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Centrica, the owner of British Gas, swung back into the black last year, but operating profit at its business supplying UK homes fell as challenger electricity and gas suppliers succeeded in attracting customers away from the “big six” utility companies.
The group on Thursday posted a pre-tax profit of £2.2bn for 2016 from a £1.1bn loss the previous year. In 2015, Centrica’s profits were dragged down by a large writedown in the value of its assets, to the tune of nearly £2bn.
Group revenue dipped 3 per cent to £27.1bn, slightly below analysts’ forecasts for revenue of £27.7bn. However, adjusted operating profit – the measure often focused on to give a clearer picture of underlying trading – came in at a better-than-forecast £1.5bn, up 4 per cent year-on-year.
Adjusted operating profit at Centrica’s UK home business fell to £810m from £880m in 2015 – an 8 per cent dip – as British Gas suffered a 3 per cent reduction in UK energy supply accounts in the first half of the year.
By the second half, however, the group had managed to staunch the flow of customers choosing to switch to other suppliers as it launched new offers. Including British Gas’s Ireland business and its division supplying UK businesses, however, adjusted operating profits rose 1.6 per cent to £906m.
Centrica has maintained the full-year dividend at 12p a share but has promised a restoration of a progressive dividend when net debt falls to a range of £2.5bn-£3bn, a level it is targeting by the end of 2017. Net debt at the close of 2015 was £3.5bn, down 27 per cent on the prior year.
However, analysts at Jefferies expressed disappointment at the “unexpected announcement” that there would be no dividend growth this year.
“This gives downside to consensus dividend forecasts,” they said in a note.
Centrica reports financial results at a delicate time for UK energy companies. There are fears the UK government could further clamp down on the sector after three of the big six – Npower, EDF Energy and ScottishPower – announced rises in UK domestic energy bills this year.
Iain Conn, chief executive of Centrica, said:
2016 was a year of robust performance and progress in implementing our customer-focused strategy.We delivered our key objectives including improved customer service and more innovative offerings and solutions – while repositioning the portfolio, building capability and driving significant cost efficiencies. 2016 was a busy year for the team, but we have delivered a lot, and Centrica enters 2017 a stronger company – with encouraging underlying momentum and positioned to deliver longer-term returns and growth.
Centrica has been scaling back on exploration and production activities to focus on its customer-facing businesses under Mr Conn, who took over as chief executive in January 2015.