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Centrica 2019 Operating profit and earnings impacted by challenging environment

Centrica PLC (LON:CNA) has today announced its preliminary results for the year ended 31 December 2019.

GROUP FINANCIAL SUMMARY

Year ended 31 December20192018Change
Adjusted revenue1£26.8bn£27.4bn(2%)
Adjusted gross margin£3,852m£4,253m(9%)
EBITDA£2,119m£2,447m(13%)
Adjusted operating profit£901m£1,392m(35%)
Adjusted effective tax rate34%41%(7ppt)
Adjusted basic earnings per share (EPS)7.3p11.2p(35%)
Full year dividend per share5.0p12.0p(58%)
Adjusted operating cash flow£1,830m£2,245m(18%)
Group net debt£3,181m2£2,656m20%
Group return on average capital employed9%13%(4ppt)
Statutory operating (loss) / profit(£849m)£987mnm
Net exceptional items after taxation included in statutory loss(£987m)(£235m)nm
Basic earnings per share(17.8p)3.3pnm
Statutory net cash flow from operating activities£1,250m£1,934m(35%)

See notes 2, 5 and 10 to the Financial Statements and pages 64 to 66 for an explanation of the use of adjusted performance measures.

1.  The Group has amended the presentation of certain energy derivative contracts and re-presented prior period accordingly. See note 1 to the Financial Statements for further details.

2.  Includes an impact of Centrica adopting IFRS 16 from 1 January 2019 of £394m. See notes 1(c) and 11(b) for further details.

HEADLINES

· Full year adjusted earnings and adjusted operating cash flow down vs 2018 reflecting impacts of UK default tariff cap, low wholesale gas prices and nuclear outages. Significantly improved in H2 2019 vs H1 2019.

· Adjusted operating cash flow (AOCF) and net debt both within 2019 target ranges.

· Full year dividend per share of 5.0p, in line with the rebasing announced in July at the Interim Results.

· Net exceptional charge before tax of £1,103m, including impairments of E&P and Nuclear assets predominantly due to a reduction in commodity price forecasts, and restructuring costs of £356m.

· Consumer customer account holdings up 722,000 or 3%. UK Home accounts up 78,000 with growth in services more than offsetting a reduction in energy supply. UK energy supply net losses of 286,000 significantly lower than in 2018, with H2 2019 account losses lower than H1 2019.

· £315m of cost efficiencies delivered in 2019, taking cumulative annual savings to £1.26bn compared to a 2015 baseline with 2020 nominal like-for-like costs expected to be well below 2015 levels per our five year target.

· Consumer and Business expected to benefit from adjusted earnings and AOCF momentum in 2020, but Upstream expected to be impacted by very low current wholesale commodity prices. 2020 AOCF expected to be in the range £1.6-£1.8bn based on 31 December 2019 commodity prices, assuming the existing portfolio.

· Cost efficiencies of £350m expected in 2020, with associated cash restructuring costs expected to be £300m.

· Continued focus on financial discipline. 2020 cash capital expenditure expected to be around £800m.

· Targeting broadly balanced sources and uses of cash flow in 2020 with closing net debt expected to be in the range £3.2-£3.6bn, including an expected additional £0.2bn of non-cash lease commitments and before the impact of planned divestments.

IAIN CONN, GROUP CHIEF EXECUTIVE

“2019 operating profit and earnings were materially impacted by a challenging environment, most significantly the implementation of the UK default tariff cap and falling natural gas prices. Against this backdrop Centrica delivered growth in customer accounts, higher net promoter scores, significant cost efficiencies in excess of our target, and full year adjusted operating cash flow and net debt within its target ranges. As expected, performance during the second half was much improved compared to the first half, demonstrating momentum as we enter 2020.

Looking to 2020, we expect to deliver earnings momentum relative to 2019 from our core customer divisions, but Upstream earnings are likely to be impacted by the lower commodity price environment. However, with our continued focus on financial discipline we expect 2020 sources and uses of cash flow to remain broadly balanced.

2020 will be another busy year as we complete the re-positioning of the company towards the customer, focused on our strengths of energy supply and its optimisation, and on services and solutions centred around energy, with an emphasis on helping our customers transition to a lower carbon future.”