British Gas owner Centrica sees profits fall steeply

Centrica, the owner of British Gas, has reported a big fall in profits after being hit by the drop in oil prices and by warmer weather.

Centrica's full-year operating profits fell by 35% to £1.75bn.

Profits at British Gas's residential business fell by 23% to £439m after warmer weather meant households used less energy for heating.

Centrica said it had taken a "painful" decision to cut dividend payments to shareholders.

The company cut its full-year dividend for 2014 to 13.5p a share from 17p the year before.

Shares in Centrica ended the day 8.5% lower at 257.3p.

Centrica said two of its gas-fired power stations, Killingholme and Brigg, are to close. Both power stations - which are 20 years old - are losing money.

The firm also said it was having to cut capital investment in the North Sea by 40% between now and 2016, as its planned returns from the region were being "completely compressed".

Chief executive Iain Conn told the BBC: "Other companies are doing the same thing. It's difficult, but it is what we have to do to position the company sustainably."

Global oil prices have halved since last summer as supplies have increased while weak economic growth has hit demand.

'Challenges'

Mr Conn described the dividend cut for 650,000 individual shareholders as necessary, in order to balance costs.

"I know how painful it is for our shareholders," he told the BBC's business editor, Kamal Ahmed.

Mr Conn, the former BP executive who took over as Centrica boss last month, admitted that "2014 was not the year we had planned it to be".

"We had the warmest weather on record in the UK, which of course helped our customers. But for us it did impact our profits."

He added that the Windsor-based firm continued "to face a number of challenges as we enter 2015, particularly the significant further reductions in wholesale oil and gas prices since the middle of December".

'Highly competitive'

Centrica also said that the average dual fuel profit per household was now £42, some £10 lower than in 2014.

The average residential customer bill of £1,152 in 2014 was about £100 lower than in 2013.

The number of residential accounts supplied by British Gas fell by 368,000 in 2014 to end the year on 14.8 million.

The company said that it had experienced a significant loss of customers in the first quarter of 2014, after an increase in residential prices in November 2013, but that the rate of customer loss was reduced during the rest of the year.

"The market remains highly competitive, with recent reductions in standard tariffs and most suppliers also offering a range of fixed price products," said Centrica.

The volume of gas it sold over the year fell by 20%, and electricity by 8%.