24th Feb 2022 22:08
(Alliance News) - British Gas parent Centrica PLC on Thursday said dividends are on the horizon, but commodity price volatility may mean shareholder returns are still a little way off.
The Windsor, Berkshire-based energy and services company reported pretax profit of GBP1.17 billion in 2021, swinging from GBP117 million loss a year before.
The British Gas-owner posted revenue of GBP14.74 billion, up 20% from GBP12.25 billion.
"Our strong balance sheet and responsible business model has allowed us to ensure continued supply for customers whose suppliers have ceased trading and offer additional help to those most vulnerable through the ongoing energy crisis. 2021 financial performance was resilient, and we continue to make good progress towards the turnaround of Centrica, having materially completed our portfolio simplification," Chief Executive Chris O'Shea said.
Centrica did not declare any dividends for the year, unchanged from the year before. But the company did say that it has a clear path towards the revival of dividends.
"We remain focused on delivering shareholder returns. Although no 2021 final dividend is being proposed, the balance sheet is in a much stronger position reflecting our divestments and our continued focus on free cash flow generation. With triennial pension negotiations due to conclude in the first half of 2022, we should soon be in a position to restart paying a dividend out of our adjusted earnings and free cash flow," Centrica said.
Centrica is currently in negotiations with pension trustees after hitting a net pension deficit of GBP601 million at the end of 2020. At December 31, 2021 the company was not in any pension deficit and said talks with the trustees are proceeding constructively with an agreement expected in the first half of this year.
Hargreaves Lansdown's Laura Hoy noted that Centrica stands in good stead after hedge positions cushioned it from the record energy prices which pummelled peers.
"The group took in over 600,000 customers whose suppliers went under - the cost of which should be recouped over the next few years as Ofgem approves higher price caps. Management's now calling for tougher regulatory scrutiny to prevent a repeat crisis. Regulators may need to step in sooner than later as the escalating crisis in Ukraine could push wholesale prices to new highs," said Hoy.
She added: "With the balance sheet looking much improved and free cash flow on the up, the group looks on track to stage a fully fledged recovery. However with uncertainty looming over future price volatility it could take some time before management is confident enough to loosen the purse strings."
By Lucy Heming; [email protected]
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