Extreme weather in the first half of the year has resulted in a slump in Centrica’s energy supply profits, according to its interim report for the six months to 30 June.
Figures published today (31 July) reveal the company’s adjusted operating profits fell by four per cent to £782 million.
The company said “rising wholesale energy costs” and “extreme cold weather” put pressure on UK energy supply margins and additional costs in UK services.
British Gas, a subsidiary of Centrica, has been reported to have lost 340,000 customer accounts representing around 270,000 customers so far this year.
The number of British Gas customers on standard variable tariffs (SVTs) has also decreased significantly, from 4.3 million at the start of the year to 3.5 million.
Last year British Gas announced it will abolish SVTs for new customers by 31 March this year. The number of British Gas account holdings on a SVT fell by 24 per cent from 7.2 million in 2017 to 5.5 million this year.
Centrica Business also faced losses with its adjusted operating profit down by 57 per cent while Centrica Consumer’s adjusted operating profit was down 20 per cent.
Last year by comparison, the consumer division’s adjusted operating profit was down just 1 per cent at £890 million.
The first half of 2018 saw adjusted operating cash flow for Centrica of £1.1 billion, down 11 per cent from the same period last year.
The company expects the full year adjusted operating cash flow to be higher than 2017, within the targeted £2.1-£2.3 billion range, and net debt expected to be within the targeted £2.5-£3 billion range for 2018.
Despite the disappointing first half results group chief executive Iain Conn, who took over the company in January 2015, said the big six firm had demonstrated “resilience” from its portfolio of business and said Centrica was on track to achieve the full year group financial targets.
“In a first half in which we experienced rapidly rising commodity prices, extreme weather patterns, continued competitive pressures and ongoing political and regulatory uncertainty, Centrica demonstrated resilience from its portfolio of businesses.
“We delivered stable gross margin and earnings before interest, taxes, depreciation, and amortisation (Ebitda) relative to 2017 and adjusted operating cash flow of £1.1 billion.
“We are on track to achieve our full year group financial targets and expect to maintain the full year dividend per share at its current level, subject to delivering adjusted operating cash flow and net debt in line with our target ranges.”
During a media briefing Conn raised concerns that the company had about the impending energy price cap.
He said: “There are big issues in terms of the level playing field in the market already and the big question is how will that work with a price cap?
“Different energy suppliers have got different cost bases. It’s a really challenging task for Ofgem.”