British Gas Blames Warmth For 23% Profit Fall

The company that owns British Gas has blamed warm weather for a 23% slump in profits at its residential supply business.

Centrica reported earnings of £439m during 2014 at the division, which supplies gas and electricity to homes - down from £571m in the previous year.

Total British Gas profits, which includes boiler services to households, fell 20%.

Centrica (LSE: CNA.L - news) 's share price slumped more than 8% when the FTSE 100 opened after it confirmed the extent of the wider energy market woes on its business had forced it to slash investment and its dividend.

The company said the profit declines at British Gas primarily reflected lower consumption in a "record warm year".

It said average dual fuel profit per household fell £10 to £42, with average actual household energy bills "around £100 lower than in 2013" at £1,152.

The number of households taking its energy fell 2% in 2014 to 14.8 million.

A previously announced 5% cut to its standard gas tariff is due to take effect on 27 February as critics of the industry continue to question whether industry-wide bill reductions go far enough to reflect the recent dives in wholesale energy costs .

Raw gas prices have lost 30% of their value over the past 12 months.

The British Gas results were announced just 24 hours after the Competition and Markets Authority (CMA) confirmed it was examining the use of standard tariffs as a default for customers of the big six firms, suggesting households that had failed to switch supplier were paying up to £234 more annually for their energy.

The so-called big six, made up of British Gas, SSE (LSE: SSE.L - news) , Scottish Power, E.ON, EDF (Paris: FR0010242511 - news) and npower, insist they welcome the CMA's investigation to help restore trust in profit levels.

Centrica reported a group statutory loss before tax of £1.4bn against profits of £1.6bn in the previous year.

The performance was mainly driven by significant writedowns on a number of its exploration and production assets, with North Sea capital investment trimmed by 40% in reaction to Brent crude oil costs diving by up to 60%.

Adjusted operating profits fell 35%.

Chief executive, Iain Conn, said: "2014 was a very difficult year for Centrica and the recent fall in oil and gas prices creates further challenge.

"We are cutting investment and costs in response. However, it is with regret that, along with reducing capital expenditure and driving efficiency beyond planned levels, we have taken the difficult decision to rebase the dividend by 30%, commencing with the final distribution for 2014.

"In addition, given the changed external environment we are reviewing the longer term strategy, and will conclude this by the interim results in July.

"Despite the obvious current challenges, I am confident in the quality of Centrica's team and the platform which has been established, and I believe the group is well-placed to take advantage of the longer term trends in the global energy markets.

"Our priorities remain to serve our customers competitively and with integrity, to develop new offers and services, to provide secure and reliable energy supplies and to deliver long-term value for shareholders".