British Gas owner Centrica shed more than 200,000 customers this year while taking a hit from warmer weather

Courtney Goldsmith
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British Gas Controversially Increases Its Energy Prices
Boss Iain Conn could face shareholder unrest at today's AGM (Source: Getty)

Warmer weather hit Centrica's first quarter finances as it lost more than 200,000 customers and warned of uncertainty ahead of a proposed price cap in the UK.

The figures

In a trading update ahead of its annual general meeting (AGM) today, Centrica said adjusted operating cash flow is expected to be above £2bn.

The owner of British Gas said closing net debt is expected to be between £2.5bn and £3bn.

The firm has lost 261,000 customers in the year so far, but it said that reflects a decision to shift more focus on to customer value instead of volume.

Centrica also said it will cut around 1,500 jobs over the year as part of a strategic review.

Shares in the company fell 2.11 per cent to 194.5p in morning trading.

Why it's interesting

Commodity price variables, weather and the impact of the UK's intervention in the energy market could all impact Centrica's financial performance this year.

The utility said warmer than normal weather so far has resulted in lower than planned consumption in the UK and North America while wholesale oil, gas and baseload power prices have fallen in the UK since February.

The Conservative party said it will offer voters a new cap on energy prices in its election manifesto, but Centrica's boss, Iain Conn, has argued a price cap is not the right way to help the market.

"Centrica does not believe in any form of price regulation. Evidence from other countries would suggest this will lead to reduced competition and choice, and potentially higher average prices," the company said in its trading update.

But a price cap isn't the only trouble Conn faces.

Investors could show unrest at today's AGM in the face of the 37 per cent boost to Conn's annual remuneration. The boss was paid £4.15m last year after the firm returned to profit following a loss in 2015.

What Centrica said

Conn said: “We continue to make good progress in implementing our customer-facing strategy, building on the underlying momentum we had as we entered 2017.

"Customer service is improving, we have launched new offers delivering choice for customers and rewarding loyalty and we continue to develop our technology capabilities. We remain on track to deliver against our 2017 targets.”

What analysts said

George Salmon, equity analyst at Hargreaves Lansdown said the tricks weather and energy prices play on Centrica's profits will be familiar to long-term investors: "In this context, it’s good to see guidance remain unchanged, as progress against strategic targets continues apace."

Salmon added the move to a quality over quantity approach "feels like the right thing to do".

Investors will be hoping that with customer offers shifting to a more loyalty-based approach and service levels improving, the group can build a strong and stable base of valuable customers.

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