Preliminary results Preliminary results for the year ended 31 December 2020 CHRIS O’SHEA, GROUP CHIEF EXECUTIVE “We started a major transformation of the Company during 2020. Against the continuing uncertain backdrop caused by the Covid-19 crisis, I am truly grateful for the efforts of all my colleagues, as we kept our customers warm, safe and supplied with energy and services and protected the business. We have made a good start to the turnaround of Centrica, with the sale of Direct Energy now complete and our significant Group restructure on track. However, our journey to transform has only just started, as we seek to restore shareholder value by improving customer experience, retention and employee engagement, while maintaining a strong balance sheet. It won’t be easy, but I am confident we have the people, the brands and the market positions to deliver a successful turnaround in the coming years.” TURNAROUND OF CENTRICA STARTED Major transformation of Centrica underway. Completion of Direct Energy sale in January 2021 strengthens the balance sheet and allows an increased focus on core UK and Ireland activities. Significant restructure to simplify and modernise the Group on track. Increased focus on fixing the basics. Customer service levels broadly maintained. Customer numbers broadly unchanged over H2 compared to a 2% drop in H1. RESILIENT 2020 FINANCIAL PERFORMANCE Group adjusted basic EPS of 6.5p, down 11%. Adjusted operating profit from continuing operations (excluding Direct Energy) down 31% to £447m and adjusted basic EPS from continuing operations of 2.8p, down 35%. Reflects negative impacts of Covid-19, warmer weather and low commodity prices. Partly offset by efficiency benefits, a strong trading and optimisation result and lower depreciation. Total exceptional charges in Group operating profit from continuing operations of £1,593m, including restructuring and pension strain costs of £274m and impairments of £1,319m. From continuing operations, statutory operating loss of £362m (2019: £783m loss), statutory EPS loss of 4.7p (2019: 16.8p loss), statutory net cash flow from operating activities down 1% to £957m. BALANCE SHEET STRENGTHENED Total Group free cash flow up 10% to £1,061m and net debt down £0.4bn to £2.8bn, reflecting a tight focus on cash expenditure and prompt and prudent actions taken in response to Covid-19. IAS19 pension deficit of £601m and technical pension deficit of £1.9bn on a roll-forward basis at 31 December 2020. Next triennial pensions valuation scheduled for 31 March 2021. CREATING A MORE SUSTAINABLE AND PROFITABLE COMPANY Significant uncertainties continue into 2021. No specific earnings or cash flow guidance provided. Strengthened balance sheet and continued tight focus on cash flow generation and expenditure leave Centrica well placed to navigate future uncertainties. Focus remains on adding shareholder value through simplifying and modernising the Group and improving the long-term quality, sustainability and level of earnings and cash flow. Intention remains to sell Spirit Energy. Nuclear divestment process remains paused. New climate change ambitions for Centrica to become net zero by 2045 and help our customers be net zero by 2050 are aligned to potential growth opportunities. Intend to set out longer-term strategy in H2 2021. Centrica plc Preliminary Results for the year ended 31 December 2020 1 Preliminary results FINANCIAL SUMMARY Year ended 31 December 2020 2019 Change From continuing and discontinued operations 1 EBITDA £1,635m £2,119m (23%) Group adjusted operating profit £699m £901m (22%) Group adjusted basic earnings per share (EPS) 6.5p 7.3p (11%) Full year dividend per share - 1.5p nm Group free cash flow £1,061m £966m 10% Group net debt £2,769m £3,181m (13%) Group net debt (including margin cash) £2,998m £3,507m (15%) Statutory operating profit / (loss) £52m (£849m) nm Basic earnings per share 0.7p (17.8p) nm Statutory net cash flow from operating activities £1,400m £1,250m 12% From continuing operations EBITDA £1,336m £1,778m (25%) Adjusted operating profit £447m £650m (31%) Adjusted basic earnings per share 2.8p 4.3p (35%) Free cash flow £685m £472m 45% Statutory operating (loss) (£362m) (£783m) (54%) Exceptional items included in statutory operating (loss) (£1,593m) (£1,123m) 42% Basic earnings per share (4.7p) (16.8p) (72%) Statutory net cash flow from operating activities £957m £970m (1%) See notes 2, 5 and 10 to the Financial Statements and pages 75 to 77 for an explanation of the use of adjusted performance measures. 1. Includes Direct Energy which is now classified in discontinued operations. See note 5 for more information on segmental operating profit and free cash flow. GROUP PERFORMANCE INDICATORS Year ended 31 December 2020 2019 Change Total recordable injury frequency rate (per 200,000 hours worked) 1.03 1.06 (3%) Total residential customers (‘000) 1 9,217 9,440 (2%) Group Brand NPS 14 15 (1pt) Group direct headcount 23,846 26,932 (11%) Group employee engagement (%) 42% 43% (1ppt) 1. Includes British Gas Energy, British Gas Services and Bord Gáis Energy. Excludes Direct Energy. INVESTOR PRESENTATION A pre-recorded results presentation will be available on Centrica.com at 8am GMT on 25 February 2021 and Centrica will host a conference call for institutional investors and analysts at 10.30am GMT on 25 February 2021. To register for the call please visit: https://webcasts.centrica.com/centrica112/vip_connect If you would like to join in listen only mode, please register at: https://webcasts.centrica.com/centrica112 ENQUIRIES Investors and Analysts: tel: +44 (0)1753 494900 email: [email protected] Media: tel: +44 (0)1784 843000 email: [email protected] 2 Centrica plc Preliminary Results for the year ended 31 December 2020 Preliminary results Group Overview HELPING COLLEAGUES, CUSTOMERS AND COMMUNITIES DURING COVID-19 Centrica was significantly impacted by the Covid-19 pandemic during the year. However, colleagues responded with incredible commitment and dedication, as we ensured the continuity of the supply of gas and electricity and the provision of essential energy services to homes and businesses, while following all advice from governments and relevant health authorities. Looking after our colleagues Looking after our colleagues to ensure they can continue to offer our customers the level of service they demand was, and remains, a key focus. Our service engineers continued carrying out essential work such as boiler breakdowns during lockdown periods, as we provided them with appropriate personal protective equipment. We were also able to provide our customer agents with all the necessary equipment to work from home, with customer service levels holding up relatively well. We committed to find flexible working options for parents and carers to support them balance work with their other responsibilities. Our commitment to offer mental health and wellbeing support to colleagues has been more important than ever, with a variety of options available to them to get any help they may need. Being there for customers We remained available to all our customers, while prioritising those who are vulnerable and needed additional support and those without heating or hot water. Throughout the year we regularly reviewed which services we could carry out safely. In addition, over 80,000 of British Gas’ most vulnerable customers had additional help in the year, through advance credit for prepayment customers or deferred payments for credit customers. Supporting our communities We also continued to help the communities we serve. Through our partnership with the Trussell Trust in the UK more than 3,000 British Gas engineers volunteered to deliver from foodbanks to help get food to people who need it most. Our engineers volunteered over 58,000 hours and have now delivered the equivalent of over 4 million meals across the UK. We helped fund extended helpline hours for Carers UK, with the volume of carers contacting their national helpline having increased by 60% in the first few weeks of the pandemic. We also partnered with the Sagesse charity in Alberta to promote the organisation’s ‘REAL Talk’ campaign focusing on recognising signs of domestic violence. SIGNIFICANT GROUP RESTRUCTURE ON TRACK Creating a simpler, leaner, more modern Company In June 2020, we announced plans for a significant restructure designed to create a simpler, leaner Group focused on delivering for our customers. This included a proposed new organisational design, and the start of a consultation process to simplify terms and conditions for colleagues in the UK. These changes will help to simplify and modernise the Group and allow us to put customers at the heart of everything we do. This will provide us with the platform from which we will continue to invest in transforming our business, to improve competitiveness and enable growth. Restructure expected to be largely completed in 2021 The reorganisation was expected to lead to a total reduction of around 5,000 roles across the Group when compared to the start of 2020, with around 1,000 of the reduction expected to have come from roles in Direct Energy. Over half of the reduction is expected to come from management roles. Centrica plc Preliminary Results for the year ended 31 December 2020 3 Preliminary Results | Group Overview (continued) The expected cost to complete this restructuring has largely been provided for in the 2020 full year exceptional charge of £274m, with the cash expenditure expected to occur over 2020 and 2021. These changes will result in a more competitive cost structure, in particular in our UK energy supply and services businesses, and an improved customer experience to provide a platform for growth. The restructure is on track: The number of organisational layers has been reduced from eleven to seven, creating a flatter, less bureaucratic organisation, which is closer to and focused on the customer. The number of roles at the three most senior levels of the organisation has been reduced by around half since the restructure was announced.