CPYYY Centrica Plc (PK)

--Centrica lowered its cash flow guidance hit by the U.K. energy-price cap, prompting fears over the sustainability of its dividend

--The owner of British Gas missed 2018 adjusted earnings expectations

--Shares in the company fell sharply on the back of the news, on track for their biggest percentage decline since November 2017

By Adria Calatayud

Shares of British Gas owner Centrica PLC (CNA.LN) fell Thursday after the company lowered its cash flow guidance for 2019 and missed 2018 adjusted earnings expectations, prompting fears over its ability to sustain dividend.

The FTSE 100 utilities company said cash generation this year will take a hit from the U.K.'s energy-price cap, and lower volumes at its exploration and production as well as nuclear operations. Centrica said it will step up its cost-reduction initiatives, with plans to cut between 1,500 and 2,000 jobs, targeting savings of 250 million pounds ($326.3 million).

The company also intends to sell noncore units for up to GBP500 million, including the GBP230 million disposal of its Clockwork home-services business in North America.

Centrica said adjusted operating cash flow will come in at between GBP1.8 billion and GBP2.0 billion, below previous guidance for the 2018-2020 period of GBP2.1 billion to GBP2.3 billion. In 2018, the company's adjusted operating cash flow rose 9% to GBP2.25 billion.

Centrica's lower cash-flow guidance led analysts to question whether the company will be able maintain its full-year dividend at the 12.0 pence a share it declared for 2018.

"Centrica is increasingly relying on cost cutting and disposals to prop up the payment. Neither can continue forever," Hargreaves Lansdown analyst George Salmon said.

Analysts at Citi noted that Centrica failed to reassure investors on its dividend plans for this year, while its outlook pointed to weaker adjusted earnings.

The company's adjusted earnings per share fell 10% to 11.2 pence, falling short of the company's guidance of 11.5 pence.

The company said it made a pretax profit of GBP575 million in 2018 compared with GBP137 million a year earlier on revenue that increased 5.9% to GBP29.69 billion. In 2017, the company's profit fell sharply due to exceptional charges.

"Centrica's financial performance in 2018 was mixed against a challenging external backdrop," Centrica Chief Executive Iain Conn said.

Shares at 1554 GMT were down 13% at 119.15 pence, on track for their worst one-day percentage decline since November 2017, making Centrica the biggest faller in the FTSE 100.

Write to Adria Calatayud at adria.calatayudvaello@dowjones.com

(END) Dow Jones Newswires

February 21, 2019 11:11 ET (16:11 GMT)

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