Is Centrica Plc Vouching On Its Software Business Plan?

  • Apr 23, 2019 BST
  • Team Kalkine
Is Centrica Plc Vouching On Its Software Business Plan?

UK-based, Centrica Plc (LSE: CNA) is an integrated utility company. It carries out electricity generation and combined cycle gas turbine (CCGT) power stations, and nuclear power plants through its stake in EDF Energy Nuclear Generation. The company supply gas and electricity to homes and business. It offers range of home energy solutions and low carbon products and services.

Recently, the group’s managing director of distributed energy and power, Jorge Pikunic, said that the group has planned to enhance its software operation, to create virtual power stations. The company is planning to create a virtual power station almost fivefold in the next three years.

As the use of renewable energy growing globally, the company is trying to cash in on an increasing need for a flexible system.

Recently, the group entered into a contract with Japan’s Tepco. Tepco is a giant utility company in the Asian region, which will see Centrica's in-house software to aggregate various sources of renewable energy in the Kyushu region, which has a large number of industrial customers.

As per the management’s comments, Centrica Plc seems to be vouching on its software business to revamp its fortunes, as London Stock Exchange-listed Centrica is witnessing tough home market and its stocks witnessed steep plunge in the past one year.

Mr Jorge Pikunic expects margins from software business to be significantly higher than the company's core business operation, and he added that the group is targeting margin above 20 per cent.

During the last year, reported adjusted profit of the group stood at £1.4 bn on revenues of £29.7 bn, indicating a margin of about 5 per cent. If the company to grow its software business to £1 bn with margins of 20 per cent, it would be a considerable uplift to the bottom line.

Stock Performance – 1 Year

Daily Price Chart (as on April 23, 2019), before the market close.  (Source: Thomson Reuters)

At the time of writing (as on April 23, 2019, at 12:20 PM GMT), shares of Centrica Plc were trading at GBX 107.47 and added 1.75 points or 1.65% against its previous day closing price. During the last one-year, shares of Centrica Plc have registered a 52w high of GBX 164.50 and a 52w low of GBX 105.10 and at the current market price, as quoted in the price chart, shares were trading 34.66% lower than its 52w high and 2.25% above its 52w low price level.

On a yearly basis, the stock has delivered a price return of negative 27.19%, and on a year-to-date basis, the stock has delivered a price return of negative 21.6%. However, because of the steep plunge in its stock price in last one-year, the company's dividend yield stood at 11.35%, which was relatively very high as compared with industry and FTSE 100 dividend yield.

From simple moving average (SMA) standpoint, shares were trading considerably below its 30-day, 60-day and 200-day simple moving average price.

The outstanding market capitalisation of the company stood at £6.12 bn, which ranks the company among the large-cap category and a constituent of the FTSE 100 index as well.

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