Shares in Centrica (CNA) slid 8% to 180p after the British Gas owner halted its buyback programme. The firm made the announcement alongside lacklustre FY25 results which saw operating profits halve.
| Share price: 180p (-8%) | PE: 16.1x |
| Market Cap £8.8bn | Yield: 3.0% |
From profit to loss
Following £800 million of buybacks last year, Centrica said it was pausing repurchases to reflect ‘the quality of investment opportunities’. The firm is part-way through its ‘transformation programme’ and clearly needs to conserve cash for future profitability.
The news was accompanied by a 40% drop in FY adjusted EBITDA and a 50% drop in adjusted operating profit. The firm insisted its earnings were ‘resilient against a challenging market backdrop’.
Breaking down the numbers, income was lower across Home Energy Supply, Gas and Power Trading and Infrastructure. The firm also took a £700 million loss on derivative energy contracts and exceptionals against a £200 million profit previously.
There were an additional £500 million of impairments for late-life gas assets and its investment in nuclear assets excluding Sizewell C. Therefore, on a statutory basis, earnings per share were a loss of 1.5p versus a profit of 25.7p previously.
The only positive news was adjusted basic earnings per share fell less, from 19p to 11p. That enabled the firm to increase the FY25 dividend by 22% to 5.5p per share.
All of a sudden, more firms are finding they can’t afford to buy back their own shares. Energy companies are at the top of the list, with Centrica joining BP (BP.) and TotalEnergies.
Buybacks have been seen as a cure-all, and announcing one usually prompts a bounce in a company’s stock price. The flip side is investors now expect them as a matter of course and will punish firms which push back.
Putting that to one side for a moment, investors are getting a 22% hike in the dividend. That still only takes the yield to 3%, which isn’t much compensation for the lack of growth in our view.
Read the press release here: https://www.centrica.com/investors/
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