British Gas owner Centrica slumps to £1BILLION loss and sees its share price dive

British Gas owner Centrica swung to a loss of £1.1billion last year, with the group blaming the Government’s energy bill price cap and lower natural gas prices for its fall in fortunes. 

The energy group’s annual pre-tax profit was wiped out in a dramatic reversal of the £575million it banked a year earlier. 

With fierce competition mounting in the sector, the group admitted it lost 286,000 energy supply accounts in the last year, and total revenues fell nearly 3 per cent to £22.7billion.  

Centrica’s annual loss is the deepest reported by the energy giant since 2015, when it made a loss of £857million. 

In the last year, the group’s shareholders have seen their annual dividend cut by 58 per cent, from 12p a share to 5p a share. 

The FTSE-100 listed group’s share price has taken a hefty hit since the publication of the results this morning and is currently down 16 per cent to 70.8p. 

Centrica said the Government’s energy price cap had cost it around £300million in revenues. 

The Government’s cap on energy prices came into force at the beginning of last year, promising to bring down bills for customers on default tariffs.

The group also booked £1.75billion in one-off charges, the biggest of which was a £476million impairment of its upstream oil and gas production assets and a £372million impairment against its 20 per cent stake in UK nuclear power plants. 

The group’s net debt is set to come in higher than expected, at around the £3.2billion to £3.6billion mark.   

In the year to 31 December, the company’s net debt soared by 20 per cent per cent to £3.1billion, while adjusted operating cash flow tanked 18 per cent to £1.8billion. 

Outgoing Centrica boss Iain Conn admitted that while the last year had been ‘challenging’, the number of people ditching and switching British Gas as their energy provider had slowed down. 

Poor: Centrica admitted it lost 286,000 energy supply accounts in the last year

Conn said the group saw its service arm grow over the year. The service arm deals with anything from boiler repairs to the installation of smart thermostats and security cameras. 

The group has been on a major cost-cutting drive and in the last year made £315million worth of ‘cost efficiencies.’ In the year ahead, it plans to make another £350million worth of savings. The group also now has over 3,000 fewer staff than it did a year ago.

The number of injuries per 200,000 hours worked at Centrica rose to 1.006, marking a 4 per cent increase on the year before, and at least the third year that the measure has increased. 

Conn said that the second half of last year was better than the first, ‘demonstrating momentum as we enter 2020.’ 

In the last few years, a growing number of customers have been turning their backs on the UK’s Big Six energy suppliers, and a number of experts hailed 2019 as the year that their stranglehold on the market was finally broken for good.

Centrica’s rival SSE was snapped up by one of the smaller challengers, Ovo Energy, which only entered the market a decade ago.

Ovo and other challengers spent the second half of the last decade stealing customers away from the former giants, slashing Centrica’s market share from 24 per cent when Conn took over, to 19 per cent towards the end of last year, according to figures from Ofgem.

‘British Gas is really struggling with the onslaught from small suppliers, the price cap, and falling natural gas prices hitting them hard,’ said Mark Todd, the co-founder of Energyhelpline.

Conn is gearing up to leave Centrica after a torrid five years at the helm, which has seen the group lose a sizeable number of British Gas customers and suffer a sliding share price.  

A replacement for Conn is yet to be found. The company is also temporarily without a permanent chairman after Charles Berry began a leave of absence earlier this week due to a medical condition. Centrica said it expects Berry to return to his duties shortly.

Commenting on Centrica’s results, Neil Wilson, chief analyst at Markets.com, said: ‘Consumers can go elsewhere now. Much like Royal Mail and BT, this monopoly incumbent has lost its way in the new world of competition.’ 

Meanwhile, David Barclay, senior investment manager at Brewin Dolphin, said: ‘Today’s results cap an undoubtedly difficult year for Centrica with drops across the board and an increase in debt. 

‘The shares rallied following December’s election, but have eased back since with weaker commodity prices undermining the short-lived change in sentiment towards the shares. 

‘The good news, however, is that management has identified that drastic action is required and is duly taking it to make Centrica a smaller, simpler, and more competitive business. Nevertheless, there is still plenty of work to do and investors will have a keen eye on future updates.’