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British Gas owner Centrica weak as it cancels dividend as coronavirus pandemic hits gas demand

Chris O'Shea, Centrica's interim group chief executive, praised the efforts of the utility's workforce during the crisis

Centrica PLC -

Centrica PLC (LON:CNA) shares fell on Thursday as the owner of British Gas cut its dividend and unveiled £400mln in spending cuts to offset the impact of the coronavirus downturn.

Management bonuses have also been withdrawn, while the sale of Spirit Energy has been put on hold, the FTSE 100-listed group said in a statement

Gas demand from businesses has fallen sharply as businesses temporarily shut down though there has been a modest pick-in residential usage, Centrica noted, however, there has also been a rise in bad debts as people and businesses struggle to pay bills.

In its upstream business, which comprises Exploration & Production (E&P) and nuclear, Centrica is cutting more costs and running the business purely on a cash break-even basis. Capital expenditure in 2020 including E&P is now expected to be around £600mln compared to around £800mln.

Meanwhile cancelling the final dividend of 3.5p will save an additional £204mln, the group said. At end-March, Centrica had cash facilities of £0.6bn and £2.7bn of undrawn credit facilities.

Chris O'Shea, Centrica's interim group chief executive, praised the efforts of its workforce during the current crisis and said several hundred engineers had volunteered to continue to service homes where there was a higher risk of coronavirus.

 "As the scale and length of the crisis unfolds, it is becoming increasingly clear what a vital role so many of the Centrica team perform to keep our communities warm, safe and supplied with energy," he said.

In a note to clients, analysts at RBC Capital said: "The actions being taken by CNA are unlikely to be overly surprising to investors and we note the share price is down ~60% YTD (to record lows) versus the sector down ~20%.

"However, even after announcing these corrective measures and trying to provide some visibility to the market we struggle to see redeeming features in the CNA investment case. The level of uncertainty around future cashflows, earnings and dividends is among the highest in the sector and we would not be tempted to call the bottom."

RBC maintained a 'sector perform' rating on the stock and a price taget of 85p.

Centrica shares were 7.9% lower at 34.19p.

 -- Adds analyst comment, share price --

Quick facts: Centrica PLC

Price: 46.96 GBX

Market: LSE
Market Cap: £27.44 m

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