Centrica posts £1bn loss as UK energy price cap hits earnings

Centrica has swung to a full-year loss of more than £1bn as it felt the impact of a price cap on UK household energy bills and wrote down the value of oil and gas production assets to reflect weaker commodity prices.

Britain’s biggest energy supplier, which has had a stormy few years, posted a pre-tax loss of £1.1bn last year, down from a £575m profit in 2018. It booked £1.75bn of one-off charges, including a £476m impairment of its upstream oil and gas production assets and a £372m impairment against its 20 per cent stake in UK nuclear power plants, which it had been aiming to sell by the end of this year.

Centrica shares fell 15 per cent to 72 pence in early trading, and have lost nearly half their value over the past year.

Revenues were nearly 3 per cent lower at £22.7bn as the company felt the heat of lower commodity prices. It has also been affected in the past year by outages at several UK nuclear plants.

The company behind the British Gas brand lost 286,000 energy supply accounts last year at its consumer business as the biggest suppliers in the market suffer from a surge in competition.

Newer rivals, with lower cost bases, have often been able to undercut the incumbents and have been attracting customers in large numbers. The problems of the biggest suppliers have been exacerbated by the introduction last year of a price cap on bills for 11m UK households and some have since exited the market altogether — SSE last month completed a deal to sell its household supply arm in Britain to Ovo Energy.

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However Centrica’s outgoing chief executive Iain Conn sought on Thursday to paint an improving picture, pointing out that the rate at which customers were departing British Gas had slowed, while the company was succeeding in offsetting this with a growth in services.

Centrica has been trying to expand its services in recent years, which range from boiler supply and repairs to home gadgets such as smart thermostats and security cameras that can be controlled remotely via a mobile phone. Overall consumer account holdings rose by 722,000 or 3 per cent last year, the group said.

Centrica has been slashing costs and cutting jobs to try and deal with its problems — it ended 2019 with 3,588 fewer staff, reducing its workforce to just over 26,900 people. It stripped £315m of costs from the business and expects to remove a further £350m this year.

Mr Conn announced last summer that he would depart Centrica after its annual meeting this year, although a successor has yet to be appointed. Centrica had said the previous day that its chairman, Charles Berry, who was leading the search for a new chief executive, was to take a leave of absence due to an “unanticipated medical condition” and would be replaced in the interim by Scott Wheway, a non-executive director and head of the company’s remuneration committee.

Mr Conn said on Thursday: “Looking to 2020, we expect to deliver earnings momentum relative to 2019 from our core customer divisions, but upstream earnings are likely to be impacted by the lower commodity price environment.”


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