence dividends to shareholders when it is prudent to do so.”

Elsewhere in the FTSE 250 index, the rebuilding job at Aston Martin Lagonda (LSE:AML) appears to be making progress under the leadership of F1 motor racing financier Lawrence Stroll.

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The company today recorded a full-year loss of £466 million for 2020 but shares rose 139p to 2,140p after it hailed the successful launch of its first sport utility vehicle. As well as strong demand for the new DBX, the company has rebalanced supply to demand by cutting dealer inventories of certain models.

Stroll, who became executive chairman in April as part of a consortium's £688 million cash injection, said: “I am extremely pleased with the progress to date despite operating in these most challenging of times.”

This year he expects to see the first steps towards improved profitability, having previously announced plans to boost efficiency through the reduction of 300 roles. His medium-term aim by 2024-25 is for annual revenues of £2 billion and adjusted earnings of £500 million, based on vehicle sales to dealers of 10,000. This wholesale figure fell to 3,394 for revenues of £611.8 million in 2020, but is expected to recover to 6,000 this year.