By Susanna Twidale
(Reuters) – Centrica CEO Iain Conn will step down next year after the company reported a near 50% drop in operating profit, slashed its dividend and announced plans to exit its oil and gas business, sending its shares to a 21-year low.
The owner of Britain’s largest energy supplier, British Gas, also said it would make an extra 250 million pounds of cost cuts after a national cap on energy prices, warmer-than-normal weather and weak British natural gas prices trounced profits in the first half of the year.
Centrica is shifting its focus to consumer-facing energy services from oil and gas exploration and large-scale power generation.
As well as supplying energy, it plans to build up its connected home and energy services divisions, offering items such as smart thermostats which can control home heating via a phone app and products for electric vehicle drivers.
It said on Tuesday it would partner with automaker Ford to offer home charging installations for Ford’s electric vehicle customers.
Centrica shares were down almost 12% by 0836 GMT at 80 pence per share, having falling almost 70% since 2015 under Conn’s tenure
“The results were even worse than expected, and the problem everyone has now is when its left with this consumer facing business what is that actually going to be worth?” said Peter Atherton, an associate at consultancy Cornwall Insight.
Conn said a cut in the dividend payment was necessary after Britain’s energy regulator Ofgem capped prices in January, while additional pension contributions were among other increased demands on the company’s cash flow.
The interim dividend of 1.5 pence is less than half the 3.6 pence awarded in the first half of 2018, while the full-year 2019 dividend will be cut to 5 pence, lower than the 6 pence predicted by most analysts.
Conn, under pressure from shareholders because of the company’s poor performance and from trade union groups after receiving a 44% pay rise to 2.4 million pounds last year amid a restructuring that included thousands of job losses, said he would step down in 2020.
Earlier this year the company said it expected to make between 1,500 and 2,000 job losses on a like-for-like basis in 2019, as a part of the 4,000 cuts to 2020 announced last year.
Conn said, during a call with journalists, that more jobs cuts could be announced with the company’s full year results next February as part of the further 250 million of cost cut announced on Tuesday.
Centrica said earlier this year that the cap on standard energy prices, ordered by former Prime Minister Theresa May, would lead to a 300 million pound hit to profits in 2019, including a one-off impact of about 70 million in the first quarter of 2019.
Conn said the price cap had done little to help households and he hoped to discuss this with Britain’s new government led by Prime Minister Boris Johnson.
“I am encouraged this new government realises the importance of Britain’s productivity and competitiveness,” Conn said.
Centrica also said it would exit its oil and gas exploration and production (E&P) business Spirit Energy by the end of 2020. Conn said that would most likely be via a trade sale with analysts valuing the business at around 1.5-1.8 billion pounds.
Centrica also hopes to sell its 20% stake in Britain’s nuclear fleet by the end of 2020.
(Reporting by Susanna Twidale, additional reporting by Yadarisa Shabong in Bengaluru; Editing by Anil D’Silva and Louise Heavens)