Centrica warns of continued challenging market conditions

14th Nov 2013 07:01

- Market conditions remain challenging in UK and US- EPS likely to match 2012 levels - Consumption up four per centBritish Gas-owner Centrica on Thursday warned market conditions remained challenging, particularly in business energy supply in both the UK and the US, in UK gas-fired power generation and in UK gas storage. It predicted 2013 adjusted earnings per share would be at similar levels to 2012. The group said consumption in the first 10 months of the year was up 4% on 2012, but that it used this benefit to absorb higher costs faced by the business. In the face of a loss-making British Gas Residential, the company said it took the decision to increase its domestic gas and electricity tariffs by 8.4% and 10.4%, respectively. It currently expected its residential energy supply margin to be slightly lower than last year, a little under 5% after tax. The number of residential energy accounts on supply at the end of October was 15.7m, broadly unchanged since the half year. British Gas Services remained on track to deliver modest profit growth this year, while British Gas Business experienced challenging market conditions, and as such full year profitability is expected to be "significantly lower" than in 2012. The group warned that it continued to experience margin pressure in its North American energy supply businesses, particularly in power sales to business customers, and reported a slight drop in the number of energy accounts in Direct Energy Residential. The company also faced challenges in Centrica Storage, and warned lower historic summer/winter spreads will affect the profitability of the business in the second half of 2013. The group's interest charge is expected to be around £230m this year, which takes into account the raising of $1.35bn in the US bond market in October. Based on current pre-tax profit expectations, the group's effective tax rate for the full year is expected to be around 46%. At the end of October, group net debt stood at £4.3bn, before the impact of the Hess Energy Marketing acquisition.NR