LEAKING CUSTOMERS
Enery giant warns over warm weather
Energy giant loses 823,000 accounts between June and October this year
SHARES IN British Gas owner Centrica tumbled 15 per cent after it announced the loss of another 823,000 household energy accounts since June and warned that warm weather will hit earnings.
The decision by British Gas to raise electricity prices by 12.5 per cent in September annoyed customers and contributed to the exodus between the end of June and end of October.
All of the UK’s Big Six energy providers have been under pressure from smaller rivals as customers increasingly switch to get the best deal.
British Gas lost 387,000 domestic energy customers in the first six months of the year.
The FTSE 100 firm said results would also be hit by problems in its North American arm.
Centrica said annual earnings in its British Gas business would only break even due to the account losses and a drop in demand for energy in the recent unseasonally warm autumn weather, although it said cost cutting had helped limit the profit impact.
Centrica group chief executive Iain Conn 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.”
Its update comes just days after British Gas moved to scrap its standard variable tariffs (SVTs) for new customers ahead of Government plans to impose a price cap on the costly energy products.
Around 4.5 million of Centrica’s customers – or about 60 per cent – are currently on SVTs, with 70 per cent of profits coming from the company’s SVT customer base.
Centrica said 150,000 of the UK accounts lost since the end of June were down to market switching trends following the tariff rise.
The bulk – 650,000 – were as a result of so-called collective switching, where large groups of households join forces with a new provider to get the best deal, as well as falling numbers on its white-label and pre-payment tariffs.
Centrica also warned of over a £76m pre-tax hit in its North American business division, with full-year profits in the unit set to tumble to £86m.
Analyst Ken Odeluga at CityIndex said: “Centrica has handed wary shareholders a good reason to pull the plug after a shock profit warning.
“In its third quarter trading update, usually a dull one, the group reports 823,000 customers left British Gas, over four months to the end of October.
“The exact link to the profit downgrade is unclear, but the group now envisages full-year earnings per share coming in at 12.5p, around 17 per cent lower than expected.”
Centrica has handed wary shareholders a good reason to pull the plug. Ken Odeluga, analyst at CityIndex