Centrica continues to face ‘tough’ trading conditions

Centrica says it is continuing to face tough trading conditions as a result of the pandemic but added that its restructure remains “on track”.

In a trading update issued ahead of its annual general meeting this morning (10 May) the company said the factors impacting its 2021 outlook remained “broadly unchanged” since its preliminary results in February in which it announced a £360 million loss.

The British Gas-owner said electricity demand from its UK business customers was down by around 15 per cent while residential boiler installations decreased by 11 per cent compared to Q1 2020. It added that non-essential service visits were postponed to prevent the spread of Covid-19.

Last month the bitter dispute between Centrica and the GMB Union over the former’s restructure plans came to an end, following the longest strike in the company’s history.

Centrica said its restructure was “on track” and added that it continued to expect year-on-year operating cost savings of more than £100 million in 2021.

Elsewhere the company revealed it reduced its group net debt by £2.5 billion to £500 million during the first quarter of the year. This includes the impact of net proceeds from the sale of its North American retail arm, Direct Energy.

The company declined to provide any specific group earnings or cash flow guidance for the year, citing the ongoing uncertain outlook. It is due to release its interim results for 2021 on 22 July.

In a report responding to the trading update Martin Young, senior analyst at Investec, said: “Although we did not expect guidance, the lack of commentary around the ongoing pensions triennial review, customer numbers, commodity price strength, and Spirit disposal plans, is disappointing, although likely to be a consequence of a company not wanting to over-promise and under-deliver. Today’s statement is unlikely to move the dial.”

Centrica chief executive Chris O’Shea said: “As expected, trading conditions have remained tough in the year to date. However, the modernisation of our group remains on track and the difficult, but necessary process to move colleagues onto new terms and conditions is now complete.

“We are pleased that 98 per cent of UK colleagues have accepted the new contracts which will enable us to better serve the needs of our customers.

“Although the external environment remains uncertain, our tight focus on cash and on fixing the basics across the group leaves us well placed as we continue the turnaround of our company.”