Centrica warns of ‘challenging’ start to the year

The energy giant said factors such as the default tariff cap, warm weather and falling natural gas prices have caused more difficult trading conditions than it hoped for

Centrica

Centrica has warned that trading conditions across the first few months of 2019 have proved “challenging”.

The energy giant has admitted while its operational performance remained “largely in line” with its expectations, factors such as the UK default tariff cap, unseasonably warm weather and falling natural gas prices, as well as extensions to nuclear power plant outages, have provided challenging conditions for the market.

It noted while these factors are largely temporary, they will impact financial performance in the first half of 2019 and have also put some further pressure on the outlook for the rest of the year.

The British Gas owner said it expects to hits its 2019 targets of maintaining net debt within the £3-£3.5 billion range, keeping adjusted operating cash flow in the £1.8-£2 billion boundaries and achieving a cost efficiency delivery of £250 million through the year – on the last goal it has seen £58 million of reductions acheived so far.

It has suggested final 2019 financial performance will remain subject to the usual variables of weather patterns, commodity prices and operational and commercial performance but noted it is focused on improving factors it has control over, such as customer service, margin capture and cost efficiency programmes.

Total Centrica Consumer customer accounts fell by 20,000 through 2019 so far, with growth in North America, Ireland and its Connected Home segment nearly offsetting a drop in 234,000 customer accounts from its domestic business.

Despite a spike in ‘customer churn’ following the announcement of an increase in the level of the default tariff cap, the number of customer accounts exposed to the cap remained relatively level.

Iain Conn, CEO of Centrica Group, said: “We continue to focus on those things we can control and as a result we expect to achieve our 2019 cash flow and net debt targets, while we are making further progress on cost efficiency delivery and on demonstrating margin capture capability.

“We intend to provide a strategic update regarding our portfolio and prospects at the time of our Interim Results in July.”

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