19th Feb 2015 13:15
LONDON (Alliance News) - Centrica PLC shares lead FTSE 100 losers Thursday, after after the British Gas owner reduced its dividend for the full year after swinging to a loss in 2014 on the back of a significant impairment charge, and issued a profit warning for 2015 due to the fall in wholesale oil and gas prices.
Centrica shares were down 8.5% to 257.10 pence per share on Thursday midday.
For the year ended December 31, Centrica reported earnings before interest and tax of GBP1.74 billion, down 35% from GBP2.69 billion, driven by a fall in profit across all of its divisions, leading to adjusted earnings of GBP962 million, down by 30% from GBP1.37 billion in 2013, representing adjusted earnings per share of 19.2 pence from 26.6 pence a year earlier.
Centrica reported post tax impairments of GBP1.38 billion on exploration, production and power assets to reflect the fall in oil and gas prices during the second-half of 2014, it said.
The impairments included GBP371 million to the Langage and Humber power stations, GBP164 million on its other UK gas fired power stations and GBP214 million on its nuclear investment, it said.
The impairments led to Centrica reporting a GBP1.01 statutory loss attributable to shareholders for 2014, swinging from the GBP950 million profit reported in 2013.
"The change compared to 2013 is due to lower profit from business performance, a net loss from certain re-measurements...and higher net exceptional charges," said Centrica.
As a result of the swing to a loss, Centrica decided to reduce its full year dividend for 2014, to 13.5 pence per share, which is down 21% from the 17.0 pence per share paid in 2013.
"We have also taken the very difficult decision to rebase the dividend from the 2014 final payment," the company said in a statement.
Revenue for the year increased by 11% to GBP29.4 billion from GBP26.6 billion a year earlier. British Gas revenue fell by 9% year on year, offset by a 62% increase in revenue from Centrica's direct energy unit.
Centrica said that further reductions in wholesale oil and gas prices in December will mean that the company "needs to plan on the basis that lower wholesale prices will persist for all of 2015 and potentially through 2016 and into 2017," which means cashflow from its energy business will be impacted.
"During this time we expect the exploration and production supply chain costs to respond to the lower price environment. Until that time, the group?s cash flows from Centrica Energy will be materially impacted," said Centrica.
"Despite these actions, with 2014 adjusted earnings per share of 19.2 pence, and with 2015 adjusted earnings per share having been negatively impacted by around 2.5 pence since the interim management statement in November and therefore expected to be down compared to 2014," it added.
Centrica spent GBP950 million in capital expenditure on exploration and production during the year, and said it is "taking positive action to improve earnings and cash flows in 2015 and 2016", in response to the low commodity price backdrop. The company has reduced its capital expenditure budget for exploration and production in 2015 to fall to GBP800 million in 2015, and to GBP650 million in 2016.
"We will also maintain a tight control on production costs, examining all internal and external supply costs for our operated fields and working with our partners to reduce costs where we are not the operator," said Centrica.
The company is hoping the reduction in capital expenditure and tight control over costs will lead to a 10%, or GBP100 million, fall in the company's lifting and other production costs in 2015 compared to 2014, it said in its statement.
By Joshua Warner; [email protected]; @JoshAlliance
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