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(qlmbusinessnews.com via telegraph.co.uk – – Tue, 31 July, 2018) London, Uk – –
The Government’s energy price cap is already chilling profits at British Gas as costs climb and customers continue to turn their backs on the supplier.
British Gas, which is owned by FTSE 100 energy giant Centrica, said its operating profits fell by a fifth compared to the first half of last year, to £430m, as costs continued to climb and more than 340,000 customers left the supplier.
The country’s largest energy supplier said the freezing weather brought by the so-called Beast from the East drove energy use higher for the first half of this year, but also brought soaring costs.
The supplier hinted that another price hike could be on the cards, as market costs continue higher.
The company said: “Energy prices have continued to rise since we announced our price rise in April, and a number of competitors have since increased prices. We are keeping the movement of wholesale energy prices and their impact on our cost of supply under review.”
British Gas said the extreme weather earlier this year also brought a one-off £15m hit to the company due to higher call-outs and other associated costs.
The Big Six supplier lifted its standard tariff price by 5.5pc to keep up with rising energy market prices, but British Gas is unable to lift tariffs for homes using pre-payment meters which are protected by a new Government cap.
The hit wiped 11pc from Centrica’s cash flows and dragged its adjusted operating profits down 4pc from the first half of last year to £782m.
Centrica boss Iain Conn assured investors that the group would still manage to meet its full year financial targets in the second half of 2018, and will keep its 12p a share dividend in tact.
But the markets reacted to the worse than expected results with a punishing 5pc share price drop to £1.45 a share, a fraction of Centrica’s market value in 2013 when its shares traded at around £4.
Further pain for the supplier is likely to emerge in the years ahead as the Government’s market-wide price cap takes effect from the end of this year.
Mr Conn said: “Although we are awaiting the final outcome of regulation to impose a temporary cap on all default tariffs for residential customers in the UK, we have plans in place to manage this.”
The former BP executive took over the top spot at Centrica in 2015 with a three-year plan to reposition the energy producer as a customer-focused business.
“We continue to make progress on implementing our strategy,” he said. “We have developed new propositions and delivery capabilities in both customer divisions and our cost efficiency programme is on track.”
By Jillian Ambrose
