Slide 1: Centrica plc Preliminary Results 2014
19/02/2015 CENTRICA PLC PRELIMINARY RESULTS for the year ended 31 December 2014 > 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-lookin
Slide 2: Centrica Team
19/02/2015 IAIN CONN Chief Executive CENTRICA TEAM Rick Iain Conn Jeff Bell Jill Shedden Haythornthwaite Chief Executive Interim Chief Group Director, Chairman Financial Officer Human Resources Mark Hanafin Ian Peters Badar Khan Grant Dawson Managing Director, Interim Managing President and CEO, Gro
Slide 3: 2014 Earnings & Response
19/02/2015 2014 EARNINGS & RESPONSE • Earnings down 30%; EPS of 19.2p • Oil and gas prices and cash flow impact • Cutting capex and opex • Need for strong investment grade credit ratings • Decision to rebase dividend by 30% • Strategic review launched 5 JEFF BELL Interim Chief Financial Officer 3
Slide 4: Weather and Commodity Prices
19/02/2015 WEATHER 2014 average UK temperature (degrees Celsius) Warmer than normal 25 Colder than normal Average Q1 US North East Seasonal normal temperature temperature (degrees Celsius) 20 SNT - 2.9 2.6 15 10 0.2 5 2013 2014 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 7 COMMODITY PRICES Ave
Slide 5: Financial Headlines
19/02/2015 FINANCIAL HEADLINES Year ended 31 December (£m) 2014 2013 Δ% Revenue (£m) 29,408 26,571 11% Adjusted operating profit (£m) 1,746 2,695 (35%) Adjusted effective tax rate 30% 43% (13ppt) Group result: Adjusted earnings (£m) 962 1,370 (30%) Adjusted earnings per share (p) 19.2 26.6 (28%) Ful
Slide 6: Operating Profit and British Gas
19/02/2015 OPERATING PROFIT Year ended 31 December (£m) 2014 2013 Δ% British Gas 823 1,030 (20%) Direct Energy 150 276 (46%) Bord Gáis Energy 7 - nm Centrica Energy 737 1,326 (44%) Centrica Storage 29 63 (54%) Adjusted operating profit 1,746 2,695 (35%) Share of JV / associates’ interest and taxatio
Slide 7: Direct Energy and Bord Gáis Energy
19/02/2015 DIRECT ENERGY Operating profit (£m) Year ended 31 December 2014 2013 Δ% Direct Energy operating profit £m Residential energy (underlying) 122 163 (25%) 165 Business energy (underlying) 65 77 (16%) Services 28 36 (22%) 111 109 Direct Energy (underlying) 215 276 (22%) 41 Polar vortex impact
Slide 8: Centrica Energy - Gas and E&P Volumes and Costs
19/02/2015 CENTRICA ENERGY - GAS Year ended 31 December (£m) 2014 2013 Δ% Operating profit before tax 606 1,155 (48%) Operating profit after tax 302 325 (7%) Average gas sales price Average liquids sales price Europe p/therm Americas Europe £/boe Americas US$/boe US$/mmbtu 65.0 62.9 53.9 54.2 67.8 7
Slide 9: Centrica Energy - Power and Centrica Storage
19/02/2015 CENTRICA ENERGY - POWER Operating profit (£m) Year ended 31 December (£m) 2014 2013 Δ% Gas-fired (120) (133) nm Renewables 10 25 (60%) Nuclear 210 250 (16%) Midstream 31 29 7% Power 131 171 (23%) Gas-fired generation TWh Nuclear generation TWh Renewables generation TWh & achieved clean sp
Slide 10: Group Operating Costs and Net Investment
19/02/2015 GROUP OPERATING COSTS Centrica cash operating costs (£bn) • Cash operating costs up 4% year on year 3.0 – Hess, Bord Gáis acquisitions – underlying costs broadly flat 2.0 • Cost initiatives 1.0 – $100m DE programme delivered – £100m BGB programme by 2016 0.0 2013 2014 • Additional cost op
Slide 11: Cash Flow and Credit Metrics
19/02/2015 CASH FLOW Year ended 31 December (£m) 2014 2013 Opening net debt (5,049) (4,047) EBITDA 2,811 3,799 Working capital movements (37) 237 Margin cash movement1 (640) 82 Interest and tax (968) (1,111) Net investment (829) (2,565) Dividends (864) (862) Share repurchase (420) (500) FX / Other 2
Slide 12: Sources and Uses of Cash; Summary and Financial Outlook
19/02/2015 UNDERLYING SOURCES AND USES OF CASH • Low commodity prices will place additional EBITDA pressure on EBITDA post 2014 • Remedial actions being taken EBITDA Dividends – 40% reduction in E&P capex by 2016 – additional cost improvement Capex • Scrip alternative to be implemented Tax & Interes
Slide 13: Energy Trends
19/02/2015 IAIN CONN Chief Executive ENERGY TRENDS • Primary energy demand growth • Falling energy intensity • Divergence of CO2 from energy growth • Energy efficiency; Natural gas; Nuclear; Renewables • Changing customer expectations 26 13
Slide 14: Centrica Well Placed; Business Response – Upstream
19/02/2015 CENTRICA WELL PLACED • Focused on serving customers UK, Ireland and North Sea 24m customer accounts 420bcf gas / 40TWh power sales volume • Diverse energy portfolio 140mboe/d production; 398mmboe 2P reserves • Providing energy security North America 4m customer accounts 816bcf gas / 116TW
Slide 15: Business Response – Downstream and Group Costs
19/02/2015 BUSINESS RESPONSE – DOWNSTREAM • Serve our customers competitively and with integrity • Price cuts in British Gas and Bord Gáis • Continued focus on improving service levels • Close attention to cost to serve 29 BUSINESS RESPONSE - GROUP & DOWNSTREAM COSTS UK energy supply indirect cost G
Slide 16: Connected Homes; Q1 Delivery and Milestones
19/02/2015 CONNECTED HOMES 31 Q1 DELIVERY AND MILESTONES • Return to more normal weather patterns • Valemon field on stream 3 January 2015 • Morecambe 30 year anniversary • CMA investigation and hearing • Price cuts in British Gas and Bord Gáis 32 16
Slide 17: British Gas Household Bills and Profits; Strategic Review
19/02/2015 BRITISH GAS HOUSEHOLD BILLS AND PROFITS 1,400 LHS: Average British Gas dual fuel bill (£/customer) 70 1,200 60 1,000 50 800 40 RHS: Average British Gas post tax profit (£/customer) 600 30 400 20 200 10 0 0 2009 2010 2011 2012 2013 2014 33 STRATEGIC REVIEW • Outlook and sources of growth •
Slide 18: Summary and Q&A
19/02/2015 SUMMARY • 2014 a difficult year for Centrica • Expect 2015 earnings to be lower than 2014 • Taking action now on capital and costs • Strategic review to be concluded by July 2015 • Decision to rebase the dividend • Strong capabilities and positions for the long term 35 Q&A Iain Conn Jeff