Energy giant Centrica reported a major jump in profits today, as it looked to have shrugged off the worst of the energy crisis that has put many of its rivals out of business.
The British Gas owner said adjusted operating profits hit £948m for the year, up 112 per cent on 2020, while earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 38 per cent.
The group also bolstered its balance sheet last year, closing 2021 with £680m net cash compared to net debt of £3bn at the start of the year.
The firm said it was helped by households using more gas in the first six months of the year due to unusually cold weather, while warmer weather in the final three months of the year allowed it to sell gas and electricity it had bought in advance, cashing in on high energy costs.
Centrica has also announced it is ready to restart dividends for shareholders, as bosses prepared to up payouts by 46 per cent to 4.1p per share.
Chief executive Chris O’Shea argued a strong balance sheet had allowed the firm to weather the worst of the crisis and take on customers from a spate of failed suppliers across the energy market.
He said: “Our strong balance sheet and responsible business model has allowed us to ensure continued supply for customers whose suppliers have ceased trading and offer additional help to those most vulnerable through the ongoing energy crisis.”
The energy boss suggested the group would now focus on simplifying its portfolio with the sale of Direct Energy and the already agreed sale of Spirit Norway as part of its decarbonisation.
“2021 financial performance was resilient, and we continue to make good progress towards the turnaround of Centrica, having materially completed our portfolio simplification,” he explained.
O’Shea maintains confidence in regulator amid reform calls
The UK’s energy market has been hit by soaring wholesale prices over winter, leading to a number of firms going under, and Centrica bosses aid they wanted to see an overhaul in market structure to prevent similar failings again.
Centrica said: “We believe we need to see significant change to address the underlying issues in the UK’s complex energy regulations, by simplifying and strengthening regulations to protect customers and to ensure a crisis of this sort never happens again,” Centrica said.
O’Shea told City A.M. he had full confidence in Ofgem to deliver market reforms, with the regulator recently announcing plans to unveil hedging controls and financial stress tests for suppliers.
It is also set to update the consumer price cap at more regular intervals, and has announced temporary measures such as financial levies for suppliers who take consumers from other firms.
Since last August, 29 energy suppliers have ceased trading, directly affecting over four million customers – with over two million being ferried from fallen energy firms to surviving suppliers.
Bulb Energy was meanwhile dropped into de-facto nationalisation last November, being propped up by nearly £2bn in public funds.
Centrica has faced activist pressure in recent months, with investors reportedly questioning its decision to scoop up 750,000 customers amid the widespread market carnage.
O’Shea said he was not prepared to comment on press speculation.
However, he was prepared to reassure consumers that energy suppliers would be guaranteed to its eight million customers, following Russia’s invasion of Ukraine and consequent volatility in gas prices.
He said: “What we have made quite clear is that when we make a commitment to gas and electricity for customers we deliver on that. We can deliver everything to consumers that we said we would.”
Wholesale prices have soared nearly 60 per cent on UK and European benchmarks following Russia’s decision to invade Ukraine and instigate conflict in the region.