Centrica profits triple to over £3bn
The owner of British Gas has reported a surge in annual profits this morning, becoming the latest energy giant to benefit from the jump in energy prices since the invasion of Ukraine.
Centrica made total operating profits of £3.3bn, a record, and more than three times as much as the £948m adjusted profits it made in 2021.
The jump in earnings comes just weeks after British Gas suspended the forced installation of prepayment meters due to concerns over its treatment of vulnerable customers.
Centrica says it benefitted from “strong gas production and electricity generation against a backdrop of higher commodity prices”.
The company operates oil and gas production in the North Sea, plus holds interests in Britain’s nuclear power plants and operates an energy trading business. These divisions, rather thatn British Gas, provided the bulk of Centrica’s profits.
Such high profits, when the energy crisis is fuelling the cost of living crisis, will intensify calls for tougher windfall taxes on the industry, with BP and Shell have also reported record profits for 2022.
Chris O’Shea, Centrica chief executive, says:
“Our performance in 2022 demonstrates the benefits of our balanced portfolio and our strong balance sheet.
The energy crisis and cost of living pressures have created a challenging environment for customers and communities, but we have been able to provide much needed stability and support.
We invested £75m in supporting our energy customers in 2022, which was greater than the £8 post-tax profit per customer earned by British Gas Energy. Whilst customers may see some relief given recent easing of prices, it remains clear that some will continue to need help and we will do what we can to support them in the year ahead.”
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Bond prices are also weakening, pushing up the yield (or interest rate) on US Treasury bills.
So much for the markets focusing more on the labor market than inflation. Inflation data, as witnessed by this week’s CPI and PPI reports, are still very much driving yields higher. pic.twitter.com/Aj65RgvgOm
— Kathy Jones (@KathyJones) February 16, 2023
UK government bond yields are also higher, another sign that the markets are disappointed that inflation pressures are higher than hoped.
Stock markets are taking a knock from the strong US PPI inflation report just released.
The FTSE 100 has sunk back from its earlier record highs, and is now back below the 8,000-point mark which it cleared for the first time yesterday.
US producer prices inflation higher than expected
US goods and services producers hiked their prices by more than expected last month, dampening hopes that inflation is easing.
The Producer Price Index for final demand rose by 0.7% in January, the US Bureau of Labor Statistics has reported.
On an anual basis, producer prices jumped by 6% in the year to January. Economists had expected it would fall to 5.4%, from 6.5% in the year to December.
Goods prices rose by 1.2% in Janary alone, which is the largest monthly increase since last June.
This was driven by higher energy costs, with prices for gasoline increasing by 6,2% in the month.
This is a sign that US inflation may be stickier than hoped, which may push the US Federal Reserve to raise interest rates still higher, and hold them their for longer than expected. Especially with the US jobs market still strong last week.
The dollar is rallying in response, pushing the pound down below $1.20.
not as much disinflation in US then thought perhaps and labour market still strong #USD
— Michael Hewson 🇬🇧 (@mhewson_CMC) February 16, 2023
Just in: the number of Americans filing new unemployment claims has dropped, suggesting the jobs market is still strong.
There were 194,00o fresh ‘initial claims’ for jobless support last week, down from 195,000 the previous week, and lower than expected – suggesting firms are holding onto workers.
These are low figures in historic terms, which may indicate that the increase in US interest rates has not yet cooled the labour market.
🇺🇸 *US JOBLESS CLAIMS 194,000 IN FEB. 11 WEEK; EST. 200K – BBG
*US CONTINUING CLAIMS ROSE TO 1,696K LAST WEEK; EST. 1,695K— Christophe Barraud🛢🐳 (@C_Barraud) February 16, 2023
Richard Partington
Millions of consumers with O2 and Virgin Mobile contracts are to be hit with an inflation-busting 17.3% increase in their bills for making calls, sending texts and using data, adding to pressure on households amid the cost of living crisis.
The price hike is the latest in a series of big increases imposed on consumers for vital utilities, and will add to pressure on the government to step in with tougher protections.
The telecoms operators – merged under the same umbrella company since 2021 – confirmed the cost of their airtime contracts, or what customers pay for calls, texts and data, would go up by the annual rate of retail prices index (RPI) inflation announced this week, plus 3.9 percentage points.
Official figures on Wednesday showed RPI stood at 13.4% in January, landing consumers with a 17.3% increase in their airtime bills in total – almost triple the rate of growth for average workers’ pay. Consumers will see the increase from April.
More here:
New: O2 and Virgin Mobile customers to pay inflation-busting 17.3% more for calls, texts and data
It comes as Rishi Sunak has pledged to halve inflation, and is insisting public sector workers take real-terms cuts.
Govt under pressure to act on telcos
https://t.co/GWHVz9TqLR— Richard Partington (@RJPartington) February 16, 2023
France’s stock market is also celebrating a record high today.
France’s CAC 40 index broke over its previous lifetime high this session, hitting 7,387.29 points.
France’s CAC 40 index briefly hits record high as European stocks continue to sizzle
The CAC 40 is up by around 1% so far today pic.twitter.com/Snoi9Lr4If— AnirudhSethi-Chart Surgeon (@CHARTISKING) February 16, 2023
Hopes that Europe’s economy will avoid a recession have boosted stocks in Paris, as have Beijing’s push to reopen China’s economy
Reuters explains:
French stocks have risen nearly 14% so far this year, following a battering in 2022, boosted by hopes that the euro zone will narrowly avoid a recession and surging shares of luxury goods groups that rely heavily on Chinese shoppers.
“France has particularly leveraged the faster-than-expected Chinese reopening,” said Andrea Cicione, head of research at TS Lombard.
“The fact that there is significant chunk of consumer discretionary in there, particularly luxury goods as opposed to Germany for example, where consumer discretionary is mostly autos, is definitely a positive for France.”
The boss of Centrica is refusing to say if he will waive his bonus for the past year, after the British Gas owner tripled its profits this morning.
Chris O’Shea, chief executive of Centrica, could be in line for a personal financial windfall after the company beat forecasts with profits of £3.3bn last year.
However, he said on Thursday that it is “too early to have a conversation” about his potential bonus payout despite pressure from campaigners to reject it.
The boss of British Gas owner Centrica, Chris O’Shea, have refused to rule out taking an annual bonus that could see him net £1.6million.
— Graham Hiscott (@Grahamhiscott) February 16, 2023
Mr O’Shea told reporters:
“On the bonus, we’ve been a bit more efficient this year, and we’re a bit earlier in the process.
“Last year we reported a little bit later. It’s a bit early for us to say – the annual report will be published in March and it will have everything that you need.”
Three valiant attempts from @NathalieThomas3 @MrAlexLawson and @emilygosden to press Chris O’Shea Centrica boss on whether he’ll take a bonus this year.
O’Shea bats away every time saying “it’s too early and have to wait for annual report”. Hmmmm— Ashley Armstrong (@AArmstrong_says) February 16, 2023
Given the shocking revelations this month that agents working for British Gas had ignored customers’ vulnerabilities and broken into homes to fit pre-payment gas meters, there will surely be an outcry if O’Shea pockets a bonus for 2022.
Mike Ashley’s sports empire could drop out of the FTSE 100 when the index is next reshuffled, in March.
Frasers Group only rejoined the blue-chip index in September (when the takeover of defence firm Meggitt created a vacancy). It is currently the lowest-valued company on the FTSE 100, at around £3.7bn, so could be dislodged when index provider FTSE Russell recalculates which companies should be in the index.
Investec, the most valuable member of the FTSE 250 index of medium-sized firms, has a market capitalisation of £5.17bn, enough to propel it into the blue-chip FTSE 100.
FTSE Russell will conduct the review after the market closes on 28th February, with the reshuffle taking place on 20th March.
Proactive Investors reported yesterday that Frasers is on the brink of a drop back to the FTSE 250 index, saying:
In order to avoid companies yo-yo-ing between the two indices, a company must be able to climb into the top 90 by market cap to be promoted into the FTSE 100. Likewise, to be demoted, it must fall below the 110th position in terms of market cap.
Based on current market caps, Frasers is on the brink of the drop, with its £3.6bn market cap putting it in 109th position.
Ed Miliband MP, Labour’s Shadow Climate Change and Net Zero Secretary, has issued a statement on Centrica’s soaring profits:
“It cannot be right that, as oil and gas giants rake in the windfalls of war, the Rishi Sunak’s Conservatives refuse to implement a proper windfall tax that would make them pay their fair share.
“In a matter of weeks, the Government plans to allow the energy price cap to rise to £3,000. Labour would use a proper windfall tax to stop prices going up in April.
“When it comes to oil and gas interests, Rishi Sunak is too weak to stand up for the British people. Only Labour is on your side – with a plan to tackle the cost of living crisis now, and a long term plan to cut bills for good and make Britain a clean energy superpower.”
Russian central bank not planning to ease capital controls soon – governor
Over in Moscow, Russia’s top central banker has dashed hopes that capital controls could be lifted soon.
Capital controls were introduced almost a year ago, including curbs on foreign currency withdrawals. They were brought in after the full-scale invasion of Ukraine sent the rouble plunging, helping the currency to recover.
Reuters has the details:
Russia’s central bank does not yet see an opportunity to significantly ease capital controls, Governor Elvira Nabiullina told reporters on Thursday, stating that it could extend restrictions on foreign currency withdrawals in March.
Nabiullina said the controls that have been left in place are important for financial stability. Russia introduced capital controls to stabilise the FX market shortly after Moscow sent troops into Ukraine a year ago and the rouble tumbled to a record low.
UK consumer spending weakened last week, the latest realtime economic data shows.
But, takings at Pret A Manger rose, as workers returned to the office following rail strikes the previous week.
The Office for National Statistics has reported that aggregate UK spending on debit and credit cards is estimated to have dropped by 3 percentage points last week. Younger shoppers cut back the most; debit card transactions by those aged 18-34 fell by 12 percentage points.
But, the number of in-store transactions at all Pret A Manger locations increased in the week to 9 February 2023, apart from in “London Suburban” where they were broadly unchanged.
Pret takings are a proxy for consumer spending and high street visits.
The ONS says:
This latest recovery in transactions may be partially because of the rail strikes in the previous week. Manchester stores saw the largest increase of 12 percentage points compared with the previous week, followed by Regional Stations where they increased by 9 percentage points.
In the week ending 9 Feb 2023, transactions at @Pret stores increased in all locations except “London Suburban”.
The largest increases were in Manchester stores and regional stations.
This may be partially because of the rail strikes the previous week. pic.twitter.com/4IiT2O5Mfo
— Office for National Statistics (ONS) (@ONS) February 16, 2023
Centrica has beaten City forecasts with its 2022 earnings this morning, reports Keith Bowman, investment analyst at interactive investor:
Bowman explains:
Higher energy prices following the war in Ukraine helped push upstream adjusted operating profit to £1.79 billion from last year’s £663 million. Profit on the same basis for its British Gas supply business fell 39% to £72 million, while profit at its Irish supply business rose 11% to £31 million. Hindered by the loss of customer numbers as consumers look to reduce outgoings, its boiler and other services business saw an adjusted loss of £9 million.
A final dividend of 3p per share follows the reinstatement of shareholder payouts at the half year results in July, and leaves the shares sat on an historic yield of around 4%. Centrica’s existing £250 million share buyback scheme is being extended by a further £300 million.
In all, and as with business in general, elevated inflation is raising costs, Bowman adds:
The weather and its unseasonal swings also cause uncertainty over customer energy demand, while a lot is already in the price after outperforming the FTSE 100 by 20%-plus over the last year.
British Gas owner Centrica posts record profits of £3.3bn – beating the £2.7bn notched up in 2012.
– Plans to pay out £200m to investors and extra £300m in share buybacks.
– Says it was “extremely disappointed” by debt agents on prepayment meters https://t.co/GlGAbMskFG— Alex Lawson (@MrAlexLawson) February 16, 2023
Here’s Ed Miliband, Shadow Climate and Net Zero Secretary, on Centrica’s profit surge:
It cannot be right that, as oil and gas giants rake in the windfalls of war, Rishi Sunak’s Conservatives refuse to implement a proper windfall tax that would make them pay their fair share.
Labour would use a real windfall tax to stop the energy price cap going up in April. https://t.co/RyJrki0EYs
— Ed Miliband (@Ed_Miliband) February 16, 2023
Shares in Standard Chartered are now up 3.5%, after the bank upgraded its forecasts and posted a 28% rise in profits for last year.
Standard Chartered said the reopening of China after the pandemic is giving grounds for optimism, after it made a statutory pre-tax profit of $4.3bn (£3.56bn) for last year.
Standard Chartered, which is focused on the Asia-Pacific region, told shareholders that the pace of economic recovery in many of its “footprint markets” was encouraging.
“The recent opening-up of China and the generally receding impacts of COVID-19 should help,” it added.
It also saw its net interest margin – the difference between what a bank charges for loans and pays for savings – increase by 0.2 percentage points as it benefited from a higher interest rate environment.
CEO Bill Winters says the bank is upgrading its expectations, and now targeting “a return on tangible equity approaching 10% in 2023, to exceed 11% in 2024, and to continue to grow thereafter”.
Alex Lawson
The scandal-hit owner of British Gas has reported record profits of £3.3bn boosted by soaring wholesale gas prices after Russia’s invasion of Ukraine and as many households in Britain struggle with the cost of living, our energy correspondent Alex Lawson reports.
Centrica’s bumper profits are likely to anger campaigners calling for tougher windfall taxes, lower bills and better treatment of vulnerable customers against the backdrop of the prepayment meter scandal.
The company’s profits for 2022 more than tripled compared with the £948m in 2021, aided by soaring profits in its North Sea oil and gas division. They also surpass the company’s previous profit high of £2.7bn, recorded in 2012.
British Gas faced widespread criticism earlier this month when it emerged that debt agents working for Britain’s largest energy supplier had ignored customers’ vulnerabilities and forced them on to prepayment meters to recover debts.
The company suspended the use of court warrants to install prepayment meters and the government and Great Britain’s energy regulator, Ofgem, later ordered all energy suppliers to pause the tactic.
Centrica’s North Sea profits are subject to a windfall tax on North Sea oil and gas operators while it also has a 20% stake in Britain’s nuclear power stations, which are subject to the electricity generator levy implemented by the chancellor, Jeremy Hunt, to capture windfall gains.
However, Labour has called for the oil and gas windfall tax to be expanded to capture a greater proportion of profits.
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