A second heavyweight broker has predicted British Gas owner Centrica will risk a PR furore with its first-half results by announcing bumper profits and a first dividend in three years.
At a time when its residential customers will be facing an increase in their energy bills to around £3,000 a year, Credit Suisse expects Centrica to announce its highest earnings for half a decade and a dividend that might rise to 3.5p per share for the year.
Credit Suisse adds that for the first time in eight years Centrica will not be constrained by its balance sheet due to higher gas and power prices.
Centrica tipped to resume dividends as household energy bills soar
“We estimate Centrica can fund £1bn working capital, pay the full £1.56bn pension deficit and remain below 1.0xND: EBITDA [debt ratio] without high energy prices.
“We anticipate the company will undertake an on-market debt buyback to lower the interest charge.”
One risk is that the UK government’s review of the electricity market might limit the rise in power prices, but even with this possibility Credit Suisse still rates the shares as 'outperform' with a target price of 96p.