Slide 1: Preliminary Results for the year ended 31 December 2004
Centrica plc Preliminary Results for the year ended 31 December 2004
Slide 2: Disclaimers
Disclaimers This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Centrica shares. This presentation contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of Centrica
Slide 3: Chairman
Chairman Roger Carr
Slide 4: Group Finance Director
Group Finance Director Phil Bentley
Slide 5: Financial highlights
Financial highlights Year ended 31 December 2004 2004 ∆ Turnover* (excluding Accord) (£m) 11,757 9% Operating profit (£m) 1,227 16% Earnings (£m) 839 18% Earnings per share (p) 20.0 19% Interest cover 64 times 44 times Effective tax rate 29% 1 ppt Final dividend per share 6.1p 65% Total ordinary div
Slide 6: Operating Profit Analysis
Operating Profit Analysis* Year ended 31 December, £m 2004 2003 ∆ British Gas Residential 337 206 64% Centrica Business Services 64 51 25% Centrica Energy 512 561 (9% ) Centrica Storage 69 40 72% One.Tel 16 4 300% North America 134 130 3% Europe 4 (3 ) nm Other/Discontinued 91 69 32% Total 1,227 1,0
Slide 7: British Gas Residential
British Gas Residential Operating profit: causal track £m £m Year ∆ Year ended 31 December 2003 206 Higher selling prices 593 Higher commodity & transportation costs (366 ) Higher EEC spend (27 ) 200 Customer numbers (19 ) Weather 21 Energy investment / opex / other (82 ) (80 ) Home Services revenue
Slide 8: Centrica Energy
Centrica Energy Operating profit: causal track £m £m Year ∆ Year ended 31 December 2003 561 Higher gas production selling price 149 Statfjord contribution 20 Increased PRT (80 ) Industrial & Wholesaling (129 ) Opex (9 ) (49 ) Year ended 31 December 2004 512
Slide 9: Other UK businesses
Other UK businesses Operating profit: causal track £m £m Year ∆ Year ended 31 December 2003 161 Centrica Business Services 13 Centrica Storage 29 One.Tel 12 Discontinued businesses – AA & Goldfish 24 78 Year ended 31 December 2004 239
Slide 10: North America
North America Operating profit: causal track £m £m Year ∆ Year ended 31 December 2003 130 Foreign exchange movements (10 ) Texas 2003 profit adjustment (16 ) 104 Texas Electricity 24 Canada Energy (2 ) Home and Business services 7 Other 1 30 Year ended 31 December 2004 134
Slide 11: International Financial Reporting Standards
International Financial Reporting Standards • Last results prepared under UK GAAP • Now accounting under IFRS • Industry interpretation of IAS39 • Treatment of PRT • Humber/Spalding on balance sheet • 4 May • seminar & restatement of 2004 results • 15 September • first reporting under IFRS - 2005 In
Slide 12: Cash flow (excluding Goldfish)
Cash flow (excluding Goldfish) 2004 (£m) Year ∆ (£m) EBITDA* 1,628 215 Post-tax operating cash flow** 1,168 28 Free cash flow (before ordinary dividends) 540 (201) Net cash+ 296 163 • £100m pension top-up • £939m capex & acquisitions – up £555m • £1.6bn proceeds from AA disposal • £1.3bn special div
Slide 13: Return on Invested Capital
Return on Invested Capital* 2004 year average ROIC invested capital (£m) UK Energy (including Home Services)** 6,308 14% North America 1,713 11% Centrica Storage 322 17% One.Tel 103 23% Europe 75 4% Group 8,737 14% • Group WACC 8% • Group returns improved by 175 basis points in 2004 • Continue to ap
Slide 14: Returns to shareholders
Returns to shareholders • 8.6p per share ordinary dividend pence 8 Centrica ordinary DPS • 40% dividend payout ratio • 59% increase on 2003 6 • 28% dividend CAGR (1999-2004) 4 • £1.3bn special dividend / buybacks 2 0 2000 2001 2002 2003 2004 Interim Final Step change in returns to shareholders … … d
Slide 15: Chief Executive
Chief Executive Sir Roy Gardner
Slide 16: Review of 2004
Review of 2004 • Significant step change in returns to shareholders • Strategic refocus • Higher upstream investment planned • Volatile commodity markets • Increased customer churn • British Gas investment in operating efficiencies
Slide 17: Agenda for 2005
Agenda for 2005 • Leveraging the value of scale • Getting back to growth in British Gas • Reducing the cost base • Growing Home Services • Investing in value-enhancing upstream assets • Managing for growth in other business areas
Slide 18: Getting back to growth
Getting back to growth • Pricing innovation • Larger direct salesforce • Cross-selling capability • Save & winback activity • New propositions • Increased marketing
Slide 19: Results so far
Results so far Annualised gross churn rates Average gross weekly sales (indexed to H1 2004 = 100) 30 100 80 20 churn % 60 index 40 10 20 0 0 H1 2004 H2 2004: H2 2004: 2005 YTD H1 2004 H2 2004: H2 2004: 2005 YTD pre price- post price- pre price- post price- rise rise rise rise Gas Electricity Gas Ele
Slide 20: Operational efficiency & cost base
Operational efficiency & cost base • Cross-selling • System now fully rolled out • Billing • First migration of customers mid-2005 • Engineer deployment • Rolling out nationally following successful 150-engineer pilot • Re-engineering processes • Identified 2,000 roles that could be removed; 1,500 n
Slide 21: British Gas Home Services
British Gas Home Services 100 • Supports energy 80 10% 8% • Increases customer loyalty profit (£m) op margin 60 6% • Differentiation from 40 4% competitors 20 2% • Enhances the brand 0 2000 2001 2002 2003 2004 0% • Stand-alone profitability Operating profit Operating margin • Growth opportunities 8
Slide 22: Upstream investment
Upstream investment • Will remain a patient & disciplined buyer • Flexible portfolio: equity and contractual positions • Infrastructure projects in progress • New gas will come into the UK • Gas producers are competing for market access • Centrica has scale and a strong balance sheet
Slide 23: Import capacity projects
Import capacity projects 100 South Hook (Qatar/Exxon Mobil)* 80 Dragon (Petroplus/BG)* Isle of Grain expansion BCM per annum 60 Langeled Langeled 40 IUK Enhancement (2) BBL 20 Dutch Interconnector (BBL) Isle of Grain IUK IUK enhancement Milford Isle of Grain 0 Haven end-2005 end-2006 end-2007 Chart
Slide 24: Telecoms
Telecoms • One.Tel now firmly profitable • Grown scale • Added VOIP capability • New delivery model • Single platform – One.Tel
Slide 25: North America
North America Turnover (£m) • Organic growth in existing markets 2,500 • 200,000 organic customers in Texas 2,000 • Cross-selling energy & services 1,500 1,000 • Residential Services Group 500 • Building scale in business markets 0 2000 2001 2002 2003 2004 • 62% increase in turnover Operating Profit
Slide 26: Europe
Europe Belgium Spain • Greater certainty around market opening • Partnership approach still preferred option • Patience and discipline still required
Slide 27: Summary & Outlook
Summary & Outlook • Leveraging the value of scale • Getting back to growth in British Gas • Optimising gross margin • Reducing the cost base • Growing Home Services • Investing in value-enhancing upstream assets • Managing for growth in other business areas
Slide 28: centrica: taking care of the essentials
4 centrica taking care of the essentials y
Slide 29: Appendices
Appendices
Slide 30: Cash flow (excluding Goldfish)
Cash flow (excluding Goldfish) Year ended 31 December, £m 2004 2003 EBITDA* 1,628 1,413 Adjustments: PRT P&L charge 208 128 PRT cash paid (263 ) (210 ) Corporation Tax (239 ) (181 ) Pension top-up (100 ) - Other working capital (66 ) (10 ) (460 ) (273 ) Post-tax operating cash flow 1,168 1,140 Inter
Slide 31: Net cash capital expenditure
Net cash capital expenditure £m 2004 2003 British Gas Residential 122 137 Centrica Energy 92 67 North America 63 57 Other* 72 62 Less disposals & loans repaid 2 (41 ) Total 351 282 * Includes discontinued businesses
Slide 32: Net cash acquisitions
Net cash acquisitions £m 2004 Statfjord oil & gas interests 43 ATCO (Alberta) 30 Quintana minerals 18 Bastrop Energy Centre (Texas) 79 Killingholme 140 Telco Global 46 Dyno-Rod 56 Residential Services Group 81 Frontera 68 Other 27 588 Proceeds from AA disposal (1,586 ) Total (998 ) 2003 (292 )