Centrica plc (LONCNA) today announced the interim results for the period ended 30 June 2018
Centrica, Iain Conn, chief executive commented
“In a first half in which we experienced rapidly rising commodity prices, extreme weather patterns, continued competitive pressures and ongoing political and regulatory uncertainty, Centrica demonstrated resilience from its portfolio of businesses. We delivered stable gross margin and EBITDA relative to 2017, and adjusted operating cash flow of £1.1bn. We are on track to achieve our full year Group financial targets and expect to maintain the full year dividend per share at its current level, subject to delivering adjusted operating cash flow and net debt in line with our target ranges.
We continue to make progress on implementing our strategy. We have developed new propositions and delivery capabilities in both customer divisions and our cost efficiency programme is on track. Although we are awaiting the final outcome of regulation to impose a temporary cap on all default tariffs for residential customers in the UK, we have plans in place to manage this. Our focus remains on performance delivery and financial discipline.”
H1 PERFORMANCE AND FULL YEAR OUTLOOK
Stable adjusted gross margin and EBITDA relative to H1 2017. Adjusted operating cash flow of £1.1bn, down 11%, including impact of working capital outflows due to cold weather and wholesale commodity price increases.
Full year adjusted operating cash flow currently expected to be higher than 2017, within the targeted £2.1-£2.3bn range, and net debt expected to be within the targeted £2.5-£3bn range for 2018.
Full year dividend per share expected to be maintained at 12.0p, subject to delivering adjusted operating cash flow and net debt in line with our target ranges.
H1 2018 adjusted operating profit down 4%. Profit recovery in E&P from higher commodity prices and Rough field production, largely offsetting lower profit in the customer-facing divisions.
H1 2018 adjusted EPS down 22% to 6.4p, impacted by a higher adjusted effective tax rate of 39%.
Centrica Consumer adjusted operating profit down 20%. Rising wholesale energy costs have put pressure on UK energy supply margins, and extreme cold weather resulted in additional costs in UK services. Consumer account holdings down 1% in H1 2018, but rate of losses slowed compared to 2017. UK services accounts stable.
Centrica Business adjusted operating profit down 57%. Strong underlying performance in EM&T but losses as expected from legacy gas contracts reduced overall EM&T profit. Good recovery in UK Business vs H2 2017 and strong order-book growth in DE&P. Continued weakness in North America Business power retail book as previously signalled. North America Business forward book higher for 2019.
Awaiting final regulations imposing a temporary default tariff cap in the UK. Continue to engage constructively while implementing mitigating actions.
PROGRESS ON IMPLEMENTING THE STRATEGY
Resilience from Centrica’s diverse portfolio of businesses. Focus on performance delivery and financial discipline.
Demonstrating new sources of gross margin growth. Improved customer segmentation, enhanced propositions, focus on customer lifetime value. Connected Home gross revenue up 31% and DE&P order book up 47% compared to H1 2017.
Continued strong cost efficiency delivery with £92m of efficiencies delivered in H1 2018. On track to deliver £200m of savings for the full year, taking cumulative annual savings relative to 2015 to around £900m.
Spirit Energy successfully established, providing cash flow diversity and balance sheet strength for the Group.
