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E.ON hails turnaround in UK retail business with £100m earnings jump

Image: WikiCommons.

Image: WikiCommons.

E.ON has managed to turnaround its operations in the UK and is expected to recover faster than originally anticipated, it said in its full year results for 2020.

It pointed to the £200 million loss in the company’s UK retail business in 2019, which was impacted by the acquisition of innogy, including its UK subsidiary npower. At the time, E.ON announced a £500 million restructuring plan in order to reorganise npower and ensure its UK supplier arm was profitable.

Through 2020, E.ON’s UK retail business delivered a positive contribution of more than £100 million to Customer Solutions’s earnings for the group, with the company hailing the success of the turnaround.

This is largely being driven by digitalisation of npower, with 90% of its customers migrated to a new digital platform E.ON Next – which is powered by Octopus Energy’s Kraken technology after the two companies signed a strategic partnership in May 2020 – over the last year. All of E.ON’s UK customers will be migrated to the platform by the end of 2022.

The company has been in ongoing discussions with unions around the restructuring, which could result in up to 4,500 job losses.

E.ON’s challenges with its UK retail arm were one of a number it overcame last year, according to the results released today. It fully met the European Commission’s conditions for the innogy takeover, with the company reaffirming this will deliver €780 million (£673 million) in recurring savings by 2024.

Additionally, it largely completed its exit from the nuclear energy sector, and the related risk associated with such thanks to an agreement with the German federal government.

The impact of COVID-19 on the Group’s reported earnings was not limited to the €300 million (£259 million) reported in its half year results in August 2020, but it expects this to be largely recovered over the next few years.

COVID-19 and the resulting lockdowns have “put many business models to a severe test,” CEO Johannes Teyssen said at the company’s results presentation in Essen. “E.ON, by contrast, successfully completed the financial year without any significant impact, either from the COVID-19 pandemic or from the historically warm winter.

“E.ON has impressively demonstrated its strength and resilience during the greatest economic crisis in decades. We deliver secure and growing earnings and dividends.”

The company reported sales of €60.9 billion (£52.5 billon), Group adjusted of about €3.8 billion (£3.3 billion), and adjusted net income of €1.6 billion (£1.4 billion), all of which is in line with its revised August 2020 forecasts.

E.ON’s net debt reduced by €1.4 billion (£1.2 billion) to €40.7 billion (£35.1 billion), due to strong operating cash flow especially in the fourth quarter of 2020. Additionally, provisions for pensions fell by about €500 million (£431 million) between October and December.

For 2021, the company is forecasting higher earnings according to CFO Marc Spieker, with an adjusted EBIT of €3.8 to €4 billion (£3.8 to £3.5 billion) and adjusted net income of €1.7 to €1.9 billion (£1.5 to £1.6 billion)

“We have ambitious plans for beyond 2021 as well: we expect our EBITDA to grow by 2 to 3 percent on average between 2021 and 2023, our EBIT by an average of 8 to 10 percent. In particular, tangible earnings in our core business of 11 to 13 percent will than offset declining earnings at our nuclear power business in Germany. The synergies we’re leveraging will also help.”

The company is to recommend a dividend of €0.47 per share for the 2020 financial year, and is to target a 5% growth in dividend for the 2023 financial year.

Along with financial growth, E.ON is aiming to target the company’s sustainability, with a goal of being climate-neutral by 2040. It will reduce its scope one and two emissions by 75%, and its scope three emissions by 50% by 2030.

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