British Gas parent Centrica's share price rose this morning as the firm revealed it had narrowed its losses for the full year and gave a confident update on its plan to circumvent falling oil prices.
Revenues at the UK energy giant dropped five per cent to £28bn, while adjusted operating profit slumped 12 per cent to £1.5bn. Adjusted earnings were also down, by four per cent to £863m.
Its group operating loss narrowed from £1.3bn in 2014 to £1.1bn this year.
As a result, the company has slashed its dividend 11 per cent to 12p, down from 13.5p per share last year.
However profits at British Gas itself rose by 31 per cent to £574m for the 12 months to 31 December. British Gas said gas usage rose by five per cent, despite the warmest December on record, as 2015 had more normal temperatures compared with a very mild 2014.
Centrica's share price was up three per cent in early trading.
Why it's interesting
Consumers will, no doubt, be frustrated to see that while Centrica has been hurt by oil prices, British Gas has surged ahead, despite its promises to cut prices. That £100 a year will seem like small beer next to the 31 per cent increase in profits.
But for investors, the fact that Centrica has demonstrated a "resilient financial performance in a challenging environment", will be pleasing.
One of the ways the company is doing this is through shedding jobs as part of a £750m turnaround plan, which is "on track". Around 2,000 roles are being cut through restructuring announcements already made, and a further 3,000 will go this year "excluding the impact of increased headcount in smart metering and in growth areas such as our Connected Home business".
"As a result, we expect to deliver £200m of annualised savings in 2016, and we are on track to achieve two-thirds or £500m of the savings by 2018," the business said.
What Centrica said
Chief executive Iain Conn has admitted that the "steep falls" in commodity prices will "continue to have a material impact on the operating cash flows from our E&P and central power generation businesses in 2016 and beyond, if current levels persist".
But the business is (relatively) prepared for that and will be able to cut its capex to the bottom end of our £400-£600 million range.
"As a result, we currently project that our sources and uses of cash flow will remain more than balanced over the period 2016-18, even if flat real wholesale oil, gas and power prices remain at low levels of $35/bbl Brent oil, 35p/therm UK NBP gas and £35/MWh UK power," he said.
Conn also emphasised Centrica's new strategy of being "a customer-facing energy and services business" as driving the business forward in coming years. "This is where we have distinctive positions and capabilities and where we can make the biggest difference and contribution going forward, for our customers, our employees and our shareholders," he said."
"We remain confident we can deliver at least three to five per cent per annum operating cash flow growth at flat real commodity prices and are committed to delivering a progressive dividend in line with the sustainable operating cash flow growth of the group. I am encouraged with the progress we have made since July, as we develop our customer-facing platforms for growth and we deliver on our major cost efficiency programme, which is now underpinned in our business plans.
"Implementation of the strategy is on track, and I remain excited about this next phase and continue to believe that Centrica has all the components necessary to deliver a powerful investor proposition – one of returns and growth.
Centrica is down but, with its various cost-saving measures, is definitely not out.