Centrica Finals.

[idpickering]

· Adjusted gross margin up 5% and EBITDA up 15% relative to 2017. Adjusted operating cash flow of £2,245m up 9%, within targeted £2.1-£2.3bn range. Group net debt of £2,656m, within 2018 targeted range of £2.5-£3.0bn.

· 2018 full year dividend per share of 12.0p.

· Adjusted operating profit up 12% to £1,392m, with higher commodity prices and strong Rough gas production benefiting E&P despite disappointing volumes in Spirit Energy.

· £248m of in-year efficiency savings in 2018, taking total cumulative savings since 2015 to £940m. 2018 exceptional restructuring charge of £170m taking total exceptional restructuring costs 2016-18 to £486m.

· Adjusted EPS of 11.2p, down 10% compared to 2017, including a higher adjusted tax rate of 41%.

· 2019 AOCF impacted by the UK default tariff cap, continued lower E&P and Nuclear volumes, and cash tax phasing. Targeting 2019 AOCF in the range £1.8bn-£2.0bn.

· 2019 net debt expected to be in the range £3.0bn-£3.5bn, consistent with the mid-point of our 2018-20 range when adjusted to reflect the adoption of IFRS 16.

The Directors propose a final dividend of 8.40 pence per ordinary share (totalling £479 million) for the year ended 31 December 2018. The dividend will be submitted for formal approval at the Annual General Meeting to be held on 13 May 2019 and, subject to approval, will be paid on 27 June 2019 to those shareholders registered on 10 May 2019.

https://www.investegate.co.uk/centrica- ... 00187151Q/

[moorfield]

· 2018 full year dividend per share of 12.0p.

Phew, thanks Ian, I had this result penciled in as a possible dividend cut. Albeit another static one to add to my AZN, GSK, HSBA ...

Holding on, but not adding (at least until we have seen the riddance of John McDonnell).

Perhaps the yield will begin to drop a little now from its rather neurotic 8.7% - we'll see.

[Arborbridge]

https://www.dividenddata.co.uk/dividend ... y?epic=CNA

Well, I don't think Centrica is doing us any favours looking at the chart here, so does not deserve top-ups even if it is at the top of the table. Such a long drought smells of danger, added to other signs. I wouldn't blame anyone less "pyadic" from reducing or selling.

CNA is currently at 67% of my median weight and won't receive more - a few months ago I even contemplated selling

[monabri]

The CEO, in the opening statement says;

"Our 2019 financial performance will be impacted by the UK default tariff cap and continuing lower volumes in E&P and Nuclear, meaning our 2018-20 target range for average adjusted operating cash flow is under some pressure. "

I interpret that to mean " heads up, divi cut".

[kempiejon]

The CEO, in the opening statement says;

"Our 2019 financial performance will be impacted by the UK default tariff cap and continuing lower volumes in E&P and Nuclear, meaning our 2018-20 target range for average adjusted operating cash flow is under some pressure. "

I interpret that to mean " heads up, divi cut".

They have form for cutting, Arb posted the graph, the last dividend cut was 20% in ye 2014, then 11% in 2015, 3 most recent years static. I'm not one to sell but certainly been excluded for quite a while from my HYP and no sign of that changing.

[blobby]

Looks like a bargain to me. 10% yield WOW. Some of the headlines are aimed at the government and the public and not at investors IMO.

I don't think I understand the figures very well though...

Adjusted effective tax rate increased from 22% to 41%. Is this due to oil and gas production perhaps?

Adjusted EPS of 11.2p but yet Basic earnings per share of 3.3p is concerning, how has this happened?

[Alaric]

Centrica are still big in gas presumably?

There's a piece in the Mail about installation of gas supply in new houses being banned in about six years time.

https://www.dailymail.co.uk/news/articl ... rgets.html

[Arborbridge]

Adjusted EPS of 11.2p but yet Basic earnings per share of 3.3p is concerning, how has this happened?

Search me, but it shouts "fiddle-factor" doesn't it? The bigger the difference, the more suspicious one should become in my view. Sometimes there is a menu of three or four different types of eps - what the heck!

There are companies which have basic and adjusted eps which are very similar. I don't know that they are any "safer" but I feel intuitively that wide divergences probably indicated increasing desperation on behalf of management to make things look good.

Too cyncial? or just ignorant?

Arb.

[Dod101]

No. It's not a 'fiddle factor'. It is essentially the difference between operating profit and statutory profit. Read the accounts and it is all clear. Even if it takes a bit of careful following of the various references, it is all there in the announcement. Fundamentally the exceptionals are restructuring costs and impairment of assets, as if they do not count. The idea of course is to show that the basic business is fine, it is just those pesky exceptional charges (although unfortunately most businesses have exceptional charges most years)

It is a bit like my stepson who keeps on about profit before EBITDA. That is fine for a manager to be judged on because he is not usually responsible for borrowings, taxation, depreciation or amortisation, simply for managing the basic business, but shareholders have to carry the can for all those costs so I think it is thoroughly misleading for accounts to be presented this way. Centrica are not the only ones to do this, in fact I think most businesses do so to some extent.

With Centrica though, they should be judged on their statutory results and on that basis the accounts are not encouraging. In fact I think they should certainly be cutting the dividend and will do so sooner or later when reality eventually hits them.

I do not hold, having sold some time back.

Dod

[moorfield]

I interpret that to mean " heads up, divi cut".

Yes I think that's a reasonable interpretation, plus can kicked by Conn until he can bail himself out safely perhaps? Those who hold both CNA, SSE cannot now say we haven't been warned - 2020 income from utilities could look messy ...

[moorfield]

Looks like a bargain to me. 10% yield WOW.

That's too high to chase for me - lesson learnt from CLLN. Since then I've imposed an upper yield limit of 2 * City of London IT on all purchases. I would only consider preference shares above that (but OT here).

[idpickering]

Looks like a bargain to me. 10% yield WOW.

That's too high to chase for me - lesson learnt from CLLN. Since then I've imposed an upper yield limit of 2 * City of London IT on all purchases. I would only consider preference shares above that (but OT here).

I think you're very wise holding off from Centrica. I gave up on CNA years ago, and no longer hold them.

Ian.

[blobby]

That's too high to chase for me - lesson learnt from CLLN. Since then I've imposed an upper yield limit of 2 * City of London IT on all purchases. I would only consider preference shares above that (but OT here).

Hi moorfield, I think I should respond to this type of statement which I see quite often here.

As I understand it there is no restriction on upper yield when following the PYAD HYP methodology. There are other things which should shield investors from Carillions but not yield and it would be better to look at what those other things are.

Personally, I will invest in things with over 9% yield if I can where other things look reasonable (I’m not saying that Centrica is such a candidate at the moment but I am not ruling it out).

I feel that if posters support policies that are different to the HYP principles then they should make that clear when posting about them. Other examples of this are where posters say that they are buying or increasing holdings in shares with low yields like Diageo or Unilever.

[Dod101]

But blobby this Board is for discussions according to the Board Guidance not what you call PYAD HYP methodology. It is true that in neither cases as far as I know is there an upper limit set but it is certainly a factor which only the foolish would ignore. Very often, a very high yield such as can currently be obtained from inter alia, Centrica and Vodafone, is a sign that the market is nervous about the dividend sustainability. I tend to dismiss any yield more than about 150% of the FTSE100 average, which would today be around 6.5/7.00%. The market very often knows a lot more than I do.

The only comment in the Guidance re yield is that it should be above the average dividend yield of the FTSE100 but of course you are free to invest for any yield you like. From experience, it is normally unwise to chase a high yield.

Dod

[kempiejon]

Looks like a bargain to me. 10% yield WOW.

That's too high to chase for me - lesson learnt from CLLN. Since then I've imposed an upper yield limit of 2 * City of London IT on all purchases. I would only consider preference shares above that (but OT here).

I do take the point that high yields are driven by low prices, prices depressed because of adverse sentiment about a target share's prospects but I rule out CNA but not because it has a high yield but because its history of cutting. Back in the summer CNA was on about 7% and CTY about 4% they would have come under that twice CTY guideline but I'd not consider them because they cut. Back in 2015 CNA was on 5% with CTY about 4%, in fact regardless of the multiple between CTY and CNA it has not been a buy for years as IDP said. I still hold.

[moorfield]

As I understand it there is no restriction on upper yield when following the PYAD HYP methodology. There are other things which should shield investors from Carillions but not yield and it would be better to look at what those other things are.

blobby I don’t disagree but personally I don’t have the time and/or expertise to divine what those other things might or might not be for CNA, so this is a deliberately simple measure intended to encourage myself not to dither-tinkerbuy it for the foreseeable future and put new monies to work elsewhere. Neither am I a pyadic lemming.

[Arborbridge]

I interpret that to mean " heads up, divi cut".

Yes I think that's a reasonable interpretation, plus can kicked by Conn until he can bail himself out safely perhaps? Those who hold both CNA, SSE cannot now say we haven't been warned - 2020 income from utilities could look messy ...

I'm not sure if was you, but we had a similar statement about a year or so back We've been well and truly warned, I accept. I also dithered over selling CNA a couple of times, and no doubt this discussion will make me think further on it.

There are times when one either closes down and forgets all this "news" or perhaps says I'll sell and invest in some less risky instrument.

[Dod101]

It is essentially the difference between operating profit and statutory profit.

Before someone pulls me up on this I should have said that 'It is essentially the difference between adjusted profit and statutory profit'. I noticed that only after it was too late to edit the original post. Sorry about that.

Dod

[Arborbridge]

No. It's not a 'fiddle factor'. It is essentially the difference between operating profit and statutory profit. Read the accounts and it is all clear. Even if it takes a bit of careful following of the various references, it is all there in the announcement. Fundamentally the exceptionals are restructuring costs and impairment of assets, as if they do not count. The idea of course is to show that the basic business is fine, it is just those pesky exceptional charges (although unfortunately most businesses have exceptional charges most years)



Dod

Therein lies the rub. Not only do management have considerable room to define what is and what isn't exceptional, but as you mention exceptionals of various types can become so regular that they are, in fact, an occupational habit.
That's why I would regard them as a fiddle factor to be pull into play when required - obviously within the law, but there's a wide scope to play around.

Read the accounts and it is all clear. Yes, as clear as the pigs flying over my house There are many ways in which accounts can conceal and obfuscate. And that's before we get to auditors who seem to be blind in one eye or stock systems that seem capable of losing ten of millions in value overnight, or managements who use pseudo legal aggressive accounting ideas.

Arb.

[blobby]

But blobby this Board is for discussions according to the Board Guidance not what you call PYAD HYP methodology. It is true that in neither cases as far as I know is there an upper limit set but it is certainly a factor which only the foolish would ignore. Very often, a very high yield such as can currently be obtained from inter alia, Centrica and Vodafone, is a sign that the market is nervous about the dividend sustainability. I tend to dismiss any yield more than about 150% of the FTSE100 average, which would today be around 6.5/7.00%. The market very often knows a lot more than I do.

So Dod you agree that ruling out high yield companies not part of the official strategy. It’s just something that you personally believe but not part of the HYP approach which is essentially contrarian in nature. You are consciously (or subconsciously) following the market in your approach and as a result you will resist the natural contrarian approach of HYP.