British Gas-owner Centrica PLC (LON:CNA) saw its shares knocked this morning by a negative note from Credit Suisse, with the broker cutting its rating on the stock to ‘neutral’ from ‘outperform’.
In a note to clients, analysts at the Swiss bank pointed out that in its 2016 results, released on February 23, Centrica reported around a £1.1bn accounting pension deficit and indicated that after 2½ years of asset sales and debt reduction, there would be “another year of de-levering”.
They said: ”We view this as negative for equity.”
As a result, the analysts reduced their earnings per share estimates for Centrica by around 10% for 2017 and 2018, leading to a cut in the target price for the stock to 230p from 255p and the downgrade in rating.
They noted: “Unlike at other UK Utilities, Centrica cannot recover deficit repair payments made to their pension funds through regulated consumer bills.
“We forecast payments of c£113m p.a. until 2033 (c5% of operating cash flows), reducing debt capacity and cash available for distribution to equity shareholders.”
In early morning trading, Centrica shares on the FTSE 100 index were down 1.7%, or 3.8p at 222.3p.