Profits fall 35% at British Gas owner Centrica as customers exit over bills

The results came a day after a Competition and Markets Authority inquiry found that millions of families paid up to £234 a year too much for their energy

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The Independent Online

Centrica, the British Gas owner, said it could cut bills for a second time this year despite disappointing the City with a fall in profits and dividend that sent its shares tumbling by 8.5 per cent.

Its new chief executive, Iain Conn, predicted that wholesale oil and gas prices could stay low until 2017, adding that another gas price cut this year was “absolutely feasible”.

The results came a day after a Competition and Markets Authority inquiry found that millions of families paid up to £234 a year too much for their energy by failing to switch supplier. But Mr Conn claimed that the gap between standard and cheaper fixed-price deals stemmed from the “falling market” in wholesale prices. British Gas trimmed gas tariffs by 5 per cent last month but Mr Conn said: “The overall cost of gas that we’re supplying to people will come down over time, and that should mean that we will be able to pass on further reductions to customers.”

Fewer people will benefit, though, as almost 400,000 households switched away from British Gas last year, sending its customer numbers to a record low of 14.8 million. In 2005, it had more than 17 million customers. That, plus warmer weather last year, saw its profits sink by 20 per cent to £823m in 2014.

The impact of low oil and gas prices hit the upstream business even harder, sending Centrica’s overall operating profit down by 35 per cent to £1.7bn. Mr Conn, who is only six weeks into his job running the FTSE 100 energy giant, disappointed the markets by slashing the dividend by 30 per cent to 8.4p. That was considerably more than feared and, with Centrica having one of the largest shareholder registers, will hit more than 600,000 private investors particularly hard.

The plunging oil price also saw Centrica write down the value of its assets by £1.4bn. It said it would cut investment by 40 per cent over the next two years, including in the North Sea. “We have to cut our cloth to suit the new situation,” Mr Conn added.

He launched a strategic review which will be concluded by July, and also claimed politicians’ involvement in the energy market was threatening jobs.

“‘Butt out’ is a strong term, but when [politicians] suddenly talk about price controls, you just don’t know what consequences that has,” he said. “And once the Government starts doing that, it brings uncertainty into the marketplace, which clearly hinders investment and frankly could have a knock-on effect on jobs.”

But Mr Conn said that despite Centrica’s parsimonious spending plans, fracking tests would go ahead. “In a nation that is increasingly short of natural gas, it has got to make sense,” Mr Conn said.  “Obviously, we have to do it safely and in a way that is acceptable to the public, but we are absolutely going ahead with our testing programme. Everyone in Britain should want to know whether it works or not.”

Centrica shares fell 24p to 257.1p.