The owner of British Gas, Centrica, have reported a drop in annual operating profits by 35%, arriving at a total of £1.75 billion. It is largely the result of the warmer weather experienced last year and the worldwide drop in the price of oil. The average household reduced its energy bill by £100.
The total amount made from residential business at British Gas reached £439 million which is 23% less than in 2013. As a result, Centrica has announced the difficult choice to reduce its full-year dividend to 13.5p for 2014. This is down 3.5p per share from 2013. Subsequent to news, Centrica shares fell by 8% this morning.
The chief executive of Centrica, Iain Conn, has stated that due to this plummet in profits they will have to implement cutbacks in costs and investments. British Gas lost around 368,000 people last year as they moved to other suppliers, especially after the price increase BG introduced at the start of 2014. However, they are still the largest energy supplier in the UK with 14.8 million people signed up with them.
In further bad news for Centrica, they have announced the closure of various power stations across the country. These include stations in Lincolnshire at Brigg and Killingholme whilst they have tried to sell units at Humber and Langage but have not received an adequate price from potential buyers.
It has been shown by Energy UK that 41% of the switches in suppliers by customers in the past year have been moves from a large, renowned one to a smaller, more independent provider. The total amount of people that did this reached 1.3 million.
In a statement given by Mr. Conn, he highlighted: ìOther companies are doing the same thing. Itís difficult, but it is what we have to do to position the company sustainablyÖI know how painful it is for our shareholders.î
He also remarked that ì2014 was not the year we had planned it to be. We had the warmest weather on record in the UK, which of course helped our customers. But for us it did impact our profits.î
Mr. Conn emphasized that Centrica would go on ìto face a number of challenges as we enter 2015, particularly the significant further reductions in wholesale oil and gas prices since the middle of December.î
In further announcements, Centrica informed the public that their turnover for the average dual-fuel household was £42 which was down from £52 the previous year. On average, a residential customerís invoice came to £1152 in 2014 where in 2013 it was around £100 more. This comes in the week where the Competition and Markets Authority have announced the benefits many customers have lost by not switching from big energy suppliers such as British Gas.
However, British Gas is benefitting from distinguishing itself from other suppliers through the introduction of smart meters. They announced that they have implemented the facility in a total of 1.3 million households.
Moreover, their Hive technology which gives its users the power to control their thermostat via a remote is getting rave reviews. Data released show that around 90% of people with it would recommend the service whilst 96% state that it gives them greater control of their central heating system.
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