Centrica announces billion pound strategy swing towards retail

Centrica is poised to move ahead with a major job cull as part of a multi-billion pound strategy shift away from its loss-making upstream gas and power businesses and towards core customer-facing activities.

The move will result in a signifincat blow to the company’s workforce which will see 6,000 jobs slashed before subsequent job creation of 2,000 brings the net impact to a headcount reduction of 4,000.

The company concluded its six month strategy review on Wednesday, announcing plans for a raft of investments in its customer facing businesses totaling £1.5 billion over the next five years with a focus on energy supply, services, distributed energy and power, the connected home and energy trading.

“It’s the way the world is going,” said chief exeucitve Iain Conn in press call following the report publication.

The company will capitalise on the “increasing trend” in supplying business energy customers with advanced efficiency services and will also adapt to the way its residential customers are shifting towards the use of integrated home technologies, Conn said. 

The shift towards its “strength” as a customer-facing business will be underpinned by a radical departure from the beleaguered E&P and generation business units which have come under increased pressure in recent years.

Conn said the strategy will provide a “clear direction” for the business which has suffered heavy losses on its upstream activities while the supply and services business units have posted better than expected profits.

Centrica’s half-year financial results show that Centrica Energy’s operating profits plummeted from £526 million to £116 million, with heavy losses felt on its gas business which fell from £465 million to £48 million over the same period.

At the same time British Gas posted first half operating profits of £656 million this year, up from £455 million in the first half of 2014 as a result of higher temperature-led energy use and lower policy costs.

“Centrica is an energy and services company,” said Conn of the company’s new direction.

“Our purpose is to provide energy and services to satisfy the changing needs of our customers, and as such we will focus our growth ambitions on our customer-facing activities,” he added.

The company will reduce its capital intensity from its E&P and central power generation business units by £1.5 billion over the next five years, with £1 billion to be released through divestment from E&P and wind assets in the next two years.

“What this review is signaling is that central thermal generation is not a focus for us,” Conn said in an investor call.