Slide 1: Centrica plc Interim Results
Centrica plc Interim Results for the period ended 30 June 2017
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: Iain Conn, Group Chief Executive
Iain Conn Group Chief Executive
Slide 4: Headlines
Headlines • Solid H1 2017 financial performance - Adjusted operating profit down 4%; customer-facing adjusted operating profit flat - Adjusted earnings down 11%; adjusted EPS of 8.2p - EBITDA up 2%; AOCF down 9%; underlying AOCF growth of 0.3% - £124m of cost efficiencies - Net debt down to £2.9bn •
Slide 5: Jeff Bell, Group Chief Financial Officer
Jeff Bell Group Chief Financial Officer
Slide 6: Commodity prices
Commodity prices Average Brent oil prices Average UK NBP gas prices Average UK baseload power prices ($/bbl) (p/th) (£/MWh) 80 60 75 $70/bbl 50p/th 60 40 50 £50/MWh 35p/th 40 £35/MWh $35/bbl 20 25 20 0 0 0 Jan 16 Jan 17 Jan 16 Jan 17 Jan 16 Jan 17 60 60 60 30% 46% 31% 40 40 40 20 20 20 0 0 0 H1 2016
Slide 7: Financial Headlines
Financial Headlines Six months ended 30 June 2016 2017 ∆ Revenue (£m) 13,380 14,293 7% Adjusted operating profit (£m) 853 816 (4%) Adjusted earnings (£m) 507 449 (11%) Adjusted basic earnings per share (p) 9.8 8.2 (16%) Interim dividend per share (p) 3.6 3.6 0% EBITDA (£m) 1,272 1,293 2% Adjusted op
Slide 8: Adjusted operating profit
Adjusted operating profit Six months ended 30 June (£m) 2016 2017 ∆ Centrica Consumer 669 538 (131) Centrica Business 92 222 130 Customer-facing businesses 761 760 (1) Asset businesses 92 56 (36) Total Centrica 853 816 (37) The above figures are stated before exceptional items and certain re-measure
Slide 9: Centrica Consumer
Centrica Consumer ADJUSTED OPERATING PROFIT / (LOSS) Average UK temperature (degrees Celsius) Six months ended 30 June (£m) 2016 2017 ∆ H1 2016 UK Home 635 489 (23%) Ireland 24 33 38% H1 2017 SNT North America Home 33 60 82% Connected Home (23) (44) (91%) Connected Home Centrica Consumer 669 538 (20
Slide 10: Centrica Business
Centrica Business ADJUSTED OPERATING PROFIT / (LOSS) Average US North East temperature (degrees Celsius) Six months ended 30 June (£m) 2016 2017 ∆ H1 2016 UK Business 31 0 (100%) North America Business 62 112 81% H1 2017 SNT Distributed Energy & Power (11) (19) (73%) Energy Marketing & Trading (14)
Slide 11: Exploration & Production
Exploration & Production Production volumes Total (mmboe) Six months ended 30 June (£m) 2016 2017 ∆ H1 2016 37.8 Gas and liquids realisations 1 680 696 2% Adjusted operating profit 88 99 13% H1 2017 35.2 Adjusted operating cash flow 336 276 (18%) Free cash flow 72 89 24% Average gas Average liquids
Slide 12: Centrica Storage
Centrica Storage Six months ended 30 June (£m) 2016 2017 ∆ Gross revenue 82 12 (85%) Adjusted operating (loss) / profit 4 (43) nm Adjusted operating cash flow 30 (42) nm The above figures are stated before exceptional items and certain re-measurements and include share of joint ventures and associat
Slide 13: Operating costs
Operating costs Six months ended 30 June (£m) 2016 2017 ∆ Reported operating costs 1,514 1,466 (3%) FX impact 61 - - Adjustments (239) (195) - Adjusted operating costs 1,336 1,271 (5%) Growth investment (11) (36) - Adjusted operating costs excl. growth investment 1,325 1,235 (7%) The above figures a
Slide 14: Efficiency programme delivery
Efficiency programme delivery £44m (£124m) £102m (£44m) £2,333m £2,311m H12016 2016 FX FX Inflation Inflation Efficiency Efficiency Other 1 Other H12017 2017 controllable controllable programme programme like-for-like controllable costs controllable costs Costs of goods sold costs Operating costs 1.
Slide 15: Net investment
Net investment Six months ended 30 June (£m) 2016 2017 Centrica Consumer 61 59 Centrica Business 39 81 Exploration & Production 289 220 Gas storage and other 1 35 25 Capital expenditure (including small acquisitions) 424 385 Material acquisitions 2 132 - 3 Net disposals (112) (254) Group net investm
Slide 16: Cash flow
Cash flow Six months ended 30 June (£m) 2016 2017 EBITDA 1,272 1,293 Tax (141) (24) Dividends received 49 20 1 Working capital & other 192 (47) Adjusted operating cash flow 1,372 1,242 Net investment (444) (131) Interest (55) (128) Dividends (365) (258) 2 Other (186) (182) Equity placing 700 - Adjus
Slide 17: Sources and uses of cash flow
Sources and uses of cash flow Capital expenditure Material acquisitions AOCF Dividends Equity placing Other Disposals Interest 2015 2016 2017e Closing net debt £4.7bn £3.5bn £2.5-£3.0bn 17 Interim Results 2017
Slide 18: Financial framework
Financial framework Targets Metric Adjusted operating cash flow • 3-5% underlying growth p.a. on average Dividend • Progressive in line with adjusted operating cash flow Controllable costs • Operating cost growth < inflation Capital re-investment • Investment <70% of adjusted operating cash flow • L
Slide 19: Iain Conn, Group Chief Executive
Iain Conn Group Chief Executive
Slide 20: Capital Markets Day summary
Capital Markets Day summary • Clear purpose and strategy • Executing on all aspects of our strategy • Company fundamentally re-positioned by end 2017 • Stronger and more resilient • Capable of delivering customer-led growth • Confident in delivering returns and growth 20 Interim Results 2017
Slide 21: Strategic update
Strategic update • Portfolio transformation • Consumer account holdings • Strategic progress – Consumer and Business divisions, asset businesses • Efficiency programme • UK energy supply market • Summary and outlook 21 Interim Results 2017
Slide 22: Portfolio transformation
Portfolio transformation • Around £600m organic capital reduction in E&P since 2015 • Over £900m of divestments • Over £500m invested incrementally in customer-facing growth activities - Acquisitions and capital expenditure - ~£100m revenue investment in growth areas in FY 2017 - New capabilities an
Slide 23: Consumer account holdings
Consumer account holdings Customer accounts (‘000) (257) 26,799 (66) (90) (572) 296 26,110 H1 H1 2016 tariff Collective Collective Door / aggregation D2D roll to selling Protection Protection off plan trial Competitive Competitive roll-off Connected Connected pressure H1 H1 2017 Home growth 2017 tar
Slide 24: Energy Supply value management
Energy Supply value management Example customer value distribution Customer Contribution High value segment • High consumption Mid value segment • 20% less likely to churn High Low value segment • Low cost to acquire • Average consumption • Low consumption • High propensity to hold • Average churn A
Slide 25: Centrica Consumer performance and progress
Centrica Consumer performance and progress Energy Services Peace Home energy Home supply of mind management automation • Reduced • UK nationwide • Connected camera • 660k Hive hubs • >1m products complaints launch of launched installed sold ‘Local Heroes’ • UK, Ireland, NA • Hive ‘Home Check’ • Hive
Slide 26: Centrica Business performance and progress
Centrica Business performance and progress Energy Wholesale Energy Energy Energy supply energy insight optimisation solutions • Reduced • Strong trading • ~44k sensors • Integration of • Integration of complaints performance installed in total Neas Energy ENER-G Cogen • UK billing issues capabilitie
Slide 27: Asset businesses performance and progress
Asset businesses performance and progress • Over £900m of disposals by end of 2017 as part of £0.5-£1bn programme - Exit from wind generation ownership - Langage and Humber CCGTs disposal - Trinidad and Tobago and Canada E&P divestments • Cessation of storage operations at Rough • JV with Bayerngas
Slide 28: E&P joint venture strategic rationale
E&P joint venture strategic rationale • Like-minded shareholders; strategic alignment on the role of E&P • Complementary mix of producing and development assets with strong positions in NW Europe • Robust, self-financing entity with attractive financial E&P profile, enabling reinvestment and distrib
Slide 29: Efficiency programme
Efficiency programme • Continued efficiency programme delivery in H1 2017 - £124m of cost savings - ~1,100 direct like-for-like headcount reduction • On track to deliver £250m of cost savings and ~1,500 direct like-for-like headcount reduction in FY 2017 • Total savings of around £650m by end of 201
Slide 30: UK energy supply market
UK energy supply market • Competitive market with nearly 60 suppliers • Regulatory focus on effective competition and protecting vulnerable customers • Prepayment cap effective from April 2017 • Centrica market reform proposal - Market-wide ending of evergreen tariffs - Level playing field for socia
Slide 31: UK energy supply competitive position
UK energy supply competitive position Average dual fuel standard • 12.5% standard tariff electricity price increase variable tariff • First increase for four years £1,200 £1,120 £1,200 • Increases in transportation and distribution £1,000 £1,000 and environmental and social policy costs £800 £800 •
Slide 32: Summary and outlook
Summary and outlook • Solid H1 2017 financial performance • On track to achieve 2017 full year targets - Adjusted operating cash flow >£2bn - Group capital investment limited to £1bn; E&P capex ~£500m - ~£100m incremental growth revenue investment - ~£250m of cost efficiencies - Like-for-like direct
Slide 33: Q&A
Q&A Iain Conn Jeff Bell Mark Hodges Mark Hanafin Group Chief Group Chief Chief Executive, Chief Executive, Executive Financial Officer Centrica Consumer Centrica Business 33 Interim Results 2017
Slide 34: Adjusted operating profit
Adjusted operating profit Six months ended 30 June (£m) 2016 2017 ∆ UK Home 635 489 (23%) Ireland 24 33 38% North America Home 33 60 82% Connected Home (23) (44) (91%) Total Centrica Consumer 669 538 (20%) UK Business 31 0 (100%) North America Business 62 112 81% Distributed Energy & Power (11) (19)
Slide 35: Adjusted operating cash flow
Adjusted operating cash flow Six months ended 30 June (£m) 2016 2017 ∆ UK Home 505 348 (31%) Ireland 58 70 21% North America Home 78 126 62% Connected Home (25) (60) (140%) Total Centrica Consumer 616 484 (21%) UK Business 259 84 (68%) North America Business 121 147 21% Distributed Energy & Power (1
Slide 36: Net debt
Net debt Six months ended 30 June (£m) 2016 2017 Opening net debt (4,747) (3,473) Adjusted net cash inflow 1,022 543 Other movements in net debt (58) (11) Closing net debt (3,783) (2,941) Margin cash (359) (427) Closing net debt including impact of margin cash (4,142) (3,368) The items to which the