Investors will be eager to dissect Centrica PLC (LSE:CNA)’s shareholder returns policy when the British Gas owner publishes an interim trading update next week.
Centrica has been walking a tightrope between committing to investor returns and diverting cash flow to value-enhancing energy projects.
UBS predicts another £250 million top-up to its share buyback programme when the utility company reports on 25 July. Whether that keeps the wolves at bay is another story.
In February, Citigroup researchers suggested that the energy giant’s share price weakness at the time stemmed “from an investor meeting feedback referencing Centrica not wanting the entire equity story to be around share buybacks”.
Centrica boss Chris O’Shea acknowledged the company needed to keep hold of "quite a bit" of cash to deal with energy market volatility.
Next week’s interim results follow a June trading update confirming that current-year has been in line with analyst expectations despite a return to a "more normalised" market backdrop, as gas prices staged a retreat from the highs following the Ukraine invasion.
Centrica has not budged from its full-year earnings guidance of 18.3p per share and UBS analysts do not expect that to change.
“We believe it is too early for the company to materially raise full-year EPS guidance,” they said.
Analysts stated that Centrica’s profitability is “hugely exposed” to domestic volumes, energy volatility, LNG diversion spreads and nuclear output.