Centrica's 2013 profits fall amid margin pressures

20th Feb 2014 07:03

British Gas owner Centrica said market conditions in 2014 are set to remain challenging amid political pressure to lower energy prices.In its 2013 annual results, the group warned that going into the new financial year there would be a squeeze on margins, unusual weather patterns on both sides of the Atlantic, rising unit costs in the North Sea and weak economics for gas storage and gas-fired power generation. For the year through December 2013, operating profit fell 2% to £2.69bn, as British Gas customers used less energy during unseasonably warm weather towards the end of last year.Basic earnings per share were flat at 26.6p due to economic and market headwinds. In an effort to mitigate the impact of margin pressures, the company completed a £500m cost reduction programme. "We have completed strategic reviews in both British Gas and Direct Energy, and introduced new management structures," said Chief Executive Sam Laidlaw. "These will help us deliver consistent, high quality customer service, reduce costs and drive growth through innovation."During the period, the firm signed £14bn worth of new gas supply agreements with Cheniere and Qatargas, helping secure supplies for the UK.Total capital and acquisition expenditure came to £2.5bn, down 6% on the previous year. Investments included £1.5bn in North Sea exploration and production projects such as Cygnus.Centrica completed the acquisition of a portfolio of Canadian gas assets in partnership with Qatar Petroleum International for 1bn Canadian dollars. The deal adds more than 100m barrels of oil equivalent of reserves to the group's international upstream portfolio at lower cost than for equivalent North Sea assets.The company also bought a 25% stake in the Bowland shale exploration licence in the UK.The Hess Energy Marketing business was bought for $1.2bn, transforming the capabilities of the North American business to business activities. "The acquisitions we announced in 2013 are performing well and together with the positive action we are taking across the group, position Centrica well for the future, for the benefit of both customers and shareholders," Laidlaw added.Centrica also made £650m of disposals including selected North Sea assets, Texas Combined Cycle Gas Turbines (CCGT) and non-core UK wind assets.The dividend for the year was raised by 4% to 17p.RD