British Gas owner Centrica has announced a "disappointing" performance in today's trading update, as it said that 823,000 household customers had left the firm since the end of June.
Shares slumped more than 16 per cent in early trading on the news, with AJ Bell investment director Russ Mould saying if shares stay at that level, Centrica will be "the ninth current FTSE 100 member firm to suffer a 10 per cent drop or more in a single trading day this year".
The utility firm said full-year earnings per share are expected to be lower than market consensus at around 12.5p, due to lower than expected profit across its North American and UK businesses.
Centrica said the full year dividend per share was underpinned, as the firm's net debt was expected to be within its £2.5bn-£3bn range and adjusted operating cash flow for the year will top £2bn.
It added that for some time, while Centrica looks to grow new sources of gross margin, the company "would be willing to operate with dividend cover from earnings below historic levels".
Centrica's North America and UK businesses have been under pressure from competitive market conditions and low price volatility. The energy supplier is expected to report full year adjusted operating profit of around £80m in its North America unit, and will take a one-off non-cash post-tax charge of £46m relating to "a reassessment of the historic recognition of unbilled power revenues".
It said its UK business will be "broadly break-even" for 2017 though it is facing tough competitive pressures.
Why it's interesting
Earlier this week, Centrica unveiled a package of measures it says will help improve the energy market, including scrapping its criticised standard variable tariff (SVT) for new customers from April. It has around five million customers on these tariffs, and said it was keen to move all of its customers away from the SVT.
The move to ditch the tariff comes amid efforts to fend off the government's plans for price caps. In October, Theresa May said she would implement controls to end "rip-off energy prices".
What the company said
Iain Conn, Centrica group chief executive, said:
Although some aspects of our delivery in the second half of 2017 have been disappointing, I remain encouraged by our progress in implementing our strategy.
The balance sheet has been materially strengthened, and we continue to focus on improving our underlying performance. We have also provided a broad and definitive set of proposals this week to improve the UK energy market for customers and look forward to engaging with the government and regulator in the coming weeks.
What analysts said
Lee Wild, head of equity strategy at Interactive Investor, said: "Centrica is already in a dark place given the exodus of customers from its British Gas business, and the market did not want to hear about a further deterioration both here and in North America. Despite attempts to reassure that the generous dividend is safe, the risk of a cut remains very real as the government continues a crackdown on expensive energy bills."
Russ Mould, AJ Bell investment director, said: "If the shares stay down at those levels the owner of British Gas will become the ninth current FTSE 100 member firm to have suffered a drop of 10 per cent or more in a single trading day this year. There were two more instances this year in June and August, although Provident Financial has since dropped out of the index."
The 10 FTSE 100 firms that have suffered 10 per cent drops in a single trading day this year
|4 January 2017||14.4 per cent||Next|
|18 January 2017||29.1 per cent||Pearson|
|24 January 2017||20.8 per cent||BT|
|27 July 2017||15.4 per cent||AstraZeneca|
|23 August 2017||10.9 per cent||WPP|
|16 October 2017||26.6 per cent||Convatec|
|17 October 2017||15.9 per cent||Merlin Entertainment|
|9 November 2017||10 per cent||Burberry|
|23 November 2017||16.6 per cent (as of 8.30am)||Centrica|