18th Apr 2016 10:27
LONDON (Alliance News) - UK power company Centrica PLC on Monday said it is on track to meet its targets for 2016 following a solid performance in the first quarter but said it saw a fall in domestic energy customers in the period as customers rolled off fixed-price deals.
Its shares were down 2.4% to 232.70 pence, the worst performer in the FTSE 100 late morning.
Centrica, which has both upstream and downstream oil and gas operations and which runs the British Gas consumer energy business, said it expects to deliver GBP200.0 million in efficiency savings in 2016 as part of its plan to cut GBP750.0 million in costs out of the business.
The company anticipates its operating cashflow for 2016 will be in excess of GBP2.0 billion, while group capital investment will total no more than GBP1.0 billion, half of which will be spent on exploration and production.
Like-for-like operating costs are set to be lower in 2016 year-on-year, Centrica said, and it said around 3,000 jobs will be cut across the business over the course of 2016, 800 of which were cut in the first quarter to the end of March.
However, while group cost-cutting efforts remain on track, Centrica said its number of UK home energy supply accounts shrank by 1.5% in the first quarter, primarily due to long-term contract churn. This translates to loss of around 220,000 customers.
It expects to launch new customer propositions in the second quarter and said its third gas price reduction since the start of 2015 came into force in March.
Centrica said its Boiler IQ connected boiler offering launched in March and said it has seen strong demand for its connected home offerings, including the Hive thermostat. Boiler IQ will self-identify issues and alert engineers to possible faults with home boilers, while Hive allows homeowners to control heating and hot water from their smartphones.
The group added it has now installed 2.25 million residential smart meters in the UK and remains on track to have 3.0 million installed by the end of 2016.
Centrica said its UK business, which includes British Gas, returned to profit in the first quarter, while its North American energy supply business performed well against unseasonably warm winter weather.
The group added its exploration and production arm performed well in the quarter and is operating efficiency within the low oil price environment.
Centrica also said it has submitted its formal response to the UK Competition & Markets Authority's investigation into the UK energy market, published in March.
In its report, the CMA, the UK's competition watchdog, claimed the Big Six energy suppliers have been taking customers for granted after having a stranglehold on the market for years, but encouragement by the regulator Ofgem and the government has seen increasing numbers of independent suppliers enter the market since 2015.
The CMA wants a price cap to be introduced for the 4.0 million households in the UK that use prepayment meters, claiming the cheapest deal available to them is around GBP300 per year more than the cheapest deals on offer to customers paying by the more traditional methods of credit or direct debits.
In addition, the CMA wants the 700,000 households with an Economy 7 meter, which offer electricity at night at around a third of the average price of electricity prices during the day, to switch to cheaper single-rate tariffs without requiring a meter replacement.
"We continue to make good progress in implementing our strategy, and with improving levels of customer service, good operational performance, lower costs, and the launch of new products to help customers manage their energy usage, we remain on track to deliver against our 2016 targets," said Iain Conn, Centrica's chief executive.
The trading update coincides with Centrica's annual general meeting, at which shareholders are expected to sound a note of protest against the pay package given to Conn, which amounts to around GBP3.0 million for 2015.
A third of investors in Centrica voted against his remuneration package at its annual general meeting last year, complaining about the amount the board was being paid at the same time Centrica was cutting its dividend payouts.
Centrica cut its dividend again for 2015, as earnings were dragged down by its upstream unit amid the depressed conditions in the oil and gas industry.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
Centrica