British Gas owner Centrica has blamed political intervention and the loss of energy customers in the UK for helping push annual profits down 17%.
The company’s UK business division suffered a whopping 92% fall in adjusted operating profit to just £4 million for the full year to December 31, while its UK home arm managed a 1% rise to £819 million.
It compounded pain caused by a drop in its North American business unit, resulting in a 17% fall in group adjusted operating profits to £1.25 billion, although on a statutory basis, operating profits plunged 80% to £486 million.
Centrica said political meddling in the UK energy market had impacted its performance.
Group chief executive Iain Conn said: “The combination of political and regulatory intervention in the UK energy market, concerns over the loss of energy customers in the UK, and the performance issue in North America have created material uncertainty around Centrica and, although we delivered on our financial targets for the year, this resulted in a very poor shareholder experience.
“We regret this deeply, and I am determined to restore shareholder value and confidence.”
The total number of customer accounts at its UK home division slumped 6% to around 20.3 million, while its UK business unit saw a 9% drop to 653,000.
Centrica said in November that cost cuts would help hold annual earnings at its British Gas arm “broadly” flat on a year earlier, in spite of customer account losses and a drop in demand for energy due to unseasonably warm autumn weather.
The energy group said on Thursday that its £740 million cost-cutting programme had been delivered three years early, having made another £308 million in savings in 2017 and cut a further 2,100 jobs on a like-for-like basis.
It takes the total drop in headcount to 5,500 since the start of 2016.
The group’s cost-cutting target has been ramped up by £500 million to £1.25 billion per year by 2020.
Mr Conn said: “We are committed to delivering attractive returns and growth over the medium term.
“Our focus today is on performance delivery and financial discipline – on demonstrating top line growth as we deliver improved service and new propositions for our customers, and driving efficiency as hard as possible to underpin our competitiveness.”
Energy firms like Centrica have been facing pressure over the way they treat customers in the UK, with controversy over pricing and the use of standard variable tariffs (SVTs) which have been deemed poor value for consumers.
British Gas announced plans in November to scrap SVTs for new customers ahead of Government plans to impose a price cap on the costly energy products, which Centrica has warned could have “unintended consequences” for the market.
Around 4.5 million of Centrica’s customers – about 60% – were on SVTs at the time of the announcement, with 70% of profits coming from the SVT customer base.
“We believe that price controls in competitive energy markets are not good for customers and evidence shows that where they have been introduced in other markets they have led to reduced competition, less choice, and prices that tend to cluster around the cap,” the company said.