British Gas owner Centrica blames energy price cap as losses hit £1.1bn

Chief executive Ian Conn says company faced 'challenging environment' including the falling price of natural gas

Profits at British Gas, which operates Centrica’s retail energy business, fell 71 per cent to £137m (EPA)

British Gas owner Centrica plunged to a £1.1bn loss before tax last year, blaming the government’s energy price cap and the falling price of natural gas.

Shares in the company fell 17 per cent after the announcement on Thursday to below 70p - less than a quarter of their value when chief executive Ian Conn took over five years ago.

The outgoing boss said Centrica had faced a “challenging environment”, pointing to the price cap on standard energy tariffs which cost the company an estimated £300m in 2019.

Adjusted operating profit, which strips out major restructuring costs and some effects of lower wholesale gas prices, dropped 35 per cent to £901m.

Profits at British Gas, which operates Centrica’s retail energy business, fell 71 per cent to £137m.

Mr Conn, who has faced criticism over his multimillion-pound pay packets, pointed to an improvement in the second half of 2019 over the first half.

British Gas’ rate of decline has also slowed down, he said. The UK’s largest energy supplier lost 286,000 of customer accounts last year, which is half the rate of 2018 and a quarter of the rate in 2017.

British Gas has lost millions of customers to smaller suppliers and cut thousands of jobs during Mr Conn's tenure.

The company also incurred hefty one-off costs in 2019, including a £476m write-down of its exploration and production business thanks to fluctuating fossil fuel prices.

The energy price cap came into force at the start of last year, aiming to cut outgoings for millions of households.

But British Gas has been fiercely critical of how it has been implemented, winning a high court fight in November after arguing that the energy watchdog's changes to the cap's methodology were unfair.

David Barclay, senior investment manager at Brewin Dolphin, said: “Today’s results cap an undoubtedly difficult year for Centrica with drops across the board and an increase in debt.

"The good news, however, is that management has identified that drastic action is required and is duly taking it to make Centrica a smaller, simpler, and more competitive business. Nevertheless, there is still plenty of work to do and investors will have a keen eye on future updates.”