British Gas owner Centrica cuts energy trading arm outlook, pauses buyback

By Ankita Bora and Yadarisa Shabong

Feb 19 (Reuters) - British Gas owner Centrica warned on Thursday that 2026 profit at its energy trading arm would miss its forecasts and paused its share buyback programme after reporting a 39% drop in annual profit, sending shares 8% lower.   

Unfavourable weather and tough market conditions have weighed on Centrica's margins over the past year, and the company has been selling non-core assets to focus on liquefied natural gas-related infrastructure.

The company expects 2026 core profit at its Optimisation energy trading unit of about 250 million pounds ($337.4 million), below its earlier estimate of 300 million to 400 million pounds.

Centrica aims to keep operating costs flat through 2030, delivering 500 million pounds in underlying cost savings that will offset inflation and fund business growth. The transformation programme, however, will cost about 600 million pounds to execute, it said.

Analysts at JPMorgan said the outlook cut and the transformation costs could lead to near-term estimate downgrades and drive weakness in its shares. 

Centrica's shares were headed for their biggest daily drop since July 2024.

LAYING THE GROUNDWORK

Centrica reported adjusted core profit of 1.42 billion pounds for 2025, ahead of market expectations. 

The company is targeting core profit of 1.7 billion pounds by the end of 2028, growing to 2 billion pounds in 2030, supported by its transformation programme and expected nuclear life extensions that are yet to be approved.

"With major projects like Sizewell C, Grain LNG and our Meter Asset Provider laying the groundwork for more stable and predictable earnings, our long-term opportunities have never been better," CEO Chris O'Shea said in a statement.

"Pausing the buyback enables us to prioritise investment."  

Centrica's Rough gas storage facility is expected to break even in 2026 after the company paused operations last year due to an uneconomic seasonal gas price spread.

It is awaiting a British government consultation outcome on gas storage that could change the business model for facilities like Rough.  

($1 = 0.7409 pounds)

(Reporting by Ankita Bora and Yadarisa Shabong in Bengaluru; Editing by Subhranshu Sahu and Jan Harvey)