British Gas owner Centrica says it will beat targets after cost cuts

British Gas owner Centrica has upgraded its profit outlook after cost cuts and strong trading, a day after it emerged that three-quarters of its customers are on expensive variable tariffs.

Despite volatile energy markets, Centrica now expects adjusted earnings per share of 16.5p this year and adjusted operating cashflow of £2.4bn to £2.6bn, up from a previous estimate of more than £2bn.

Its shares were the biggest risers on the FTSE 100 index, gaining almost 3% to 225p.

An energy league table published by the watchdog Ofgem on Wednesday showed that 74% of British Gas customers (6.6 million people) are on standard variable tariffs, and pay an average annual bill of £1,044. This is £129 more expensive than the company’s cheapest tariff.

British Gas, Britain’s biggest energy supplier, recently said it would freeze prices until March but consumer organisations said this was not enough and warned that price rises of up to 10% were likely after the end of the winter.

Energy companies have repeatedly been accused of profiteering and are under growing pressure from the government to treat their loyal customers better.

Centrica has slashed more than 3,000 jobs in an attempt to save £750m a year. More than £300m of that has already been achieved and operating costs are expected to be lower this year than in 2015.

Iain Conn, Centrica’s chief executive, said: “Our performance in the second half of the year has been strong and we expect to exceed our 2016 targets. We have made considerable progress in reshaping our portfolio and capabilities to deliver a robust platform for customer-focused growth. The Centrica team has performed very well in extremely difficult circumstances.”

Neil Wilson, a senior market analyst at ETX Capital, said: “Its upbeat trading statement today shows UK home energy accounts are virtually unchanged since the half-year update. That marks a fairly important milestone after it lost 400,000 customers in the first half – 3% of its base. Improvements in customer service seem to be paying off.”

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