“We believe Centrica’s balance sheet can weather the impact of the COVID-19 pandemic and the collapse in oil and gas prices,” analyst Mark Freshney said in a note.
Perhaps less positive for shareholders is Credit Suisse’s assumption that Centrica will cancel its dividend for two further years, in order to save £590mln and help ride out future challenges.
“We forecast bad debts of c£450m in 2020 and £325m in 2021 (from c£200m in 2019). We think this is conservative,” Freshney added.
Credit Suisse expects a £500mln of working capital outflow in 2020, based on 10% of customers not paying for three months.
The Swiss bank reckons other companies will need government support before Centrica, and, noted that maintaining credit ratings with Moodys and S&P (Baa2 and BBB respectively) will be key for the company, which Credit Suisse believes is possible.
It also noted that it is assuming that Centrica will, finally, sell out of its oil and gas production interests (a 69% stake in Spirit Energy).
According to Credit Suisse, the business should still be cashflow break-even against commodity prices of US$34 per barrel crude and gas at 34p per therm. Pegged against a long-term oil price of around US$60 per barrel the bank said the business could be worth £1.2bn.
Published at Fri, 24 Apr 2020 12:16:00 +0000-Centrica upgraded as Credit Suisse says coronavirus impacts now ‘priced in’