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FTSE 100: British Gas owner hands billions to shareholders as customers face £3,500 bills

Operating profit at the British Gas energy arm fell 43% in the first six months of 2022. Photo: Owen Humphreys/PA
Operating profit at the British Gas energy arm fell 43% in the first six months of 2022. Photo: Owen Humphreys/PA

British gas owner Centrica (CNA.L) has seen profits increase more than fivefold during the energy crisis and reinstated its dividend for the first time since 2020.

The FTSE 100 (^FTSE) energy company posted a £1.3bn ($1.6bn) in the first six months of the year, from £262m during the same period in 2021, buoyed by higher revenues from its oil, gas and nuclear assets.

Britain's biggest energy retailer said on Thursday it expects a surge in profits this year on the back of rising energy prices.

That has seen the energy giant reinstate its dividend payout, paying shareholders a dividend of 1p per share at a time when soaring energy bills push many households into poverty.

Gas prices have hit their highest level since the Ukraine war began, with consumers set to bear the brunt as the UK’s energy price cap could hit over £3,500 per year in January.

Chief executive Chris O'Shea said that the results came against the backdrop of "the most challenging energy crisis in living memory".

"We are very aware of the difficult environment many customers are facing and we will continue supporting them," he said.

Read more: UK faces power crunch in winter, grid operator warns

Gas, oil and fuel prices surged to record highs after Russia's invasion of Ukraine in February, which saw the introduction of a windfall tax on energy firms to help households struggling with food and energy costs.

Centrica said it anticipates to pay around £600m in windfall tax next year, subject to wholesale prices.

The group's adjusted earnings before interest, taxes, depreciation and amortisation, including from oil and gas producing assets, rose to £1.7bn in the period, up from £682m during the same time last year.

Adjusted earnings per share, which strip out the impact of the writedowns and other one-off charges, jumped to 11p from 1.7p.

The group rejoined London's bluechip index in May following rapid growth in its share price. Shares declined 3.4% on Thursday in London.

Operating profit at the British Gas energy arm fell 43% to £98m, driven largely by the need to buy gas and electricity for new customers for whom it had not been able to hedge in advance.

"The rise in wholesale commodity prices meant that default tariffs remained cheaper than nearly all new fixed-price tariffs," British Gas owner Centrica said. "This resulted in more customers on default tariffs than we had hedged for, requiring us to purchase more commodity from the market at prices above those allowed with the price caps."

The firm announced it gained more than 200,000 customers at a time of economic and political uncertainty as it absorbed a large number of customers from failing suppliers in the UK who went out of business.

"The past year has demonstrated the importance of well-funded, well-run energy companies," said O’Shea. "We’ve made significant progress de-risking the Group and building a stronger business for the benefit of all stakeholders."

Watch: Why are gas prices rising?