Roy Gardner’s Centrica Legacy

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Centrica chief executive Roy Gardner is to leave the UK utility group by the summer of 2006, after nearly ten years. During his tenure, which began when the group was formed from the breakup of British Gas in 1997, "shares have quadrupled", said Robert Cyran on

The group has bought into businesses "as varied as telecoms, road assistance and credit cards", with the idea that "Centrica could sell customers anything". But this was "more easily said than done."

Centrica has spent the past two years selling its acquisitions but "unlike most strategic U-turns" this has been profitable. It managed to sell the AA for almost £1bn more than it paid for the road recovery group, and is now looking to sell its One.Tel telecoms operation.

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But despite the sell-offs, the label of utility group is "somewhat misleading", said Lex in the FT. In the past four years, more than 50% of operating profits have come from "drilling for gas".

First-half profits for 2005 "were no different: 56% came from gas production" offsetting a 24% slide in its energy-supply unit. Management have also been "upfront about a difficult second-half". Full-year margins at its residential energy business are "set to fall below last year's already thin 3.6%".

This margin squeeze has lead to pressure on Gardner to replenish the group's shrinking gas supplies, said Cyran. "Had Centrica bought gas a few years ago when it was cheaper, the group would be in a much better position."

But the UK is "building a huge infrastructure for the importation of natural gas". Gas prices could "easily plummet" between now and when Gardner is due to retire. Should that happen, "his one failure may be hailed as brilliance"

John Stepek

John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.