Centrica to exceed financial targets after stemming customer losses

Centrica now expects to exceed its 2016 financial targets after stemming the customer losses it experienced in the first six months of the year.

The British Gas owner said account numbers for its UK Home business have stayed “broadly flat” since it announced losses of 400,000 in its half-year results in July.

“Our performance in the second half of the year has been strong and we expect to exceed our 2016 targets,” said chief executive Iain Conn in a trading update. “We have made considerable progress in reshaping our portfolio and capabilities to deliver a robust platform for customer-focused growth.”

Centrica confirmed it is on course to make £300 million of efficiency savings in 2016 as part of a £750 million per year cost reduction programme. Like-for-like operating costs are projected to be lower than in 2015, despite having “absorbed the effects of inflation, foreign exchange movements and additional investment”. The company also confirmed it is on track to reduce its headcount by more than 3,000 over the year.

Adjusted operating cash flow is projected to be in the range of £2.4 billion to £2.6 billion, and capital investment around £900 million.

The company announced the acquisition of Danish energy management and trading optimisation firm Neas Energy for £170 million and combined heat and power business Ener-G Cogen for £145 million in the first half of the year. Neas Energy made a “strong initial contribution” to its energy marketing and trading performance after the purchase was completed in the second half of 2016. The process of integrating Ener-G Cogen into the group is also “proceeding to plan”.

The sale of Centrica’s exploration and production activities in Canada and its Lincs offshore wind farm are “ongoing” and expected to be completed in 2017.

The jobs culls, costs cuts, acquisitions and sales are part of Centrica’s multi-billion-pound pivot away from its loss-making upstream gas and power businesses and towards its core customer-facing activities. Revealing the strategic shift last July, it said it would invest £1.5 billion over the following five years on areas such as energy supply, services, distributed power, the ‘connected home’ and trading.

Over the summer Centrica Storage announced the complete shut down its Rough gas storage facility until spring 2017 as it extended tests on the wells used for injections and withdrawals. Full testing and verification is still on course to be completed by March or April, according to the trading update. Twenty of the wells have now returned to service for withdrawals as announced in August. 

Group net debt is predicted to fall over the second half of the year, “reflecting a strong cash focus and capital discipline”. Centrica will “remain focused on cash generation and reducing net debt in 2017” as it seeks to maintain strong investment grade credit ratings.

Preliminary full-year results for 2016 are due to be published on 23 February.