CNA: Centrica plc: Final Results UK Regulatory Announcement LONDON Centrica plc Preliminary Results for the year ended 31 December 2013 Group results and highlights RICK HAYTHORNTHWAITE, CENTRICA CHAIRMAN “The opportunity to chair Centrica is a great privilege. It is a company with a deep heritage and relevance to the UK, supplying energy or services to over 11 million of the country’s homes, employing over 30,000 people in the UK, and with a responsibility to pension funds and over 700,000 individual shareholders. Our vision remains to be the leading integrated energy company with customers at its core, and our scale is of great benefit to the UK as we secure the future energy needs of our customers. In an increasingly international gas market, our interests and those of our customers remain inextricably linked.” RICK HAYTHORNTHWAITE Chairman 20 February 2014 SOLID YEAR ON YEAR EARNINGS IN DIFFICULT MARKET CONDITIONS Adjusted financial figures for the year ended 31 2013 2012 Change December Operating profit £2,695m £2,743m (2%) Taxation charge £1,022m £1,112m (8%) Effective tax rate 43% 45% (2ppt) Earnings £1,370m £1,378m (1%) Basic earnings per share 26.6p 26.6p 0% Full year dividend per 17.0p 16.4p 4% share Group capital and £2,565m £2,727m (6%) acquisition expenditure Lost time injury frequency rate (per 100,000 hours 0.11 0.20 (45%) worked) The Group has applied IAS19 (revised) pensions accounting. As a result, 2012 net finance costs, taxation, earnings and earnings per share have been restated 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 £1.5billion 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 £699million 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 £950million (2012: £1,245 million), including post-tax exceptional items of £667million (£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.” SAM LAIDLAW Chief Executive 20 February 2014 ENQUIRIES Investors and Analysts: Andrew Page 01753 494 900 email: firstname.lastname@example.org Media: Greg Wood / Sophie Fitton 0800 107 7014 email: email@example.com Interviews with Rick Haythornthwaite (Chairman), Sam Laidlaw (Chief Executive), Nick Luff (Group Finance Director) and Chris Weston (International Downstream Managing Director) are available on www.centrica.com. Divisional results and highlights INTERNATIONAL DOWNSTREAM British Gas: Focus on service, efficiency and innovation Adjusted operating profit for the year ended 31 2013 2012 Change December Residential energy supply £571m £606m (6%) (BGR) Residential services (BGS) £318m £312m 2% Business energy supply and £141m £175m (19%) services (BGB) Total British Gas £1,030m £1,093m (6%) Performance indicators for 2013 2012 Change the year ended 31 December Residential energy customer 15,256 15,618 (2%) accounts (year end, ’000) ^1 Residential services product 8,227 8,402 (2%) holding (year end, ’000) Business energy supply 912 924 (1%) points (year end, ’000) 1. British Gas residential energy customer accounts as at 31 December 2012 have been restated to exclude 38,000 accounts subsequently classified as dormant *Strategic review complete; new organisational structure in place *Aiming to deliver industry leading, high quality service for both residential and business customers *BGR operating profit down due to higher commodity and non-commodity costs, with warm weather towards the end of the year resulting in an 18% decline in operating profit in the second half of the year compared to 2012 *Targeting a return to customer account growth, following a 2% decline in 2013, helped by our January 2014 price reduction and the introduction of new fixed price propositions *Simplified product range to four residential tariffs; further improvements in transparency of reporting *First energy supplier to reduce retail tariffs in 2014, following proposed ECO changes *BGS benefited from cost reduction initiatives *Targeting a return to customer account growth, leveraging our insurance capabilities and developing differentiated propositions such as Hive *BGB operating profit down as a result of difficult trading environment and the ending of auto roll-over of contracts for the benefit of customers *£100 million cost reduction programme underway to improve competitiveness *Implementation of new billing system proceeding to plan Direct Energy: Enhanced scale in deregulated markets Adjusted operating profit for the year ended 31 2013 2012 Change December Residential energy supply £163m £156m 4% (DER) Business energy supply £77m £121m (36%) (DEB) Residential and business £36m £33m 9% services (DES) Total Direct Energy £276m £310m (11%) Performance indicators for the year ended 31 2013 2012 Change December Residential energy customer accounts (year 3,360 3,455 (3%) end, ’000) Residential services product holding (year 2,608 2,401 9% end, ’000) Business energy supply 1,839 793 132% gas volumes (mmth) Business energy supply 63.9 51.4 24% electricity volumes (TWh) To reflect a new organisational structure, the North American upstream gas business and North American power and midstream and trading businesses have been reallocated from Direct Energy upstream and wholesale to Centrica Energy International gas and Direct Energy business energy supply respectively *Strategic review complete, new organisational structure in place *Overall Direct Energy profitability down, reflecting challenging market conditions leading to a narrowing of energy supply margins *$100 million cost reduction programme launched to improve competitiveness, driving synergies from enhanced scale *Profit growth in DER, as we benefitted from previous acquisitions *Innovative products and enhanced digital capability key to future growth; ‘Power To Go and ‘Free Electricity Saturdays’ both proving popular with customers *Decline in DEB margins and profitability, with rising wholesale costs and a highly competitive power supply market resulting in difficult trading conditions *Hess integration proceeding well; EBITDA in first three months ahead of our expectations *Growth potential through enhanced scale, dual fuel capabilities, advantaged positions along the gas value chain, long term customer relationships *Increase in DES profitability, with services accounts up by more than 200,000 *Services protection plans a unique differentiating factor *Significant potential for bundling of energy and services over time INTERNATIONAL UPSTREAM Centrica Energy: Securing energy supplies for our customers Adjusted operating profit/(loss) for the year 2013 2012 Change ended 31 December International gas (E&P) £1,155m £940m 23% UK Power £171m £311m (45%) Gas-fired (£133m) (£4m) nm Renewables £25m £56m (55%) Nuclear £250m £237m 5% Midstream £29m £22m 32% Total Centrica Energy £1,326m £1,251m 6% Adjusted operating profit after tax for the year ended 2013 2012 Change 31 December International gas £325m £198m 64% UK Power £143m £243m (41%) Performance indicators for 2013 2012 Change the year ended 31 December International gas production 3,557 2,990 19% (mmth)^1 International liquids 18.7 17.4 7% production (mmboe) ^ 1 International total gas and liquids production (mmboe) ^ 77.3 66.8 16% 1 International Upstream proven and probable reserves 711 633 12% (mmboe) ^ 2 Total UK power generated 21.7 21.5 1% (TWh) To reflect a new organisational structure, the North American upstream gas business has been reallocated from Direct Energy upstream and wholesale to Centrica Energy International gas 1. Includes a 100% share of Canadian assets acquired from Suncor in partnership with QPI 2. Centrica’s share of reserves, including a 60% share of Canadian assets acquired in partnership with QPI from Suncor, and excluding Rough cushion gas of 30mmboe *Increased international gas operating profit, with strong production from recently acquired assets and the impact of higher UK gas prices more than offsetting North Sea cost pressures *155mmboe of 2P reserves added in total; 56mmboe added organically, predominantly in Norway; 2Cresource base up by 28% *£318 million of post-tax exceptional impairments relating to UK Southern North Sea projects and existing Canadian gas assets *Reducing organic E&P capital expenditure by approximately 20% to around £900 million per year on average over the next three years, against a backdrop of rising costs and lower wholesale market prices *Targeting flat E&P unit lifting and cash production costs over the next three years *Power profit down significantly despite strong nuclear performance *Gas-fired fleet loss making, reflecting weak spark spreads and following the loss of free carbon allowances *Near term investment in the UK power sector likely to be limited Centrica Storage: Making an important contribution to the UK’s security of supply Adjusted operating profit for the 2013 2012 Change year ended 31 December Centrica Storage £63m £89m (29%) *Profitability impacted by continuing low seasonal gas spreads; further significant decline expected in 2014 *Decision not to proceed with new gas storage projects at Caythorpe and Baird resulted in post-tax exceptional impairments and provisions of £224 million *Programme launched to deliver £15 million of cost reductions through operational efficiencies over the next three years Chairman’s Statement I regard the opportunity to chair Centrica as a great privilege. It is a company with a strong heritage and deep relevance to the UK, serving over 11 million UK households, employing over 30,000 people in the UK and contributing around £1billion of tax across the Group each year. With approximately 700,000 individual shareholders and numerous pension fund investors, Centrica also forms an important part of the savings and pension plans of millions of people across the country. In other words, Centrica is essential to the quality of life and competitiveness of the UK. But beyond the statistics, Centrica also has an important role to play in the resolution of some of the most pressing issues for the UK – energy security, climate change and affordability. It has the know-how, balance sheet and assets to play a leading role in helping to deliver a solution to these issues. And yet, the company is sometimes regarded as part of the problem rather than the solution. Levels of trust between energy companies and wider society have come under severe pressure. I therefore believe that it will be essential to establish common ground between the participants in the debate, to enable us to meet the energy challenges which the country faces. Centrica recognises the need to reaffirm and demonstrate its commitments to treating customers well, working constructively with policy makers and conducting its business in the most transparent manner possible. I have found such a response to be instinctive within the company and very much the focus of attention – as evidenced by the pace at which savings from recent UK Government policy changes were passed on to customers. But this alone is unlikely to be sufficient to completely turn the tide. So, in parallel, I have been using my early independence to explore some of the issues to find a way to accelerate the restoration of trust and collaboration. First, I have been looking into the various criticisms that have been directed towards the industry and am conducting my own independent fact finding review of some of the issues that are most important to our customers and seeing for myself whether we are truly living by the Business Principles we espouse. Secondly, I have been meeting our customers to discuss what they need from their energy supplier, the trade-offs involved in fulfilling these needs and what it will take to re-establish a sense of mutual partnership. My early impression is that, while there are issues around customer trust and service levels, the reputation of British Gas in the eyes of our customers is vastly better than one would be led to believe from the media and political commentary, particularly when it comes to our service engineers helping customers in their homes. At the same time, the growth and performance of the wider Centrica Group should not be forgotten. While our UK downstream businesses still contribute the largest proportion of the Group’s post-tax earnings, we have substantially increased the scale of our North American operations, and now serve over six million residential and business customers. We have also delivered good strategic progress upstream, despite some setbacks in the UK North Sea, adding reserves organically and through acquisition. And we continue to play a critical role in bringing supplies of gas to the UK as North Sea resources decline. Last year we signed new deals with both Qatari and US exporters, taking our supply commitments to over £60 billion. In summary, our interests and those of customers are inextricably linked. Our financial future and corporate capability depend on forward momentum, both in and outside the UK. In an increasingly international gas market, Centrica has a clear strategic direction and strong management, positioning itself for long-term, sustainable growth. RICK HAYTHORNTHWAITE Chairman 20 February 2014 Chief Executive’s Review STRATEGY AND FOCUS REAFFIRMED In 2013, we saw unprecedented focus on the energy sector in the UK, with intense political and media scrutiny against a backdrop of declining real disposable income for many consumers. However much has been achieved during the year. We have simplified our energy offering and now have just four residential tariffs, and are leading the industry in the transparency of our reporting; the recently announced changes to the Government’s ECO energy efficiency programme will help more people at lower cost; and there is improved public understanding and recognition of the real costs of securing energy supplies, the impact of climate change objectives, and the global market in which we operate. However investor confidence and public trust in the industry have been damaged, with proposals for price controls and the potential for further political intervention, at a time when substantial investment is required to secure supplies of energy for the UK for the long term. The consensus that existed between political parties over key questions of energy policy has broken down. We are engaging with all stakeholders, working towards a sustainable and affordable energy policy which recognises the need for strong underlying economics and investment certainty. In February 2013, we announced new strategic priorities – Innovate to drive growth and service excellence; Integrate our natural gas business, linked to our core markets; and Increase our returns through efficiency and continued capital discipline. Developments over the past year have reaffirmed these priorities and validated our strategic direction. As existing sources of gas decline, and worldwide energy markets become more interrelated, the UK will need to look further afield to secure energy supplies for the future. Downstream, we have completed strategic reviews in both British Gas and Direct Energy, and introduced new management structures. This will enable us to focus on improving our core operations in order to deliver better customer service, reduce costs where appropriate, and drive growth through innovative propositions. Upstream, we entered into a number of key transactions which will not only benefit our customers but provide the business with sustainable growth over the longer term. We also added reserves organically, mainly in Norway. Moving forward, against a backdrop of challenging economics upstream, particularly in the UK North Sea, we will be increasingly selective in our investments, directing capital towards the projects offering the most attractive returns with the lowest political risk. SOLID EARNINGS AND GOOD STRATEGIC PROGRESS IN CHALLENGING MARKET CONDITIONS Centrica performed well in 2013, with good operational performance in gas and oil production, power generation and gas storage, and we are benefiting from improved scale from previous E&P and North American acquisitions. We delivered further improvements in our safety record, with the frequency of lost time incidents falling by 45% in 2013 compared to 2012 and no significant process safety incidents recorded during the year. I was also pleased to see another increase in employee engagement levels in 2013, and remain grateful to all my colleagues for their commitment and hard work during the year, particularly during times when the company was the subject of much political and media scrutiny. We have made good strategic progress in 2013 in challenging market conditions - investing along the gas value chain to secure long term, affordable energy supplies, with customers at the core of our activities: *we signed £14 billion worth of new gas supply agreements with Cheniere and Qatargas, helping secure supplies for the UK; *we completed the C$1 billion acquisition of a portfolio of Canadian gas assets in partnership with Qatar Petroleum International (QPI), adding over 100mmboe of reserves to our international upstream portfolio at lower cost than for equivalent North Sea assets; *we acquired a 25% stake in the Bowland shale exploration licence, bringing our expertise and resources to a potentially important long-term source of gas for our customers; *we made over £1.5billion of organic investments across the Group, predominantly in our North Sea E&P portfolio, including in major projects such as Cygnus; *we added 56mmboe organically to our reserves base, mostly from upgrades to our Norwegian assets; *we announced £650 million of disposals, of selected North Sea assets, our Texas CCGTs and non-core UK wind assets, underlining our commitment to capital discipline and value; and *we acquired the Hess Energy Marketing business for $1.2 billion, transforming the capabilities of our North American B2B activities. However, with economic and market headwinds impacting many areas of the business, adjusted earnings per share were flat year-on-year at 26.6p. We also recognised pre-tax impairments and provisions totalling £1,064 million, £667 million after tax. Downstream in the UK, the post-tax margin for residential energy supply fell to 4.5%, in part reflecting the impact of mild weather on consumption towards the end of the year. This followed unusually cold weather in the first half, with the benefit from higher consumption used to absorb the increased external costs being faced by the business for as long as possible. However, in October we announced the decision to increase our residential energy tariffs, as a result of higher commodity and non-commodity costs. Following the announcement, the level of customer switching increased significantly and the number of residential customer accounts reduced by 2% over the year. However, although account losses have continued in early 2014, with around 100,000 in the year to date, the position is now stabilising, with British Gas the first to pass on savings in full to all our customers following the announcement of changes to the ECO programme and the introduction of new fixed price propositions. British Gas Services once again recorded operating profit growth despite the challenging economic environment, benefiting from cost reduction initiatives implemented over the course of 2012 and 2013. Early signs of economic recovery are also benefiting our central heating installations business. Installations were 7% higher in 2013 compared to 2012, while weekly sales of our remote heating control product have more than doubled since its launch under the Hive brand in September. In British Gas Business, the trading environment remained difficult in a highly competitive market. We led the industry with our programme to end auto-rollover of contracts at renewal, although this has placed further pressure on margins. Downstream in North America, we delivered profit growth in both residential energy and residential services, as we benefitted from previous acquisitions and services account growth. However total Direct Energy profitability fell as a result of lower margins in Direct Energy Business, with rising wholesale costs and a highly competitive power market resulting in difficult trading conditions. Upstream, gas and liquids production performance was good, as recent acquisitions in the North Sea and Canada delivered production better than our investment cases. We also added 56 mmboe of 2P reserves organically, predominantly on our Norwegian assets. However, following reserve and resource downgrades and increases in expected costs on certain projects in the Southern North Sea, and a reduction in North American natural gas prices since previous asset acquisition and development, we recognised exceptional post-tax impairments of £318 million. In UK power generation, the performance of the nuclear fleet was once again strong. However, our gas-fired fleet was loss-making, reflecting weak spark spreads and the end of free carbon allocations. In this environment we continued to minimise our cost base and run our plants as efficiently as possible. We also recognised a £125 million exceptional onerous contract charge on the Rijnmond tolling contract in the Netherlands as a result of decreases in expected future revenues. Our Rough gas storage asset performed well, particularly during the prolonged cold weather at the start of the year, making an invaluable contribution to UK security of supply. However, forward seasonal gas spreads remain very low, leading to a significant reduction in profit in 2013. The low seasonal spreads, together with the UK Government’s decision to rule out incentivisation for new gas storage projects to be built, caused us not to proceed with the Baird storage project and to put our project at Caythorpe on hold. As a result, we have recognised exceptional impairments and provisions relating to storage projects of £224million after tax. We successfully completed our £500 million Group-wide cost reduction programme, announced at the start of 2012. We also completed our £500 million share repurchase programme launched in February, and in December announced a further £420million share repurchase programme, following the sale of our Texas CCGTs, to be undertaken over the course of 2014. WORKING TOWARDS A TRANSPARENT AND AFFORDABLE ENERGY POLICY Over the past year, UK energy policy has seen unprecedented levels of debate and discussion amongst stakeholders. As a result, there is improved awareness of the costs of securing and supplying energy, the majority of which are external to the business. However, it is important that the facts are made public and that all stakeholders – energy companies, regulators, politicians, consumers and commentators - engage in full and open conversation. We have simplified our UK residential energy product range to four tariffs, and led the way earlier in 2013 with our unique ‘Tariff Check’, making it easier for our customers to ensure they are on the most appropriate British Gas tariff for them. We continue to improve the transparency of our reporting, including publication of audited Ofgem segmental statements as part of our year end reporting and separating out our midstream power profits, and call on others to follow. We also protected over half a million of our most vulnerable customers from the November price rise, through a special discount to be applied to their bills. As a result, we currently expect this group of customers to have lower bills in 2014 than in 2013. And we welcome the proposed changes announced by Government to the ECO programme, enabling more customers to benefit, at lower cost. However, the prospect of political intervention and a wide range of potential policy initiatives has damaged investor confidence. In particular, we believe that a price freeze is not a credible solution, when the large majority of costs are external to the business. Such proposals create both short term uncertainty for all energy suppliers and longer term additional costs for customers. With substantial investment required to secure energy supplies for the UK, these uncertainties increase the cost of capital and, in the eyes of major global producers, reduce the credit worthiness of prospective buyers of their gas, impairing rather than improving the UK’s energy security position. Against this uncertain background, financial stewardship and discipline remain important to our business, for the benefit of customers and shareholders. Customers rely on us for our financial strength to enter into long term supply contracts and shareholders require an appropriate return, reflecting the risks inherent in managing commodity price and weather risk in the underlying business and in the investments we make. Whilst delivering good service and value for customers is paramount, with a significant proportion of our share capital held by UK pension funds and around 700,000 individual shareholders, making appropriate investments and delivering a fair level of return to investors also remains a core responsibility. We firmly believe that any form of price control in a competitive market is not the answer and is not in the best interests of customers, and this has been clearly demonstrated by experience in other markets. The industry requires a stable policy environment, which recognises the need for strong underlying economics and investment certainty, to deliver secure supplies for our customers. We will continue to engage with all policymakers to present proposals for more affordable ways to decarbonise and reduce energy consumption, helping more people at lower cost. INVESTING TO SECURE ENERGY SUPPLIES FOR OUR CUSTOMERS We have made substantial progress in delivering our gas value chain strategy, positioning the business for future growth. In an increasingly global gas market, it is important that the UK is able to source gas at the most cost effective price. Centrica plays an important role, with existing relationships to secure pipeline gas from Norway and Continental Europe, and LNG from Qatar. During the year we extended our LNG supply contract with Qatargas until 2018. We also signed a contract with Cheniere to take gas export capacity at the Sabine Pass facility in Louisiana, which gives us destination rights over cargoes for the first time, and will allow us to benefit from any differential between North American gas prices and other worldwide markets. With rising costs in the North Sea, we are targeting our investment towards opportunities that offer the best value, particularly in Norway and in North America. We have taken a stake in UK shale exploration, potentially a significant source of gas for the UK. And in power, our Lincs offshore wind farm, which is capable of providing electricity for up to 200,000 UK homes, is now fully operational. POSITIONING THE BUSINESS FOR THE FUTURE Market conditions are expected to remain challenging in 2014, with margin pressures in our energy supply businesses on both sides of the Atlantic, rising North Sea unit costs, and weak economics for both gas storage and gas-fired power generation. In British Gas Residential, the level of margin achieved in a competitive market is dependent on a number of factors, including retail and wholesale prices, service and the weather, which has been warmer than usual in the year to date. The wider external environment also currently provides a challenging operating backdrop. In North America, although the Hess Energy Marketing business is performing well, Direct Energy has had a difficult start to 2014. With a weaker US dollar, continued margin pressures, and exceptionally cold weather which resulted in additional short term system charges, we currently expect Direct Energy operating profit to be broadly flat year on year. Overall for the Group, 2014 trading is in line with recent market forecasts, other than the one-off impact from extreme weather conditions in Direct Energy, with adjusted earnings per share in 2014 expected to be lower than in 2013. Recognising the challenges, we are maintaining our focus on operational and capital efficiency, with specific new targets appropriate for each area of the business. We have now completed strategic reviews in both British Gas and Direct Energy, and our downstream strategic priority – Innovate to drive growth and service excellence – remains robust. New organisational structures are in place on both sides of the Atlantic to ensure delivery, as we target improvement in our core operations to enhance service and reduce costs, while driving growth through innovative propositions. In our UK residential energy and services businesses, we are targeting industry leading service levels for our customers. We will aim to improve service and deliver further efficiencies by simplifying key customer interactions, in part enabled by our investment in a single residential Customer Relationship Management (CRM) system for energy and services, which is expected to be completed in 2014. Our leadership in digital, smart and connected homes enables us to offer compelling, differentiated propositions. By the end of 2014 we are targeting over 100,000 sales of our ‘Hive Active Heating’ smart thermostat and currently expect to have installed 1.3 million residential smart meters. We see the smart connected home as core to our customer proposition, materially improving the customer experience and providing an opportunity for growth. We also see further opportunities in residential services, leveraging our insurance capabilities to offer new pricing structures and an expanded product choice, and from growing share in adjacent markets such as the landlord sector. Through enhanced price competitiveness, improved service quality and innovation we are targeting a return to account growth in both UK residential energy and services. In British Gas Business, we are also targeting industry leading service levels, with a sustained programme of process simplification and the implementation of a new billing system expected to deliver improved service at lower cost. A cost reduction programme is underway, which is expected to generate £100 million of annual savings by the end of 2015, helping to offset the impact of continuing difficult market conditions and the impact of our decision to lead the market in ending auto-rollover at contract renewal. Longer term, we expect to deliver growth from the development of new offerings tailored to the most valuable customer segments, and from business services, where the market opportunity is comparable in size to business energy. In North America, with margin pressures persisting in 2014, improving cost competitiveness is a core priority. Against this backdrop we have launched a $100 million cost reduction programme, driving synergies from the enhanced scale of our business. We are already benefiting from call centre consolidation and back office integration, while we have started investment in a new residential energy billing system. We are also positioning the business for growth, and building a range of innovative product offerings is core to our North American business model, enabling improved customer retention and delivering growth. Our ‘Power To Go’ prepayment offering and our innovative ‘Free Electricity Saturdays’ product have both proved popular with residential energy customers, while we are targeting further growth in our services protection plan offering in 2014, which we see as a unique differentiating factor in our business model. Over time, we see significant potential for bundling of energy and services propositions to our residential customer base. In Commercial and Industrial energy supply, the integration of Hess Energy Marketing is proceeding well. Our priority for 2014 is to fully integrate the teams, retaining key personnel and systems, and in turn to deliver good service levels and high levels of customer retention. In the first three full months of our ownership, the business has delivered EBITDA in excess of our investment case. Over time, the enhanced scale, dual fuel capabilities, advantaged positions along the gas value chain and long-term customer relationships delivered by the Hess acquisition provide additional growth opportunities. Our International E&P business has been re-organised with a substantially new leadership team, to help realise the full potential of the international resource base. We have added 155mmboe in total to our 2P reserves, organically and through acquisition. We also retain a number of attractive investment options, particularly in Norway and Canada, having increased our 2C resource base by 28% to 771mmboe over the year. However, with rising costs, in the UK in particular, we are targeting savings to keep unit lifting and other cash production costs flat over the next three years. Against this backdrop, we are being increasingly selective in our investment, concentrating on the most attractive opportunities. An increasing proportion is expected to be directed towards North America, where we are well placed to benefit from any increase in gas prices. Taking account of forward UK gas prices and higher costs, we are targeting a reduction in our organic investment in gas and oil projects to approximately £900million on average over the next three years. This is around 20% lower than previously expected levels, but will have limited impact on near-term production, which we expect to be in the range 80-85mmboe per annum. Our current level of committed capital expenditure in the short to medium term gives us flexibility to consider acquisition opportunities, if the economics are attractive and the assets provide a good fit with our existing portfolio, while potentially divesting non-core assets for value. In UK power generation, reflecting the challenging market conditions that resulted in losses for our gas-fired power stations, we will continue to optimise the running of our existing fleet to capture the benefit from any improvement in market spark spreads. However, following our decision not to invest in new nuclear in the UK and to sell the Race Bank offshore wind project to Dong, we expect our near-term investment in the UK power sector to be limited. Any future investment in new build gas-fired generation capacity will depend on the economics of the projects and the successful introduction of a capacity market, including an assessment of the political risk. Centrica is an important company, providing energy or services for over 11 million homes in the UK as well as serving some sixmillion customer accounts in North America. We directly employ over 35,000 people worldwide, make a tax contribution of around £1billion a year and make a valuable contribution to retirement savings through our dividend payments, as well as securing cost-effective sources of energy for the UK. Centrica has a strong balance sheet, providing flexibility for targeted investments for value. However, maintaining tight capital discipline is a core priority, as evidenced by our share repurchase programmes. We are recommending 2013 full year dividend growth of 4%, in excess of the UK retail price index, and are maintaining our commitment to real dividend growth. In a challenging external environment, we remain committed to our guiding principles of offering good service and value for customers and playing a vital role in the transition to a lower carbon economy. Whilst the outlook for the UK business has been impacted by short term political uncertainty, we are taking positive action across the Group to position the business for the long term, for the benefit of both customers and shareholders. SAM LAIDLAW Chief Executive 20 February 2014 Group Financial Review Group revenue was up 11% to £26.6 billion (2012: £23.9 billion). Revenue increased in British Gas, primarily due to the impact on retail energy prices of higher UK wholesale gas and electricity prices and non-commodity costs. Revenue in Direct Energy increased, predominantly reflecting the impact of higher gas and power volumes, and the acquisition of the Hess Energy Marketing business which completed in November. Revenue increased in Centrica Energy, with higher gas and liquids production due to the full-year impact of the 2012 asset purchases and higher achieved gas and liquids prices in Europe. Centrica Storage revenue fell slightly, reflecting lower seasonal gas spreads and a higher proportion of storage capacity sold internally. Throughout the Operating Review and Group Financial Review, reference is made to a number of different profit measures, which are shown in the table below: 2013 2012 Exceptional Exceptional Year ended Business items and Statutory Business items and Statutory 31 December Notes performance certain result performance certain result £m re-measurements £m £m re-measurements £m £m £m Adjusted operating profit British Gas 1,030 1,093 Direct 276 310 Energy Centrica 1,326 1,251 Energy Centrica 63 89 Storage Total adjusted 5c 2,695 2,743 operating profit Depreciation of fair value uplifts from 5c (66) (96) Strategic Investments, before tax Interest and taxation on joint 5c (111) (85) ventures and associates Group operating 5c, 6 2,518 (626) 1,892 2,562 63 2,625 profit Net finance (243) – (243) (209) – (209) cost Taxation 6, 8 (942) 243 (699) (1,031) (140) (1,171) Profit for 1,333 (383) 950 1,322 (77) 1,245 the year Depreciation of fair value uplifts from 10 37 56 Strategic Investments, after taxation Adjusted 1,370 1,378 earnings The Group has applied IAS19 (revised) pensions accounting. As a result, 2012 net finance costs, taxation, earnings and earnings per share have been restated. To reflect a new organisational structure, the North American upstream gas business has been reallocated from Direct Energy to Centrica Energy. In British Gas, total profitability decreased. Operating profit decreased in residential energy supply, with the impact of higher unit tariffs more than offset by increased wholesale commodity, transmission and metering, and environmental costs. Operating profit decreased in business energy supply and services, with lower margins as a result of challenging market conditions and our programme to end the auto-rollover of contracts. Operating profit increased in residential services, predominantly reflecting the impact of cost efficiencies. In Direct Energy, overall profitability decreased, as increases in residential energy supply and residential and business services operating profit, resulting from previous acquisitions and services account growth, were more than offset by decreased profitability in the business energy supply segment, which experienced margin pressure on power sales in a competitive environment. In Centrica Energy, overall profitability increased, with higher operating profit in the gas segment more than offsetting lower power operating profit. In the gas segment, higher gas and liquids production and higher achieved prices in Europe more than offset the impact of increased unit costs. In the power segment, profitability decreased following the loss of free carbon allowances. In Centrica Storage, reduced seasonal gas price differentials led to lower profitability. Net finance cost increased to £243 million (2012: £209 million), with higher average levels of debt in the year, as the Group raised $1.35 billion in the US bond market to fund North American acquisitions completed during the year. The taxation charge reduced to £942 million (2012: £1,031 million) and the adjusted tax charge was £1,022 million (2012: £1,112 million). The resultant adjusted effective tax rate for the Group was 43% (2012: 45%). An effective tax rate calculation, showing the UK and non-UK components, is shown in the table below: 2013 2012 UK Non-UK Total UK Non-UK Total £m £m £m £m £m £m Adjusted operating 1,903 792 2,695 2,079 664 2,743 profit Share of joint ventures / (60) - (60) (44) – (44) associates interest Net finance (146) (97) (243) (105) (104) (209) cost Adjusted profit before 1,697 695 2,392 1,930 560 2,490 taxation Taxation on 493 449 942 694 337 1,031 profit Tax impact of depreciation on Venture 29 - 29 40 – 40 fair value uplift Share of joint ventures / 51 - 51 41 – 41 associates taxation Adjusted tax 573 449 1,022 775 337 1,112 charge Adjusted effective tax 34% 65% 43% 40% 60% 45% rate Reflecting all of the above, profit for the year was £1,333 million (2012:£1,322 million) and after adjusting for fair value uplifts adjusted earnings were broadly flat at £1,370 million (2012: £1,378 million). Adjusted basic earnings per share (EPS) were unchanged at 26.6 pence (2012: 26.6 pence). The statutory profit for the year was £950 million (2012: £1,245 million). The reconciling items between Group profit for the year from business performance and statutory profit are related to exceptional items and certain re-measurements. The decrease compared with 2012 is principally due to an increased net exceptional charge of £667million (2012: £481million) and a reduced gain from certain re-measurements of £284 million (2012:£404million). The Group reported a statutory basic EPS of 18.4pence (2012: 24.0 pence). In addition to the interim dividend of 4.92 pence per share, we propose a final dividend of 12.08 pence, giving a total ordinary dividend of 17.0 pence for the year (2012: 16.4 pence), an increase of 4%. Group operating cash flow before movements in working capital was higher at £3,737 million (2012: £3,542 million), with the full year impact of the 2012 upstream asset purchases being the main contributing factor. After working capital adjustments, tax, and payments relating to exceptional charges, net cash flow from operating activities was £2,940 million (2012: £2,820 million). The net cash outflow from investing activities was lower at £2,351 million (2012: £2,558 million), predominantly reflecting the receipt of a larger nuclear dividend and increased proceeds from the disposal of businesses. The net cash outflow from financing activities was £791 million (2012: inflow of £190 million). The outflow mainly reflects the impact of the Group’s £500 million share repurchase programme, fully undertaken during the year, and a reduced net issuance of debt during the period of £809 million (2012: £1,196 million). Reflecting all of the above, the Group’s net debt at 31 December 2013 was £5,049 million (2012: £4,047 million). During the year net assets decreased to £5,257 million (2012: £5,927 million), reflecting the impact of the Group’s share repurchase programme, actuarial losses on the Group’s defined benefit pension schemes, and foreign currency movements on the retranslation of foreign subsidiaries. EXCEPTIONAL ITEMS Exceptional pre-tax charges of £1,064 million were incurred within Group operating profit during the year (2012:£534million). Taxation on these charges generated a credit of £397 million (2012: £93 million), while there was a £40 million exceptional tax charge in 2012 related to the effect of a change in upstream UK tax rates. This resulted in exceptional post-tax charges of £667 million (2012: £481 million). Following reserve and resources downgrades and increases in expected costs on the Seven Seas, York and Ensign fields in the Southern North Sea, and a weaker outlook for North American natural gas prices and an increase in the discount rate applicable to North American assets, the Group recognised pre-tax impairment charges of £699 million relating to UK and Canadian exploration and production assets. Taxation on these charges generated a credit of £381 million, resulting in exceptional post-tax charges of £318 million. In September, in the light of weak economics for new storage projects and the UK Government’s announcement ruling out incentivisation for gas storage capacity to be built in the UK, Centrica announced its decision not to proceed with the Baird offshore gas storage project and to put the onshore project at Caythorpe on hold indefinitely. As a result, the Group has recorded £240 million of impairments and provision charges as exceptional operating costs. Taxation on these charges generated a credit of £16 million resulting in exceptional post-tax charges of £224 million. The Group also recognised a further onerous contract charge of £125 million (no tax impact) for the Rijnmond power tolling contract in the Netherlands as a result of decreases in expected future revenues. CERTAIN RE-MEASUREMENTS As an integrated energy business the Group enters into a number of forward energy trades to protect and optimise the value of its underlying production, generation, storage and transportation assets (and similar capacity or off-take contracts), as well as to meet the future needs of our customers. A number of these arrangements are considered to be derivative financial instruments and are required to be fair-valued under IAS39. The Group has shown the fair value adjustments on these commodity derivative trades separately as certain re-measurements, as they do not reflect the underlying performance of the business because they are economically related to our upstream assets, capacity/off-take contracts or downstream demand, which are typically not fair valued. The operating profit in the statutory results includes net gains of £438 million (2012: £597 million) relating to these re-measurements, of which there are a number of elements. The Group recognises the realised gains and losses on these contracts in business performance when the underlying transaction occurs. The profits arising from the physical purchase and sale of commodities during the year, which reflect the prices in the underlying contracts, are not impacted by these re-measurements. See note 2 for further details. BUSINESS COMBINATIONS On 15 April 2013, the Group announced that it had agreed to form a partnership with Qatar Petroleum International and jointly acquire a package of producing conventional natural gas and crude oil assets and associated infrastructure located in the Western Canadian Sedimentary Basin from Suncor Energy. The transaction completed on 26 September 2013 for consideration of C$987 million (£601 million). The Group owns a 60% share in the partnership and operates the assets. It has fully consolidated the partnership for accounting and reporting purposes. On 30 July 2013, the Group announced that it had agreed to acquire the New Jersey-based energy marketing business of Hess Corporation. The transaction completed on 1 November 2013 for consideration of $1,194million (£736 million) including a payment for the working capital of the business of approximately $416million (£257 million). Further details on business combinations, plus details of asset purchases, disposals and disposal groups held for sale are included in notes 5(f) and 15. EVENTS AFTER THE BALANCE SHEET DATE Details of events after the balance sheet are described in note 17. RISKS AND CAPITAL MANAGEMENT The Group’s risk management processes are largely unchanged from 31 December 2012. Details of how the Group has managed financial risks such as liquidity and credit risk are set out in note 4. Details on the Group’s capital management processes are provided under sources of finance in note 11. ACCOUNTING POLICIES UK listed companies are required to comply with the European regulation to report consolidated financial statements in conformity with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Group’s specific accounting measures, including changes of accounting presentation and selected key sources of estimation uncertainty, are explained in note 3. Operating Review INTERNATIONAL DOWNSTREAM The operating environment for both our UK and North American downstream businesses was challenging during 2013. However we made good strategic progress on both sides of the Atlantic, positioning ourselves for the future, and our downstream strategic priority – Innovate to drive growth and service excellence – has been reaffirmed. Under the leadership of Chris Weston a new management structure is in place, designed to enable us to focus on improving our core operations to deliver better customer service and drive growth through innovative propositions. BRITISH GAS In the UK, the operating environment for our downstream energy supply businesses was unprecedented. Affordability has been a key concern for both residential and business customers, amplified by media and political debate ahead of the 2015 election. Against this backdrop we welcomed the Government’s proposed changes to the Energy Company Obligation (ECO), announced in December, which enabled us to be the first UK energy supplier to reduce retail tariffs. We have also made good progress in positioning the business for the future, with further development of our digital platforms, the launch of new propositions, continued industry leadership on smart metering, and an ongoing focus on service and cost efficiency. Residential energy supply operating profit fell by 6%, reflecting warmer weather towards the end of the year and higher commodity and non-commodity costs, while business energy supply and services operating profit fell by 19% in challenging market conditions. A continued focus on cost reduction resulted in an increase in residential services profit, although delivering new sales of services contracts proved challenging. The health and safety of our employees and customers remains a core priority and the lost time injury frequency rate (LTIFR) over 2013 was 0.11 per 100,000 hours worked in British Gas (2012: 0.23). Tough environment for residential energy supply Having absorbed higher commodity and non-commodity costs for as long as possible, we took the decision in October to increase average household gas prices by 8.4% and average household electricity prices by 10.4%, an average of 9.2%. The price rise took effect in late November. However, the UK Government’s proposed changes to the ECO programme allowed British Gas to reduce average household gas and electricity prices by 3.2%, effective from 1 January 2014. Including the Government’s £12 rebate in relation to the Warm Home Discount, the average customer bill will reduce by £53, or 4.1%. We strongly support the aims of the ECO programme, which is providing energy efficiency measures such as insulation to transform homes and communities across the UK, helping keep homes warm and reducing carbon emissions. Therefore we welcome the proposed changes to the ECO programme, which will extend the obligation period by two years to March 2017 and broaden eligibility measures, allowing us to help more customers and reduce the short term impact on bills. We expect our costs to be over £1.7 billion over the life of the programme, and in 2013 we incurred £420 million of costs. We also completed all work under the CERT and CESP programmes around the middle of 2013, later than the target date of December 2012. Overall, through these programmes, we installed 236,000 energy efficiency measures in customer homes in 2013, over half of which were for the elderly, disabled or those most in need. We continue to lead the industry in helping the most vulnerable, having helped more than 1.8 million households suffering from fuel poverty. We maintain the widest eligibility criteria among all energy suppliers for the Warm Home Discount, which benefited over 500,000 of our customers during the year. We also protected these customers from our November price increase through an additional discount of up to £60 to be applied to their bills. We now offer four distinct tariffs, all with a standing charge and single unit rate, and have consolidated our discount structures. We introduced our unique ‘Tariff Check’ in the first half of the year, which provides a personalised comparison of their energy costs under each British Gas tariff and enables customers to check that they are on the most appropriate tariff for them. In October, the Government announced a new annual competition review for the UK energy sector, and we expect the results to be published around the end of the first quarter of 2014. Helping restore confidence in the energy industry is a top priority for British Gas. Our independent Customer Board is in its third year and has continued to challenge and advise on a range of service and product topics. And we are making good progress on implementing Ofgem’s Standards of Conduct and have established a Customer Fairness Committee, which includes two independent external members. We also continue to invest in jobs, with 1,200 apprentices currently in training, while we have committed that from January 2014 all UK-based employees will be paid at least the ‘living wage’ rate. Focus on delivering great customer service The number of residential accounts on supply as at the end of 2013 was 15.3 million, 2% lower than at the start of the year. This reflects a competitive market and higher levels of customer churn in the period immediately following our pricing announcement in October. Customer account losses have continued into 2014, with around 100,000 in the year to date, however the position is now stabilising, reflecting our January 2014 price reduction and the introduction of new fixed price propositions. In a competitive market for energy supply it is important to focus on delivering high levels of customer service. The migration of our residential customers onto a new Customer Relationship Management (CRM) platform will be completed in 2014. We experienced some system outages during implementation, which was exacerbated by higher call volumes caused by the tariff increase announcement. Reflecting this, the total British Gas net promoter score decreased to +15 in 2013 (2012: +30). However we invested in additional customer service advisors to address the short term issues, and the new system is expected to deliver a more integrated customer experience. We are leading the industry in the use of digital platforms, reducing our cost to serve and increasing customer engagement, and British Gas was awarded ‘best e-commerce utility supplier’ at the 2013 e-commerce awards for excellence. Customer downloads of our top-rated mobile ‘App’ were up 37% and over a million have been downloaded since its launch. The number of customers transacting through digital channels also increased. Total transactions increased 16%, while 1.2 million customers booked their annual service or boiler breakdown online, up 22% and nearly 40% of bills were sent electronically. In January 2014, we fully launched ‘Me’ (Mobile Energy), a new energy brand capable of being delivered entirely via mobile devices and aimed at the private tenant segment. We are also developing smart and 'connected home' solutions to give customers greater visibility and control over their energy usage. We have now installed over 1.3 million smart meters for homes and businesses in the UK, with over 800,000 of these for residential customers, and in 2014 we expect to be the first company to install smart meters for residential prepayment customers. The industry-leading progress we have made leaves us well placed, as we move towards the mandated roll-out of smart meters in the UK from the end of 2015. Over 200,000 customers now receive our ‘Smart Energy Report’, which we launched in March 2013. This provides customers with comprehensive analysis of their energy usage, and has resulted in a positive impact on customers’ perception of British Gas. In September we launched Hive, our rebranded Remote Heating Control proposition, which allows customers to control their heating and hot water remotely via their smart phone or online. Initial brand recognition has been strong, and we have now sold over 50,000 smart thermostats, with weekly sales having doubled since the Hive launch. Strong cost focus in residential services in tough sales environment Market conditions remained challenging for British Gas Services, in part due to continued pressure on household disposable income. Retention of existing customers was strong, with customers recognising the value of our services products during sustained periods of cold weather in the first half. However sales of new products were lower, reflecting the overall economic environment. As a result, the number of services customer accounts fell by 2% during 2013, ending the year at 8.2million. We are beginning to see some pick up in the market for new central heating installations, with the number increasing by 7% in 2013 compared to 2012, and by 10% in the second half of the year, in part reflecting our leadership position on the ‘Green Deal’. British Gas was the first energy supplier to market on the ‘Green Deal’ and we now have 300 Green Deal advisors trained, and have completed over 10,000 installation measures. British Gas Services delivered strong levels of operational performance in the year. Overall we responded to 3.2million boiler breakdowns, over 200,000 more than in 2012. Despite the higher workload, our net promoter score increased to +59 (2012: +55), while the average speed to answer calls improved. Although we incurred additional costs as a result of the higher level of call-outs, residential services operating profit increased slightly compared to 2012, reflecting the benefit of cost savings delivered in 2012 and 2013. With the existing cost reduction programme now complete, we will maintain a keen focus on cost efficiency in the business. We will also look to develop new and innovative products and propositions. During 2013 we launched packages tailored specifically for landlords and tenants, while we also launched British Gas branded home insurance in partnership with AXA and entered into a new partnership agreement with Nationwide’s ‘buy-to-let’ mortgage arm. Continued challenging market conditions for business energy supply and services The number of business energy supply points fell by 12,000 over the year, and were flat in the second half of the year. The tough economic and competitive environment continued to put pressure on business energy supply margins, which were also impacted by our programme to end the auto-rollover of contracts at renewal, for the benefit of customers. This decision ensures our customers have a transparent choice of products, and should provide long-term benefits. As a result of the margin pressures, operating profit in 2013 was significantly lower than in 2012. During the year we started the implementation of a new business energy billing system, which is proceeding to plan and is expected to be fully operational by the end of 2014. The system leverages previous investment in residential platforms and will result in improved customer service at lower cost, helping to offset margin pressures. We continue to develop our business services propositions, and we have now mobilised two major new contracts with Cornwall Council and a consortium of eight local authorities in the North East of England. We have also signed and commenced work on thirteen energy performance contracts. Business services revenue increased by 11% in 2013 compared to 2012, while our secured pipeline of future work increased by 25% to over £200 million. Reduced year-on-year operating profit Total British Gas gross revenue increased to £14,226 million (2012: £13,857 million) while total British Gas operating profit fell to £1,030 million (2012: £1,093 million) with a slight increase in residential services profitability more than offset by declines in residential energy supply and business energy supply and services. British Gas has delivered its £300 million share of the Group’s cost reduction programme, with the full year impact of 2012 initiatives coming through and further savings delivered in 2013 through procurement, IT and operational efficiencies. Reflecting the impact of inflation and investment in growth areas, British Gas operating costs were up slightly in 2013 compared to 2012, while previous investment in systems and a more proactive approach to helping customers resulted in the bad debt charge as a proportion of revenue holding broadly flat. Residential energy supply gross revenue increased to £9,487 million (2012: £9,121 million), predominantly reflecting the impact of higher commodity and non-commodity costs on retail gas and electricity tariffs. Average gas consumption was broadly flat compared to a cold 2012, with a decline in underlying consumption and warmer than usual weather in the fourth quarter offsetting the impact of unusually cold weather in the first half. Average electricity consumption fell by 3%. Second half operating profit fell by 18% compared to 2012, while full year operating profit fell by 6% to £571 million (2012: £606 million), as increased revenue was more than offset by higher external costs, with commodity, transmission, metering, and environmental costs all rising. The full year post-tax margin decreased to 4.5% (2012: 5.0%). Residential services gross revenue decreased slightly to £1,655 million (2012: £1,674 million). Operating profit, including the receipt of an ECO management fee from residential energy supply, increased to £318 million (2012:£312 million), while the post-tax margin increased to 14.6% (2012: 14.1%), primarily reflecting the impact of operational efficiencies. Business energy and services gross revenue increased to £3,084 million (2012: £3,062 million), while operating profit, including credits arising from improved revenue and billing processes, fell by 19% to £141 million (2012: £175 million), reflecting the margin pressures. The post-tax margin fell to 3.7% (2012:4.2%). Positioning the business for the future in a tough external environment Having completed a comprehensive review of the business, our focus is on improving our core operations to enhance service and reduce costs, while driving growth through innovative propositions. In British Gas Residential and British Gas Services, we are targeting industry leading service levels for our customers. We will aim to improve service and deliver efficiencies by simplifying key customer interactions, such as moving home and paying by direct debit, to provide an effortless, consistent experience through all channels. Our project to move to a single residential billing platform for energy and services, which is expected to be completed this year, will improve service and cost efficiency as well as facilitating the integrated propositions needed to deliver increased energy and services cross-selling. In addition, our leadership in digital, smart and connected homes enables us to offer compelling, differentiated propositions, such as our ‘Hive Active Heating’ smart thermostat. We currently expect to have installed 1.3 million residential smart meters and to have sold over 100,000 smart thermostats by the end of 2014. We continue to see the smart connected home as core to our customer proposition, materially improving the customer experience and providing an opportunity for growth. We see further growth opportunities in residential services, from new pricing structures and expanded product choice, leveraging our insurance capabilities. We also see opportunities to grow share in adjacent, under-served markets such as the landlord sector and from improved conversion of boiler installation enquiries into sales. Overall, through enhanced price competitiveness and innovation, we are targeting a return to account growth in both residential energy and services. In British Gas Business, a sustained programme of process simplification and the implementation of a new billing system, which started in 2013, is expected to deliver improved service at lower cost. We expect to deliver £100million of annual operating cost and bad debt reductions by the end of 2015, and have already delivered around £20million of this in 2013. This will help to offset the impact of transitioning our commercial model, including our decision to lead the market in ending auto-rollover at contract renewal. As in the residential business, we will drive growth in business energy supply by developing new offerings tailored to valuable customer segments and utilising a more targeted channel strategy. In business services, where the market opportunity is comparable in size to business energy, we expect to grow a material position over time, through a combination of organic and inorganic growth. Total British Gas For the year ended 31 FY 2013 FY 2012 Δ% H2 2013 H2 2012 Δ% December Total customer accounts 24,395 24,944 (2) 24,395 24,944 (2) (period end) (’000) Total customer households 11,120 11,379 (2) 11,120 11,379 (2) (period end) (’000) Joint product households 2,257 2,393 (6) 2,257 2,393 (6) (period end) (’000) Gross Revenue 14,226 13,857 3 6,314 6,650 (5) (£m) Operating cost (excluding bad 1,392 1,353 3 706 672 5 debt) (£m) Operating 1,030 1,093 (6) 461 530 (13) profit (£m) Operating profit after 777 823 (6) nm nm nm taxation (£m) FY 2012 residential energy customer accounts have been restated to exclude 38,000 accounts subsequently reclassified as dormant. FY 2012 total customer households and joint product households have been restated to reflect a revised alignment of products to households following the implementation of a new customer database. FY 2012 operating costs have been restated to reflect the reallocation of certain costs from operating costs to cost of sales. Residential energy supply For the year H2 ended 31 FY 2013 FY 2012 Δ% H2 2013 2012 Δ% December Customer accounts (period end): Gas (’000) 8,603 8,872 (3) 8,603 8,872 (3) Electricity 6,653 6,746 (1) 6,653 6,746 (1) (’000) Total (’000) 15,256 15,618 (2) 15,256 15,618 (2) Estimated market share (%): Gas 38.2 39.9 (1.7) 38.2 39.9 (1.7) ppts ppts Electricity 24.5 25.1 (0.6) 24.5 25.1 (0.6) ppts ppts Average consumption: Gas (therms) 492 494 (0) 181 218 (17) Electricity 3,688 3,794 (3) 1,752 1,875 (7) (kWh) Total consumption: Gas (mmth) 4,342 4,460 (3) 1,579 1,945 (19) Electricity 25,078 25,683 (2) 11,932 12,696 (6) (GWh) Gross Revenue (£m): Gas 6,033 5,884 3 2,307 2,668 (14) Electricity 3,454 3,237 7 1,694 1,646 3 Total 9,487 9,121 4 4,001 4,314 (7) Operating profit 571 606 (6) 215 261 (18) (£m) Operating profit after taxation 423 457 (7) nm nm nm (£m) Post-tax margin 4.5 5.0 (0.5) nm nm nm (%) ppts FY 2012 residential energy customer accounts have been restated to exclude 38,000 accounts subsequently reclassified as dormant. Further detail on costs can be found in the Ofgem Consolidated Segmental statement on page 74 of the Preliminary Results announcement and on the Centrica website Residential services For the year ended FY 2013 FY 2012 Δ% H2 2013 H2 Δ% 31 December 2012 Customer product holdings (period end): Central heating service 4,575 4,663 (2) 4,575 4,663 (2) contracts (’000) Kitchen appliances care (no. of 453 465 (3) 453 465 (3) customers) (’000) Plumbing and drains care 1,683 1,714 (2) 1,683 1,714 (2) (’000) Home electrical 1,420 1,444 (2) 1,420 1,444 (2) care (’000) Other contracts 96 116 (17) 96 116 (17) (’000) Total holdings 8,227 8,402 (2) 8,227 8,402 (2) (’000) Domestic central heating 101 94 7 55 50 10 installations (’000) Gross Revenue (£m): Central heating service 841 839 0 430 435 (1) contracts Central heating 263 258 2 142 137 4 installations Other 551 577 (5) 278 291 (4) Total 1,655 1,674 (1) 850 863 (2) Operating profit 318 312 2 183 187 (2) (£m) Operating profit after taxation 241 236 2 nm nm nm (£m) Post-tax margin 14.6 14.1 0.5 nm nm nm (%) ppts Business energy supply and services For the year ended FY 2013 FY 2012 Δ% H2 2013 H2 Δ% 31 December 2012 Customer supply points (period end): Gas (’000) 310 322 (4) 310 322 (4) Electricity 602 602 0 602 602 0 (’000) Total (’000) 912 924 (1) 912 924 (1) Average consumption: Gas (therms) 2,476 2,737 (10) 996 1,156 (14) Electricity 28,852 27,521 5 14,201 14,014 1 (kWh) Total consumption: Gas (mmth) 784 940 (17) 312 399 (22) Electricity 17,260 17,110 1 8,504 8,581 (1) (GWh) Gross Revenue (£m): Gas 904 1,014 (11) 373 443 (16) Electricity 1,951 1,841 6 968 929 4 Business 229 207 11 122 101 21 Services Total 3,084 3,062 1 1,463 1,473 (1) Operating profit 141 175 (19) 63 82 (23) (£m) Operating profit after taxation 113 130 (13) nm nm nm (£m) Post-tax margin 3.7 4.2 (0.5) nm nm nm (%) ppts Further detail on costs can be found in the Ofgem Consolidated Segmental statement on page 74 of the Preliminary Results announcement and on the Centrica website DIRECT ENERGY Market conditions for our North American downstream energy supply businesses proved challenging in 2013, as rising gas and power prices, declining barriers to entry and an increasingly competitive environment among both competitive energy suppliers and default utility providers led to a narrowing of margins. However we made good strategic progress during the year, with the acquisition of the Hess Energy Marketing business significantly enhancing our scale and capability in Commercial and Industrial (C&I) gas supply, the acquisition of Bounce Energy providing a leading internet-based digital platform and further organic growth in our services protection plan product. We also continued our strong focus on health and safety, with the LTIFR remaining low at 0.12 per 100,000 hours worked in Direct Energy (2012: 0.11). Direct Energy’s scale in deregulated markets leaves us uniquely positioned in North America to respond to these challenging market dynamics. In the fourth quarter of the year the business was reorganised, and the role of ChiefOperationsOfficer was created to lead the drive for operational synergies across our businesses. In 2014 the business will be focused on delivering further cost reductions and building our range of innovative new products and services, with an increased focus on digital channels. We are positioning the business for growth, through innovation and attractive products and propositions, while the Hess acquisition provides us with the ability to optimise positions along the gas value chain. The combination of organic growth and the effect of acquisitions has increased the scale of the business, resulting in an increase in Direct Energy gross revenue to £7,325 million (2012: £5,684 million). However operating profit fell to £276 million (2012: £310 million), principally reflecting lower margins in business power energy supply. The operating profit in 2013 includes £14 million of integration costs and £22 million of additional amortisation of acquired intangibles relating to the Hess acquisition. Competitive pressures offsetting the impact of acquisitions in residential energy supply Operating profit for Direct Energy residential energy supply was up slightly in 2013, as the positive impact of previous acquisitions and reduced operating costs were largely offset by some narrowing of margins in Texas and the continued decline of our customer base in Ontario as a result of our decision to forgo renewals and new customer sales, due to the Energy Consumer Protection Act (ECPA). Gross revenue increased to £2,517million (2012: £2,357 million) reflecting higher gas and power prices, while operating profit was £163 million (2012:£156 million) and the post-tax margin was unchanged at 4.4%. The number of residential energy accounts at the end of 2013 was 3.4 million, a slight decline since the start of 2013, in part reflecting the expected decline in Ontario, a highly competitive sales environment in both Texas and the USNorth East and the expected loss of aggregation customers in the US North East. In Canada, we now have less than 200,000 customer accounts in Ontario. The business is no longer core to our operations, with the region delivering only 11% of our residential energy supply operating profit in 2013 compared to 20% in 2012 and 29% at its peak in 2010. We also experienced a small drop in our regulated customer base in Alberta, although this was partially offset by growth in the competitive customer base in the region. This resulted in an increase in profitability in Alberta. In the US North East, the number of accounts fell by 72,000, to 1.3 million, with the loss of 53,000 aggregation customers and the impact of a competitive sales environment being only partly offset by improved retention rates. However profitability increased in the region, reflecting cost efficiencies and the successful integration of customers acquired in 2012 in the Energetix and NYSEG Solutions transactions onto our systems. In Texas, retention rates also improved, with churn improving by 2ppt. However a highly competitive sales environment, with around 50 retail energy suppliers and 200 competitive offers, resulted in reduced renewal margins. To help offset this margin decline, we focused on lowering our operating cost base, with our cost to serve per customer in Texas falling by 24%. We also continued to develop innovative products, and during the second half of the year we launched our ‘Free Electricity Saturdays’ product, while we increased sales of our prepayment product, ‘Power To Go’ by 30% in 2013. In the second half of the year we also completed the acquisition of the independent electricity retailer, Bounce Energy, for $42 million (£27 million), adding 80,000 accounts to our Texas business and further consolidating our position as a top three retail energy provider in Texas. The acquisition provides a leading internet-based digital and e-commerce platform, for marketing innovative products and online account management and over time we expect this platform to aid residential energy and services account growth in all our core regions. Volume growth in business energy supply not fully offsetting margin pressures On 1 November 2013 we completed the acquisition of the New Jersey-based energy marketing business of Hess Corporation for $1,194 million (£736 million), including a payment for working capital of $416 million (£257 million). The acquisition makes Direct Energy the largest C&I gas supplier on the East Coast of the US and the second largest C&I power supplier in the competitive US retail markets, and gives us a more balanced gas and power customer portfolio. It also builds on our existing capabilities and further integrates our activities along the gas value chain, linking gas supply from producers and other market participants, through secured transport and storage capacity, to both our C&I and residential customer bases. The initial performance of the acquired business has been strong. Direct Energy business energy supply gross revenue increased by 52% to £4,238 million (2012: £2,795 million), reflecting the impact of higher wholesale commodity prices and increased sales volumes. Electricity volumes increased by 24% to 63.9TWh (2012: 51.4TWh) and gas volumes more than doubled to 1,839mmth (2012:793mmth) reflecting two months of contribution from the Hess Energy Marketing business and good sales performance. However the power market has been increasingly competitive with, up until January 2014, potential competitors finding it easier to access credit and reduced market volatility providing lower barriers to entry. This led to a 36% decline in profitability to £77 million (2012: £121 million). The underlying post-tax margin, excluding the impact of integration costs and additional amortisation associated with the Hess acquisition, fell to 1.8% (2012: 2.8%). The business energy supply division now includes power generation and midstream activities. In December we announced the sale of our three Texas-based power stations, with a combined capacity of 1,295MW, to Blackstone for $685 million (£420 million). The disposal completed in January 2014 and we expect to recognise a profit on disposal of approximately £220 million as an exceptional item in the 2014 financial results. As part of the transaction we also entered into a three year heat rate call option arrangement with Blackstone for an equivalent amount of capacity. We believe that in the near term this arrangement, together with a liquid physical and financial power market in Texas, can ably support our downstream operations through contractual arrangements rather than asset ownership. Contract and profit growth in residential and business services Direct Energy residential and business services gross revenue increased by 7% to £570 million (2012: £532 million), predominantly reflecting an increase in sales from our owned operations and those of our franchises. Operating profit increased to £36million (2012: £33 million) and the post-tax margin improved slightly to 4.4% (2012: 4.1%) reflecting cost control. Direct Energy Services gained market share during 2013, with the number of accounts increasing by 207,000. This partly reflects the acquisition of the US-based home services business, America’s Water Heater Rentals (AWHR) for $30 million (£18 million), which added over 80,000 residential customers located primarily in the US Midwest, Florida and the US Northeast. The acquisition was completed in October and provides Direct Energy with an expanded services product range and the opportunity to grow its customer base further in the US, offering rentals alongside heating, air conditioning, plumbing and electrical services across its growing franchise business. In the year we increased our number of franchise territories by 11% to 633. The increase in accounts also reflects organic growth from developing our protection plan offering in the US, in part leveraging the acquisition of Home Warranty of America in 2012, and we now have over 100,000 whole-home warranty plans, up from 70,000 at the time of acquisition. Direct Energy Services also benefited from improved optimism in the economy, with a revival in new housing starts helping drive a 25% increase in sales in our residential new construction business. Positioning the business for the future in a challenging external environment Direct Energy has had a difficult start to 2014, and market conditions for our residential and business energy supply divisions look set to remain challenging. Although the Hess Energy Marketing business is performing well, Direct Energy has been impacted by a weaker US dollar, continued margin pressures and exceptionally cold weather, which had a significant impact across all suppliers in the US North East and resulted in additional system charges. As a result, we currently expect total Direct Energy operating profit to be broadly flat year-on-year. Against this backdrop, improving cost competitiveness is a core priority and a cost reduction programme of $100million is underway, as we deliver synergies from Direct Energy’s enhanced scale. We are already benefiting from the creation of an integrated residential energy operations centre in Tulsa and a consolidated energy and services call centre in Phoenix. We are also investing in a new residential energy billing platform for the Alberta market. And in Services, we are transitioning from eight separate operating systems to one, to help deliver simplified processes and operating efficiencies as well as to facilitate a more robust franchising platform. In C&I, the integration of Hess Energy Marketing is proceeding well and on schedule. Our priority for 2014 is to fully integrate the teams, retaining key personnel and systems, and in turn deliver exceptional service levels and high levels of customer retention. In the first three full months of ownership, the business has delivered EBITDA in excess of our investment case, with the acquisition expected to be earnings accretive in 2014. Over time, the enhanced scale, dual fuel capabilities, advantaged positions along the gas value chain and long-term customer relationships delivered by the Hess acquisition will provide additional growth opportunities across the enlarged business. Building a range of innovative product offerings is also core to our business model, improving customer retention and delivering growth. Our ‘Power To Go’ prepayment product and our innovative ‘Free Electricity Saturdays’ product have both proved popular with residential energy customers. The Bounce Energy acquisition is already delivering increased sales through digital channels, while we see scope for further growth through connected home propositions. We have a relationship with Nest in Canada and launched a bundled thermostat and energy offering in the first quarter of 2014. Additionally, we plan to launch a Direct Energy branded smart thermostat in 2014. In services, our franchise model enables expansion for limited capital outlay, while we expect to see further growth in our protection plan offering in the United States. We also recently launched a small scale pilot of a new HVAC leasing proposition. Initial sales have been considerably ahead of our expectations, with customers willing to undertake a higher value of work when purchased through rental payments as opposed to upfront payment. Over time, we see significant potential for bundling of energy and services propositions to our residential customer base. Total Direct Energy For the year FY FY H2 H2 ended 31 2013 2012 Δ% 2013 2012 Δ% December Total residential energy and 5,967 5,856 2 5,967 5,856 2 services accounts (period end) (’000) Gross revenue 7,325 5,684 29 4,134 2,921 42 (£m) Operating profit 276 310 (11) 111 155 (28) (£m) Operating profit after taxation 189 203 (7) nm nm nm (£m) Residential energy supply For the year ended 31 FY 2013 FY 2012 Δ% H2 2013 H2 2012 Δ% December Customer accounts (period 3,360 3,455 (3) 3,360 3,455 (3) end) (’000) Gross revenue 2,517 2,357 7 1,209 1,147 5 (£m) Operating profit 163 156 4 64 55 16 (£m) Operating profit after taxation 111 103 8 nm nm nm (£m) Post-tax margin 4.4 4.4 0.0 nm nm nm (%) ppts Business energy supply For the year ended 31 FY 2013 FY 2012 Δ% H2 2013 H2 2012 Δ% December Gas sales (mmth) 1,839 793 132 1,345 372 262 Electricity 63,919 51,378 24 35,920 27,443 31 sales (GWh) Gross revenue 4,238 2,795 52 2,629 1,495 76 (£m) Operating profit 77 121 (36) 24 78 (69) (£m) Operating profit after taxation 53 78 (32) nm nm nm (£m) Post-tax margin 1.3 2.8 (1.5) nm nm nm (%) ppts Post-tax (1.0) underlying 1.8 2.8 ppts nm nm nm margin (%) FY 2013 post-tax underlying margin (%) excludes £25million (£36m pre-tax) relating to amortisation of customer intangibles and integration costs associated with the Hess Energy Marketing acquisition. Residential and business services For the year FY FY H2 H2 ended 31 2013 2012 Δ% 2013 2012 Δ% December Contract relationships 2,608 2,401 9 2,608 2,401 9 (period end) (’000) On demand and installation 748 670 12 398 360 11 jobs (’000) Gross revenue 570 532 7 296 279 6 (£m) Operating 36 33 9 23 22 5 profit (£m) Operating profit after 25 22 14 nm nm nm taxation (£m) Post-tax 4.4 4.1 0.3 nm nm nm margin (%) ppts Direct Energy (with comparator year of 2012 restated to remove effect of foreign exchange movements) For the FY FY H2 H2 year ended 2013 2012 Δ% 2013 2012 Δ% 31 December Revenue (£m) Residential energy 2,517 2,360 7 1,209 1,132 7 supply Business energy 4,238 2,989 42 2,629 1,594 65 supply Residential and 570 534 7 296 276 7 business services Direct Energy 7,325 5,883 25 4,134 3,002 38 revenue Operating profit (£m) Residential energy 163 157 4 64 55 16 supply Business energy 77 121 (36) 24 77 (69) supply Residential and 36 33 9 23 22 5 business services Direct Energy 276 311 (11) 111 154 (28) operating profit 2012 figures restated at 2013 weighted average exchange rate. INTERNATIONAL UPSTREAM CENTRICA ENERGY Significant progress towards our refreshed strategic priorities International Upstream performed well in 2013, with strong gas and oil production, the highest UK nuclear generation volumes for eight years and consistent operational performance from our gas-fired generation fleet. Under the leadership of Mark Hanafin we also made significant progress towards our refreshed strategic priority – to integrate our natural gas business, linked to our core markets – with a new international structure enabling us to maximise the potential of our core E&P regions of UK and Netherlands, Norway and Canada. We have completed three key transactions: the North American LNG export agreement with Cheniere; the acquisition of a package of producing conventional gas and oil assets in the Western Canadian Sedimentary Basin from Suncor; and the acquisition of a 25% interest in the Bowland shale exploration license from Cuadrilla Resources and AJ Lucas. Overall we added 155 million barrels of oil equivalent (mmboe) of net proven and probable (2P) reserves in 2013, both organically – principally in Norway - and through acquisition, and we increased our 2C resource base by 28% to 771mmboe. However, we recognised £318 million of post-tax impairments, reflecting reserve and resource downgrades and increases in expected costs on certain Southern North Sea projects and a reduction in North American natural gas prices since previous asset acquisitions and developments. We also announced the divestments of selected North Sea E&P assets and of non-core UK wind assets for value, evidence of our commitment to maintaining capital discipline. International Upstream operating profit increased by 6% to £1,326 million (2012: £1,251 million). Gas operating profit increased, reflecting higher production volumes following recent acquisitions and higher achieved prices, partially offset by a decrease in Power operating profit following the loss of free carbon allowances, and continued difficult trading conditions for gas-fired generation. Health and safety remains a core priority and we continued our focus on the effective management of major accident hazards through improved process safety training and reporting. We had no significant safety events in 2013, while the LTIFR fell to 0.10 (2012: 0.22). Increased and more diverse gas and oil production Total production of gas and liquids increased by 16% to 77.3mmboe (2012: 66.8mmboe). Total gas production volumes increased by 19% to 3,557 million therms (mmth) (2012: 2,990mmth) and total liquids volumes increased by 7% to 18.7mmboe (2012: 17.4mmboe). This predominantly reflects the benefit of a full year of production from the three acquisitions completed during 2012, and a part year of production from the package of Canadian conventional gas and crude oil assets acquired from Suncor in partnership with QPI, with production from new fields broadly offsetting the natural decline in our existing portfolio. As a result of the recent acquisitions, we now have a more diverse geographical portfolio, with less reliance on Morecambe, and larger scale businesses in Norway and Canada. Norwegian production increased by 36% in 2013 and production from Canada increased by 28%, while production from the East Irish Sea contributed only 17% of total 2013 production, compared to 20% in 2012. The assets acquired in 2012 have overall been producing better than our investment cases and initial production from the Canadian assets acquired from Suncor was ahead of our expectations in the fourth quarter of 2013, following completion of the transaction in late September. This C$987million (£601 million) acquisition was made through a newly formed partnership owned by Centrica (60%) and QPI (40%), and was the first transaction made under the Memorandum of Understanding signed between the two parties in 2011. 100% of production and financial performance from the assets have been consolidated into the 2013 results. Centrica’s 60% share of 2P reserves from the assets as at the end of 2013 was 101 mmboe, which was higher than original expectations, and we are well placed to benefit from any upside in North American gas prices through the accelerated development of resources in the portfolio. In 2013 we had a full year of production from our Ensign and Seven Seas fields, which came on-stream in 2012, and delivered first gas from our York and Rhyl fields in the first quarter of 2013. However, lower than expected production flow rates at Ensign, SevenSeas and York, combined with lower forward gas prices and updated information on resource potential and development costs, have caused significant reductions in the value of these assets, leading to post-tax impairments totalling £252million. In the case of Ensign, the lower flow rates have led to adverse revisions of the future reserves potential of producing wells and of additional wells to exploit the potential of the field. In the case of Seven Seas, lower flow rates have led to a downward revision in 2P reserves from the production well. In the case of York, production flow rates from a second well were below expectations and we also suspended drilling on a third well. This has led to an increase in expected capital expenditure, and adverse revisions to the future reserves potential of the two producing wells and of additional wells yet to be drilled. In the second half of the year we announced the disposals of three packages of North Sea assets – a 13% non-operated stake in the Babbage field, a 50% operated interest in the Greater Kittiwake Area and a portfolio of assets in the Heimdal area in Norway – disposing of 2P reserves totalling 12mmboe for a combined consideration of £125 million, including contingent consideration. The Babbage and Heimdal disposals, totalling 8mmboe of reserves, were completed in late 2013, with the Greater Kittiwake disposal expected to complete in late February 2014. This is in line with our strategy to optimise the North Sea portfolio, investing selectively in assets around our existing hubs while managing costs, and looking to divest non-core assets for value. Taking into account these North Sea divestments and the full year impact of the Canadian acquisition, total gas and liquids production volumes are expected to increase to around 85mmboe in 2014, in line with previous guidance. Adding value through reserve additions in our E&P portfolio Centrica Energy added 155mmboe of 2P reserves in 2013, a net 99mmboe from acquisitions and disposals and 56mmboe from existing fields. This represents a total production replacement ratio of 201%, and 73% from organic sources. In Norway, we recognised an additional 23mmboe of 2P reserves across our Kvitebjorn and Statfjord fields, reflecting strong performance from these assets and demonstrating the quality of our acquisitions in Norway. In Canada, incremental reserves of 7mmboe were recognised in the year from our existing portfolio, in addition to the reserves added following the Suncor acquisition. We have now undertaken a review of our larger Canadian portfolio and expect to increase our capital allocation to a number of attractive liquids-rich opportunities in the region, which we believe will drive longer term profit growth. However we recognised a post-tax impairment of £66 million on our existing gas assets in Canada, reflecting a weaker outlook for North American natural gas prices and an increase in the discount rate applicable to these assets. We continued to make progress across our development portfolio. In addition to producing first gas from York and Rhyl in the first quarter of 2013, first production from Kew was delivered in January 2014, while we are currently drilling a fourth production well at York. We have now sanctioned a sidetrack well at Grove, which is expected to produce first gas later in 2014. The Statoil-operated Valemon project continues to proceed as planned, with first production expected towards the end of 2014, while the GDF-operated Cygnus project is progressing well and remains on track to bring 53mmboe of reserves into production around the end of 2015. In the year, we recognised 21mmboe of 2P reserves at Butch in the Norwegian North Sea, which was discovered in 2011, and continue to work on a development plan for the project. We have now also commenced appraisal drilling on the adjacent Butch East well, which has the potential to add further to reserves. On our Block 22 project in Trinidad and Tobago we had drilling successes on two wells, helping to firm up our resource base in the region. We continue to review our development and partnership options for gas export. In exploration, drilling at the Rodriguez well in Norway in January confirmed the presence of gas condensate, while drilling at Whitehaven in the East Irish Sea in February confirmed a satellite field adjacent to the Rhyl reservoir. In January 2014 we were awarded 10 further Norwegian licences through the ‘Awards in Predefined Areas’ (APA) process. In the UK, we were awarded 16 licences in the second tranche of the 27^th UK offshore oil and gas licencing round, in addition to the 6 licences awarded in 2012. Since the start of 2013, in line with our commitment to capital discipline, we have relinquished our interests in Bligh, Christian, Selkirk and Peik. Overall we have an attractive portfolio of exploration prospects and will focus our expenditure on the best prospects. In June, we announced that we had acquired a 25% interest in the Bowland shale exploration license in Lancashire from Cuadrilla Resources and AJ Lucas for £44 million. This provides an attractive opportunity to explore the potential for natural gas from shale in the UK, while utilising our expertise as a responsible operator and developer of UK gas resources. We welcomed the Government’s announcements in July and December concerning tax allowances relating to shale gas, although much remains to be done to determine its commercial viability in the UK. Develop our midstream business to integrate along the gas value chain In March, we announced a 20 year agreement with Cheniere to purchase 91,250,000 million British thermal units (mmbtu) (89 billion cubic feet) per annum of liquefied natural gas (LNG) volumes for export from the Sabine Pass liquefaction plant in Louisiana in the United States. The project remains subject to regulatory approvals being achieved for the fifth train, including Federal Energy Regulatory Commission clearance. In early April the export licence application was filed with the US Department of Energy and the full Federal Energy Regulatory Commission application was filed in September 2013. The contract marks an important step in delivering our strategy, as we look to link our positions across the gas value chain and invest in new sources of gas on both sides of the Atlantic, where we see attractive opportunities. In November, we announced that we had entered into a further supply agreement with Qatargas to purchase up to 3 million tonnes per annum of LNG for the UK from June 2014. This deal follows on from our existing agreement with Qatargas, and highlights Centrica’s status as an attractive counterparty, underpinning the UK’s access to the global LNG market amidst fierce demand from Asia and Latin America. Higher gas and oil volumes and achieved prices more than offsetting higher costs International gas operating profit increased by 23% to £1,155 million (2012: £940 million), reflecting higher production volumes and higher achieved prices. The average achieved gas sales price, including production from North America, increased by 10% to 53.7 pence per therm (p/th) (2012: 49.0p/th). This primarily reflects an increased achieved gas price in Europe of 65.0p/th (2012: 57.6p/th) due to a higher prevailing UK NBP gas price, only partially offset by a change in the production mix towards North America. The achieved gas price for North America and Trinidad and Tobago fell slightly to 20.9 p/th (2012: 23.2p/th). The average achieved oil and condensate price was broadly flat at £61.6 per boe (2012: £61.7/boe). On a per unit of production basis, depletion, depreciation and amortisation (DDA) costs increased by 23% in the year to £11.4/boe (2012: £9.3/boe) with a shift in production mix towards more recently acquired and developed higher cost fields in Europe, partly offset by additional production from lower cost North American fields. Unit lifting and other cash production costs increased by 2% to £12.6/boe (2012:£12.4/boe), with the impact of industry-wide cost inflation being mostly offset by the impact of an increased proportion of lower cost North American production. Exploration and appraisal costs were £154 million (2012: £143 million), in part reflecting costs written down following licence relinquishments. International gas operating profit after tax was £325 million (2012: £198 million) and the return on total capital employed was 8.3% (2012: 5.6%). The business generated free cash flow of £180 million, net of total capital expenditure and acquisitions of £1,449 million. Strong performance from existing nuclear fleet; challenging market conditions for gas-fired generation Output from the nuclear fleet was once again strong, with our 20 per cent equity share of the output increasing to 12.1 terawatt hours (TWh) (2012: 12.0TWh), the highest annual output since 2005. This reflects continued investment in the fleet, with no large unplanned outages occurring during the year, underlining the quality of our original investment in the British Energy fleet. The average achieved price for the year was £51.9 per megawatt hour (MWh) (2012:£49.6/MWh), reflecting the increase in the baseload power market price and the impact of hedging. An increase in revenue was only partly offset by additional depreciation and inflationary cost pressures, resulting in a 5% increase in nuclear operating profit, to £250 million (£237 million). In February we announced that we would not be exercising our option to participate in UK nuclear new build, taking into account increased costs and the lengthening time frame for a return on capital invested in a project of this scale. The market environment remains challenging for gas-fired power generation, with continued low market clean spark spreads. The average gas-fired load factor increased to 27% (2012: 26%), although slightly lower capacity meant that generation volumes reduced to 8.9TWh (2012: 9.0TWh). Against this challenging environment, we continued to minimise costs, running the plants as efficiently as possible and thermal fleet reliability remained high at 97% (2012:97%), enabling running at peak times. The gas-fired operating loss increased to £133 million (2012: £4 million loss), primarily reflecting the end of free carbon allowances. Our gas-fired power stations at Barry, Brigg and Peterborough were all awarded contracts by the National Grid in March, as part of its Short Term Operating Reserve (STOR) market. All the contracts run until the end of the first quarter of 2015, with Brigg awarded a two-year contract, Peterborough awarded a ‘follow-on’ contract when its current arrangement finishes in 2014 and Barry awarded a one-year contract starting in April 2014. Availability of our wind assets was 88% (2012: 88%), with generated volumes up 41% to 753 gigawatt hours (GWh) (2012: 533 GWh) and a load factor of 36% (2012: 32%), reflecting output from the Lincs wind farm, with all 75 turbines having been fully commissioned by September. In June, we sold our 50% interest in the Braes of Doune onshore wind farm to Hermes GPE Infrastructure fund for £59 million. In December, we were disappointed not to receive a letter of eligibility for transitional Feed in Tariffs for our Race Bank offshore wind project, and we sold our 100% interest in the project to DONG Energy Power (UK) Limited, for £50 million. The net impact of these two transactions was a £23 million profit on disposal. We retain a 50% interest in 4.2GW of potential capacity in CelticArray, the Round 3 Irish Sea Zone, however we have impaired the carrying value of this project by £25 million in the year. Overall, renewables operating profit reduced to £25 million (2012: £56 million), predominantly reflecting lower net profit on disposal during the year and the Round 3 impairment. Total Power profitability decreased by 45% to £171 million (2012: £311 million), with increased losses from our gas-fired fleet and lower renewables profit only partially offset by improved nuclear and Midstream profits. UK power operating profit after tax was £143 million (2012: £243 million) and the return on total capital employed was 3.8% (2012: 6.7%). Positioning the business for the future We made good strategic progress during 2013 and we will benefit in 2014 from a full year’s worth of production from the Canadian assets acquired from Suncor. However the E&P business is facing rising costs in the UK North Sea, while gas and oil prices have reduced from their peaks. As a result, we expect operating profit to reduce in 2014 compared to 2013, although with the move in production mix towards Canada, we expect post-tax profit to be broadly unchanged. In this environment, while existing projects such as Cygnus and Valemon remain attractive opportunities and we have a number of potentially attractive future development options in Norway, we are likely to concentrate on only the very best North Sea investments, with North America potentially a more attractive region for investment. We have also established new processes for project stage-gate review and have reduced our rig commitments, to provide additional assurance and maximise project returns. Overall we expect to invest around £900 million per annum of capital expenditure in E&P projects over the next three years, with an increasing proportion of capital spend in NorthAmerica. This is around 20% lower than previously expected levels, but will have limited impact on near-term production, which we expect to be in the range 80-85mmboe per annum. Our profile of committed investment gives us flexibility to consider acquisitions, if the economics are attractive and they are a good fit with our existing portfolio, while potentially divesting further non-core assets for value. Market conditions look set to remain challenging for our gas-fired power stations with no sign of material recovery in 2014. We have sanctioned a further turbine blade upgrade at our 1.3GW South Humber CCGT power station, which will improve the efficiency of the plant and work is scheduled to commence on the project in the first half of 2014. In addition, we have consent for 1GW of new build CCGT on our existing site at Kings Lynn and are exploring the option to repower the existing plant. However continued political uncertainty is putting investment at risk, and any future investment decisions remain dependent on the economics of the projects and the successful introduction of the capacity market. On renewables, we retain interests in our joint venture portfolio of operating wind assets, with purchase agreements for both the power and the ROCs. Our focus will be on maximising value through operating our assets efficiently. International gas For the year ended FY FY Δ% H2 H2 Δ% 31 December 2013 2012 2013 2012 Gas production volumes (mmth) East Irish Sea 718 740 (3) 374 378 (1) Other UK and 1,071 883 21 530 403 32 Netherlands Norway 828 557 49 392 381 3 North America 701 549 28 449 270 66 Trinidad & 239 261 (8) 116 131 (11) Tobago Total 3,557 2,990 19 1,861 1,563 19 Liquids production volumes (mmboe) UK and 6.3 7.4 (15) 2.8 3.5 (20) Netherlands Norway 11.0 8.9 24 5.2 5.9 (12) North America 1.4 1.1 27 0.9 0.5 80 Total 18.7 17.4 7 8.9 9.9 (10) Total production 77.3 66.8 16 39.7 35.9 11 volumes (mmboe) Average achieved gas price (p/therm) Europe 65.0 57.6 13 64.2 59.3 8 North America and Trinidad & 20.9 23.2 (10) 21.2 22.4 (5) Tobago Total 53.7 49.0 10 51.8 50.9 2 Average oil and condensate sales price (£/boe) Europe 62.9 62.8 0 60.6 63.4 (4) North America and Trinidad & 43.3 45.5 (5) 41.3 46.9 (12) Tobago Total 61.6 61.7 0 58.8 62.5 (6) DDA costs (£/boe) Europe 12.9 10.2 26 13.0 10.5 24 North America and Trinidad & 6.1 6.2 (2) 5.5 5.8 (5) Tobago Total 11.4 9.3 23 11.0 9.6 15 Lifting and other cash production costs (£/boe) Europe 13.5 13.8 (2) 14.0 15.0 (7) North America and Trinidad & 9.7 7.4 31 10.4 8.0 30 Tobago Total 12.6 12.4 2 13.0 13.6 (4) Exploration & appraisal costs 154 143 8 107 110 (3) (£m) Operating profit 1,155 940 23 472 421 12 (£m) Operating profit 325 198 64 nm nm nm after taxation (£m) Return on total 2.7 capital employed 8.3 5.6 ppts nm nm nm (%) Total net proven and probable 711 633 12 nm nm nm reserves (mmboe) To align with a new organisational structure, the North American Upstream gas business is now reported in Centrica Energy. Prior year comparatives have been restated accordingly. Lifting and other cash production costs include all cash costs except exploration and appraisal costs and the impact of underlift / overlift. Prior year comparatives have been restated. Centrica's share of proven and probable reserves excludes Rough cushion gas of 30mmboe, and includes the 60% share of Canadian assets acquired from Suncor. UK power For the year ended 31 FY 2013 FY 2012 Δ% H2 2013 H2 2012 Δ% December Power generated (GWh) Gas-fired 8,897 8,952 (1) 4,366 4,046 8 Renewables 753 533 41 463 287 61 Nuclear 12,097 12,004 1 6,334 6,050 5 Total 21,747 21,489 1 11,163 10,383 8 Achieved Clean Spark Spread 11.7 10.7 9 13.4 11.2 20 (£/MWh) Achieved power price (including 114.5 105.7 8 120.9 111.3 9 ROCs) (£/MWh) - renewables Achieved power price (£/MWh) - 51.9 49.6 5 51.7 49.8 4 nuclear Operating profit / (loss) (£m) Gas-fired (133) (4) nm (69) 0 nm Renewables 25 56 (55) (10) 11 nm Nuclear 250 237 5 128 119 8 Midstream 29 22 32 3 7 (57) Operating 171 311 (45) 52 137 (62) profit (£m) Operating profit after 143 243 (41) nm nm nm taxation (£m) Return on total (2.9) capital 3.8 6.7 ppts nm nm nm employed (%) Midstream includes results from trading and from bilateral arrangements with third party owners of power generation assets in the UK and Europe. CENTRICA STORAGE Good operational performance in challenging market conditions Centrica Storage performed well operationally in 2013, with strong reliability of 96% (2012: 92%) helping Rough make an important contribution to the UK’s security of supply during periods of sustained cold weather in the first four months of the year. However operating profit fell by 29%, reflecting narrowing summer/winter gas price differentials. The Net Reservoir Volume (NRV) reached record low levels in April, as we experienced sustained customer withdrawals during the prolonged cold weather. As temperatures returned to more normal levels from mid-April, customers switched to injection, and the business delivered a record year in terms of gas volume injected. With warmer weather in November and December resulting in less withdrawal than usual towards the end of the year, the NRV ended the year above the five year average. Health and safety remains a core priority and Centrica Storage continues to progress its process safety programme. We experienced no further lost time incidents (LTIs) in the year, after recording our first LTI in over three years in March. Narrow forward seasonal spreads creating commercial headwinds In April, Centrica Storage announced that it had sold all SBUs for the 2013/14 storage year at an average price of 23.3p (2012/13: 33.9p), reflecting low summer/winter gas price differentials over the course of 2012 and 2013. Forward 2014/15 market spreads remain narrower still. The narrow summer/winter spreads also provide a challenging background for new projects. In light of the weak economics for storage projects, and the UK Government’s decision to rule out incentivisation for additional gas storage capacity to be built, Centrica decided not to proceed with its offshore Baird project and put its project at Caythorpe on hold indefinitely. As a result, a post-tax exceptional charge of £224 million was recognised in the year, relating to impairments and provisions for these projects. Reduced year-on-year operating profit Gross revenue fell 7% to £188 million (2012: £202 million). This reflected a lower calendar year SBU price of 26.7p (2012: 31.0p) and lower optimisation revenue, only partially offset by revenue generated from the York gas processing terminal, which was commissioned early in the year. Operating profit decreased by 29% to £63 million (2012:£89million), primarily reflecting the decrease in revenue, additional fuel costs from the high levels of injection during the year and costs associated with the York terminal. With forward spreads even lower, Centrica Storage profitability is likely to be only around break-even in 2014. Against this backdrop we will continue our focus on safety, and further capital investment will be limited. We have also now launched a three year programme to deliver £15million of cost reductions through operational improvements. Centrica Storage For the year FY FY H2 H2 ended 31 2013 2012 Δ% 2013 2012 Δ% December Average SBU price (in 26.7 31.0 (14) 23.3 33.9 (31) period) (pence) Gross Revenue (£m) Standard 121 141 (14) 52 77 (32) SBUs Optimisation 67 61 10 29 34 (15) / other Total 188 202 (7) 81 111 (27) Operating 63 89 (29) 16 53 (70) profit (£m) Operating profit after 48 67 (28) nm nm nm taxation (£m) Return on (2.0) total capital 11.0 13.0 ppts nm nm nm employed (%) Statement of Directors’ Responsibilities The Directors are responsible for preparing the Group Financial Statements in accordance with applicable law, regulations and accounting standards. In preparing the Group Financial Statements, the Directors are required to: *select suitable accounting policies and then apply them consistently; *make judgements and accounting estimates that are reasonable and prudent; *state whether IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the Group Financial Statements; and *prepare the Group Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. Each of the Directors confirm that, to the best of their knowledge: *the Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and *the Strategic Report contained in the Annual Report and Accounts, from which this narrative is extracted, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces. By order of the Board SAM LAIDLAW NICK LUFF Chief Executive Group Finance Director Group Income Statement 2012 2013 (restated) (i) Exceptional Results Exceptional Results Year ended 31 Business items and for Business items and for December Notes performance certain the year performance certain the year £m re-measurements £m £m re-measurements £m £m £m Group revenue 5(b) 26,571 – 26,571 23,942 – 23,942 Cost of sales before exceptional items and (21,464) – (21,464) (18,840) – (18,840) certain re-measurements ^(i) Exceptional 6 – (125) (125) – (89) (89) items Re-measurement of energy 6 – 413 413 – 603 603 contracts Cost of sales (21,464) 288 (21,176) (18,840) 514 (18,326) Gross profit 5,107 288 5,395 5,102 514 5,616 Operating costs before (2,735) – (2,735) (2,680) – (2,680) exceptional items ^(i) Exceptional 6 – (939) (939) – (445) (445) items Operating costs (2,735) (939) (3,674) (2,680) (445) (3,125) Share of profits/(losses) in joint ventures and 6, 12 146 25 171 140 (6) 134 associates, net of interest and taxation Group operating 5(c) 2,518 (626) 1,892 2,562 63 2,625 profit Financing costs 7 (297) – (297) (271) – (271) ^(i) Investment 7 54 – 54 62 – 62 income ^(i) Net finance cost (243) – (243) (209) – (209) Profit before 2,275 (626) 1,649 2,353 63 2,416 taxation Taxation on 6, 8 (942) 243 (699) (1,031) (140) (1,171) profit ^(i) Profit for the 1,333 (383) 950 1,322 (77) 1,245 year Attributable to: Owners of the 1,333 (383) 950 1,322 (77) 1,245 parent Earnings per Pence Pence ordinary share Basic ^(i) 10 18.4 24.0 Diluted ^(i) 10 18.3 23.9 Interim dividend paid per 9 4.92 4.62 ordinary share Final dividend proposed per 9 12.08 11.78 ordinary share (i) See note 1(a). The notes on pages 36 to 72 form part of these Financial Statements. Group Statement of Comprehensive Income 2013 2012 Year ended 31 December Notes (restated) (i) £m £m Profit for the year ^(i) 950 1,245 Other comprehensive income/(loss): Items that will be or have been recycled to the Group Income Statement: Gains on revaluation of available-for-sale 3 5 securities, net of taxation Net losses on cash flow hedges (25) (27) Transferred to income and expense on cash 34 108 flow hedges Taxation on cash flow hedges (1) (20) 8 61 Exchange differences on translation of (217) (44) foreign operations Share of other comprehensive income/(loss) of joint ventures and associates, net of 18 (12) taxation (188) 10 Items that will not be recycled to the Group Income Statement: Net actuarial losses on defined benefit (179) (293) pension schemes ^(i) Taxation on net actuarial losses on defined 31 71 benefit pension schemes ^(i) (148) (222) Reversal of revaluation reserve, net of (17) – taxation and exchange differences Share of other comprehensive (loss)/income of joint ventures and associates, net of (15) 44 taxation Other comprehensive loss net of taxation (368) (168) Total comprehensive income for the year 582 1,077 Attributable to: Owners of the parent 590 1,077 Non-controlling interests (8) – (i) See note 1(a). Group Statement of Changes in Equity Share Share Retained Other Total Non-controlling Total capital premium earnings equity £m interests equity £m £m £m £m £m £m 1 January 2012 (as previously 319 874 4,043 364 5,600 – 5,600 reported) Effect of adoption of IAS – – (297) 297 – – – 19 (revised 2011) ^(i) 1 January 2012 319 874 3,746 661 5,600 – 5,600 (restated) Total comprehensive – – 1,245 (168) 1,077 – 1,077 income ^(i) Employee share 2 55 11 (2) 66 – 66 schemes Dividends – – (816) – (816) – (816) Taxation – – – (1) (1) – (1) Exchange – – – 1 1 – 1 adjustments 31 December 321 929 4,186 491 5,927 – 5,927 2012 (restated) Total comprehensive – – 950 (360) 590 (8) 582 income Employee share – 2 (15) 70 57 – 57 schemes Purchase of – – (2) (500) (502) – (502) treasury shares Amounts arising on acquisition – – – – – 81 81 (see note 15) Distribution paid to – – – – – (8) (8) non-controlling interests Dividends paid to equity – – (864) – (864) – (864) holders Taxation on share based – – – (16) (16) – (16) payments 31 December 321 931 4,255 (315) 5,192 65 5,257 2013 (i) See note 1(a). The notes on pages 36 to 72 form part of these Financial Statements. Group Balance Sheet 2013 2012 31 December Notes (restated) (i) £m £m Non-current assets Property, plant and equipment 7,446 7,965 Interests in joint ventures and 12 2,658 2,721 associates Other intangible assets 1,905 1,579 Goodwill 2,819 2,543 Deferred tax assets 105 183 Trade and other receivables 150 55 Derivative financial instruments 13 227 313 Retirement benefit assets 14 205 254 Securities 11(b) 202 199 15,717 15,812 Current assets Trade and other receivables 5,446 4,335 Inventories 530 545 Derivative financial instruments 13 573 268 Current tax assets 151 54 Securities 11(b) 9 7 Cash and cash equivalents 11(b) 719 931 7,428 6,140 Assets of disposal groups classified as 15 301 – held for sale Total assets 23,446 21,952 Current liabilities Derivative financial instruments 13 (506) (615) Trade and other payables (5,630) (4,545) Current tax liabilities (645) (594) Provisions for other liabilities and (258) (266) charges Bank overdrafts, loans and other 11(c) (859) (566) borrowings ^(i) (7,898) (6,586) Net current liabilities (470) (446) Non-current liabilities Deferred tax liabilities (1,426) (1,678) Derivative financial instruments 13 (431) (327) Trade and other payables (64) (26) Provisions for other liabilities and (2,934) (2,480) charges Retirement benefit obligations 14 (165) (166) Bank overdrafts, loans and other 11(c) (5,172) (4,762) borrowings ^(i) (10,192) (9,439) Liabilities of disposal groups classified 15 (99) – as held for sale Net assets 5,257 5,927 Share capital 321 321 Share premium 931 929 Retained earnings ^(i) 4,255 4,186 Other equity ^(i) (315) 491 Total shareholders’ equity 5,192 5,927 Non-controlling interests 65 – Total non-controlling interests and 5,257 5,927 shareholders’ equity (i) See note 1(a). The Financial Statements on pages 32 to 72, of which the notes on pages 36 to 72 form part, were approved and authorised for issue by the Board of Directors on 20 February 2014 and were signed below on its behalf by: SAM LAIDLAW NICK LUFF Chief Executive Group Finance Director Group Cash Flow Statement Year ended 31 December Notes 2013 2012 £m £m Group operating profit including share of results 1,892 2,625 of joint ventures and associates Less share of profit of joint ventures and (171) (134) associates Group operating profit before share of results of 1,721 2,491 joint ventures and associates Add back/(deduct): Depreciation, amortisation, write-down and 2,319 1,507 impairments Profit on disposals (21) (38) Increase in provisions 162 201 Defined benefit pension service cost and (87) (52) contributions Employee share scheme costs 43 43 Unrealised gains arising from re-measurement of (400) (610) energy contracts Operating cash flows before movements in working 3,737 3,542 capital Decrease/(increase) in inventories 78 (88) Increase in trade and other receivables ^(i) (456) (205) Increase in trade and other payables ^(i) 697 361 Operating cash flows before payments relating to 4,056 3,610 taxes, interest and exceptional charges Taxes paid (892) (524) Payments relating to exceptional charges (224) (266) Net cash flow from operating activities 2,940 2,820 Purchase of businesses (1,115) (155) Sale of businesses 140 30 Purchase of intangible assets and property, plant 5(f) (1,615) (2,367) and equipment Sale of property, plant and equipment and 17 14 intangible assets Investments in joint ventures and associates (51) (291) Dividends received from joint ventures and 12(c) 193 110 associates Repayments of loans to, and disposal of 59 42 investments in, joint ventures and associates Interest received 29 33 (Purchase)/sale of securities 11(b) (8) 26 Net cash flow from investing activities (2,351) (2,558) Issue and surrender of ordinary share capital for 20 24 share awards Purchase of treasury shares under share (502) – repurchase programme Distribution paid to non-controlling interests (8) – Financing interest paid (248) (215) Repayment of borrowings 11(b) (400) (516) Cash received from borrowings 11(b) 1,209 1,712 Equity dividends paid (862) (815) Net cash flow from financing activities (791) 190 Net (decrease)/increase in cash and cash (202) 452 equivalents Cash and cash equivalents at 1 January 931 479 Effect of foreign exchange rate changes (10) – Cash and cash equivalents at 31 December 719 931 Included in th*Story too large* [TRUNCATED]
CNA: Centrica plc: Final Results
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