20th Feb 2014 08:35
LONDON (Alliance News) - Centrica PLC Thursday said pretax profit fell significantly in its full-year 2013 as increased costs offset higher revenues ahead of a tough 2014, specifically for British Gas.
The major energy supplier said its pretax profit fell 32% to GBP1.65 billion for the twelve months from GBP2.42 billion in the previous year.
The company - which owns British Gas - said its sales increased 11% to GBP26.57 billion from GBP23.94 billion in 2012 as revenue from its British Gas operations rose on higher UK wholesale gas and electricity prices. Revenues increased at its Direct Energy operations due to higher gas and power volumes and the acquisition of Hess Energy Marketing in November, and revenues increased at Centrica Energy due to higher gas and liquids production after asset puchases in 2012 and better prices in Europe.
The company said revenues at its Centrica Storage business fell slightly, due to lower seasonal gas spreads and a higher proportion of storage capacity sold internally.
Centrica was hit by significantly higher cost of sales, which increased 16% to GBP21.18 billion from GBP18.33 billion bringing the company's total full year operating profit down 28% to GBP1.98 billion from GBP2.63 billion.
The company said its second-half pretax profit fell 78% to GBP162 million for the twelve months from GBP751 million the previous year and its second half revenues increased 7.9% to GBP12.92 billion from GBP11.97 in 2012 with 13% higher cost of sales at GBP10.58 billion from GBP9.40 billion bringing the company's second half operating profit down 2% to GBP2.70 billion from GBP2.74 billion.
Centrica said its earnings per share were flat at 26.6 pence as expected, following a profit warning in November by the company which said market conditions remain difficult in business energy supply in both the UK and the US, in UK gas-fired power generation and in UK gas storage.
The company said total profitability at British Gas decreased, with the impact of higher unit tariffs more than offset by increased wholesale commodity, transmission and metering, and environmental costs.
Centrica added that overall profitability in its Direct Energy business also decreased, as increases in residential energy supply costs and residential and business services operating profit, resulting from previous acquisitions and services account growth, were more than offset by decreased profitability in the business energy supply segment, which experienced margin pressure on power sales in a competitive environment.
Furthermore, the company said it expects full-year 2014 group earnings per share to be lower than in 2013 but said that overall 2014 trading is in line with recent market forecasts, with a one-off impact from extreme weather conditions in its Direct Energy sector.
Centrica did however propose a final dividend of 12.08 pence, increasing its full-year dividend 4% to 17.0 pence from 16.4 pence in 2012.
The company added that it expects a tough environment for residential energy supply in the UK due to political and public issues ahead of the 2015 election coupled with increasing costs.
"Market conditions are set to remain challenging in 2014 with margin pressures and unusual weather patterns on both sides of the Atlantic, rising unit costs in the North Sea and weak economics for gas storage and gas-fired power generation," Chief Executive Sam Laidlaw said in a statement.
"However in the short term, we are focused in our downstream businesses on improving service levels, reducing costs and returning to growth through innovation, technology and customer propositions. Upstream, we will continue to drive efficiencies and will be increasingly selective in our investments, focusing on the projects that offer the best returns and the lowest political risk," Laidlaw added.
Centrica shares were trading down 0.2% to 313.52 pence Thursday, after initially dropping when the market opened.
By Tom McIvor; [email protected]; @TomMcIvor1
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