The owner of Scottish Gas and British Gas has reported a large fall in profits.

Centrica said the steep drop was a result of "challenging trading conditions" which included recent falls in oil and gas prices, as well as extreme weather patterns.

Publishing its preliminary results for the year ending 31 December 2014, the firm said its operating profits plunged by 35% to £1.75bn; while its profit at British Gas's residential business fell by 23% to £439m.

Again, the fall in energy consumption followed a record year for warmer weather, meaning households used less energy for heating. Meanwhile, the fall in global oil and gas prices resulted in Centrica writing off £1.4bn from its balance sheet.

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

The full-year dividend payout for 2014 will now be 13.5p per share.


Looking ahead, the energy firm said it was "taking positive action" against the low commodity price backdrop to improve earnings and cash flows for 2015 and 2016, and is focusing on reducing capital expenditure "through driving efficiencies on in-flight projects and putting a hold on certain new project".

With this in mind, Centrica announced it is to close two of its gas-fired power stations that are losing money. Following a review, it plans to close the Killingholme and Brigg power stations, and ensure the management of its power portfolio is more efficient.

Iain Conn, Chief Executive of Centrica, explained: "2014 was a very difficult year for Centrica and the recent fall in oil and gas prices creates further challenge. We are cutting investment and costs in response.

"However, it is with regret that, along with reducing capital expenditure and driving efficiency beyond planned levels, we have taken the difficult decision to rebase the dividend by 30%, commencing with the final distribution for 2014.

"In addition, given the changed external environment we are reviewing the longer term strategy, and will conclude this by the Interim Results in July."

However, he added: "Despite the obvious current challenges, I am confident in the quality of Centrica's team and the platform which has been established, and I believe the Group is well-placed to take advantage of the longer term trends in the global energy markets.

"Our priorities remain to serve our customers competitively and with integrity, to develop new offers and services, to provide secure and reliable energy supplies and to deliver long term value for shareholders."

(JP/IT)