Energy giant Centrica unveils £1.3 billion profits

Utility giant Centrica came under fire from consumer groups today after it unveiled £1.3 billion in half-year profits - including £270 million for its residential arm British Gas - just weeks after announcing a price hike.

Centrica said adjusted operating profits in the six months to June 30 at British Gas fell by 54% compared to the same period last year, as it battled with a 30% increase in wholesale gas prices and lower consumption.



But independent lobby group Consumer Focus said customers did not care which parts of the business were making money - they are just worried about paying the bills.



British Gas, the UK's biggest energy supplier, plans to lift gas and electricity prices by an average of 18% and 16% respectively from August 18 to counteract soaring costs.



Centrica, which posted a 19% decline in adjusted operating profits from £1.6 billion in the same period last year, said the hikes were essential if British Gas was to make a profit this year.



But its upstream gas exploration and production arm - which benefits from higher wholesale prices and includes assets in the North Sea and Trinidad and Tobago - posted a 14% increase in profits to £414 million.



Audrey Gallacher, director of energy at Consumer Focus, said Centrica "seems to win whether wholesale costs are high or low".



She said: "Retail profit margins may have been reduced by recent increases in wholesale prices - but as they are also major gas and electricity wholesalers, they can still make healthy 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.



"Given Centrica profits remain strong, consumers are bound to question whether recent large price hikes were necessary."



Some nine million customers will be hit when British Gas raises the average dual fuel bill by £190 a year to £1,219, pushing the average monthly bill to £101.58p.



The hike comes at a time when household incomes are becoming increasingly squeezed by high inflation and muted wage growth.



Richard Lloyd, executive director of Which?, said: "Many people are struggling with rising energy costs and when they see suppliers announcing these profits they're bound to question whether we're paying a fair price for our energy."



But Centrica said British Gas saw an 18% year-on-year decline in gas usage in the period, as well as a 3% drop in electricity consumption.



The FTSE 100-listed company said British Gas profits were made in the first quarter of the year - with energy being sold at a loss since April. Centrica said without the pending price rise in August, it will make a loss in the second half of the year.



Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: "It's been a tough half year for Centrica. Rising wholesale gas prices have pressured its doorstep supply business, whilst unexpected changes in UK tax legislation have hit its production business.



"Ongoing and almost constant regulatory changes continue to overhang, while the group competes in what is regarded by many as Europe's most competitive market place."



But British Gas did record an increase in customers in the period - up 159,000 to 16.1 million accounts.



Centrica said it was investing £1.3 billion this year alone in securing new sources in energy.



However, the company said it was "now clear" the UK's programme for new nuclear generating capacity will be delivered later than originally hoped. Centrica now expects clarity on the revised timetable towards the end of the year.



Nick Luff, Centrica group finance director, said: "With events in the Middle East, events in Japan, strong Asian demand pushing up commodity prices, an increase in taxes, the energy market review, the retail market review - this has been a significant period for companies in the industry."



Despite today's drop in profits at Centrica, the group said it was on track to deliver full-year earnings growth. However, full-year profit for its residential arm are still expected to be lower than last year.



Centrica said investment this year had been focused on its Lincolnshire offshore wind farm and the Ensign gas field near York.



Ofgem has said £200 billion of investment is required between now and 2020 to secure Britain's energy supply.



The company said it had taken a £204 million tax charge relating to the increase in supplementary corporation tax rate on gas and oil producing assets introduced by the Government in March.



In North America, its Direct Energy business saw a 25% increase in operating profits to £174 million and is "well placed to grow".



Centrica also increased its interim dividend by 12% to 4.29p.

PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
Markus Persson: If being that rich is so bad, why not just give it all away?

That's a bit rich

The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

Coleman on course to end half a century of hurt for Wales

Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference