Centrica warns on profits for full year and 2015

20th Nov 2014 07:06

British Gas and Direct Energy owner Centrica has warned that its full year and 2015 earnings will be lower than previously guided due to "a number of challenges" including low oil and gas prices, cold weather in the US, warm weather in the UK and boiler inspections at its power stations.The energy giant said it now expected full year adjusted earnings per share to be in the range of 19-20p, having previous pointed investors to 21-22p in July.As well as losing 50,000 residential energy account since the end of June, British Gas's residential post-tax margins are now expected to be around 4% this year, lower than long-term expectations.Production guidance for the exploration and production (E&P) business has also been lowered, to 80m barrels of oil equivalent (mmboe) for the full year, meaning lower full year operating profit than previously expected, but with limited impact on post-tax earnings due hedging and tax.The FTSE 100 group also warned that lower gas and oil prices and higher tax will hit the value of its E&P assets and "significantly" reduce E&P and midstream gas earnings in 2015.2015 earnings at British Gas and Direct Energy may also be lower than previously forecast.The company warned that, while it expects a first full year of contribution from Bord Gáis in Ireland and increased underlying profit in Direct Energy, British Gas Services and British Gas Business all contributing to earnings growth in 2015, it will be "significantly offset" by lower oil and gas prices on the upstream business, together with a higher effective upstream tax rate.Looking back on the first ten months of its financial year, Centrica said British Gas had been hit by warmer than normal temperatures, with average residential gas consumption 21% lower than for the same period last year and average electricity consumption 7% lower.For consumers this has been a good result, with the average residential dual fuel bill to be around £100 lower in 2014 than in 2013, and the company said the launch of our competitively priced Sainsbury's Energy tariff in September had helped it return to account growth in recent weeks.British Gas and Direct Energy both remain on track to deliver their £100m and $100m respective cost reduction programme by the end of the year, with the US business making good progress despite losing 99,000 residential accounts in the quarter.Direct Energy continued to build on the sales margin increases in the first half of the year, with sold business unit margins 35% higher for gas and 51% higher for power in the third quarter of 2014 compared to the second half of 2013.The US arm is expected to see much improved second half profitability from its business-to-business segment compared to the second half of 2013, though though lower margin business written in prior years will continue to impact operating performance, with good underlying profit growth in 2015.