AGM Statement
Centrica PLC
10 May 2004
Centrica AGM statement
Sir Michael Perry, retiring chairman of Centrica plc, today told shareholders
attending the company's Annual General Meeting that 2003 had been a year of
steady progress in the face of economic uncertainty. Operating profit had
exceeded £1bn for the first time and this was a very pleasing result, he said.
Sir Michael highlighted the proposed final dividend payment of 3.7p, a total of
5.4p, representing a 35% increase year on year.
He also took the opportunity to review the seven years of his chairmanship and
to pay tribute to his colleagues throughout the organisation. 'We've moved from
a position in the bottom half of the FTSE 100 to the top 30. Our market
capitalisation has more than trebled, growing from £2.9 billion in 1997 to £9.5
billion at the closing share price last Friday,' he said. 'In Britain we have
expanded our business from gas into electricity, telecommunications, roadside
services and a whole range of home services.'
Chief Executive Sir Roy Gardner paid tribute to Sir Michael's contribution to
the evolution of Centrica. 'As a board, we've benefited enormously from his
considerable experience, sharp insight and acute sense of what customers want,'
he said.
Turning to progress in 2004, Sir Roy said that although overall group trading
was in line with market expectations, further commodity price rises would put
group margins at risk.
In particular he made the following observations:
Since the preliminary results presentation in February, impact on British Gas
Residential's customer churn levels as a consequence of its January price
increase has been slightly higher than the company had anticipated. However, the
rate of withdrawal has now started to slow in line with expectations. While
there has been a net reduction of 220,000 energy accounts in the first four
months of the year, British Gas still has just over 40% of the domestic energy
market.
Wholesale gas and electricity prices have continued to rise and, for the fourth
quarter of 2004, are now 20% and 14% respectively above levels anticipated when
the last price increase was announced. As a result of this and the cost of
increasing environmental obligations, the whole industry is faced with higher
costs of procurement and British Gas margins are currently expected to be lower
than previously anticipated.
However, as it indicated at its preliminary results, the company has brought
forward elements of its transformation programme aimed at reducing its cost base
and simplifying processes and this will underpin delivery of British
Gas'operating margin target for 2005. Implementation of the remaining elements
of this programme is on track.
At Centrica Energy, the company's upstream energy management group, performance
in 2004 has been above expectations due to the higher gas prices. Investment has
continued in upstream assets and a five-year gas purchase agreement has been
reached with Shell.
Last month's acquisition of the option to build a fully permitted gas-fired
power station in Devon, along with significant investment in generation from
renewable sources reflects Centrica's continuing commitment to power generation
in the UK.
The performance of Centrica Storage Ltd has also exceeded expectations. The
average price for capacity sales for the new storage year, which began on 1st
May, is more than 23% higher than in the previous year.
The AA is also going from strength to strength, in both financial and roadside
services, where membership is expected to hit 15million by the end of May. It is
anticipated that profits for the year will significantly exceed last year's
record levels.
One.Tel is performing ahead of market expectations and the company is encouraged
by the scope of Ofcom's strategic review, which is crucial for the creation of a
competitive landscape. It is also essential, not only for Centrica, but for the
competitive market as a whole, that there is an appropriate response to BT's
recent pricing changes.
For Centrica North America, the acquisition of one million Albertan customers
brings the total number of customer relationships to 5.1million. Already this
year, Centrica has acquired its first power station in North America and another
gas field in Alberta to support its growing retail position and is committed to
investing up to £350million in total over the next few years. Although, in local
currency terms, profitability will increase in 2004, Centrica expects reported
profits for North America to be flat year on year as a consequence of the weaker
US and Canadian dollars.
In conclusion, Sir Roy said Centrica was well placed to meet the continued
challenges of the competitive market in the UK and to take advantage of
international opportunities. 'Our strategy is both clear and robust,' he said.
'We have a strong balance sheet and the financial strength to fund these
opportunities from our own cash generation while still having the ability to
increase returns to shareholders.
'I am confident that as we execute our plans shareholders will continue to
benefit from our success in the years ahead.'
Sir Roy concluded by welcoming the appointment of Roger Carr as the new chairman
of Centrica. 'We are fortunate to have Roger as our chairman during the next
stage of Centrica's evolution,' he said. 'Roger has been on our board for three
years now, and I look forward to working with him even more closely in the years
ahead.'
Centrica will report its 2004 interim results on 29th July.
Enquiries:
Centrica Media Relations: 01753 494085
Centrica Investor Relations: 01753 494900
This information is provided by RNS
The company news service from the London Stock Exchange