Centrica reduces its 2014 full year dividend by 30%

DividendMax Ltd.

Centrica reduces its 2014 full year dividend by 30%

2014 Group results

  • Group adjusted EPS down 28%, reflecting challenging trading conditions, including extreme weather patterns and falling oil and gas prices. Post-tax impairments of £1,385 million on E&P and power assets
    • British Gas operating profit down, primarily reflecting lower consumption in record warm year, with average dual fuel profit per household falling to £42. Average actual household energy bill around £100 lower than in 2013
    • Direct Energy operating profit down due to impact of polar vortex in Q1 and narrowing of energy supply margins in a competitive environment
    • Centrica Energy gas operating profit before tax down, reflecting lower market prices. Post-tax earnings largely protected by hedging, tax allowances on previous investments, and strong midstream performance. Power profit impacted by unplanned nuclear outages

2015 environment and response

  • Since the November IMS, our forecast 2015 adjusted EPS has been negatively impacted by about 2.5p, primarily due to changes in the external environment. 2015 adjusted earnings are expected to be down compared to 2014
  • Taking action in a low commodity price environment
    • 40% reduction in E&P capex to £650 million by 2016
    • Continued focus on competitiveness, service and efficiency downstream
    • Group-wide performance improvement plan, with a strong cost focus
    • Dividend rebased by 30%, commencing with the 2014 final dividend. 2014 full year dividend of 13.5p per share
  • Decision to retain UK CCGTs, with bids received significantly below our internal valuation
  • Strategic review launched, to be concluded by Interim Results in July 2015 covering; (i) outlook and sources of growth; (ii) portfolio mix and capital intensity; (iii) operating capability and efficiency; (iv) Group financial framework

Iain Conn, Centrica Chief Executive

“2014 was a very difficult year for Centrica and the recent fall in oil and gas prices creates further challenge. We are cutting investment and costs in response. However, it is with regret that, along with reducing capital expenditure and driving efficiency beyond planned levels, we have taken the difficult decision to rebase the dividend by 30%, commencing with the final distribution for 2014. In addition, given the changed external environment we are reviewing the longer term strategy, and will conclude this by the Interim Results in July.Despite the obvious current challenges, I am confident in the quality of Centrica’s team and the platform which has been established, and I believe the Group is well-placed to take advantage of the longer term trends in the global energy markets. Our priorities remain to serve our customers competitively and with integrity, to develop new offers and services, to provide secure and reliable energy supplies and to deliver long term value for shareholders.”

Companies mentioned