Centrica revealed Thursday morning that its operating profit for the first half of the year was down 35 per cent to £1,032 million “reflecting a challenging market environment, mild weather in the UK and the Polar Vortex in North America”.
Meanwhile, British Gas Residential operating profits were down 26 per cent to £265 million following a milder than average winter which resulted in lower than average consumer consumption.
“The first half of the year has seen challenging market conditions across the group, both as a result of the weather and reflecting the wider political environment,” said outgoing chief executive Sam Laidlaw.
But despite expectations that growth will return with the start of normal weather conditions the company said no retail price cuts will be made this year.
Household tariffs are 4 per cent higher than they were last year but will not be cut despite multi-year lows on the wholesale energy markets, due to the company’s forward buying strategy and higher expected costs relating to the carbon tax and network charges, Centrica said.
The company explained that its gas and electricity requirements are contracted up to three years in advance meaning that the majority of gas needed for the coming winter was already purchased before wholesale prices declined to current levels.
The benefit of current lower wholesale commodity prices will be offset by higher costs for carbon, renewables and network costs, it added.
The company added that despite lower market prices it is not increasing profits on its consumer bills, pointing out that the profit per household in 2014 is 20 per cent lower than last year at around £51 before tax, due to lower consumption of gas.
The company said it expects the company to return to growth in 2015 but analysts at RBC Capital warned that lower gas prices could hit the company’s upstream business meaning the “the trend of declining market expectations is expected to continue”.