Centrica's Annual Earnings Nearly Halve in Challenging Year for British Gas
Centrica, the parent company of British Gas, has reported a dramatic slump in its annual earnings, with underlying operating profits falling by nearly 50% to £814 million in 2025, down from £1.55 billion the previous year. The group described the period as "challenging," citing significant headwinds in its household energy supply business.
Warm Weather and Tariff Shifts Drive Profit Decline
The household energy supply arm of British Gas saw earnings plummet by 39% to £163 million. A key factor was an £80 million hit due to warmer weather, which led customers to reduce their central heating usage. Additionally, profitability was impacted by customers switching to fixed-price products, often at a discount compared to standard variable tariffs.
Centrica noted that 32% of its customers are now on fixed-price tariffs, up from 25% at the end of 2024. This shift reflects broader market trends as consumers seek more predictable energy costs amid fluctuating prices.
Strategic Moves and Customer Growth Amid Challenges
In response to the financial pressures, Centrica has paused its share buyback programme to prioritise investment. Shares in the firm fell by 8% following this announcement. Despite the downturn, the company achieved a milestone: customer growth across its retail businesses for the first time in over a decade.
UK and Ireland household customer numbers increased by 1% to 7.96 million, with 7.5 million in the UK. This growth was partly boosted by acquiring 91,000 customers from failed suppliers Rebel Energy and Tomato Energy, which offset a slight decrease in underlying customers. However, British Gas was overtaken by rival Octopus Energy as the UK's largest household energy supplier last year.
Chief executive Chris O'Shea commented, "The environment has been challenging, and performance has varied across the business. However, we have remained disciplined, delivering strong operational performance and achieving customer growth across all our retail businesses simultaneously for the first time in over a decade."
Investment Plans and Market Context
Centrica plans to invest at least £700 million in 2026, following a £1.3 billion investment in 2025 for a 15% stake in the Sizewell C nuclear power plant in Suffolk. O'Shea emphasised that pausing the buyback allows the company to focus on investments that create lasting value for shareholders while providing reliable and affordable energy.
The results come as Cornwall Insight forecasts a 7% reduction in Ofgem's energy price cap, potentially lowering typical dual fuel household bills by £117 to £1,641 annually from April 1. This follows Chancellor Rachel Reeves' announcement last November of a £150 cut to average bills by scrapping the Energy Company Obligation scheme.
Gas Storage and Analyst Perspectives
Centrica's Rough gas storage site in the North Sea reported lower-than-feared losses in 2025 and is expected to roughly break even in 2026, despite previous warnings about needing government support. A government consultation on gas storage in the UK recently closed, with a decision expected in the first half of the year.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, noted, "British Gas owner Centrica's headline numbers were a tough read as energy markets adjusted to more normalised conditions." He added that the company's investment programme, involving £600-800 million annually until 2028, could strain cash flows if returns are slower or lower than anticipated.
Overall, Centrica's performance highlights the volatile nature of the energy sector, with external factors like weather and regulatory changes significantly impacting profitability, even as the company pursues strategic growth and investment initiatives.
