Slide 1: Preliminary Results for the year ended 31 December 2013
Preliminary Results for the year ended 31 December 2013
Slide 2: Disclaimer
Disclaimer This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Centrica shares or other securities. This presentation contains certain forward-looking statements with respect to the financial condition, results, operations and busi
Slide 3: Rick Haythornthwaite, Chairman
Rick Haythornthwaite Chairman
Slide 4: Sam Laidlaw, Chief Executive
Sam Laidlaw Chief Executive centrica
Slide 5: Overview
Overview • Robust actions in a challenging environment – service level improvements and cost reduction downstream – cost efficiency and tight capital allocation upstream • New platforms for long term growth – Sabine Pass LNG, Canadian E&P, Hess Energy Marketing, innovation in downstream • Political
Slide 6: Nick Luff, Group Finance Director
Nick Luff Group Finance Director
Slide 7: Commodity prices and spreads
Commodity prices and spreads Average month ahead Average temperature commodity prices (degrees Celsius) SNT = 12.9 Brent Oil 112 109 ($/barrel) 12.9 SNT = 9.5 11.3 NBP Gas (p/therm) 8.5 66.7 58.3 7.3 UK Power 50.0 44.6 (£/MWh) 3.7 2.8 US Gas ($/mmbtu) 2012 2013 2012 2013 2012 2013 2012 2013 H1 2012
Slide 8: Financial headlines
Financial headlines Year ended 31 December 2013 2012 Revenue (£m) 26,571 23,942 Adjusted operating profit (£m) 2,695 2,743 Adjusted effective tax rate 43% 45% Group result: Adjusted earnings (£m) 1,370 1,378 Adjusted earnings per share (p) 26.6 26.6 Full year dividend per share (p) 17.0 16.4 Above f
Slide 9: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2013 2012 British Gas 1,030 1,093 Direct Energy 276 310 Centrica Energy 1,326 1,251 Centrica Storage 63 89 Adjusted operating profit 2,695 2,743 Share of JV / associates’ interest and taxation (111) (85) Depreciation of FV uplifts to property, pl
Slide 10: British Gas
British Gas Year ended 31 December (£m) 2013 2012 British Gas 1,030 1,093 Direct Energy 276 310 Centrica Energy 1,326 1,251 Centrica Storage 63 89 Adjusted operating profit 2,695 2,743 Above figures include share of joint ventures and associates before interest and taxation and are before depreciati
Slide 11: British Gas
British Gas Operating profit Residential energy revenue (£m) and post tax margin (%) Year ended 31 December (£m) 2013 2012 Residential energy 571 606 9,487 9,121 Residential services 318 312 Business 141 175 British Gas 1,030 1,093 5.0% 4.5% 2012 2013 Residential services revenue Business revenue (£
Slide 12: Direct Energy
Direct Energy Year ended 31 December (£m) 2013 2012 British Gas 1,030 1,093 Direct Energy 276 310 Centrica Energy 1,326 1,251 Centrica Storage 63 89 Adjusted operating profit 2,695 2,743 Above figures include share of joint ventures and associates before interest and taxation and are before deprecia
Slide 13: Direct Energy
Direct Energy Operating profit Residential energy revenue (£m) and post tax margin (%) Year ended 31 December (£m) 2013 2012 Residential energy 163 156 2,517 Business energy 77 121 2,357 Services 36 33 Direct Energy 276 310 4.4% 4.4% 2012 2013 Business energy revenue (£m) Services revenue (£m) and p
Slide 14: Centrica Energy
Centrica Energy Year ended 31 December (£m) 2013 2012 British Gas 1,030 1,093 Direct Energy 276 310 Centrica Energy 1,326 1,251 Centrica Storage 63 89 Adjusted operating profit 2,695 2,743 Above figures include share of joint ventures and associates before interest and taxation and are before deprec
Slide 15: International gas
International gas Gas & oil production volumes Gas (mmth) Liquids (mmboe) Year ended 31 December (£m) 2013 2012 3,557 2,990 Operating profit before tax 1,155 940 Americas Operating profit after tax 325 198 Europe 18.7 17.4 2012 2013 2012 2013 Average gas sales price Average liquids sales price Total
Slide 16: UK power
UK power Operating profit/(loss) Power generation (TWh) Year ended 31 December (£m) 2013 2012 0.5 0.8 Gas 1,155 940 Power 171 311 9.0 8.9 Renewables Gas-fired (133) (4) Gas-fired Renewables 25 56 Nuclear 250 237 12.0 12.1 Nuclear Midstream 29 22 Centrica Energy 1,326 1,251 2012 2013 Achieved power p
Slide 17: Centrica Storage
Centrica Storage Year ended 31 December (£m) 2013 2012 British Gas 1,030 1,093 Direct Energy 276 310 Centrica Energy 1,326 1,251 Centrica Storage 63 89 Adjusted operating profit 2,695 2,743 Storage revenue (£) Forward price spreads (p/therm) 18 15 Other W12-S12 spread 61m SBU 12 67m W14-S14 9 spread
Slide 18: Exceptional items and certain re-measurements
Exceptional items and certain re-measurements Year ended 31 December 2013 (£m) Pre tax Post tax Rijnmond tolling contract1 (125) (125) E&P Impairments2 (699) (318) Gas storage projects 3 (240) (224) Total exceptional items (1,064) (667) Total net re-measurements 438 284 Exceptional items and certain
Slide 19: Cash flow
Cash flow Period ended 31 December (£m) 2013 2012 Opening net debt (4,047) (3,292) EBITDA 3,799 3,650 Working capital movements 237 (51) Margin calls 82 114 Interest (219) (172) Tax (892) (524) Net capex (2,565) (2,727) Dividends (862) (815) Share repurchase (500) 0 Pension deficit payments (85) (37
Slide 20: Capex and acquisitions
Capex and acquisitions 1 4 Period ended 31 December (£m) 2012 2013 2014e Centrica Energy gas and oil 906 1,078 950 2 Centrica Energy power 314 77 50 British Gas 161 204 150 Centrica Storage 37 50 25 Direct Energy 50 89 100 Other 59 38 25 Total pre-acquisitions 1,527 1,536 1,300 3 5 Acquisitions / (d
Slide 21: Summary and outlook
Summary and outlook • 2013 EPS flat at 26.6p; scale and efficiency benefits offset by market headwinds • 2014 outlook – margin pressures in energy supply on both sides of the Atlantic – new source of growth from Hess Energy Marketing; extreme weather conditions and FX movements impacted Direct Energ
Slide 22: Sam Laidlaw, Chief Executive
Sam Laidlaw Chief Executive centrica
Slide 23: Our strategic priorities
Our strategic priorities 1. Innovate to drive growth and service excellence 2. Integrate our natural gas business, linked to our core markets 3. Increase our returns through efficiency and continued capital discipline The leading integrated energy company with customers at its core 23
Slide 24: Good strategic progress
Good strategic progress • Validation of refreshed strategy; investing to secure gas for our customers • Hess and Suncor transactions deliver enhanced scale and capability in North America • Simplified tariffs and improved reporting transparency in UK energy supply • Realised value through divestment
Slide 25: Securing gas for the UK in an increasingly international market
Securing gas for the UK in an increasingly international market • £14bn of new gas supply contracts – US export deal with Cheniere, giving Centrica market optionality – extension to Qatargas LNG contract • Acquired 25% stake in Bowland UK shale exploration licence • £1.5bn organic capital expenditur
Slide 26: Enhanced scale in North America
Enhanced scale in North America • C$1bn gas and liquids acquisition doubles upstream scale in Canada and cements QPI relationship – initial production ahead of expectations – reserves and production upside potential NE BRITISH COLUMBIA • $1.2bn Hess Energy Marketing acquisition transforms our operat
Slide 27: Working towards a transparent and affordable UK energy policy
Working towards a transparent and affordable UK energy policy • Prospect of political intervention has damaged investor 2012 Comparison of UK vs. EU domestic gas prices (p/kWh) 1 confidence 12 – proposed price freeze and ‘resetting the market’ 10 is creating uncertainty 8 – over 50% of UK gas now im
Slide 28: Working towards a transparent and affordable UK energy policy
Working towards a transparent and affordable UK energy policy • Detailed discussions with all stakeholders – improved understanding of true cost of components of the bill – proposals for more affordable ways to decarbonise • First supplier to reduce prices following Based on British Gas 2013 financi
Slide 29: Positioning the Group for the future - operational and capital efficiency
Positioning the Group for the future - operational and capital efficiency • Group-wide £500m cost reduction programme completed • Downstream focus on improving core operations – new targets to deliver better service, lower costs and account growth • Cost control and selective capital investment upst
Slide 30: Growth through differentiation in British Gas
Growth through differentiation in British Gas • Targeting industry leading service levels for our customers – improving key processes – combined residential energy and services platform • Reducing costs – targeting £100m annual cost savings in BGB by end of 2015 • Driving for growth – number of cust
Slide 31: Improving cost competitiveness in Direct Energy
Improving cost competitiveness in Direct Energy • Targeting $100m cost reduction in 2014 Total US non-residential annualised sales volumes – benefiting from synergies from enhanced scale TWh 250 800 bcf • Differentiation through innovative product offerings 200 600 – further growth expected in prote
Slide 32: Positioning Centrica Energy for the future - adding value through selective investments
Positioning Centrica Energy for the future - adding value through selective investments Centrica 2P reserves (mmboe) 1 • Adding value through reserve additions, reflecting quality of previous investments 56 711 – 56mmboe of organic 2P reserve additions, 633 77 99 predominantly in Norway – well place
Slide 33: Positioning Centrica Energy for the future - adding value through selective investments
Positioning Centrica Energy for the future - adding value through selective investments • Organic E&P capex reduced to around Global gas & oil production outlook (mmboe/a) 100 £900m on average over next 3 years 80mmboe – 85mmboe – limited impact on near-term 80 range production Americas 60 Norway –
Slide 34: Summary
Summary • Good strategic progress, robust actions in place across the Group in a challenging environment • Engaging with political stakeholders to help reduce uncertainty • Strong cash flow and balance sheet • Platform for long term growth – underpin competitive position in UK downstream through ser