Centrica predicts ‘significantly higher’ profits from household energy arm
British Gas owner Centrica forecasts ‘significantly higher’ profits from household energy business
- Centrica told investors the first five months of 2023 were “generally strong.”
- It expects full-year adjusted earnings per share to come in at the high end of projections
- CEO Chris O’Shea’s proposed £4.5m pay package has been heavily criticized
Centrica, the parent company of British Gas, expects to post ‘significantly higher’ profits at its British retail division in the first half of this year.
Centrica told investors on Tuesday that the company has become the boss due to changes in regulations that allow energy suppliers to recover certain costs from sales to customers at capped prices.
The government’s energy price guarantee limits a household’s average annual energy bill to £2,500, but this will drop to £2,074 from the beginning of July due to falling wholesale gas costs.
Outlook: Centrica, the parent company of British Gas, expects full-year adjusted earnings per share to be at the high end of analyst expectations
Centrica said the first five months of 2023 were “generally strong,” thanks to impressive performance from its energy marketing and trading division and “good” availability of its nuclear and gas production and storage assets.
As a result, it expects full-year adjusted earnings per share to be near the high end of analyst expectations of 16.5p to 24.7p.
However, it warned that “uncertainties remain” for the remainder of the trading period, including the impact of weather, commodity prices, the economic climate and government policies.
The company’s trading update came Tuesday ahead of Centrica’s annual general meeting in Leeds, where investors voted in favor of the proposed £4.5 million payment for CEO Chris O’Shea.
Controversy has arisen over the compensation package, which includes bonuses of £3.7m, due to the increase in fuel poverty in the UK due to skyrocketing household energy bills.
The Unite union had urged shareholders to reject it, with general secretary Sharon Graham saying the “obscene bonus is just one glaring example of the epidemic of profiteering plaguing the country.”
Centrica’s profits tripled to a record £3.3 billion in 2022 as gas and electricity prices soared in the wake of the easing of Covid-related restrictions and the Russian invasion of Ukraine.
Prices were further pushed up by low gas storage capacity in the UK, disappointing wind and solar production in 2021 and increased demand for gas from Asia and South America.
O’Shea’s bonus also comes against the backdrop of an Ofgem investigation into British Gas hiring outside contractors who broke into the homes of vulnerable people to forcibly install prepayment meters.
The regulator then introduced a new code of conduct that obliges suppliers and contractors to waive mandatory installations for the ‘highest risk groups’, such as the over 85s and homes with the terminally ill.
Russ Mould, director of investment at AJ Bell, said: “The owner of British Gas is doing little to endear itself to struggling British households, even though shareholders will be pleased as it leads to profits at the top end of the market. expectations. ‘
He added, “Unlike some energy suppliers, Centrica was spared a lot of pain during the energy crisis because it capitalized on its wholesale business.”
Centrica Shares were 1 percent lower at 116.7 pence early Tuesday afternoon, but their value is up about 51 percent over the past 12 months.