Energy costs

How are the energy companies going to get a 73% increase in turnover without raising prices significantly?

I'd like to see more investment in energy solutions that will actually work.

The massive increase in profits shows that the energy companies blaming the price rises on the market is bollocks. It also shows that competition in the energy sector isn't working.

Are these the same pensioners who won't be able to afford to heat their homes over the winter?

Reply to
Mark
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The energy companies haven't had a 73% increase in turnover or anything like it. IIRC BG came very close to posting a loss 3 years ago so returning to a net margin closer to the long term norm is almost bound to give a large increase in %age terms even if the end result is no better than Tesco's.

But what about the profit. What profit do you think is fair on sales of say £1,400? £140 (10%)? £350 (25%)?

So (again) what do you think is a reasonable profit margin in this industry?

They already have their pensions so will not have to take a big hit when the rest of you eventually pass go.

Reply to
Roger Chapman

yes, but you cant write off the expenditure used to make it

Reply to
The Natural Philosopher

FGRom

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-------------------------------------------------------------- OK, I get the picture. What are the rest of the expenses on the P&L?

Under the gross profit come all your business?s running costs that aren?t directly related to actual sales.

Often these will be ?fixed? costs, which are costs that you?d have to pay exactly the same amount for no matter how many sales your business made. That might include wages for salaried staff, or office rent.

?Variable? costs are those that go up or down with your business?s sales income, for example the wages for a team member who?s paid on commission, or the cost of buying materials to sell. What costs aren't here?

*What the P&L won?t include is the cost of any large items you?ve bought for your business?s own use which are going to be useful for more than about a year, for instance a new iMac to design your customers? websites.*

*These are called ?capital assets? and they go on your business?s balance sheet rather than its P&L, for two reasons.*

*Firstly, they?re treated differently for tax, and secondly, because they?re going to be useful to your business for more than a year.*

More about capital assets in a later post.

I rest my case.

Reply to
The Natural Philosopher

lowering costs, improving efficiency, increasing economies of scale, or simply regressing from a loss / low profit position would also be ways of doing it.

However you have not answers the question - you can't form a realistic assessment as to whether a level of profit is "reasonable" without knowing what it actually is as a percentage of turnover, and being able to compare it to other industries.

Was that an answer?

Are you targeting the right organisation? i.e. how many investment decisions are actually dictated by outside forces such as government policy or rigged / skewed markets resulting from green incentives / taxes.

As has been highlighted elsewhere, investment can be made from current year's turnover, or from retained profit from previous years. Large scale investment usually requires a multi year commitment

If you want sensible investment in workable solutions, then you also need compatible frameworks of legislation to make that possible, rather than encourage "investment" in expensive non dispatchable generation capacity like wind etc. Dopey politicians making speeches designed to frighten off potential investment don't appear to add anything useful to the party.

Of course...

While many people like to denigrate public corporate entities that return profits to shareholders, they seem to forget that the majority of the shareholders are not "fat cats", but institutional investors managing portfolios that represent ordinary peoples savings and investments.

Reply to
John Rumm

Don't be daft...

turnover - costs = profit

Where costs can be staff, equipment, consumables, services, interest etc.

Some purchases will be assets... other will be written off or written down to zero immediately.

e.g. a new computer will be an asset - depreciated over the fewest number of years permitted. New software would be fully written off in the first year etc.

Investment for R&D for example could be anything from hardware, software, market research, advertising, professional services etc - much of which would be lowering profits if carried out using current year income. Obviously if doing stuff that requires aggregated income from multiple years, then some of it must come out of taxed retained profits as well. To claim it must be either exclusively one or the other makes no sense to me.

Purchase of an asset is not a capital gain. If one of those assets then increases in value, that is a capital gain.

Agreed - you select what is appropriate and allowable for the item in question.

Reply to
John Rumm

Of course you can. It might not be over one year. But the value most certainly IS written down. And the first year will certainly contain some of that write-down. For many assets, the first year will contain a significant amount of write-down.

B'sides, "investment" != "capex".

Reply to
Adrian

A little knowledge is a dangerous thing.

Reply to
Adrian

Of course you can. It might not be over one year. But the value most certainly IS written down. And the first year will certainly contain some of that write-down. For many assets, the first year will contain a significant amount of write-down.

B'sides, "investment" != "capex".

Reply to
Adrian

I figure there must be plenty of companies thinking that capital gains on disposal would be a nice problem to have ;-)

That is exactly what depreciation is designed to do...

Reply to
John Rumm

A little knowledge is a dangerous thing.

Reply to
Adrian

Of course you can. It might not be over one year. But the value most certainly IS written down. And the first year will certainly contain some of that write-down. For many assets, the first year will contain a significant amount of write-down.

B'sides, "investment" != "capex".

Reply to
Adrian

a proverb is a convenient excuse

Reply to
The Natural Philosopher

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The fact that capital assets go on the balance sheet and not into the profit and loss account has next to nothing to do with taxation and everything to do with accounting practice which spreads the declining value of an asset across the years it is in use by means of depreciation. Depreciation is not an allowable expense for tax purposes but for expenses that are subject to capital allowances the advantages to business are considerable. First year allowances can write off up to all the cost in a single year if that is advantageous and capital allowances can be restricted or not claimed at all if the taxable profit for the year is less than the allowances available.

TNP should learn to use quotation marks. That way it would have been obvious that the "later post" is from the cited site and not his words of wisdom.

A case as full of holes as a colander.

Reply to
Roger Chapman

Thank f*ck for that, I thought TNP had somehow just rewritten the UK rules on tax.

Taxable profit is not an essential requirement of operating a business.

Reducing profit subject to tax is.

Reply to
The Other Mike

Whatever the f*ck you mean by that.

Once again, you assume all investment is capex. Clearly, that's complete bollocks. What if that van or power station was leased? That wouldn't be capex. It'd be opex. And it would be an investment.

How about recruitment? How about M&A?

As a blanket statement, that's as much complete and utter bollocks as a blanket statement stating the opposite would be.

I don't recall seeing that statement. It would, of course, be incorrect - and would, of course, be a simple error easily identifiable as such.

The quality of your typing in that reply suggests your own "deeply held political beliefs" are causing foam to drip from your screen right now. Either that, or you've hit the sauce early.

Reply to
Adrian

# No it would not be an inevstement. The law is quite clear. You do not have ownership so it is not an investment.

debatable.

And has beern dep[abyted.

How about M&A?

Investment and capex. which you may or may not write down.

no, it is true. That you are trying to find examples of 'investment' that are not accounting ideas of what 'investment' is , is not my problem.

You can argue with the Revenue all you like.

Oh its occurred upstream in the thread amd was commented on without comment as to its veracity..

I was being talked to and didnt have time to edit.

However that has nothing to do with what is under discussion. I challenge you to once again find an example of 'investment' that a company can do that is written off against tax in the same year that it is made, when the investment clearly benefits the company over decades to come.

IN particular I challenge you to find an 'investment' in a new power station by any energy company that comes in the P&L for that company, and not in the asset register.

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Reply to
The Natural Philosopher

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Reply to
Roger Chapman

Centrica, to take one example, claim an increase of 12% in domestic gas con sumption due to cooler weather - it depends on the ratio of fixed to variab le costs but you could easily get a 73% increase in profit from that sort o f increase. Equally you could find profits nearly wiped out by a similar si ze drop.

Reply to
docholliday93

The medium term profit margin is about 5%. That does not seem overly large to me.

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Robert

Reply to
RobertL

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