Centrica still positive on earnings oulook

10th May 2010 07:02

Centrica remains positive about the earnings outlook for 2010 as British Gas has added over 200,000 residential energy accounts so far this year and the upstream UK business maintains production targets.The group said its UK residential energy supply business British Gas had a "very strong" start to the year, with the number of joint energy and services households it serves up 50,000.At the end of April, the company had 15.9m residential energy accounts on supply and, given current trading conditions, residential energy supply is expected to perform strongly in 2010 with profit heavily weighted towards the first half.Freezing weather caused gas consumption to jump 7% and electricity usage increase by 2%. The residential services business has attracted more customers, with over 100,000 contracts added in the first three months, but costs jumped as the cold snap earlier this year caused more boilers to break.Low gas prices have proved an issue at the upstream business where gas and oil volumes produced in the first quarter of 2010 were up 59% on 2009, reflecting the additional contribution from the Venture portfolio. Full year production is expected to be around 300 billions of cubic feet equivalent (bcfe).The North American residential and business energy supply unit has had a "good" start to the year, with underlying profitability better than last year's first quarter"In the UK, our integrated energy model is performing well in the current low wholesale commodity price environment," Centrica said. "Downstream our competitive position, supported by our performance to date, should enable us to deliver strong returns while remaining price competitive.""Upstream the forward outlook for gas prices will impact returns from our gas and oil assets, while the industrial and commercial segment will benefit from a modest reduction in losses from legacy contracts.""Overall the outlook for group earnings for the full year remains positive, subject to the usual variables of commodity price movements and weather patterns."Jonathan Jackson, head of equities at Killik Capital, welcomes today's announcement."We believe the current valuation provides an excellent opportunity to buy a well-managed company with a strong brand, high market share and scope to add shareholder value through the implementation of its vertical integration strategy.""We would take advantage of the recent pullback in the shares."Interim results are due on 28 July.