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Jason Butler of NW Brown: Centrica results leave investors cold

PUBLISHED: 05:30 15 August 2018 | UPDATED: 08:06 15 August 2018

Jason Butler of NW Brown. Picture: NW Brown.

Jason Butler of NW Brown. Picture: NW Brown.

Archant

Centrica, owner of Britain’s biggest energy supplier British Gas, saw underlying profits dip in its recent half-year results.

They fell by 4% to £782m in the six months to June 30 which disappointed investors as underlying earnings increased by 3%. Much of the fall in profits came from its consumer business that owns British Gas, with the biggest fall coming from the UK home division.

The Beast from the East cold weather snap resulted in increased energy consumption in the first quarter of 2018, but with it came an additional £15m in call-out costs. The company also announced a 5.5% price rise in April this year due to rising wholesale gas and electricity prices.

Despite an initial fall in the share price following the results, the share price has slowly risen this year, suggesting that investor sentiment may be improving.

Centrica and its peers are also bracing themselves for the price cap on standard variable tariffs (SVT), which is expected to come into force later this year.

The group has been working hard to reduce the number of customers on SVTs, withdrawing the contracts from new business, and reducing the number of customers on such deals from 4.3 million to 3.5 million this year.

Last week management announced that the SVT would be increasing by 3.8% from October, a decision that may have been made to encourage customers on to fixed-term deals, and to help limit the financial impact when Ofgem implements the price cap.

The regulator is expected to announce the composition of the tariff later this month, but the precise level will not be known until October.

• Jason Butler of NW Brown is an EDP Business columnist.

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