Centrica suffered a protest vote over pay at its annual meeting on Monday when one in three investors failed to back a pay deal for its new boss, Iain Conn.
The annual meeting was held after the owner of British Gas announced it was hiring more than 350 service staff and pledged to spend £50m to make life easier for its customers after more than 300,000 of them defected last year.
Just 67% of investors voted in favour of the remuneration report at the annual general meeting, after influential shareholder advisory body ISS had raised concerns about the pay deal for Conn, hired from BP last year. His pay and shares package was worth up to £3.7m when it was announced in July, but is less than that of his predecessor, Sam Laidlaw. There was no protest about Conn’s election to the board.
The UK’s biggest household energy supplier said it would recruit the new staff immediately in Manchester, Leeds, Cardiff and Edinburgh. Centrica said the extra spending over three years showed the commitment of Conn.
In a trading statement published before the AGM, Centrica said British Gas’s customer numbers stopped falling in the first three months of 2015 after it cut prices. However, the group said it needed to make further changes in order to hang on to retain those customers. British Gas lost 368,000 customers last year, ending 2014 with 14.8 million residential accounts. The company reviewed its customer numbers at the end of the year and found it had overestimated them by 110,000.
British Gas wants to reduce call times, give out better information and make it easier to use its website. A recent survey by Which? ranked British Gas 15th out of 18 suppliers surveyed for customer satisfaction.
Conn, who took over in January, said: “Customers tell us they want excellent service when they deal with their energy supplier. We’re making a substantial and long-term commitment today, which will help us achieve that goal. In addition to new jobs, the £50m will fund significant investment in training and new systems to improve customer service.”
Centrica and other big energy companies are under political and regulatory pressure over their treatment of UK energy customers, reflecting public uproar over the cost of household bills. Uncertainty surrounding the closely fought election and the Competition and Markets Authority’s investigation into the energy sector were listed among the main risks to its annual earnings.
Ed Miliband has pledged to freeze domestic energy prices and shake up regulation to give customers a better deal if Labour wins next week’s election. The CMA preliminary view, released in February, was that the big six energy companies charged loyal, often vulnerable, customers up to £234 more per year than those who shopped around.
With about a month until the CMA publishes its intitial report, consumer group Which? said the regulator should make increased consumer understanding and involvement its top priority. The campaign group called for simpler pricing and protection for uninformed customers so that they do not languish on expensive tariffs.
Household energy consumption rose in the first quarter because of cold weather, increasing British Gas’s profitability. Operating profit at British Gas fell 20% to £823m last year because of a sharp drop in demand during the warmest year on record.
Centrica said improved profitability at British Gas would be more than offset by pressure from low oil prices on its exploration and production business. The company said tax reductions announced in the budget to help North Sea producers would help the business, although profits are too low for a benefit to be registered this year.
Mark Hodges, the former head of Aviva’s UK business, is due to join British Gas as managing director at the start of June. Centrica said it chose Hodges because he had a record of improving customer service and working with regulators.
