Boss of British Gas owner Centrica in line of fire as shares sink to a 16-year low on fears dividend will be cut
Shares in the owner of British Gas crashed to a 16-year low on fears that its dividend will be cut.
On a miserable day for 530,000 ordinary savers with Centrica shares, the stock dived 11.7 per cent, or 16.05p, to 121.15p, a level not seen since early 2003.
The sell-off was triggered by a warning that its profits and cash flow will be lower than anticipated this year, raising concerns over future dividend payments.
On a miserable day for 530,000 ordinary savers with Centrica shares, the stock dived 11.7 per cent, or 16.05p, to 121.15p, a level not seen since early 2003
Although the energy giant reported a 12 per cent rise in profits to £1.4billion and 6 per cent rise in revenues to £29.7billion for 2018, it said the energy price cap introduced by regulators will dent its fortunes in 2019, piling pressure on under-fire chief executive Iain Conn.
Analysts warned that the dividend – which was held at 12p a share in 2018 – is under threat.
Ian Forrest, investment research analyst at The Share Centre, said there is now ‘a big question mark over this year’s dividend payments, and possibly those in future years as well’.
Around 5 per cent of Centrica shares are held by retail investors, an unusually high amount for a FTSE 100 company.
It is a hangover from British Gas’s privatisation in 1986 under Margaret Thatcher when an estimated 1.5m individual investors bought stock after the ‘Tell Sid’ advertising campaign which encouraged everyday Brits to put their money into the firm.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: ‘All the ‘Sids’ out there who still hold Centrica shares won’t be best pleased with the performance in the last few years, and with the dividend under pressure there could be further bad news in the pipeline.’
Shares have fallen by around 70 per cent since peaking at over 400p six years ago, when talk of an energy price cap was first raised by then Labour leader Ed Miliband. They are down 57 per cent since Conn took over at the start of 2015.
Michael Hewson, chief market analyst at derivatives dealer CMC Markets, said: ‘If Iain Conn has a long term plan for Centrica it’s difficult to imagine how much worse it could have gone if the share price direction has been any guide since he took over.’
Asked about the slump in shares on his watch, Conn said: ‘I don’t think it’s my job to tell retail shareholders what to think.
‘We’ve been very clear about the company’s strategy and what we’re facing and what we’re doing about it.
‘Centrica still offers a healthy dividend, we’ll have to see if that remains.’ Conn added that ‘revenues were up last year, profit was up last year’.
He said: ‘We’re facing a very complex set of circumstances. It’s only right to tell our shareholders what the outlook is. I’m a very straight-up person.’
Investors were left jittery after the firm revealed it lost another 742,000 customers in 2018 and that the energy price cap introduced by regulator Ofgem in January will cost it £300million this year.
The company lowered the outlook for its cash flow in 2019 and said this could hit profits by £100million.
It will also cut as many as 600 more jobs than expected this year, it estimates, as it strives to make another £250million of savings.
The total number of jobs cut over the last four years stands at around 10,000.