Slide 1: Preliminary Results for the year ended 31 December 2007
Centrica plc Preliminary Results for the year ended 31 December 2007 1 Preliminary Results 2007
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: Roger Carr, Chairman
Roger Carr Chairman 2 Preliminary Results 2007
Slide 4: Nick Luff, Finance Director
Nick Luff Finance Director 3 Preliminary Results 2007
Slide 5: Commodity
Commodity (p) Gas price movements 40 35 Retail 30 25 20 15 EEC 10 T&D 5 Wholesale* 0 2004 2005 2006 2007 * Wholesale forward supply year 4 Preliminary Results 2007
Slide 6: Financial headlines
Financial headlines Year ended 31 December (£m) 2007 2006 Revenue (£m) 16,342 16,403 Operating profit (£m) 1,949 1,392 Profit before tax (£m) 1,876 1,251 Total effective tax rate 40% 44% Earnings (£m) 1,121 701 Earnings per share* (p) 30.6 19.4 Full year dividend per share (p) 13.0 11.15 Above figur
Slide 7: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2007 2006 British Gas Residential 571 95 Centrica Energy 663 686 British Gas Business 120 87 Centrica Storage 240 228 UK Energy 1,594 1,096 British Gas Services 151 102 Direct Energy* 187 173 Europe 17 7 Other - 14 Total operating profit 1,949 1,
Slide 8: British Gas Residential Causal track
British Gas Residential Causal track £m First Half £m Second Half 800 800 600 600 400 Other 400 200 200 T&D Other 0 Commodity 0 Cost H1 H2 H2 (200) saving (200) 2006 Commodity H1 2007 Cost 2007 Sales (400) 2006 T&D Sales (400) saving Price Price £m Full Year 800 600 Other 400 200 0 FY Commodity FY (
Slide 9: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2007 2006 British Gas Residential 571 95 Centrica Energy 663 686 British Gas Business 120 87 Centrica Storage 240 228 UK Energy 1,594 1,096 British Gas Services 151 102 Direct Energy* 187 173 Europe 17 7 Other - 14 Total operating profit 1,949 1,
Slide 10: Centrica Energy Causal track
Centrica Energy Causal track £m First Half £m Second Half 800 800 600 600 400 400 Volumes Other Other 200 200 Volumes Sales I&C Sales I&C 0 Price 0 Price H1 2006 H1 2007 H2 2006 H2 2007 £m Full Year 800 600 Other Volumes 400 200 Sales I&C Price 0 FY 2006 FY 2007 9 Preliminary Results 2007
Slide 11: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2007 2006 British Gas Residential 571 95 Centrica Energy 663 686 British Gas Business 120 87 Centrica Storage 240 228 UK Energy 1,594 1,096 British Gas Services 151 102 Direct Energy* 187 173 Europe 17 7 Other - 14 Total operating profit 1,949 1,
Slide 12: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2007 2006 British Gas Residential 571 95 Centrica Energy 663 686 British Gas Business 120 87 Centrica Storage 240 228 UK Energy 1,594 1,096 British Gas Services 151 102 Direct Energy* 187 173 Europe 17 7 Other - 14 Total operating profit 1,949 1,
Slide 13: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2007 2006 British Gas Residential 571 95 Centrica Energy 663 686 British Gas Business 120 87 Centrica Storage 240 228 UK Energy 1,594 1,096 British Gas Services 151 102 Direct Energy* 187 173 Europe 17 7 Other - 14 Total operating profit 1,949 1,
Slide 14: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2007 2006 British Gas Residential 571 95 Centrica Energy 663 686 British Gas Business 120 87 Centrica Storage 240 228 UK Energy 1,594 1,096 British Gas Services 151 102 Direct Energy* 187 173 Europe 17 7 Other - 14 Total operating profit 1,949 1,
Slide 15: Direct Energy Causal track
Direct Energy Causal track £m 200 150 Upstream & Services Mass C&I Wholesale Markets 100 50 0 Full Year Full Year 2006 2007 * The results of The Consumers’ Waterheater Income Fund are reported in discontinued operations 11 Preliminary Results 2007
Slide 16: Operating profit analysis
Operating profit analysis Year ended 31 December (£m) 2007 2006 British Gas Residential 571 95 Centrica Energy 663 686 British Gas Business 120 87 Centrica Storage 240 228 UK Energy 1,594 1,096 British Gas Services 151 102 Direct Energy* 187 173 Europe 17 7 Other - 14 Total operating profit 1,949 1,
Slide 17: Cashflow
Cashflow Year ended 31 December (£m) 2007 2006 Opening net debt (1,527) (1,060) EBITDA 2,514 1,948 Working capital movements 261 (15) Margin calls 2 (477) Interest and tax (538) (762) Gross capex (1,054) (768) Dividends (417) (384) Disposals / other (36) (9) Total movement in net debt 732 (467) Clos
Slide 18: Capital and acquisition expenditure
Capital and acquisition expenditure Year ended 31 December (£m) 2007 2006 Upstream gas - growth 114 70 - maintenance 41 31 UK power - conventional 177 94 - wind 146 30 Direct Energy 117 155 Other 113 174 Total pre-acquisitions 708 554 Gas acquisitions 242 158 Total 950 712 ROCs / emissions 104 56 14
Slide 19: Simplification of financial structure
Simplification of financial structure • The Consumers’ Waterheater Income Fund (CWIF) deconsolidation • Prepayment of Humber finance lease • HMRC settlement 2007 CWIF Humber HMRC Operating profit (£39m) - - Net interest £38m (£40m) (£19m) Net debt (£573m) £54m - Net assets £227m - (£13m) Tax - £16m
Slide 20: Summary
Summary • Strong financial results • Year contained two distinct performance periods • Continued strong cash generation 16 Preliminary Results 2007
Slide 21: Sam Laidlaw, Chief Executive
Sam Laidlaw Chief Executive 17 Preliminary Results 2007
Slide 22: Priorities
Priorities 18 Preliminary Results 2007
Slide 23: Priorities
Priorities 1. Transform British Gas 18 Preliminary Results 2007
Slide 24: Priorities
Priorities 1. Transform British Gas 2. Sharpen the organisation and reduce costs 18 Preliminary Results 2007
Slide 25: Priorities
Priorities 1. Transform British Gas 2. Sharpen the organisation and reduce costs 3. Reduce risk through increased integration 18 Preliminary Results 2007
Slide 26: 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 18 Preliminary Results 2007
Slide 27: Transform British Gas: Customer service
1 Transform British Gas Customer service Seconds Average speed to answer* % Call abandonment rate* 150 14 12 10 100 8 6 50 4 2 0 0 Jul Aug Sep Oct Nov Dec Jul Aug Sep Oct Nov Dec 2007 2007 Average correspondence outstanding* energywatch complaints 50,000 4,000 40,000 3,000 30,000 Average daily 20,00
Slide 28: Transform British Gas: Customer growth
1 Transform British Gas Customer growth • Customer churn falling through H2 2007 • Sales levels 7% above 2006 • 900,000 customers receiving online bills • Ended 2007 with 16.0m customers Customer accounts (m) 16.1 16.0 15.9 15.8 15.7 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 20 Preliminar
Slide 29: Transform British Gas: Operating costs
1 Transform British Gas Operating costs • Prioritised service in 2007 • Removed £140m from base • £60m to come out in 2008 Operating costs (£m) 1,000 750 500 2004 2005 2006 2007 2008* * Including planned £60m cost reduction in 2008 21 Preliminary Results 2007
Slide 30: Sharpen the organisation and reduce costs
2 Sharpen the organisation and reduce costs Organisation • BGR restructured into three P&Ls structure • Direct Energy reorganised • Separated UK power generation profits People • Senior team skills review initiatives • Upskilled in key areas in Centrica Energy Process • Instituted business unit cost
Slide 31: Sharpen the organisation: Performance metrics
2 Sharpen the organisation and reduce costs Performance metrics 2007 2006 BGR • Operating cost per customer account £50 £57 • Operating profit margin 8.8% 1.3% • Share of energywatch * complaints* 49% 72% BGS • % revenue growth 16% 8% • Operating profit margin 11.8% 9.2% BGB • Customer numbers* 954k
Slide 32: UK power progress
3 Reduce risk through increased integration UK power progress Braes of Doune Came on line in 2007 Under construction Pipeline of projects Lincs Inner Race Bank Dowsing Docking Shoal Kings Lynn Lynn Expansion Langage 24 Preliminary Results 2007
Slide 33: Power coverage
3 Reduce risk through increased integration Power coverage % Equity cover of residential peak demand 100 80 Drax & wind power Under construction 60 40 Current generation 20 0 2007 2008 2009 2010 25 Preliminary Results 2007
Slide 34: Gas progress
3 Reduce risk through increased integration Gas progress Norway licences 06 Norway licences 07 East Irish Sea Isle of Grain Newfield / Sojitz Stetind Rockyview Egypt Trinidad Seven Nigeria Seas Grove Sloop 26 Preliminary Results 2007
Slide 35: Gas coverage
3 Reduce risk through increased integration Gas coverage % Equity gas hedge ratio 40 Acquisitions 30 Development North Sea 20 Morecambe Bay 10 0 2006 2007 2008 2009 2010 2011 27 Preliminary Results 2007
Slide 36: Capital and acquisition expenditure
3 Reduce risk through increased integration Capital and acquisition expenditure Year ended 31 December (£m) 2008 2007 Upstream gas - growth 150 114 - maintenance 50 41 UK power - conventional 200 177 - wind 200 146 Direct Energy 130 117 Other 120 113 Total pre-acquisitions 850 708 Gas acquisitions*
Slide 37: Build on our growth platforms
4 Build on our growth platforms Customer Relationships Share of operating profit 2007 2007 million Growth 16 - platforms Europe 12 - British Direct Gas Energy Residential 8- British Gas Services 4- British Gas 0- Business 29 Preliminary Results 2007
Slide 38: Build on our growth platforms: British Gas Business
4 Build on our growth platforms British Gas Business Opportunity Credentials • £20bn UK energy business • One of few dedicated market suppliers – BGB share 12% • Ranked #1 for large users • Significant opportunities in: • Differentiated service model – additional services • Smart meter leadership –
Slide 39: Build on our growth platforms: British Gas Services
4 Build on our growth platforms British Gas Services Opportunity Credentials Electrical Central Heating • National coverage with Installations employed engineer base Services £1.2bn • Large customer base for £1.8bn cross selling Kitchen £6.3bn* • Broad range of home Appliance £0.9bn services £0.6bn
Slide 40: Build on our growth platforms: Direct Energy
4 Build on our growth platforms Direct Energy Opportunity Credentials • $500 billion market • Highly hedged supply portfolio • 1,000TWh of C&I power • Re-organised for focus and demand open to competition growth – 14TWh share • Track record of profit growth • Many states yet to open and business exp
Slide 41: Build on our growth platforms: British Gas New Energy
4 Build on our growth platforms British Gas New Energy Opportunity Credentials • Rapidly growing awareness of • Greenest energy supplier climate change • Most trusted to install new • Microgen worth up to £3bn p.a. energy technologies by 2016 • Unique route to market – 11m domestic microgen • Early
Slide 42: Summary
Summary • Strong financial results 34 Preliminary Results 2007
Slide 43: Summary
Summary • Strong financial results • Clear direction set for the business 34 Preliminary Results 2007
Slide 44: Summary
Summary • Strong financial results • Clear direction set for the business • Progress made against priorities 34 Preliminary Results 2007
Slide 45: Summary
Summary • Strong financial results • Clear direction set for the business • Progress made against priorities • Vertical integration remains top of agenda 34 Preliminary Results 2007
Slide 46: Preliminary Results 2007
3 Preliminary Results 2007