Decreased earnings for Centrica due to milder temperatures and reduced energy costs
Unseasonably warm weather and lower wholesale energy prices have significantly impacted Centrica's profits in the first half of 2025. Here's a breakdown of the effects:
- Profit Decline
Centrica's adjusted operating profit for the first half of 2025 was £549 million, down from just over £1 billion in the same period last year. The company's adjusted EBITDA also fell, from £1.4 billion to £900 million.
- Warm Weather Impact
Warmer than normal weather reduced energy demand, impacting British Gas's residential energy business. This resulted in a £50 million headwind for the residential energy performance.
- Lower Wholesale Prices
Lower wholesale energy prices and narrower price spreads hurt businesses like Centrica Energy and affected the company's gas and power trading operations. These factors limited opportunities for deploying capital effectively.
- Business Segment Impacts
- Retail Energy: The retail segment saw a slight improvement with an adjusted operating profit of £300 million, up from £200 million last year, driven by improved performance in British Gas Services & Solutions.
- Optimisation and Infrastructure Segments: The optimisation segment's adjusted operating profit decreased to £100 million from £300 million due to challenging market conditions. The infrastructure segment's profit also fell to £200 million from £500 million due to lower commodity prices and seasonal gas price spreads.
Despite these challenges, Centrica plans to increase its full-year dividend per share to 5.5 pence, reflecting a commitment to shareholder value.
- Investment in Sizewell C
Centrica announced an agreement to acquire a 15% stake in the new nuclear power plant Sizewell C. The group's total funding obligation for Sizewell C is capped at £1.3 billion. Centrica's CEO, Chris O'Shea, stated that the investment in Sizewell C would be 'good for Centrica, giving us predictable, regulated returns on our investment.' The investment is expected to generate a return on equity of 10.8% through the construction and initial operations phase.
- Customer Base
Centrica's customer base decreased by 2% in the first half of the year.
- Financial Performance
Centrica returned £500 million to shareholders in the first half of the year, but experienced a decrease in profits. Chris O'Shea, Centrica's CEO, stated that there is more to do across the group, specifically in improving commercial performance in services & solutions. Centrica posted a statutory operating loss of £69 million, compared to a £1.7 billion profit last year.
Centrica highlighted falling wholesale energy prices and weaker returns from gas storage as factors in the profit decrease. The company emphasised its commitment to long-term growth and the potential benefits of Sizewell C investment.
Investing in the energy sector, Centrica announced an agreement to acquire a 15% stake in the new nuclear power plant Sizewell C, with a total funding obligation capped at £1.3 billion. This strategic move, according to CEO Chris O'Shea, will provide predictable, regulated returns on investment and is 'good for Centrica.' However, in the first half of 2025, Centrica's financial performance was affected by falling wholesale energy prices and weaker returns from gas storage, leading to a decline in profits and a statutory operating loss of £69 million.
