British Gas profit’s soar while Centrica looks to cut costs: reports

British Gas’ parent company Centrica is this week expected to unveil plans to cut hundreds of millions of pounds in costs, at the same time as revealing soaring profits at British Gas’s residential retail arm.

According to a report by The Telegraph, Centrica chief executive Iain Conn is expected to use an announcement on Thursday to reveal the results of a five-month strategic review that analysts say will focus on trying to save hundreds of millions of pounds a year.

He is expected to announce a departure from further expansion in oil and gas to instead focus on efficiency and growth at British Gas.

The lower price of oil is expected to have wiped out two-thirds of the profits from Centrica’s upstream oil and gas division, where earnings are expected to be just £163 million from the period, down from £465 million a year before.

As a result, Centrica group adjusted profits are expected to be broadly flat, with analysts forecasting they fall 2 per cent to £1.01 billion.

Several analysts have also suggested Mr Conn should scale back Centrica’s attempts to expand in North America. Mr Turner said he did “not think that Centrica is credible as a North American upstream player, despite this being a focus of the previous strategy”.

Exane BNP Paribas’ analyst Iain Turner said British Gas was Centrica’s “main area of strength” strategically.

He said: “We expect to see a renewed focus on this – with a reinvigorated drive to achieve and exploit economies of scale in this activity and leverage Centrica’s leading position in smart meters and connected houses.”

Centrica’s interim results, also due Thursday, are expected to show profits at the supplier’s residential energy supply arm to have risen by almost 50 percent to £394 million in the first half of the year.

Analysts say the rise is due to colder weather than in spring 2014, and is despite a price reduction of 5 per cent being given in late February.

A second 5 per cent price reduction for gas was announced by the supplier earlier this month.