Interim Results for the Period Ended 30 June 2016

IAIN CONN, Group CHIEF EXECUTIVE

“The first half of the year has been demanding for Centrica, but the response has been strong and I am encouraged by the progress we have made.  We are delivering underlying performance improvement and are building a robust platform for customer-focused growth.  I remain confident in our ability to deliver both attractive returns and underlying cash flow growth, as we continue to implement our strategy.”

HEADLINES

Encouraging first half financial delivery despite weaker commodity prices and warm weather

• Adjusted earnings down 14% to £507 million, primarily reflecting extreme warm weather in North America and the impact of low commodity prices on E&P and Central Power Generation, partially offset by cost efficiency.
• Adjusted operating cash flow up 19% to £1,372 million, including working capital delivery in UK Business.

Efficiency programme delivery ahead of target

• Strong progress on cost targets with efficiencies of £141 million delivered in the first half of 2016.  Target for 2016 in-year delivery increased to around £300 million.

Good progress in implementing the strategy

• Focus and investment in customer service resulting in improved service metrics.
• UK Home energy account losses of 3% in the first half of 2016 due to long-term contract roll-offs and increased competitive intensity.  Home accounts in North America and Ireland stable. 
• CMA final report provides clarity on UK regulatory framework.  Focus is now on bringing new innovative products and services to market.
• ENER-G Cogen and Neas Energy acquisitions will add leading international capabilities in distributed generation and asset management.  In Connected Home, over 360,000 hubs installed in UK and five new products launched.
• E&P free cash flow positive in the first half of 2016 with capex and cash production costs down.
• Portfolio re-positioning continues.  GLID wind-farm sale completed and Canada E&P disposal process commenced.
• Balance sheet strengthened in line with Financial Framework.  Moody’s rating confirmed at Baa1, stable outlook.

2016 full year cash flow underpinned

• 2016 full year adjusted operating cash flow on track to exceed £2 billion.  2016 first half net debt down to £3.8 billion, a reduction of 23% compared to the first half of 2015, reflecting underlying cash flow growth and the net impact of the equity placing and the acquisition of ENER-G Cogen.

Dividend

• Interim dividend of 30% of last year’s full year dividend in line with established practice.  As previously stated, the full year dividend will be determined based on our assessment of the sustainable growth in operating cash flow.

Group financial summary

Adjusted operating profit, adjusted effective tax rate, adjusted earnings and adjusted basic earnings per share now include fair value depreciation related to our investments in Venture and Nuclear.  2015 comparatives have been restated accordingly. Unless otherwise stated, all references to operating profit or loss, taxation, cash flow, earnings and earnings per share throughout the announcement are adjusted figures, reconciled to their statutory equivalents in the Group Financial Review on pages 6 to 8.

Download further documentation for the Interim Results