Whether the latest strategic change of direction at British Gas owner Centrica (CNA) is yet another false dawn or a genuine reset onto a more profitable path, the shares are so beaten up that the risk/reward ratio here is attractive.

There are early signs that greater retail customer focus is having a positive impact on market share.

For instance a net 20% of households switched to British Gas in November as it offered one of the most competitive tariffs on comparison website Compare the Market.

Peter Earl, head of energy commented: ‘British Gas has put its foot on the gas in November, accounting for more than a third of all switches on our platform.’

The company is exiting oil and gas production as well as its interest in nuclear generation and is expected to provide net proceeds of around £2.7bn, most of which will be used to reduce the firm’s £3.37bn of debts.

Centrica is targeting £1bn of annualised efficiencies over the 2019 to 2022 period, a third higher than its prior target. It estimates these savings will cost £1.25bn to deliver.

If the new initiatives work they will result in a rough £20 saving for customers on dual fuel contracts, in real terms, propelling the firm into the top quartile cost position compared with the competition.

The firm has identified three fundamental trends which are reshaping the energy landscape today and its strategy is founded on an analysis of these changes.

The energy system is becoming more decentralised as renewable technologies are deployed on a smaller scale. At the same time customers have more choice about how they obtain their energy and the services they require, all aided by technology which puts the customer in control.

Positioning its services at the value-for-money end of the price spectrum should maximize the firm’s strong brand awareness and plays into the company’s strengths.

Centrica is the largest gas supplier and installer of boilers in the UK and has the widest range of on-demand services through its Local Heroes platform.

From an investment perspective, the most important consideration is that the market is sceptical on management achieving and keeping the cost savings announced, leaving room to surprise on the upside.

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