Centrica has seen a fivefold year-on-year increase in profits after inflated energy prices benefited its gas, oil and nuclear assets.
Adjusted operating profit for the six months to the end of June hit £1,342 million, up from £262 million during the same period last year. The company has confirmed it will reinstate its dividend which has been paused since 2020.
Centrica said it will pay 1p per share, resulting in a £59 million pay-out for shareholders.
Despite the strong overall performance of the group, British Gas saw its adjusted operating profit decrease by 43% to £98 million (£172 million in H1 2021).
The company explained that high wholesale costs have seen default tariffs remain cheaper than nearly all new fixed-price deals, resulting in more customers moving to default tariffs than it had hedged for. This meant it was required to purchase energy for those customers at prices above those allowed by the price cap.
Furthermore, the company highlighted decreased demand due to warmer weather and a £63 million increase in bad debt.
British Gas saw a 3% increase in the number of its residential energy customers, bring the total number to 7.4 million. It said 158,000 new customers came from Together Energy via the Supplier of Last Resort process, whilst 46,000 came from organic growth.
The company’s cost of serving each customer increased by £3 to £96. It said this included a £7 increase per customer due to increased bad debt and dual running IT costs, meaning there was an underlying reduction of £4 per customer. Profit per residential customer was £6 after tax.
Elsewhere, the company’s business arm Centrica Business Solutions reported an adjusted operating profit of £20 million, compared to a loss in of £24 million in the first half of 2021.
British Gas Services and Solutions
Centrica blamed a “weak economic backdrop and investment in service and pricing” for a negative financial performance from British Gas Services and Solution.
This arm of the company saw an 88% decrease in adjusted operating profit to £7 million (down from £60 million in 2021).
It explained that the reversal of a £50 million negative impact from Covid-19 and industrial action in the first half of 2021 was partially offset by an increase in customer compensation following “disappointing service levels” over the past winter, continued higher absence rates earlier in the year and increased workload.
Centrica believes the latter is due to customers choosing to have non-urgent jobs completed that they had been delaying during the pandemic.
These temporary factors negatively impacted adjusted operating profit by approximately £25 million, the company added.
A 5% decrease in customer numbers and customers opting for lower priced products also negatively impacted adjusted operating profit by approximately £20 million compared to H1 2021.
Meanwhile, investments in improving this area of the business, such as in recruitment and core IT systems, resulted in a negative impact of approximately £50 million and a further £10 million was due to global supply chain issues.
Centrica chief executive Chris O’Shea said the company has made “significant progress” in de-risking the group and building a stronger business. He added that the company is “very aware” of the difficult environment many customers are facing.
“We have a clear strategy to continue improving operational performance, to grow our business and to position ourselves to deliver net zero at a cost which helps the many, not the few.
“We are committed to investing in the energy transition which will improve the security of energy supply in our core markets,” he said.