I’ve always admired people who stand up for what they believe in and have the guts to say what they think in a straightforward and honest manner.
Indeed, I think such qualities make for a potentially great chief executive and they are character traits I look for when investing. I like a chief exec who will defend his or her company and back themselves when they feel they are in the right.
So, I was pleased to see that Centrica‘s (LSE: CNA) (NASDAQOTH: CPYYY.US) boss, Sam Laidlaw, was recently criticising the government’s flagship energy plan that aims to make houses more energy efficient. He said it makes houses far more costly than the government had expected.
Laidlaw also called for an overhaul of the initiative, which requires power suppliers to pay for energy-efficient house improvements, saying that it was more expensive than the scheme it replaced.
Furthermore, the current scheme is “complicated” and “expensive to administer”, according to Centrica’s leader.
Indeed, the cost of carbon abatement under the old scheme was around £25 per tonne, whereas now it is more like £110 per tonne. This should concern Centrica’s shareholders, because it is thought to be costing the company around £100 million per year.
Clearly, the new scheme does not appear to be great news for investors in Centrica. However, the robust response from the chief exec shows that shareholders’ interests are being looked after, which should provide investors with a degree of confidence.
Another welcome aspect of Centrica is its yield of 4.1%, which is particularly relevant given that interest rates look set to stay low for quite some time yet. In addition, the shares trade on a price to earnings (P/E) ratio of 14.5, which compares well to the FTSE 100 on 15.2 and also to Centrica’s industry group (utilities), whose P/E is 14.7.
Furthermore, Centrica’s earnings per share are forecast to grow by 5.5% per year over the next two years, proving that utilities can provide investors with growth opportunities as well as an impressive yield.
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> Peter owns shares in Centrica.
