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British Gas Owner Centrica Plc Issues Profit Warning

Shares in Centrica (LSE: CNA) (NASDAQOTH: CPYYY.US) fell by 4% in early trade this morning, following a rather cautious interim management statement.

Citing “unprecedented times for the energy sector in the UK, with intense public and political debate over rising bills”, the owner of British Gas announced that full-year profits were now expected to come in significantly lower than the previous year, although  adjusted earnings per share for 2013 are anticipated at similar levels to 2012.

It’s not only consumers who have been hit by the rising costs stemming from the likes of higher wholesale commodity prices: investors may suffer, too, as CEO Sam Laidlaw had previously indicated that Centrica might increase shareholder payouts, but with 111 million shares (for £412m) now purchased as  part of its £500m share buyback programme, analysts believe that the pressure exerted on the industry by political figures is likely to restrict any further such schemes in 2014.

It was widely reported in the news that British Gas (Residential) was increasing domestic gas and electricity tariffs by 8.4% and 10.4% respectively from 23 November due to the rising costs of securing and supplying energy; however, today’s update stated that the number of residential energy accounts on supply at the end of October was 15.7 million, “broadly unchanged since the half year”.

An update with little cheer, then. But it’s worth pointing out that the forecasts are based on the assumption of normal weather conditions for the remainder of the year, and recent news reports tell of an incoming cold winter freeze. The majority of the company’s competitors have also ‘been forced’ to hike up their prices due to rising charges for transporting energy to the home, so it is far from alone; Centrica’s dip in share price, compared to SSE‘s which was little moved yesterday, could therefore represent a buying opportunity today.

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> Sam does not own shares in any company mentioned.