British Gas owner Centrica has reported operating profits of £1.3bn in the six months to 30 June, which is down 19 per cent on the same period last year.
The results include a 54 per cent fall in operating profits at its residential energy division, British Gas, to £270m.
As part of the operating and financial overview the company says it is on track to deliver full year earnings growth in 2011, despite commodity price volatility, challenging economic environment and higher UK upstream gas and oil tax rates.
Centrica says that the first half of 2011 was a dramatic period for global energy markets. With the UK's indigenous production declining, the country has become increasingly dependent on imports, particularly LNG. As a result, UK wholesale gas prices have risen by around 30 per cent, reflecting unrest in the Middle East and North Africa and increased global demand for gas, in part due to closures of nuclear plants in Japan.
British Gas says higher wholesale gas prices are responsible for the fall in profits and the need to raise gas prices by 18 per cent and electricity prices by 16 per cent in August. However Centrica has also reported that operational performance was strong for each area of the business, and that the number of British Gas residential accounts increased during this period.
Although Centrica announced in its overview that it is making progress in improving levels of customer service, British Gas has recently been fined £2.5m by the regulator Ofgem for failure to deal with customer complaints.
Speaking to the
BBC, Richard Lloyd from consumer group Which? said: 'These profits come at a terrible time for people who are being clobbered by these 18 per cent rises in gas bills and 16 per cent rises in electricity bills.'
Centrica chief executive, Sam Laidlaw said: 'Global events have resulted in a steep increase in commodity prices, with UK wholesale gas prices 30 per cent higher than last winter. In this challenging market, the resilience of our integrated business model has enabled Centrica to continue to perform well. We are focused on reducing costs and ensuring disciplined deployment of capital, to maintain our competitive position and drive long-term shareholder returns.'
