British Gas has more than doubled its profits for the first half of the year after cold weather prompted customers working from home to turn their heating up, and small companies began to reopen for business following Covid-19 lockdowns last year.
Profits at the UK’s biggest energy supplier soared to £172m for the first six months of the year, from £78m in the same months last year, even after losing 114,000 home energy customers since the end of last year.
Chris O’Shea, chief executive of the British Gas owner Centrica, said the unusually cold start to the year, compared with an unusually mild spring in 2020, helped to boost its first-half profits by around £50m.
British Gas also benefited from a hike in the energy regulator’s price cap, which soared by an average of £96 a year for 11m homes using a standard dual-fuel energy tariff. Almost a quarter of this increase, which hit bill payers in April this year, was put in place to help energy companies cover the cost of households which could not afford to pay their bills during the pandemic.
O’Shea said British Gas had not seen any “material impact” from unpaid bills since the outbreak of the pandemic, due to the government’s job retention scheme and because “when customers can pay, they do pay”.
The profit rise at British Gas helped Centrica to offset losses at its services business due to long-running strike action following a standoff with trade unions over its plans to ‘fire and rehire’ thousands of staff on tougher contract terms. Profits at British Gas Services, which employs engineers to fit and maintain home boilers and heating systems, tumbled to £60m in the first half of the year from £94m the year before.
The controversial “fire and rehire” scheme was part of a major turnaround programme at Centrica, which has floundered in recent years due to its high costs, and rising competition in the energy supply market.
O’Shea was able to reduce Centrica’s net debt from almost £3bn to £93m after the sale of its US energy business Direct Energy. But the company has struggled to sell off its stake in the UK’s nuclear power plants and its North Sea business, Spirit Energy. Centrica may consider a new sales structure for Spirit Energy and would consider keeping its share of EDF Energy’s nuclear plants to help play a role in generating low carbon electricity to help meet the UK’s net zero targets, O’Shea said.