Centrica suspends dividends and announces cost-cutting measures on COVID-19 uncertainty

The
British multinational energy and services company, Centrica (LON:CNA) announced
its 2019 dividends suspended on Thursday. The company also resorted to other
measures aimed at cutting costs as it expected the UK consumers to defer
payments for electricity bills amidst the ongoing Coronavirus lockdown. In the
upcoming months, the company said, business usage is likely to see a steep
decline.

The
rising uncertainty, according to Centrica, poses new challenges for the company
to continue its divestment plans concerning Spirit Energy (oil and gas
producer) and its nuclear energy interests.

Centrica
Says Demand From Residential Customers Is Increasing

Centrica
also highlighted in its statement on Thursday that the residential
customers are pushing the energy demand higher as the government restricted
people to their homes and offices made work from home arrangements. However, as
business customers push the demand to a near halt amidst the nationwide
lockdown, the overall impact on the company remains negative.

Centrica
also remarked on Thursday:

“We
also expect to see an increase in working capital outflows and customer bad
debt, as certain customer segments defer payments due to the reduction of
household incomes and business revenues.”

To
further save costs, Centrica said that its customer-facing divisions will
postpone or pause all of the new capital expenditure projects (non-critical). Such
measures, as per the energy services company, is expected to fuel a 25% cut in
spending plans. Centrica had originally estimated £800 million in spending in
2020 which will now be reduced to £600 million.

Centrica
Suspends 2019 Employee Cash Bonuses

Centrica
also made the decision of suspending the 2019 employee cash bonuses for as long
as the uncertainty prevails. The company also resorted to a pay freeze applied to
the majority of its non-customer facing workers.

In
its announcement earlier in 2020, Centrica had told its directors that they
will not be receiving their 2019 bonuses due to the COVID-19 driven financial
challenges. All in all, the company has postponed its restructuring expenditure
by a massive £100 million.

At
the time of writing, Centrica is exchanging hands at 34 pence per share in the
stock market that marks an over 60% decline in 2020 so far. However, its
performance in the stock market wasn’t any better even before the pandemic
with an annual loss of around 35% in 2019. Centrica currently has a market cap
of £1.98 billion.