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Beaufort Securities Breakfast Alert - British Gas owner Centrica to cut 4,000 jobs after 'weak' year

Beaufort Securities Breakfast Alert - British Gas owner Centrica to cut 4,000 jobs after 'weak' year


The FTSE-100 finished yesterday's session 0.48% higher at 7,281.57, whilst the FTSE AIM All-Share index was up 0.25% at 1,043.57. In continental Europe, the CAC-40 finished 0.23% higher at 5,302.17 whilst the DAX was down 0.14% at 12,470.49.

Wall Street
Last night in New York, the Dow Jones fell 166.97 points, or 0.67%, to end the day at 24,797.78. The S&P 500 ended 14.93 points lower at 2,701.33 and NASDAQ shed 16.08 points at 7,218.23.

In Asia this morning,  the Nikkei 225 was 246.46 points lower at 21,724.35 heading into the close. The Hang Seng was also in negative territory, with the index down 0.82% at 31,172.71. Meanwhile, the Shanghai Stock Exchange remains closed as the Lunar New Year break continues in China.


At around 6:00am, WTI crude was 0.96% lower at $61.09 per barrel and Brent crude was down 0.72% at $64.95 per barrel.



British Gas owner Centrica to cut 4,000 jobs after 'weak' year
Centrica, which owns British Gas, is cutting 4,000 jobs as it continues to lose customers. The energy supplier, which has operations in North America and Ireland as well as its main UK market, said group profits fell 17% to £1.25bn. Chief executive Iain Conn said the firm had a "weak" second half of 2017, and it was not helped by political and regulatory intervention in the UK. British Gas shed 9% of its UK domestic customers in 2017.

Source: BBC News

Company news


BAE Systems (LON:BA) 601.40p – Buy
BAE Systems, this morning announced its results for the 12 months ended 30 December 2018 (‘FY17’). During the period, sales advanced by +3.2% to £19,626m, underlying EBITA rose by +6.8% to £2,034m (Constant Currency: +4%), and underlying EPS grew by +7.9% to 43.5p, against the comparative period (FY16). Operating business cash flow was at £1,752m (FY16: £1,004m) and net debt more than halved to £752m (FY16: £1,542m). Order intake during the period amounted to £20,257m against £22,443m a year ago, while order backlog was at £41.2bn compared to £42bn in FY16 (unchanged on a constant currency basis). The company’s net pension deficit reduced by £2.2bn to £3.9bn. The company declared a final dividend of 13p, taking full year dividend to 21.8p, up +2.3%, to be paid on 1 June 2018.

Our view: Solid results from BAE. Though sales came marginally short, underlying EBITA was higher than expected and EPS came at the higher end of the 5-10% guidance (consensus: 42.6p). Net debt was more than halved to £752m, came significantly ahead of the “small reduction” guidance and consensus estimate. Looking ahead, in FY18, BAE Systems expects underlying EPS to be 42.1p, in line with FY17 (43.5p to 42.1p reflecting the impact of IFRS 15 adoption and assuming a US$1.40 to sterling exchange rate). Though this was below the consensus estimate, we believe there remain good upside given “improving outlook” for defence budgets in a number of BAE’s markets. The shares are valued at FY18E and FY19E P/E multiples of 13.6x and 12.7x with a dividend yield of 3.8% and 3.9%, respectively. It is not expensive comparing to UK sector average P/E of 15.6x and dividend yield of 2.6%. With a solid order backlog amid ongoing terrorism, cyber-security and geopolitical threats, at a time when global economic trend is encouraging with higher oil prices, we believe BAE remain well placed to maintain positive momentum. We reiterate our Buy rating on the shares with a 685p target price.


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