Slide 1: Centrica plc Interim Results
Centrica plc Interim Results For the 6 months ending 30th June 2003
Slide 2: Disclaimer
Disclaimer This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Centrica Shares. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.
Slide 3: Chief Executive Sir Roy Gardner
Chief Executive Sir Roy Gardner
Slide 4: Results in brief
Results in brief Six months ended 30 June, £m 2003 % change Turnover (excluding Accord) 6,224 20% Operating profit* 694 11% Earnings* 479 11% Earnings (post excp & goodwill) 390 12% Interim dividend per share 1.7p 21% * Before exceptional charges & goodwill amortisation • Another strong set of resul
Slide 5: The Centrica strategy journey continues to evolve
The Centrica strategy journey continues to evolve 1997 1998 1999 2000 2001 2002 2003 Performance Creating Expanding Exporting Refining Managing turnaround the Centrica essentials the Centrica the model for value business model model • Operating • Reposition • AA integration • Entry into • Reorganise
Slide 6: Higher customer numbers and slower churn drives margin improvement in British Gas
Higher customer numbers and slower churn drives margin improvement in British Gas Weekly net customer movements Churn 60,000 - 30% 40,000 - 20% 20,000 - 10% 0 - 0% -20,000 -40,000 2002 2003 -60,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Electricity Gas Energy Ele
Slide 7: Margins will be further improved through British Gas' business transformation
Margins will be further improved through British Gas’ business transformation Integrated Prompted customer data cross-selling (completed 1H 2003) (pilot, roll-out 2H 2003) People & culture (ongoing) Cross-serving New billing for customer value engine & systems (2004) (roll-out from Q4 2003) • Busine
Slide 8: The home services business is growing strongly and is a key point of differentiation
The home services business is growing strongly and is a key point of differentiation • 15% increase in customer product holdings Customer product holdings (millions) 7 6 Home electrical care Kitchen appliance care 5 Plumbing & drains care 4 Other service contracts 3 2 Central heating contracts 1 0 H
Slide 9: Centrica's Energy Management Group secures advantaged energy supplies
Centrica’s Energy Management Group secures advantaged energy supplies % of requirements procured: Q4 ’04 100% 75% Contracted 50% Equity 25% 0% Gas Electricity • Key role for Centrica Energy Management Group is to de-risk the downstream supply business. • Aim to maintain a balanced portfolio to provi
Slide 10: Morecambe Bay remains cash-generative in the medium term despite the decline in production
Morecambe Bay remains cash-generative in the medium term despite the decline in production 175 150 125 100* 75 50 25 0 2002 2003 2004 2005 2006 2007 Production Operating Profit Operating Cash Flow * indexed: 2002 actual = 100 • On indicative basis, expect production and profit to decline by around 1
Slide 11: Renewable generation build as part of a balanced upstream portfolio
Renewable generation build as part of a balanced upstream portfolio • Balanced supply portfolio including: – ROCs from bilateral contracts – ROCs from traded market – pay the buyout price – equity ownership • Obligation for 2002/3 met through purchase of ROCs • Up to £500m investment in generation o
Slide 12: We are making solid progress in the AA and Centrica Business Services
We are making solid progress in the AA and Centrica Business Services • Increased operating profit – AA up 8% – Centrica Business Services up 8% • Good indications on drivers of future value growth – cross-selling – driving out cost-efficiencies • AA and Centrica Business Services are making solid p
Slide 13: Our Telecoms strategy is progressing
Our Telecoms strategy is progressing 40% CPS customers as % of fixed line customer base • Losses halved 30% 20% • Improved regulatory 10% environment 0% – carrier pre-selection Dec- Mar- Jun- Sep- Dec- Mar- Jun- 01 02 02 02 02 03 03 – wholesale line rental The impact of CPS on ARPU • Average revenue
Slide 14: We have achieved growth in Goldfish but cash breakeven by end-Q4 is an ambitious target
We have achieved growth in Goldfish but cash breakeven by end-Q4 is an ambitious target 1000 750 Credit card receivables £m 500 Savings deposits Loan receivables 250 0 Jun 02 Dec 02 Jun 03 • Path to profitability - continue momentum on loans - sustain credit insurance penetration - increase income f
Slide 15: Focus in North America is leading to improved performance
Focus in North America is leading to improved performance • Good progress in Texas • Cross-selling in Ontario • Value from water heater public offering • Alberta acquisition expected to complete Q4 ’03 • Future customer acquisitions • Upstream asset acquisitions • Primary focus in North America is o
Slide 16: Texas organic customer quality is improving
Texas organic customer quality is improving 120,000 Customer Numbers 110% Consumption Rising Growing (% of ERCOT average) 105% 80,000 100% 40,000 95% 0 90% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun '03 '03 '03 '03 '03 '03
Slide 17: Focus in North America is leading to improved performance
Focus in North America is leading to improved performance • Good progress in Texas • Cross-selling in Ontario • Value from water heater public offering • Alberta acquisition expected to complete Q4 ’03 • Future customer acquisitions • Upstream asset acquisitions • Bill 210 restricts ability to grow
Slide 18: Summary and outlook
Summary and outlook • Continued growth • Further cost efficiencies • Strong platform • Increased cash generation • Targeting - continued strong earnings growth - increasing returns on investment in excess of Group WACC - 40% dividend payout ratio • Well positioned to continue to grow the business. •
Slide 19: Group Finance Director Phil Bentley
Group Finance Director Phil Bentley
Slide 20: Financial highlights
Financial highlights Six months ended 30 June 2003, £m 2003 2002 ∆% Turnover (excl. Accord) 6,224 5,184 20% Operating profit 694 627 11% Operating margin 11% 12% (1 ppt) Interest 29 29 - Tax 186 168 11% Earnings 479 431 11% Net margin 8% 8% - All figures before exceptional charges & goodwill • Acqui
Slide 21: Operating Profit Analysis
Operating Profit Analysis (including JV’s & Associates, pre exceptionals & goodwill amortisation) Six months ended 30 June 2003, £m 2003 2002 ∆ British Gas Residential 200 193 4% Centrica Business Services 43 40 8% Centrica Energy Management Group 373 336 11% AA 39 36 8% North America 73 25 192% One
Slide 22: British Gas Residential
British Gas Residential Operating profit: causal track £m £m Six months ended 30 June 2002 193 NTS rebate in 2002 (54) Higher pricing 16 Weather (12) Lower churn 17 Higher Opex/Lower T&D/Lower commodity 5 Home services growth 19 Lower telecoms losses 16 7 Six months ended 30 June 2003 200 • Strategy
Slide 23: CEMG
CEMG Operating profit: causal track £m £m Six months ended 30 June 2002 336 Lower gas selling prices (27) Abolition of Royalties (net of PRT shield) 21 Higher I&W profits 32 Rough Storage 16 Other (5) 37 Six months ended 30 June 2003 373 • Strategy is to build an advantaged commodity position. • Pro
Slide 24: Centrica Business Services
Centrica Business Services Operating profit: causal track £m £m Six months ended 30 June 2002 40 NTS rebate in 2002 (6) Electricity Direct 6 Lower commodity costs 6 Higher Opex/Lower T&D (3) 3 Six months ended 30 June 2003 43 • The strategy for Centrica Business Services is to widen the range of pro
Slide 25: AA Operating profit: causal track
AA Operating profit: causal track £m £m Six months ended 30 June 2002 36 Increased road customer contribution 6 Rationalisation costs (4) Service centres - higher Opex (5) Other AA businesses 6 3 Six months ended 30 June 2003 39 • AA operating margins are now over 10%. • Roadside customer numbers pa
Slide 26: Goldfish
Goldfish Operating profit: 2003 2002 Six months ended 30 June £m £m Credit card gross contribution 29 30 Banking gross contribution 3 1 Bad & doubtful debts provision (13) (12) Operating costs (48) (36) Operating Loss (30) (17) • Lower credit card contribution was driven by a fall in net interest ma
Slide 27: North America
North America Operating profit: causal track £m £m Six months ended 30 June 2002 25 Acquisition of WTU / CP&L 44 Texas organic growth (11) Ontario Electricity 27 Home Services 4 Lower gas production prices (7) Alberta market entry (4) Other (5) 48 Six months ended 30 June 2003 73 • Strategy is to bu
Slide 28: H1 2003 cash flow drivers
H1 2003 cash flow drivers £m H1 2003 H1 2002 EBITDA 886 802 Adjustments: PRT P&L Charge 68 47 PRT cash paid (9) (199) Corporation tax (67) (58) Other working capital (212) (307) (220) (517) Post tax operating cash flow 666 285 Interest 0 (9) Capex (92) (154) Acquisitions (66) (511) Free cash flow (b
Slide 29: centrica
centrica
Slide 30: Appendices
Appendices
Slide 31: Gross capital expenditure
Gross capital expenditure £m H1 2003 British Gas Residential 47 Centrica Energy Management Group 25 AA 13 North America 22 Other 5 112
Slide 32: Gross acquisitions
Gross acquisitions £m H1 2003 Roosecote power station 25 AEP deferred consideration 26 North America 13 JVs and associates 9 Other 2 75