Slide 1: Preliminary Results
centrica wesourceit wegenerateit Preliminary Results | v2 wetradeit For the year ended 31 December 2008 wesaveit wesupplyit weserviceit <5.
Slide 2: Roger Carr, Chairman
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Slide 3: Nick Luff, Finance Director
centrica aN ; A ~ ~S. Ve. % <a al * Np “AS >» ~ wy EN » Mes Nick Luff Finance Director
Slide 4: Commodity prices
Commodity prices 130 Brent $/boe Power £/MWh 110 90 70 Gas p/th 50 30 10 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 2008 2009
Slide 5: Financial headlines
Financial headlines Year ended 31 December (£m) 2008 2007 Revenue (£m) 21,345 16,272 Operating profit (£m) 1,942 1,949 Profit before tax (£m) 1,931 1,876 Total effective tax rate 53% 40% Earnings (£m) 904 1,123 (1) Earnings per share* (p) 21.5 27.2 Full year dividend per share (p) 11.57 (1) 12.2 Abo
Slide 6: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2008 2007 British Gas Residential 379 571 British Gas Business 143 120 British Gas Services 195 151 Centrica Energy 879 663 Centrica Storage 195 240 Direct Energy 215 187 Europe (56) 17 Other (8) - Total operating profit 1,942 1,949 Above figures
Slide 7: BGR operating profit: key drivers
BGR operating profit: key drivers Revenue Commodity costs (£m) (£m) 7,769 6,457 4,799 3,352 2007 2008 2007 2008 Transmission & Operating costs metering costs (£m) (£m) 1,862 1,734 800 729 2007 2008 2007 2008
Slide 8: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2008 2007 British Gas Residential 379 571 British Gas Business 143 120 British Gas Services 195 151 Centrica Energy 879 663 Centrica Storage 195 240 Direct Energy 215 187 Europe (56) 17 Other (8) - Total operating profit 1,942 1,949 Above figures
Slide 9: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2008 2007 British Gas Residential 379 571 British Gas Business 143 120 British Gas Services 195 151 Centrica Energy 879 663 Centrica Storage 195 240 Direct Energy 215 187 Europe (56) 17 Other (8) - Total operating profit 1,942 1,949 Above figures
Slide 10: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2008 2007 British Gas Residential 379 571 British Gas Business 143 120 British Gas Services 195 151 Centrica Energy 879 663 Centrica Storage 195 240 Direct Energy 215 187 Europe (56) 17 Other (8) - Total operating profit 1,942 1,949 Above figures
Slide 11: CE operating profit: key drivers
CE operating profit: key drivers Gas production Gas sales price (mmth) (p/th) 2,418 59.1 2,260 30.4 2007 2008 2007 2008 I&C profit / (loss) (£m) Power generation volumes (TWh) 179 23.4 2008 2007 (329) 19.8 2007 2008
Slide 12: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2008 2007 British Gas Residential 379 571 British Gas Business 143 120 British Gas Services 195 151 Centrica Energy 879 663 Centrica Storage 195 240 Direct Energy 215 187 Europe (56) 17 Other (8) - Total operating profit 1,942 1,949 Above figures
Slide 13: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2008 2007 British Gas Residential 379 571 British Gas Business 143 120 British Gas Services 195 151 Centrica Energy 879 663 Centrica Storage 195 240 Direct Energy 215 187 Europe (56) 17 Other (8) - Total operating profit 1,942 1,949 Above figures
Slide 14: DE operating profit
DE operating profit* Mass markets Commercial and industrial (£m) (£m) 135 137 11 2 2007 2008 2007 2008 Home and business Upstream and wholesale services (£m) (£m) 50 51 20 16 2007 2008 2007 2008 * 2007 restated at 2008 weighted average exchange rate
Slide 15: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2008 2007 British Gas Residential 379 571 British Gas Business 143 120 British Gas Services 195 151 Centrica Energy 879 663 Centrica Storage 195 240 Direct Energy 215 187 Europe (56) 17 Other (8) - Total operating profit 1,942 1,949 Above figures
Slide 16: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2008 2007 British Gas Residential 379 571 British Gas Business 143 120 British Gas Services 195 151 Centrica Energy 879 663 Centrica Storage 195 240 Direct Energy 215 187 Oxxio (63) 3 SPE (25.5% share after interest and tax) 8 10 Europe other (1)
Slide 17: Cash flow
Cash flow Year ended 31 December (£m) 2008 2007 Opening net debt (795) (1,527) EBITDA 2,586 2,514 Working capital movements (561) 261 Margin calls (556) 2 Interest and tax (1,165) (538) Gross capex (1,205) (1,055) Dividends (500) (417) FX / other (479) (35) Rights Issue 2,164 - Closing net debt (511
Slide 18: Capital and acquisition expenditure
Capital and acquisition expenditure Year ended 31 December (£m) 2008 2007 2009e Gas - growth 106 114 300 - maintenance 15 41 25 Power - conventional 151 178 150 - wind 170 149 25 Storage 27 18 50 Direct Energy 111 105 125 Europe 23 22 100 Other 79 66 75 Total pre-acquisitions 682 693 850 Acquisition
Slide 19: Balance sheet
Balance sheet 31 December (£m) 2008 2007 Capital employed (excluding cash) 5,487 4,907 Tax / other (477) (827) Pensions (113) 97 Net debt (511) (795) Net assets 4,386 3,382 Cash and cash equivalents 2,939 1,130 Undrawn committed facilities 1,350 1,300 Above figures include JVs & associates net of in
Slide 20: Outlook for 2009
Outlook for 2009 • Strong start to the year for UK supply businesses • Gas production expectations lower on softer curve • Weakness in power generation from narrow spreads • Growth businesses continuing to perform well • Headroom exists for further investment within ‘A’ credit range
Slide 21: Sam Laidlaw, Chief Executive
centrica ws Sam Laidlaw Chief Executive
Slide 22: Priorities
Priorities 1 Transform British Gas 2 Sharpen the organisation and reduce costs 3 Reduce risk through increased integration 4 Build on our growth platforms
Slide 23: Transform British Gas
1 Transform British Gas • Organisation designed around customers − three customer focused P&Ls driving accountability • Significant customer service improvements − call handling process improved − Billing performance enhanced • Innovation now meeting customer needs − 3.6 million fixed price accounts
Slide 24: Transform British Gas
1 Transform British Gas • Customer calls down 44% and • Customer accounts stabilising complaints down 50% in 2008 following two price increases • Industry share of complaints is − lost 55% fewer customers 25% versus market share of 33% than 2006, last time prices rose % of Ombudsman complaints and C
Slide 25: Transform British Gas
1 Transform British Gas • Lowered headcount by 2,800 • Reduced operating costs over two years by £210m since 2006 Headcount Operating costs (£m) 15,000 1,000 900 12,500 800 10,000 700 7,500 600 5,000 500 2006 2007 2008 2006 2007 2008
Slide 26: Transform British Gas
1 Transform British Gas BGB Operations Support Residential Energy BGR Customer management Loyalty and value Commercial Services Energy Cost efficiencies BGS
Slide 27: Transform British Gas
1 Transform British Gas • 12 million customers - only 16% have joint product holdings • New structure enables better customer segmentation • Growth from increased product sales to existing and new customers 8.3m 1.9m 1.8m Energy joint Services only customers customers only customers
Slide 28: Transform British Gas
1 Transform British Gas • Customers holding joint products churn at least 20% less • Customer Lifetime Value (LTV) increases with multiple products − more than doubles with energy and services relationship Energy churn 2008* Indexed Customer LTV Index (Dual Fuel = 100) 15 250 22% reduction 10 200 %
Slide 29: Transform British Gas
1 Transform British Gas • Structure removes duplication and improves service • Cost reduction opportunity increased in single organisation £m Operating Costs 1,000 Services Cost opportunity British 500 Gas around £100m Energy (retail) 0 2008 2010
Slide 30: Sharpen the organisation and reduce costs
2 Sharpen the organisation and reduce costs • New senior management • Enhanced capital allocation structure framework • More transparent • Three year planning horizon organisation structures • Group like-for-like cost down − Direct Energy 2008 on 2007 − UK Power Generation £m Opex Causal Track: 2007
Slide 31: Sharpen the organisation and reduce costs
2 Sharpen the organisation and reduce costs • Cost control evident across British Gas Services the Group 250 84% Op cost / gross margin • Growth businesses becoming 200 Op profit (£m) increasingly efficient 150 76% • Cost control remains on agenda 100 68% 50 Operating cost / 0 60% Operating profit 2
Slide 32: Gas - progress
3 Reduce risk through increased integration Gas - progress • Successfully increased asset base: − acquired around 800bcfe of reserves − invested £1bn in gas acquisitions and development • Exploration acreage offers future potential • Commissioned initial LNG capacity at Isle of Grain • Increased hed
Slide 33: Power - progress
3 Reduce risk through increased integration Power - progress • Growing generation to 5.3GW Wind • Increased UK power coverage ratio to 58% Gas • Lowest carbon fleet in the UK • Expect to complete 885MW CCGT at Langage late in 2009 • Constructed world’s largest offshore wind farm, 180MW • 1.4GW wind
Slide 34: Gas - looking forward
3 Reduce risk through increased integration Gas - looking forward • Upstream hedge increasingly important • Focus acquisitions on UK and Norway • Medium term £1bn investment Statfjord programme to develop assets Peik • Additional global LNG supply coming Heimdal on-stream • Continuing strategic disc
Slide 35: Power - looking forward
3 Reduce risk through increased integration Power - looking forward • Aim to increase level of power Power cover ratio* (%) asset cover: 60 − captures value upstream 50 Drax Wind & renewables and downstream 40 − absorbs high levels of 30 intra-day power price 20 Gas volatility 10 0 2008 • Aim to div
Slide 36: British Energy
3 Reduce risk through increased integration British Energy • Medium term power price • Deal could provide: remains volatile − 25% of power from • Strategic rationale remains existing fleet strong, with value as key − right to participate in new determinant nuclear build Power cover ratio (%) Energy
Slide 37: Gas storage
3 Reduce risk through increased integration Gas storage • Implement multi-asset, multi-product model − enhances value − reduces risk • Announced 3 major projects − totalling around 85bcf − investment of £1.5bn Bains Rough Caythorpe Baird Rough Baird Bains Caythorpe Size (bcf) 120 60 15-20 7.5 Inject
Slide 38: Build on our growth platforms
4 Build on our growth platforms BGB BGS • Customer acquisitions and • Maintained core customer base organic growth • Strong growth in secondary • Improved customer service products and retention • Improved operational efficiency • Delivered efficiency savings and service Direct Energy Growth Busines
Slide 39: Build on our growth platforms: Europe
4 Build on our growth platforms Europe • Gained 51% controlling Generation mix interest • 1.5m energy accounts, Nuclear PE2 14 1.6GW power stations • Pax Electrica 2 adds value Nuclear 14 • Business more competitive 65 moving forward Wind 3 4 • Majority stake provides Hydro Gas / Diesel valuable opp
Slide 40: Focus and integrate in North America
4 Build on our growth platforms Focus and integrate in North America • Built a leading competitive position in North America • Grow presence in core markets where we have scale and brand • Increase vertical integration in primary markets − support retail positions − provide growth Canada US Energy a
Slide 41: Summary
Summary • Good results in a difficult environment
Slide 42: Summary
Summary • Good results in a difficult environment • Second stage of British Gas transformation under way
Slide 43: Summary
Summary • Good results in a difficult environment • Second stage of British Gas transformation under way • Continued investment on improving the hedge in the UK
Slide 44: Summary
Summary • Good results in a difficult environment • Second stage of British Gas transformation under way • Continued investment on improving the hedge in the UK • Focusing and integrating North American business
Slide 45: Summary
Summary • Good results in a difficult environment • Second stage of British Gas transformation under way • Continued investment on improving the hedge in the UK • Focusing and integrating North American business • Business well positioned to keep moving forward
Slide 46: Preliminary Results
centrica wesourceit wegenerateit Preliminary Results | v2 wetradeit For the year ended 31 December 2008 wesaveit wesupplyit weserviceit <5.