Weather evaporates pounds 244m of BG profits
Thursday 26 February 1998
The company's 19 million domestic customers turned down the central heating in their droves as the thermometer went up, punching a pounds 244m hole in operating profits last year.
The impact of the warm weather was made worse by price cuts introduced on 1 October which reduced revenues at its pipeline arm Transco by a further pounds 130m. In the final quarter of the year Transco's operating profits slumped by 45 per cent to pounds 253m.
However, cost reductions in the main gas business and a pounds 170m turnaround in BG's exploration and production arm more than compensated to leave 1997 operating profits pounds 127m higher at pounds 1.148bn.
David Varney, BG's chief executive, described last year's warm weather as "a big surprise and disappointment", but added that it was a cyclical fluctuation.
The company had not abandoned its long-term view of weather patterns and said global warming could only be measured in fractions of degrees.
The new price curbs, under which BG's pipeline charges are falling by 13 per cent, will wipe pounds 400m from revenues this year. BG will also have the additional costs, currently running at pounds 200m a year, of preparing its network for full competition in the domestic gas market this year.
Disposals during the year raised pounds 811m from which BG netted a pounds 288m profit and further asset and property sales this year are set to bring the total raised to well over pounds 1bn.
Staff cuts are expected to yield a further pounds 50m in savings this year on top of the pounds 48m achieved last year. BG is reducing the 16,000 strong workforce by 2,500 and has so far identified 700 job cuts.
Mr Varney indicated BG had further scope for share buybacks following the pounds 1.3bn share repurchase completed last year. But he said the company would wait to see the Government's Green Paper on utility regulation, due out next month, before deciding whether to change its capital structure further.
BG has authority to buy back another 10 per cent of its capital which, at last night's closing price of 310p, down 13.5p, would cost it another pounds 1.3bn.
- 1 Cyclist in Russia narrowly misses being hit by car and lorry
- 2 'F*ck it, I quit': KTVA reporter Charlo Greene quits live on air in spectacular fashion
- 3 What are your fingerprint words?
- 4 Gary Lineker involved in Twitter row after presenter rubbishes claims he will be warned by BBC over foul-mouthed tweets
- 5 Pink Floyd new album: Band unveil cover art for first record in 20 years
Scotland could still declare independence – even without referendum, says Alex Salmond
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
Labour Party conference: Ed Balls to set out plan to freeze child benefit to balance books
iJobs Money & Business
£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...