British Gas owner Centrica falls to £1.1bn loss as price cap bites
British Gas owner Centrica reported a £1.1bn loss before tax today as the utilities giant suffered from the implementation of new energy tariff cap for UK households and lower commodities prices.
Shares in the firm plunged 17 per cent as the firm swung from profit of £575m in 2018.
The figures
Having posted statutory profit of £987m in 2018, Centrica posted a loss of £849m in this morning’s annual results, a swing of nearly £2bn.
The company was also hit by exceptional charges worth £1.1bn due to a combination of falling commodity price forecasts, writedowns from its nuclear power assets, and a £356m restructuring charge.
Revenues were nearly 3 per cent lower at £22.7bn, whilst earnings per share fell 35 per cent to 7.3 per cent per share.
The company lost 286,000 customers from British Gas’ energy supply business last year, far fewer than the 742,000 lost the year before.
The company announced a 5p dividend, in line with forecasts made at July’s interim results.
Why it’s interesting
Since taking over in 2015, outgoing chief executive Iain Conn has seen shares fall from 300p to 70p. This year’s results were the the worst since that year, when the company posted a loss of £857m.
The company confirmed that it was still looking to offload its offshore business Spirit Energy, which was hit with a £476m charge.
It is also in talks with investors to sell its 20 per cent stake in the UK’s nuclear power station fleet.
The FTSE blue-chip stock has been one of the energy suppliers worse affected by affected by the energy price cap, a flagship policy of former British Prime Minister Theresa May to end what she called “rip-off” prices.
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In November Centrica won an appeal against Ofgem over the way the sector regulator, which first brought in the price cap last year, had calculated the tariff.
The firm had previously said that the rules had cost the energy company £70m in the first three months of 2019.
Last week the watchdog said it will cut the energy price cap by £17 from April as lower wholesale costs continue to drive the price downwards.
David Barclay, senior investment manager at Brewin Dolphin, said: “Today’s results cap an undoubtedly difficult year for Centrica with drops across the board and an increase in debt.
“The shares rallied following December’s election, but have eased back since with weaker commodity prices undermining the short-lived change in sentiment towards the shares.
“The good news, however, is that management has identified that drastic action is required and is duly taking it to make Centrica a smaller, simpler, and more competitive business. Nevertheless, there is still plenty of work to do and investors will have a keen eye on future updates.”
What Centrica said
Chief executive Iain Conn said: “2019 operating profit and earnings were materially impacted by a challenging environment, most significantly the implementation of the UK default tariff cap and falling natural gas prices.
“Against this backdrop Centrica delivered growth in customer accounts, higher net promoter scores, significant cost efficiencies in excess of our target, and full year adjusted operating cash flow and net debt within its target ranges.
“As expected, performance during the second half was much improved compared to the first half, demonstrating momentum as we enter 2020”.