Centrica (LSE: CNA) shares have crumbled in value this year. The stock has lost more than 50% in 2020, underperforming the FTSE 100 by a staggering 36%, excluding dividends.
Shares in the company were already under pressure heading into 2020. Centrica has been trying to re-ignite growth at its key British Gas supply business for years. So far, all of these attempts have failed, and customers have continued to defect to competitors.
But it now looks as if management is doubling down on its attempts to restructure the business. If successful, these efforts could dramatically improve investor sentiment towards Centrica shares over the long run.
Restructuring
The company’s latest turnaround plan involves a dramatic reduction in the number of people employed by the group. This is part of its ambition to become a more customer-focused business by removing bureaucracy.
It’s planning to remove business units and around half of its 40 strong senior leadership team by the end of August this year. On top of these management cuts, around 5,000 jobs will go across the groups. Approximately 2,500 jobs will be eliminated from management roles across the business.
Centrica is also looking to restructure its employment contracts. According to the company, it has over 80 different employee contracts in place across the business with some of the agreements dating back over 35 years. Management wants to reorganise these agreements for the 21st century.
This is just the latest restructuring effort from my company, and only time will tell if it’s going to be successful.
However, customer service is something that’s been lacking at Centrica for some time. Reviews of the business online are generally pretty terrible. Of the 34k reviews of British Gas on Trustpilot.com, 25% rate the company “bad“. The average rating is 3.5 stars out of 5.
By comparison, 71% of the reviews for competitor EDF Energy rate the company “excellent“. It has an average rating of 4.3 out of 5. Upstart Octopus energy has an average rating of 4.8 stars from 28k reviews.
Centrica shares on offer?
If the company can improve its customer service record, and reduce the customer exodus, investor sentiment should begin to improve. That would be a positive development for Centrica shares.
Still, looking ahead, the company faces an uncertain period in the short run. It will take time for customer sentiment to improve. The firm also faces the risk of having to deal with a second wave of coronavirus and further economic pain.
Nevertheless, Centria remains the most significant player in the UK energy market, and this means it’s a great base to grow from if customer relations improve.
Therefore, after the stock’s 50% share price decline since the start of the year, now could be an opportune moment to buy it while it appears to offer a wide margin of safety. A return to 2019 levels could see Centrica shares double from current levels.
Centrica shares may offer excellent value for money and recovery prospects when owned as part of a well-diversified portfolio.
