The owner of British Gas, Centrica, has witnessed its shares spike this month after confirming that it’s earnings were firmly on course despite the sinking prices of energy. However, the energy company did warn that the profit margins of its UK residential arm would suffer during the second half of this year after it cut gas prices by 5 per cent back in August, the second price cut of the year.
Industry analysts anticipate that the company will make between £1.1 billion and £1.4 billion in pre-tax profit, having made £1.4 billion in the previous year. The company itself did not give an estimated figure, but did say it anticipated to make £2 billion in cash flow for adjusted operations this year. The company, which is the largest energy supplier in Britain, also confirmed to the media that it was on track to cut capital spending below the previous target that it had been set, which was £1.05 billion. The company’s results for the full year will be unveiled on the 18th February 2016.
The Chief Executive of Centrica said that he was pleased with the progress of the company since they announced a new strategy in July. He added that 2015 has been a difficult year for the company, with challenging factors outside of the organisation’s control. Under his watch, he believes that Centrica is establishing a more solid base to be able to deliver excellent service to both customers and shareholders. He added that the company was seeing performance improvement across all divisions and that he has ‘concrete’ plans for executing the strategy.
Centrica also announced that the amount of customers with accounts remained unchanged ever since the middle of the year. Shares at the moment are up by two percent, or 5.1p, having dropped around 23 per cent this year as a result of falling gas and oil prices, which have in turn hurt both the oil production business and led to the company cutting energy bills.
In the British Gas business division, the company has encountered problems with their billing system, for which it said it would be experiencing a small loss for the year. Back in February, it cut its dividend, dampening any expectations for higher profits because of tumbling gas and power prices combined with a weak demand for them.
One energy industry expert from USwitch.com said that although British Gas was the only one of the big six energy providers to reduce prices twice this year, it is still an issue that the combined cuts have only lowered duel fuel energy bills by a small 6 per cent. He said that given the fact wholesale energy prices are at the biggest low for five years, he believed consumers should be witnessing a cut in their energy bills by at least double figures. He added that in light of the share spike, British Gas should ‘lead by example’ and reduce prices once again by 5 per cent to both ther standard gas and electricity tariffs.
The industry expert rounded off by saying that there is still a £288 a year difference between the British Gas standard tariff and the cheapest deal on the market.