Hot on the heels of one of the worst winters the UK has suffered for many years, it comes as little surprise that the British Gas division of Centrica has been the main driving force behind its improved first-half figures. In basic terms, the colder the weather, the more gas or electricity we need to heat our homes. And the more Centrica can sell of both, the better its profits. However, to ensure a steady flow of these energy sources, Centrica will need to source fresh supplies for the years ahead, and it is likely that a sizable chunk of these profits will have to be ploughed back into securing adequate supply.
The fact that the firm has been able to post operating profits of £802 million, up 16% from last year, will no doubt ensure that plenty of press coverage will be devoted to demanding lower fuel charges for the year ahead. But before everyone gets too worked up about this, we should also realise that the company has seen the tax it pays increase by 21%, up to £690 million for the year, and its tax rate has jumped from 43% up to 47%. It has also announced that it will be embarking on a number of shale gas operations in the UK, as well as having 1,000 apprentices currently training with the company plus 200 new apprentices announced in June.
Understandably, as the underlying consumers find their spending power being crushed, Centrica will become a target – but arguably that’s not all bad.