Centrica posts £3.3bn profit

Centrica has posted a £3.3 billion profit for 2022 after its generation arms benefited from soaring commodity prices.

Adjusted operating profit rose 250% on the £948 million it posted in 2021 and exceeds the company’s highest profits to date – of £2.7 billion in 2012.

In its preliminary results for 2022, the British Gas owner revealed that it plans to extend its existing £250 million share buyback programme by another £300 million. That equates to the company buying back 10% of the total issued share capital.

Despite the strong overall performance from the group, retail arm British Gas saw its profits dip by £46 million to £72 million.

Centrica said the loss reflected the financial support it offered to customers to mitigate the impacts of the energy crisis, along with the repayment of furlough funds received in 2020.

Other reasons include rising wholesale commodity prices which meant default tariffs remained cheaper than new fixed-price tariffs, meaning more customers were on default tariffs than it had hedged for.

“This required us to purchase more commodity at prices above the allowance in the price cap in Q1 2022, although with allowances introduced into the price cap from April 2022 to allow recovery for suppliers, the impact was broadly neutral in the year,” it said.

Warmer than normal temperatures in the first half of the year resulted in lower demand and meant the company could sell surplus gas and power back into a high-priced market at a profit.

Although temperatures remained warm in H2 2022, there was a “material fall in near-term commodity prices” to levels below which it had forward purchased gas and power, resulting in it selling the surplus at a loss.

Additionally soaring bills resulted in a change in consumer behaviour, leading to a reduction in underlying consumption.

However, the company added that overall, “the net impact of these factors on adjusted operating profit was slightly positive”.

British Gas’ domestic customers increased by 256,000, or 4%, to more than 7.5 million. This included a net increase of 158,000 customers from Together Energy, as well as an organic net growth of 98,000 in the year.

It also saw a 25,000, or 5%, increase in the number of small business customers to 480,000, including organic net growth of 18,000.

Cost per customer (excluding bad debt) fell by £1 to £83, despite the impacts of inflation, which the company said was a £3 impact of dual running IT costs and its investment in additional call centre agents.

Centrica chief Chris O’Shea revealed the supplier made an £8 post-tax profit per customer, but added that this was down from £13 last year.

Furthermore, British Gas accounted for the majority (£213 million) of the group’s £235 million increase in bad debt. A spokesperson would not confirm how much bad debt Centrica had in total.

British Gas Services & Solutions

Elsewhere British Gas Services & Solutions saw improved operational metrics but “weak commercial performance”, with increased challenges from cost of living and inflationary pressures.

This arm of the business made a £9 million adjusted operating loss compared to the £121 million profit it made the year previously. Customer numbers also dipped to just over 3.1 million, from 3.4 million.

Centrica said a number of factors seen in H1 including an increased workload after customers chose to have non-urgent work completed that was delayed during the pandemic, temporary higher absence rates and an increase in the payment of compensation to customers negatively impacted adjusted operating profit by approximately £25 million.

Investments in increasing the number of engineers and IT upgrades resulted in a negative impact on operating profit of approximately £45 million, while a further impact of £50 million was due to inflationary costs and £60 million due to lower customer numbers, coupled with customers choosing lower priced products.

O’Shea said: “Our performance in 2022 demonstrates the benefits of our balanced portfolio and our strong balance sheet.

“The energy crisis and cost of living pressures have created a challenging environment for customers and communities, but we have been able to provide much needed stability and support.

“We invested £75 million in supporting our energy customers in 2022, which was greater than the £8 post-tax profit per customer earned by British Gas Energy.

“Whilst customers may see some relief given recent easing of prices, it remains clear that some will continue to need help and we will do what we can to support them in the year ahead.”