British Gas is bracing for a steep fall in revenues due to the coronavirus pandemic, as households delay paying their bills and its business customers close their sites.
The owner of Britain’s largest energy supplier abandoned its cash flow forecasts for the year because it cannot predict how many households will be able to pay their energy bills, or how long they may defer payments to weather the coronavirus lockdown.
The company also expects to sell less energy overall as a result of the pandemic, as increased demand from its seven million household customers working at home will not offset the reduction in demand from businesses.
The supplier’s parent company, Centrica, told its investors – including more than half a million individuals – that it would cancel its shareholder dividend this year and cut spending plans worth a total of £400m. It will also scrap plans to pay senior executive bonuses, and freeze the pay of back office staff to help see out the crisis.
Centrica’s share price plunged to fresh all-time lows of just under 34.6p, down sharply from around 90p a share in January this year before the combined impact of the coronavirus and the oil price collapse began to weigh on the struggling energy company.
The 18-year lows on the oil market are expected to cut its cash flows by around £100m this year, although it is “difficult to quantify” the full impact of the coronavirus crisis on its 2020 financial results, the company said.
“It is unclear how long the current situation will last, how customer behaviour may change, the impact on the wider economy, and the extent to which government financial support for households and businesses may help mitigate some of the expected effects,” the company said.
The record share price lows come weeks after Centrica replaced its chairman and ousted its outgoing chief executive with immediate effect following a £1bn loss for 2019.
Centrica had hoped to continue efforts to turn around its fortunes in 2020 after a torrid few years, marked by rising competition in the energy market and a government-mandated cap on energy bills.
Its plan to sell its share of Spirit Energy, the North Sea oil and gas company, and its stake in the UK’s nuclear reactor fleet to focus on its customer business have also been derailed by the Covid-19 outbreak, it said.
Chris O’Shea, the interim chief executive and chief financial officer, said: “While there are so many uncertainties surrounding the impacts of this situation, I am confident that we have acted promptly and prudently to underpin the long-term strength of Centrica.”
The company’s board is continuing to look for a new chief executive.