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Centrica posts big loss after oil and gas write-offs

The new year will see lower adjusted operating cash flow and higher net debt due to low commodity prices

Centrica PLC - Centrica to suffer low commodity prices until it offloads exploration & production division

Centrica PLC (LON:CNA) plunged into the red as write-offs in its oil and gas business overshadowed a second-half upturn in its customer-facing operations.

“Significant” falls in commodity prices are also set to hit the upstream division this year, pushing adjusted operating cash flow down to £1.6bn-£1.8bn.

READ: UBS warms to Centrica, upgrades to ‘buy’ as it predicts 25% upside in the shares

The impact on earnings will be “much less material”, the FTSE 100-listed firm said, but net debt will now be higher than 2019 at between £3.2bn-£3.6bn.

The owner of British Gas is planning to exit both exploration & production (E&P) and nuclear activities, which will allow it to become a customer-focused company.

According to UBS, the company may not start to pick up until it completes these sales.

"Centrica's outlook suggests that in 2020, growth in the customer facing business and contraction in the asset businesses could offset each other, implying limited room for earnings growth in 2020 and downside to consensus," analysts said in a note.

In the year to 31 December, net debt rose 20% to £3.1bn, while adjusted operating cash flow tanked 18% to £1.8bn.

Centrica posted al loss of £1.1bn on revenue down 2% to £26.8bn after impairment charges of £1.76bn.

These included a £476mln impairment on E&P assets and a £372mln impairment on its 20% stake in nuclear power plants planned to be offloaded by the end of the year.

It was not helped by the loss of 286,000 energy accounts as it is pressured by growing competition from new entrants luring customers with flexible offers and a digital-driven service.

The company took action by sacking 12% of the staff, with headcount standing at 26,900 as of 31 December.

On Wednesday, Centrica announced chairman Charles Berry was leaving temporarily due to an "unanticipated medical condition" and would be replaced by non-executive director Scott Wheway.

The news comes amid the search for a new chief executive, as Ian Conn announced his departure last summer.

Shares tanked 16% to 71.42p on Thursday morning.

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Quick facts: Centrica PLC

Price: 32.38 GBX

Market: LSE
Market Cap: £1.89 billion


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