Centrica PLC (LSE:CNA) issued a profits guidance upgrade this morning that is unlikely to quell calls for a windfall tax on companies benefiting from soaring energy prices.
The British Gas owner was at pains this morning to emphasise it is investing more than £50mln in supporting its customers with 500 additional UK based customer service roles in British Gas Energy, 1,000 new UK engineering apprenticeships, and the British Gas Energy Support Fund, which provides grants of up to £750 to help customers pay their energy bills.
The fact remains, however, that the company – after just over four months of the year, is already expecting full-year profits to be at the top end of analysts' expectations, which prior to this morning’s announcement ranged from £739mln to £1.4bn.
In 2021, the company’s adjusted profit before taxation was £740mln, so we could be looking at a near doubling of profits this year.
Benefits of vertical integration
The company puts the profit uplift down to a “strong operational performance in the first four months of 2022”.
Volumes from its nuclear and gas production assets in the UK have been strong and will have benefited from the sharp increase in energy prices.
Meanwhile, its Energy Marketing & Trading business said it “managed increased commodity price volatility well”.
So, although Centrica will have been subject to an extent to the same problems that have caused around 30 energy suppliers to go bust, its size and its production assets have enabled it to weather the storm.
Furthermore, with some 4.5mln customers affected by small energy suppliers going bust, the company has seen a “flight to safety” with around 750,000 customers transferring to the big name in the UK sector.
The group may not be making much money from those new customers at the moment thanks to price caps but an adjustment to the price cap is on the way in October with analysts suggesting it could rise as high as £2,900 a year (about 10% of the average UK salary of those who are in employment).
Other companies more deserving of a tax raid
The smoke signals coming from Whitehall suggest that the government is opposed to the idea of a windfall tax on the energy companies (including oil & gas giants Shell PLC (LSE:SHEL, NYSE:SHEL) and BP PLC (LSE:BP.)).
The chancellor of the exchequer, Rishi Sunak, said siphoning money from these companies could constrain investment in new production assets and hamper the UK’s plan to reduce its dependence on Russian supplies.
Prime minister Boris Johnson has previously sung a similar tune but this morning on BBC Radio 4’s programme, John Allan, the chair of Tesco PLC (LSE:TSCO), came out in favour of a windfall tax on energy producers so that more money could be distributed to those families on low incomes.
A cynic might suggest that Allan is interested in shoppers having more money in their purses and pockets to spend in Tesco.
The fact remains, however, that Centrica (and Tesco, come to that) pay their fair share of taxes (unlike many megacorps we could mention) and it could be that the government will decide to reward them for avoiding tax avoidance.