Centrica has warned a new cap on household energy bills in Britain, plus other factors such as warmer weather and weak commodity prices, will hit its financial performance in the first half as it lost a further 234,000 customer accounts in the UK in the first four months of the year.
The owner of British Gas, the biggest energy supplier to UK homes, warned the trading environment had been “challenging” in the opening months of 2019, as it grappled with a number of challenges, also including outages at nuclear power plants, in which it owns non-operated stakes. The company also cited warmer than normal weather, which has pushed households to use less heating, and falling UK natural gas prices.
While the group has maintained full-year targets for 2019, set out in February, Centrica warned on Monday that these recent challenges “will impact financial performance in the first half of 2019 and have also put some further pressure on the outlook for the full year”.
Centrica, whose chief executive Iain Conn, has been under pressure for a number of months, has promised a strategic update alongside its interim results at the end of July, by which time the company said it would have “additional clarity” on issues such as how the UK energy price cap, which came into force in January, is likely to affect the market longer term, plus the commodity price environment.
The strategic update would also include “reflections” on Centrica’s “current business portfolio”. The company has been trying to sell its 20 per cent in UK nuclear power plants majority owned by EDF of France.
Mr Conn said in a statement on Monday that in the meantime, the company continues “to focus on those things we can control and as a result we expect to achieve our 2019 cash flow and net debt targets, while we are making further progress on cost efficiency delivery and on demonstrating margin capture capability”.
The update comes as Mr Conn prepares to face shareholders at its annual meeting in central London on Monday amid controversy over his salary for 2018. Mr Conn received a 44 per cent increase in pay last year to more than £2.42m despite the company cutting thousands of jobs. The pay rise has been criticised by unions in the UK as well as campaigners against excessive boardroom pay.
Mr Conn has found himself increasingly under pressure in recent months as more analysts have called in to question his strategy. Having joined Centrica from BP in January 2015, Mr Conn has shifted the company’s strategy to focus on customer-facing services but analysts are yet to be convinced that services such as its Hive products — which range from smart thermostats that can be controlled via a mobile phone to security cameras — can replace income lost from its core energy supply business.
Centrica’s shares fell to a two-decade low following its full-year results in February after the company triggered concerns that investors may be in line for another dividend cut. Centrica shares have lost more than 66 per cent since Mr Conn took office on January 1 2015.
Analysts at Bernstein have questioned whether recent problems could be the “last straw” for Mr Conn, whose tenure at the energy company has been marred by dividend cuts, profit warnings, credit rating downgrades and thousands of job cuts.
Centrica recently appointed a new chairman, Charles Berry.