Gas firm profits down 19 per cent

British Gas parent company Centrica today posted half-year profits of £992 million, a day after hitting millions of customers with a record hike in gas bills.

The operating profits are 19 per cent below last year after the group felt the impact of rising wholesale costs at British Gas, where profits fell 69 per cent to £166 million.

The UK's biggest domestic energy supplier, which has 15.9 million customers, has upped gas bills by a mammoth 35 per cent, with electricity prices up 9 per cent.

The group said the price increases were necessary to restore "reasonable profitability" to British Gas and invest in additional gas and power assets.

But while British Gas earnings were down more than two-thirds from last year's £533 million - when Centrica waited before passing on rapidly falling wholesale prices - the firm's production business saw a five-fold jump in profits.

Centrica's gas production and development operation benefited from this year's soaring gas prices to post operating profits of £638 million, compared with just £123 million during the previous year.

Chief executive Sam Laidlaw said: "We produced a good set of results in tough market conditions and against a record first half in 2007."

Centrica's operating profits are more than £100 million ahead of the £880 million expected by City forecasts, and the company also upped its dividend payout to shareholders from 3.35p to 3.9p - a rise of more than 16 per cent.

Despite the price hikes at British Gas, Centrica said it had made strides in improving the efficiency of the business in a trading environment "dominated by high wholesale energy prices".

By June this year complaints to consumer watchdog Energywatch had fallen by more than 90 per cent from a peak in April last year when the company had problems with the introduction of a new billing system, the firm said.

The business also cut 8 per cent of its staff over the period and is on track to make £60 million in cost savings, although yesterday's tariff increases will overshadow the results.

British Gas said it was left with no choice - despite the pressure on households struggling to cope with surging food, petrol and mortgage costs - because of increasing global demand, diminishing UK gas reserves and record oil prices pushed up its costs.

French-owned EDF Energy became the first major energy company to lift prices last Friday - 17 per cent for electricity and 22 per cent for gas - blaming record oil prices for the move.

And other rivals among the UK's "big six" are sure to follow EDF and Centrica after Scottish & Southern Energy last week said it was becoming "more difficult by the day" to resist hitting customers with higher bills.