British Gas owner Centrica has said a “challenging trading environment” such as the price cap, warmer weather and falling gas prices will impact its financial performance in the first half of 2019.
In a trading update issued before its annual general meeting this morning (13 May) the company blamed the cap as the reason it lost 234,000 British Gas accounts in the first four months of the year.
It added that the number of customer accounts exposed to the default cap “remained broadly flat” over the period.
Centrica also blamed the extension of nuclear power station outages at the non-operated Dungeness B and Hunterston B power stations as being likely to have an impact on its financial results.
The company’s operational performance has been largely in line with the company’s expectations in the first four months of the year and Centrica said it is on track to achieve its yearly group targets.
These include adjusted operating cash flow in the £1.8-£2 billion range, in-year efficiency delivery of £250 million as well as up to 2,000 job cuts across the group.
Last month Centrica announced around 500 jobs in the UK are at risk, with 400 looking likely to go in Scotland due to “growing challenges” including the price cap.
Furthermore the company said it is expected to invest around £1 billion in the group as well as £500 million in non-core divestments and achieve net debt within the range of £3 billion to £3.5 billion.
Also in the update was the fact that Centrica’s Distributed Energy and Power business had increased its gross revenue by 54 per cent in the first four months of the year.
Its Connected Home gross revenue meanwhile was up 70 per cent compare to the same period last year.
In a statement group chief executive Iain Conn said: “Although operational performance has been largely in line with our plans, external factors have presented challenges for Centrica during the first four months of 2019, in the form of the default tariff cap, warm weather, and falling gas prices.
“We have also experienced extensions to nuclear outages. However, we continue to focus on those things we can control and as a result we expect to achieve our 2019 cash flow and net debt targets, while we are making further progress on cost efficiency delivery and on demonstrating margin capture capability.
“We intend to provide a strategic update regarding our portfolio and prospects at the time of our interim results in July.”
Last month it was announced that Conn received a 44 per cent pay rise in 2018 after being awarded two £388,000 bonuses, according to the company’s annual report.
His total pay packet for the year was £2.4 million compared to £1.7 million in 2017. His base salary increased by £4,000 to £940,000.
Unions have urged shareholders to block the pay rise.
Centrica is due to release its interim results for the year on 30 July. Alongside these the company will present a strategic update which will include reflections on the current business portfolio, updated future expectations for the customer-facing divisions and an update to the group’s financial framework.
Centrica reiterated it expects profit to be reduced by £70 million in the first quarter of 2019 due to the introduction of the price cap on default tariffs, which came into effect on 1 January.