Centrica takes a financial hit at it repositions further for a new future as a customer-focused firm without Iain Conn.
Shares in British Gas parent Centrica are trading at levels not seen since 1997 after it reported a slew of negative news and said its chief executive was to go.
Iain Conn, the company said, would “step down” next year following an “exceptionally challenging” period.
The announcement was made alongside financial results which showed Centrica had swung to a £446m loss in the first six months of the year compared with profits of £704m in the same period last year.
It blamed a string of problems including the impact of the price cap on default energy tariffs, warm weather and a further bleeding of 178,000 customers from its British Gas arm.
Centrica said Mr Conn had “agreed with the board” to remain in post “to drive the repositioning of the company’s portfolio and improve underlying performance as it continues to gain momentum”.
Actions that were being taken, the company said, included an acceleration in its cost efficiency programme that now aims to deliver savings of £1bn a year between 2019 and 2022.
It marks a £250m annual increase and the scheme could include further job losses at British Gas as the company said its UK Home division, would be “fundamentally rebased” with further reductions in costs.
The company also announced its intention to leave oil and gas production behind to focus on provision of services to customers and a greener future.
While it maintained its full-year outlook, Centrica said the dividend had been slashed by more than 50% to 5p to reflect the impact of the price cap, additional pension deficit contributions and restructuring charges of around £1.25bn.
Shares – down by a third in the year to date ahead of Tuesday’s statements – fell by 10% when the FTSE 100 opened for business.
The declines extended as they were more than 17% lower in early afternoon trading at 75p – a level not seen for 22 years.
There was no respite by the time markets closed, as shares ended the day down 19% at 73.58p.
Mr Conn told investors: “Centrica faced an exceptionally challenging environment in the first half of 2019, which impacted earnings and cash flows.
“We have also regrettably had to make the decision to rebase the dividend due to our changed circumstances… The outlook is more positive for the second half of the year and we expect this momentum to continue into 2020, while we expect to meet our cash flow and net debt targets for 2019.”
He is expected to leave by next April.
Questioned on the manner of his departure on Sky’s Ian King Live, Mr Conn denied he had been forced out.
“This is a decision that I have made with the board. It’s been something i have been discussing for six months with the chairman,” he said.
He added it was a “natural” moment to retire as the repositioning of the company entered its final phase.
The Unison union welcomed his looming exit and signalled it would oppose any further jobs losses among its members.
Its national officer for energy, Matt Lay, said: “Iain Conn cannot solely be blamed for the company’s present challenges, but if the business is to move forward, it is right for him to stand down.
“The company can’t continue to axe thousands of front-line staff to make savings, so the cut in dividend is welcome to allow more investment for the future and to strengthen the balance sheet.”
George Salmon, equity analyst at Hargreaves Lansdown, said of the share price decline: “These results bring a lot of cloud and not much silver lining for Centrica shareholders.
“Adjusted operating profits are way down, and by more than had been expected.
“It’s a similar story on the dividend. Given how the cocktail of challenges had been brewing over the last couple of years, the cut isn’t a surprise in itself, but a near 60% reduction is harsher than had been feared.”