Centrica predicts ‘significantly higher’ profits from household energy arm

British Gas parent company Centrica expects to post ‘significantly higher’ profits from its UK retail division for the first half of this year.

Centrica told investors Tuesday that the business has been bossted by regulatory changes that enable energy suppliers to be reimbursed some costs from selling to customers at capped prices.

The Government’s Energy Price Guarantee limits a typical annual household energy bill to £2,500, but this will drop to £2,074 from the beginning of July due to slumping wholesale costs for gas.

Outlook: British Gas’s parent company Centrica anticipates its full-year adjusted earnings per share will be towards the top end of analyst expectations

Centrica said the opening five months of 2023 were ‘strong overall’, thanks to an impressive result from its energy marketing and trading arm, and ‘good’ availability from its nuclear and gas production and storage assets.

As a consequence, it anticipates full-year adjusted earnings per share will be towards the top end of analyst expectations of 16.5p to 24.7p.

However, it cautioned that ‘uncertainties remain’ for the remainder of the trading period, including the impacts of weather, commodity prices, the economic environment and government policy.

The company’s trading update came ahead of Centrica annual general meeting in Leeds on Tuesday, where investors voted to approve the £4.5million pay proposed for chief executive Chris O’Shea.

Controversy has erupted over the compensation package, which contains bonuses of £3.7million, due to the rise in fuel poverty across the UK caused by skyrocketing household energy bills.

Unite the union had urged shareholders to reject it, with general secretary Sharon Graham saying the ‘obscene bonus is just one glaring example of the epidemic of profiteering afflicting the country’.

Centrica’s profits tripled to a record £3.3billion in 2022 as gas and electricity prices soared in the aftermath of loosening Covid-related restrictions and Russia’s invasion of Ukraine.

Prices were further pushed up by the UK’s low gas storage capacity levels, poorer-than-forecast wind and solar power generation levels in 2021, and greater gas demand from Asia and South America.

O’Shea’s bonus also comes against the backdrop of an Ofgem probe into British Gas hiring third-party contractors who broke into vulnerable people’s homes to forcibly install pre-payment meters.

The regulator has subsequently introduced a new code of practice that requires suppliers and contractors to refrain from compulsory installations for the ‘highest risk’ groups, such as the over-85s and homes containing residents with terminal illnesses.

Russ Mould, investment director at AJ Bell, said: ‘The owner of British Gas is doing little to endear itself to the UK’s hard-pressed households, even if shareholders will be pleased, as it guides for profit at the top end of expectations.’

He added: ‘Unlike some utility suppliers, Centrica has been spared much pain during the energy crisis because it benefited from its wholesale business.’

Centrica shares were 1 per cent lower at 116.7p on early Tuesday afternoon, yet their value has expanded by around 51 per cent over the past 12 months.