After years of low profitability, dividend cuts and balance sheet concerns, the invasion of Ukraine by Russia elevated energy prices and provided the conditions for Centrica to unleash their earnings potential.
Centrica’s EPS for 2022 rose to 34.9p from 4.1p in 2021 as higher gas prices bolstered revenue by 61% to £23.7bn.
With customer numbers for their retail business only growing 2%, the lion’s share of Centrica’s revenue growth was achieved by price inflation in their British Gas retail and business supply, and increased marketing and trading activity.
Net cash rose to £1.2bn at the end of 2022 compare to £0.7bn at the end of 2021.
The higher energy price environment permitted Centrica to reinstate their progressive dividend policy and will pay 3p for the 2022 full year.
“There will no doubt be howls of anguish and pain at the news that British Gas owner, Centrica, has today reported a 700% jump in profits from almost £400m to just over £2,800m, with earnings per share rising even faster from 2.8p to 34.2p. Despite that huge increase, British Gas saw profits fall 39% to £72m, in no small part due to the company spending £75m on customer assistance measures,” said Steve Clayton, Head of Equity Funds at Hargreaves Lansdown.
“The huge dichotomy between a group that makes billions and British Gas making millions is because the money is being made in the North Sea and beyond, where the energy is brought out of the ground at high prices. British Gas’s realm is onshore, where gas must be piped around through expensive networks and sold at thin margins in a market with many competitors.”