Centrica blames fuel efficiency for profit slide at British Gas

Centrica blamed warm weather, rising wholesale prices, bigger taxes and its customers' increasing energy efficiency as its British Gas subsidiary reported a 54 per cent dive in first-half profits.

The group said its 9 million residential customers used 18 per cent less gas and 3 per cent less electricity in the first half, as unseasonably warm April weather combined with a growing trend among its customers to become greener and more cost-conscious.

The group as a whole recorded a 19 per cent decline in pre-tax profits to £1.2bn, as a 9 per cent increase in operating profits at Centrica's "upstream" gas and oil production and exploration business – helped by rising wholesale prices – partially offset weak British Gas revenues.

Centrica's unit supplying energy to businesses saw a 7 per cent decline in operating profit to £137m, while its British Gas division recorded an operating profit of £270m.

Nick Luff, Centrica's group finance director, pointed yesterday to the slide in profits at British Gas as he defended its decision to raise gas and electricity bills by 16 per cent and 18 per cent, respectively, from next month.

The energy price rise was announced in response to a 30 per cent increase in wholesale gas prices this year.

Mr Luff said: "Without the price rise British Gas would make a loss in the second half of the year. We had a profit margin of plus 7 per cent in the first half as wholesale prices rose, which would have turned into minus 11 per cent in the second half if we [hadn't increased] our prices."

Mr Luff added: "With events in the Middle East, events in Japan, strong Asian demand pushing up commodity prices and an increase in taxes, the energy market review and the retail market review, this has been a significant period for companies in the industry."

The company said it would take a £204m charge for the period as a result of the Government's recent decision to increase taxes on oil and gas production in the North Sea

Audrey Gallacher, the director of energy at independent lobby group Consumer Focus, said: "Retail profit margins may have been reduced by recent increases in wholesale prices, but they are also major gas and electricity wholesalers: they can still make profits at the other end. Consumers will be more worried by their increasing bills than which part of an energy company makes the most money."

Ofgem, the energy regulator, is reviewing whether the dominance of the so-called big six energy providers, including British Gas, distorts the market and allows for profiteering.

Mr Luff denied this was the case, pointing out that there have been "15 different reviews in the last 10 years and none have concluded Britain was anything other than a competitive market".

Centrica increased its dividend by 12 per cent to 4.29p a share. The group's shares fell by 7.3p, or 2 per cent, to close at 313p.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Joe Cocker performing on the Stravinski hall stage during the Montreux Jazz Festival, in Montreux, Switzerland in 2002
musicHe 'turned my song into an anthem', says former Beatle
News
Clarke Carlisle
sport
Sport
footballStoke City vs Chelsea match report
Arts and Entertainment
theatreThe US stars who've taken to UK panto, from Hasselhoff to Hall
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
News
newsIt was due to be auctioned off for charity
News
Coca-Cola has become one of the largest companies in the world to push staff towards switching off their voicemails, in a move intended to streamline operations and boost productivity
peopleCoca-Cola staff urged to switch it off to boost productivity
Environment
Sir David Attenborough
environment... as well as a plant and a spider
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there