Warm weather might sound like good news for us chilly Britons right now, but it’s not ideal for Centrica (LSE: CNA) shares. The British Gas owner saw operating profit in 2025 plunge to £814m — little more than half the £1.55bn recorded in the previous year.
The company told us: “Warmer than normal weather was an £80m headwind,” while also talking about the, erm, “shape of the commodity curve” and how it “impacted profitability.” I guess that means gas prices dropped a bit. Competition from cheaper deals enticing away customers, coupled with discounted fixed-rate contracts, didn’t help either.
Centrica’s UK household energy business saw operating profit slump from £269m in 2024 to £163m. On results day morning (19 February), Centrica shares fell 8% in early trading — though at the time of writing they’ve recovered to a 6% dip. Is it time for investors to abandon ship as the world warms up? Maybe not.
Dividend up
It wasn’t all bad news, as Centrica lifted its full-year dividend to 5.5p per share — up from 4.5p in 2024. Whether that was well-enough covered by earnings is a bit tricky to decide. After exceptional items and adjustments, the company reported a loss per share of 1.5p. But excluding those things, basic earnings per share came in at 11.2p. The total paid in dividends rose from £219m the year before, to £237m this time.
Analyst forecasts have the dividend growing strongly in the next couple of years too, backed by a return to earnings growth following a couple of years of falls. But we’ll have to wait and see if they temper their optimism in the light of these latest results.
Looking forward, Centrica is talking about “maximising sustainable earnings, maintaining a strong balance sheet,” and “delivering a progressive dividend.” A progressive dividend is one of the first things I look for when I’m evaluating a potential purchase. But saying that, the 5.5p for 2025 only represents a 2.8% yield on the previous day’s closing price.
Still, the company did say it continues “to expect dividend cover of around 2x by 2028.” I definitely wouldn’t rule out Centrica as a potential long-term income investment.
What next?
To put more figures on its outlook, management spoke of “adjusted EBITDA of £1.7bn” by 2028, and also aired “a belief that we can deliver above this.” They also added that “we expect to generate adjusted EBITDA of £2bn” by 2030.
In the latest update, Centrica spoke of “the unpredictable regulatory and political outlook, including debate over net zero policy and targets.” US energy policy might have drawn the focus away from the earlier renewables drive. But is it going to come back and bite hydrocarbon companies? I’d say that’s inevitable, though the real question is when. Centrica’s moves into nuclear power should help ease these fears to some degree.
For me, there are too many uncertainties — volatile energy markets, government regulation, long-term energy politics — for me to buy. But for those who see a good few years yet of profit from hydrocarbons, I think Centrica shares have to be worth considering.
