Shares in Centrica PLC (LSE:CNA) fall almost 3% to 129.7p today and are down 10% since its results last week, which is apparently down to management at the British Gas owner telling institutional investors that share buybacks were not its only attraction.
"As we understand, the weakness stems from an investor meeting feedback referencing Centrica not wanting the entire equity story to be around share-buybacks," explained Citigroup in a note.
Last year the group returned £800 million to shareholders through dividends and a share buyback programme that remains ongoing.
Centrica chief executive Chris O'Shea made it "crystal clear" on the results call that the plan is to invest in value-creative projects or return the cash.
On the call, when asked about buybacks O'Shea said it is "very, very important for us to demonstrate to shareholders that we understand that we manage their money, and we manage it to get a return. I would say, give us time. Let us get to the end of the current share buyback programme. Let us progress the very exciting investment opportunities that we’ve got."
He said the company also needed to keep a hold of some "quite a bit" of cash to deal with volatility in the markets and "we are super focused on returns and the returns compensating for the risks. If we don’t have projects that give us the right returns, we will not invest that money."
Citi said the share price reaction is "effectively implying value destruction on new investments (holding cash itself cannot destroy value), which seems harsh, especially given O'Shea's track record".
Analysts at the bank said they believe investments in major infrastructure projects such as nuclear, hydrogen or carbon capture are "all potentials for later this decade" but in the meantime, Centrica is generating cash, which Citi expects to top £3 billion by the end of the financial year.
With the shares down to six-month lows, 'buy' remains the Citi rating.