Centrica slumps on Citi downgrade to 'neutral'

British Gas owner Centrica was under the cosh on Friday as Citi cut its stance on the stock to 'neutral' from 'buy' and trimmed the price target to 144p.

"In our view, Centrica shares are already fully reflecting the challenging retail market and pricing in a probable dividend cut with its 9% dividend yield," Citi said.

However, it argued that unless the company is able to revitalise its current strategy by delivering growth in some of its new business lines or to curb the level of churn in retail or to improve the commodity output, there is little reason for investors to own the shares.

Earlier this week, RBC Capital Markets downgraded Centrica to 'underperform' from 'outperform', saying it expects a dividend cut and that the shares are still expensive relative to peers despite recent underperformance.

"Aside from the dividend, our primary concern remains a lack of visible growth for the company, and we remain unconvinced that areas such as Connected Home or Distributed Energy and Power will ever be significant earners for the group," said the Canadian bank.

At 1450 GMT, the shares were down 2.8% to 135.10p.