Centrica (GB:CNA) posted its interim results for H1 2022, which ended on June 30. The profits jumped to £1.3 Billion in the first half as compared to £262 Million a year ago. The company mainly benefited by increased capacity in upstream coupled with higher prices.
Centrica is a leading utility company that supplies electricity and gas to the people of the UK and Ireland.
Centrica’s stock has given a massive return of 90% in the last year. The stock is trading up by 19% YTD.
More for shareholders
Centrica had been a consistent dividend payer until the pandemic hit the company hard and it suspended the payout.
The increased profits, however, have allowed the company to pass along the earnings to its shareholders. It also announced an interim dividend of 1.0p per share, restarting its dividend cycle. The interim dividend of 1p will cost £59 Million to the company.
Centrica’s rival company Shell (GB:SHEL) recently posted a big jump in its profits with adjusted earnings of $11.5 Billion for Q2 2022. It also announced a £6 Billion share buyback to be completed by Q3.
This has enraged the people in the UK who are struggling hard with the energy bills. And, on the other hand, the energy companies are posting record profits followed by dividends and buybacks.
Centrica’s company’s balance sheet was the highlight of the results. It has transformed its net debt of £93 Million in H1 2021 to healthy net cash of £316 Million in 2022. This gives headroom to the company to survive the volatility of this market and remain stable with the dividends.
During this period, Centrica also completed the disposal of some assets of Sprit Energy for $1.1 Billion. This reduced its liabilities by £800 Million which was passed on to the buyers.
View from the city
According to TipRanks’ analyst rating consensus, Centrica stock has a Moderate Buy rating. The rating is based on nine Buy, one Hold, and one Sell ratings from analysts.
The average price target for Centrica is 110.45p, which implies upside potential of 23.4%. The analyst price targets range from a low of 71p to a high of 140p.
After the announcement of the results, Sam Arie from UBS increased his price target for Centrica from 90p to 97p, while maintaining a Hold rating on the stock.
Prior to the results, J.P. Morgan also raised its price target from 94p to 120p. It has a Buy rating on the stock.
Conclusion
Energy companies are taking advantage of high fuel prices. With the increasing pressure on the UK government to safeguard households from rising energy bills, companies like Centrica remain on the radar. It will be interesting to see how they will manage profits in the event of further regulatory tightening.
Centrica’s management is optimistic about its full-year numbers of 2022 and aims to continue its progressive dividend policy.
