British Gas owner Centrica said its chief executive was stepping down today as it announced a dividend cut of nearly 60 per cent.
Chief executive Iain Conn will step down as chief executive and retire next year, the company said.
Centrica also said it would exit oil and gas production as it tries to refocus its business.
Centrica’s share price tumbled 10.3 per cent in early morning trading to 81.5p per share.
The company today posted a £446m operating loss for the six months to 30 June, down from a profit of £704m in the same period last year.
Adjusted revenue fell two per cent to £13.8bn and its adjusted gross margin fell 15 per cent to £1.9bn.
It cut its interim dividend from 3.6p in the first half of 2018 to 1.5p this year, a 58 per cent drop.
Why it’s interesting
Centrica blamed a tough environment in the first half for the poor results, singling out the UK’s energy price cap and increased pensions contributions.
The company said it still expects to meet its 2019 full year targets, including operating cash flow in the range of £1.8bn – £2bn and net debt in the range of £3bn – £3.5bn.
Centrica said it will exit oil and gas production, having previously said it would move away from nuclear generation.
The company said it plans to “focus on our distinctive strengths in energy supply and its optimisation, and on services and solutions centred around energy, with a major emphasis on helping our customers transition to a lower carbon future”.
It also plans to make cuts with a target of £1bn “annualised efficiencies” over 2019-2022, up £250m compared to the previous target.
It expects to spend £1.25bn on restructuring in order to deliver savings.
Centrica said it will cut its full year expected dividend to 5p per share.
It said it will use its proceeds from its oil and gas exploration and production and nuclear generation divestments to fund restructuring costs and underpin its balance sheet.
David Barclay, senior investment manager at Brewin Dolphin, called the results “grim” reading for investors.
“The City was prepared for a fairly grim set of results from Centrica and they’ve duly arrived. The dividend has been cut significantly and the chief executive has stepped down,” he said.
“The company has undoubtedly faced a number of challenges and has had to make some difficult decisions to adjust, which is commendable.
“Nevertheless, the hope will be that Centrica can emerge from this tough period a stronger, simpler, and more competitive business than it is now.”
What Centrica said
“Centrica faced an exceptionally challenging environment in the first half of 2019, which impacted earnings and cash flows. We have also regrettably had to make the decision to rebase the dividend due to our changed circumstances including the UK energy price cap and increased demands on our cash flows, including additional pension contributions.
“The outlook is more positive for the second half of the year and we expect this momentum to continue into 2020, while we expect to meet our cash flow and net debt targets for 2019.”
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