Centrica set for dividend cut and asset sales to repair its finances

CENTRICA is preparing to pare back its dividend for the second time in four years as the British Gas owner plots the sale of some oil and gas interests to revive its finances.

The FTSE 100 firm could cut to its payout to investors as well as offload some or all of its 69pc stake in oil and gas producer Spirit Energy in a bid to cut its £2.7bn debt mountain.

Chief executive Iain Conn slashed the dividend by 30pc when he joined from BP in 2015 and analysts believe he will do so again when the company updates investors next week.

Billions have been wiped off Centrica’s market value since he joined, while Britain’s biggest largest supplier of gas and electricity lost almost 750,000 customers last year.

It already made sweeping job cuts, with 700 management roles axed this summer as part of a wider measure to cut 4,000 jobs and save £1.25bn annually by 2020. Despite the 2015 dividend cut, Centrica shares still yield a healthy 12.7pc for its millions of small shareholders.

George Salmon, equity analyst at Hargreaves Lansdown, has said that even if Centrica halved its payout, the shares would still carry an abovemarket yield. Earlier this year, analysts at RBC Capital warned the company may need to cut payouts from an “unsustainable” 12p a share to as little as 7p.

Centrica has been grappling with growing competition from smaller energy suppliers attempting to win market share, as well as the energy price cap, industry incumbents, and risks losing its place in the FTSE 100 index.

A dividend cut would be another blow to investors in FTSE 100 bluechip stocks.

In May, Vodafone slashed its fullyear dividend by 40pc as its quest to roll out next-generation 5G mobile networks saw its losses balloon to £6.6bn.

Meanwhile, Marks & Spencer has cut its payout to shareholders to fund its deal with online food retailer Ocado.

A number of other companies have made a similar move, as tobacco firm Imperial Brands said this month that future dividend payments would be linked to “underlying business performance”.

The maker of Lambert & Butler cigarettes hopes the plan will allow it to pay back loans and eye up new investment opportunities.

Centrica did not respond to a request for comment.