Centrica chief executive Iain Conn has rarely been accused of lacking self-belief.
Even with shares down more than 70 per cent since he took the helm four-and-a-half years ago, and the biggest ever dividend cut announced on Tuesday — alongside his own departure — Mr Conn doubled down on the view that his strategy was correct.
“I have been convinced and am convinced that the strategy is the right one for this company,” Mr Conn said. “The board just spent six months kicking the tyres and has come to the same conclusion, again.”
The problem is investors don’t just lack his confidence, but have lost faith. The parent company of British Gas saw almost £1bn wiped off its market capitalisation on Tuesday, with its shares posting their biggest ever one day fall, losing 19 per cent.
The stock is now one of the smallest on London’s blue-chip FTSE 100, and is at risk of facing a humiliating demotion from the index.
However, the shareholder exodus has not just been driven by a series of weak results or even the near-60 per cent dividend cut, but by a strategy that has left investors pondering just where growth is going to come from.
Some are even questioning whether the company has a future at all, or if it might be snapped up or broken up by those ready to pounce on a wounded giant.
“What is the strategy? What are we trying to work towards? That’s not clear to me,” said one investor.
Utility companies across Europe have been locked in a battle for survival as they try to cope with seismic changes in the energy system, with more countries adopting targets to end their contribution to global warming, threatening traditional power assets.
Under Mr Conn, Centrica tried to reshape itself as a consumer-focused energy company, reducing its exposure to oil and gas production and thermal power plants, and shifting towards smart meters and home services.
But these growth prospects were once again called into question as the company backtracked on a target to generate £2bn in revenue by 2022 from two divisions Mr Conn had repeatedly held up as key to its future: Connected Home and Distributed Energy and Power.
The former sells gadgets such as smart thermostats, security cameras and plugs that can be controlled remotely. The latter helps businesses become more energy efficient.
Mr Conn said Centrica now only expects revenue of £150m-£200m by 2022 from the Connected Home division and has decided to stop selling its devices in North America and Italy to concentrate on the UK. The departing CEO said the company realised it did not have the same brand recognition and fleet of engineers able to install devices elsewhere.
“It did show a little naivety in what they thought the growth areas of the company could be,” said John Musk, analyst at RBC Capital Markets. “If I was a shareholder, I’d be asking how we're going to get value out of this.”
Investors acknowledge Mr Conn took the top job at time of significant structural change in power markets and some factors have been outside of his control — for instance the introduction this year of a price cap on the majority of UK household energy bills.
Yet Centrica’s performance compared with its peers has remained poor. Shares in rival FTSE 100 utility SSE have fallen by around a third over the same period.
Mr Conn expressed regret for slashing the dividend, which came after a difficult six months marred by unplanned outages at UK nuclear power plants in which Centrica holds stakes, volatile commodity prices and the impact of the price cap.
Mr Conn announced on Tuesday that it was selling its Spirit Energy oil and gas production joint business. Its 20 per cent holding in the UK’s operational nuclear plants is already on the block.
But the proceeds from those businesses will go towards rebuilding the balance sheet to ensure Centrica maintains its investment-grade credit ratings. Once they are gone, Centrica will have an even smaller selection of options from which to increase revenues.
The company argues this smaller, simpler portfolio will allow it to concentrate on stabilising and growing customer numbers in core areas such as energy supply and becoming the lowest-cost provider.
Mr Conn insisted there was already some cause for optimism. The number of UK energy supply accounts increased in May and June, although they fell by 178,000 as a whole in the first six months of the year.
But if investors cannot see where the growth is going to come from, analysts said it was hard to see a quick recovery in its shares, leaving it vulnerable.
“It shows that with these kinds of growth strategies, what may look good on PowerPoint might not be so easy to implement,” said Deepa Venkateswaran, analyst at Bernstein.
Additional reporting by Attracta Mooney
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