The practice of blue chip companies tanking on profit warnings is becoming something of a trend this year. Centrica is the latest member of the club with shares plunging c17% in early trading after warning on profits. That would be its worst one-day fall since the 13.58% drop in February 1997, shortly after the group was formed. Shares are down two-thirds in the last four years.

When companies use phrases like ‘highly competitive’ and ‘disappointing’ in a trading update you know it’s not going to be good news; and Centrica’s trading update was greeted with more than just mild concern.

Earnings guidance has been slashed with management now guiding earnings per share at 12.5p for 2017, significantly below the 15p consensus – which was already pretty low - before today’s update. The stock’s fall is therefore neatly in line with the 16.6% drop in EPS guidance.

In Consumer, margins are being squeezed with account losses and warmer weather but efficiency programmes are alleviating the worst. But British Gas is stilling losing customers and market share.

In four months between the end of June to the end of October, Centrica lost 823,000 UK energy supply accounts, albeit 650,000 relate to collective switch, white-label fixed price and prepayment tariffs. Nevertheless that leaves 150,000 who have switched to an alternative provider in just four months – the price hike in September clearly had an impact. You have to wonder why Centrica rushed out its plans to reform the energy market – perhaps it’s seeing a larger number of account losses than planned.

But the worst news come from Business, with the group reporting ‘significant market pressure’ in North America while improved operational performance in the UK is not yet being felt on the bottom. Centrica also has to book a one-off £46m charge (£76m pre-tax) for its North American business.

North America Business is now expected to report adjusted operating profit in 2017 of c£80m – down from £221m last year, which was 10% lower than the £246m reported in 2015.

Despite this, Centrica says it’s on track to delivery adjusted operating cash flow above £2bn, some £300m in efficiency savings (ahead of the original target) and for net debt to be within the £2.5bn-£3bn target range.



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