Centrica said today that group pre-tax profits slipped 5% to £936m in the first half of the year, as the fall in commodity prices took its toll on its gas production arm. However, it was a much happier story at British Gas, its residential supply division, where profits jumped a massive 80% to nearly £300m. Its big price hikes of last year, just as the weather turned cold, may have driven a few customers to other providers; but it also meant that everyone else shelled out much more on bills than the previous year. Still, at least these healthy profits make it more likely that we’ll see some price cuts in time for the winter…
Centirca said today that British Gas actually ended the year with fewer residential customers than it had at the start (15.6m as opposed to 15.8m), in most cases because the steep price increases drove them to other providers. However, since it started to cut prices again in January (a 10% drop, followed by another 10% drop in May) customers have started to trickle back, with 6,000 signing up during the first six months of 2009. And those that were too loyal (or more likely, too lazy) to switch were clearly paying much higher bills, since overall revenues jumped from £10bn to £11.7bn.
So Centrica boss Sam Laidlaw will have enjoyed that cold snap earlier this year. Instead, his major concern lately will have been its upstream gas production activity, which was hit by the fall in energy prices. But he’s continuing to invest in the area, in the hope of making Centrica less reliant on the fluctuating wholesale markets: he’s currently negotiating a stake in British Energy, and trying to buy North Sea operator Venture Productions for £1.3bn (although his advances are getting very short shrift from the firm’s management).
Still, with British Gas churning out profits like this, industry watchers have decided that there must be scope for some price cuts. But perhaps we shouldn’t get too excited just yet. Laidlaw warned that prices could yet go up again – particularly if Russia and the Ukraine decide to have another spat, which pushed up wholesale costs last year. And our gas suppliers seem to be much more assiduous about tracking prices when they’re going up than when they’re coming down - otherwise we wouldn't see such huge profit jumps...
In today's bulletin:
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Profits slump but share price rises at BT
Centrica cools but British Gas on fire
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