Centrica Leads FTSE 100 Higher, Up 9% As Earnings Forecasts Upgraded

Energy giant Centrica has upgraded its profits forecasts for the full year and announced a £200 million-plus share buyback programme.

Shares in the British Gas owner were last trading 9% higher on Thursday, at 84.6p.

Centrica said that it has “continued to deliver strong operational performance from its balanced portfolio” and that it “now expects full year adjusted earnings per share to be towards the top end of the range of more recent sell side analyst expectations.”

The FTSE 100 business noted that brokers are expecting earnings of between 15.1p and 26p per share in 2022.

High Energy Prices

Centrica said that “volumes from our electricity generation and gas production activities have remained strong.” This division has benefitted from a surge in energy prices since Russia’s invasion of Ukraine earlier in 2022.

Meanwhile, Centrica said that its marketing and trading unit “continues to perform very well.”

Trading has been bumpier at the company’s British Gas retail division, however. It said that “broader inflationary and economic pressures have impacted both our cost base and customer numbers.”

With warmer weather in October also damaging volumes and profits, Centrica said that adjusted operating profits at British Gas would be lower than current predictions.

“Significant Uncertainties”

Centrica has also increased the amount of support it will give its 10 million customers as the cost-of-living crisis endures.

The business said it is “acutely aware of the difficult environment facing many people” and has set aside another £25 million to help households. This takes the total to £50 million.

Looking ahead, Centrica said that “there are significant uncertainties that remain over the remaining two months of the year” that could affect its performance.

These include “the impacts of weather, commodity price movements, asset performance and the potential consequences of a weak economy and high inflation on commercial performance in British Gas.” It added that bad debt in its energy supply activities provides further uncertainty.

Share Buyback Launched

Despite this, Centrica has announced plans to launch a share buyback programme worth up to 5% of its issued share capital. This figure equates to around £230 million.

Centrica said the decision reflects its “recent performance and outlook, together with the work undertaken in recent years to strengthen the balance sheet and ensure appropriate liquidity.”

The energy firm announced net cash of £316 million on the balance sheet as of June. A year earlier it recorded net debt of £93 million.

Windfall Tax Question Resurfaces

Analyst Sophie Lund-Yates of Hargreaves Lansdown noted that Centrica’s “resilient performances form its gas production and electricity generation arms” have been significantly aided by higher energy prices.

She added, too, that today’s strong results “will be used by some to argue that a windfall tax should be levied on energy companies.” The analyst noted that “any potential financial knocks brought about by new taxes would need to be carefully managed by Centrica, given what’s at stake for its customers.”

Lund-Yates noted that Centrica’s planned buyback will be the first since 2014.