Doors were being banged down again at Centrica PLC (LSE:CNA) today but this time it was investors scrambling for shares as profits at the owner of British Gas more than tripled.
The scandal-hit firm faced widespread criticism earlier this month after revelations that debt-collectors working for British Gas broke into customers' homes to install prepay gas meters that left vulnerable people at risk of having their heating cut off.
A penny in the gas meter for their thoughts today.
Centrica’s profits for 2022 more than tripled to £3.3bn compared with the £948mln in 2021, aided by soaring profits in its North Sea oil and gas division. They also topped the company’s previous profit high of £2.7bn.
The bumper profits were accompanied by a £300mln fresh buy-back and a 3p dividend as shareholders reaped the rewards from the group’s cash mountain.
But how do you square record profits, bumper dividends and soaring share prices with consumers being cut off and doors kicked in? In short, with difficulty.
As AJ Bell’s Russ Mould put it: “The fact a big driver of Centrica’s soaring earnings and cash flow is the energy crisis resulting from the war in Ukraine will sit uncomfortably with many struggling to heat their homes.”
Benefiting from what Rishi Sunal calls an “illegal war” doesn’t put Centrica in cahoots with Vladimir Putin but shows the juxtaposition the investment community sometimes faces in a world where EBITDA, profits and shareholder returns are king.
Perhaps a little over dramatic. But as Unite general secretary Sharon Graham said: “British Gas owner Centrica has been coining it in from our massive energy bills while sending bailiffs to prey on vulnerable consumers the length and breadth of the country.”
In Centrica’s defence you can only play the hand you are dealt and the British Gas arm of the business only contributed around 2% of the total profit.
Indeed Centrica is really two separate businesses, one making record breaking profits and one which is not. Competition rules prevent it from selling the energy it produces more cheaply to its own retail customers than others leaving it with the dilemma of what to do.
But to the outsider looking in, hearing the sound of the latest gas bill landing on the door mat, it looks like a company swimming in cash, rewarding its City chums – doubles and trebles all round.
So what else could Centrica do with the cash? On the plus side it has significantly improved its finances, turning net debt into cash in recent years, has restored the dividend and is looking at opportunities to invest in energy transition through battery storage, solar farms and carbon capture.
But that may not satisfy the Government. With an election looming talk of windfall taxes is unlikely to go away.
Ed Miliband shadow secretary of state of climate change and net zero said: “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.”
Centrica paid £1bn in UK tax last year but only £54mln of this was a windfall tax. It estimates it will pay another £2.5bn in total UK tax in the next four years.
What else? Well, one idea came from the BBC’s Business Editor Simon Jack. He suggested Centrica could offer to shoulder more of the cost of fully re-opening the Rough gas storage facility, where he noted the firm was currently haggling with the government over subsidies, as a contribution to UK energy security?
The City seems to have shrugged any concerns for now marking shares up 5% today. It’s a bonanza time for the firm. The real challenge will be if high energy prices no longer remain a cash cow.
As Mould said: “Centrica has demonstrated it can perform well when conditions are heavily weighted in its favour. To really win the market over it needs to do the same when it is not getting such a big external boost.”
To win over the rest of the country is a battle unlikely to ever be won.