British Gas owner loses 340,000 UK customer accounts after bill hikes

Energy provider previously announced 4,000 jobs to go by 2020

The Centrica-owned company reported higher revenues but lower profits (Reuters)

British Gas owner Centrica shed 340,000 UK customer accounts in the first six months of this year, during which time the energy provider announced a price hike affecting 4.1 million households.

The rate of customer losses was down 2.6 per cent compared with the first half of last year, and significantly reduced from the second half of 2017 – the group lost 823,000 customers in the period between June and October last year.

Stockbroker Jefferies said the customer losses were “likely to be related to Centrica’s standard variable tariff price hike”, which translated to a 5.5 per cent increase in bills for customers. At the time, the group blamed rising wholesale prices and government policy for putting energy firms under financial pressure.

George Salmon, equity analyst at Hargreaves Lansdown, noted that the company’s SVT currently has bills of around £1,100 a year on average and said: “While that means the group is far from the worst offender in the eyes of the regulator, it’s not beyond the realms of possibility that Centrica will have to cut prices by 5-10 per cent at a time when wholesale energy costs are rising. That’s not a good combination for profits.”

In May, Centrica said it would cut 1,000 jobs this year, with a further 3,000 to go by 2020, also due to political and regulatory intervention.

Revenue was up 7 per cent in the first half to £15.3bn, while earnings before interest, taxation, depreciation and amortisation rose 3 per cent to £1.3bn.

However, pre-tax profits fell from £637m to £627m, and adjusted earnings dropped 20 per cent from £447m to £358m, with the company blaming higher commodity prices, extreme weather patterns and continued competitive pressure.

The group also highlighted “ongoing political and regulatory uncertainty” as challenging factors.

Shares in the group dropped more than 5 per cent in early trading.

Centrica chief executive Iain Conn said: “In a first half in which we experienced rapidly rising commodity prices, extreme weather patterns, continued competitive pressures and ongoing political and regulatory uncertainty, Centrica demonstrated resilience from its portfolio of businesses.

“We are on track to achieve our full-year group financial targets and expect to maintain the full-year dividend per share at its current level, subject to delivering adjusted operating cash flow and net debt in line with our target ranges.”

Mr Conn said the group is continuing to make progress on implementing its strategy, by developing “new propositions and delivery capabilities”, and said the company’s cost efficiency programme is “on track”.

“Although we are awaiting the final outcome of regulation to impose a temporary cap on all default tariffs for residential customers in the UK, we have plans in place to manage this. Our focus remains on performance delivery and financial discipline,” he added.