Centrica, the parent company of British Gas, yesterday announced profits of more than £1bn for the first time but complained that the warm weather had prevented it from making even more money.
The group, which also owns the AA breakdown service and the telephone operator One-Tel, rewarded shareholders by raising its dividend by 35 per cent. Total dividend payments for the year were £229m.
Centrica went on to indicate that it would return even more cash to shareholders - possibly through a share buy-back or special dividend - if it could not find internal uses for the money or suitable takeover targets. Sir Roy Gardner, Centrica's chief executive, said that with £163m of net cash in its coffers, the group no longer had an efficient balance sheet.
Sir Roy defended the company's decision to raise prices by 5.9 per cent last month, saying British Gas had been hit by a sharp increase in wholesale prices last year and milder weather, which resulted in a £33m loss in its domestic energy business in the second half of the year.
Group operating profits rose 14 per cent to £1.058bn, with the AA proving one of Centrica's best performers. The organisation, which now has 13.5 million members, made profits of £93m compared with just £6m in 1999, the year that Centrica bought the AA.
However, operating profits from British Gas's residential division, which includes home services such as boiler cover and home electrical repairs, fell 16 per cent to £206m. In the domestic energy business, which has 18.8 million customers, profits fell by 36 per cent to £136m.
Apart from what Sir Roy called the "double whammy" of warmer weather and higher wholesale prices, British Gas was hit by steeper transportation charges. However, the loss of market share was halted with 145,000 net new energy customers being signed up.
Centrica disclosed that it had run into snags with the roll-out of a new £400m computer system designed to help it cross-sell more services to customers, which will delay the programme by nine months. But the company said its target of achieving margins of 8 per cent at British Gas in 2005 remained intact.Reuse content