Centrica, the owner of British Gas, has continued to lose customers to rivals, but claimed the exodus was less marked than last year’s.
Updating investors ahead of its annual general meeting later today, the group also said it had benefited from the ‘Beast from the East’ as households turned up the heating.
British Gas lost 110,000 accounts in the first three months of 2018, but claimed that losses in the year to date ‘slowed materially’ compared to last year.
In light of this, the group maintained its guidance for the year ahead. The shares were little moved on the news, rising by 0.5 per cent to 147.90p in morning trading.
Heat is on: British Gas continued to lose customers, but also profited from colder weather
Centrica boss Iain Conn said: ‘2018 has begun well and overall financial performance in the year to date has been good, despite high competitive intensity in all our markets.
‘Our customers continue to see new products and propositions and stable service levels, other than in UK Home Services, which was impacted by extreme weather.’
Big energy providers like British Gas, EDF Energy and SSE have been facing pressure from smaller rivals offering cheaper deals.
British Gas recently confirmed a price hike of 5.5 per cent, or £60 a year, for those with a standard variable tariff from May 29.
But anger over rising bills has seen the government announce a price cap on standard variable tariffs, which is set to be introduced later this year.
Centrica said it expected to have a temporary cap will be in place by the end of 2018, but reiterated that in its opinion a price cut was not good for customers.
The company said recent cold snaps meant customers spent more on heating their homes. However, it also saw an ‘exceptionally high number’ of calls to fix boilers that had broken down, resulting in extra costs to the company.
It said such ‘additional call-out costs due to the cold weather’ were likely to result in lower operating profits in its UK services arm in the first half of the year.
‘We fixed 145,000 breakdowns in one week, our busiest week ever and more than twice the normal weekly number,’ the group said.
Centrica said it was on track to deliver its cost-cutting programme, having already announced the axing of 4,000 jobs after a slump in profits.
Profits dived 80 per cent to £486million last year because its business supply divisions in Britain and North America were hit by highly competitive markets and unusually warm weather.
Today it confirmed that the majority of the cuts will affect both its UK home and business units over the next three years, as it looks to meet a higher cost-cutting target of £1.25billion per year by 2020.
Boiler breakdowns: Centrica said it had fixed 145,000 boilers in just a week
George Salmon, equity analyst at Hargreaves Lansdown, said: ‘It’s been a case of one step forward, one step back at Centrica so far this year.
‘With heating dials turned up to the max to combat the cold, the Beast from the East provided a much-needed boost to the group. However, some of the extra volumes were offset by customer unrest following a higher number of boiler breakdowns. All the while, intense competition means account numbers continue to fall.’
He added: ‘Centrica is sticking to previous targets, including holding the dividend at 12p per share, and this will boost confidence to a degree. The prospect of an 8%-plus yield will be attractive to some, but the market is wary the pressures on the group could mean a repeat of recent dividend cuts.’
Helal Miah, investment research analyst at The Share Centre, said the trading update was aimed at pleasing investors, who have suffered significant share price falls over the last few years.
‘The shares offer a very attractive dividend yield around 8%, but the question is how sustainable is this given that these earnings only just cover dividends. We have expressed caution over Centrica in recent years primarily due to some of the issues highlighted above. While this trading update provides some reassurances we still maintain our Hold rating for investors seeking income and willing to accept a medium level of risk.’