London Briefing: Bord Gáis Energy parent waves cheery goodbye to Iain Conn

Centrica sheds few tears over CEO while vegan sausage roll fuels Greggs

Centrica chief executive Iain Conn: failed to act swiftly enough to reshape the business. Photograph: Dominic Lipinski/PA

Centrica chief executive Iain Conn: failed to act swiftly enough to reshape the business. Photograph: Dominic Lipinski/PA

 

Shareholders in Bord Gáis Energy parent group Centrica, Britain’s biggest energy supplier, will not be sorry to see the back of Iain Conn.

He started his disastrous five-year reign as chief executive by cutting the dividend by a fifth, and he’s ending it the same way too, this time with an even more savage 58 per cent cut to the shareholder payout.

The loss of income will come as a real blow to Centrica’s army of small shareholders. These number some 600,000, many of whom bought into the business when it was privatised in 1986 in a blaze of publicity backed by the “Tell Sid” advertising campaign.

Even worse than the loss of dividend income is the precipitous plunge in the Centrica share price, which has collapsed by more than 75 per cent over the course of Conn’s tenure.

As the group reported on Tuesday a big swing into the red over its first half, the shares slithered to a new 21-year low of just 73.5p, down almost 20 per cent on the day.

Behind the losses of £446 million, against a profit of £704 million the previous year, are the now familiar litany of problems, from lower oil and gas prices to the sweeping structural changes in the energy sector.

To be fair to Conn, the company he inherited in January 2015 was already struggling and the first dividend cut, made just weeks after his arrival, was already on the cards.

Nimble rivals

The intention was there but he failed to act swiftly enough to reshape the business.

As it steps up its focus on consumer operations, Centrica has decided to sell off its oil and gas production arm. But analysts say the move should have been made a long time ago and the group will struggle to catch up with its more nimble rivals.

It’s also still losing customers at an alarming rate – some 178,000 took their business elsewhere over the first half, taking total customer losses to an astonishing 2.7 million over the past few years.

And there’s a new source of pain – the price cap imposed by the UK government on energy tariffs, which came into force in January. The energy regulator estimated the cap on standard prices would save 11 million customers an average of £76 a year; it’s cost Centrica some £300 million of lost profit.

Conn said he “agreed with the board” that it was time for him to depart. But even if he’d disagreed, he’d have been out anyway. It’s not just the dire performance of the British Gas group that has angered shareholders. Conn has also been embroiled in rows over pay, such as the £2.4 million he collected last year – an increase of 44 per cent – even as the group axed thousands of jobs and pushed through price rises.

Greggs: has upgraded its profits outlook three times this year, largely on the back of the success of its vegan sausage roll. Illustration: Christopher Furlong/Getty
Greggs: has upgraded its profits outlook three times this year, largely on the back of the success of its vegan sausage roll. Illustration: Christopher Furlong/Getty

Conn, who’s staying on until next year while a successor is sought, was asked on Tuesday how he would mark his time at the group out of 10. “I’m not sure I should be rating myself,” he replied. “And I haven’t finished yet.”

As far as shareholders and the City are concerned, however, he’s most definitely finished.

Bakery chain

It was a very different tale at Greggs, the bakery shop chain that has upgraded its profits outlook three times this year, largely on the back of the huge success of its vegan sausage roll.

Greggs shareholders are being rewarded with a special dividend of 35p a share, costing the company some £35 million in total. That’s on top of the ordinary half-year payout, which is being raised by 11 per cent to 11.9p a share after interim profits surged by more than 50 per cent to £36.7 million.

The launch of the meat-free sausage roll at the start of the year was little short of spectacular. It sold out in Greggs shops over the first few weeks as customers clamoured for a healthier version of the chain’s most popular product, and is now firmly established as one of its best sellers. Its traditional sausage roll remains number one, however.

More vegan options are in the pipeline, and the group is planning an assault on the evening takeaway market, by keeping a number of its shops open until 9pm, and offering a wider range of hot options and meal deals.

This follows the group’s successful push at the start of the day, with its popular breakfast menu. In just a few years Greggs has become the second-largest provider of breakfasts on-the-go and has also leapfrogged Starbucks to become the third-largest seller of coffee, after McDonald’s and Costa.

Fiona Walsh is business editor of theguardian.com

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