Centrica focussed on strategy after another disappointing first half

31st Jul 2018 08:09

(Sharecast News) - Centrica posted its interim results for the period ended 30 June on Tuesday, reporting "stable" adjusted gross margin and EBITDA relative to the first half of last year, with adjusted operating cash flow falling 11% to £1.1bn.The FTSE 100 energy firm, which owns the British Gas brand, said that included the impact of working capital outflows due to cold weather and wholesale commodity price increases.Its full-year adjusted operating cash flow was currently expected to be higher than 2017, within the targeted £2.1bn-£2.3bn range, with net debt expected to be within the targeted £2.5bn-£3bn range for 2018.The board said its full-year dividend per share was expected to be maintained at 12.0p, subject to delivering adjusted operating cash flow and net debt in line with its target ranges.Revenue was up 7% year-on-year to £15.3bn.It said first-half adjusted operating profit was down 4% to £782m, with profit recovery in exploration and production from higher commodity prices and Rough field production said to be "largely offsetting" lower profit in the customer-facing divisions.First half adjusted earnings per share were down 22% to 6.4p, impacted by a higher adjusted effective tax rate of 39%.Centrica consumer adjusted operating profit was down 20%, with the board saying rising wholesale energy costs had put pressure on UK energy supply margins, and extreme cold weather resulted in additional costs in UK services.Consumer account holdings were down 1% in the first half, but the rate of losses slowed compared to 2017, with UK services accounts said to be "stable".Centrica business adjusted operating profit fell 57%, with the company saying it saw "strong" underlying performance in energy marketing and trading, but losses - as expected - from legacy gas contracts reduced overall energy marketing and trading profit.Good recovery was reported in UK business compared to the second half of 2017, with strong order-book growth in distributed energy and power.Continued weakness was seen in the North America business power retail book, as the board had previously signalled, with the North America business forward book higher for 2019.Centrica said it was awaiting final regulations on imposing a temporary default tariff cap in the UK, adding that it was continuing to "engage constructively" while implementing mitigating actions.On the strategy front, Centrica said it saw "resilience" from its diverse portfolio of businesses and had a focus on performance delivery and financial discipline during the period.It said that demonstrated new sources of gross margin growth, with improved customer segmentation, enhanced propositions, and focus on customer lifetime value.Connected home gross revenues were up 31%, and the distributed energy and power order book tose 47% over the first half of 2017.The board reported continued strong cost efficiency delivery, with £92m of efficiencies delivered in the first half.Centrica said it was on track to deliver £200m of savings for the full year, taking cumulative annual savings relative to 2015 to around £900m.Additionally, the Spirit Energy brand was successfully established, which reportedly provided cash flow diversity and balance sheet strength for the group."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," said group chief executive Iain Conn."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."Conn said Centrica was continuing to make progress on implementing its 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."