Centrica to Cut 5,000 Jobs as New CEO Seeks Fresh Start

(Bloomberg) --

Centrica Plc is set to shed 5,000 jobs before the end of the year as the new boss seeks to cut costs after years of customer losses and falling profits.

The losses, which amount to about 19% of the utility’s workforce, include 2,500 roles in senior management. Half of the 40-person leadership team is to leave by the end of August, the company said in a statement. Centrica is the U.K.’s biggest energy supplier to homes.

Chris O’Shea was appointed chief executive officer of Centrica just three months ago at a low point in the utility’s history. The U.K. government’s price cap on some tariffs hit profits and customers left in droves for smaller, cheaper suppliers.

At the same time oil and gas prices plunged and uncertainty stemming from coronavirus forced Centrica to put the sale of its upstream gas business on hold. The utility’s share price has fallen 86% since the start of 2015 and earlier this month it was demoted from the FTSE-100 U.K. benchmark stock index after 33 years.

Centrica to Cut 5,000 Jobs as New CEO Seeks Fresh Start

“I believe that our complex business model hinders the delivery of our strategy,” O’Shea said in the statement. “The harsh reality is that we have lost over half of our earnings in recent years. Now we must bring focus by modernizing and simplifying the way we do business.”

The biggest names to exit the firm include Sarwjit Sambhi, chief executive officer of Centrica’s consumer division, and Richard Hookway, chief executive of the business unit, who’ll both leave by the end of July. Their positions on the board won’t be replaced, Centrica said.

Lower oil and natural gas prices combined with a regulatory price cap have caused earnings to plummet. In April, Centrica paused the divestment of its North Sea oil and gas assets and withheld its final dividend payment as the impact of the coronavirus rippled through the energy industry.

Centrica to Cut 5,000 Jobs as New CEO Seeks Fresh Start

A “recovery won’t be swift amid weak commodity markets,” said Elchin Mammadov, an analyst at Bloomberg Intelligence. “Earnings battered by the roiling commodity markets should bottom in 2021, and the outlook may improve thereafter.”

Centrica had already reduced headcount by almost 33% since 2015 as it grappled with falling profits, according to company data. A previous restructuring by former CEO, Iain Conn, to focus on Centrica’s technology and services business failed to impress investors and hampered growth prospects.

Centrica to Cut 5,000 Jobs as New CEO Seeks Fresh Start

The company had already pledged not to pay any bonuses to its management for 2019 and cut capital expenditure by 400 million pounds ($507 million). In February, it booked a 1.1 billion-pound writedown on its gas and nuclear production assets. Oil and gas prices have slumped dramatically since then.

Analysts aren’t convinced that Thursday’s measures will be enough to bring on a fast turn around of the company.

“The sharper focus is welcome, but investors are likely to want much more clarity on the new simpler customer-focused business model before passing judgment,” said John Musk, an analyst at RBC Europe Ltd. “We think there is still too much uncertainty in the investment case.”

Shares fell by as much as 9% in London to 38 pence before trading at 40.53 pence by 4:09 p.m.

O’Shea, appointed Johnathan Ford to his own previous role as chief financial officer. Ford was chief operating officer and CFO at Homeserve Plc.

The Reference Shelf
  • New Centrica Boss Takes Pay Cut to Ride Out Crisis
  • British Gas Owner’s 33-Year Reign in FTSE 100 Index Nears an End
  • Centrica Pauses Spirit Energy Sale and Cancels Dividend
  • Gas Writedowns Hit Europe With $1.4 Billion Blow to Centrica

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