Slide 1: 1998 Full Year Results
1998 Full Year Results Internet version with notes 1
Slide 2: Roy Gardner and Mark Clare
Roy Gardner Chief Executive Mark Clare Finance Director • 1998 was a very important year in the evolution of Centrica. • Now positioned to compete in the fast emerging energy market having laid the foundations for future growth. 2
Slide 3: Results in Brief
Results in Brief Full Year 1998 Full Year 1997 Sales £7,481m £7,842m Operating profit £208m £175m pre-exceptionals Earnings pre- £174m £44m exceptionals Cashflow pre- £543m £877m exceptionals Employees (FTE) 15,677 14,989 •Sales at £7.5 billion were £361 million lower than ‘97, largely because of th
Slide 4: 1998 Achievements
1998 Achievements • Improved financial performance • Customer service progress continues • Gas customer retention • Electricity customer growth • Services profitable • PowerGen North Sea acquisition •Very good progress against key objectives •Further improvements in customer service •Service & value
Slide 5: Customer Satisfaction
Customer Satisfaction B ritis h G as T rad in g 80 75 Target = 70 70 Best in class 65 60 55 50 Ap 96 Au 96 D 6 Ap 97 Au 97 D 7 Ap 8 Au 98 D 8 F e 96 F e 97 8 Ju 6 Ju 7 J u 98 O 6 O 7 O 8 -9 -9 9 -9 -9 r-9 r-9 9 9 9 b- n- b- n- b- n- - - r- g- g- g- ct ct ct ec ec ec Fe •Achieved ambition in supply b
Slide 6: Gas Consumers Council Category A complaints
Gas Consumers Council Category A complaints 35000 30000 Switching 25000 Trading Services 20000 Retail 15000 10000 5000 0 1996 1997 1998 Category A complaints are those where the customer dealt with British Gas and the reply they received was not to their satisfaction •Complaints to the GCC fell by 6
Slide 7: % customers retained
Customer Market Share Including Winbacks C u stom er losses from v ariou s areas TA1 & TA2 P h3 T r1 100 P h3 T r 2 & 3 95 % customers retained P h3 T r4 , 5 & 6 90 85 80 75 70 65 60 Ju 7 Ju 8 Ja 7 Ja 8 N 97 M 98 N 98 99 7 M 98 Se 7 Se 8 -9 -9 -9 -9 -9 l- 9 l- 9 p- n- p- n- - ay ay ar ar ov ov M M •
Slide 8: Cumulative Acquisitions (Electricity Sales)
Electricity Sales 1,00 0,0 00 C umulative A cquisitions 80 0,000 60 0,000 40 0,000 20 0,000 0 M -9 8 Ju 8 N o 98 Au 8 M 98 Se 8 Ja 8 99 Fe 8 O 8 Fe 9 Ap 8 D e 98 Ju 8 9 l-9 9 9 -9 9 9 9 -9 n- - b- g- c- b- n- p- v- n- ct r ay ar Ja •By the end of 1998, 850,000 customers had signed electricity contra
Slide 9: British Gas Services
British Gas Services • Increased turnover • Business profitability • Customer service • Business retention • New product rollout •1998 Turnover up by 13% and operating profit pre-exceptionals was £9m compared to an operating loss of £49m in ‘97 and £196m in ‘96. •Achieved a 3% increase in Domestic H
Slide 10: Retail
Retail • Challenging year • Restructuring • Reduced cost base • Channel for Group products •Disappointing year •Extensive restructuring during 1998 included rationalisation of the delivery service, reorganisation of management structure, and closure of loss-making shops. •Restructuring measures cont
Slide 11: Energy Management
Energy Management • Gas & oil prices • Take or pay • Morecambe • Interconnector • Electricity • Effect of lower oil prices felt through European gas prices in the UK market. Benefit to gas input costs. Take or Pay renegotiations also benefited our Q4 gas costs. • Volume of prepaid gas reduced by abo
Slide 12: Financial Services
Financial Services • Goldfish card • Home insurance • Goldfish Guide •Over 900,000 Goldfish cards now in issue - a 3% share of the credit card market. •Home insurance product launched nation-wide during 1998, with around 45,000 policies signed to date. •The Goldfish Guide well received with some 70
Slide 13: Regulatory - Key Agenda 1999
Regulatory - Key Agenda 1999 • Pool Reform • Plant divestments • Distribution & Supply separation • Electricity Distribution Review • Electricity & gas price control •Gas market now fully competitive; but significant barriers to entry in electricity. •Pool reform will bring significant price reducti
Slide 14: Strategy
Strategy • Power Generation - Support downstream market entry - Physical/virtual generation • Gas Assets - Leverage upstream position/skills - Extract portfolio synergies • Overseas - Develop alliances & co-operation - Exploit liberalisation opportunities •To have a flexible range of electricity sup
Slide 15: Strategy
Strategy • Energy Supply - Utilise low cost channels - Dual fuel focus - Grow LPG market position • Home Services - Utilise existing service infrastructure - Install & maintain high value items • Financial Services - Build on Goldfish/British Gas brand - Seek out partners for new products •Electrici
Slide 16: Investments
Investments • Upstream gas – PowerGen North Sea – Dana, British Borneo • Supergas • Repair & Care • Organic growth – Electricity – Home & Financial Services •Invested around £400m back into the business in the last 12 months to support the strategy for growth. •Powergen North Sea assets acquired at
Slide 17: Distribution to Shareholders
Distribution to Shareholders • Proposal – £530m Special Dividend – 9 for 10 share consolidation • Board intend to pay total ordinary dividend of 2.5 pence in respect of 1999 •Proposed special dividend of 12p per share to be paid in ‘99, and a 9 for 10 consolidation of shares. •Intend to pay a total
Slide 18: Gas Volumes, Pricing & Cost
Gas Volumes, Pricing & Cost 1998 1997 Domestic sales Volume (m therms) 10,922 11,423 Price (p/therm) 45.2 48.2 Non-domestic sales Volume (m therms) 6,328 6,079 Price (p/therm) 18.6 19.1 Equity production 3,213 3,199 Gas costs - full year (p/therm) 18.4 20.6 Gas costs - Q4 (p/therm) 16.9 21.7 •Domest
Slide 19: Turnover
Turnover 1998 (£m) 1997 (£m) Domestic @ SNT 5,291 5,906 Non-domestic @ SNT 1,211 1,218 Weather (323) (391) Gas (sub total) 6,179 6,733 Electricity 5 - Accord 600 459 Energy Supply (sub total) 6,784 7,192 Services 526 467 Retail 169 183 Other 2 - Total 7,481 7,842 •Domestic turnover down by 10% due t
Slide 20: Operating Profit Analysis (pre-exceptionals)
Operating Profit Analysis (pre-exceptionals) 1998 (£m) 1997 (£m) Domestic @ SNT 150 118 Non-domestic @ SNT (120) (323) Weather (77) (81) Gas (sub total) (47) (286) Electricity (86) (25) Morecambe 344 566 Accord 31 16 Energy Supply (sub total) 242 271 Services 9 (49) Retail (31) (45) Financial Servic
Slide 21: Operating Costs
Operating Costs 1998 (£m) 1997 (£m) Energy Supply Gas 663 709 Electricity 85 25 Services 200 193 Retail 95 107 Financial Services 12 2 Total 1,055 1,036 •Overall operating costs rose slightly in absolute terms, however excluding new product investment, the cost base reduced overall by 5%. •Gas suppl
Slide 22: Earnings
Earnings 1998 (£m) 1997 (£m) Operating profit 208 175 Associates/joint ventures (1) (1) Interest receivable 42 38 Taxation (75) (168) Underlying performance 174 44 Exceptionals (85) (835) Earnings/(loss) 89 (791) •Pre-exceptional earnings increased by £130m during 1998. •Interest receivable increase
Slide 23: Exceptionals
Exceptionals 1998 (£m) 1997 (£m) Windfall Tax - 192 Restructuring costs 3 35 Gas contracts: Renegotiations 63 573 Contract Losses - 35 Year 2000 costs 19 - Total 85 835 •Renegotiations covered by the charge in 1998 include Victor at £50m and Dana at £11m, but exclude the internal price write-downs c
Slide 24: Cash Flow before Financing
Cash Flow before Financing 1998 (£m) 1997 (£m) Energy Supply 457 511 Services 40 (16) Retail (25) (40) Financial Services (10) (2) Operating cash flow 462 453 Working capital 408 575 Sub total 870 1,028 Cap expenditure (70) (87) Acquisitions (101) 3 Taxation & interest (156) (67) Sub total 543 877 E
Slide 25: Cash Flow Movement
Cash Flow Movement 1998 (£m) 1997 (£m) Opening net cash/debt 41 (178) Cash flow before financing 332 224 Debt taken on acquisition (145) - Other (5) (5) Closing cash 223 41 •This takes into account the debt acquired on with the PGNS and Supergas acquisitions. •£1.5bn generated since demerger, before
Slide 26: Outlook for 1999
Outlook for 1999 • Gas portfolio • Electricity investment • Cost reductions • Services & Retail improvement • Transco pre-payment reversal • Distribution • Investment opportunities •Gas costs reduced through renegotiation and falling oil prices. Softening gas market prices will impact turnaround of