Centrica share price surges despite ‘challenging’ environment

Shares in Centrica (LON:CNA) have climbed higher in London this morning even as the British Gas owner pointed to a challenging trading environment. The update comes with the company set to hold its annual general meeting.

As of 08:48 BST, Centrica’s share price had added 1.64 percent to 94.12p, outperforming the broader London market, with the benchmark FTSE 100 index currently standing 0.20 percent lower at 7,188.67 points. The group’s shares have lost more than 36 percent of their value over the past year, as compared with about a 6.9-percent drop in the Footsie.

‘Challenging’ environment

Centrica announced in a statement this morning that its operational performance had been  largely in line with the company’s expectations. The British Gas owner, however, noted that the trading environment had been challenging due to a specific set of external factors, including the negative impact from the UK default tariff cap, warmer than normal weather and falling UK natural gas prices. The blue-chip group nevertheless reaffirmed its full-year guidance on operating cash flow and net debt, and noted that it continued to expect to achieve its 2019 targets.

Centrica’s chief executive Iain Conn commented in the statement that the company intended “to provide a strategic update regarding our portfolio and prospects at the time of our Interim Results in July”.

Analysts weigh in on update

Proactive Investors quoted Neil Wilson, chief market analyst at Markets.com, as commenting that with Centrica facing “a cocktail of headwinds” it was ‘increasingly clear’ that the company would not be able to defend its dividend for much longer.

“Management is clinging to its full year guidance but doesn’t seem to be all that confident it can achieve it,” he pointed out, adding that Centrica’s share price reflected ‘despair in the strategy’. Wilson further noted that unless “the July update comes with a convincing strategic update” he did not think Centrica’s CEO Iain Conn will “be sticking around for much longer”.