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E.ON reports positive first-quarter earnings and Centrica announces its aims to reduce costs

Richard Simmonds • May 11, 2021

Two of the UK's largest energy suppliers have released their latest earnings and savings reports with E.ON announcing it had seen earnings rise in the first quarter of 2021 and British Gas owner Centrica reveals how it expects to save more than £100m in 2021.

E.ON earnings rise

The UK’s third-largest energy suppliers, E.ON revealed in its company report that first-quarter earnings rose by nearly a fifth following a period of significant cost savings.

The German-based supplier last year had reported challenging conditions as a result of declining customer numbers and falling energy prices but thanks to making significant cost savings it saw its adjusted net income rise 19% to £695.6 million. Adjusted earnings before tax increased by 14% to £1.43 billion.

The company said that after reporting a £197 million loss in the UK retail market in 2019 thanks to a combination of challenges created by the Covid-19 pandemic and increased competition it initiated a major restructuring.

4,500 jobs were cut and a drive towards increased digitisation of its services. E.ON now expects to make £670 million in savings by 2024.

Back in January, the energy supplier landed in hot water with the energy regulator Ofgem after an energy billing error resulted in many of its customers being wrongfully charged on Christmas Eve instead of in January.

The error resulted in many of E.ONs customers sliding into their overdrafts over the holiday season and causing needless stress and worry to consumers.

As a consequence, Ofgem ordered E.ON to pay back hundreds of thousands of pounds in compensation as well as a sum of £627,312 to the energy redress fund in recognition of its failure to address underlying system and governance weaknesses, which would have prevented the error from occurring.

Also read: E.ON pays compensation to customers following energy billing error

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Centrica expects to save £100 million after controversial measures

British Gas owner, Centrica has announced that it will aim to make £100 million in cost savings as it seeks to modernise the company.

Since 2013, the company has seen its shares lose 85% of their value as it suffered from an increasingly competitive energy market.

Earlier this year Centrica revealed that it saw a 35% decline in profits for 2020 and blamed the losses on the warmest spring weather on record and the need to provide provisions for bad debts that increased sharply due to the impacts of the pandemic.

As part of its restructuring the company introduced the controversial fire and rehire policy that made the headlines earlier this year. Employees were asked to accept a 15% cut in pay rates and other changes in terms and conditions. Despite the negative headlines, Centrica said that 98% of its engineers had agreed to sign the new employment contracts.

According to Centrica, the measures have reduced debt during the first three months of 2021 to bring its net debt down from £3 billion to £500 million.

Chris O’ Shea, Group Chief Executive of Centrica, said: “As expected trading conditions have remained tough in the year to date. However, the modernisation of our Group remains on track and the difficult, but necessary process to move colleagues onto new terms and conditions is now complete.

“Although the external environment remains uncertain, our tight focus on cash and on fixing the basics across the Group leaves us well placed as we continue the turnaround of our company.”

Also read: British Gas loses 2% of customers and profits hit a record low due to pandemic and increased competition