British Gas owner Centrica kills dividend and delays Spirit Energy sale
British Gas owner Centrica has abandoned 2020 guidance as it cancelled its 2019 dividend today and warned it would take at least a £100m hit from coronavirus.
Centrica’s shares dived 7.3 per cent to a record low in early trading as it warned the fallout of an oil price war and the coronavirus lockdown would lead to an unpredictable hit to profit in 2020.
The firm cancelled its 3.5p per share final dividend payout for last year, and slashed 2020 spending plans by £400m to tackle the coronavirus fallout. It will also not pay any management bonuses for 2019 as the coronavirus crisis causes shockwaves through the energy sector.
A collapse in oil prices driven by the Covid-19 crisis will lead to a £100m hit on Centrica’s oil exploration business in 2020, it said.
And the coronavirus lockdown will dampen British Gas revenues as engineers only attend the most urgent callouts.
While people may spend more on energy bills while working from home, Centrica also expects an increase in “bad debt” from customers unable to pay their bills.
Offices shut down during the coronavirus lockdown will also counter the rise in home energy usage.
“Although we are starting to see increased energy demand from residential customers as more people work from home, we are seeing a more significant reduction in demand from business customers as sites temporarily close,” Centrica said.
“We also expect to see an increase in working capital outflows and customer bad debt, as certain customer segments defer payments due to the reduction of household incomes and business revenues.”
The firm said it was too hard to calculate the hit to 2020 profits, with little visibility on how long the coronavirus lockdown will last. The possibility of a UK recession and hopes for further government financial support could also affect its outlook.
Chris O’Shea, interim chief executive, said: “While there are so many uncertainties surrounding the impacts of this situation, I am confident that we have acted promptly and prudently to underpin the long term strength of Centrica.”
Coronavirus delays Centrica’s Spirit Energy sale
Centrica has also delayed a sale process for Spirit Energy, which it had expected initial bids for in March, with a sale by the end of the year.
It had taken a £1.1bn charge for Spirit Energy and nuclear assets just two months ago, but it must now keep them on the books for the time being.
“We have taken the decision to pause the process until financial and commodity markets have settled,” Centrica said. “We continue to pursue the divestment of both assets and our intention remains to exit oil and gas production and nuclear power generation in line with our strategic shift towards the customer.”