Centrica says price cap to hit 2019 results

Energy supplier Centrica on Thursday said the government-imposed price cap would hit 2019 results as it lost customers but reported a rise in operating profits.

The company said it would sell its North American franchisee home services business Clockwork for £230m as recovery in the region was slower than expected, adding that it was targeting £500m in non-core divestments.

The company lost 742,000 of its 25m household energy customers last year. Home energy unit profits fell 18% to £668m.

Higher commodity prices boosted adjusted operating profit rose 12% to £1.39bn bolstered by higher commodity prices.

Centrica's described the financial performance as “mixed, against a backdrop of volatile commodity prices, extreme weather patterns, continued competitive pressures and political and regulatory scrutiny and intervention”.

The company also said the price cap, lower nuclear volumes and continued low exploration and production would squeeze cash flow by £350m, with around £100m of the reduction also expected to impact 2019 adjusted earnings. Centrica has a target cashflow range of £2.1bn - £2.3bn.

"We have been very clear that we do not believe a price cap is a sustainable solution for the market," Centrica said.

The new energy price cap came into force at the start of the year and regulator Ofgem estimated that the cap will save 11m people an average of £76 a year.

However, Centrica said the cap was “likely to have unintended consequences for customers and competition".

"Since the implementation of the cap, the differential between the highest and lowest SVT tariffs in the market has reduced from around £400 during periods of 2018 to around £150 early in 2019."

"In addition, the number of domestic energy suppliers in the UK has fallen by 12 since the start of 2018. In February 2019, Ofgem announced that the level of the cap for the period April 2019 to September 2019 would be increasing by £117 to £1,254."