Octopus Energy has made its first ever full-year profit since launching eight years ago.
The retailer generated an operating profit of more than £243 million over the 12 months the end of April 2023, compared to a £188 million loss over the previous year.
In its last set of results, the company claimed it would have recorded a profit had it not decided to provide financial assistance to help customers struggling with high energy bills. In its latest update Octopus said it had continued to sacrifice profits in 2022/23 to keep down energy bills – voluntarily absorbing £69 million of energy costs; tripling its financial hardship to £15 million (since doubled again to £30 million); and sending out over 38,000 (now 50,000) free electric blankets to households in need.
The company’s operating margin nevertheless rose from -4.8% to 2.6%, putting it slightly above the target in Ofgem’s price cap methodology of 2.4%. Octopus Energy Group chief executive and founder Greg Jackson said this “modest profit” was delivered by achieving better efficiency than the rest of the sector.
Octopus Energy reported pre and post-tax profits of £227 million and £181 million respectively, compared to losses of £181 million and £161 million in the previous financial year. It said its cumulative losses from energy retail in the UK currently stand at £71 million since 2016.
The company saw a huge increase in revenues to around £9.44 billion, including around £5.04 billion of domestic electricity sales and £4.17 billion of domestic gas sales, mainly due to high energy prices. Its sales amounted to £3.91 billion in 2021/22.
The total includes £2.58 billion received through the government’s Energy Price Guarantee and Energy Bills Relief Scheme, as well as £1.5 billion from its Energy Bill Support Scheme.
The rise in revenues was also driven by organic growth in Octopus’ customer base, which increased by almost 286,000 to 3.472 million by the end of April 2023.
This does not include the 1.5 million customers of Bulb, which Octopus Energy Group acquired in December 2022 after the supplier went into special administration. The proceeds from these customers were reported as part of the results for the parent group, which also reported its first ever profits in 2022/23.
The group went from a loss of £180 million to an operating profit of £265 million. It reported pre and post-tax profits of £283 million and £202 million respectively, compared to losses of £168 million and £141 million in 2021/22. Group sales almost tripled from £4.22 billion to £12.54 billion.
The total number of customers supplied by Octopus Energy grew from 3.4 million to 5.2 million. Octopus said 4.7 million of these customers were located in the UK, giving it the second largest market share in the country at 17%.
The Bulb customers were all migrated to Octopus’ systems by June 2023. As part of the acquisition deal, the government agreed to pay spot market prices for energy used by these customers until Octopus had fully hedged for their demand. In exchange, Octopus agreed to pay the government for this energy at the wholesale rate set by the price cap.
As a result of falling wholesale prices over the winter of 2022/23, Octopus said the government is expected to see a net benefit from this arrangement of £1.2 billion.
Octopus Energy Group also includes Kraken Technologies – the company created to market its proprietary billing platform, Kraken, to other utilities around the world. Following its adoption by EDF and Eon, Octopus said the platform is now used to serve around half of all households in the UK.
The total number of live accounts on the platform grew from 16.1 million to 21.8 million, including 12 million of external accounts. The number of contracted accounts reached more than 34 million by the end of April and now stands at over 54 million.
Octopus said contracted recurring annual revenues from Kraken Technologies increased from £80 million to £127 million in 2022/23.
Meanwhile, the group’s generation portfolio grew from 2.76GW to 3.26GW. The total number of staff across the group grew by nearly 1,900 to roughly 4,700 and now stands at almost 6,800.
Commenting on the results, Jackson said: “Our group spans a wide array of activities across many countries, but as a company which directly supplies millions of household and business customers, our commitment to caring for them and our staff has been more important than ever.
“I’m tremendously proud of the way our team has tirelessly supported customers and clients through the energy crisis.
Stuart Jackson, co-founder and chief financial officer for Octopus Energy Group, said: “Our intense focus on prudent risk management and the cost savings delivered by Kraken allowed us to deliver a responsible 1.6% profit margin, whilst devoting significant financial and human resource to helping customers through the crisis.
“With the backing of major investors from the UK, Australia, Japan and Canada we have a strong balance sheet and not only manage a financially robust company, but can continue to invest in lower prices, international growth and critical innovation in sectors such as heat pumps, EVs and smart grid technologies.”