OREANDA-NEWS. Centrica is today providing an update on its business performance.  Overall, the Group continues to trade in line with the guidance provided at the time of its 2014 Preliminary Results in February, with improved year-on-year profitability downstream expected to be more than offset by the impact of lower commodity prices on the upstream business.  In the year to date, the Group has:
  • experienced colder than normal weather in both the UK and North America, resulting in higher than expected energy consumption in British Gas and Direct Energy;
  • progressed capital expenditure and cost reduction programmes in E&P against a continued low commodity price backdrop;
  • made good progress in strengthening its balance sheet and financial metrics, through the issue of £1 billion equivalent of hybrid securities and the sale of Lincs wind farm debt; revised Moody’s credit rating of Baa1 (stable outlook) is consistent with the Group’s target to maintain a strong investment grade credit rating;
  • launched group-wide strategic review covering: (i) outlook and sources of growth; (ii) portfolio mix and capital intensity; (iii) operating capability and efficiency; (iv) Group financial framework.  The outcome will be presented at the time of the Interim Results in July 2015.

The Group’s earnings remain subject to the usual variables of commodity prices, weather and asset performance, and the uncertain outcomes of the UK General Election and the Competition and Markets Authority investigation into the UK energy market.

 

Business update

British Gas

Average British Gas year-on-year residential gas consumption was 10% higher and average year-on-year electricity consumption was 2% higher in the first three months of 2015, reflecting colder than normal temperatures in the UK compared to a warm 2014.  The number of residential energy accounts on supply is broadly unchanged at around 14.8 million since the start of the year, reflecting the 5% reduction in our residential gas tariffs from 27 February 2015 and our competitive fixed price and collective switch offerings.  We are also dedicating further resource to improve customer service, and have set aside an additional £50 million to invest in this area over the next three years.   

We continue to lead the industry in technology, innovation and smart connected homes.  We have installed 1.4 million residential smart meters in the UK, and have sold nearly 200,000 smart thermostats, mostly under our Hive Active Heating brand.  In March we completed the acquisition of AlertMe, the provider of the technical platform that underpins our existing connected homes activity, and the integration of the business is proceeding to plan.

In British Gas Services, the net promoter score for our engineers increased further from its record high in December 2014, to +69 in March 2015.  The number of contract holdings fell by 62,000 to just over 7.9 million in the first quarter, with good retention of existing customers but the environment for new contract sales remaining challenging.  In British Gas Business, the number of accounts fell by 28,000 to 826,000 in the first quarter, in a competitive market place.  The resolution of transitional issues following the implementation of a new billing system is ongoing.

Direct Energy

In North America, Direct Energy remains on track to deliver material operating profit growth in 2015 relative to a weak result in the prior year.  Total Direct Energy gas consumption in the first quarter was 1% higher than the same period last year as, like in 2014, we experienced much colder than normal weather in the first quarter.  However a combination of more stable physical infrastructure, market re-design and management action meant we did not see a repeat of the additional costs incurred last year.  We continue to make good progress in building our brand in North America.  In March it was announced that Direct Energy was joining a range of well-known brands to launch Plenti, the first United States-based coalition loyalty programme, where consumers can earn and use reward points for purchasing a wide range of products.  

Direct Energy Business is now benefiting from increased unit margins on contracts sold in prior periods, while average commercial and industrial sold unit margins again improved in the first quarter of 2015, and were higher than in the second half of 2014 for both gas and electricity.  In Direct Energy Residential, the number of accounts fell by 62,000 to just under 3.2 million in the first quarter, in a competitive sales environment.  We continue to make good progress in Direct Energy Services, although service contract relationships reduced by 42,000 to 855,000 as we focused acquisition and retention efforts on our highest value customer segments.  Following the acquisition of Astrum Solar last year, we completed 42% more solar installations in the first quarter than Astrum completed over the same period in 2014, albeit from a low base.  Astrum Solar was rebranded as Direct Energy Solar in April.