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Centrica returns to growth as decentralised power shift kicks into gear

Power giant Centrica returned to growth in 2016 as it continues to shift its focus towards more distributed power markets.

Adjusted earnings for the year ended 31 December 2016 stood at £895 million, a 4% increase year-on-year, with better performance from its so-called ‘growth divisions’ – Connected Home and Distributed Energy & Power – noted by chief executive Iain Conn.

But while revenue from the two divisions grew 70% year-on-year to £194 million, it remained a minimal part of the overall business. Total Centrica group revenues stood at £27.1 billion for 2016.

Nevertheless, there has been significant growth in its UK-focused decentralised power divisions. The number of residential customers falling under its Connected Homes business, which includes those fitted with Hive energy management products, climbed by around 80% year-on-year to 527,000, and Centrica is planning to nearly double that to 1 million by the end of this year.

To capitalise on this growth Centrica is to divert investment towards these businesses and away from its more established units, including central power generation and exploration and production.

This has already become apparent through its recently-announced launch of a £100 million ‘Centrica Innovations’ division, and the £19 million trial of a local energy marketplace in Cornwall.

“The business is now focused on delivering further operational improvements and continued cash collection, developing new offers and channels to deliver growth, and supporting Distributed Energy & Power in the development of compelling customer propositions,” Conn said.

The business also hinted at possible further acquisitions to build on its recent deals with the likes of Neas Energy and ENER-G, but stressed that these would not amount to more than £1 billion in total.

Within its supply division Centrica moved to put well-publicised billing issues behind it while its business division returned to profit.

Conn said that Centrica had spent the year “repositioning the portfolio, building capability and driving significant cost efficiencies”, all of which were considered key objectives throughout 2016.

“2016 was a busy year for the team, but we have delivered a lot, and Centrica enters 2017 a stronger company – with encouraging underlying momentum and positioned to deliver longer-term returns and growth” he added.