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Reasons to watch
- A strong yield for income investors
- A competitive forward earnings valuation
- Increasing importance of the North American operation helping to reduce reliance on UK-focused operations.
Centrica is a utility company with operations in the UK and around the world. Its main activities are the supply of electricity and gas to homes and businesses, primarily in the UK and North America. It also maintains a nuclear power division and engages in exploration for and production of natural gas.
The roots of Centrica go back to the privatisations of the 1980s and British Gas. Centrica itself was formed from the demerger of British Gas into three separate companies, with responsibility for gas sales and trading, along with the retail business and gas production in the North-West. A diversification strategy from 1998 saw the company acquire, among others, AA, and also move into the North American market.
From 2003 the strategy changed, with a focus on consolidation and the removal of operations deemed ‘non-core’ to the business. Since then Centrica has aimed to confine expansion to energy technologies, gas fields and partner arrangements with oil and gas firms.