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Centrica share chat (cna)

Discussion in 'General Share Chat' started by Apache Reign, May 10, 2015.

  1. Apache Reign

    Apache Reign Member

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    Hi all
    I am interested in cna does anyone have any views on the company

    Thanks
     
  2. coolebenji

    coolebenji ..in the Real World we compete with the Best...

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    235p holds support and will be the test for this share, recent rise was only to the down trend.. GL



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  3. TupacAmaru

    TupacAmaru Co-Founder of BlueShare Staff Member Moderator

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    HL COMMENT (27 APRIL 2015)
    In a brief first quarter trading update Centrica said it is performing in line with the guidance provided at the time of its 2014 full year results in February, with improved year-on-year profitability downstream expected to be more than offset by the impact of lower commodity prices on the upstream business. In the year to date, the group said it has:
    • Experienced colder than normal weather in both the UK and North America, resulting in higher than expected energy consumption in British Gas and Direct Energy.
    • Progressed capital expenditure and cost reduction programmes in Exploration and Production (E&P) against a continued low commodity price backdrop.
    • Made good progress in strengthening its balance sheet and financial metrics, through the issue of £1 billion equivalent of hybrid securities and the sale of Lincs wind farm debt; consistent with the group's target to maintain a strong investment grade credit rating.
    • Launched a group-wide strategic review, the outcome of which will be presented at the time of the Interim Results in July 2015.

    The shares were little changed in response to the announcement.

    Divisional performance:

    British Gas - residential gas consumption was 10% higher and electricity consumption was 2% higher in the first three months of 2015, reflecting colder than normal temperatures in the UK compared to a warm 2014. The number of residential energy accounts on supply is broadly unchanged at around 14.8 million since the start of the year.

    Direct Energy - Centrica's US gas supply business remains on track to deliver material operating profit growth in 2015 relative to a weak result in the prior year. Total Direct Energy gas consumption was 1% higher as, like in 2014, the group experienced much colder than normal weather in the first quarter. However, Centrica did not see a repeat of the additional costs incurred last year. The number of residential energy accounts decreased by 62,000 to just under 3.2 million.

    Centrica Energy
    - Centrica's upstream gas and power businesses both continue to be impacted by the low commodity price environment. In E&P, the group remains on track to meet its target of a 25% reduction in capital expenditure to around £800 million in 2015, and a 40% reduction to around £650 million in 2016. Overall E&P production was in line with the group's forecasts in the first quarter, and Centrica continues to expect full year output of around 75 million barrels of oil equivalent (mmboe), versus 79.5mmboe in 2014.

    Our view:
    After a very disappointing 2014 and the announcement of a 30% cut to the dividend, at least today hasn't brought any more bad news for Centrica's shareholders. In truth though, today's trading update doesn't tell us much and investors will have to wait for the outcome of the Strategic Review on 30 July 2015 to see where the company goes from here.

    The Strategic Review will look at the group's financial framework, and Centrica stress the need to maintain investment grade credit ratings. Centrica has recently raised around a billion Euros of hybrid capital and sold windfarm assets to strengthen its balance sheet. We should learn in July if further capital raising measures are required. There are many moving parts within Centrica; it is a very complex business spanning everything from oil exploration and production through nuclear power generation and domestic boiler repairs, alongside the core supply of energy to retail customers.

    Centrica, and other large energy suppliers, have suffered from having bought supplies of gas and electricity before the price fell sharply at the end of last year. Smaller rivals, especially "green" energy providers that do not have to contribute toward environmental energy policy costs, have been able to undercut their bigger brethren with cheaper energy, bought in the wholesale markets after the price fell.

    In the Upstream businesses, where Centrica is acting as an oil & gas producer, or generating electricity in Nuclear or gas-fired power stations, lower wholesale energy prices are cutting profits. The group also faces lower revenues from storing gas due to mechanical problems at its Rough storage facility underneath the North Sea.

    So Centrica is between the devil and the deep blue. It isn't the most competitive supplier for customers, the shareholders are losing out and the politicians are still up in arms. The Competition & Markets Authority will make some recommendations about the energy markets; they have to be seen to do something. This creates additional uncertainty, but we doubt it will change much.

    It is quite hard to see what investors can look forward to; Centrica's markets are quite mature and increasingly transparent. If more of Centrica's customers start to switch energy supplier in response to publicity about the cheaper prices available outside of the Big 6, that won't help margins, already very low. It looks to us as if energy suppliers make very little indeed from customers who switch, depending on the stay-puts for their profit. Regulators would like to see us all shopping around and are shouting out loud about the savings we could all make, if we left one of the big 6 and went to one of the minnows in the market.

    After the recent dividend cut the shares offer a yield in the region of 4.7% (variable and not guaranteed), but it is not clear at what level future year dividend payments are likely to be set, particularly given that the strategic view hasn't yet been concluded. The shares trade on a price to earnings ratio (P/E) of around 14.3x, which is a discount to the wider market but above the company's long run average. Holding onto Centrica at the moment is something of an act of faith in the company's ability to strategise itself out of what looks like an uncomfortable and exposed position.
     
  4. TupacAmaru

    TupacAmaru Co-Founder of BlueShare Staff Member Moderator

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    The market had been pricing in the risk that Labour could come into power and tackle the big energy companies by capping prices, and hence reacted very positively to Friday's General Election results. There are still risks to CNA of sustained lower gas prices (particularly due to US shale gas exports) but I believe CNA are looking to build their presence in LNG which could be a major part of their strategic review (in my opinion).
     
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  5. Apache Reign

    Apache Reign Member

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    Thank you coolbengi and Tupac for your prompt reply.
    The charts do show a distinct downtrend.
    I will keep looking for value.
     
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  9. danscomp

    danscomp Member

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    A small investment here as part of my diversification post capital return. See what happens.
     
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  17. Walter @ WalbrockResearch

    Walter @ WalbrockResearch Member

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    Why hasn’t Centrica’s share price moved, despite raising electricity prices by 12.5% (it owned British Gas) for the first time since 2013? http://bit.ly/2v8BGEw

    The reason is the British Pound has fallen 20% against USD in 2016/17. This limit profit growth!

    On a more serious note, Centrica’s share price saw no improvement since 2001! WHY?
    One reason is ROCE has been declining.
    To find out why ROCE has been falling and three more reasons why Centrica is struggling, then click http://bit.ly/2wIiKMp
     

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