Charles Stanley reaffims 'hold' on Centrica
On Monday, British investment management firm Charles Stanley reaffirmed its ‘hold’ status for Centrica shares.
The energy provider reported first half figures in line with lowered expectations reflecting the challenges facing the company on both sides of the Atlantic, Charles Stanley wrote in a note to investors. Sales were up 15% year-on-year, while operating profit and earnings per share dropped 35% and 29%, respectively, while dividend per share rose 4%.
Warm weather in the UK, the polar vortex in North America, low seasonal gas storage spreads and a £40m write-off of an offshore wind investment impacted performance across all divisions, though Centrica continues to guide for a return to earnings growth in 2015, helped by a reversal of this year’s negative one-offs.
The energy group is pulling on several levers to maintain balance sheet strength including non-core asset disposals, a scrip dividend alternative to its final 2014 pay-out and ruling out a share buy-back programme for next year. The UK's first capacity market auction come December should be positive for the firm's generation business, allowing it to de-risk future revenues - albeit with only one year of visibility - the broker adds.
“New chief executive Iain Conn starts in January and we expect some clarification on strategy going forward. Centrica’s share price has been weak, but given ongoing uncertainties, our recommendation is ‘hold’,” Charles Stanley said.
Centrica closed down 1.02% to 292.50p on Monday.