By Mark Kleinman, City Editor
The owner of British Gas will warn on Thursday of stuttering margins in its residential gas and electricity supply business as the row over energy profits rages on.
Sky News has learned that Centrica is expected to say in a third-quarter trading update that British Gas' domestic supply margins are likely to come in significantly below 5% for the full year.
The news is likely to fuel the debate about energy company profits amid accusations by ministers that the 'Big Six' suppliers treat customers as "cash cows".
Centrica's announcement is unlikely to constitute a full-blown profit warning, with City analysts forecasting a broad spread of outcomes for the full year.
However, insiders said that Centrica was likely to "massage expectations" for the full year because of rising costs outside the company's control, with some downward revisions to forecasts the likely outcome of its guidance.
Analysts have pencilled in an average projection of adjusted operating profit of £2.95bn for the full financial year.
In line with its usual practice, Centrica will not provide detailed quarterly revenue or profit numbers in Thursday's announcement.
It is, however, expected to highlight challenging market conditions across many of its businesses, reflecting anxieties that have sent its shares into a prolonged decline in recent weeks.
"The company is braced for the shares to take another hammering after the trading update," said a City source close to Centrica.
In a note to clients, analysts at Credit Suisse said last week that they had concerns about weaker margins in its business energy supply operations and lower profitability in its upstream oil and gas production unit.
British Gas announced last month that it would raise gas and electricity prices by an average of 9.2% from November 23, becoming the third of the six firms that dominate the industry to do so.
Only German-owned Eon among the six companies has not yet announced a price hike.
The escalating conflagration about energy prices has cost Sam Laidlaw, the Centrica chief executive, an annual bonus potentially worth up to £2m.
Mr Laidlaw said at last week's annual CBI conference that he would waive the payout because of the political climate, although he will still be in line for a multimillion pound long-term share award for this year.
The Centrica boss has pledged that any reduction by ministers in the green levies that constitute a large chunk of consumers' bills would result in immediate price cuts.
George Osborne, the Chancellor, is expected to use next month's Autumn Statement to remove some of the environmental tariffs affecting energy costs although the exact mechanism for doing so is unclear.
On Tuesday, Ed Davey, the Energy Secretary, warned at an industry conference that companies were treating customers as "cash cows" and said they risked being compared to the venality of banks before the financial crisis.
The criticism prompted a furious response from the industry. SSE announced on Thursday that it made an operating loss of £115m for the half-year to September at its energy retailing business.
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