British Gas owner Centrica has reported a 20% slump in earnings at its residential supply arm and raised the prospect of further tariff hikes as it said wholesale prices have continued to surge.
The group’s consumer arm saw underlying operating profits fall to £430 million for the six months to June 30 after it was hit by last year’s pre-payment price cap, the ongoing loss of customers and rising wholesale energy prices.
More than four million British Gas customers were hit by a price rise at the end of May, but Centrica said wholesale costs had risen further since then, prompting competitors to announce recent hikes.
It said: “We are keeping the movement of wholesale energy prices and their impact on our cost of supply under review.”
The group’s half-year results showed it lost another 341,000 UK household energy accounts in the first half as customers continued to switch away to smaller competitors.
But it said this also included 50,000 pre-payment accounts after the Government imposed a pre-payment price cap last April and insisted the overall customer exodus has slowed in recent months.
Overall, Centrica group-wide underlying half-year operating profits fell 4% to £782 million.
It said cost-cutting targets were on track to make £200 million of savings in 2018, which will see around 1,000 jobs axed as part of an overall plan to trim its workforce by 4,000 by 2020.
The majority of the cuts are affecting both its UK home and business units.
Centrica also gave an update on the impact of the Government-enforced price cap set to be introduced on standard variable tariffs (SVTs) later this year, revealing it still has 3.4 million customers on these deals.
But it said this has reduced from 4.3 million since the start of the year, while it also has around 250,000 customers on its new fixed-term default temporary tariff.
Group chief executive Iain Conn said: “In a first half in which we experienced rapidly rising commodity prices, extreme weather patterns, continued competitive pressures and ongoing political and regulatory uncertainty, Centrica demonstrated resilience from its portfolio of businesses.”
He added: “We continue to make progress on implementing our strategy. We have developed new propositions and delivery capabilities in both customer divisions and our cost efficiency programme is on track.
“Although we are awaiting the final outcome of regulation to impose a temporary cap on all default tariffs for residential customers in the UK, we have plans in place to manage this.”