In a trading update British Gas owner Centrica (CNA) said it had cancelled its final 2019 dividend of 3.5p, reduced capital expenditure by £400m as well as cutting bonuses in an effort to preserve cash. The shares fell 7% to 34.6p on the news and are down 60% over the last three months.
Another casualty of the pandemic was the planned divestment of its oil and gas business Spirit Energy, which has been put on ice until the financial and commodity markets have calmed down.
KEEPING THE LIGHTS ON
The company has followed Government guidelines and stopped all non-essential customer visits to minimise contact and stop the spread of coronavirus.
Several hundred UK engineers have volunteered to perform essential service visits, even where there may be higher risk of coronavirus, to ensure they have continued access to heat, hot water and electricity.
With more people working from home, the firm is starting to see increased energy demand from residential customers, but unfortunately this is being more than offset by a ‘significant reduction’ in demand from businesses as corporate sites temporarily close.
In addition there has been an increase in customer bad debts as households defer payments due to a drop in incomes, which has increased working capital outflows.
The narrow focus on essential work will result in lower revenues from the customer-facing businesses.
As a result, the firm has removed its guidance for adjusted earnings until the financial situation becomes clearer.
The brutal fall in the price of oil is forecast to negatively impact its exploration and production arm which the company estimates to be around £100m.
However, cost saving actions are expected to mitigate lost income and the company is still targeting the Upstream division to be ‘no worse than free cash flow neutral in 2020’.
At the end of March the company had $0.6bn of net cash available and £2.7bn of undrawn credit facilities.