FTSE: British Gas owner to buy back £250m of shares as profits soar on rising bills

A gas hob with a bill from British Gas, which is owned by energy giant Centrica
Centrica announced a share buyback on the strong performance, with the aim to repurchase up to 5% of its issued share capital, or around £250m. Photo: Press Association

British Gas owner Centrica (CNA.L) surged to the top of the FTSE 100 (^FTSE) on Thursday after it revealed strong profits from high gas and electric prices.

Here are some of the key takeaways from its trading update:

EPS: Forecast at the top end of 15.1p to 26.0p range

Share buyback: 5% of issued capital or £250m

Cost of living pledge: Increase of £25m to £50m this year

The company, which is both a producer and supplier of energy, said profits will be ahead of expectations this year, with full year underlying earnings per share forecast to be at the top end of the 15.1p to 26.0p range.

It announced a share buyback on the strong performance, with the aim to repurchase up to 5% of its issued share capital, or around £250m. It is the first share buyback since 2014.

It said the move reflected its “recent performance and outlook, together with the work undertaken in recent years to strengthen the balance sheet and ensure appropriate liquidity”.

The group’s liquidity also improved since the half year results, it said in its unscheduled update.

Centrica cited “strong operational performance” from its electricity generation and gas production business, as well as its marketing and trading arm.

However, it did warn of significant short-term uncertainty, including the impacts of weather, commodity prices, a weakening economy, and high inflation.

Inflationary and economic pressures increased the group’s costs, and impacted customer numbers in British Gas services and solutions. British Gas energy volumes have also been held back because of unusually warm weather.

As a result, underlying operating profit in the retail business will be lower than current expectations.

Read more: FTSE treads water as traders await US inflation data

The company added that there was still a risk that the retail division would be affected by further fluctuations in energy prices, as well as customers struggling to pay their bills over the winter period.

In response to the sharp cost of living crisis, it pledged a further £25m in support to those who needed help with bills, bringing total voluntary support to £50m this year. This will add to the government’s energy bills support scheme.

Centrica shares rose more than 8% following the announcement.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “Centrica is Britain’s biggest household supplier, so if a large portion of customers struggle to pay their bills amid the cost-of-living crisis, current conditions could have an enormous potential impact for the group.

“So far £50m has been put aside to help those struggling. The recent performance will be used by some to argue that a windfall tax should be levied on energy companies. The situation is certainly a highly sensitive one, and any potential financial knocks brought about by new taxes would need to be carefully managed by Centrica, given what’s at stake for its customers.”

It comes as National Grid (NG.L) also lifted its earnings guidance today after growing its underlying profits by 50% to £2.1.bn in the first half of the year.

Watch: Why are gas prices rising?