Centrica profits down to £571m

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BRITISH Gas owner Centrica has revealed a £571m profit haul from its residential energy arm for 2013, months after hiking gas and electricity prices.

It marks a six per cent drop on the £606m the year before but is unlikely to calm public anger over rising energy costs.

Centrica said British Gas shed two per cent of residential customer accounts in 2013 to 15.3m as households switched to other suppliers following its move to increase tariffs by 9.2 per cent on average from November as part of a round of painful winter bill rises across the industry.

It added that another 100,000 had quit the group so far this year, but customer switching was now “stabilising” after it scaled back its price rise by 3.2 per cent following a shake-up of the Government’s so-called green levies on bills.

Across the group, operating profits were two per cent lower at £2.7bn last year.

Chief executive Sam Laidlaw admitted that public and investor trust in the energy industry had been “damaged” by the threat of price controls and political intervention.

He attacked Labour leader Ed Miliband’s pledge to freeze tariffs if the party wins power, saying it was “not a credible solution”.

He said: “We firmly believe that any form of price control in a competitive market is not the answer and is not in the best interests of customers, and this has been clearly demonstrated by experience in other markets.

“Such proposals create both short-term uncertainty for all energy suppliers and longer-term additional costs for customers,” he added.

The group’s shares have plunged by more than a fifth since autumn following Labour’s price freeze pledge, with the stock driven down further after Energy Secretary Ed Davey recently called for a full-scale investigation into the energy market that could see British Gas broken up.

In a letter, Mr Davey urged competition authorities to “think radically” as they consider whether to launch a probe.

Centrica’s results showed that higher wholesale prices and unseasonally warm weather at the end of last year saw British Gas suffer an 18 per cent slump in operating profit in the final six months of 2013, which offset a better start to the year.

Centrica said it “can’t make promises” over prices for the year ahead, but added it would look to keep prices “as low as we can for as long as we can”.

It said this year’s milder winter weather was likely to see bills come down by nine per cent or 10 per cent as households have not had to crank up the heating.

British Gas said it was “confident we can go back to customer growth” after the exodus since November, helped by the recent launch of new fixed price deals.

It revealed profit margins for its gas business stood at 8.9 per cent in 2013 - far higher than the 0.8 per cent electricity margin.

Mr Davey recently raised concerns over the group’s dominance in the gas supply market, querying why its margins were several times higher than for electricity, and claiming consumers could save £40 a year if they were brought in line.

But outgoing finance director Nick Luff, who recently announced plans to leave the group this year, denied it was taking advantage of its market leading position.

He said: “Scale does give us an advantage in terms of costs, which means we can offer good service and prices to our customers, but it doesn’t give us an advantage that means other suppliers can’t compete with us.”

The group remained tight-lipped on reports that it was lining up candidates to replace Mr Laidlaw at the helm.

While he has not officially confirmed departure plans, it is widely believed he is preparing to call time after nearly eight years at the group.

Mr Luff said: “Naturally the chairman is looking at long-term succession, but there’s nothing to say at this stage.”

Rick Haythornthwaite took over last month as chairman, replacing Sir Roger Carr, who left after nine years in the job.

The group is still searching for a replacement for Mr Luff, who announced plans to leave last month.