Interim results for the period ended 30 June 2022

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Chris O’shea, group chief executive

“The past year has demonstrated the importance of well-funded, well-run energy companies. We’ve made significant progress de-risking the Group and building a stronger business for the benefit of all stakeholders. This strength has allowed us to lead the industry in measures to protect and support customers through the most challenging energy crisis in living memory and the benefit of our balanced portfolio can be seen in our first half performance. We expect this to continue into the second half, underpinning continued investment in customer service and elsewhere in our portfolio.

We are very aware of the difficult environment many customers are facing and we will continue supporting them. We are investing in our customers and colleagues, creating at least 500 additional UK-based customer service roles in British Gas Energy and 1,000 new UK engineering apprenticeships, while through the British Gas Energy Support Fund we are providing grants to help customers pay their energy bills.

We have a clear strategy to continue improving operational performance, to grow our business and to position ourselves to deliver net zero at a cost which helps the many, not the few. We are committed to investing in the energy transition which will improve the security of energy supply in our core markets.”

Strong H1 Operational Performance and Positive Outlook

• • Adjusted basic EPS of 11.0p (2021: 1.7p); 10.2p excluding Spirit Energy disposed assets.
    • Strong Upstream volumes against a backdrop of higher commodity prices.
    • Increased commodity volatility handled well in Energy Marketing & Trading.
  • Statutory basic EPS loss of 14.7p (2021: profit of 23.2p) includes a £1.9bn loss on net remeasurements after taxation, reflecting the high commodity price environment.
  • Group total free cash flow from continuing operations of £643m (2021: £524m). Statutory net cash flow from operating activities of £165m (2021: £558m) including margin cash outflow of £519m.
  • 2022 full year outlook remains positive.

A significantly de-risked portfolio and a stronger balance sheet

• H1 2022 net cash of £316m compared to net debt of £93m at H1 2021.
• Completion of the sale of Spirit Energy Norway and the Statfjord field in May, resulting in a £0.8bn reduction in gross decommissioning liabilities.
• March 2021 triennial pensions technical provisions deficit agreed in principle at £944m. £0.6bn on a roll-forward basis at 30 June 2022. Cash contributions expected to remain broadly unchanged.

Stabilising the business and improving operational performance

• Continued investment in service to stabilise operational performance and position for growth in British Gas Services & Solutions. Full financial recovery likely dependent on length of economic downturn.
• Improving net promoter scores and delivering organic customer growth in British Gas Energy.

Delivering growth and positioning ourselves for net zero

• Strong Retail and Optimisation capabilities and positions leave us well positioned for growth as our core markets transition to net zero.
• Opportunities to invest in the energy transition with a focus on battery storage, gas-peaking plants, solar farms, hydrogen and Carbon Capture, Utilisation and Storage (CCUS).

Balance sheet strength enables growth and shareholder returns

• Strong balance sheet – maintain strong investment grade credit ratings.
• Dividend – reinstate progressive dividend with a 2022 interim dividend of 1.0p per share. EPS to DPS cover ratio moving to ~2x over time.
• Value accretive investments – invest for growth in lower carbon and flexible assets, to accelerate the energy transition and improve security of supply in our core markets.
• Efficient use of capital – including returning surplus structural capital to shareholders.

Financial summary

Group performance indicators