Centrica 2015 interim dividend down 30% after rebasing

Performance summary

• Group adjusted operating profit down 3%, with higher profit from customer-facing businesses more than offset by lower profit from upstream gas and power businesses; Group adjusted EPS up 17%, reflecting a lower tax rate due to the change in operating profit mix.
  • British Gas operating profit up:
    • Higher residential energy consumption due to colder weather compared to a warm first half of 2014, falling wholesale gas costs, net lower other costs including ECO; residential energy market share broadly stable.
    • Two reductions in household gas bills totalling 10% this year, saving customers £72 per year on average.
    • Residential services impacted by challenging sales environment; new propositions to be launched in second half of 2015.
    • Business energy supply impacted by issues following the implementation of a new billing and CRM system; actions in place to resolve issues by the end of 2015.
  • Direct Energy operating profit significantly up:
    • Managed extreme cold weather well in residential and business energy supply, with no repeat of additional costs incurred in 2014.
    • Increased bundling of offerings in residential energy supply and restoration of higher margin contracts sold in prior periods now benefitting business energy supply.
    • Accelerated investment for future growth in solar business, resulting in an operating loss in services.
  • Centrica Energy operating profit and earnings down reflecting lower wholesale gas, oil and power prices:
    • Flat year-on-year E&P production and good nuclear operational performance.
    • On track to deliver E&P capital expenditure and cash production cost reductions.
  • Good first contribution from Bord Gáis Energy; Centrica Storage operating profit broadly in line with 2014.
• Interim dividend per share down 30%, following the decision earlier in the year to rebase the dividend.
• Good progress made in strengthening the balance sheet and financial metrics; successful hybrid bond issuance and strong first-time scrip dividend take-up; Group free cash flow positive with net debt reducing by around £300 million since the start of the year.
• Full year outlook broadly unchanged, but uncertainties include continued low wholesale commodity prices and a competitive environment for our customer-facing businesses, as well as the ongoing resolution of British Gas business energy supply billling issues; Group adjusted basic EPS expected to be weighted towards the first half of the year.