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Centrica Shares Soar as Stability Returns to UK Energy Market

  • Centrica's retail supply business is set to hit its profit target two years ahead of schedule.
  • The company's other divisions, including British Gas services and solutions, are also expected to report growth.
  • Centrica expects to report adjusted earnings per share in line with consensus analyst expectations
UK

Centrica said today its plan to get the retail supply business back to a “sustainable” level of profit is two years ahead of schedule.

The update will come as a relief for the company’s investors after years of instability in the UK energy supply and distribution market.

The FTSE 100 company, which owns British Gas, the largest retail energy supplier in the UK, made the announcement this morning ahead of its annual general meeting.

In a short update published to the market, the group said its retail supply and optimisation businesses would hit its “medium-term sustainable adjusted operating profit” target this year, two years ahead of schedule.

The group’s projected operating profit range for British Gas Residential is £150m to £250m.

Centrica’s other divisions are also expected to report growth, with British Gas services and solutions expected to deliver an improved financial result compared with last year. The group has forecast an operating profit range of £100m to £200m for the division.

The FTSE 100 group’s production business, Centrica Energy, Irish business, Bord Gáis and Business Energy Supply units are expected to report an operating profit for the year of £250m to £350m for Centria Energy and £100m to £200m for Bord and Business Energy Supply.

Overall, Centrica said it expected to report adjusted earnings per share in line with consensus analyst expectations. The 14 analysts covering the energy giant have pencilled in a mean consensus of 18.3p per share for 2024.

Centria reported adjusted earnings per share of 32.3p in 2023 as the company reaped the benefits of high energy prices. It also triggered a bumper £8m pay award for the company’s chief, Chris O’Shea.

This year, the group is set to return to a more normalised operating environment, which will be welcomed by investors.

Despite the company’s windfall profit in 2023, the prior years saw the group report a very mixed performance, with losses reported in 2019, 2020, and 2022. Earnings per share totalled 3.3p in 2018 and 10p in 2021, the only two years in the past six in which the group has reported a profit.

After it cut the dividend in 2020, the payout returned in 2021, and analysts have forecast a distribution of 4.8p per share this year, up 80 percent from 2024’s payout.

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