Scottish Gas owner to review operations
Warm weather and oil price fall prompt slump in Centrica profits
Shares in Scottish Gas owner Centrica plunged after it said it would slash investment and cut its dividend following what it described as “a very difficult year” caused by warmer weather and the slump in oil and gas prices.
New chief executive Iain Conn has initiated a review of its operations which will be completed by July.
Operating profits at British/Scottish Gas fell 35% from £2.7 billion to £1.7bn prompting the company to slash the final dividend by 30% and reduce capital expenditure.
Capital committed to exploration and production will fall by 40% or £250 million this year and £150m next year to £650m. Shares closed down 24p or 8.54% at 257.1p.
Unveiling annual figures, Mr Conn said: “2014 was a very difficult year for Centrica and the recent fall in oil and gas prices creates further challenge. We are cutting investment and costs in response.
“However, it is with regret that, along with reducing capital expenditure and driving efficiency beyond planned levels, we have taken the difficult decision to rebase the dividend by 30%, commencing with the final distribution for 2014.
“In addition, given the changed external environment we are reviewing the longer term strategy, and will conclude this by the Interim Results in July.
“Despite the obvious current challenges, I am confident in the quality of Centrica’s team and the platform which has been established, and I believe the Group is well-placed to take advantage of the longer term trends in the global energy markets. Our priorities remain to serve our customers competitively and with integrity, to develop new offers and services, to provide secure and reliable energy supplies and to deliver long term value for shareholders.”
Mr Conn said that “to underpin future growth in cash flows” the group will undertake a review to focus on the outlook for growth, it operating capability and efficiency, mix of activities and the company’s financial framework.
A final dividend has been declared of 8.4p per share, which when added to the interim dividend of 5.1p gives a 2014 full year dividend of 13.5p. The company also announced a scrip dividend programme as an alternative to the cash dividend, commencing with the final dividend.
The company said that following lower than acceptable offers some of its gas-fired power stations to retain Humber and Langage, which are cash generative at the operating level, and close the Killingholme and Brigg power stations.