In its 2014 financial results the British Gas parent company said that the recent fall in oil and gas prices combined with historically mild temperatures resulted in “a very difficult” year for the company, with its total adjusted operating profit plunging 35 per cent year to £1.746 billion from £2.7 billion the year before.
“We are cutting investment and costs in response,” said Centrica’s newly appointed chief executive Iain Conn in a statement.
“In addition, given the changed external environment we are reviewing the longer term strategy, and will conclude this by the interim results in July,” he added.
The timing of the company’s new strategy puts it after the upcoming General Election in May this year and the provisional findings from the ongoing CMA sector probe expected in May or June.
Part of the company’s new thinking includes abandoning plans to sell its Humber, Langage and Killingholme gas-fired power plants after bids for the plant came in “significantly below” its own valuation. Centrica will retain still-profitable Humber and Langage plants but said it will close the Killingholme plant as well as the Brigg power plant.
The heaviest losses to the company were sustained in its upstream business with Centrica Energy’s gas profits almost halving from £1.15 billion in 2013 to just £606 million last year. Meanwhile profits from power generation fell 23 per cent to £131 million, the results show.
Centrica’s retail arm British Gas also saw a heavy losses of 20 per cent on its total operating profits to £823 million, reflecting a residential supply downturn of 23 per cent to £439 million and business supply losses of 19 per cent to £114 million in 2014.
Much of the loss can be attributed to lower retail consumption due to 2014’s historically mild temperatures. However, the company acknowledged that increased consumer switching has played a part in the weaker results.
British Gas saw the number of customers for its supply and services offerings decline while at the same time the company also “experienced a shift in mix towards lower priced products” as customers switch away from the standard variable tariff.
However British Gas did see account growth return in the fourth quarter with increased sales and services numbers, the company said.