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Centrica issues profit warning amid customer exodus

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British Gas has lost 823,000 – nearly 6% – of domestic customer accounts since the end of June.Owner Centrica said 150,000 of those accounts had switched to other providers, some of them because it raised prices in September.The news, unveiled in a warning about poor trading, sent Centrica shares tumbling by 17%.Centrica said operating profits would be “lower than expected” because of problems at both its UK and US arms.British Gas has 13.1 million customer accounts.

Centrica said 650,000 of the customer accounts it had lost were as a result of so-called “collective switching”, where large groups of households join forces with a new provider to get the best deal.Also, a fall in customers for its energy sold under the Sainsbury’s brand name and pre-payment tariffs also contributed.Earlier this week, British Gas said it would withdraw Standard Variable Tariffs for new customers. Centrica said that “despite the impact of account losses and warmer than normal weather in the year to date”, cost-cutting meant British Gas’s full year operating profit was expected to be “broadly in line with 2016”. Although the company also added that the dividend was “underpinned”, Centrica shares were down 22% at one point.’Price hike’Neil Wilson, senior market analyst at ETX Capital, said: “The price hike in September clearly had an impact. You have to wonder why Centrica rushed out its plans to reform the energy market – perhaps it’s seeing a larger number of account losses than planned.”The performance of Centrica’s division supplying large scale business users in North America and the UK also seems to have spooked the financial markets.The North America Business division is expected to report full year adjusted operating profit of around £80m, down from a previous expectation of £259m The division has been hit by intense competition and a one off charge. The UK Business division has also faced a very competitive market. George Salmon, equity analyst at Hargreaves Lansdown, said: “It is the business-facing parts of Centrica that are responsible for the latest dose of bad news. “Weaker margins as a result of intense pricing pressure on both sides of the Atlantic, plus a £46m write-down, means Centrica is set to miss profit expectations.”
Source: BBC