Published: Fri, February 23, 2018
Markets | By Noel Gibbs

British Gas owner to cut 4000 jobs by 2020 after 'weak' year

British Gas owner to cut 4000 jobs by 2020 after 'weak' year

Centrica said political meddling in the United Kingdom energy market had impacted its performance.

Britain's biggest energy supplier said that profits from its core United Kingdom household supply arm actually rose by 3 per cent to £572 million previous year, despite it having lost 1.4 million customer accounts.

Earnings before interest, tax, depreciation and amortisation (EBITDA) dropped by 9 per cent to £2,142 million and statutory operating profit was down four fifths at £486 million. This included the loss of 1.4 million energy supply accounts, corresponding to 750,000 customers.

"Our financial result in the second half of 2017 was weak", Chief Executive Officer Iain Conn said in a statement on Thursday.

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Meanwhile, the firm's British Gas business shed 9 per cent of its United Kingdom domestic customers last year.The company's United Kingdom business division also saw profits plunge by 92 per cent in adjusted operating profit for the year to 31 December. The company made a profit margin per customer of about 5%, or £59.

British Gas owner, Centrica, announced plans to cut 4,000 jobs by 2020 following a 17 per cent fall in its operating profit to £1.25bn.

The group said that it was chasing savings of £1.25bn per year by 2020 and that this would likely see a "reduction in like-for-like headcount of around 4,000" by the same year.

Conn said the expansion to the scope of its cost cutting efforts is partly a response to "fierce" competition in the retail market from almost 70 suppliers, "most of which lose money", as well as the trend towards online interactions with customers.

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Around 12 million British households are charged some form of default tariff for their energy, which can cost hundreds of pounds more per year than the cheapest deals on offer. Most of the job cuts are expected to be in the UK. "We've got to respond to the circumstances".

The government's price cap will affect millions of British Gas customers by the end of this year, which Conn admitted would dent profit margins.

In 2018 alone, the firm aims to reduce spending of £200mn ($277.5mn) and to lose 1,000 jobs.

HVP reached out to British Gas for more information, but the company declined to comment further. "We hope it doesn't happen because we think that ultimately it will be bad for customers".

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It also noted that it intends to sell is United Kingdom nuclear investments and said it has no plans for any major mergers and acquisitions activity. Conn said the group is looking at the possibility of selling to infrastructure funds, given the limited pool of potential buyers within the nuclear sector itself.

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