Centrica raises dividend, expands share buybacks after EBITDA fall

(Sharecast News) - Centrica shares were surging on Thursday morning, even after it reported a sharp decline in full-year profits for 2024, with adjusted EBITDA falling to £2.3bn from £3.5bn in 2023, as it declared an increased dividend and announced a further £500m in share buybacks. The FTSE 100 energy supplier, which owns British Gas, said its adjusted operating profit dropped to £1.6bn from £2.8bn, reflecting lower commodity prices and reduced volatility in its Optimisation business.

Statutory operating profit also declined significantly to £1.7bn from £6.5bn, due in part to the reversal of unrealised hedges from the previous year.

The company's retail and optimisation divisions posted combined operating profits of £0.8bn, down from £1.7bn in 2023.

Retail operations, including British Gas and Bord Gáis Energy, contributed £0.4bn, while optimisation earnings dropped to £0.4bn from £0.9bn.

Centrica said its infrastructure segment saw a more modest decline, posting an operating profit of £0.8bn compared to £1.1bn in the prior year, as weaker seasonal gas price spreads weighed on Centrica Energy Storage+.

Despite weaker earnings, Centrica maintained a strong balance sheet, ending the year with £2.9bn in adjusted net cash.

Shareholder returns remained a priority, with £0.7bn returned through dividends and buybacks.

The firm raised its full-year dividend by 13% to 4.5p per share and announced plans to increase the 2025 dividend to 5.5p.

An additional £500m share buyback programme would meanwhile extend the total repurchase scheme to £2bn by the end of 2025.

Centrica said it continued investing in energy security and decarbonisation, including extending the operational life of four UK nuclear power stations and advancing its meter asset provider program, installing 450,000 smart meters in 2024.

In Ireland, the company expanded its flexible power generation capacity by 50% to 1GW.

That included securing a 10-year contract for a new 334MW Open Cycle Gas Turbine power station in Galway, expected to begin operations in 2029, alongside a five-year contract extension for the 445MW Whitegate power station in Cork.

In its global expansion efforts, Centrica said it had signed a 15-year LNG supply agreement with Petrobras, covering 0.8 million tons per annum from 2027.

The deal, representing 30% of Centrica's US portfolio, strengthened its LNG footprint while supporting Brazil's energy security.

It also said it had concluded its triennial pension scheme review, agreeing with trustees on a revised technical provisions deficit of £504m as of March, down from £944m in 2021.

Annual deficit contributions were reduced to £140m from £175m, set to continue until 2027.

Centrica reaffirmed its 2025 outlook, with all retail and optimisation businesses expected to remain within their sustainable operating profit ranges.

The company projected infrastructure EBITDA between £0.65bn and £0.85bn, and outlined a pathway to £1.6 billion in run-rate EBITDA by 2028, supported by ongoing investments and operational improvements.

"2024 was a good year for Centrica as we made further operational improvements and ramped up our investment programme," said group chief executive officer Chris O'Shea.

"This has resulted in happier customers and more innovative propositions, but there is so much more we can do.

"Looking ahead, I want to see Centrica continue to focus on the areas that make the biggest difference."

O'Shea said the company was investing in the energy transition.

"Everything we do must deliver an appropriate return, and our investments during 2024 demonstrate our ability to invest responsibly and profitably.

"Centrica has been transformed in recent years, and most of our businesses delivered against our medium-term expectations two years ahead of schedule."

Centrica now had greater resilience and financial flexibility supporting the capital returns, dividend increases and new investments in Ireland also announced on Thursday, Chris O'Shea explained.

"Our confidence in the future is as strong as it's been for a long time and I look forward to continuing to deliver for our colleagues, our customers and our shareholders."

At 0848 GMT, shares in Centrica were up 9.93% at 149.4p.

Reporting by Josh White for Sharecast.com.