Centrica Plc stepped up its cost-cutting drive, vowing to eliminate 4,000 more jobs and sell nuclear assets after its profit plunged.
Iain Conn, chief executive officer of Britain's biggest energy supplier, apologized for "very poor" results last year and said he'd focus on delivering attractive returns to improve shareholder confidence. A plan by the UK government to cap some household energy bills "partially" contributed to the need to cut jobs, he said.
Centrica is suffering from tougher trading conditions in its North American subsidiary as well as the UK government's crusade to protect consumers from the highest energy tariffs. This is the second round of cost-cutting measures by Conn since he was appointed in 2015. The stock rose as analysts said they were reassured that he maintained the dividend and paid down debt.
"The second half of 2017 was weak," Conn said on a call with analysts. "The poor performance in North America Business energy supply was significantly amplified by the government announcement on the price cap."
Conn boosted the cost-savings target by about 66 percent to 1.25 billion pounds (USD 1.73 billion) a year by 2020, according to a full-year earnings statement from the company. It intends to sell its 20 percent stake in Electricite de France SA's UK nuclear operations.
The cutbacks bring to 10,000 the number of job reductions Conn has announced since he took over, representing a quarter of Centrica's workforce. Today, Conn said he delivered the first 750 million pounds of annual cost cuts three years early, enabling the bigger target for 2020. A quarter of the 4,000 additional job reductions come this year, most of them in Britain.
Centrica had "very few negatives" for 2018 and "supportive" guidance about future earnings, John Musk, an analyst at RBC Capital Markets, wrote in a note. Goldman Sachs Group Inc. noted the results were "weak by historical standards" but included measures to defend profit this year.
Centrica bought a stake in EDF's UK nuclear operations in 2009 and plans to divest this holding "subject to ensuring alignment with our partner and being sensitive to government interests," it said in the statement.
No decommissioning liabilities are associated with the nuclear holding. And while a buyer won't need technical expertise because of the partnership with EDF, the U.K. government will be watchful about the type of companies seeking the stake, Conn said.
The earnings statement buoyed the utility's stock, which rose as much as 5.3 percent, the most since July. Centrica is still down 42 percent in the past 12 months and the worst performer in the 29-member Stoxx 600 Utilities Index.
The UK government plans to have a law that limits household energy prices approved this summer so the measure can be introduced in time for winter. Centrica expects to reduce the number of customers on the most-expensive default tariffs by 30 percent to about 3 million by the end of this year.
Adjusted operating profit for 2017 was 4.6 percent below the average analyst estimate Dividend kept at 12 pence a share; conditional on adjusted operating cashflow being 2.1 billion - 2.3 billion pounds and net debt of 2.25 billion -3.25 billion pounds Margins for supplying UK customers were 6.4 percent in 2017, up from 6.2 percent in 2016; customer numbers fell by 1,352,000, or 5 percent, last year.
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