Centrica picks up pace as fears over price caps recede
British Gas owner Centrica was a gainer in a falling London market yesterday as fears receded that price caps will erode sector profitability.
The Conservative party’s general election manifesto set a more moderate tone on capping energy bills than the prime minister Theresa May had put forward in a Sun editorial the week before. Absent were commitments to “protect around 17m customers on standard variable tariffs” and to save all customers up to £100 a year. Instead, it pledged to protect “more customers” against “abusive price increases” by capping the “poorest value tariffs”.
The softer wording suggests the cap is “not intended to save money on current bills but to prevent future precipitate and unwarranted price hikes”, said Bernstein. It estimated that, by reining in the highest tariff by £100 rather than targeting the average cost, residential dual-fuel bills would be capped at about £1,100 a year — higher than the current big-six average of £1,076.
Centrica closed 3.9 per cent higher at 200.9p and SSE took on 1.6 per cent to £14.92. The rally was tempered by news that a cap might be widened to include “micro businesses”. “Given the continued lack of specific information on the price cap proposal, estimating the impact on the companies remains fraught with error,” said Jefferies.
The turmoil enveloping Donald Trump’s presidency contributed to the wider market’s sharpest fall in two months, as did heavyweight stocks including Royal Dutch Shell and HSBC losing rights to their latest dividends. The FTSE 100 slipped 0.9 per cent or 67.05 points to close at 7,436.42.
Shire gained 1.8 per cent to £48.15 after releasing positive top-line results of a pivotal trial of lanadelumab, an anti-swelling drug it bought in 2015 via the $6bn acquisition of Dyax.
The success bolstered hopes that Shire could defend its monopoly for treating hereditary angioedema, a rare disease that accounts for about 10 per cent of group revenue but faces patent expiries and a challenge from CSL of Australia, whose rival drug could win US regulatory approval this year.
TalkTalk rose 2.8 per cent to 179.5. RBC, upgrading to “outperform”, argued that the broadband provider could release hidden value by selling its business-to-business division.
Bodycote was down 3.6 per cent to 760.5p on a downgrade to “underweight” from Morgan Stanley, which turned cautious on the capital goods maker. “The sector typically undergoes a three- to nine-month tactical correction when PMIs peak,” Morgan Stanley told clients.
Laundries operator Berendsen jumped 21.1 per cent to £10.46 on news that it had rejected two offers from French peer Elis, the second of which was for £11.43 in cash and shares.