Centrica Shares Tumble as Buyback Program Paused Amid Profit Decline
Shares of British Gas owner Centrica plunged nine per cent on Thursday morning after the London-listed energy giant announced it was pausing its share buyback program. This decision comes in response to a significant earnings hit, with the group reporting lower adjusted operating profit for 2025 compared to the previous year.
Financial Performance and Market Challenges
The FTSE-100 company's adjusted operating profit fell by approximately 50 per cent, dropping from £1.6 billion in 2024 to £800 million in 2025. Adjusted pre-tax profits settled at £1.4 billion as energy prices stabilized following the spikes seen in the prior year. Despite these lower earnings, Centrica demonstrated resilience in a challenging market environment.
In a move signaling confidence, the group increased its full-year dividend by 22 per cent to 5.5p per share, adhering to what it describes as a "progressive" payment policy. Throughout 2025, Centrica returned £1.1 billion to shareholders, which included an £800 million share buyback component.
Strategic Shift and Investment Focus
The pause in the buyback program is attributed to a strategic refocus on "quality of investment opportunities." Management has set ambitious targets, aiming for pre-tax profits of £1.7 billion by 2028 and £2 billion by 2030. This shift aligns with broader investments in infrastructure, particularly in renewable energy and nuclear assets.
Chris O'Shea, group chief executive, emphasized that 2025 was "a year of real momentum," highlighting bold investments as part of Centrica's fundamental transformation. However, he recently cautioned that electricity bills could be higher in 2030 than they were following the Russian invasion of Ukraine, due to major upgrades to the UK's grid infrastructure.
Analyst Insights and Future Outlook
Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, noted that lower commodity prices and reduced energy price volatility significantly impacted performance, leading to sharp profit declines. He explained that Centrica is investing heavily in building out its renewable energy infrastructure and extending the life of its nuclear assets.
Chiekrie added, "Results aren't going to come cheap or quickly, though, with between £600-800 million 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. As a result, share buybacks have been put on hold to help provide some financial wiggle room."
This strategic pause reflects Centrica's commitment to long-term growth and sustainability, even as it navigates immediate financial pressures and market uncertainties.
