Centrica’s shares were hit afresh yesterday as it cut its 2013 earnings forecasts. The company blamed rising costs in the UK and sharpening competition in North America, particularly Texas, where it has expanded rapidly in recent years.
North America and UK energy supply profit margins are under pressure. Centrica now says its underlying earnings are likely to only tread water this year compared with previous guidance for modest growth of 3 to 4 per cent.
The stock shed a further 5.1 per cent. It has barely had time to draw breath since, like all energy company shares, it was rammed by Labour leader Ed Miliband’s autumn pledge to freeze electricity and gas prices for 20 months if he succeeds in turfing out the Tory/Lib-Dem coalition government at the next general election.
When Centrica and its peers responded to cross-party criticism of the industry’s pricing policies, the companies blamed higher wholesale energy costs and green levies.
The only respite for Centrica came last week when chief executive Sam Laidlaw revealed he would not take his bonus for 2013 because of the consumers’ pain.
But, that apart, it has been downhill all the way in terms of sentiment. And the bad news from across the Atlantic, in particular, adds to the negative perceptions.
Laidlaw has made big play, with justification, that his North American arm, which also includes the deregulated Canadian market, is a growth platform for the group. The platform now looks more wobbly.
Centrica’s shares have now given up 12 per cent since Miliband’s canvas-altering demarche in September.
And as the negative factors mount, it looks likely that they will remain challenged by investor perceptions, at least in the short term.
The only looming positive among the pylons is the government’s impending December announcement that is likely to shift some of the energy industry’s green and social charges away from the utility companies.
Centrica and some of its rivals have pledged to pass any such reduced costs on to customers in terms of reduced charges. That would at least be a public relations gift and is a slim sliver of hope among gathering clouds for the industry.
Green shoots from the hip to counter concerns
A 2.7 per cent fall in like-for-like sales at Sir Philip Green’s Topshop-to-Miss Selfridge retail empire, Arcadia, is further evidence that mid-market operators may be getting squeezed on the high street.
The likes of Burberry, Debenhams and John Lewis cream off the aspirational shoppers, while Arcadia risks getting bitten nearer the ankles by discounters typified by all-conquering Primark.
And, just as Marc Bolland at Marks & Spencer revealed last week, Green admitted that the mild autumn weather has not done clothing sellers any favours.
Response? I would expect a savvy operator like the Arcadia billionaire to look again at entry level price points to fight Primark fire with fire. It might be more problematic repulsing ritzier rivals.