British Gas holds its margins despite customer exodus

Could another controversial price hike be on the way?

James Moore
Chief Business Commentator
Tuesday 31 July 2018 11:11 BST
British Gas: Centrica's best known business
British Gas: Centrica's best known business (Reuters)

It’s time for British Gas to tell us

A: How much less money it has made

B: How many UK customers it has lost

C: When the next price rise is coming, and finally

D: What the excuses are for another set of disappointing first half numbers

There are times when Iain Conn, the boss of its owner Centrica, looks a bit like the business equivalent of Theresa May.

But that’s perhaps unfair. No CEO is quite that bad and British Gas’s customers can very easily jump ship (as they have been doing).

The same is true of Centrica’s shareholders, albeit with a bit less money than most of them came in with.

None of us are safe from the May-Terminator and her crew T-1000 Brexiteer wrecking machines.

It’s also true that while British Gas sometimes looks like the Titanic, Centrica has a diverse group of overseas businesses that it can usually rely upon to help mitigate the impact of the hole in the side of the part of the group that’s best known to the UK consumer.

As the answer to A will show. Here it is, along with the rest:

A. For the record, operating profits were 20 per cent less at British Gas, but 4 per cent less (after adjustments) at the group as a whole

B. British Gas lost 341,000 UK customers

C. Another price rise will probably be announced soon, despite the answer to B, because we’re told wholesale energy prices are rising

D. The excuses for the lacklustre performance this time around are rapidly rising commodity prices, extreme weather patterns, continued competitive pressures and ongoing political and regulatory uncertainty.

Stop me if you’ve heard that last one before.

If you were tempted to give Adam Faith’s ‘Poor Me’ a spin at this point, hang fire. There’s nothing poor about Mr Conn, who made £1.7m last year, according to the company’s annual report.

His shareholders have recently been enjoying some welcome respite, particularly since March. Normal service was resumed after the market took stock of the latest numbers because, while they could have been worse, analysts were left fretting about “misses”.

Here’s what you should know if you’re a British Gas customer: Despite all the controversy about energy prices and the arguments about why they’re rising, analysts at Jeffries stated that the company’s UK energy supply margins were largely stable at 8.4 per cent.

What that tells you is that, notwithstanding the complaints about price caps and competitive pressures and wholesale prices, Centrica seems determined to hold the line when it comes to the profits it expects its customers to deliver up, even if that means losing lots of them.

Perhaps it’s just hoping that the rate of decline will “stabilise” through having a corps of people who will stay put regardless.

We’re about to find out whether that’s the case. Centrica says it is keeping the movement of wholesale energy prices “under review” which is usually code for “watch out”.

We wouldn’t want anything to happen to those all important margins.

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