Centrica says full year earnings will hit target

Centrica said its full year earnings would in-line with forecasts in a pre-close statement at the end of a what the British Gas owner admitted was a difficult year.

British Gas' residential energy supply margins will be squeezed in the second half by the second 5% tariff cut, which left account volumes largely unchanged since the half-year, will remain "within the range of recent years".

British Gas business will report a small loss, while US-based Direct Energy will deliver "material operating profit growth".

The upstream exploration and production arm is now expected to have produced more than 75m barrels of oil and gas, higher than previous guidance.

Following the conclusion of a strategic review in July, where a renewed focus was put on adjusted operating cash, the FTSE 100 company confirmed it remained on track to deliver a baseline level of over £2bn in the year to 1 January despite recent commodity price weakness.

Group capital expenditure is expected to be slightly below the target £1.05bn this year, thanks to the E&P business keeping capex below £800m. The division plans to trim this to below £600m in 2016 as well as cutting £100m from cash production costs.

Chief executive Iain Conn was pleased with progress since the strategy review.

"2015 has been a difficult year, and against challenging external factors Centrica is establishing a solid base from which to deliver for our customers and shareholders.

"We are seeing underlying performance improvement against a softening commodity market, and have concrete plans for executing our strategy."

Centrica shares opened up 2.7% in the first few minutes on Thursday morning to 211.60p.