Standard content for Members only
To continue reading this article, please login to your Utility Week account, Start 14 day trial or Become a member.
If your organisation already has a corporate membership and you haven’t activated it simply follow the register link below. Check here.
Centrica shares have taken a hit since the vertically integrated energy giant signalled a billion pound strategy shift, despite analyst views that its planned refocus is a step in the right direction.
The share price plummeted 6 per cent from early Thursday morning when the company announced it would reallocate around £1.5 billion in investment from its struggling upstream arm to drive forward growth in its more profitable downstream supply and services business.
The lack of market confidence comes despite a consensus analyst view that the measures form a viable strategy in managing the pressures of a changing utilities landscape.
The share price tumbled from around 279 pence Thursday morning to 266.70p by the end of the day. And on Friday morning the share price opened at even lower levels of 265p and slumped further still to 263p by 08.00, around 6 per cent lower than seen just 24 hours before.
The price moves stand in contrast to the analyst reaction to the news, with Jefferies welcoming the announcement as a “considerable step forward” and Whitman Howard saying the strategy represents a “move in the right direction”.
Jefferies analyst Peter Atherton told Utility Week that it would take some time for the market to digest the news, but added: “When you look at the strategy shift it does bring home the challenges which are faced by energy companies and the new reality they operate in.”
Centrica has already slashed its interim dividend by 30 per cent this year amid historic lows on the global price of oil which helped to crush profits in the Centrica Energy business from £465 million in the first half of last year to £48 million over the same period in 2015.
The company has also made headlines after revealing it would need to slash 6,000 jobs in order to achieve net cost efficiency savings of £300 million by the end of the decade.
Chief executive Ian Conn said the new strategy will provide a “clear direction” for the business to refocus on its core downstream activities.
Please login or Register to leave a comment.