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Centrica increases 2013 full year dividend by 4%

Investment Tools Ltd.
Centrica increases 2013 full year dividend by 4%

GOOD STRATEGIC PROGRESS, HELPING SECURE FUTURE GAS SUPPLIES FOR THE UK

  • Group wide £500 million cost reduction programme completed
  • Engaging with all stakeholders to improve understanding and rebuild trust
  • £14 billion of new gas supply agreements signed with Cheniere and Qatargas, taking the Group’s gas and power supply commitments to over £60 billion
  • £2.6 billion invested in the year, including:
    • Over £1.5 billion of organic investments, predominantly in North Sea E&P, including in major projects such as Cygnus
    • C$1 billion Canadian upstream gas acquisition, in partnership with Qatar Petroleum International
    • The acquisition of a 25% stake in the Bowland shale exploration licence in the UK
    • $1.2 billion Hess Energy Marketing acquisition, delivering a step-change in North America B2B
    • £650 million of divestments of selected E&P assets, UK wind assets and US power stations, for value
  • Adding value through 56mmboe of organic reserve additions, principally in Norway, however £699 million pre-tax (£318 million post-tax) exceptional impairments of UK Southern North Sea projects and existing Canadian gas assets
  • £420 million share repurchase programme in 2014 following sale of Texas CCGTs; recommending a 4% increase in the full year dividend to 17.0 pence per share

Unless otherwise stated, all references to operating profit or loss, taxation and earnings numbers throughout the announcement are adjusted figures, as reconciled to their statutory equivalents in the Group Financial Review on pages 12, 13 and 14. Statutory operating profit is £1,892 million (2012: £2,625 million). Statutory profit before taxation is £1,649 million (2012: £2,416 million). Statutory earnings are £950 million (2012: £1,245 million), including post-tax exceptional items of £667 million (£1,064 million before tax) relating to an onerous contract charge on Rijnmond, E&P impairment charges and UK gas storage impairment and provision charges. Statutory basic EPS is 18.4p (2012: 24.0p).

NEW TARGETS FOR EACH AREA OF THE BUSINESS

  • Overall, 2014 trading is in line with recent market forecasts, other than a one-off impact from extreme weather conditions in Direct Energy, with Group adjusted EPS for the year expected to be lower than in 2013
  • New targets set, creating a platform for long term, sustainable growth, both downstream and upstream
  • Targeting a return to account growth in UK residential energy and services, following a 2% decline in 2013
  • Aiming to achieve industry leading, high quality service for all our customers
  • Efficiency and cost reduction programmes across the Group
  • Selective investment, concentrating on the most attractive opportunities
    • Reducing organic E&P capital expenditure by approximately 20% to around £900 million per year on average over the next three years
    • Limited UK power investment against a backdrop of losses in gas-fired generation

SAM LAIDLAW, CENTRICA CHIEF EXECUTIVE

“We have made good strategic progress across the Group in 2013, investing along the gas value chain to secure long term, affordable energy supplies for our customers. We have completed strategic reviews in both British Gas and Direct Energy, and introduced new management structures. These will help us deliver consistent, high quality customer service, reduce costs and drive growth through innovation. In Centrica Energy, we entered into a number of key strategic transactions to drive long term growth and we also added reserves from the drill-bit, mainly in Norway.

Recently we have seen unprecedented focus on the energy sector in the UK, with intense political and media scrutiny at a time when many customers have faced declining real disposable income. In British Gas, we have simplified our energy product range to just four residential tariffs, we have made further improvements to the transparency of our reporting, and we were the first energy company to reduce retail tariffs following proposed changes to the ECO programme.

Market conditions are set to remain challenging in 2014 with margin pressures and unusual weather patterns on both sides of the Atlantic, rising unit costs in the North Sea and weak economics for gas storage and gas-fired power generation. However in the short term, we are focused in our downstream businesses on improving service levels, reducing costs and returning to growth through innovation, technology and customer propositions. Upstream, we will continue to drive efficiencies and will be increasingly selective in our investments, focusing on the projects that offer the best returns and the lowest political risk. The acquisitions we announced in 2013 are performing well and together with the positive action we are taking across the Group, position Centrica well for the future, for the benefit of both customers and shareholders.”

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