Slide 1: Interim Results
centrica Centrica ple Interim Results
Slide 2: Disclaimer
centrica 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
Slide 3: centrica
centrica
Slide 4: H1 financial performance and 2018 outlook
centrica H1 financial performance and 2018 outlook * Challenging H1 environment - extreme weather patterns, rising commodity prices, regulatory uncertainty and continuing competitive pressures * Rising wholesale prices compressing energy supply margins, but driving improvement in E&P * On track to d
Slide 5: Business headlines
centrica Business headlines * Consumer account losses continue, but at slower rate than 2017. UK Home Services accounts stable * Capability - improved segmentation, enhanced tailored propositions, maximising customer life-time value, reducing cost-to-serve * North America showing improvement vs H2 2
Slide 6: Portfolio resilience
centrica Portfolio resilience Revenue, gross margin, AOCF, operating profit (fbn) 30.0 27.5 ~~ 25.0 | 5.0 25 — Group revenue — Adjusted gross margin 0.0 — Adjusted operating cash flow 2014 2015 2016 2017 2018e — Adjusted operating profit 2016 adjusted operating cashflow excludes £357m UK Business wo
Slide 7: 2018-20 focus - performance delivery and financial discipline
centrica 2018-20 focus - performance delivery and financial discipline * Demonstrating customerled gross margin growth * Driving cost efficiency towards being ‘most efficient price-setter’ Improving organisational effectiveness Securing the capabilities we need for 2020 and beyond * Maintain capital
Slide 8: centrica
centrica
Slide 9: Financial headlines
Financial headlines Six months ended 30 June 2017 2018 A Revenue (£m) 14,299 15,321 7% Adjusted gross margin (£m) 2,242 2,256 1% Adjusted operating profit (£m) 814 782 (4%) Adjusted effective tax rate 30% 39% (9ppt) Adjusted earnings (£m) 447 358 (20%) Adjusted basic earnings per share (p) 8.2 6.4 (
Slide 10: Commodity prices
Commodity prices Average Brent oil prices ($/bbl) 80 $70/boe 60 A 0 FF Seeeeereeeeereeeererrerreececeecerereercercrces $35/boe 20 0 Jan 16 Jan 17 Jan 18 Jan 19 Average UK NBP gas prices (p/th) centrica Average UK baseload power prices (£/MWh) 75 60 SORA LP fe + £50/MWh 40 + 35p/th gs flees cvvsccnse
Slide 11: Centrica Consumer
Centrica Consumer centrica ADJUSTED OPERATING PROFIT / (LOSS) Consumer gross margin Six months ended 30 June (£m) 2017 2018 A (£m) UK Home 489 393 (20%) isiF Ireland 33 15 (55%) : 1,399 North America Home 58 66 14% Connected Home (44) (44) 0% Centrica Consumer 536 430 (20%) ADJUSTED OPERATING CASH F
Slide 12: Consumer: adjusted operating profit drivers
centrica Consumer: adjusted operating profit drivers Weather, FX, . oo f Prepayment Choices Efficiencies Accounts / inflation / (£28m) £71m £15m —_— —= LJ _ (£113m) £430m = H1 2017 H1 2018 The above figures are stated before exceptional items and certain re measurements and include share of joint ve
Slide 13: Centrica Business
Centrica Business ADJUSTED OPERATING PROFIT / (LOSS) Six months ended 30 June (£m) 2017 2018 A UK Business 0 23 nm North America Business 112 50 (55%) Distributed Energy & Power (DE&P) (19) (37) (95%) Energy Marketing & Trading (EM&T) 105 48 (54%) Central Power Generation 24 12 (50%) Centrica Busine
Slide 14: Business: adjusted operating profit drivers
centrica Business: adjusted operating profit drivers Weather, FX, DE&P Legacy gas NAB, core Efficiencies Nuclear price investment contracts EM&T, other £222m (£6m) | Ln (£16m) £16m H1 2017 H1 2018 ‘The above figures are stated before exceptional items and certain re-measurements and include share of
Slide 15: Business: North America
Business: North America North America Business gross margin ($m) 400 300 Y | ot LJ | H1 2017 H2 2017 H1 2018 Gas Power Optimisation e Supply e e centrica energy supply gross margin NAB forward net margin under contract ($m) 2018 2019 @ 2018 net margin under contract as at June 2017 @ 2019 net margin
Slide 16: Business: UKB, DE&P and EM&T gross margin
centrica Business: UKB, DE&P and EM&T gross margin UKB gross margin (£m) 129 H1 2017 H1 2018 ‘The above figures are stated before exceptional items and certain re-measurements and include share of joint ventures and associates before interest and taxation, Reconciliations of adjusted operating profi
Slide 17: Exploration & Production
Exploration & Production E&P Six months ended 30 June (£m) 2017 2018 A Gas and liquids realisations 696 1,101 58% Adjusted operating profit 56 256 357% Adjusted operating cash flow 234 667 185% Free cash flow 34 442 1,200% Average gas Average liquids Lifting & other sales price sales price productio
Slide 18: E&P: adjusted operating profit drivers
centrica E&P: adjusted operating profit drivers Canada/ Trinidad CSL disposals £144m £108m £56m a | | (£13m) H1 2017 commodity price/ FX Spirit unit Spirit lifting costs, production unit DDA, exploration [| £21m £256m (£60m) H1 2018 The above figures are stated before exceptional items and certain r
Slide 19: £1.25bn per annum of cost efficiency 2015-20
centrica £1.25bn per annum of cost efficiency 2015-20 £750m Efficiency programme delivered £203m = (£692m) coon | £5.0bn i Inflation FX (£298m) Efficiency programme £4.5bn (£54m) Other/one off/ portfolio change/ phasing 2015 controllable costs © @ Costs of goods sold @ @ Operating costs a1 unre run
Slide 20: Efficiency programme delivery
centrica Efficiency programme delivery (£31m) £2,239m FX 2017 controllable costs £112m £2,280m £52m (£92m) Efficiency programme Other' Inflation 2018 like-for-like © @ Costs of goods sold controllable costs @ @ Operating costs 1. Other includes E&P exploration and project costs (£33m), bad debt (£29
Slide 21: Net investment
Net investment Six months ended 30 June (£m) 2017 2018 Centrica Consumer 59 110 Centrica Business 81 132 Exploration & Production! 233 231 Other 12 20 Capital expenditure (including acqui ns) 385 493 Net disposals * (254) (30) 131 463 Group net investment centrica 1. 2017 comparatives have been rest
Slide 22: Cash flow
centrica Cash flow Six months ended 30 June (£m) 2017 2018 EBITDA 1,291 1,324 Tax (24) 6 Dividends received 20 22 Working capital & other (45) (251) Adjusted operating cash flow 1,242 1,101 Net investment (131) (463) Interest (including debt purchase) (128) (292) Dividends (258) (427) Other | (182)
Slide 23: Balance sheet
Balance sheet Net debt remains within 2018 targeted range of £2.5-£3bn Achieved target financial metrics at end of 2017 Debt repurchase programme completed 1AS19 pension deficit reduced to £29m Continued focus on capital discipline centrica Current credit ratings Moopy’s Baa1 BBB+ (Stable Outlook) |
Slide 24: 2018 Group targets
2018 Group targets * Adjusted operating cash flow of £2.1bn-£2.3bn * Capital reinvestment <£1.1bn; Spirit Energy capex ~£500m Expect flat 2018 full year dividend per share of 12.0p £200m of efficiency savings in 2018 Like-for-like headcount reduction of around 1,000 in 2018 Net debt in a £2.5bn-£3.0
Slide 25: centrica
centrica
Slide 26: Agenda
centrica Agenda * 2018-20 focus — performance delivery and financial discipline * Customer-led gross margin growth * Asset business update * UK energy supply default price cap 26 Interim Results 2018
Slide 27: 2018-20 focus - performance delivery and financial discipline
centrica 2018-20 focus - performance delivery and financial discipline * Demonstrating customerled gross margin growth * Driving cost efficiency towards being ‘most efficient price-setter’ * Improving organisational effectiveness * Securing the capabilities we need for 2020 and beyond * Maintain cap
Slide 28: Consumer energy customer complaints
centrica Consumer energy customer complaints Energy supply complaints per 100,000 customers (rebased to 100) 100 75 50 25 —— UK Home Energy — NAHome — _lreland H1 2015 FY 2015 H12016 FY 2016 H1 2017 FY 2017 H1 2018 28 Interim Results 2018
Slide 29: Consumer accounts
centrica Consumer accounts Customer accounts (‘000) 25,316 pitteeeeeeeeeeeessseeeeceeeseeeaaeeeeeseeeeeeeaes : 60 = (247) : 25,090 Collective : Prepayment Fe 135 i . tariff/ white : | | : label : Competitive Connected } : pressures Home : growth FY 2017 H1 2018 Choices made: @ UK&! @ NA Underlying h
Slide 30: Deploying segmentation capability across Consumer
centrica Deploying segmentation capability across Consumer * Understanding of individual customer behaviour Driving differentiated pricing * Developing new propositions tailored to differing needs Rewarding loyal customers with differentiated offers * Optimising sales and marketing activity towards
Slide 31: Customer lifetime value - UK Home
centrica Customer lifetime value —-UK Home UK energy supply UK services Joint energy supply and services Proportion of customer base (%) Proportion of customer base (%) Proportion of customer base (%) 0 Increasing CLV 0 Increasing CLV (0) Increasing CLV 31. Interim Results 2018
Slide 32: Consumer - segmentation in action
centrica Consumer - segmentation in action Top line growth * Improved retention * Improved acquisition Targeted customer acquisition Tailored roll-off offers for high value customers Use of Rewards to improve customer retention Increased customer lifetime value * Cross sell / up sell * Increased hol
Slide 33: British Gas Rewards growth
centrica British Gas Rewards growth hieal British Gas Rewards sign ups * Over 1m customers signed up * Wide range of personalised offers, including 1,200 free energy days, supermarket and restaurant ewards 1,000 vouchers 800 * Greater rewards for higher value customers 600 * 22% average churn reduct
Slide 34: $220 35% • 30% 25% • 20% • 15% 10% - - 5% $140
$220 35% • 30% 25% • 20% • 15% 10% - - 5% $140 0%
Slide 35: France Italy
2000 1500 France Italy 1000 500 0
Slide 36: Connected Home pipeline
centrica Connected Home pipeline H1 seenetnetnstcescenetntld ceseenetneuntncencen fvnetnetneecesetnetneen NE cnetneecensenstnee Products F M A M J i J A s O° N D Hive View a Camera Storage a Hive GU10 bulbs = a Hive Hub 360 ——_eEqo Hive Leak ED Philips Hue integration = OO ) Services H Close to Home
Slide 37: Distributed Energy & Power growth
Distributed Energy & Power growth * Significant sales momentum - Order intake up 119% - Order book up 47% * Revenue weighted to H2 - Targeting full year revenue growth of 40% (restated for IFRS 15) - Dependent on phasing of pipeline conversions 37 Interim Results 2018 Order intake fm H1 2017 H1 2018
Slide 38: Single User Interface
Single User Interface Demand Demand Energy Operational Management Response / O&M Usage Efficiency & Optimisation DSR Common Market Interface Subsystem (Forecast, Prices, Dispatch, etc) Direct Load Control Generator Scheduling CHP Control & Device / Site Metering Battery Dispatch & Dispatch Managemen
Slide 39: Riverbay Co-op City
centrica Riverbay Co-op City * Housing Corporation in US North East * Wide suite of services - Wholesale Energy Management - Power and gas procurement and supply - Demand Response centrica Business Solutions 39 Interim Results 2018
Slide 40: St George's Energy Centre
St George's Energy Centre centrica * Hospital in London Two CHP units, four boilers, chiller system, lighting and controls £1m annual savings guaranteed Reduced carbon emissions centrica Business Solutions 40 Interim Results 2018
Slide 41: Terhills
Terhills centrica * Holiday resort in Belgium * 27MW “Virtual Power Plant” * 18MW battery combined with flexible load and generation centrica Business Solutions 41 Interim Results 2018
Slide 42: Exploration & Production
Exploration & Production * Diversity of cash flow and balance sheet strength * Spirit Energy successfully established - Strong and sustainable self-financing European E&P business - Focus on reliable operations and value creation through cost savings and portfolio optimisation - Sustainable medium-t
Slide 43: Spirit Energy project delivery
Spirit Energy project delivery * Development projects - Offshore installation commenced at operated Oda project; on track for first oil in Q4 2019 - FID on non-operated Nova oil field - Successful appraisal at operated-Fogelberg discovery; FID expected in 2019 * Exploration - Discoveries at Hades/Ir
Slide 44: Nuclear
centrica Nuclear * Announced intention to pursue sale - Partner alignment - UK Government sensitivities * Targeting divestment by 2020 * Pre-marketing process now commenced 44 Interim Results 2018
Slide 45: UK energy supply - default tariff cap
centrica UK energy supply - default tariff cap * Default tariff cap bill passed in July 2018 * Ofgem statutory consultation due to be published August 2018 * Final decision due October 2018 Level of price cap set by end of October 2018, cap in place at the end of the year * Engaging constructively w
Slide 46: Exposure to UK default tariff cap risk
centrica Exposure to UK default tariff cap risk Standard tariff price and market share (£) 1,400 1,300 1,200 1,100 1,000 900 800 700 Market Share @ British Gas @ Large Suppliers @ Small Suppliers 1. Average of other largest six suppliers for customers on paper billing inclusive of any applicable dua
Slide 47: Summary
centrica Summary * Challenging H1 environment * Stable adjusted gross margin and adjusted operating profit. AOCF of £1.1bn. EPS impacted by higher tax rate * Continued strong progress on cost efficiency delivery * Developed new capabilities to capture, optimise and grow gross margin * On track to de
Slide 48: Q&A
centrica O&A 48 Interim Results 2018
Slide 49: Adjusted operating profit
centrica Adjusted operating profit Six months ended 30 June (£m) 2017 2018 A UK Home 489 393 (20%) Ireland 33 15 (55%) North America Home 58 66 14% Connected Home (44) (44) nm Total Centrica Consumer 536 430 (20%) UK Business - 23 nm North America Business 112 50 (55%) Distributed Energy & Power (19
Slide 50: Adjusted operating cash flow
centrica Adjusted operating cash flow Six months ended 30 June (£m) 2017 2018 A UK Home 348 91 (74%) Ireland 70 29 (59%) North America Home 126 117 (7%) Connected Home (60) (43) 28% Total Centrica Consumer 484 194 (60%) UK Business 84 58 (31%) North America Business 147 172 17% Distributed Energy &
Slide 51: Net debt
Net debt Six months ended 30 June (£m) 2017 2018 Opening net debt (3,473) (2,596) Adjusted net cash inflow 543 (285) Other movements in net debt (11) (5) Closing net debt (2,941) (2,886) Cash posted as collateral (427) (350) Closing net debt excluding cash posted as collateral (3,368) (3,236) The it
Slide 52: Operating costs
Operating costs Six months ended 30 June (£m) 2017 2018 A Reported operating costs before exceptional items 1,466 1,482 1% FX impact (18) = - Adjustments (208) (196) - Controllable operating costs 1,240 1,286 4% Growth investment (36) (42) - Controllable operating costs excl. growth investment 1,204