British Gas owners Centrica recently announced that they had lost an astonishing 340,000 accounts in the first 6 months of this year after announcing a price increase that would affect 4 million homes across the country.
Centrica reported that profits for had fallen by 20% to £430m, which caused shares to drop 5% in trading following the news. Despite what would appear to be catastrophic losses, its chief executive Iain Conn said that the rate at which they were losing accounts had actually halved since 2017. In the second half on 2017 alone Centrica lost 823,000 customers, so they recent news will probably come as almost a relief, amidst hopes that the recent freefall will be beginning to stabilise.
Conn said: “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 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.”
Centrica announced in May that they would be slashing 1,000 jobs in 2018 alone, with 3,000 expected to have been cut in total by 2020. The cited changes in the political climate as well as new regulations that have been damaging their profitability. They have also been affected by the steady rise in popularity of smaller independent energy suppliers. Recent surveys have shown that many ‘challenger’ companies provide a much better service that any of the ‘big six’.
George Salmon, an equity analyst from Hargreaves Landsdown said: “Centrica’s standard variable tariff currently has bills of around £1,100 a year on average.
“While that means the group is far from the worst offender in the eyes of the regulator, it’s not beyond the realms of possibility that Centrica will have to cut prices by 5-10% at a time when wholesale energy costs are rising. That’s not a good combination for profits.”
British Gas is by a fair margin the largest energy supplier in Britain and currently has around 3.5 million customers on standard tariffs alone. This number has fallen, however, from 4.3 million at the beginning of 2018, after British Gas began informing customers aware of cheaper offers that they have available. This effort precedes a cap on the most costly tariffs which will be put into place at the end of this year. It’s still not entirely sure exactly how the price cap will work as it is subject to market conditions but the initial plan will be set out in August, with energy regulator Ofgem reviewing and altering it every 6 months.