Centrica hit by customer flight
CENTRICA shares plunged to a 14-year low yesterday as the British Gas owner warned of weaker profits after a mass exodus of customers.
About £1.4billion was wiped from its market value as it admitted losing 823,000 UK energy supply accounts in the four months to the end of October.
About 150,000 defected after a price rise in September, while more than 650,000 related to collective switching, where consumers join together to use bulk-buying power to negotiate better deals with rival suppliers.
British Gas leads the market with about 13.1 million accounts, while a proposed merger of the domestic business of two of its “big six” competitors, Npower and SSE, will create a company with 11.5 million accounts.
Centrica warned that operating profit would be lower than expected in its North America and UK business operations, with the former taking a £76million one-off charge and facing “highly competitive market conditions. It is also feeling the heat from warmer than normal weather across October and November.
Annual North America profit is expected to be £140million lower than previously expected, while UK business is targeting break-even, compared with analysts’ forecasts of £40milllion profit. CEO Iain Conn, pictured, said: “Although some aspects of our delivery in the second half of 2017 have been disappointing, I remain encouraged by our progress in implementing our strategy. The balance sheet has been materially strengthened, and we continue to focus on improving our underlying performance.”
He also pointed to efficiency savings for this year approaching £300million, £50million ahead of its target. But investors took fright at the gloomy earnings outlook and shares closed 25¼p lower at 138p.
Broker Jefferies described the UK customer account losses as “staggering” and warned that dividend growth was unlikely this year.
Ken Odeluga, market analyst at City Index, said: “The bad news is now in, but energy market pressures are unlikely to abate in 2018. That suggests another poor price return for the shares next year.
“We also expect the return of vocal investor criticism of Centrica’s retention of capital-hungry and sub-scale exploration and production assets. Signalling a rethink about that division would be one way 2018 could end more positively for the group.”