Interim results for the period ended 30 June 2017

IAIN CONN, Group CHIEF EXECUTIVE

“Centrica delivered a solid first half financial performance despite reduced energy demand due to warm weather and strong competitive pressures, and we remain on track to achieve the 2017 targets we set out in February. We have made further significant strategic progress, continuing to reallocate resources away from our asset businesses towards our customer-facing businesses.  With the announced asset disposals and the creation of a new European E&P joint venture, we expect the first phase of our portfolio transformation to be complete by the end of 2017, leaving the Group well-positioned to deliver longer-term returns and growth.”

HEADLINES

Solid H1 financial performance

• Customer-facing businesses’ adjusted operating profit was flat in H1 2017 compared to H1 2016, with higher profit in Centrica Business offset by reduced profit in Centrica Consumer; overall adjusted operating profit down 4% to £816m reflecting lower profit from our asset businesses.
• Adjusted earnings down 11% to £449m including a higher net interest cost.
• £268m post-tax net exceptional charge, predominantly relating to an impairment of the Rough storage asset; shareholder statutory profit of £44m after taking into account re-measurements of open commodity positions.
• EBITDA up 2%; adjusted operating cash flow down 9% reflecting one-off UK Business working capital inflow in 2016; underlying adjusted operating cash flow flat vs H1 2016 and 2.6% CAGR vs H1 2015.
• Interim dividend of 3.6p, 30% of the 2016 full year dividend in line with established practice.
• On track to achieve the 2017 Group targets set out at the 2016 Preliminary Results in February.

First phase of strategic transformation of Centrica expected to be complete by end 2017

• £124m of cost efficiencies delivered in H1 2017; remain on track to deliver £250m in FY 2017 which will take total savings since 2015 to approaching £650m as part of our £750m efficiency programme.
• Net debt down 22% over past year to £2.9bn; on track to remain in target range of £2.5-£3.0bn by end 2017.
• Continued shift of resources from asset businesses to customer-facing businesses in line with strategy; as part of planned £1.5bn resource reallocation to 2020, over £500m spent in growth areas on acquisitions and incremental capital expenditure and revenue investment since the start of 2016.
• Enhanced capabilities and technology in customer-facing businesses, with the establishment of Centrica Consumer and Centrica Business in H1 2017 enabling a more coherent approach to the end-customer.
• Continued focus on customer service, cost efficiency and offer innovation. 
• New Centrica Consumer offers focused on bundling and personalisation, with British Gas Rewards and Hive ‘Welcome Home’ and ‘Home Check’ subscription plans launched.
• Strong Energy Marketing & Trading performance in Centrica Business.
• Connected Home and Distributed Energy & Power customer and revenue growth.
• Over £800m Central Power Generation and E&P disposals completed or announced in H1 2017, in line with strategy, taking total disposals to over £900m since 2016, at the upper end of the £500m-£1bn targeted range.
• E&P joint venture with Bayerngas Norge creates a self-financing, more sustainable, more capable European E&P business, generating synergies and the possibility to participate in further consolidation and joint ventures.

Group financial summary

Six months ended 30 June	2017	2016	Change
Revenue	£14.3bn	£13.4bn	7%
EBITDA	£1,293m	£1,272m	2%
Adjusted operating profit	£816m	£853m	(4%)
Adjusted earnings	£449m	£507m	(11%)
Adjusted basic earnings per share (EPS)	8.2p	9.8p	(16%)
Interim dividend per share	3.6p	3.6p	0%
Adjusted operating cash flow	£1,242m	£1,372m	(9%)
Underlying adjusted operating cash flow growth	0.3%	4.9%	nm
Group net debt	£2,941m	£3,783m	(22%)
Statutory operating profit	£252m	£1,766m	(86%)
Statutory profit for the period attributable to shareholders	£44m	£1,148m	(96%)
Net exceptional items after taxation included in statutory profit	(£268m)	(£63m)	325%
Basic earnings per share	0.8p	22.2p	(96%)

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 20 to 22. See also notes 3, 4 and 9 to the Financial Statements and pages 53 to 54 for an explanation of the use of adjusted performance measures.  nm = not measured.  CAGR = compound annual growth rate.

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