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FTSE falls as Centrica tumbles but dividend boosts Barclays

British Gas owner leads FTSE 100 lower on warning energy price cap will hit 2019 profits, but Barclays tops index on dividend rise

FTSE falls as Centrica tumbles but dividend boosts Barclays

The FTSE 100 has fallen, led lower by Centrica (CNA) after the British Gas owner warned a national price cap on energy bills would hit this year's profits.

The UK blue-chip index fell 52 points, or 0.7%, to 7,177, with Centrica the heaviest faller, down 11.1% at 122p. 

The British Gas owner said the price cap, coupled with a fall in nuclear output and volumes in its oil and gas division, would hit performance in 2019, after reporting a 12% rise in 2018 operating profits.

'Our 2019 financial performance will be impacted by the UK default tariff cap and continuing lower volumes in exploration and production and nuclear, meaning our 2018-20 target range for average adjusted operating cashflow is under some pressure,' said chief executive Ian Conn.

Ofgem set the price cap around 6% lower than British Gas' standard variable tariff, although the energy regulator will raise the cap by 10% in April, with British Gas following suit.

Centrica kept its dividend unchanged, with a final payout of 8.4p, taking the full-year payment to 12p. But George Salmon, equity analyst at Hargreaves Lansdown, said the dividend was now starting to 'creak'.

'Centrica is increasingly relying on cost cutting and disposals to prop up the payment. Neither can continue forever,' he said.

'We wouldn't be surprised if a cut was around the corner, especially given the group has previously stated it was only comfortable committing to the dividend if it could generate over £2.1 billion of adjusted operating cash flow, a figure that now looks out of reach next year.'

Centrica was joined at the bottom of the index by BAE Systems (BAES), down 6.7% at 460.6p as the defence group warned German moves to block exports to Saudi Arabia could hurt its deals with the country.

Barclays dividend boosts shares

Barclays (BARC) bucked the falls, jumping 3.6% to 166.6p to the top of the index, as investors cheered a 4p final dividend, taking the full-year payout to 6.5p, up from 3p in 2017.

'The resumption of a 6.5p dividend is symbolically as well as financially significant,' said Laith Khalaf, senior analyst at Hargreaves Lansdown.

'That's the level the dividend stood at before it was halved when Jes Staley took over, and suggests the bank is back to business as usual.'

The bank also stoked hopes of more returns to shareholders, through higher dividends and share buybacks. 'This is excellent progress, but not sufficient,' said chief executive Jes Staley.

'Going forward the principal calls on future earnings should now be returns to shareholders and investing to grow the business. We will use the strong capital generation of the bank to return a greater proportion of those earnings to shareholders by way of dividends and to supplement those dividends with additional returns, including share buybacks.'

Barclays posted headline profit before tax of £3.5 billion in 2018, unchanged from the previous year, but weighed down by litigation and conduct charges. Stripping them out, £5.7 billion was 20% higher than the previous year.

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