Centrica cuts earnings forecast

Centrica, one of the big six utilities under fire from politicians for hiking bills, has cut its 2013 earnings forecast, citing not only rising costs in the UK but also intensifying competition in the United States.

The company, which blamed higher wholesale energy, transportation and environmental costs when it raised prices at its British Gas unit by 9.2 per cent in October, said yesterday adjusted earnings per share were likely to be flat this year, compared with previous hopes for growth of 3-4 per cent.

Its shares, down sharply since Labour said it would freeze prices for 20 months if it won an election due in 2015, dropped a further 4 per cent.

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“In particular, the weakness in the US will be a concern, given this is one of the supposed growth platforms of Centrica,” Royal Bank of Canada analyst John Musk said.

“With the headwinds highlighted today and the ongoing political debate in the UK, we believe the share price will remain challenged in the near term.”

While the country has emerged from a long and deep recession, average earnings are still running well below inflation, keeping the pressure on household bud- gets.

Centrica made adjusted earnings per share of 26.6p in 2012 and analysts’ had been expecting a 2013 figure of 27.81p.

“(It) reflects the margin pressure we’re seeing in the business energy supply both in UK and US,” finance director Nick Luff said, explaining the reduced expectations.

The group highlighted increased competition in Texas which has reduced its margins.