DCF Studio

    CNA.L · LSE · Utilities

    Centrica plc

    Also onConsensus Drift

    Implied value per share

    GBp 494.11

    Market price

    GBp 147.05

    Implied upside

    +236.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 494.11+236.0%
    Exit multiple
    GBp 274.81+86.9%
    Market price
    GBp 147.05

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 18.3bnGBP 17.1bnGBP 16.0bnGBP 15.0bnGBP 14.0bn-6.4%
    EBITGBP 2.0bnGBP 1.8bnGBP 1.7bnGBP 1.6bnGBP 1.5bn-6.4%
    NOPATGBP 1.5bnGBP 1.4bnGBP 1.3bnGBP 1.2bnGBP 1.1bn-6.4%
    Add depreciation & amortisationGBP 426.5mGBP 399.4mGBP 374.0mGBP 350.2mGBP 327.9m-6.4%
    Less capital expenditureGBP -354.1mGBP -331.6mGBP -310.5mGBP -290.7mGBP -272.2m-6.4%
    Less increase in working capitalGBP -47.7mGBP -44.7mGBP -41.9mGBP -39.2mGBP -36.7m-6.4%
    Free cashflow to firmGBP 1.5bnGBP 1.4bnGBP 1.3bnGBP 1.2bnGBP 1.2bn-6.4%
    Discount factor0.96690.90390.84500.78990.7384-
    Present valueGBP 1.4bnGBP 1.3bnGBP 1.1bnGBP 970.5mGBP 849.5m-12.5%
    Present Value Of The ForecastGBP 5.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.544Reported 0.320, pulled toward 1.0 (Blume)
    Cost of equity7.49%Risk-free + beta x equity risk premium
    Cost of debt7.63%Interest expense / average total debt
    Market capitalisationGBP 6.8bn70.4% of capital
    Total debtGBP 2.9bn29.6% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC6.97%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareGBP 4.94

    75% of EV

    Forecast FCFF, final year
    GBP 1.2bn
    Capex at depreciation, working capital in reinvestment
    GBP 1.2bn
    Less reinvestment at g/ROIC (16.9% of NOPAT)
    GBP -200.3m
    Capitalised
    GBP 983.9m
    ROIC (reported)
    14.8%
    Terminal value, undiscounted
    GBP 22.6bn
    Terminal value, discounted
    GBP 16.7bn
    Enterprise value
    GBP 22.3bn
    Less net debt
    GBP -1.3bn
    Equity value
    GBP 23.6bn

    Exit at 4.5x EBITDA

    Value per shareGBP 2.75

    52% of EV

    Terminal value, undiscounted
    GBP 8.3bn
    Terminal value, discounted
    GBP 6.2bn
    Enterprise value
    GBP 11.8bn
    Less net debt
    GBP -1.3bn
    Equity value
    GBP 13.1bn

    Spread between methods: 57%.

    Sensitivity

    Value per share (GBP) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.97%6.747.428.379.8012.20
    5.97%5.375.726.166.757.58
    6.97%4.514.704.945.245.62
    7.97%3.914.024.164.334.53
    8.97%3.463.543.633.723.84

    Outlined: this model. Green text: above today's price of 1.47. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-6.4%-31.3%-25.0pp
    EBIT margin10.8%2.4%-8.3pp
    Discount rate7.0%25.8%+18.9pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.