British Gas owner Centrica returns to growth in 2016, but profit in its UK home arm drops
British Gas owner Centrica today said it swung back to profit growth in 2016, but profit in its UK homes business dropped.
The figures
Britain's largest energy supplier said group operating profit rose four per cent to £1.52bn in the year to the end of December. However, operating profit for its UK home supplying business fell eight per cent to £810m.
Group revenue was down three per cent on the previous year, at £27.1bn.
Centrica lowered its net debt by 27 per cent to £3.47bn and said it will increase its dividend if it can bring debt into the range of £2.5bn to £3bn.
Shares in the firm fell as much as 3.5 per cent in morning trading, making it one of the FTSE 100's biggest losers.
Why it's interesting
The number of energy supply customer accounts fell three per cent, or 409,000 in 2016, including the impact of a significant roll-off of long-term fixed price contracts in the first half of the year, Centrica said. It was broadly flat in the second half of the year due to new "competitively priced" customer offers.
Investors were disappointed the energy provider hadn't increased its dividend – and Centrica told reporters today it is uncertain there will be an increase in 2017. The firm cut its dividend two years ago and again last year.
British Gas announced earlier this month it will extend its price freeze until August 2017 after it managed to "significantly" reduce its own costs. It reckons it now has "one of the lowest standard variable tariff prices in the market".
Following a two-year investigation by the Competition and Markets Authority (CMA), Ofgem announced it will put a price cap on prepayment meters. Centrica said moving tariffs will be in line with this cap, negatively impacting 2017 gross revenue by around £50m.
What Centrica said
Iain Conn, chief executive of Centrica, said:
2016 was a year of robust performance and progress in implementing our customer-focused strategy. We delivered our key objectives including improved customer service and more innovative offerings and solutions – while repositioning the portfolio, building capability and driving significant cost efficiencies.
Centrica enters 2017 a stronger company – with encouraging underlying momentum and positioned to deliver longer-term returns and growth.
What analysts said
George Salmon, equity analyst at Hargreaves Lansdown, said:
With the group saying a resumption of dividend growth is unlikely until it has shed more of its debts, shareholders are still feeling the effects of the hangover from the decision to splurge billions on offshore exploration and production at just the wrong time.