Centrica (CNA) reported a statutory loss in 2022 on re-measurement and higher operating costs, but adjusted profit tripled as revenue surged 84%.
The owner of British Gas revealed a pretax loss of £240 million in 2022, compared with a profit of £954 million in 2021. Revenue jumped 84% to £33.64 billion from £18.30 billion.
But on a different accounting measure, adjusted earnings before interest, tax, depreciation and amortisation jumped to £3.99 billion from £1.85 billion in 2021.
The swing to a loss was on re-measurements after taxation, Centrica said, largely reflecting the revaluation of UK energy supply hedging positions due to wholesale gas and power price falls towards the end of the year. The cost for re-measurement and settlement of derivative energy contracts ballooned to £8.48 billion in 2022 from £434 million in 2021.
Centrica met the guidance it gave in January. Adjusted earnings per share in 2022 jumped to 34p from 4.1p a year ago, as it had predicted more than sevenfold growth to over 30p.
"The energy crisis and cost of living pressures have created a challenging environment for customers and communities, but we have been able to provide much needed stability and support," Centrica said.
"We invested £75 million in supporting our energy customers in 2022, which was greater than the £8 post-tax profit per customer earned by British Gas Energy. Whilst customers may see some relief given recent easing of prices, it remains clear that some will continue to need help and we will do what we can to support them in the year ahead."
Centrica added it intends to extend its existing £250 million buyback programme, announced in November, by an additional £300 million. This would result in Centrica buying back 10% of its share capital, the power utility said.
The company proposed a full-year dividend of 2p per share, compared to none in 2021.
The Heat is On
AJ Bell investment director Russ Mould says these results will increase scrutiny on Centrica.
“Recently caught up in a scandal where bailiffs were breaking into people’s homes to fit pre-payment meters, today’s results from Centrica will do nothing to dial down the heat on the company. Talk of more aggressive windfall taxes seems inevitable.
“Investors in the company might argue after years of disappointing returns they are due some bumper rewards. However, the fact a big driver of Centrica’s soaring earnings and cash flow is the energy crisis resulting from the war in Ukraine will sit uncomfortably with many struggling to heat their homes.
“It is fair to acknowledge that most of the company’s record profit came not from its retail-facing British Gas business but from its energy trading division as well as its oil and gas and nuclear assets, but casual observers are unlikely to make the distinction."
Steve Clayton, head of equity funds at Hargreaves Lansdown, says the focus will be on the retail arm, but that's not where the money is being made. “British Gas’s realm is onshore, where gas must be piped around through expensive networks and sold at thin margins in a market with many competitors,” he says.
The chancellor, Jeremy Hunt, introduced windfall taxes on electricity generators at a 40% rate in the Autumn Statement in November 2022, in addition to the tax on oil and gas companies brought in during May 2022.
Pre-Payment Meter Scandal
Earlier this month, British Gas came under pressure for its treatment of "vulnerable" customers who faced debt collectors forcibly installing prepayment meters in their homes.
UK energy minister Graham Stuart asked Centrica to urgently outline "redress" for "mistreated customers", while regulator Ofgem called for "action, not warm words".
Ofgem ordered all domestic energy companies to suspend the system of forcibly installing prepayment meters, while business secretary Grant Shapps described the practice as "outrageous". Since February 3, British Gas is banned from force-fitting prepayment meters.
Centrica shares were 4.4% higher at 102.85p each in London on Thursday morning.
