Centrica PLC (LSE:CNA)'s reinstated dividend proved welcome news for shareholders after a three year hiatus, though consumers will be less enthused about the pay out given the prospect of further hikes to household bills.
The British Gas parent today announced it would pay a dividend for the first time since 2019 (having shelved payments during the pandemic) whilst announcing a 143% surge in underlying group earnings as a result of higher energy pricing. Looking to the rest of 2022, Centrica said its outlook for the full year "remains positive".
Money saving expert Martin Lewis made a public plea to ministers today to tackle rising energy prices, as ministers decried a profits bonanza among energy companies.
UK gas prices have risen 270% in the past year, according to the UK Natural Gas Futures benchmark price, and spiked this week after Russian state energy company Gazprom said it would cut supply to Germany through the Nord Stream 1 pipeline.
First-half earnings (adjusted EBITDA) totalled £1.66bn for the six months to the end of June, compared with £682mln in the first half of last year.
Statutory financials, meanwhile, showed an operating loss for the period due to the impact of derivative energy contracts caught up amidst sharply rising gas prices.
Investors weren’t entirely impressed despite the dividend news, which had been anticipated in some quarters, and at 88.38p Centrica shares were down 2.8% in Thursday afternoons deals.
Among the market’s lingering concerns are the uncertainties facing energy utilities ahead of this winter’s demand, how surging prices will impact longer-term contracts, and whether political outcry may again raise the issue of windfall taxation.
Victoria Scholar, Interactive Investor’s head of investment, highlighted that ‘commodity players’ like Centrica have been “the standout winners” because of the geopolitical turmoil which was a tailwind for the sector in an “otherwise challenging year for equities”.
“Shares in Centrica have rallied to highs not seen since January 2020 before the start of the pandemic as the stock continues to go from strength to strength,” Scholar said.
Centrica declared an interim dividend per share of 1p, saying it would reinstate its progressive dividend to shareholders and “retain our historic policy to pay roughly one third of the full year dividend as an interim”.
The energy supplier said it had “strong upstream volumes against a backdrop of higher commodity prices” during the first half of 2022 as it dealt with “increased commodity volatility”.
Centrica is investing more than £100mln in customer service, support and pricing in 2022 to help customers get through the energy crisis.
It reported strong exploration and production and nuclear volumes and said it improved net promoter scores, a measure of customer loyalty, in British Gas Energy and British Gas Services & Solutions.
The energy supplier also completed the sale of Spirit Energy Norway and the Statfjord field for US$1.1bn, reducing its decommissioning liabilities by £800mln.
Centrica said it improved its net cash position to £316mln at the end of June, up from a debt of £93mln a year earlier.
However, operationally it made an operating loss in the first half following remeasurements of derivative energy contracts and tax liabilities after the price of gas surged.
Centrica's statutory operating loss was almost £1.1bn for the period, compared to an operating profit of £1bn last year.
Its statutory loss includes a “£1.9bn loss on net remeasurements after taxation”, it said, adding that in one remeasurement it was lumbered with an increase in an onerous energy supply contract provision of nearly £1.87mln.
“We have a clear strategy to continue improving operational performance, to grow our business and to position ourselves to deliver net zero at a cost which helps the many, not the few. We are committed to investing in the energy transition which will improve the security of energy supply in our core markets,” said Chris O’Shea, group chief executive of Centrica.