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Centrica’s profit soars 112% amid high oil and gas prices

Centrica's profit jumped to £948 million as oil and gas prices surged in 2021. Image: Centrica.

Centrica's profit jumped to £948 million as oil and gas prices surged in 2021. Image: Centrica.

Centrica’s adjusted profit has soared by 112%, jumping from £447 million to £948 million following the surge in oil and gas prices.

This led the company’s upstream adjusted operating profit to increase by £573 million for the year ending 31 December 2021. This increase more than covered its lower oil and gas production as Spirit Energy volumes fell 18% to 36.8mmboe, as well as nuclear generation which fell by 9% to 8.3TWh due to outages.

Its adjusted earnings were up 44%, from £165 million to £237 million for the year ending 31 December 2021. Total group free cash flow from continuing operations was up 71% to £1,174 million for the period, and statutory net cash flow from continuing operating activities was up 68% to £1,611 million.

Centrica paid back £27 million to the UK government, which it received in 2020 through the Coronavirus Job Retention Scheme to cover furlough payments. Additionally, the company didn’t pay senior management bonuses in 2021, including Chris O'Shea, group chief executive of Centrica, foregoing his £1.1 million bonus.

British Gas Services & Solutions adjusted operating profit fell by 37% to £121 million, with £50 million of this a reflection of the impact of COVID-19 along with industrial action in H1 2021 – this followed the company’s controversial ‘fire and rehire’ policy, which was met by widespread protest and workers going on strike.

The company’s UK based supplier arm British Gas significantly grew its residential customer numbers, which increased by 344,000, or 5%, over 2021. This was particularly significant as the company has been struggling to stem the loss of customers in recent years, attracted away by lower tariffs from competing suppliers.

Overall it took on around 500,000 customers in the second half of 2021 and a further 176,000 in January 2022 through the Supplier of Last Resort (SoLR) mechanism, taking on the customers from collapsed suppliers including Together Energy, Simplicity Energy, PfP Energy, MoneyPlus Energy, People’s Energy, Zebra Power, Bluegreen Energy Services, Neon Reef and Social Energy Supply.

“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,” the company noted in its results.

“Consumers ultimately pay for supplier failures through future energy tariffs or taxation, so we believe the energy retail market requires stronger prudential regulation to ensure those involved in the industry are fit and proper, companies have adequate capital and monitored risk management procedures and customer deposits are protected.”

Centrica has separated customer deposits, and holds £294 million in a separate account, a move it has called on Ofgem to make a requirement for all suppliers.

Overall, 2021 represents the first year of profit after a consistent period of loss from the Big Six company, including its adjusted operating profit falling 31% in 2020, a record low.

To tackle this it has been undergoing a restructuring process, which included transferring over seven million UK customers to ENSEK’s Ignition platform in August 2021.

It has also looked to simplify its portfolio, including selling Direct Energy – its North American arm – and agreeing the sale of Spirit Norway.

Additionally, in June 2021 it agreed the sale of its Peterborough gas site with Whitetower Holdings UK Limited, an affiliate of Rockland Capital, LP, to work to streamline its operations.

"2021 financial performance was resilient, and we continue to make good progress towards the turnaround of Centrica, having materially completed our portfolio simplification,” said O'Shea.

“Our focus for 2022 is on building on the progress we have already made to drive improvements in colleague engagement and in particular customer service, while continuing to build our capabilities to help our customers on their path to net zero."

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