Friday 24 July 2020 8:24 am

British Gas owner Centrica to sell US business for £3bn

Centrica has today announced that it will sell US subsidiary Direct Energy for £2.8bn as it attempts to restructure after a brutal couple of years for the British Gas owner.

Shares in the firm rose 24.3 per cent on the back of the news.

Read more: British Gas owner Centrica to cut 5,000 jobs

The move comes as the former FTSE blue chip attempts to restructure its business, with plans to cut 5,000 jobs.

In a statement, Centrica said that the sale would allow it to focus on its home markets in the UK and Ireland.

It said that cash flows would be “more predictable and stable” as a result of the sale.

Chief executive Chris O’Shea said: “The transaction provides Centrica with an opportunity to realise significant value for our shareholders at an attractive valuation.

“This disposal is aligned to our strategy to become a simpler, leaner business and in addition it will materially strengthen our balance sheet and remove a source of earnings volatility from the group”.

Stuart Lamont of Brewin Dolphin said that the sale would “go some way towards simplifying the firm”.

“With resilient cash flow and reduced debt, there are tentative signs of recovery in Centrica after a challenging few years – but there is also still plenty to do and it remains a work in progress”, he added.

The firm announced the sale along with its interim results, which it said showed a “resilient performance” in the first half despite the coronavirus pandemic.

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Operating profit fell 14 per cent from £399m to £343m in the period, which Centrica said was due to a combination of the pandemic, low commodity prices and spells of warm weather.

The firm made a loss of £136m, which it said was due to exceptional charges worth up to £1.04bn.

Given the continued uncertainty over the coronavirus, Centrica did not provide any further guidance for the year.

Along with the sale of Direct Energy, Centrica confirmed it would resume the sale of Spirit Energy once financial markets had stabilised.

In recent years, the firm has been hit hard by the imposition of a price cap for energy suppliers, which has damaged its margins.

Read more: British Gas owner Centrica plans new digital-only energy brand

The current pandemic has further battered Centrica, which earlier this year cancelled its dividend and warned it would take a £100m hit due to the virus.

In June, the firm also announced a number of changes to its board, as well as the launch of a new digital only energy supply firm.