Centrica sees record shares fall as price hike sends customers fleeing

British Gas decided to hike electricity prices by 12.5% in September
British Gas decided to hike electricity prices by 12.5% in September

British Gas owner Centrica has suffered its biggest ever one-day shares crash after haemorrhaging 823,000 household energy accounts in four months and warning over full-year earnings.

The FTSE 100 giant saw shares plunge more than 17% at one stage after it revealed the customer exodus at British Gas and said results would also be hit by woes in its North American arm and warmer-than-normal weather in October and November.

It marked its biggest ever intra-day shares fall and took the stock down to levels not seen for 14 years.

The move by British Gas to hike electricity prices by 12.5% in September contributed to the loss of customers between the end of June and end of October.

British Gas - Britain's biggest energy supplier - now has 13.1 million customer accounts and 7.9 million customers.

All of the UK's Big Six energy providers have been under pressure from smaller rivals as customers increasingly switch to get the best deal.

The most recent customer losses at British Gas follow 387,000 domestic energy customers shed by the group in the first six months of the year.

Centrica warned its earnings per share would be nearly a fifth lower than expected due to the British Gas woes as well as troubles in its North American arm, which is being hit by "highly competitive market conditions and low price volatility".

The group said annual earnings in its British Gas business would only break even due to the account losses and a drop in demand for energy in the recent unseasonally warm autumn weather, although it said cost cutting had helped limit the profit impact.

Centrica group chief executive Iain Conn said "Although some aspects of our delivery in the second half of 2017 have been disappointing, I remain encouraged by our progress in implementing our strategy."

Its update comes just days after British Gas moved to scrap its standard variable tariffs (SVTs) for new customers ahead of Government plans to impose a price cap on the costly energy products.

Around 4.5 million of Centrica's customers - or about 60% - are currently on SVTs, with 70% of profits coming from the company's SVT customer base.

Centrica said 150,000 of the UK accounts lost since the end of June were down to market switching trends following the tariff rise.

The bulk - 650,000 of its customer accounts - were as a result of so-called collective switching, where large groups of households join forces with a new provider to get the best deal, as well as falling numbers on its white-label and prepayment tariffs, according to the group.

Its gloomy update also saw it caution over a £76 million pre-tax hit in its North American business division, with full-year profits in the unit set to tumble to £86 million.

The group's division in the UK that serves businesses is also being impacted by "competitive pressures" and will only "broadly break even" this year.

Market analyst David Madden, at CMC Markets, warned Centrica's record share price crash may not be the end of its stock market troubles.

He said: "The share price has been in decline since July 2013 and it has now fallen to a level not seen since 2003.

"If the bearish sentiment continues the stock could target 125p."