British gas owner Centrica to cut 4,000 jobs as profits tumble

British Gas
British Gas owner Centrica's profits have slumped

The boss of British Gas owner Centrica attacked the Government’s cap on energy tariffs this morning as the company revealed plans for 4,000 job cuts following a customer exodus and a drop in annual profits.

Centrica lost 1.4m UK domestic customers in 2017, 10pc of the total, but blamed its declining earnings on problems in its commercial division, particularly in North America.

The energy provider has already scrapped 6,000 roles in a battle to remain profitable in the face of tighter regulation, mounting competition and rising costs. After trimming costs by around £750m since 2015 it now plans to find another £500m of annual savings by 2020.

Iain Conn

The FTSE 100 company’s chief executive Iain Conn said just over half of the job cuts would be in the UK, where most of its 35,000-strong workforce is based.

A combination of "political and regulatory intervention in the UK" and the profits slump in North America had “created material uncertainty around Centrica”, he said.

"Although we delivered on our financial targets for the year, this resulted in a very poor shareholder experience," he said. "We regret this deeply, and I am determined to restore shareholder value and confidence."

The Government announced plans towards the end of last year to cap so-called standard variable tariffs, which customers are forced to pay if they fail to switch providers or negotiate a new tariff once their fixed deal expires.

In response, Centrica and its fellow “Big Six” suppliers E.on and Scottish Power said they would scrap the tariffs altogether.

The GMB union condemned the job cuts, which it said were an “inevitable” consequence of Mr Conn’s attempts to keep shareholders happy.

One of its leaders, Stuart Fegan, said: “Iain Conn must immediately learn from the failure of other, now departed, battlefield generals that you cannot cut your way out of a crisis.”

Centrica’s pre-tax profits were all but wiped out in 2017, down 93pc to just £142m, partly due to massive writedowns in its exploration and production business.

Its adjusted operating profit, stripping out those and other one-off costs, was down 17pc to £1.25bn, while revenues grew 3pc to £28bn. There had been speculation Centrica would cut its dividend, but it held steady at 12p per share.

Centrica’s shares have been in decline since 2013, falling to their lowest point since 1999 earlier this month, but were up 6.2pc to 140p in afternoon trade.

Neil Wilson, an analyst at ETX Capital, said: “While this mea culpa from Conn looks bad, it was all fairly well guided in November, hence why the shares are responding positively this morning to news that Centrica plans to ramp up its cost-savings programme.”

Centrica said it would make £200m worth of cuts in 2018, with the loss of 1,000 jobs, maintain net debt of between £2.5bn and £3bn and pay another 12p dividend at the end of the year.  

Analysts at Deutsche Bank said Centrica was “doing its best to cope” with market pressure and government interference, but that the number of customers it had lost was “alarming”, adding: “We continue to believe retail disruption and regulation will overwhelm self-help and force another dividend cut”.

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