Centrica’s full-year revenue fell by 9% to £22.4bn (£22.3bn expected), driven by lower commodity prices.
Underlying cash profits (EBITDA) fell by 39% to £1.4bn (£1.3bn expected). The decline was driven by its Optimisation business which fell well short of expectations due to unfavourable energy prices and the pausing of energy storage.
Underlying free cash flow fell from an inflow of £1.0bn to an outflow of £0.2bn, largely due to higher capital expenditure. The net cash position fell from £2.9bn to £1.5bn.
In 2026, Retail cash profits are expected to land in the £0.5-0.8bn range, while Optimisation cash profits are expected to be around £250mn.
The full-year dividend increased 22% to 5.5p per share. Share buybacks have been paused.
The shares fell 8.4% in early trading.
Our view
British Gas owner Centrica’s full-year profits weren’t quite as bad as forecasts, despite falling sharply in 2025 due to lower energy prices. But news that it’s pausing its share buyback programme, alongside soft guidance for 2026, was enough to leave investors wanting more.
In spite of the challenges, the Retail division continues to perform relatively well. In fact, it’s already trading in line with its mid-term profitability targets, well ahead of schedule. Recent initiatives to improve the customer experience are bearing fruit, with customer numbers and satisfaction scores both trending in the right direction.
The main pain point was in the Optimisation division, which houses Centrica’s energy trading arm. This had been the group’s cash cow in recent years, buying and storing gas when prices are low, then waiting for higher prices to generate and sell power back to the market, profiting on the difference. However, recent price moves have proved unfavourable, and operations have been paused for now.
The Infrastructure division is responsible for the production of oil as well as the sale of power from its UK nuclear plants. Underlying performance has weakened in recent times, largely as a result of lower prices.
Big plans are afoot to turn this unit into a renewable energy powerhouse. But the transition's not going to come cheap or quickly, with between £600-£800mn per year set to be invested in the transition out to 2028, which could put a strain on cash flows if returns aren't as high or quick as planned.
The balance sheet remains in good shape, with enough cash on hand to help fund the group’s mammoth investment plans, and the forward dividend yield of 3.3% looks well covered. But in order to make sure it doesn’t burn through cash too quickly, the group’s stopping share buybacks for now (2025: £0.8bn), a clear reminder that shareholder returns are never guaranteed.
The longer-term picture for Centrica remains favourable, helped by its ongoing investments in the business and the expected life extension of its nuclear fleet. There’s also a sizable cash pile to cushion any further bumps in the road. But amid the current low energy prices, the near-term outlook for profits remains subdued. With the shares having performed well over the last year, we think the valuation looks about right.
Environmental, social and governance (ESG) risk
The utilities industry is high-risk in terms of ESG. Management of these risks tends to be strong, with European firms outperforming their overseas counterparts. Environmental risks like carbon emissions, resource use and non-carbon emissions and spills tend to be the most significant risks for this industry. Employee health and safety and community relations are also key risks to monitor.
According to Sustainalytics, Centrica’s management of ESG risk is strong.
It has a board-level committee overseeing ESG issues such as safety and environmental programmes. Services have been digitalised to help improve customer experience and retention, however, customer complaints at British Gas Energy rose by 5.9% in FY22. Centrica also reports ESG information in its annual report, which does not follow best practices.
Centrica key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.