TOP NEWS: Centrica Annual Loss Narrows Despite Rise In Impairments

(Alliance News) - Centrica PLC on Thursday declared no dividend for 2020 in response to the ...

Alliance News 25 February, 2021 | 10:12AM
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(Alliance News) - Centrica PLC on Thursday declared no dividend for 2020 in response to the Covid-19 pandemic, as the British Gas owner's loss for the year narrowed despite a decline in revenue.

Centrica's pretax loss from continuing operations narrowed to GBP577 million, from GBP1.03 billion the year before, on revenue that declined 5.7% year-on-year to GBP12.25 billion from GBP12.99 billion.

For 2020, the company booked GBP1.59 billion in exceptional costs, compared to GBP1.12 billion in 2019. The one-off expenses were mainly due to impairments totalling GBP1.32 billion, up from GBP919 million in 2019.

The impairments partly were for Upstream assets, mainly UK and Norwegian oil and gas fields due to a reduction in both near-term liquid prices and long-term price forecasts. This impairment amounted to GBP580 million.

There also was a GBP481 million impairment taken for Centrica's nuclear investment, as a result of a drop in price forecasts and lower output following generation issues at the Hunterston, Hinkley and Dungeness power stations.

Total operating costs including exceptional costs rose by 6.1% to GBP3.50 billion from GBP3.30 billion. Excluding the one-off expenses however, total costs declined 12% to GBP1.91 billion from GBP2.17 billion.

In addition, the loss from the remeasurement and settlement of derivative energy contracts narrowed to GBP632 million from GBP2.11 billion.

Meanwhile, Centrica's revenue decline was attributed to a weaker performance from retail arm British Gas, as energy customer numbers fell 2% to 6.92 million, and the Covid-19 pandemic led to some core sales channels being unavailable during the first half of the year.

There were also the decline in commodity prices achieved on Upstream, retail prices charged by British Gas, and lower demand for energy from business customers.

Centrics declared no dividend, interim or final for 2020. The company said that it intends to recommence dividends "when it is prudent to do so".

As at December 31, net debt was reduced 13% year-on-year to GBP2.77 billion from GBP3.18 billion, while the company's technical pension deficit stands at GBP1.9 billion on a roll-forward basis.

Centrica said it will exercise its call option to redeem the EUR750.0 million subordinated resettable fixed rate notes due 2076 on April 12, with the aim of simplifying its capital structure. Centrica has no plans to replace the notes by raising new hybrid capital, noting that following the sale of Direct Energy, the group has much lower net debt.

Looking ahead, Centrica provided no specific guidance for earnings or cash flow, citing significant uncertainties remaining in 2021. Although its nuclear divestment process remains paused, the group still intends to exit oil and gas production through the sale of its 69% interest in Spirit Energy E&P.

Shares in Centrica were down 4.6% at 51.06 pence on Thursday in London.

Also on Thursday, Centrica said it has accelerated its aim to become net zero on carbon emissions by 2045, five years ahead of its prior target and the UK deadline.

As part of this commitment, the group has brought forward its goal to electrify its 12,000-strong fleet of vehicles from 2030 to 2025.

"We have made a good start to the turnaround of Centrica, with the sale of Direct Energy now complete and our significant group restructure on track. However, our journey to transform has only just started, as we seek to restore shareholder value by improving customer experience, retention and employee engagement, while maintaining a strong balance sheet. It won't be easy, but I am confident we have the people, the brands and the market positions to deliver a successful turnaround in the coming years," said Chief Executive Chris O'Shea.

By Dayo Laniyan; dayolaniyan@alliancenews.com

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Centrica PLC 58.38 GBX -0.17

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