Phew, the relief of investors that today’s full year 2017 results from Centrica (CNA) are not worse is almost tangible.

A renewed £500m per year cost savings push and, vitally, a maintained dividend at 12p per share sees the British Gas-owner’s share price rally 4% on Thursday to 137.5p.

That makes it the FTSE 100’s second biggest gainer behind only Barclays (BARC).

Yet there is a growing sense that chief executive Iain Conn has been able to do little more than kick the can a little further down the road. Huge problems remain to be faced.

STRANGLED SUPPLY

Struggles within its energy supply division, particularly in the US, continue to eat into profits, while political and regulatory uncertainty remains intense here at home in the UK.

Centrica lost nearly 1.38m energy customers last year, about 10%. That’s staggering even by recent standards of big six energy supplier losses over the past year.

This demonstrates how fierce competition has become from the multitude of smaller independents actively encouraged by UK policy on switching suppliers.

British Gas lost 750,000 customers in the year, although it is still the largest UK energy supplier with 7.8m accounts.

DESPERATE ACTION ON COSTS

Centrica’s response is to look for more operating efficiencies, and it has apparently spotted an extra £500m worth of annual savings, beyond 2020. That would be on top of the £750m a year already lopped off.

But axing 4,000 jobs, at least 2,000 in the UK, seems an increasingly desperate move to achieve such savings, and shore up investor confidence in future dividends. The company is promising to hold the 12p payout this year but the market has serious doubts thanks to increasingly tight cash flow.

If Centrica can hold the dividend then the implied 8.7% yield would be a boon for income seekers. The alternative view, one held by Shares, is that this is the market's subtle way of showing its disbelief, and that another dividend cut is on the way.

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Issue Date: 22 Feb 2018