Centrica Plc, the biggest energy supplier to U.K. homes, will cut about 16 percent of its workforce and shrink its exploration and production business to reduce costs.
The company will lose about 6,000 jobs, of which roughly half will be redundancies and the rest a result of “turnover and attrition,” it said Thursday after a five-month review. Centrica will lower spending on exploration and production as well as power generation by 1.5 billion pounds ($2.3 billion) over the next five years.
“The conclusion of our strategic review provides a clear direction for the business,” Chief Executive Officer Iain Conn, who joined the Windsor, England-based company in January from BP Plc, said in a statement. “We will focus our growth ambitions on our customer-facing activities.”
Conn’s comments follow a 44 percent jump in first-half operating profit at British Gas, Centrica’s retail unit. Earnings at the Centrica Energy business, which includes exploration and production, tumbled 78 percent.
“The external environment heavily influenced our performance in the first half of the year, with lower wholesale gas and oil prices” hurting the E&P business, according to Conn, who is seeking to turn around a 1 billion-pound loss in 2014. Most of the job cuts will take effect by 2017, he said on a conference call.
Brent crude, a benchmark for more than half the world’s oil, reached a six-year low in January after slumping 48 percent last year. U.K. gas for winter delivery has declined 11 percent since the start of 2015.
Centrica Energy posted an operating profit of 116 million pounds in the first half, down from 526 million pounds a year earlier. The E&P business will focus on the North Sea and the Irish Sea and now views its Canadian assets as “non-core,” the company said. Production will drop to 40 million to 50 million barrels of oil equivalent a year from about 80 million barrels a year.
The shares retreated 3.1 percent to 266.6 pence by the close in London trading. They slid 4.4 percent this year, compared with the 2.1 percent gain by the Stoxx Europe 600 Utilities Index of 26 companies.
Centrica will also exit its 245 megawatts of wind-power joint ventures and plans to scale back from power generation as a whole, according to the statement.
The shift of focus is aimed at saving 750 million pounds a year by 2020, with about two-thirds of that by the end of 2018.
Adjusted net income climbed to 611 million pounds from 530 million pounds a year earlier. Adjusted earnings per share rose to 12.3 pence from 10.5 pence, compared with the 11.4 pence average of nine analyst estimates compiled by Bloomberg.
The company said July 15 it would reduce household gas prices by 5 percent to reflect lower wholesale costs.