Centrica has announced it will restructure the company, at the cost of 5000 jobs.
In an effort to become a “simpler, leaner” group the company, which owns Big Six supplier British Gas, will reduce the number of customer-facing business units.
The restructure will also include the removal of three management layers, with around half of the current 40-strong Senior Leadership Team to leave Centrica by the end of August. This will help to create a “flatter, less bureaucratic organisation” according to a statement from the group.
Around 5,000 job cuts will take place in the second half of this year, with around half of these to come from the management layer. This will help reduce costs for the struggling Centrica, which has consistently posted a loss in recent years.
Commenting on the changes, Centrica Group chief executive Chris O’Shea said: “Since becoming chief executive almost three months ago, I’ve focused on navigating the company through the COVID-19 crisis and identifying what needs to change in Centrica. We’ve learnt through the crisis that we can be agile and responsive in the most difficult conditions and put our customers at the heart of our decision making.
“However, I believe that our complex business model hinders the delivery of our strategy and inhibits the relentless focus I want to give to our customers. We have great people, strong brands that are trusted by millions and leading market positions, but the harsh reality is that we have lost over half of our earnings in recent years. Now we must bring focus by modernising and simplifying the way we do business.”
Centrica slumped to a £849 million loss in 2019, a performance it blamed on Ofgem’s energy price cap for creating a “challenging environment”.
This followed on from Centrica’s 2018 financial results sending its share price tumbling to a 20 year low, after it confirmed that the incoming price cap would create challenges for the company. While the previous annual financial statement led to the company cutting over 4,000 jobs when it was released in February 2018, due to the company’s “weak” performance.
Speaking about the new wave of job cuts, O’Shea added: “I truly regret that these difficult decisions will have to be made and understand the impact on the colleagues who will leave us. However, the changes we are proposing to make are designed to arrest our decline, allow us to focus on our customers and create a sustainable company.”
Along with today's restructuring announcement, Centrica has also made a number of changes to the board as part of the first stages of reducing management roles.
Both Sarwjit Sambhi, chief executive of Centrica Consumer and Richard Hookway, chief executive of Centrica Business will step down from the board and leave the company by the end of July.
There are two additions to the company as well, with Johnathan Ford joining the company and the board as group chief financial officer with immediate effect.
O’Shea welcomed him, saying he was “delighted that Jonathan [is] joining Centrica".
“He has a proven track record in driving growth and efficiency and has deep experience in Centrica’s core in-home servicing business as well as experience of working in regulated industries. This is an important period as we continue to simplify our organisation and I am confident that Johnathan is the right addition to the executive team as we refocus the Company on the customer and create long term value by returning Centrica to growth.”
Carol Arrowsmith is also joining the company as a non-executive director, and take on a number of roles including chair of the Remuneration Committee, replacing Stephen Hester.
Commenting on the changes, Scott Wheway, chairman of Centrica, said: “I am delighted to welcome Johnathan and Carol to the Board as Group chief financial officer and non-executive director respectively. Johnathan brings deep and relevant experience and Carol brings extensive FTSE advisory experience, especially of advising boards on executive remuneration across a range of sectors and has a deep understanding of how the energy sector operates in a commercial setting.
“I would also like to extend my thanks, on behalf of the Board, to both Sarwjit and Richard for their service to Centrica and to wish them every success in the future.
“These appointments complete a significant refresh and re-sizing of the Board which will enable Centrica to focus on delivering competitively priced, high quality services and products for our customers.”
Centrica’s board underwent significant changes in March, when Charles Berry stepped down as Centrica chairman, and Iain Conn officially stepped down as CEO.
The company’s struggles have been heightened by the current COVID-19 pandemic and the economic downturn it has triggered. In response to this, the company had already cancelled its dividend and halted the sale of Spirit Energy.
In the UK, British Gas was one of the suppliers to take up the government's job retention scheme, with 3,800 of its staff members put on furlough.
Centrica is not the only company to downsize in response to the pandemic and wider struggles in the UK supply market, with challenger OVO Energy announcing 2,600 redundancies in May. This came as a result of COVID-19 putting pressure on the company’s integration of SSE Energy Services, which it acquired in January after SSE Energy Services struggled under the constraints of the UK system.
The pinch of COVID-19 is being felt in other areas of the energy sector as well, with oil and gas giant BP announcing this week that it will cut 10,000 jobs in a response to the pandemic and the subsequent economic downturn.