Profits plunge at British Gas owner

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Published: Thursday 19th February 2015 by The News Editor

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Annual profits at British Gas owner Centrica have fallen 35% to £1.75 billion in a “very difficult year” for the company, it said today.

Profits from residential energy supply were down 23% to £439 million as the warmer weather meant each household spent around £100 less on bills than in 2013.

Iain Conn, the former BP executive who took over as Centrica boss last month, said the company would cut investments and slash costs. He has launched a strategic review of the business.

He said the group had taken the “difficult decision” to rebase its shareholder dividend. The full-year pay-out for 2014 will be 21% lower at 13.5p.

Mr Conn said: “2014 was a very difficult year for Centrica and the recent fall in oil and gas prices creates further challenge. We are cutting investment and costs in response.”

British Gas, Britain’s biggest energy supplier, saw a continuing customer exodus as it lost 368,000 customer accounts and a review of the business found there were 110,000 less than thought to begin with. It ended the year with 14.8 million.

There had been “significant losses” of accounts in the first quarter of the year following a tariff hike in November 2013 but the rate of losses fell later in the year as prices were cut after reforms to Government levies. More recently gas tariffs were cut as wholesale costs fell.

Centrica said: “British Gas faced a challenging environment in 2014, with the warmest year on record in the UK, difficult trading conditions, major systems migrations, and continued political, regulatory and media focus.

“The market remains highly competitive, with recent reductions in standard tariffs and most suppliers also offering a range of fixed price products.”

The volume of gas sold over the year fell by 20% and electricity by 8%.

British Gas made an average of £42 profit per household, nearly £10 lower than last year, as the average actual bill fell by around £100 to £1,152 in 2014.

The company said it was leading the industry in smart meters, with 1.3 million now installed in homes.

Results come as British Gas, Britain’s biggest energy supplier, is facing a full-scale competition probe along with the rest of the Big Six firms that dominate gas and electricity supply.

An early report by the Competition and Markets Authority (CMA) found that the large companies were overcharging loyal customers up to £234 a year and prompted Energy Secretary Ed Davey to warn he would not flinch from breaking them up.

Provisional findings from the probe are due in May.

Centrica reported a statutory pre-tax loss of £1.4 billion as it wrote off £1.4 billion of assets, half in power and half in the North Sea, as low oil and gas prices hit its energy generation arm.

The group said it was closing power stations at Killingholme and Brigg, both in Lincolnshire, but has decided to retain units at Humber and at Langage, in Devon.

It said it had tried to sell Langage, Humber and Killingholme but bids received were “significantly lower” than its valuation.

Mr Conn said Centrica earnings were expected to fall again in 2015.

His review of long term strategy is expected to be concluded by the time of interim results in July.

Published: Thursday 19th February 2015 by The News Editor

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