Yahoo Finance Centrica shares suffer biggest one-day fall as British Gas loses 823,000 accounts
Shares in British Gas’s owner, Centrica, have had their their biggest fall in a single day after the company shed 823,000 customers in four months and warned earnings this year would be below expectations.
The UK’s biggest energy supplier said it lost nearly 6% of its customer accounts between July and October, with 150,000 of those heading for the door after the company raised prices for millions in September.
The exodus leaves British Gas with 13.1m accounts, meaning it will still be the market leader even after its rival big six suppliers npower and SSE merge to create a company with 11.5m accounts.
Shares in Centrica closed down more than 15% at 138p on Thursday, one-third below the price at which they were trading before Theresa May first raised the prospect of action on energy bills in October last year. The company’s market value has reverted back to what it was 14 years ago.
Centrica warned that its earnings per share for the year would be 12.5p, one-fifth below what the market had been expecting.
Its operations in the UK and US were blamed for the shortfall. Profits at the company’s North American units are expected to be down £140m for the full year, due to a one-off charge and “highly competitive market conditions”.
Tough competition in the UK means Centrica will only break even, rather than making an expected profit of £37m.
The comparison site Energy Helpline said the exodus of customers was “historic” and showed the company’s electricity price rise had not gone unnoticed by households.
Even the company’s heavy focus on connected homes and devices such as smart thermostats appears to be off track. Centrica has 1.2m connected home products, which industry watchers said suggested a target of 1.5m sold by the end of the year will likely be missed.
Revenue from the company’s gas field in Morecambe Bay is also expected to be down due to production outages.
Analysts said the trading statement was disappointing and warned the pressures the company faced were unlikely to go away next year.
Experts at the investment bank Jefferies said: “2017 is on track to be another tough year for Centrica. The negative trajectory in earnings would disappoint many.”
The Royal Bank of Canada called the performance “extremely disappointing” and said the scale of customer losses was alarming.
Bernstein bank said the expected earnings called into question the way Centrica was being run, adding: “In our view, today’s trading update has dealt a further blow to management credibility, reflected in the sharp price reaction.”
In recent years, Centrica has sold off many of its large power stations and oil and gas assets to concentrate on customer-facing businesses such as energy supply and services.
Next year appears unlikely to offer a reprieve for the company. The prime minister’s price cap on energy bills is due to take effect in late 2018 or early 2019 and new suppliers are still entering the market and undercutting British Gas on price.
The spread betting company City Index said: “The bad news about the group’s annual result is now in, but energy market pressures are unlikely to abate in 2018.”
Centrica conceded that the performance of some of its divisions was disappointing but defended the direction it was taking.
Iain Conn, who was appointed chief executive in 2015, said: “Although some aspects of our delivery in the second half of 2017 have been disappointing, I remain encouraged by our progress in implementing our strategy.”
Despite the expected weak earnings, Centrica said its dividend to shareholders this year was “underpinned” and would be protected for a period of time during the company’s transformation.
“We would be willing to operate with dividend cover from earnings below historic levels,” it said.
Earlier this week, Conn said Centrica would scrap controversial standard variable tariffs for new customers from April 2018.
The company also laid out its suggestions for how the UK energy market should be reformed, which included calling on ministers and the energy regulator, Ofgem, to phase out “evergreen” tariffs and shift clean power subsidies off energy bills on to general taxation.
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