Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Centrica. We currently have 22 research reports from 5 professional analysts.
Government bans on new fossil fueled vehicles in many major economies are likely to drive significant growth in electric vehicles (“EVs”) over the next twenty years. This will create growth in electricity demand from EV charging. The volume of energy to be supplied creates opportunities for both supply companies and generators and the provision of charge points is already creating a new industry. However, the timing of this demand puts pressure on local distribution infrastructure. While smart charging and vehicle to grid technology offer solutions, we believe these will only be partial given likely charging behaviour and as a result there will be demand for additional grid capacity and for other solutions. These other solutions include charger located storage and distributed generation.
Companies: CNA NG/ YU/ DRX GOOD RED SMS IKA AFC
FY18 had raised concerns about the sustainability of the dividend, and Centrica has finally cut it by nearly 60% after the catastrophic figures for H1. The group has announced its intention to exit from oil and gas production in order to refocus its activities on services around the transition to low-carbon. The group tried to reassure about the outlook for H2, confirming its cash flow and net debt full-year targets.
In our last model update we affirmed that, in the long run, a recovery was still possible, but that we preferred to remain cautious for the time being and wait for some news flow positive enough to cause an inflection point. Unfortunately, in the absence of a positive element, we have now decided to review our approaches and adopt a more conservative view.
Centrica delivered a mixed set of results FY18, adjusted operating cash flow and net debt were within the target ranges, but EPS is 2.6% lower than expected. Due to the UK default tariff cap the low volumes in E&P and nuclear, group downgraded AOCF guidance for 2019 is 1.8-2.0, or 13.6% lower than the required average pace of growth to reach the 2018-20 target.
Centrica released a weak trading statement. Competition remained intense in the UK during the four months to October. The company lost 372k accounts in its Home business, while the E&P business suffered from unplanned outages forcing Spirit Energy to cut its 2018 production target by 5%. However, the group confirmed its 12p dividend target for 2018, ensuring a comfy 8.8% yield at today’s price, thus limiting the downside risk.
Centrica released a rather weak set of H1 results. EBITDA was broadly flat while adjusted operating profit was down 4% as profit recovery in E&P was more than offset by tough market conditions in the Retail segment. The group confirmed its FY18 objectives and expects to pay a stable dividend in 2018 (12p).
Centrica released a short Q1 trading update. Centrica’s management said that the overall performance has been good in the year to date, driven by higher demand for gas following the colder weather and confirmed its set of FY targets (including the 12p dividend), with revenue growth expected to be weighted towards the second half of the year.
• The Centrica Business division hammers the group’s results. • The company lost 5.2% of its clients (-1.4m) in the customer segment and -7.1% in the Business one (-100k). • Price cap should hurt 2019 margins (and earnings), but impact unknown. • Reassurance on the dividend side and OCF guidance (£2.1-2.3bn) is a positive.
The group has stated in its trading update that it expects adjusted EPS for 2017 to be close to 12.5p, which is 17% below the 15.2p we previously expected. It confirmed its adjusted net debt target at £2.5-3bn and operating cash flows to be above £2bn. It has also raised its cost-cutting target for the year to £300m, from the previous £250m. It maintains its capex target at close to £1bn (with £500m for E&P). Moreover, driven by the group’s exposure to the retail market, it confirmed that the company lost 823k customers in the last three months. In addition to this, the group has stated that during the transition phase towards greater customer exposure and diversification to improve margins, Centrica would be forced to have a dividend cover below its historic levels.
Centrica’s solid H1 numbers and 12.5% electricity tariff increase announced yesterday morning were both in line with market expectations. Operationally, the business was resilient given this year’s warm weather and challenging competitive dynamics. The political impact of the tariff hike was mitigated by protecting 200,000 vulnerable customers, a move we view as sensible given especially high levels of political risk in UK retail energy currently. The bigger story for Centrica shareholders remains the long-term shift away from upstream ‘asset businesses’ to tech-enabled customer businesses. Yesterday’s announcements do not change that strategy and the reality is that Centrica is very early in its strategic change of direction.
Centrica reported a mixed set of results for the first half. The company achieved higher revenue (+7% to £14.29bn) and EBITDA (+2% to £1,293m) despite unfavourable weather conditions and competitive pressures. However, the group saw an 11% contraction in adjusted net earnings to £449m. As a direct consequence, it announced a 12.5% increase in the price of electricity on the British Gas standard tariff, effective from mid-September onwards. This is the first increase in four years, while gas prices will remain the same. Adjusted operating cash flow (AOCF) fell by 9% to £1,242m, reflecting a one-off working capital inflow in 2016. However, net debt has improved to £2,941m (a 22% reduction), on the back of the portfolio rotation strategy. Moreover, the group confirmed its full-year guidance as its strategic transformation and efficiency programme are well on track: adjusted operating cash flow >£2bn net debt in the £2.5-3bn range by year-end a further £250m efficiency savings The company proposed a flat interim dividend of £3.6p/share (30% of the FY2016 dividend), in line with historical practices.
The group has provided strong results given the conditions, beating forecasts across the board on its 2016 performance. Revenue decreased by 3% yoy to £27.1bn, but the contraction is less dramatic than expected. Adjusted operating profit, on the other hand, increased by 3.8% yoy and is 6% above market consensus, with adjusted net income on the same path with 3.8% yoy growth to €895m. EPS decreased by 2% yoy due to the issued shares and the diluting effect of the capital increase made last year to finance the acquisition in the retail business. On a reported basis, the company had an operating profit of £2,486m and £1,672m in net income, a strong performance. The best part came from the operating cash flow, the main objective of the company, as this grew by 19% yoy to £2,686m. The E&P business is in positive territory with a positive free cash flow. As a result, net debt decreased by 27% to £3.5bn, far better than previously expected. The dividend payment will be 12p/share, in line with last year’s, but below expectations given that the expected improvement on cash flows should have benefited shareholder remuneration, but it didn’t. Operating cash flows are expected to be above £2bn, which implies a contraction in the performance achieved over the year. Investments will be limited to £1bn for 2017.
As rates rise, "yieldy" stocks require careful consideration. Sustainability/track record key.
Centrica has published its Q3 16 trading update, raising its guidance expectations for 2016 with operating cash flows now expected in the £2.4-2.6bn range (+20%) rather than the £2bn earlier. Moreover, due to the gas assets’ better performance, benefits from the cost-cutting programme, and a strong performance in energy marketing and trading, the group expects the full-year EPS to be around 16.5p, whereas the market estimates something close to 15.4p (+7.1%). Nonetheless, the new expectations imply that EPS is expected to decrease by 4% yoy, although this is less than previously expected (-10.5%), which represents a substantial improvement.
Results fell 13% yoy to £13.38bn. However, £969m from the re-measurement of energy contracts has positively affected the reported results leading to a 31.5% yoy increase in operating profit to £1.76bn and net income to have a 9.3% yoy increase to £1.15bn, translating into an EPS of 22.2p. As a result, the company has increased the interim dividend by 1% to 3.6p. Nevertheless, on an adjusted basis the results show a different story as operating profit fell 12% yoy to £853m, net income decreased 14% yoy to £507m with EPS reaching 9.8p. Although, on an adjusted basis, operating cash flows increased by 19%yoy to £1.37bn. The strong cash flow performance in the first quarter has allowed the group to increase capex by 16% yoy to £444m which, added to the £694m capital increase performed earlier in the year, has allowed the company to have a comfortable net increase in cash of £1.28bn at the half year mark. This has allowed the company to achieve a 23% yoy decrease in net debt, to reach £3.8bn. Concerning guidance, the 2016 full-year expectation on operating cash flows above £2bn is expected to be exceeded. Moreover, as strong progress has been achieved in cost-cutting measures, as £141m has been achieved in the first half, the 2016 cost cutting target has been raised to £300m. Headcounts are expected to be reduced by around 3,000 FTEs.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Centrica. We currently have 22 research reports from 5 professional analysts.
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Bill McDermott stood down on Friday after a decade building up SAP as the world's leading enterprise software company, handing the task of completing its transition to cloud computing to new co-CEOs Jennifer Morgan and Christian Klein. SAP announced the management overhaul, with immediate effect, after rushing out third-quarter results that showed it gaining traction in its drive to offer a more streamlined range of services and boost profitability. The company’s stock has climbed 21% this year. It’s up 75% in the past five years, topping rival Oracle, which is up 46%, and the S&P 500′s 54% gain.
Companies: EVRH TRAK CPX CALL ECK IMMO LOOP NET SEE TCM TRCS QTX VRE
Dame Agatha Christie (née Miller) published more than 80 books and plays; and the Guinness Book of World Records lists her as the best-selling novelist of all time with roughly two billion copies sold. ‘And then there were none’ was originally published in 1939, with an un-politically correct title; and it is still the world’s best-selling mystery (with more than 100 million sold). It is also number six on the list of best-selling books of all-time.
Companies: ABBY CSP WJG TW/ BWY PSN GLV BDEV RDW BKG BVS GFRD CRN GLE SPR
Despite a tough trading environment in Q3, XP Power saw improving order flow and a book-to-bill ratio of 1.04x for the quarter and management anticipates meeting its FY19 expectations. Helped by currency, our FY19 revenue forecast appears conservative but in the face of volatile trading conditions, we maintain our estimates.
Companies: XP Power
Capital Drilling (LSE: CAPD) this morning announced the signing of binding agreements to provide a full range of mining services at Allied Gold’s Bonikro Gold Mine in Côte d'Ivoire alongside a US$3 million strategic investment. The new contract win marks a strategic move for the company, including for the first time providing load and haul operations, with control of the mine’s heavy mining fleet alongside five drill and blast rigs. Capital is working with Bonikro management to refine the mine plan following Allied’s recent acquisition, with a view to transitioning the agreement to a five year contract in H1/2020.
Companies: Capital Drilling
Since their privatisation in 1989, the 10 water companies have faced a periodic review every five years; it is undertaken by Ofwat, and prescribes customer prices, along with the investment requirements. As part of the ongoing review, PR19, Ofwat will publish its Final Determination numbers on 11 December 2019; they will apply as from April 2020, although water companies do have the option to seek a reference to the CMA.
Companies: AJB AGY ARBB CLIG DNL DPP FLTA GTLY GDR KOOV MCL MUR NSF PCA PIN PHP RE/ RECI RMDL STX SCE SIXH TON SHED VTA W7L
We have previously written on the off-balance sheet value embedded within the Group’s asset of unsettled cases, and the ability to bring this value onto the balance sheet in the coming periods given lawyer hiring. In response to investor feedback we have attempted to quantify the cash value of this asset and have arrived at a figure of £202m of cash inflows, justifying almost the entire market cap without any consideration for future growth. In our view, coupled with the current 10.2x PER, this demonstrates the continued undervaluation of the shares. Reiterate Buy rating.
Today, the software developer of advanced security and surveillance systems, announced that it has been awarded a contract to supply Bombardier Transportation with Petards eyeTrain systems. The £1.3m contract is to supply systems to be fitted to ELECTROSTAR Electrical Multiple Unit (EMU) trains as part of an upgrade programme with train owner Porterbrook and train operator Govia Thameslink Railway (GTR).
Companies: Petards Group
This is the first full year of the new AWS platform and sales progress has been excellent. Through its growing channels, PCIP has signed new contracts worldwide (notably in N. America) with a Total Contract Value (TCV) of £5.7m, up 223% on FY 2018. Moreover, the recurring Annual Contract Value (ACV) has quadrupled to £1.9m (2018: £0.5m) an extremely impressive performance that highlights the demand in the market, the quality of the channel partners and the ease of the AWS sale and global deployment. IFRS15 adoption will see the revenue booking spread over multiple periods, but the higher margins have delivered losses lower than expected at this early stage. The funding concerns have been addressed by a new £2.8m facility to be drawn as required.
Companies: PCI Pal
The cancer burden is growing globally. Each year >18 million people are diagnosed, nearly 10 million die and the estimated economic cost exceeds $1 trillion. From early diagnosis to late-stage disease, cancer care often involves inappropriate or unnecessary interventions that drive costs but provide limited clinical benefit. Coupled with an increased understanding of cancer biology and rapid technological advances, this has been driving momentum for precision medicine, leading to patient and societal benefits. The use of biomarkers and sophisticated diagnostics is facilitating early intervention through robot-enabled minimally invasive surgery and locally delivered radiotherapy. Immuno-oncology has revolutionised cancer care, with the focus now on identifying combinations that further improve long-term outcomes. Liquid biopsies and companion diagnostics are increasingly being used to personalise therapy.
Companies: VSC ABT ABBV AFMD A GOOGL AMGN AZN BCART BMY CVRS EKTAB EXAS GSK ILMN IPH ISRG IBAB JNJ MDXH MDG1 MDT MRK MYGN NSTG NOVN OCX PFZ QGEN RAYB ROG SAN SGEN TMO TRXC TNG VAR VCYT VNRX XNCR ECX IMM
To us, there are three standout features within Xpediator’s interim results: significant investment for growth, revenues broadly in-line with previous expectations and short-term difficulties across a few of the business areas. Sales of £102.4m are in-line with prior expectations, given the H2 trading bias. However, whether facilities are filling capacity slower than initially expected, or due to temporary disruptions, margins were squeezed in some instances. The investment in management and IT has markedly increased the cost profile of the business, albeit it has cemented the foundation for future growth. The latter has arguably had the greatest impact on profitability and results in a further downward review of estimates. Our valuation, based on the average of DCF, peer group comparison and dividend discount models, suggests a fair value of 53p / share. The updated fair value represents a premium of over 120% to the current share price.
Volution has reported an 11.5% increase in clean PBT, in line with expectations, helped by the strongest organic growth rate achieved since 2015. Growth strengthened as UK public RMI returned to growth and margins rose in the second half as the new factory’s performance improved.
Companies: Volution Group
The Group has announced that its subsidiary, Chesterfield Special Cylinders (‘CSC’), has won a major contract with EDF Energy for nitrogen storage solutions for EDF’s UK nuclear power plants at Heysham, Torness and Hartlepool. This represents the largest order in CSC’s history outside the defence sector. The contract is noted to be worth in excess of £3m and provides a significant underpin to our FY2020E forecasts.
Companies: Pressure Technologies
Staffline had a horrible H1, and it shows in the numbers. H1 FD EPS was down 88% and net debt was up from £63m at the year-end to £89m.
Companies: Staffline Group
The highly complementary £14m acquisition of Alderburgh expands Polypipe’s stormwater management portfolio offering, adding design and installation capabilities also. The earnings impact is modest but this serves as a further strengthening of Polypipe’s market position in the relatively robust infrastructure segment. Once wider UK economic uncertainties clear, we expect increased support for Polypipe’s share price.
Companies: Polypipe Group
Amazon is in talks to bring the cashier-less technology that runs its Go stores to other retailers like airport shops and movie theatres, according to people familiar with the matter. The effort would help Amazon grow its retail presence, so the company can lower its reliance on online shopping, but at a faster pace and at lower cost than building its own stores
Companies: BGO BIDS BOKU CDM EQLS FDEV GFIN KWS SUMO TM17 TECH