The owner of British Gas has launched its second turnaround programme in five years after the energy supplier’s earnings plunged to their lowest on record.
The supplier’s full-year earnings tumbled by more than a third to £80m last year after the coronavirus pandemic caused many of its business customers to shut their offices, while homes used less gas and electricity over the warm and bright summer months.
The earnings are a fraction of the supplier’s record high annual profits of £742m, recorded 10 years ago before the steady decline of the British Gas business. Britain’s biggest energy supplier confirmed that its customer numbers fell by a further 2% to 6.9 million last year.
The pandemic also triggered a collapse in global commodity prices, which led Centrica, the parent company of British Gas, to a £1.6bn impairment charge and a full-year pre-tax loss of £577m. That is half the size of last year’s £1.1bn loss, when Centrica also made heavy writedowns.
Chris O’Shea, who has served as chief executive of Centrica since last year, will begin a “major transformation” of the company, only a year after the end of five-year turnaround plan put in place by the former boss Iain Conn in 2015. O’Shea was the company’s chief financial officer from 2018.
Centrica’s has lost three-quarters of its market value after its share price plummeted from an all-time high of more than 400p in 2013 to a record low of just over 32p a share last year. The company has crashed out of the FTSE 100, slashed shareholder dividends twice since 2015, and last year promised to cut 5,000 jobs.
The staff cull has led to a standoff between Centrica’s executives and the trade union GMB. Alongside the cuts, the company has asked all remaining employees to sign up to tougher new employment contracts or risk losing their jobs. GMB said 7,000 British Gas engineers would down tools for four days from this Friday until Monday as part of ongoing industrial action.
O’Shea said of the change programme: “It won’t be easy. Our journey to transform has only just started, as we seek to restore shareholder value by improving customer experience, retention and employee engagement, while maintaining a strong balance sheet.”
The company said “significant uncertainties” were expected to continue into 2021 as the UK emerged from coronavirus restrictions, and offered no specific earnings or cashflow guidance for the year ahead.
It said there would be no dividend for 2020 but would “recommence dividends to shareholders when it is prudent to do so”. Investors responded by selling Centrica shares, causing their price to drop by 5% to lows of 50.34p in early trading.