British Gas owner Centrica PLC (LSE:CNA) is starting to resemble a "pantomime villain" as it enjoys bountiful profits from its Retail arm where consumers have endured sky-high energy bills - but how much longer will it benefit from the current government's regulatory price cap?
The energy company described it performance over the first five months of the year as "strong overall", expecting full-year adjusted earnings per share to be around the top end of the analyst consensus range of 16.5p to 24.7p.
Analysts at Jefferies said their understanding is that Centria's "beat" to consensus for the first few months of the year was in Retail, where the company expects a large year-on-year earnings improvement "due to allowances in the UK retail price cap relating to costs incurred in prior periods".
The outperformance of this business means the group, said Russ Mould, investment director at AJ Bell, "is doing little to endear itself to the UK’s hard-pressed households, even if shareholders will be pleased".
Even more so, with chief executive Chris O’Shea in line for a bumper pay packet, the company is "starting to resemble a pantomime villain", said Mould.
He said this view is made more uncomfortable given the driver of its strong performance is the retail-facing business where it is benefiting from regulatory changes which allow it to reclaim losses from selling at capped prices.
Unlike some rivals, Centrica benefited from having a wholesale business during the energy crisis, also reaping rewards from its energy-producing assets, making up for the easing of gas and electricity prices this year.
“Before 2022 the British Gas operation saw significant churn amid strong competition, yet much of that competition has now exited the market, putting Centrica in an enviable position," said Mould.
“The question now is whether political and regulatory pressure will intervene to upset the apple cart.”