Centrica profits to drop, analysts warn

Centrica, which owns Britain’s biggest household energy supplier British Gas, is expected to report profits of about £1.3 billion, down from £1.5 billion last year. Analysts think profits from its core British Gas household supply business also are likely to have fallen.

This comes despite the company’s shedding of British and American business customers last year, and the well-documented energy price hike of last summer – British Gas lost more than 1.2 million UK domestic customers (more than 8 per cent of its customer accounts) after raising standard electricity prices by 12.5 per cent.

Profits at Centrica’s North American arm could also fall by as much as £140 million for the full year, following a slump in its business-to-business operations, which it said was due to tough competition and warmer-than-expected weather.

Now analysts at Morgan Stanley expect this year’s dividend to pay out 12p per share, but lowered the forecasts as they “assume a lacklustre rebound in 2018”.

This follows a profit warning last November that stunned the market and sent shares tumbling to levels not seen since 2003, leaving analysts to question the credibility of the company’s management.

Centrica chief executive Iain Conn is under pressure from investors to slash costs at British Gas, raising fears of more job losses as he fights to shore up Centrica’s dividend. He has already cut 5,000 jobs and about £650 million from annual operating costs over the past two years, almost completing an efficiency drive that had originally been scheduled to run until 2020.

But despite the cut backs, analysts question whether Centrica will be able to cover its dividend next year if a proposed cap on standard energy tariffs squeezes its profits.

Centrica has been approached for comment.