British Gas residential profits down 11% amid customer exodus

British Gas owner Centrica (Frankfurt: A0DK6K - news) said profits at its UK residential supply business fell 11% as it faced up to competition in the energy market.

The drop in earnings to £553m came as it lost 409,000 customers over the course of the year. That compares to a drop-off of 119,000 in 2015.

However, Centrica said it had stemmed the exodus in the second half of the year after launching new deals, while complaint levels fell.

The results come weeks after British Gas, Britain's biggest energy supplier, said it was extending a freeze on tariffs, even as rivals said they would put up their prices.

Centrica said the fall in profits "reflects a changing product mix and lower customer account holdings".

Profits for the wider group surged to £2.2bn compared to a loss of £1.1bn in 2015, when Centrica booked £2.4bn in a series of accounting write-downs.

Chief (Taiwan OTC: 3345.TWO - news) executive Iain Conn said: "2016 was a year of robust performance and progress in implementing our customer-focused strategy."

Shares (Berlin: DI6.BE - news) fell 3.7% by the close.

George Salmon, equity analyst at Hargreaves Lansdown (Frankfurt: DMB.F - news) , said Centrica was making "good progress" on earnings and cost savings but that the company's dividend policy was still being held back by its past.

"Shareholders are still feeling the effects of the hangover from the decision to splurge billions on offshore exploration and production at just the wrong time," he said.

UK energy suppliers have been under political pressure over the past couple of years over their treatment of household customers, and regulators have imposed a price cap for vulnerable pre-payment meter customers.

Centrica said the cap would impact its revenue this year by £50m.

It said the UK energy supply market was "highly competitive" with more than 50 suppliers.

Mr Conn has previously said there was no need for Government intervention to make it more competitive.

Profits at the group's UK and Ireland (Other OTC: IRLD - news) energy and services arm, which includes British Gas, rose 2% to £906m, as earnings from home services and business customers improved.

Meanwhile, Centrica said it would be cutting 1,500 jobs this year - part of planned cuts of 6,000 first announced in 2015.

Elsewhere, smaller rival Co-operative Energy said it was increasing tariffs in April - blaming rising costs.

The 5% rise will affect about 96,000 customers on its standard tariff and added to a 3% increase in October would mean a typical £90 added to bills in six months, according to price comparison site uSwitch.