ENERGY giant Centrica said yesterday the mild weather coupled with a spike in global gas prices crushed profits at its residential arm by 30 per cent despite controversial price hikes for consumers.
The group, which trades as British Gas and Scottish Gas, said the unseasonably warm spring and autumn led to a 21 per cent drop in average household gas consumption and a 4 per cent fall in electricity demand last year.
At the same time the Arab uprisings and the shutdown of nuclear plants in the wake of Japan’s Fukushima disaster in March pushed wholesale gas prices up by almost a third.
The residential arm – still the UK’s biggest gas supplier despite shedding 97,000 customers – made a £522 million profit last year, down from £742m in 2010.
The slide in profits came despite the energy supplier hiking gas and electricity bills by an average of 18 per cent and 16 per cent respectively in August. It has since announced a 5 per cent cut in electricity prices in January.
However, Centrica reported a 1 per cent increase in group adjusted operating profits to £2.41 billion as its upstream gas and oil production and electricity generation businesses saw profits jump 33 per cent to £1bn.
Some of the fall in profits in supplying gas and electricity to households was also clawed back through residential services such as boiler repairs, where profits were 10 per cent higher at £264m. The company hiked its full-year dividend by 8 per cent to 15.4p a share.
Chairman Sir Roger Carr said: “2011 was a year of turbulence. At the beginning of the year there was little indication how dramatically events would unfold for the world in general or for Centrica in particular.”
He said rising gas prices caused “escalating losses” at British Gas, forcing the need for price increases that he admitted “would be very difficult for hard pressed customers already struggling in a severe economic downturn”.
In order to minimise the price hike whilst preserving the business’s 6 per cent margin, management cut 2,300 roles at the group, brought in changes to engineers’ timetables and lowered the firm’s future pension costs.
The company said it still faced many of the same “headwinds” as last year but planned to grow earnings with a further programme of cost efficiencies.
Graham Spooner, an analyst at the Share Centre, said that Centrica was geared towards income, with a yield of more than 4 per cent, and investors would be pleased to hear the company had increased its dividend.
He said: “The share price has underperformed in the last 12 months and at this level it looks more attractive for income seekers. We continue to recommend Centrica as a ‘buy’ for investors looking for a low-risk income stock.”