Centrica continues to pursue growth across the Atlantic

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1 August 2013, Gas

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Since securing Direct Energy in 2000, Centrica has been in acquisition mode. For example, it significantly bolstered its US home and energy services proposition through the acquisition of Clockwork Home Services in 2010, driving the share of group revenue from the US up to 26%. The $46m acquisition of Texan online retailer Bounce Energy earlier this year shows that no US acquisition is too big or too small. To give a sense of scale of the most recent acquisition, Energy Marketing's 2012 revenues were about one-sixth those of the entire Centrica Group, and four times larger than British Gas's B2B gas sales in the UK.

Profit growth is a factor too. Indeed, in 2012 adjusted operating profit from non-UK operations was up by 78%, compared with a paltry 2% growth at home in the UK. Centrica will be pushing hard with the Direct Energy/Energy Marketing integration to maximize economies of scale and optimize margins, and chief executive Sam Laidlaw reckons he can double profitability within five years.

This is in contrast with the difficult conditions in its home market of the UK, where regulatory, political, and competitive pressure have combined with market fundamentals to squeeze retail margins. Prospects for revenue growth via an improvement in energy demand are contingent on a European economic recovery, and painful spark spreads mean that tarpaulins are being draped over unprofitable gas-fired power stations all across Europe. For Centrica, and many other European energy retailers, growth prospects remain either higher up the value chain or outside of Europe.

www.datamonitorenergy.com / asken@datamonitor.com / @DatamonitorEN

Source: MarketLine

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