Profits crash as Centrica loses 1.4 million customers

Angela Jameson
British Gas owner Centrica said 4,000 jobs will go: REUTERS

Humbled Centrica chief executive Iain Conn on Thursday insisted that he would put the embattled British Gas owner back on track after a profits slump and the loss of 1.4 million customers.

Blaming the Government’s decision to intervene in the energy market with a price cap, greater competition from 67 rival suppliers and customers wanting to switch to digital and online products, Conn is also slashing 4000 jobs by the end of 2020. He said: “This is partly because of the price cap which we just have to face down.”

Conn (pictured) said he “deeply regretted” the pain suffered by investors who have seen shares in the business virtually halve during what has been an annus horribilis for the blue-chip which resulted in its being the worst performer in the FTSE 100. The latest job cuts will mean it has shed 9500 staff — around a quarter of its workforce — over six years.

Energy companies are expecting a price cap to begin next year after the Conservatives said they would cap all standard energy tariffs because of concerns that loyal customers are paying too much. Centrica said it wants to reduce its costs to serve each customer by £20 by 2020 to withstand the looming legislation.

Centrica blamed falling profits in its business divisions in the UK and North America for the “weak” results. Centrica’s underlying profits fell 17% to £1.2 billion.

In the UK energy business, customer numbers fell 10% although Conn said that a million of the departing customers were “unprofitable” and that he was not unhappy to see them leave.

Investors had feared that Centrica would cut its dividend but the company maintained its payout at 12p per share. The City was also buoyed by the cost-cutting move, sending shares up 5.7p to 137.9p. Conn insisted that the dividend was affordable. “Even in the face of a price cap we are expecting to be able to manage and maintain the dividend for the next three years,” he said.

Centrica will steer away from major acquisitions and has also said that it will sell its 20% stake in the UK’s existing nuclear power stations by 2020.

Conn said the decision to sell out of nuclear was a strategic one, since Centrica had already turned its back on nuclear when it pulled out of EDF’s Hinkley Point C project in 2013 — a decision Conn said the firm did not regret.

UBS analysts said the figures were in line with expectations and declared the shares to be worth 165p although it was concerned about taxes on the group rising to more than 30% last year, adding that net debt is too high and dividends too low.